TRANSACT TECHNOLOGIES INC

Previous wording

TransAct is a leading provider of cloud-based 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. During 2019, we launched 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, 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.

Current wording

TransAct is a leading provider of SaaS 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. We also have a 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 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.

Previous wording

Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company’s operations and overall financial performance during the quarters ended March 31, 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 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.

Current wording

Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company’s operations and overall financial performance during the six months ended June 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 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.

Previous wording

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, the 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. Following this decision, the presidential administration implemented a tariff surcharge under Section 122 of the Trade Act of 1974, establishing a minimum 10% duty on imports, subject to certain exemptions.

Current wording

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. 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. Within hours of that ruling, the White House issued Proclamation 11012, utilizing Section 122 of the Trade Act of 1974 to bypass the court decision and immediately instituted a temporary 10% global import surcharge. U.S. Customs and Border Protection (CBP) officially began collecting the new 10% surcharge on February 24, 2026. Because Section 122 authority strictly limits emergency balance-of-payments surcharges to 150 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.

Previous wording

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. 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 currently evaluating the impact of these additional tariffs but does not expect them to have a material adverse effect on its operations or financial condition.

Current wording

These tariffs impact certain goods that are assembled and imported into the U.S. from our manufacturer in 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 mitigate 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 continues to monitor and evaluate the ongoing impact of these tariffs but does not expect them to have a material adverse effect on its operations or financial condition.

Previous wording

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 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. We continue to monitor the ongoing implications of tariffs and potential increases in tariffs and counter-tariffs. Given the continued lack of clarity, it is uncertain whether other countries will continue to seek negotiations or retaliate as 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.

Current wording

Following the February 2026 U.S. Supreme Court ruling regarding IEEPA tariffs, the Company has initiated a process to claim refunds of approximately $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. The Company expects to issue 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 federal Consolidated Administration and Processing of Entries (“CAPE”) portal processing timelines and final verification 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 cash reimbursements from the government via the CAPE portal. The ultimate availability, timing and final total amount to be received from refunds remains uncertain.

Previous wording

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, Item 1A, “Risk Factors,” of this Form 10-Q.

Current wording

The continued effects of 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 I, Item 1A, “Risk Factors,” of the 2025 Form 10-K.

Previous wording

Net sales for the first quarter of 2026 increased $1.4 million, or 10%, compared to the first quarter of 2025. Printer, terminal and other hardware unit sales volume increased 9% to approximately 26,900 units, due primarily toa 16% unit sales volume increase in the casino and gaming market, partially offset bya 37% 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 hardware was down 1% in the first quarter of 2026 compared to the first quarter of 2025. FST software, labels and other recurring revenue increased $0.7 million, or 26%, in the first quarter of 2026 compared to the first quarter of 2025 due primarily to increased label sales.

Current wording

Net sales for the second quarter of 2026 increased $0.2 million, or 1%, 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. Printer, terminal and other hardware unit sales volume increased 6% to approximately 27,800 units, due primarily toa 6% unit sales volume increase in the casino and gaming market, partially offset bya 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 hardware, excluding the impact of the aforementioned $1.0 million sales adjustment, was up 2% in the second quarter of 2026 compared to the second quarter of 2025. FST software, labels and other recurring revenue increased $0.4 million, or 14%, in the second quarter of 2026 compared to the second quarter of 2025 due to increased software and label sales.

Previous wording

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

Current wording

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

Previous wording

Sales were consistent in the first quarter of 2026 compared to the first quarter of 2025 as we believe sales have normalized at a new, lower level due to competitive pressures that 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.

Current wording

POS sales were consistent in the second quarter of 2026 compared to the second quarter of 2025. We believe sales have normalized at a 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.

Previous wording

Casino and gaming. Revenue 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, currently sold both directly and through certain casino system providers on a subscription basis, that 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 March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Current wording

Casino and gaming. Revenue 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 both directly and through certain casino system providers on a subscription basis. EPICENTRAL 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 June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Previous wording

The decrease in domestic revenue from TSG during the first quarter of 2026 as compared to the first quarter of 2025 was due largely to lower sales of replacement parts, as well as lower legacy consumables sales and service revenue.

Current wording

The increase in domestic revenue from TSG during the second quarter of 2026, as compared to the second quarter of 2025, 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 spares and accessories.

Previous wording

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 thousand, or 5%, in the first quarter of 2026 compared to the first 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.

Current wording

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 $0.6 million, or 30%, in the second quarter of 2026 compared to the second 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.

Previous wording

General and administrative expenses primarily include salaries, incentive and share-based 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, professional and legal expenses, information technology expenses, board of director expenses and other expenses related to being a publicly traded company. General and administrative expenses increased $251 thousand, or 10%, during the first quarter 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 same period in 2025.

Current wording

General and administrative expenses primarily include salaries, incentive and share-based 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, professional and legal expenses, information technology expenses, board of director expenses and other expenses related to being a publicly traded company. General and administrative expenses increased $12 thousand, or 0.4%, during the second quarter of 2026 compared to the second quarter of 2025. Executive separation and associated legal expenses were partially offset by lower bonus and incentive compensation expense.

