UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-21121
TRANSACT TECHNOLOGIES INC
(Exact name of registrant as specified in its charter)
Delaware
06-1456680
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One Hamden Center,
2319 Whitney Avenue, Suite 3B, Hamden,
CT
06518
(Address of principal executive offices)
(Zip Code)
(203) 859-6800
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.01 per share
TACT
NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its
management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark
whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $33,000,000 based on the last sale price on June 30, 2024.
As of March 14, 2025, the number of
shares outstanding of the registrant’s common stock, par value $0.01 per share, was 10,080,717.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement related to its 2025 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the Securities and Exchange Commission
within 120 days after the Registrant’s fiscal year end of December 31, 2024 are incorporated by reference into Part III of this Annual Report on Form 10-K.
TRANSACT TECHNOLOGIES INCORPORATED
INDEX
PART I.
Item 1.
Business
2
Item 1A.
Risk Factors
6
Item 1B.
Unresolved Staff Comments
20
Item 1C.
Cybersecurity
21
Item 2.
Properties
22
Item 3.
Legal Proceedings
22
Item 4.
Mine Safety Disclosures
22
PART II.
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
23
Item 6.
[Reserved]
23
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
23
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
32
Item 8.
Financial Statements and Supplementary Data
32
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
32
Item 9A.
Controls and Procedures
32
Item 9B.
Other Information
32
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
32
PART III.
Item 10.
Directors, Executive Officers and Corporate Governance
33
Item 11.
Executive Compensation
33
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
33
Item 13.
Certain Relationships and Related Transactions, and Director Independence
33
Item 14.
Principal Accountant Fees and Services
33
PART IV.
Item 15.
Exhibits and Financial Statement Schedules
34
Item 16.
Form 10-K Summary
36
SIGNATURES
37
CONSOLIDATED FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
F-1
Index
Smaller Reporting Company—Scaled Disclosure
Pursuant to Item 10(f) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”), as indicated herein, we have
elected to comply with certain scaled disclosure requirements
applicable to “smaller reporting companies” in this Annual Report on Form 10-K for the year
ended December 31, 2024 (this “Form 10-K”).
PART I
Forward-Looking Statements
Certain statements included in this Form 10-K include “forward-looking statements” within the meaning of the U.S. federal securities laws, including the
Private 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.
Important factors and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements
include, but are not limited to, the
following:
•
the adverse effects of current economic conditions on our business, operations, financial condition, results of operations and capital resources;
•
difficulties or delays in manufacturing or delivery of inventory or other supply chain disruptions;
•
inflation;
•
the Russia/Ukraine and Middle East conflicts;
•
inadequate manufacturing capacity or a shortfall or excess of inventory as a result of difficulty in predicting manufacturing requirements due to
volatile economic conditions;
•
price increases, decreased availability of third-party component parts or raw materials at reasonable prices, price wars or other significant
pricing pressures affecting the Company’s products in the United
States or abroad;
•
increased product costs or reduced customer demand for our products in the United States or abroad, including as a result of trade wars or tariffs;
•
our ability to successfully develop new products that garner customer acceptance and generate sales, both domestically and internationally, in the
face of substantial competition;
•
our reliance on an unrelated third party to develop, maintain and host certain web-based food service application software and develop and
maintain selected components of our downloadable software
applications pursuant to a non-exclusive license agreement, and the risk that
interruptions in our relationship with that third party could materially impair our ability to provide services to our food service technology
customers on a
timely basis or at all and could require substantial expenditures to find or develop alternative software products;
•
any system outages, interruptions or other disruptions to our software applications, including as a result of unexpected errors or mistakes in
connection with over-the-air updates;
•
our ability to successfully grow our business in the food service technology market;
•
renewal rates for our subscription-based products;
•
risks associated with the pursuit of strategic initiatives and business growth;
•
our dependence on contract manufacturers for the assembly of a large portion of our products in Asia;
•
our dependence on significant suppliers;
•
our ability to recruit and retain quality employees;
•
our dependence on third parties for sales outside the United States;
•
marketplace acceptance of new products;
•
risks associated with foreign operations;
•
political and policy uncertainties in connection with the U.S. presidential election and change in administration;
•
our ability to protect intellectual property;
•
exchange rate fluctuations;
•
the availability of needed financing on acceptable terms or at all;
•
volatility of, and decreases in, trading prices of our common stock; and
•
other risk factors identified and discussed in Part I, Item 1A, Risk Factors, and Part II, Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, of this Form 10-K and
that may be detailed from time to time in the Company’s other reports filed
with the Securities and Exchange Commission (the “SEC”).
We caution readers not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K. We undertake no
obligation to publicly or otherwise revise any
forward-looking statements, whether as a result of new information, future events or other factors, except
where we are expressly required to do so by applicable law.
1
Index
Item 1.
Business.
