TACT 10-K & 10-Q changes, risk factors and insider trading

Investors should carefully consider the risks, uncertainties and other factors described below, as well as other disclosures in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, because they could have a material adverse effect on our business, financial condition, operating results, and growth prospects. The risks described below are the currently known risks facing our Company that management deems to be material to the Company. Additional risks and uncertainties not presently known to us, or that we currently believe to be immaterial, may also impair our business operations. In the event that If such risks or uncertainties materialize, our business, financial condition, cash flows and results of operations could be materially adversely affected.

In 2025 and 2024, we incurred a net losslosses of $1.2 and $9.9 million.million, respectively. While we generated $4.7 million of net income in 2023, we incurred a net loss of $5.9 million, $4.0 million and $5.6 millionlosses in 2022,each 2021fiscal andyear 2020,from respectively.2020 to 2022. We may not be able to achieve or maintain profitability in the future. In addition, we may make further investments in product development and may increase expenses in future periods which may affect our ability to maintain or increase profitability. We have expended, and expect to continue to expend, financial and other resources on developing our food service technologyFST business, including acquiring a licensed copy of the BOHA! source code, expanding our offerings, developing or acquiring new products and services and increasing our sales and marketing efforts. These efforts may be more costly than we expect and may not result in increased revenue or growth in our food service technologyFST business. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from maintaining or increasing profitability or positive cash flow on a consistent basis. This risk may be exacerbated by current economic conditions, which have resulted, and may continue to result in increased costs on our products assembled in Thailand, inflationary pressures, and decreased demand for our products. Customers that placed advance orders due to supply chain disruptionsproducts in 2022 and into 2023 paused orders in 2024 while they sold accumulated inventory. We believe all domestic customers have resumed ordering with the exception of one significant international casino and gaming customer. Though we expect overall casino and gaming sales to improve in 2025 compared to 2024, we expect such sales to be somewhat impacted in 2025 until this customer has sold through its inventory on hand.market. If we are unable to successfully address these risks and challenges as we encounter them, our business, financial condition, and results of operations could be adversely affected.

Our food service technologyFST business depends substantially on our customers renewing their subscriptions with the Company. Any decline in our customer renewals could harm our food service technologyFST business, results of operations and financial condition.

Our subscription offerings are term-based, and in order for us to maintain or improve our results of operations, it is important that our customers renew their subscriptions with us when the existing subscription term expires and renew on the same terms or terms more favorable to the Company. Our customers have no obligation to renew their applications and subscriptions, and they may not renew one or more of their applications as they are purchased separately and individually. We also may not be able to accurately predict customer renewal rates. Customers may elect not to renew their subscriptions with us for a variety of reasons, including as a result of changes in their strategic priorities, budgets and costs and, in some instances, due to competing solutions. Our retention rate may also decline or fluctuate as a result of a number of other factors, including our customers’ satisfaction or dissatisfaction with our solutions, the increase in the contract value of subscription and support contracts from new customers, the effectiveness of our customer support services, our pricing, the prices of competing products or services, global economic conditions and the other risk factors described herein. As a result, there can be no assurance that our food service technologyFST customers will renew any or all of their individually purchased application subscriptions. If our customers do not renew their subscriptions or renew on less favorable terms, our business, results of operations and financial condition may be adversely affected.

Subscription services revenue accounts for a growing portion of our food service technologyFST revenue. Sales of new or renewal subscription contracts may decline or fluctuate as a result of a number of factors, including customers’ level of satisfaction with our solutions, the prices of our subscriptions, the prices and features of products or subscriptions offered by our competitors, reductions in our customers’ spending levels, or other changes in consumer behavior. If our sales of new or renewal subscription contracts decline, our revenue and revenue growth may decline. We recognize subscription revenue ratably over the term of the relevant subscription period, which is generally 12 months in duration. As a result, much of the subscription revenue we report each quarter is derived from subscription contracts that we sold in prior quarters.

Consequently, a decline in new or renewed subscription contracts in any one quarter will not be fully reflected in revenue in that quarter but will negatively affect our revenue in future quarters. Accordingly, the effect of a significant downturnsdownturn in new or renewal sales of our subscriptions is not reflected in full in our results of operations in a given period. Also, it is difficult for us to rapidly increase our subscription revenue through additional sales in any period, as revenue from new and renewal subscription contracts must be recognized ratably over the applicable subscription period. Furthermore, any increases in the average term of subscription contracts would result in revenue for those subscription contracts being recognized over longer periods of time.

We use recurring revenue and ARPU as performance indicators in connection with our food service technologyFST market, and we include consumable label sales, in addition to subscription software, extended warranty and service contracts, in our calculation of these metrics. Consumable labels are not sold on a subscription basis or subject to any minimum purchase requirements. In addition, our label sales typically fluctuate and are dependent upon the current demand from food service and restaurant customers, which may be affected by factors such as general economic downturns and seasonality. As a result, our use and definitions of recurring revenue and ARPU may not be comparable with, and may be subject to, increased fluctuation relative to those of other SaaS-based companies that do not include non-subscription components such as label sales in their definitions of recurring revenue or ARPU.

Lead times for materials and components that we order vary significantly and depend on factors such as the specific supplier, the size of the order, contract terms, and demand for each component at a given time, as well as supply shortages with respect to raw materials needed to produce the components. If we underestimate our requirements, or if we are unable to obtain components on time due to supply shortages, as occurred during the COVID-19 pandemic and resulting global supply chain disruptions,disruptions in 2022 and 2023, we may have inadequate manufacturing capacity or inventory, which could interrupt manufacturing of our products and interfere with our ability to timely deliver products to our customers and adversely impact our sales. Alternatively, if we overestimate our requirements, we could have excess inventory of parts and finished products. Some of the actions we have takentook to meet customer demand in the face of recentthe supply chain disruptions have in 2022 and 2023 raised our costs and decreased margins on our products, and any such actions that we take in the future could have a similar effect. Any future underestimate or overestimate of supply requirements, and any actions we may take in the future to navigate supply chain disruptions, could have a material adverse effect on our business and results of operations.

Our future success may depend in significant part upon the continued service of certain key management and other personnel. There can be no assurance that we will be able to recruit and retain such personnel. The loss of either John M. Dillon, the Company’s Chief Executive Officer, or Steven A. DeMartino, the Company’s President, Chief Financial Officer, Treasurer and Secretary, or the loss of certain groups of key employees, such as our orsales, sales, operations and engineering teams, could have a material adverse effect on our business and results of operations.