Previous wording

Interest, net. We recorded net interest income of $66 thousand in the first quarter of 2026 compared to $22 thousand in the first quarter of 2025. For both quarters, we were required to maintain outstanding borrowings of at least $3 million in principal amount on our Siena Credit Facility. We maintained a higher average level of invested cash during the first quarter of 2026 compared to the first quarter of 2025 which resulted in higher interest income in the 2026 period.

Current wording

Interest, net. We recorded net interest income of $59 thousand in the second quarter of 2026 compared to $40 thousand in the second quarter of 2025. For both quarters, we were required to maintain outstanding borrowings of at least $3.0 million in principal amount on our Siena Credit Facility. We maintained a higher average level of invested cash during the second quarter of 2026 compared to the second quarter of 2025 which resulted in higher interest income in the 2026 period.

Previous wording

Other, net. Other, net primarily includes foreign exchange gains and losses by our UK subsidiary. During the first quarter of 2026 we recognized $48 thousand of foreign exchange losses compared to $63 thousand of foreign exchange gains in the first quarter of 2025. Going forward, we may continue to experience more foreign exchange gains or losses depending on the level of sales to European customers through our UK subsidiary and the fluctuation in exchange rates of the euro and pound sterling against the U.S. dollar.

Current wording

Other, net. Other, net primarily includes foreign exchange gains and losses by our UK subsidiary. During the second quarter of 2026 we recognized $25 thousand of foreign exchange losses compared to $115 thousand of foreign exchange gains in the second quarter of 2025. Going forward, we may continue to experience more foreign exchange gains or losses depending on the level of sales to European customers through our UK subsidiary and the fluctuation in exchange rates of the euro and pound sterling against the U.S. dollar.

Previous wording

Income Taxes. We recorded an income tax expense in the first quarter of 2026 of $23 thousand at an effective tax rate of 2.9%, compared to income tax expense during the first quarter of 2025 of $51 thousand at an effective tax rate of 72.9%. In the fourth quarter of 2024, the Company recorded a valuation allowance on the full value of its U.S. federal net deferred tax asset. The need for this valuation allowance has been assessed as of March 31, 2026 and management continues to believe this valuation allowance is appropriate. As such, we recorded no U.S. federal income tax expense during the first quarter of 2026 and the first quarter of 2025. The effective tax rate for the first quarter of 2026 was low due to tax expense only being recorded on income taxes associated with earnings in the United Kingdom and minimum required state income taxes in the United States. The effective tax rate for the first quarter of 2025 was unusually high due to (1) a near-breakeven level of pre-tax earnings of $70 thousand and (2) tax expense only included taxes associated with earnings in the United Kingdom and minimum required state taxes in the United States.

Current wording

Income Taxes. We recorded an income tax expense in the second quarter of 2026 of $30 thousand compared to income tax expense during the second quarter of 2025 of $40 thousand. In the fourth quarter of 2024, the Company recorded a valuation allowance on the full value of its U.S. federal net deferred tax asset. The need for this valuation allowance has been reassessed as of June 30, 2026 and management continues to believe this valuation allowance is appropriate. As such, we recorded no U.S. federal income tax expense during the second quarter of 2026 and the second quarter of 2025. Our tax expense for both periods only includes taxes associated with earnings in the United Kingdom and minimum required state taxes in the United States.

Previous wording

The decrease in food service technology sales in the first quarter of 2026 compared to the first quarter of 2025 was driven by a decrease in domestic hardware sales. Hardware sales were particularly strong 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 first quarter of 2026 compared to the prior year period due largely to stronger label sales to our new sushi customer and large convenience store described above.

Current wording

The increase in FST sales in the first six months of 2026 compared to the first six months of 2025 was driven by a $1.1 million increase in software, labels and other recurring revenue, partially offset by a $0.9 million decrease in hardware sales. Hardware sales were particularly strong in the first six months 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 six months of 2026. FST software, labels and other recurring revenue increased 19% in the first six months of 2026 compared to the prior year period due largely to stronger label sales (up $0.7 million due primarily to a large order by an existing customer) and stronger software sales (up $0.3 million or 35%). The increase in software sales was driven by price increases.

Previous wording

Although FST revenues were lower in the first quarter of 2026 compared to the first quarter of 2025, we 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 BOHA! labels and other recurring revenue).

Current wording

Although FST revenues were relatively flat in the first six months of 2026 compared to the first six months of 2025, we 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 software, BOHA! labels and other recurring revenue).

Previous wording

Domestic sales of our casino and gaming productsfor the first quarter of 2026 increased by $1.0 million, or 20% compared to the first 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 of 2022 and 2023. Sales in the first quarter of 2026 were strong as our major casino and gaming customers had fully worked through their on-hand inventory and began to order at higher 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.