The Company
TransAct Technologies Incorporated (together with its consolidated subsidiaries, “TransAct,” the “Company,” “we,” “us,” or “our”) was incorporated in
June 1996 and began operating as a stand-alone business in
August 1996 as a spin-off of the printer business that was formerly conducted by certain
subsidiaries of Tridex Corporation. We completed an initial public offering on August 22, 1996.
TransAct is a global leader in developing and selling software-driven technology and printing 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 related services, supplies and spare parts. The Company’s chief operating decision maker, who is the
Company’s chief executive officer, in consultation with the
Company’s chief financial officer, utilizes 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. Our primary operating, hardware research and development, and U.S. service center is
located in Ithaca, New York. In addition, we have a casino and gaming sales headquarters
and software research and development center in Las Vegas,
Nevada; a European sales and service center at our subsidiary in the United Kingdom (“UK”); and a sales office located in Macau, China. Our executive
offices are located at One Hamden
Center, 2319 Whitney Avenue, Suite 3B, Hamden, Connecticut, 06518, and our telephone number is (203) 859-6800.
Recent Developments
The Company’s previously announced strategic review process remains active. Management and the Company’s Board of Directors are focused on the
process. The Company is
determined to consider any and all options that increase and/or deliver stockholder value. The Company will provide further
updates on this process when it determines that additional disclosure is appropriate or required. This process is subject
to unknown variables, including
costs, structure, terms and timing, and may not result in any transaction or other particular outcome. For information regarding the risks related to the
strategic review process, please see Part I, Item 1A, Risk
Factors under the sub-caption “Our success may depend in part on our ability to identify and
pursue the best long-term strategy for our businesses” in this Form 10-K.
Products, Services, Markets and Distribution Methods
Printers, terminals and other hardware: TransAct designs, develops and markets a broad array of transaction-based and specialty printers and terminals
utilizing thermal printing technology for applications, primarily in the food service technology, POS automation, and casino and gaming markets. Our
printers and terminals are configurable and offer customers the ability to choose from a variety
of features and functions. Options typically include
interface configuration, mounting configuration, paper cutting devices and paper handling capacities. Our food service technology terminals also offer
software configurable menu options and
our food service technology market includes sales of optional hardware products including tablets, temperature
sensors and gateways (i.e. access points needed to enable wireless communications).
Food Service Technology (“FST”): Our primary offering in the food service technology market is our line of BOHA! products. The BOHA! product suite
combines our latest generation terminal or workstation which includes 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 a
separate 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 applications for both Android and iOS operating systems, including
applications for, temperature monitoring, temperature taking and creating checklists 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
sensors and gateways. The BOHA! Terminal and the more recently
launched Terminal 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,
and 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 2 and WorkStation are equipped with the TransAct
Enterprise Management System to ensure that only approved functions are available
on the touchscreen 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 establishments 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 and service
contracts, and technical support services. In the food service technology market, we use an internal sales force to
solicit sales directly from end users. In May 2023, we launched our new BOHA! Terminal 2. The Terminal 2 is designed to be a
high-end product
intended for enterprise customers with increased speed, print resolution and wide-label capability. We started receiving orders for the Terminal 2 in the
latter part of 2023 from both our international and domestic markets.
2
Index
POS automation: In the POS market, we sell a printer utilizing thermal printing technology. Our POS printer is
used primarily by McDonald’s, and to a
lesser extent, other quick-service restaurants and are located either at the checkout counter or within self-service kiosks, to print receipts for consumers or
print on linerless labels. In the POS market,
we primarily sell our products through a network of domestic and international distributors and resellers. We
use an internal sales force to manage sales through our distributors and resellers, as well as to solicit sales directly from
end-users.
Casino and gaming: We sell several models of printers used in slot machines, video lottery terminals (“VLTs”), sports betting kiosks and other gaming
machines that print tickets or receipts instead of issuing coins (“ticket-in, ticket-out” or “TITO”) at casinos, racetracks and other gaming venues
worldwide. These printers utilize thermal printing technology to print tickets and receipts in
monochrome and offer various other features such as jam
resistant bezels and a dual port interface that enables casinos to print coupons and promotions. In addition, we sell printers using thermal roll-fed printing
technology for use in
international non-casino establishments, including game types such as Amusements with Prizes, Skills with Prizes, Fixed Odds
Betting Terminals, sports betting establishments and other off-premise gaming type machines around the world. We sell
our casino and gaming products
primarily (1) to slot machine manufacturers, who incorporate our printers into slot machines and, in turn, sell completed slot machines directly to casinos
and other gaming establishments and (2) through
distributors. We also maintain a dedicated internal sales force to solicit sales from slot machine
manufacturers and casinos, and to manage sales through our distributors. In the fourth quarter of 2023, we launched the Epic TR80, our newest
casino and
gaming printer, which we believe will help us retain and expand our customer base in the casino and gaming markets.