Our customers rely on us and our third-party service providers for support of our software and services included in our food service technologyFST subscription packages. High-quality support is important for the renewal and expansion of our agreements with existing customers. The importance of high-quality support will increase as we expand our business and pursue new customers. If we or our third partythird-party service providers do not help our customers quickly resolve issues and provide effective ongoing support, our ability to sell new food service technologyFST products to existing and new customers could suffer and our reputation and relationships with existing or potential customers could be harmed.

We experience elements of seasonal fluctuations in the food service technologyFST and POS markets which could cause our stock price to fluctuate.

Our food service technologyFST business is highly dependent on the behavior patterns of our customers and their guests. Restaurants typically reduce purchases of equipment in the fourth calendar quarter due to the increased volume of transactions during the holiday period, which may negatively impact sales of our food service technologyFST products or POS printers during that period. As a result, seasonality may cause fluctuations in our financial results, results, and other trends that develop may similarly impact our results of operations.

We are increasingly dependent on information technology systems and infrastructure for our business. We collect, store, and transmit sensitive information including intellectual property, proprietary business information and personal information of employees and, to a lesser extent, customers in connection with business operations. Further, our BOHA! Applicationsapplications arecurrently rely on a third-party cloud service provider and will continue to be hosted withinby existing third-party cloud platformsservice thatproviders arefollowing managedthe bytransition thirdof parties.the BOHA! source code to TransAct. The secure secure maintenance of the information stored on our systems and such third-party systems is critical to our operations and business strategy. Any system outages, and any interruptions or other disruptions to our software applications, including as a result of unexpected errors or mistakes in connection with over-the-air updates, could materially adversely affect our business, results of operations, and financial condition.

In addition, some of the information that we and third-party service providers collect, store and transmit could be an attractive target of criminal attack by third parties with a wide range of motives and expertise, including organized criminal groups, disgruntled current or former employees, and others. Cyber-attacks are of ever-increasing levels of sophistication, and despite our extensive security measures, our information technology and infrastructure may be vulnerable to such attacks or may be breached, including due to employee error or malfeasance. We have experienced such breaches in the past, but they have not had a material effect on our business, financial condition or results of operations. Any such breach that occurs in the future could compromise our networks or the networks of third-party service providers, and the information stored there could be accessed, publicly disclosed, lost or stolen, and our business operations may be interrupted. If our systems become compromised, we may not promptly discover the intrusion. In addition, the techniques used to obtain unauthorized access to networks, or to sabotage IT systems, change and evolve frequently, including through the use of artificial intelligence and quantum computingcomputing, and generally are not recognized until launched against a target. We may be unable to anticipate these techniques or to implement adequate preventative measures. Like other companies in our industry, we have experienced attacks to our data and systems, including malware and computer viruses that we have been able to detect and eliminateeliminate, and incidents resulting in immaterial disruptions to our business that were remediated. . If our systems fail or are breached or disrupted by future attacks, we could lose product sales,sales and suffer other adverse consequences, such as reputational damagedamage, litigation, remediation costs, ransomware payments, and loss of customer confidence.confidence and the confidence of our vendors and suppliers. Such incidents could require notification to affected individuals and may result in legal claims or proceedings and liability under federal and state laws that protect the privacy and security of personal information. If third parties use a cyber-attack to gain access to our proprietary information, they may sell it or use it to duplicate our products, which could put us at a competitive disadvantage. Any one of these events could cause our business to be materially harmed and our results of operations to be adversely impacted, and there can be no assurance that the insurance that we maintain to address certain aspects of cybersecurity risks will be sufficient to cover all losses or all types of claims that may arise.

Our intellectual property is valuable and provides us with certain competitive advantages. Copyrights, patents, trademarks, service marks, trade secrets, technology licensing agreements, nondisclosure agreements and contracts are used to protect these proprietary rights. Despite these precautions, it may be possible for third parties to copy aspects of our products or, without authorization, to obtain and use information that we regard as trade secrets. Our pending patents may be denied, and our patents may be circumvented by our competitors. In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of the United States. There can be no assurance that our means of protecting our proprietary rights in the United States or abroad will be adequate or that competing companies will not independently develop similar technologies. Our failure to adequately protect our proprietary rights could have a material adverse effect on our competitive position and our business.

We may face difficulty keeping up with market developments in artificial intelligence and machine learning, and any such developments may be subject to rapidly evolving and extensive regulationregulation.

In addition, laws and regulations regarding artificial intelligence and machine learning are evolving rapidly. The technologiesTechnology underlying artificial intelligence and machine learning, and the use of such technologies, are subject to a variety of laws and regulations, including intellectual property, data privacy and cybersecurity, consumer protection and competition laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations, which may vary by jurisdiction. Further, because these technologies are highly complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise relating to the use of artificial intelligence and machine learning.

Revenue Recognition – Our net sales are derived from the sale of products and services and are adjusted for estimated returns and allowances, which historically have been insignificant. The application of GAAP to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, the determination of whether revenues related to our revenue contracts should be recognized over time or at a point in time. We recognize revenue when the obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our printers, terminals, consumableslabels and replacement parts. For our warranty, software applications and maintenance agreements, revenue is generally recognized ratably over the contract period. Other significant judgments include contracts that contain multiple performance obligations (most commonly when contracts include a hardware product, software, financing and extended warranties) which require a contract’s transaction price to be allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For arrangements containing multiple performance obligations, the revenue relating to the undelivered performance obligation is deferred using the relative standalone selling price method utilizing estimated sales prices until satisfaction of the deferred performance obligation. Both of these determinations impact the timing and amount of our reported revenues and net income and loss.

