{"url_path":"/sec/tact/10-q/2026/item-8","section_key":"item-8","section_title":"Item 8 “Financial Statements and Supplementary Data” in the 2025 Form 10-K.  There have been no changes to our significant accounting policies since the 2025 Form 10-K.","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1017303/0001140361-26-021058-index.html","accession_number":"0001140361-26-021058","cik":"0001017303","ticker":"TACT","issuer_name":"TRANSACT TECHNOLOGIES INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1017303/0001140361-26-021058-index.html","primary_entity_key":"0001017303","primary_entity_name":"TRANSACT TECHNOLOGIES INC"},"word_count":3484,"has_tables":true,"body_markdown":"Item 8. “Financial Statements and Supplementary Data” in the 2025 Form 10-K.  There have been no changes to our significant accounting policies since the 2025 Form 10-K.\n\nIntangible assets:\n\nThe Company accounts for software development costs for products to be sold or marketed in accordance with Accounting Standards Codification (“ASC”) 985-20, Software -- Costs of Software to\nBe Sold, Leased, or Marketed. Costs incurred to establish the technological feasibility of a software product are engineering, design and product development costs and are expensed as incurred. Technological feasibility is established when the\nCompany has completed all planning, designing, coding, and testing activities necessary to determine that a product can be produced to meet its design specifications. Capitalization of software costs begins upon the establishment of technological\nfeasibility and ceases when the product is available for general release to customers. Capitalized software costs are amortized on a product-by-product basis using the straight-line method over the estimated economic life of the product, or the ratio\nof current gross revenues to total current and anticipated future gross revenues, whichever is greater. During the quarter ended March 31, 2026, the Company capitalized $0.5 million of software development costs. Amortization will commence upon completion and release to customers and will be over\nan estimated useful life of seven years.\n\n9\n\n[Index](#INDEX)\n\nRecently issued accounting pronouncements:\n\nIn November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation\nof Income Statement Expenses. The amendments in this update require footnote disclosures on disaggregated information about specific categories underlying certain income statement expense line items that are considered relevant.  This includes\nitems such as the purchase of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal\nyears beginning after December 15, 2027. Early adoption is permitted. We expect that adoption of this ASU will result in additional disclosure, but will not impact our consolidated financial position, results of operations, or cash flows.\n\nIn September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for\nInternal-Use Software. The amendments in this update remove all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40. The amendments in this update specify that the\ndisclosures in Subtopic 360-10, Property, Plant, and Equipment—Overall, are required for all capitalized internal-use software costs, regardless of how those costs are presented in the financial statements. Additionally, the amendments clarify\nthat the intangibles disclosures in paragraphs 350-30-50-1 through 50-3 are not required for capitalized internal-use software costs. The amendments in ASU 2025-06 are effective for fiscal years beginning after December 15, 2027, and interim\nreporting periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the impact of this standard.