We also offer a software solution, the EPICENTRAL Print System, including annual software maintenance, that enables casino operators to create
promotional coupons and marketing messages and to print them in real
time at the slot machine. With EPICENTRAL, casinos can utilize the system to
create multiple promotions and incentives to either increase customer time spent on the casino floor or encourage additional visits to generate more revenue
to the
casinos. We sell EPICENTRAL directly to casinos or through partners who incorporate EPICENTRAL into their casino management system
software offerings, largely sold on a SaaS basis.
TSG: Through TSG, we proactively market the sale of consumable products (including POS receipt paper, ribbons
and other printing supplies),
replacement parts, maintenance and repair services, and shipping and handling charges. Our maintenance services include the sale of extended warranties,
multi-year maintenance contracts, a 24-hour guaranteed
replacement product service called TransAct Xpress™ and other repair services for our non-FST
products. Within the United States, we provide repair services through our service center in Ithaca, New York. Internationally, we provide repair
services
through our European service center located in Doncaster, UK, and through partners strategically located around the world.
We also provide customers with telephone sales and technical support, and a personal account representative to handle orders, shipping and general
information. Technical and sales support personnel receive
training on all our products and services. In addition to personalized telephone and technical
support, we also market and sell consumable products 24 hours a day, seven days a week, via our webstore, www.transactsupplies.com.
Sources and Availability of Raw Materials
We design our products to optimize product performance, quality, reliability and durability. These designs combine cost efficient materials, sourcing and
assembly methods with high standards of workmanship.
Almost all of our printers and terminals are currently produced by a third party manufacturer
located in Thailand. A small portion of our products are assembled in our Ithaca, New York facility largely on a configure-to-order basis using
components
and subassemblies that have been sourced from vendors and contract manufacturers around the world.
Critical component parts and subassemblies include thermal print heads, printing/cutting mechanisms, power supplies, motors, injection molded plastic
parts, LCD screens, tablets, circuit boards and electronic
components, which are obtained from domestic and foreign suppliers at competitive prices,
subject to availability. As a result of the majority of our production being performed by our contract manufacturers, the majority of our purchases consist
of fully assembled printers and terminals produced by our contract manufacturers and, to a much lesser extent, component parts. We typically strive to
maintain more than one source for our component parts, subassemblies and fully assembled
printers and terminals to reduce the risk of parts shortages or
unavailability. However, we have experienced and could continue to experience some disruption due to certain suppliers being unable to source specific
components and we could
experience temporary disruption in the availability of components. In addition, we could experience temporary disruption if
certain suppliers ceased doing business with us, as described below.
We currently buy a majority of our thermal print mechanisms, an important component of our thermal printers, and fully assembled printers for
substantially all of our printer and food service technology terminal
models, from a foreign contract manufacturer in Thailand. We believe that other
contract manufacturers could provide similar thermal print mechanisms or fully assembled printers and terminals, on comparable terms. We do not have
supply
agreements with foreign contract manufacturers, and we believe that our supply of thermal print mechanisms and fully assembled printers and
terminals will be adequate in 2025 and the foreseeable future.
Patents and Proprietary Information
TransAct relies on a combination of trade secrets, patents, employee and third party nondisclosure agreements, copyright laws and contractual rights to
establish and protect its proprietary rights in its products.
As of December 31, 2024, we held 23 active United States patents and 39 active foreign patents
and have three pending United States patent applications and eight pending foreign patent applications pertaining
to our products. The remaining duration
of these patents ranges from one to 25 years. During the year ended December 31, 2024, no United States patents were issued and 12 foreign patents were
issued. During the year ended December 31, 2024, no
United States or foreign patents expired. The expiration of any individual patent would not have a
significant negative impact on our business. We regard certain manufacturing processes and designs to be proprietary and attempt to protect them
through
employee and third party nondisclosure agreements and similar means. It may be possible for unauthorized third parties to copy certain portions of our
products or to reverse engineer or otherwise obtain and use, to our detriment,
information that we regard as proprietary. Moreover, the laws of some
foreign countries do not afford the same protection to our proprietary rights as do the laws of the United States. There can be no assurance that legal
protections we rely
upon to protect our proprietary position will be adequate or that our competitors will not independently develop technologies that are
substantially equivalent or superior to our technologies.
3
Index
Trademarks, Service Marks Trade Names and Copyrights
We own or have rights to trademarks, service marks, trade names and copyrights that we use in connection with the operation of our business, including our
corporate names, logos and website names. Other trademarks,
service marks and trade names appearing in this Form 10-K are the property of their
respective owners. The trademarks we own include TransAct®, BOHA! ®, AccuDate®, EPICENTRAL®, Epic TR80™, Ithaca® and TransAct
Express™. Solely for convenience,
some of the trademarks, service marks, trade names and copyrights referred to in this Form 10-K are listed without the
©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service
marks, trade names and copyrights.
Seasonality
Restaurants typically reduce purchases of equipment in the fourth quarter due to the increased volume of transactions during the holiday period, which may
negatively impact sales of our food service technology
products or POS printers.