Income Taxes – We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). In preparing our Consolidated Financial Statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. Among other things, this provision prescribes a minimum recognition threshold that an income tax position must meet before it is recorded in the reporting entity’s financial statements. It also requires that the effects of such income tax positions be recognized only if, as of the balance sheet reporting date, it is “more likely than not” (i.e., more than a 50% likelihood) that the income tax position will be sustained based solely on its technical merits. When making this assessment, management must assume that the responsible taxing authority will examine the income tax position and have full knowledge of all relevant facts and other pertinent information. The accounting guidance also clarifies the method offor accruing for interest and penalties when there is a difference between the amount claimed, or expected to be claimed, on a company’s income tax returns and the benefits recognized in the financial statements. This involves estimating the actual current tax exposure together with assessing temporary differences between the tax basis of certain assets and liabilities and their reported amounts in the financial statements, as well as net operating losses, tax credits and other carryforwards. These differences result in deferred tax assets and liabilities, which are reflected in our Consolidated Balance Sheets. We then assess the likelihood that the deferred tax assets will be realized from future taxable income.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not (greater than 50%) that a tax benefit will not be realized. In evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable income, and income from tax planning strategies, as well as all available positive and negative evidence. Positive evidence includes factors such as a history of profitable operations and, projections of future profitability within the carryforward period, including any potential tax planning strategies. Negative evidence includes items such as cumulative losses and projections of future losses. Upon changes in facts and circumstances, management may conclude that deferred tax assets for which no valuation allowance is currently recorded may not be realized, resulting in a charge to establish a valuation allowance. Existing valuation allowances are re-examined under the same standards of positive and negative evidence. If it is determined that it is more likely than not that a deferred tax asset will be realized, the appropriate amount of the valuation allowance, if any, is released. Deferred tax assets and liabilities are also re-measured to reflect changes in underlying tax rates due to law changes and the granting and lapse of tax holidays.

In 2024, TransAct recognized a $7.3 million discrete income tax charge for a valuation allowance on the full value of the net deferred tax assets in the United States. The company’s deferred tax assets generated by net operating losses have an unlimited life and R&D credit carryforwards have a twenty-year life. After weighing all available positive and negative evidence, as described above, management determined that it was no longer more likely than not that TransAct will realize the tax benefit of these deferred tax assets. This was mainly driven by a cumulative taxable loss over the previousthree threepreceding fiscal years (2022 through 2024) , combined with a near term outlook of future taxable losses.losses (a taxable loss was generated in 2025 as well). The need for this valuation allowance will be assessed on a quarterly basis in future periods and, as a result, a portion, or all of the the allowance, may be reversed based on changes in facts and circumstances.

Net sales for 20242025 decreasedincreased $29.2$8.1 million, or 40%,19%, from 2023.2024. Printer, terminal and other hardware sales volume decreasedincreased by 47%19% to approximately 79,000 94,000 units for 2024,2025, driven largely by large unit volume decreases across all markets, including a 50%32% decreaseincrease in unit volume from the casino and gaming market, and to a 42%much lesser extent, an 18% hardware unit volume increase in our FST market. These increases were somewhat offset by a 32% decrease in unit volume in the POS automation market and a 20% hardware unit volume decrease in our FST market. For more information about the sales volume changes described above, please refer to the results of operations for each of our markets discussed further below. The average selling price of our printers, terminals and other hardware increased approximately 1%5% during 2024 2025 compared to 20232024 due in part to generalincreased inflationarycosts pressures.in the latter part of 2025 resulting from U.S. tariffs imposed on our products assembled in Thailand, which have generally been passed on in the form of price increases to our customers. This additional cost primarily relates to an agreement which was made between the U.S. Government and Thailand to establish a U.S. tariff of 19% on goods imported from Thailand, effective August 7, 2025. The Company is closely monitoring developments relating to tariffs and the evolving international trade environment, including the implications of the recent U.S. Supreme Court ruling.

International sales for 20242025 decreased $4.7$0.5 million, or 32%,5%, compared to 2023 predominantly2024 due primarily to lowera 7% decrease in sales inwithin ourthe international casino and gaming market.

Food service technology (“FST”).FST. Our primary offering in the food service technologyFST market is our line of BOHA! products,products. theThe BOHA! product suite combines our latest generation terminal or workstation, which includeincludes one or two printers, with our BOHA! labeling, timers, and media software. In addition, customers may individually purchase cloud-based software applications that connect to an application on a separate mobile device into a solution to automate back-of-house operations in restaurants, convenience stores and food service operations. The additional software offering of BOHA! consists of a variety of individually purchased software-as-a-service (“SaaS”)-based based applications for both Android and iOS operating systems, including applications for temperature monitoring, temperature takingtaking, and checklistschecklists, and task lists. These applications are sold separately, and customers purchase the applications they need for their back-of-house operations. Customers may also purchase associated hardware, such as tablets, temperature sensorssensors, and gateways. The BOHA! TerminalTerminal, and the more recently launched Terminal 2 2, combine an operating system and hardware components in a single touchscreen device with one or two thermal print mechanisms that print easy-to-read food rotation labels, grab-and-go labels, andnutritional nutritional labels for prepared foods, and “enjoy by” date labels. The BOHA! WorkStation uses an iPad or Android tablet instead of an integrated touchscreen. The BOHA! Terminal, Terminal 22, and WorkStation are equipped with the TransAct Enterprise Management System to ensure that only approved touchscreen functions are available on the device and to allow over-the-air updates to the operating system. BOHA! helps food service establishments and restaurants (including fine dining, casual dining, fast casual and quick-service restaurants, convenience stores, hospitality establishmentsestablishments, and contract food service providers) effectively manage food safety and grab-and-go initiatives, as well as automate and manage back-of-house operations. Recurring revenue from BOHA! is generated by software sales, including software subscriptions that are typically charged to customers annually on a per-application basis, as well as sales of labels, extended warranty andwarranty, service contracts, and technical support services. Sales of our worldwide food service technologyFST products for the years ended December 31, 20242025 and 20232024 were as follows:

During the second quarter of 2024, a significant customer notified us that it would be terminating service, including its BOHA! software subscriptions and label sales, for its existing installed base of BOHA! Terminals by the middle of July 2024. Total sales to this customer (including hardware, software, labels and other recurring revenue) were approximately $4.0 million in 2023 and $0.9 million in 2024. We did not have any hardware sales, and minimal label and software sales, to this customer in the third and fourth quarters of 2024, but we expect to continue to servicehad a smallde percentageminimis amount of ongoing units and may have some additional sales to this customer in 2025. Despite the future.loss of this customer, software, labels and other recurring revenue increased $1.5 million, or 14%, compared to the prior year period due primarily to higher label sales to a new sushi customer (approximately $0.8 million) and one existing convenience store customer (up approximately $0.5 million).

We expect FST revenue to be higher in 20252026 than in 20242025 as we continue to focus on growing our installed base of terminals and the related recurring revenue (primarily the sale of labels and subscription software revenue from our labeling software application).revenue.