\n\nOn January 1, 2026, the Company adopted ASU 2025-05, which provides a practical expedient for estimating expected credit losses. Under this standard, the\nCompany elected the practical expedient that allows for the measurement of expected credit losses based on the assumption that current conditions will persist through the end of the contractual term of the financial assets. By electing this\nexpedient, the Company is no longer required to develop or incorporate complex, forward-looking forecasts or revert to historical loss descriptions for the remaining life of the assets. The Company applied this transition to its accounts\nreceivable assets using a modified retrospective approach. The adoption did not have a material impact on the Company’s consolidated financial statements or opening retained earnings, as the current economic environment at the time of\nadoption was consistent with the historical loss experience and existing trends previously utilized in our CECL models.\n\nOther new accounting pronouncements issued, but not effective until after March 31, 2026, did not and are not expected to have a material impact on our financial\nposition, results of operations or liquidity.\n\n3. Revenue\n\nWe account for revenue in accordance with ASC 606.\n\nDisaggregation of revenue\n\nThe following tables disaggregate our revenue by market type, as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows\nare affected by economic factors.  Sales and usage-based taxes are excluded from revenues.\n\n \n\nThree Months Ended\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n \n\n(In thousands)\n\n \n\n \n\n \n\nUnited States\n\n \n\n \n\nInternational\n\n \n\n \n\nTotal\n\n \n\n \n\nUnited States\n\n \n\n \n\nInternational\n\n \n\n \n\nTotal\n\n \n\nFood service technology\n\n \n\n$\n\n4,376\n\n \n\n \n\n$\n\n316\n\n \n\n \n\n$\n\n4,692\n\n \n\n \n\n$\n\n4,622\n\n \n\n \n\n$\n\n286\n\n \n\n \n\n$\n\n4,908\n\n \n\nPOS automation\n\n \n\n \n\n620\n\n \n\n \n\n \n\n–\n\n \n\n \n\n \n\n620\n\n \n\n \n\n \n\n618\n\n \n\n \n\n \n\n–\n\n \n\n \n\n \n\n618\n\n \n\nCasino and gaming\n\n \n\n \n\n5,782\n\n \n\n \n\n \n\n2,557\n\n \n\n \n\n \n\n8,339\n\n \n\n \n\n \n\n4,822\n\n \n\n \n\n \n\n1,897\n\n \n\n \n\n \n\n6,719\n\n \n\nTransAct Services Group\n\n \n\n \n\n638\n\n \n\n \n\n \n\n126\n\n \n\n \n\n \n\n764\n\n \n\n \n\n \n\n684\n\n \n\n \n\n \n\n124\n\n \n\n \n\n \n\n808\n\n \n\nTotal net sales\n\n \n\n$\n\n11,416\n\n \n\n \n\n$\n\n2,999\n\n \n\n \n\n$\n\n14,415\n\n \n\n \n\n$\n\n10,746\n\n \n\n \n\n$\n\n2,307\n\n \n\n \n\n$\n\n13,053\n\n \n\n10\n\n[Index](#INDEX)\n\nContract balances\n\nContract assets consist of unbilled receivables.  Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the customer being invoiced. \nAn unbilled receivable is recorded to reflect revenue that is recognized when such revenue exceeds the amount invoiced to the customer. Unbilled receivables are separated into current and non-current assets and included within “Accounts receivable,\nnet” and “Other assets” in the Condensed Consolidated Balance Sheets.\n\nContract liabilities consist of customer pre-payments and deferred revenue.  Customer prepayments are reported as “Accrued liabilities” in current liabilities in the\nCondensed Consolidated Balance Sheets and represent customer payments made in advance of performance obligations in instances where credit has not been extended and are recognized as revenue when the performance obligation is complete.  Deferred\nrevenue is reported separately in current liabilities and non-current liabilities and consists of our extended warranty contracts, technical support for our food service technology terminals, EPICENTRAL maintenance contracts and prepaid software\nsubscriptions for our BOHA! software applications and is recognized as revenue as (or when) we perform under the contract.  For the three\nmonths ended March 31, 2026, we recognized revenue of $0.5 million related to our contract liabilities at December 31, 2025. Total net\ncontract liabilities consisted of the following:\n\n \n\nMarch 31, 2026\n\n \n\n \n\nDecember 31, 2025\n\n \n\n \n\n \n\n(In thousands)\n\n \n\nUnbilled receivables, current\n\n \n\n$\n\n20\n\n \n\n \n\n$\n\n31\n\n \n\nUnbilled receivables, net of current portion\n\n \n\n \n\n–\n\n \n\n \n\n \n\n1\n\n \n\nCustomer pre-payments\n\n \n\n \n\n(45\n\n)\n\n \n\n \n\n(26\n\n)\n\nDeferred revenue, current\n\n \n\n \n\n(1,340\n\n)\n\n \n\n \n\n(1,400\n\n)\n\nDeferred revenue, net of current portion\n\n \n\n \n\n(322\n\n)\n\n \n\n \n\n(355\n\n)\n\nTotal net contract liabilities\n\n \n\n$\n\n(1,687\n\n)\n\n \n\n$\n\n(1,749\n\n)\n\nRemaining performance obligations\n\nRemaining\n\nperformance obligations represent the transaction price of firm orders for which a good or service has not been delivered to our customer.  