Current wording

Domestic sales of our casino and gaming productsfor the first six months of 2026 increased by $0.4 million, or 3% compared to the first six months of 2025. As noted, the Company recorded a reduction in 2026 domestic casino and gaming salesof $1.0 million in thesecond quarter of 2026 related toexpected customer refunds. Absent this adjustment, casino and gaming sales in the first six months of 2026 would have been $16.7 million, or up $2.3 million and 16% from the first six months 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 a worldwide supply chain crisis of 2022 and 2023. Sales in the first six months of 2026 strengthened as our major casino and gaming customers had sold through their on-hand inventory and began to order at 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.

Previous wording

Our international casino and gaming sales were up 35% during the first quarter of 2026 compared to the first 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.

Current wording

Our international casino and gaming sales were up 27% during the first six months of 2026 compared to the first six months 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.

Previous wording

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

Current wording

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

Previous wording

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 (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 technology software products (during 2025). Inthe first quarter of 2026, gross profit increased $894 thousand, or 14%, and gross margin increased 160 basis points to 50% due primarily to a 10% increase in overall sales, including a 24% increase in sales in our casino and gaming market which carry higher average margins than our other markets. This was partially offset by increased overhead costs and general inflation.

Current wording

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 (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 FST software products (during 2025). Inthe first six months of 2026, gross profit increased $1.2 million, or 10%, and gross margin increased 180 basis points to 50% due primarily to a 6% increase in overall sales, including a 9% increase in sales in our casino and gaming market, as well as increased sales of FST recurring revenue (software, labels and other recurring revenue) which both carry higher average margins than our other product offerings. This was partially offset by increased overhead costs and general inflation.

Previous wording

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 food service technology software products). Engineering, design and product development expenses decreased $255 thousand, or 16%, for the first quarter of 2026 compared to the first quarter of 2025 due largely to the capitalization of 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 related to this project.

Current wording

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 FST software products). Engineering, design and product development expenses decreased $0.8 million, or 22%, for the first six months of 2026 compared to the first six months of 2025 due largely to a reduction in external consulting fees, lower bonus expense and the capitalization of 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.

Previous wording

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

Current wording

Operating Income (Loss). Operating income (loss) for the six months ended June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Previous wording

Our operating income (loss) increased $786 thousand in the first quarter of 2026 compared to the first quarter of 2025 due largely to a $1.4 million, or 10% increase in sales and a resulting $894 thousand increase in gross profit combined with relatively flat operating expenses (operating expenses were up only $108 thousand, or 2% in the first quarter of 2026 compared to the first quarter of 2025).

Current wording

Our operating income (loss) improved by $1.0 million in the first six months of 2026 compared to the first six months of 2025 due largely to a $1.5 million, or 6% increase in sales and a resulting $1.2 million increase in gross profit, combined with relatively flat operating expenses (operating expenses increased only $0.3 million, or 2%, in the first six months of 2026, compared to the first six months of 2025).

Previous wording

In the first three months of 2026, our cash and cash equivalents balance decreased $1.6 million, or 8%, from December 31, 2025. We ended the first quarter of 2026 with $18.8 million in cash and cash equivalents, of which $0.3 million was held by our UK subsidiary.

Current wording

In the first six months of 2026, our cash and cash equivalents balance decreased $1.0 million, or 5%, from December 31, 2025. We ended the second quarter of 2026 with $19.4 million in cash and cash equivalents, of which $0.3 million was held by our UK subsidiary.

Previous wording

Operating activities: The following significant factors affected our cash used in operating activities of $946 thousand for the first three months of 2026 as compared to cash used in operating activities of $161 thousand for the first three months of 2025:

Current wording

Operating activities: The following significant factors affected our cash provided by operating activities of $1.2 million for the first six months of 2026 as compared to cash provided by operating activities of $3.4 million for the first six months of 2025:

Previous wording

Investing activities: Our capital expenditures were $80 thousand for the first three months of 2026 compared to $10 thousand for the first three months of 2025. Expenditures for both periods were primarily for computer and networking equipment and new tooling equipment. We also incurred $0.5 million in capitalized software development costs during the first three months of 2026 related to our purchase of a copy of the source code related to our BOHA! line of products.

Current wording

Investing activities: Our capital expenditures were $137 thousand for the first six months of 2026 compared to $29 thousand for the first six months of 2025. Expenditures for both periods were primarily for computer and networking equipment and new tooling equipment. We also paid $2.0 million in capitalized software development costs during the first six months of 2026 related to our purchase of a copy of the source code related to our BOHA! line of products.

Previous wording

Financing activities: Financing activities used $69 thousand of cash during the first three months of 2026 compared to $50 thousand in cash used during the first three months of 2025. These amounts relate to cash used to pay withholding taxes on stock issued from our stock compensation plans.

Current wording

Financing activities: Financing activities used $93 thousand of cash during the first six months of 2026 compared to $50 thousand in cash used during the first six months of 2025. These amounts relate to cash used to pay withholding taxes on stock issued from our stock compensation plans.