Casino and gaming. Revenue from theour casino and gaming market includes sales of thermal printers used in slot machines, video lottery terminals, and other gaming machines that print tickets or receipts instead of issuing coins at casinos, racetracksracetracks, charitable gaming establishments, and other gaming venues worldwide. Revenue from this market also includes sales of thermal roll-fed printers used in the international off-premise gaming market. This gaming market in includes gaming machines such as Amusement with Prizes, Skills with PrizesPrizes, and Fixed Odds Betting Terminals and kiosks for sports betting at non-casino gaming and sports betting establishments. Revenue from this market also includes royalties related to our patented casino and gaming technology. In addition, casino and gaming market revenue includes sales of the EPICENTRAL print system, our software solution (including annual software maintenance), that enables casino operators to create promotional coupons and marketing messages andfor to print themprinting in real time at the slot machine.machines. Sales of our worldwide casino and gaming products for the years ended December 31, 20242025 and 20232024 were as follows:

TSG: Revenue generated by TSG includes sales of consumable products (POS receipt paper and ribbons for non-FST legacy products), replacement parts and accessories, maintenance and repair servicesservices, and shipping and handling charges. Sales in our worldwide TSG market for the years ended December 31, 2024 2025 and 20232024 were as follows:

The largedecrease decreaseof $0.4 million, or 16%, in domestic revenue from TSG during 20242025 as compared to 20232024 resulted primarily from a 75%$0.3 million, or 20%, decrease in sales of replacement parts and accessories.a During$0.2 2023,million, weor experienced22%, unusuallydecrease high salesin repairs, partially offset by a $0.1 million, or 26%, increase in shipping charges (as a result of approximatelyhigher $4.1overall millionsales from the final purchases of spare parts for our legacy lottery printer that did not repeatvolume in 2024.2025 Wecompared doto not expect any future sales of these spare parts.2024). Also contributing to the decline was a 57%$0.1 million, or 75%, decrease in consumable sales as we are no longer focused on selling these legacy products (POS paper and ribbons) and we expect to ceasehave sellingvirtually no sales of these legacy products byin the2026. endInternationally, TSG revenue decreased 7% during 2025 compared to 2024, due primarily to a decline in sales of 2025.replacement parts and accessories to international casino and gaming customers.

Gross profit is measured as revenue less cost of sales, which includes primarily the cost of all raw materials and component parts, direct labor, manufacturing overhead expenses, cost of finished products purchased directly from our contract manufacturers, expenses associated with installations and support of our EPICENTRAL print system and our line of BOHA! productsproducts, and royalty payments to third-parties, including to the third party licensor of our food service technology software products. Gross profit decreasedincreased $16.9$3.5 million, or 44%.16% primarily driven by an increase of sales of $8.1 million in 2025 compared to 2024, partially reduced by lower gross margin in 2025 as discussed below. Gross margin also decreased 34090 basis points tofrom 49.5% in 2024 compared to 52.9%48.6% in 2023.2025. Both gross profit and gross margin declined primarilylargely due to a 40% decline in overall sales including a 51% decline inhigher sales of higherBOHA! marginhardware casinoproducts which carry lower average margins than our other products, and gamingto a printers.lesser Grossextent, marginincreased foroverhead 2024costs, wasinflation, alsotariffs impactedand bylower prices on our POS automation printer due to increased competitive price adjustments.pressure.

We expect gross margin for 20252026 to be inrelatively theconsistent midwith 40% to high 40% range.2025..

Engineering, design and product development expenses primarily include salary and payroll-related expenses for our hardware and software engineering staff, depreciation and design expenses (including prototype printer expenses, outside design, development and testing services, supplies and contracted software development expenses including those to the third partythird-party licensor of our food service technology software products). Engineering, design and product development expenses decreased $2.5 million, or 26%, in 2024 compared to 2023 due to cost reduction initiatives taken during the latter part of 2023, and in the second quarter of 2024, including a reduction of contracted software development expenses. We expect engineering, design and product development expenses decreased to$0.3 bemillion, higheror 4%, in 2025 compared to 2024 due to typicalcost inflationaryreduction andinitiatives costtaken in the second quarter of living2024 increases(the full benefit of which was realized in such2025), expenses.including a reduction of contracted software development expenses, partially offset by higher incentive compensation due to improved financial results in 2025 compared to 2024.

Selling and marketing expenses primarily include salaries and payroll-related expenses for our sales, marketing and customer success staff, sales commissions, travel expenses, expenses associated with the lease of sales offices, advertising, trade show expenses, public relations, e-commerce and other promotional marketing expenses. Selling and marketing expenses decreasedincreased $1.7$0.2 million, or 18%, 3%, during 20242025 compared to 20232024 primarilydue largely to higher costs related to programs to further improve the Company’s go-to-market strategy as well as higher sales commissions and incentive compensation due to improved financial results in 2025 compared to 2024, partially offset by cost reduction initiatives, initiatives including reduced headcount, trade show and other marketing expenses. We expect selling and marketing expenses for 2025 to increase compared to 2024 due to typical inflationary and cost of living increases as well incremental costs we expect to incur related to programs to further improve and refine our go-to-market strategy.

General and administrative expenses primarily include salaries, incentive compensation, and other payroll-related expenses for our Chief Executive Officer, Chief Financial Officer, accounting, human resources, corporate development and information technology staff, expenses for our corporate headquarters,headquarters expenses, professional and legal expenses, information technology expenses, and other expenses related to being a publicly traded company. General and administrative expenses decreasedincreased $3.4$1.4 million, or 25%,14%, during 20242025 compared to 20232024. This increase was driven largely by higher incentive compensation and share-based compensation expense due to improved financial results in large2025 partcompared to a2024. $1.5These millionincreases severancewere chargepartially incurredoffset in 2023 related toby the resignationimpact of the Company’s former Chief Executive Officer in April 2023, as well as expensecost reduction initiatives we commenced in the third quarter of 2023 andtaken in the second quarter of 2024. We expect general and administrative expenses to increase in 2025 compared to 2024 due to typical inflationary and cost or living increases combined with higher expected incentive and share-based compensation expense (both largely performance-based).