As of March 31, 2026,\nthe aggregate amount of transaction prices allocated to remaining performance obligations was $6.4 million.  The Company expects to recognize revenue of $6.0\nmillion of its remaining performance obligations within the next 12 months following March 31, 2026, $0.3 million within the next 24 months\nfollowing March 31, 2026 and the balance\nof these remaining performance\nobligations recognized within the next 36 months following March 31, 2026.\n\n4. Inventories\n\nThe components of inventories were:\n\n \n\nMarch 31, 2026\n\n \n\n \n\nDecember 31, 2025\n\n \n\n \n\n \n\n(In thousands)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nRaw materials and purchased component parts\n\n \n\n$\n\n4,234\n\n \n\n \n\n$\n\n4,797\n\n \n\nFinished goods\n\n \n\n \n\n5,340\n\n \n\n \n\n \n\n6,061\n\n \n\n \n\n \n\n$\n\n9,574\n\n \n\n \n\n$\n\n10,858\n\n \n\n11\n\n[Index](#INDEX)\n\n5. Borrowings\n\nCredit Facility\n\nWe are party to a Loan and Security Agreement, dated as of March 13, 2020 (as amended, the “Loan Agreement”), with Siena Lending Group LLC (the “Lender”) that provides for a\nrevolving 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 (b) 50% of eligible raw material and 60% of\nfinished goods inventory (the “Siena Credit 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\nunused 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.\n\nThe 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\nadditional indebtedness and create other liens. We have remained in compliance with our excess availability covenant through March 31, 2026.\n\nThe Company is required to either maintain outstanding borrowings under the Siena Credit Facility of at least $3.0 million in principal amount, or during any period during which the Lender has control of the Company’s deposit account in accordance with the Loan Agreement, to pay\ninterest on at least $3.0 million principal amount of loans, whether or not such amount of loans is actually outstanding. The maturity\ndate of the Siena Credit Facility is March 31, 2027.\n\nAs of March 31, 2026, we had $3.0 million of outstanding borrowings under the Siena Credit Facility at an interest rate of 8.50%. We had $2.8 million of net borrowing capacity available\nunder the Siena Credit Facility at March 31, 2026.\n\n6. Segment reporting\n\nWe apply the provisions of ASC Topic 280: Segment Reporting.  We view\nour operations and manage our business as one segment: the design, development, and marketing of software-driven technology and printing\nsolutions for high growth markets, and provide related services, supplies and spare parts.  Factors used to identify TransAct’s single operating segment include\nthe similar design, construction and functionality of our products and services, the combined research & development team that supports the entire company, a combined assembly, production and supply chain logistics process used to construct our\nproducts and services and a similar class of customers within our core markets (distributors, resellers, original equipment manufacturers (“OEMs”) and end users).\n\nOther factors used to identify TransAct’s single operating segment include the organizational structure of the Company and the financial information\navailable for evaluation by the chief operating decision-maker (“CODM”) in making decisions about how to allocate resources and assess performance.  The Company’s CODM\nfunction is performed by the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, who utilize a consolidated approach to assess the performance of and allocate resources to the business.\n\nThe CODM generally uses measures of sales, gross margin percentage, net income, earnings before interest, taxes, depreciation and amortization (“EBITDA”)\nand adjusted EBITDA to make operational and strategic decisions.  