Working Capital
Inventory, accounts receivable, and accounts payable levels, payment terms, and where applicable, return policies are in accordance with the general
practices of the industry and standard business procedures. See
also Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations of this Form 10-K.
Certain Significant Customers
Light & Wonder Gaming, Inc. (Light & Wonder”) is our most significant customer. We primarily sell casino and gaming printers to Light & Wonder.
Sales to Light & Wonder represented 11% and 6% of our total net sales for the years ended December 31, 2024 and 2023, respectively.
Competition
The market for transaction-based and specialty printers, food service technology terminals and related software applications is extremely competitive, and
we expect such competition to continue in the future.
However, we experience less competition for EPICENTRAL software due to the highly customized
nature of the product. We compete with a number of companies, many of which have greater financial, technical and marketing resources than TransAct.
We
believe our ability to compete successfully depends on a number of factors both within and outside our control, including durability, reliability, quality,
design capability, product customization, price, customer support, success in developing
new products, manufacturing expertise and capacity, supply of
component parts and materials, strategic relationships with suppliers, the timing of new product introductions by us and our competitors, general market,
economic and political
conditions and, in some cases, the uniqueness of our products.
In the food service technology market, we primarily compete with CrunchTime! Information Systems, Inc. (including its Zenput and Squadle brands), Jolt
Software, Avery Dennison Corporation, Ecolab Inc., ITD Food
Safety, Daymark Safety Systems (part of CMC Group, Inc.), Integrated Control Corp, Digi
International, and Toast. We compete in this market based largely on our ability to provide highly specialized purpose-built hardware products, different
software applications that can be chosen by a customer and ongoing technical support. We rely upon third party developed software and hosting services
combined with our own proprietary hardware and software to offer a unique BOHA! branded
solution to support back-of-house operations in the food
service industry. Our competitors or others may develop, or may establish relationships with developers with the capability to develop, software and
services that are similar to or
competitive with ours, which may be disadvantageous to our competitive position. Certain portions of our food service
technology software are licensed from a third party developer on a non-exclusive basis through 2031 and are subject to a
revenue sharing arrangement with
the developer. We are reliant upon the third party developer to further develop and maintain its developed software, and the developer controls the software
source code. The license agreement does not preclude the
developer or the Company from working with others on similar products. Also, the third party
developer hosts the web-based applications. Therefore, presently, we are highly dependent upon this third party developer for continued service to our
customers and the further development of our food service technology software products.
In the POS automation market, we primarily compete with Epson America, Inc., which holds a dominant market position. We also compete with
BIXOLON America, Inc., and, to a much extent with Star Micronics America,
Inc. and Citizen - CBM America Corporation. We believe certain
competitors of ours have greater financial resources and lower costs attributable to higher volume production and lower gross profit margin expectations
which enable them to offer
lower prices than us.
In the casino and gaming market (consisting principally of slot machine printing, VLT and sports betting transaction and promotional coupon printing), we
compete with several companies including JCM Global,
Nanoptix, Inc., Custom Engineering SPA, Eurocoin Components and others. Certain of our
products sold for casino and gaming applications compete based upon our ability to provide highly specialized products, custom engineering and ongoing
technical support.
The market in which TSG competes is highly fragmented, and we compete with numerous competitors of various sizes, including POS and internet
resellers and paper converters depending on the geographic area.
Our strategy for competing in our markets is to continually develop and/or license new products (hardware and software), such as launching the BOHA!
Terminal in 2019, the BOHA! Terminal 2 in 2023, the Epic TR80
which was launched in 2023 and product line extensions that are technologically
advanced and provide differentiated features and functions, to increase our market penetration, to take advantage of strategic relationships, and to lower the
cost of
our products by sourcing certain products overseas. Although we believe that our products, operations and relationships provide a competitive
foundation, there can be no assurance that we will compete successfully in the future. In addition,
our printer products utilize certain thermal printing
technologies and licensed software. If new technologies are introduced, or existing technologies evolve, we may be required to incorporate these
technologies into our products.
Alternatively, if such technologies were to become available to our competitors, our printer products could become
obsolete, which could have a significant negative impact on our business.
4
Index
Governmental Regulation
The casino and gaming industries are generally subject to extensive and evolving regulation that in many jurisdictions includes licensing or regulatory
screening of suppliers, manufacturers and distributors and
their applicable affiliates, their major shareholders, officers, directors and key employees. In
addition, certain of our casino and gaming products and technologies must be certified or approved in each of the jurisdictions in which we operate.
Regulators review many facets of an applicant or holder of a license, including its financial stability, integrity and business experience. Any failure to
receive a license or the loss of a license that we currently hold could have a material
adverse effect on us or on our results of operations, cash flow or
financial condition.