Operating (Loss) Income.Loss. Operating (loss) income information for the years ended December 31, 20242025 and 20232024 is summarized below (in thousands, except percentages):

Our operating incomeloss decreasedimproved $9.3by $2.2 million, or 164%,61%, during 20242025 compared to 20232024 as a $16.9$3.5 millionmillion, or 44%16% decreaseincrease, in gross profit on 40%19% lowerhigher sales,sales was partially offset by a $7.6$1.3 million or 23%5% decreaseincrease in operating expenses (including the $1.5 million severance charge in 2023 discussed above in “General and Administrative”) in 2024 2025 compared to 2023.2024.

Interest, net. We recorded net interest income of $147$198 thousand in 20242025 compared to net interest expenseincome of $255 $147 thousand in 2023.2024. During 20232025 we earned more interest income than in 2024 due to higher levels of invested cash on hand (cash and cash equivalents were $20.4 million and $14.4 million at December 31, 2025 and 2024, respectively). During both 2025 and 2024 we incurred interest expense related to minimum borrowings required pursuant to the Siena Credit Facility. Following the November 2024 amendment of the Siena Credit Facility, we were required to maintain outstanding borrowings of at least $3 million in principal amount, an increase from $2.25 million prior to the amendment. The interest rate of our Siena Credit Facility was 8.50% and 9.25% as of December 31, 2025 and 2024, respectively. See Note 9 – Borrowings to the accompanying consolidated financial statements. In addition, during 2024 we earned more interest income than in 2023 due to higher levels of invested cash on hand.

Income Taxes. We recorded income tax expense in 2025 of $0.2 million at an effective tax rate of (14.4%), compared to income tax expense in 2024 of $6.3 million at an effective tax rate of (176.4%),. compared to incomeOur tax expense in 20232025 ofonly $1.2included milliontaxes atassociated anwith effectiveearnings taxin ratethe ofUnited 19.6%.Kingdom and minimum required state taxes in the United States. The effective tax rate for 2024 was unusually high due to an income tax charge of $7.3 million related to the write down of our U.S. net deferred income tax asset as more fully described below (See Note 11 – Income taxes into the Consolidatedaccompanying Financialconsolidated Statementsfinancial statements). We continue to believe this tax valuation allowance is required as of December 31, 2025. As such, the Company has not recorded any U.S. federal tax benefits associated with losses recorded in 2025.

Net (Loss) Income.Loss. As a result of the above, we reported a net loss for the year ended December 31, 20242025 of $1.2 million, or ($0.12) per diluted share, compared to a net loss of $9.9 million, or ($0.99) per diluted share, compared to net income of $4.7 million, or $0.47 per diluted share in 2023.2024.

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, the purchase of a copy of the source code and capitalized software development costs related to our BOHA! software, access to bank lines of credit and our ability to attract long-term capital with satisfactory terms.

During the third quarter of 2023, we began a cost reduction initiative to reduce our overall level of operating expenses that included reducing employee headcount, trade show, advertising and other promotional marketing expenses, certain third-party engineering resources and other expenses, and to a lesser extent, certain general and administrative expenses. We estimated annual cost savings from these initiatives to be approximately $3.0 million and we realized the full savings from these actions in 2024..2024. We also began an additional cost reduction initiative in the second quarter of 2024 focused largely on further reducing employee headcount and other external third-party resources. Savings from this initiative were realized beginning in the third quarter of 2024 and areresulted expected to bein approximately $2.0 million of savings on an annualized basis. Notwithstanding the foregoing, there is no assurance that the cost-cutting efforts we have taken to bring expenses in line with our revenue and mitigate the impact of global economic conditions such as supply chain disruptions and inflation are sufficient or adequate, and we may be required to take additional measures, as the ultimate extent of the effects of these risks on the Company, our financial condition, results of operations, liquidity, and cash flows are uncertain and are dependent on evolving developments which cannot be predicted at this time. See Part I, Item 1A, Risk Factors, of this Form 10-K for further discussion of risks related to global economic conditions, supply chain disruptions and inflation.

During 2024,2025, our cash balance increased $2.1$6.0 million, or 16%42% (versus an increase of $4.4$2.1 million in 20232024) due primarily to operating activities, including a reduction in accounts receivableinventory of $3.3$5.4 million and a reduction of inventory of $1.6 million. Financing activities also provided a netan increase in cashaccrued liabilities and other liabilities of $0.6$1.9 million. Investing activities used $1.6 million duein cash, primarily attributed to thecapitalized increasesoftware indevelopment bank borrowings required by Amendment No. 4 to the Siena Loan and Credit Facility Agreement signed on November 20, 2024 (see further detail in “Credit Facility and Borrowings” section below).costs. We had $14.4$20.4 million in cash and cash equivalents as of December 31, 2024,2025, of which $168$310 thousand was held by our UK subsidiary.

Investing activities: Our capital expenditures were $0.3$0.1 million and $0.9$0.3 million in 20242025 and 2023,2024, respectively. Expenditures forWe bothalso yearsincurred were$1.5 million in capitalized software development costs during 2025 related to newour purchase productof toolinga andcopy computerof andthe networkingsource equipment.code related to our BOHA! line of products.

Financing activities: Financing activities used $0.1 million in 2025 related to withholding taxes paid on stock issuances while financing activities provided $0.6 million of cash in 2024 due primarily to proceeds received from the increase in the required minimum borrowings on our Siena Credit Facility while the use of cash of $0.1 million in 2023 related to withholding taxes paid on stock issuances.Facility.

We believe that our cash and cash equivalents on hand, our expected cash flows generated from operating activities, and borrowings available under our Siena Credit Facility will provide sufficient resources to meet our working capital needs, finance our capital expendituresexpenditures, fund the purchase of a copy of the source code and capitalized software development costs related to our BOHA! software, and meet our liquidity requirements through at least the next twelve months. Notwithstanding this belief, the ultimate impact of current global economic pressures and uncertainty relating to tariffs, inflationary pressures and market instability is unknown.