These financial measures are compared to budgeted and forecasted amounts by the CODMs on a regular\nbasis to measure our progress towards our strategic plans, pursue product enhancements, conduct research and development initiatives and make any other necessary overall strategic changes to the business. We disclose these non-GAAP segment results\nbecause we believe they provide meaningful supplemental information and are used by the CODM in making decisions about how to allocate resources and assess performance.\n\n12\n\n[Index](#INDEX)\n\nThe following table provides the operating financial results of our segment:\n\n \n\nMarch 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n \n\n(In thousands)\n\n \n\nRevenues\n\n \n\n$\n\n14,415\n\n \n\n \n\n$\n\n13,053\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCost of materials sold\n\n \n\n \n\n5,132\n\n \n\n \n\n \n\n4,964\n\n \n\nCompensation costs\n\n \n\n \n\n4,961\n\n \n\n \n\n \n\n4,837\n\n \n\nProfessional services\n\n \n\n \n\n815\n\n \n\n \n\n \n\n971\n\n \n\nOccupancy costs\n\n \n\n \n\n386\n\n \n\n \n\n \n\n364\n\n \n\nMarketing expenses\n\n \n\n \n\n163\n\n \n\n \n\n \n\n244\n\n \n\nIT expenses\n\n \n\n \n\n345\n\n \n\n \n\n \n\n329\n\n \n\nSeverance expense\n\n \n\n \n\n42\n\n \n\n \n\n \n\n7\n\n \n\nDepreciation and amortization\n\n \n\n \n\n158\n\n \n\n \n\n \n\n173\n\n \n\nOther segment expenses\n\n \n\n \n\n1,642\n\n \n\n \n\n \n\n1,179\n\n \n\n \n\n \n\n \n\n13,644\n\n \n\n \n\n \n\n13,068\n\n \n\nOperating income (loss)\n\n \n\n \n\n771\n\n \n\n \n\n \n\n(15\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInterest income\n\n \n\n \n\n145\n\n \n\n \n\n \n\n107\n\n \n\nInterest expense\n\n \n\n \n\n(79\n\n)\n\n \n\n \n\n(85\n\n)\n\nOther, net\n\n \n\n \n\n(48\n\n)\n\n \n\n \n\n63\n\n \n\nIncome tax expense\n\n \n\n \n\n(23\n\n)\n\n \n\n \n\n(51\n\n)\n\nNet income\n\n \n\n$\n\n766\n\n \n\n \n\n$\n\n19\n\n \n\nOther segment expenses included in segment net income primarily include other cost of goods sold, other administrative costs and engineering costs.\n\nA reconciliation of net income to EBITDA and adjusted EBITDA follows:\n\n \n\nMarch 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n(unaudited)\n\n \n\n(In thousands)\n\n \n\nNet income\n\n \n\n$\n\n766\n\n \n\n \n\n$\n\n19\n\n \n\nInterest income, net\n\n \n\n \n\n(66\n\n)\n\n \n\n \n\n(22\n\n)\n\nIncome tax expense\n\n \n\n \n\n23\n\n \n\n \n\n \n\n51\n\n \n\nDepreciation and amortization\n\n \n\n \n\n158\n\n \n\n \n\n \n\n173\n\n \n\nEBITDA\n\n \n\n \n\n881\n\n \n\n \n\n \n\n221\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nShare-based compensation\n\n \n\n \n\n511\n\n \n\n \n\n \n\n323\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAdjusted EBITDA\n\n \n\n$\n\n1,392\n\n \n\n \n\n$\n\n544\n\n \n\n13\n\n[Index](#INDEX)\n\n7. Earnings per share\n\nThe following table sets forth the reconciliation of basic and diluted weighted average shares outstanding:\n\n \n\n \n\nThree Months Ended\n\n \n\n \n\n \n\nMarch 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n \n\n(In thousands, except per-share data)\n\n \n\n \n\n \n\n \n\n \n\nNet income\n\n \n\n$\n\n766\n\n \n\n \n\n$\n\n19\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nShares:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nBasic:  Weighted average common shares outstanding\n\n \n\n \n\n10,178\n\n \n\n \n\n \n\n10,043\n\n \n\nAdd:  Dilutive effect of outstanding options and restricted stock units as determined by the\ntreasury stock method\n\n \n\n \n\n55\n\n \n\n \n\n \n\n11\n\n \n\nDiluted:  Weighted average common and common equivalent shares outstanding\n\n \n\n \n\n10,233\n\n \n\n \n\n \n\n10,054\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nNet income per common share:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nBasic\n\n \n\n$\n\n0.08\n\n \n\n \n\n$\n\n0.00\n\nDiluted\n\n \n\n$\n\n0.07\n\n \n\n \n\n$\n\n0.00\n\nThe computation of basic net earnings per share for each period is computed by dividing earnings by the basic weighted average number of common\nshares outstanding during the period.  Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been\noutstanding related to potentially dilutive securities under the treasury stock method (including stock options, restricted stock units and performance stock units), if the impact is dilutive.\n\nWhen the average market price of our common stock is lower than the exercise price of the related stock option during the period, the\ncomputation of diluted earnings per share excludes the effect of the potential exercise of these stock option awards because the effect of including these stock option exercises would be anti-dilutive. Furthermore, in periods when a net loss is\nreported, basic and diluted net loss per common share are calculated using the same method.\n\nThere were 1.1 million and 1.4 million anti-dilutive stock awards excluded from the computation of earnings per share for the quarters ended March 31, 2026, and March 31, 2025, respectively. \n\n8. Leases\n\nWe account for leases in accordance with ASC Topic 842: Leases.\n\nWe enter into lease agreements for the use of real estate space and certain equipment under operating leases and we have no financing leases. Our leases are included\nin “Right-of-use-assets” and “Lease liabilities” in our Condensed Consolidated Balance Sheets. Our leases have various lease terms, some of which include options to extend. Lease expense is recognized on a straight-line basis over the lease term.\n\nOn March 31, 2026, we amended our lease agreement for our facility in Ithaca, New York. This amendment extends the expiration of the lease from May 31, 2026 to\nSeptember 30, 2031, resulting in a $3.0 million increase in our right of use assets and lease liabilities.\n\n \n\nOperating lease expense for the three months ended March 31, 2026\nand 2025 was $235\nthousand and $259 thousand, respectively, and is reported as “Cost of sales”, “Engineering, design and product development expense”,\n“Selling and marketing expense”, and “General and administrative expense” in the Condensed Consolidated Statements of Operations.  Operating lease expenses include short-term lease costs, which were immaterial for the periods presented.\n\n14\n\n[Index](#INDEX)\n\nThe following information represents supplemental disclosure for the statement of cash flows related to operating leases (in thousands):\n\n \n\nThree Months Ended,\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nOperating cash outflows from leases\n\n \n\n$\n\n217\n\n \n\n \n\n$\n\n259\n\n \n\nThe following summarizes additional information related to our leases as of March 31, 2026 and December 31, 2025:\n\n \n\nMarch 31, 2026\n\n \n\n \n\nDecember 31, 2025\n\n \n\nWeighted average remaining lease term (in years)\n\n \n\n \n\n5.2\n\n \n\n \n\n \n\n2.3\n\n \n\nWeighted average discount rate\n\n \n\n \n\n9.7\n\n%\n\n \n\n \n\n9.1\n\n%\n\nThe maturity of the Company’s operating lease liabilities as of March 31, 2026\nand December 31, 2025 were as follows (in thousands):\n\n \n\nMarch 31, 2026\n\n \n\n \n\nDecember 31, 2025\n\n \n\n2026\n\n \n\n$\n\n594\n\n \n\n \n\n$\n\n376\n\n \n\n2027\n\n \n\n \n\n764\n\n \n\n \n\n \n\n82\n\n \n\n2028\n\n \n\n \n\n778\n\n \n\n \n\n \n\n82\n\n \n\n2029\n\n \n\n \n\n813\n\n \n\n \n\n \n\n82\n\n \n\nThereafter\n\n \n\n \n\n1,260\n\n \n\n \n\n \n\n–\n\n \n\nTotal undiscounted lease payments\n\n \n\n \n\n4,209\n\n \n\n \n\n \n\n622\n\n \n\nLess imputed interest\n\n \n\n \n\n846\n\n \n\n \n\n \n\n61\n\n \n\nTotal lease liabilities\n\n \n\n$\n\n3,363\n\n \n\n \n\n$\n\n561\n\n \n\n9. Income taxes\n\nWe recorded 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 in the first quarter of\n2025 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\nbeen assessed as of March 31, 2026 and management continues to believe that the negative evidence, as further discussed below, continues to support our valuation allowance. 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\nexpense only being recorded on income taxes associated with earnings in the United Kingdom and minimum required state taxes in the United States. The effective tax rate for the first quarter of 2025 was unusually high due to (1) a near-breakeven\nlevel of pre-tax earnings of $70 thousand and (2) tax expense only included taxes associated with earnings in the United Kingdom and\nminimum required state taxes in the United States.