While we believe that we are in compliance with all material casino and gaming laws and regulatory requirements applicable to us, we cannot assure that
our activities or the activities of our customers will not
become the subject of any regulatory or law enforcement proceeding or that any such proceeding
would not have a material adverse impact on us or our results of operations, cash flows or financial condition.
Environmental Compliance
Our compliance with federal, state and local laws and regulations relating to environmental protection and discharge of hazardous materials has not had a
material impact on our capital expenditures, earnings or
competitive position, and we do not anticipate any material impact from such compliance in the
future.
Available Information
We make available free of charge through the “Investor Relations” page on our website, www.transact-tech.com (which can be accessed by selecting the
“Company” tab and then clicking on “Investor Relations”),
our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, proxy statements and all amendments to those reports and statements as soon as reasonably practicable after such material is electronically filed with
or
furnished to the SEC pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The SEC maintains
a website that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at
http://www.sec.gov. The content on any website referred to in this Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted.
Employees
As of December 31, 2024, TransAct and our subsidiaries employed 108 persons, all of whom were full-time employees. None of our employees are
unionized, and we consider our relationships with our employees to be
good.
Information about our Executive Officers
The following is a list of the names and ages of all executive officers of the registrant, indicating all positions and offices with the registrant held by each
such person and each person’s principal occupations
and employment during at least the past five years.
Name
Age
Position
John M. Dillon
75
Chief Executive Officer
Steven A. DeMartino
55
President, Chief Financial Officer, Treasurer and Secretary
Tracey S. Winslow
65
Chief Revenue Officer
Brent Richtsmeier
60
Chief Technology Officer
William J. DeFrances
60
Vice President & Chief Accounting Officer
John M. Dillon was appointed Chief Executive Officer of TransAct on April 4, 2023 and has been a member of the Board of Directors of the Company
since 2011. Mr. Dillon served as the Chairman of the Board of
Directors of Aerospike, the world’s first flash-optimized database and the fastest database at
scale, from January 2022 to February 2024 and served as CEO of Aerospike from January 2015 to January 2022. Prior to joining Aerospike, Mr. Dillon
served as CEO of Engine Yard, Inc., the leading cloud platform for automating and developing Ruby on Rails and PHP applications, from 2009 to 2014. He
served as CEO for Navis, Inc., a private company specializing in software systems for operating
large marine container terminals and distribution centers,
from 2002 to 2008. Before Navis, he also served as CEO for Salesforce, Inc. (formerly Salesforce.com) and President and CEO of Hyperion Solutions. He
began his career as a Systems
Engineer for EDS (Electronic Data Systems) and then moved into a variety of sales management positions for various high-
tech companies, including Oracle Corporation. Mr. Dillon holds a Bachelor’s degree in Engineering from the United States Naval
Academy and an MBA
from Golden Gate University.
Steven A. DeMartino was named TransAct’s President, Chief Financial Officer, Treasurer and Secretary on June 1, 2010. Previously, Mr. DeMartino
served as Executive Vice President, Chief Financial Officer,
Treasurer and Secretary from June 2004 to May 2010, Senior Vice President, Finance and
Information Technology from October 2001 to May 2004, Vice President and Corporate Controller from January 1998 to October 2001, and Corporate
Controller from
August 1996 to December 1997. Mr. DeMartino holds a Bachelor’s degree in Accounting and Economics from the College of the Holy
Cross and an MBA from the University of Connecticut. He also is a certified public accountant.
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Tracey S. Winslow was named Chief Revenue Officer of the Company in March 2023 with responsibility for worldwide sales in all of the Company’s
markets. Prior to this appointment, Ms. Winslow served as Senior Vice
President, Casino and Gaming Sales from June 2010 to February 2023, with
responsibility for the sales and marketing of all casino and gaming products. Previously, Ms. Winslow served as Senior Vice President, Sales and
Marketing of the Company
from June 2007 to May 2010, Senior Vice President, Marketing and Sales, POS and Banking of the Company from July 2006 to
June 2007, and joined TransAct in May of 2005 as Senior Vice President, Marketing. Prior to joining TransAct, Ms. Winslow
was employed with Xerox
Corporation where she held the role of Manager, Worldwide Marketing from 2003 to 2005, and Manager, Sales Operations from 2000 to 2002. She joined
Xerox Corporation in 1983.
Brent Richtsmeier was named Chief Technology Officer in September 2021. Previously, Mr. Richtsmeier served as Senior Vice President, Software
Engineering since joining TransAct in December 2019 and was appointed
as an officer of the Company in January 2021. Prior to joining TransAct, Mr.
Richtsmeier was employed with Samsung Electronics Co., Ltd., an electronics corporation, from May 2004 until November 2017 as the VP of
Development where he was
responsible for software strategy, software development at scale and business development. In November 2017, Samsung
Electronics sold their business products division to HP Inc, and Mr. Richtsmeier transferred to HP Inc to become the Global Head
of Cloud and Mobile
Software Solutions until joining TransAct in 2019.