OnWe Marchare 13,party 2020,to we entered into thea Loan and Security AgreementAgreement, dated as of March 13, 2020 (as amended, the “Loan Agreement”) governing a credit facility (the “Siena Credit Facility”), with Siena Lending Group LLC (the “Lender”). The Siena Credit Facilitythat provides for a revolving credit line of up to $10.0 million, subject to a borrowing base based on 85% of eligible accounts receivable plus the lesser of (a) $5.0 million and was(b) originally50% scheduledof toeligible expireraw onmaterial Marchand 13,60% 2023,of priorfinished togoods beinginventory extended,(the “Siena asCredit discussed below.Facility”). Borrowings under the Siena Credit Facility bear a floating rate of interest equal to the greatest of (i) the prime rate plus 1.75%, (ii) the federal funds rate plus 2.25%, and (iii) 6.50%. We also pay a fee of 0.50% on unused borrowings under the Siena Credit Facility. Borrowings under the Siena Credit Facility are secured by a lien on substantially all the assets of the Company. Borrowings under the Siena Credit Facility are subject to a borrowing base based on 85% of eligible accounts receivable plus the lesser of (a) $5.0 million and (b) 50% of eligible raw material and 60% of finished goods inventory.

The Siena Credit Facility imposes a financial covenant on the Company requiring that the Company maintain excess availability of at least $750 thousand under the Siena Credit Facility, tested as of the end of each calendar month and restricts, among other things, our ability to incur additional indebtedness and create other liens. OnWe July 21, 2021, the Company entered into an amendment (“Siena Credit Facility Amendment No. 1”) to the Loan Agreement. Siena Credit Facility Amendment No. 1 changed the financial covenant under the Siena Credit Facility from a minimum EBITDA covenant to an excess availability covenant requiring that the Company maintain excess availability of at least $750 thousand under the Siena Credit Facility, tested as of the end of each calendar month, beginning with the calendar month ended July 31, 2021. From July 31, 2021 through December 31, 2024, wehave remained in compliance with our excess availability covenant.covenant through December 31, 2025.

As of December 31, 2025 and 2024, we had $3.0 million of outstanding borrowings under the Siena Credit Facility at interest rates of 8.5% and $3.29.25%, respectively. We had $3.8 million of net borrowing capacity available under the Siena Credit Facility.Facility at December 31, 2025.

Information regarding risk factors appears under Part I, Item 1A, “Risk Factors,” of ourthe 2025 Form 10-K. There have been no material changes from the risk risk factors previously disclosed in ourthe 2025 Form 10-K, other than as set forth below.10-K. The risk described below and those other risks includedidentified in ourthe 2025 Form 10-K are the currently known risks facing our Company that management deems to be material to the Company. Additional risks and uncertainties, not currently known to us or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition or future results.

Certain statements included in this Quarterly Report on Form 10-Q for the quarterly period ended MarchJune 31,30, 2026 (this “Report”), including including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are “forward-looking statements” within the meaning of the U.S. federal securities laws, including the Private Securities Securities Litigation Reform Act of 1995. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements represent current views about possible future events and are often identified by the use of forward-looking terminology, such as “may,” “will,” “could,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” “plan,” “predict,” “design” or “continue” or the negative thereof or other similar words. Forward-looking statements are subject to certain risks, uncertainties and assumptions. In the event that one or more of such risks or uncertainties materialize, or one or more underlying assumptions prove incorrect, actual results may differ materially from those expressed or implied by the forward-looking statements.

TransAct is a leading provider of cloud-basedSaaS software and integrated hardware solutions for high-growth markets including food service technology, point of sale (“POS”) automation and casino and gaming. Our world-class products are designed from the ground up based on market and customer requirements and are sold under the BOHA!™, AccuDate™, Epic, EPICENTRAL®, and Ithaca® brand names. DuringWe 2019, wealso launchedhave a new line of products for the food service technology market, the BOHA! hardware solutions and companion branded suite of cloud-based applications. The BOHA! software and hardware products help restaurants, convenience stores and food service operators of all sizes automate the food production in the back-of-house operations. Known and respected worldwide for innovative designs and real-world service reliability, our thermal printers and terminals generate top-quality labels, coupons and transaction records such as receipts, tickets and other documents. We sell our technology to original equipment manufacturers (“OEMs”), value-added resellers, and select distributors, as well as directly to end users. Our product distribution spans across the Americas, Europe, the Middle East, Africa, Asia, Australia, New Zealand, the Caribbean Islands and the South Pacific. We also offer world-class service, support, labels, spare parts, accessories and printing supplies to our growing worldwide base of products currently in use by our customers. Through our TransAct Services Group (“TSG”), we provide a complete range of supplies and consumables used in the printing activities of customers in the restaurant and hospitality, retail, casino and gaming, and government markets. Through our webstore, www.transactsupplies.com, and our direct selling team, we address the demand for these products. We operate in one reportable segment: the design, development, and marketing of software-driven technology and printing solutions for high growth markets, and the provision of related services, supplies and spare parts. The Company’s chief operating decision makers,maker, consisting of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, utilize a consolidated approach to assess the performance of, and allocate resources to, the business. Accordingly, management has concluded that the Company consists of a single operating segment and single reportable segment for accounting and financial reporting purposes.

Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company’s operations and overall financial performance during the six quartersmonths ended MarchJune 31,30, 2026 and 2025. These macroeconomic conditions include, among others, changing levels of demand in the casino and gaming market, supply chain constraints, geopolitical conflicts, inflationary pressures, high interest rates, and and changes in global trade policies including higher tariffs in the U.S. and other countries. These macroeconomic trends could continue to impact our business, including potential impacts to overall financial performance during the remainder of 2026. We currently do not expect any significant impact to our capital and financial resources from these macroeconomic conditions, including to our overall liquidity position based on our available cash and cash equivalents and our access to credit facilities.

We are currently dependent upon a manufacturer located in Thailand for the manufacturing and assembly of substantially all of our printers and terminals. During 2025, the U.S. government announced a variety of trade-related actions, including the imposition of tariffs on imports from several countries, including Thailand. In response, many countries announced their own retaliatory tariffs. After a number of announcements imposing and revising tariffs applicable to goods imported from Thailand over the course of the year, on July 30, 2025, theOn U.S. government announced that an agreement was made with Thailand to establish a U.S. tariff of 19% on goods imported from Thailand effective August 7, 2025. On February 20, 2026, the U.S. Supreme Court issued a ruling in Learning Resources, Inc. v. Trump, holding that the International Emergency Economic Powers Act (“IEEPA”) does not provide the executive branch with the authority to impose certain tariffs. This ruling invalidated certain tariffs previously paid by the Company on goods imported from Thailand. FollowingWithin thishours decision,of that ruling, the presidential administrationWhite implementedHouse aissued tariffProclamation surcharge11012, underutilizing Section 122 of the Trade Act of 1974,1974 establishingto bypass the court decision and immediately instituted a minimumtemporary 10% dutyglobal import surcharge. U.S. Customs and Border Protection (CBP) officially began collecting the new 10% surcharge on imports,February subject24, 2026. Because Section 122 authority strictly limits emergency balance-of-payments surcharges to certain150 exemptions.days, this specific 10% global tariff met its statutory expiration date on July 24, 2026. Effective July 24, 2026, the U.S. government implemented a new 12.5% import tariff under Section 301 on various goods imported from Thailand and dozens of other trading partners, following an administration-led supply chain investigation.