\n\nAs of March 31, 2026 and December 31, 2025, we had $8.5\nmillion and $8.7 million, respectively, of valuation allowance against our net deferred income tax assets in multiple global tax\njurisdictions.  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.  Federal net operating losses can be carried forward indefinitely, however\nthese indefinite-lived NOLs are generally limited to offsetting 80% of taxable income in any given year. The Federal R&D credit carryforwards typically have a 20-year carryforward period.\n\nIn evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in carryback\nperiods, future reversals of taxable temporary differences, projections of taxable income, income from tax planning strategies, as well as all available positive and negative evidence.  Positive evidence includes factors such as a history of\nprofitable 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\nchanges 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\nallowances are re-examined on a quarterly basis under the same standards of positive and negative evidence.\n\n15\n\n[Index](#INDEX)\n\nWe are subject to U.S. federal income tax, as well as income tax in certain U.S. state and foreign jurisdictions.  We have substantially concluded\nall U.S. federal, state and local income tax, and foreign tax regulatory examination matters through 2021.  However, our federal tax returns for the years 2022 through 2025 remain open to examination. Various U.S. state and foreign tax jurisdiction\ntax years remain open to examination as well, but we believe that any additional assessment would be immaterial to the Condensed Consolidated Financial Statements.\n\n10. Subsequent events\n\nThe Company is continuously monitoring the ongoing U.S. government’s executive order tariffs and counter\ntariffs imposed on the U.S. by certain countries.  Since February 2025, the U.S. government has issued several executive orders imposing tariffs on imports from most countries with which the U.S. engages in trade, including a minimum 10% duty on\nimports, subject to certain exemptions, pursuant to Section 122 of the Trade Act of 1974. We are currently dependent upon a manufacturer located in Thailand for the manufacturing and assembly of substantially all of our printers and terminals. 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\nwith the authority to impose certain tariffs. This ruling invalidated certain tariffs previously paid by the Company on goods imported from Thailand. Following the Supreme Court’s ruling that IEEPA-based tariffs were unlawful, the Court of\nInternational Trade (“CIT”) ordered U.S. Customs and Border Protection (“CBP”) to provide a process for the refund of collected tariffs. The refund mechanism allows importers to file claims for duties paid on shipments through a declaration in\nthe Consolidated Administration and Processing of Entries (“CAPE”) system, which was launched on April 20, 2026. See Note 1 Basis of presentation.\n\nOn April 28, 2026, the Company’s Board of Directors approved a share repurchase program authorizing the purchase of up to $3 million of the Company’s outstanding common stock. Under this program, the Company may repurchase shares from time to time in the open market, through negotiated\ntransactions, or other legal means, depending on market conditions, share price, and other factors. The program has a term of one year,\nunless terminated earlier by the Board of Directors. The repurchase program will be funded using the Company’s existing cash balance and cash generated from operations.\n\nThe Company has evaluated all other events or transactions that occurred up to the date the Condensed Consolidated Financial Statements were available to be issued. \nBased upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Condensed Consolidated Financial Statements.\n\n16\n\n[Index](#INDEX)"}