William J. DeFrances joined TransAct as Vice President & Chief Accounting Officer in July 2022. Mr. DeFrances previously served as Corporate
Controller at Omega Engineering, Inc., an electronics and
instrumentation company that was, during Mr. DeFrances’ tenure, a subsidiary of Spectris plc, a
UK public company listed on the London Stock Exchange, from September 2020 to July 2022. From August 2019 to August 2020, Mr. DeFrances worked
as an
independent financial consultant. Prior to this, Mr. DeFrances held various positions with United Technologies Corporation (now RTX Corporation,
formerly Raytheon Technologies Corporation) (“UTC”) and Sikorsky Aircraft (owned by Lockheed Martin
Corporation). Mr. DeFrances previously served
as an Associate Director of Military Finance for Pratt & Whitney, a subsidiary of UTC, from October 2018 to August 2019, and the Business Unit
Controller, USG/Military and International Military
for Sikorsky Aircraft from October 2015 to October 2018. Prior to this, Mr. DeFrances also served as
the Assistant Controller, Financial Reporting for Sikorsky Aircraft from 2009 to 2013. In addition, Mr. DeFrances held various accounting and
financial
roles (VP Treasurer and VP Controller) from 2005 to 2009 at ATMI, Inc. (acquired by Entegris, Inc.), an advanced manufacturing company in the
semiconductor industry. Mr. DeFrances has an MBA from the University of Connecticut and is
a certified public accountant.
There are no family relationships between any of our executive officers and there is no arrangement or understanding between any of such officers and any
other person pursuant to which he or she was selected as an
officer. Each of our executive officers was elected by the Board of Directors to hold office
until his or her successor is elected and qualified or until his or her earlier resignation or removal.
Item 1A. Risk Factors.
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 such risks or uncertainties materialize,
our business, financial condition, cash flows and results of operations
could be materially adversely affected.
We assume no obligation (and specifically disclaim any such obligation) to update these Risk Factors or any other forward-looking statements contained in
this Form 10-K to reflect actual results, changes in
assumptions or other factors affecting such forward-looking statements, except as required by law.
Risks Related to our Financial Condition and Future Operating Results
We have a history of net losses, we anticipate making further investments in product development and we may not be able to achieve, maintain or
increase profitability in
future periods.
In 2024, we incurred a net loss of $9.9 million. 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
million in 2022, 2021 and 2020, respectively. 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 technology business, including
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 technology 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 and
decreased demand for our products. Customers that placed advance orders due to supply chain disruptions 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. 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.
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Our operating results and financial condition may fluctuate.
Our operating results and financial condition may fluctuate from quarter to quarter and year to year and are likely to continue to vary due to a number of
factors, many of
which are not within our control. If our operating results do not meet the expectations of securities analysts or investors, who may derive
their expectations by extrapolating data from recent historical operating results, the market price of
our common stock will likely decline. Fluctuations in
our operating results and financial condition may occur due to a number of factors, including, but not limited to, those identified below and throughout this
“Risk Factors” section:
•
delays between our expenditures to develop and market new or enhanced products and consumables and the generation of sales from those
products;
•
the geographic distribution of our sales and our supply chain;
•
market acceptance of our products, both domestically and internationally;
•
development of new competitive products by others;
•
increased levels of competition, including due to the return to market of our largest casino and gaming competitor;
•
our responses to price competition;
•
our level of research and development activities;
•
changes in the amount that we spend to develop, acquire or license new products, consumables, technologies or businesses;
•
changes in the amount we spend to promote our products and services;
•
changes in the cost of satisfying our warranty obligations and servicing our installed base of products;
•
availability of third party components at reasonable prices or at all;
•
general economic and industry conditions, including inflation and changes in interest rates affecting returns on cash balances, investments and
debt, that affect customer demand;
•
changes in customer demand due to supply chain constraints;
•
the dependence of our supply chain on a few, foreign third party manufacturers and suppliers and the impact on our supply chain of product or
component shortages and cost increases due to events beyond our control, including tariffs
and other trade policies, inflation and political or social
instability such as the ongoing Russia/Ukraine war , the war in the Middle East, and the conflict between China and Taiwan and possible
expansion of such conflicts;
•
severe weather events, public health crises, military actions, the cost of insurance and other external events out of our control that can disrupt our
operations or the operations of our customers’ or suppliers’ facilities; and
•
changes in accounting rules and regulations.
Due to all of the foregoing factors, and the other risks discussed in this Form 10-K, quarter-to-quarter comparisons of our operating results may not be an
indicator of future performance.
Risks Associated with Determining and Pursuing Strategic Initiatives and Business Growth
Our success may depend in part on our ability to identify and pursue the best long-term strategy for our business.