These tariffs may impact certain goods that are assembled and imported into the U.S. from our manufacturer in Thailand if a reduction or resolution cannot be negotiated between the Thai and the U.S governments.Thailand. The majority of raw components used in the manufacturing and assembly of our printers and terminals are sourced locally in Thailand, and to a lesser extent, from other countries in the region, including China. As a result, we currently have a limited ability to mitigate the potential impact of tariffs on goods sold into the U.S. through alternative sourcing or manufacturing. We currently plan to mitigate any potential tariffs by raising prices to customers, but there can be no assurance that we will be able to pass on all tariff costs to customers via price increases. The Company is currentlycontinues evaluatingto monitor and evaluate the ongoing impact of these additional tariffs but does not expect them to have a material adverse effect on its operations or financial condition.

Since we generally have been able to pass on all tariff costs to our customers, they did not materially impact our results for the first quarter of 2026. Following the February 2026 U.S. Supreme Court ruling regarding IEEPA tariffs, the Company has initiated a process to claim refunds of approximately $0.5$0.6 million in previously paid duties. In line with its commitment to customer transparency, the Company also intends to reimburse certain customers for tariff costs previously passed through via pricing adjustments, subject to applicable law and any further legal or regulatory developments. WeThe continueCompany expects to monitorissue these reimbursements following successful receipt of funds from U.S. Customs and Border Protection. The timing and ultimate amount of these payments remain subject to the ongoing implicationsfederal Consolidated Administration and Processing of tariffsEntries (“CAPE”) portal processing timelines and potentialfinal increasesverification of eligible entries. In July 2026, subsequent to the quarter ended June 30, 2026, but prior to the issuance of these financial statements, the Company received partial payment of $0.5 million in tariffscash reimbursements from the government via the CAPE portal. The ultimate availability, timing and counter-tariffs.final Giventotal the continued lack of clarity, it is uncertain whether other countries will continueamount to seekbe negotiationsreceived orfrom retaliaterefunds asremains future developments occur, or whether the U.S. government will increase, eliminate or expand tariffs, reconsider or adjust tariffs based upon negotiations, or grant further exemptions.uncertain.

The continued effects of any global tariffs may potentially increase the likelihood of a recession, create a significant reduction in consumer confidence and customer demand, increase inflation or impact credit markets and interest rates. Any of these resulting effects could materially and adversely affect our business, financial condition and results of operations. For information regarding the risks related to our manufacturer in Thailand and global economic conditions, please see Part II,I, Item 1A, “Risk Factors,” of thisthe 2025 Form 10-Q.10-K.

Results of Operations: Three months ended MarchJune 31,30, 2026 compared to three months ended MarchJune 31,30, 2025

Net Sales: Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables (including labels) and maintenance and repair services, by market for the three months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except except percentages):

Net sales for the firstsecond quarter of 2026 increased $1.4$0.2 million, or 10%,1%, compared to the firstsecond quarter of 2025. The Company recorded a reduction in second quarter 2026 domestic casino and gaming sales of $1.0 million related to expected customer refunds as discussed earlier. Printer, terminal and other hardware unit sales volume increased 9%6% to approximately 26,90027,800 units, due primarily to a 16%6% unit sales volume increase in the casino and gaming market, partially offset by a 37%7% unit sales volume decrease in FST hardware (FST has a smaller base). Unit sales volume changes in TSG and POS automation were not material. For more information about the sales volume changes described above, please refer to the results of operations for each of our markets discussed further below. The average selling price of our printers, terminals and other hardwarehardware, excluding the impact of the aforementioned $1.0 million sales adjustment, was downup 1%2% in the first second quarter of 2026 compared to the firstsecond quarter of 2025. FST software, labels and other recurring revenue increased $0.7$0.4 million, or 26%,14%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 due primarily to increased software and label sales.

International sales for the firstsecond quarter of 2026 increased $692$100 thousand, or 30%,4%, from the same period in 2025 due primarily to increased sales in our casino and gaming market.

Sales of our worldwide FST products for the three months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

The decreaseincrease in food service technologyFST sales in the firstsecond quarter of 2026 compared to the first second quarter of 2025 of $0.4 million, or 9%, was driven by aan decreaseincrease in domesticboth hardwaresoftware and label sales. Hardware sales were particularlyrelatively strongflat in the first quarter of 2025 due to replacement sales of our BOHA! Terminal 2 to a large convenience store (replacing our BOHA! Terminal 1) and a large international QSR (replacing our AccuDate 9700), as well as a new sushi customer, that did not repeat in the first quarter of 2026. FST software, labels and other recurring revenue increased 26% for the firstsecond quarter of 2026 compared to the priorsecond yearquarter periodof 2025. FST software, labels and other recurring revenue increased 14% in the second quarter of 2026 compared to the second quarter of 2025 due largely to stronger software sales (up 47%) and label sales to(up our6%). newThe sushiincrease customerin andsoftware largesales conveniencewas storedriven describedby above.price increases.

Although FST revenues were lower in the first quarter of 2026 compared to the first quarter of 2025, weWe expect FST revenue to be higher in 2026 than in 2025 for the remainder of the year as we continue to focus on growing our installed base of terminals and the related recurring software revenue (including the sale of software, BOHA! labels labels, and other recurring revenue).

Sales of our POS automation products for the three months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

SalesPOS sales were consistent in the firstsecond quarter of 2026 compared to the firstsecond quarter of 20252025. as weWe believe sales have normalized at a new, lower level due to competitive pressures that have resulted in a decreased level of sales and a reduction in average selling prices in 2025 compared to prior periods. We expect POS automation sales for the remainder of 2026 to be comparable to our sales in 2025.