The Company engaged an advisor, Roth Capital Partners, LLC (“Roth”), in the fourth quarter of 2023 to assist in determining the best long-term strategy
for its business and ensure the Company is maximizing the
value of its operations for all shareholders and stakeholders. The Company continues to actively
assess strategic alternatives with the assistance of Roth while continuing to pursue its business growth and development initiatives on a parallel
track. The
Company has engaged with a number of outside parties and is in various stages of discussion with such outside parties. The Company is committed to
pursuing an optimal outcome for all its stakeholders and maximizing shareholder value.
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No timetable has been established for our review of the best long-term strategy for our business, and we do not intend to disclose developments or provide
updates on the progress or status of our ongoing review
until our Board of Directors deems such disclosure is appropriate or required. During the course of
this review, perceived uncertainties related to our future may result in the loss of potential business opportunities and volatility in our stock
price and may
make it more difficult for us to attract and retain qualified personnel and business partners.
Acquisitions, dispositions and other strategic alternatives involve a number of risks, including: (i) the potential disruption of our ongoing business; (ii) the
distraction of management away from the ongoing
oversight of our existing business activities; (iii) if we determined to pursue a disposition strategy, we
may not be able to identify, pursue and close a transaction that provides adequate value to the Company and its stockholders; (iv) the
potential departure of
key personnel during the negotiation or pendency of a transaction; (v) the loss or reduction of control over certain of our assets; (vi) the anticipated benefits
and cost savings of those transactions not being realized
fully, or at all, or taking longer to realize than anticipated; (vii) an increase in the scope and
complexity of our operations or the management of our business subsequent to a transaction; (viii) incurring additional indebtedness or the
potential sale of
additional shares of our common stock in public or private offerings to finance acquisitions or transactions, which may be dilutive to existing stockholders
or cause the price of our common stock to decline; and (ix) the
depletion of cash to pay for an acquisition.
There can be no assurance that we will be able to successfully implement a growth strategy, or that we can successfully manage expanded operations, if
they occur. If we expand, we may from time-to-time experience
constraints that will adversely affect our ability to satisfy customer demand in a timely
fashion. Failure to manage growth effectively could adversely affect our results of operations and financial condition.
Further, there can be no assurance that we will find suitable opportunities for strategic transactions at acceptable prices or on acceptable terms, successfully
negotiate required agreements, obtain sufficient
financing on acceptable terms or at all if necessary, successfully close transactions after signing such
agreements, or that any resulting transaction will have a positive effect on stockholder value. A strategic transaction may result in a
significant change in
the nature of our business, operations and strategy, and we may encounter unforeseen obstacles or costs in implementing a strategic transaction.
Risks Related to Our Operations
Our food service technology business depends substantially on our customers renewing their subscriptions with the Company. Any decline in our
customer renewals could harm our
food service technology 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 technology 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.
Because we rely in part on revenue from subscription contracts and recognize revenue from subscription contracts over the term of the relevant
subscription period, downturns
or upturns in sales are not immediately reflected in full in our results of operations.
Subscription services revenue accounts for a growing portion of our food service technology 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 significant downturns 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.
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Our calculation of recurring revenue and average revenue per unit (“ARPU”) may differ from how other SaaS-based companies calculate such
metrics; our definitions include sales
of our consumable labels, which generally fluctuate from period to period.
We use recurring revenue and ARPU as performance indicators in connection with our food service technology 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.
Overestimates or underestimates in our manufacturing forecasts could cause us to hold insufficient or excess inventory or result in delays in the
manufacturing and delivery of
our products, which could interfere with our ability to retain orders or provide services to our customers.
If we fail to predict our manufacturing requirements accurately, we could incur additional costs or experience manufacturing delays. We currently use a
rolling 12-month forecast based primarily on our anticipated
product orders and our product order history to help determine our requirements for
purchasing components, raw materials and finished products. It is important that we accurately predict both the demand for our products and the lead-time
required
to obtain the necessary components, raw materials and finished products. We have also modified our products in the past to substitute available
components in the place of those that have become scarce or difficult to obtain, and in some
instances have identified alternate sources for certain
components.
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, 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 taken to meet customer demand in the face of
recent supply chain disruptions have
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.
We depend on key personnel, the loss of whom could have a material adverse impact on our business.
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 or sales,
operations and engineering teams, could have a material adverse effect on our business and results of operations.
Our ability to recruit, retain, and develop qualified personnel is critical to our success and growth.
To successfully compete and grow our business, we must recruit, develop and retain highly qualified managerial, technical and sales and marketing
personnel. In addition, we must develop, maintain and, as necessary,
implement appropriate succession plans to ensure we have the necessary human
resources capable of maintaining continuity in our business.
The market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace current
personnel who depart with qualified or effective successors.
Our effort to retain and develop personnel may also result in significant additional expenses,
which could adversely affect our profitability. We are also substantially dependent on our sales force to obtain new customers and increase sales to
existing
customers. There is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve significant
revenue growth will depend, in large part, on our success in recruiting,
training, and retaining a sufficient number of sales personnel to support our growth.
If we are unable to hire, train, and retain a sufficient number of qualified and successful sales personnel, our business, financial condition, and results of
operations may be harmed.