Casino and gaming. Revenue from from the casino and gaming market includes sales of thermal ticket printers used in slot machines, video lottery terminals, and other gaming machines that print tickets or receipts instead of issuing coins at casinos, racetracks, charitable gaming establishments and other gaming venues worldwide. Revenue from this market also includes sales of thermal roll-fed printers used in the international off-premise gaming market in gaming machines such as Amusement with Prizes, Skills with Prizes and Fixed Odds Betting Terminals and kiosks for sports betting at non-casino gaming and sports betting establishments. In addition, casino and gaming market revenue includes sales of the EPICENTRAL print system, our software solution, and is currently sold sold both directly and through certain casino system providers on a subscription basis,basis. thatEPICENTRAL enables casino operators to create promotional coupons and marketing messages and to print them in real time at the slot machine. Sales of our worldwide casino and gaming products for the three months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

Domestic sales of our casino and gaming products for the firstsecond quarter of 2026 decreased by $0.6 million, or 10% compared to the second quarter of 2025. The Company recorded a reduction in second quarter 2026 domestic casino and gaming sales of $1.0 million related to expected customer refunds as discussed earlier. Absent this adjustment, casino and gaming sales in the second quarter of 2026 increased bywould $1.0have been $8.3 million, or 20%up compared$0.7 tomillion and 9% from the firstsecond quarter of 2025. Sales during the first quarter of 2025 started to recover from a significant 2024 slowdown in order and shipment rates as our customers worked through their excess inventory that had accumulated as a hedge during the worldwide supply chain crisis ofin 2022 and 2023. Sales in the firstsecond quarter of 2026 were strongstrengthened as our major casino and gaming customers had fully workedsold through their on-hand inventory and began to order at higher more historical demand levels again. As a result of these factors, including higher expected demand, we expect our domestic casino and gaming sales to be higher in 2026 compared to 2025.

Our international casino and gaming sales were up 35%$0.3 million or 17% during the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, due to increased demand across multiple customers in both Europe and Australia. We expect our international sales to continue to be higher in 2026 compared to 2025.

TSG: Revenue generated by TSG includes includes sales of consumable products (POS receipt paper for non-FST legacy products), replacement parts and accessories, maintenance and repair services and shipping and handling charges. Sales in our worldwide TSG market for the three months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

The decreaseincrease in domestic revenue from TSG during the firstsecond quarter of 20262026, as compared to the firstsecond quarter of 20252025, was due largely to higher repair orders and higher shipping charges. The decrease in international revenue from TSG during the second quarter of 2026, as compared to the second quarter of 2025, was due to lower sales of replacement parts, as well as lower legacy consumables salesspares and service revenue.accessories.

We expect TSG sales to be somewhatremain lower in 2026 compared to 2025 as we ceased selling all our remaining legacy consumable products at the end of 2025.

Gross Profit. Gross profit information for the three months ended MarchJune 31,30, 2026 and 2025 is summarized below (in thousands, except percentages):

Gross profit is measured as revenue less cost of sales, which includes primarily the cost of all raw materials and component parts, direct labor, manufacturing manufacturing overhead expenses (including tariffs), cost of finished products purchased directly from our contract manufacturers, expenses associated with installations and support of our EPICENTRAL print system and BOHA! products and royalty payments to third parties, including to the former third-party licensor of our food service technologyFST software products (during 2025). In the firstsecond quarter of 2026, gross profit increased increased$0.4 $894 thousand,million, or 14%,5%, and gross margin increased 160200 basis points to 50% due primarilyin part to a 10% increase in overall sales, including a 24% increase inincreased sales inof ourFST casinorecurring revenue (software, labels and gamingother marketrecurring revenue) which carry higher average margins than our other markets.product This was partially offset by increased overhead costs and general inflation.offerings.

Operating Expenses - Engineering, Design Design and Product Development. Engineering, design and product development expense information for the three months ended MarchJune 31,30, 2026 and 2025 is summarized below (in thousands, except percentages):

Engineering, design and product development expenses primarily include salary and payroll-related expenses for our hardware and software engineering staff, depreciation and design expenses (including prototype printer expenses, outside design, development and testing services, supplies and contract software development expenses including those payments to the former third-party licensor of our foodFST service technology software products). Engineering, design and product development expenses decreased $255$0.5 thousand,million, or 16%,29%, for the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 due largely to thea capitalizationreduction ofin external consulting fees and lower bonus expense. Also, management capitalized certain internal labor costs associated with development activities related to the 2025 acquisition from Avery Dennison Corporation of a perpetual license to a copy of the source code for the BOHA! software. TransAct is capitalizing certain internal and external labor costs related to this project.project (see Note 2).

Operating Expenses - Selling and Marketing. Marketing. Selling and marketing expense information for the three months ended MarchJune 31,30, 2026 and 2025 is summarized below (in thousands, except percentages):

Selling and marketing expenses primarily include salaries and payroll-related expenses for our sales, marketing and customer success staff, sales commissions, travel expenses, expenses associated with the lease of sales offices, advertising, trade show expenses, public relations, e-commerce, other promotional marketing expenses and outsourced go-to-market consulting services. Selling and marketing expenses increased $112$0.6 thousand,million, or 5%,30%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 due to higher costs related to programs to further improve the Company’s go-to-market strategy, including the hire of additional sales, marketing and sales support staff, as well as higher sales commissions due to increased sales in 2026 compared to 2025.staff.

Operating Expenses - General and Administrative. General and administrative information for the three months ended MarchJune 31,30, 2026 and 2025 is summarized below (in thousands, thousands, except percentages):

General and administrative expenses primarily include salaries, incentive and share-based compensation, and other payroll-related expenses for our Chief Executive Executive Officer, Chief Financial Officer, accounting, human resources, corporate development and information technology staff, expenses for our corporate headquarters, professional and legal expenses, information technology expenses, board of director director expenses and other expenses related to being a publicly traded company. General and administrative expenses increased $251$12 thousand, or 10%,0.4%, during the first quartersecond of 2026 compared to the first quarter of 2025. This increase was driven largely by increased share-based compensation expense due to the timing of awards, recruiting fees for the hire of additional sales and marketing staff, and other fees and taxes in the first quarter of 2026 compared to the samesecond periodquarter inof 2025. Executive separation and associated legal expenses were partially offset by lower bonus and incentive compensation expense.

Operating IncomeLoss. (Loss). Operating income (loss) for the three months ended MarchJune 31,30, 2026 and 2025 is summarized below (in thousands, except percentages):