If we fail to offer high quality support, our business and reputation could suffer.
Our customers rely on us and our third-party service providers for support of our software and services included in our food service technology
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 party service providers do not help our
customers quickly
resolve issues and provide effective ongoing support, our ability to sell new food service technology products to existing and new
customers could suffer and our reputation and relationships with existing or potential customers could be harmed.
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We experience elements of seasonal fluctuations in the food service technology and POS markets which could cause our stock price to fluctuate.
Our food service technology 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 technology products or POS printers during that period. As a result, seasonality may cause fluctuations in our financial results,
and
other trends that develop may similarly impact our results of operations.
Risks Related to Product Development
Our revenue and profitability depend on our ability to continue to develop or license, on a timely basis, new products and technologies which are free
from hardware or
software anomalies and cannot be fraudulently manipulated, and customer acceptance of such products.
Our success depends upon our, and our development partners’, ability to timely adapt our capabilities and processes to meet the demands of producing new
and innovative products. Because our newer products contain
software and generally are more technologically sophisticated than those we have produced
in the past, we must continually refine our capabilities to meet the needs of our product innovation. In addition, the food service technology industry
continues to experience technological developments and innovations (such as the use of artificial intelligence and machine learning), and if we are unable
to provide enhancements, new features and integrations for our existing platform (due to a
lack of investment or otherwise), or if we are unable to
efficiently adapt our infrastructure to meet the needs of our product innovations in a timely manner, our business could be negatively impacted.
In addition, even if we, or developers on our behalf, successfully develop such products, there is no assurance that our innovations will be accepted by our
customers. Developing and marketing new products, such
as our line of BOHA! products, is costly, and our business could be materially adversely
affected if we are unable to generate sufficient sales of such products or if our existing or new customers do not quickly accept such products. Customer
acceptance is crucial because new products typically have little competition and market penetration due to their novelty. Customer acceptance of new
products is never assured and may take time to materialize, even with respect to products
developed with customer input. In addition, we may not be able to
obtain necessary registrations, licenses, permits or regulatory approvals for new products in the casino and gaming market on a timely basis or at all, which
may adversely affect
our ability to develop such products. Further, technological innovation often results in unintended consequences such as bugs,
vulnerabilities, and other system failures. Any such bug, vulnerability, or failure, especially in connection with a
significant technical implementation or
change, could result in lost business, harm to our brand or reputation, consumer complaints, and other adverse consequences, any of which could materially
adversely affect our business, results of
operations, and financial condition.
Risks Related to Intellectual Property and Data Security
Cybersecurity and privacy breaches, cyber-attacks, or other disruptions could expose us to liability, affect our business, and damage our reputation.
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! Applications are hosted within cloud platforms that are managed by third parties. The 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 computing 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 eliminate 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, and suffer reputational damage and loss of customer
confidence. 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.
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These risks may be exacerbated by global political unrest. For example, the Russia–Ukraine war and other international hostilities, and related sanctions
imposed by the U.S. government may expose government
entities and public and private U.S. companies to attempted or actual cyber-security attacks
launched for geopolitical reasons or in conjunction with, or to finance, military conflicts and defense activities. These attacks could materially
disrupt our
supply chain or our systems and operations or those of our customers and suppliers and may lead to loss of data and income, reputational harm and
diversion of funds. See Part I, Item 1C. Cybersecurity, of this Form 10-K for
information regarding our cybersecurity risk management practices.
The inability to protect our intellectual property rights could harm our reputation, damage our business or interfere with our competitive position.
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.
Prosecuting or defending against intellectual property litigation could be time consuming and costly, and claims that we have infringed upon the
intellectual property rights
of others could impede our business and put us at a competitive disadvantage.
Prosecuting and defending against intellectual property litigation is generally complex, costly, protracted, and highly disruptive to business operations by
diverting the attention and energies of management and
key technical personnel. We are committed to aggressively asserting and defending our technology
and related intellectual property rights, which we have spent a significant amount of money to develop. Similarly, third parties have claimed and
may
claim, from time to time in the future, that we have violated their intellectual property rights. In the event that a court rules that we have violated a third
party’s patent or other intellectual property rights, we may be prevented from
operating our business as planned and may be required to pay damages, to
obtain a license, if available, or to use a non-infringing method, if possible, to accomplish our objectives. Litigation relating to any such claims could be
costly and, if
successful, could result in costly judgments or settlements, and there can be no assurance that a license or a substitute technology will be
available on favorable terms, or at all. Any such outcome could have a material adverse effect on our
business, financial condition and results of operations.
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 regulation
Our industry is marked by rapid technological developments and innovations (such as the use of artificial intelligence and machine learning) and evolving
industry standards. If we are unable to provide enhancements
and new features and integrations for our existing platform, develop new products that
achieve market acceptance, or innovate quickly enough to keep pace with these rapid technological developments, our business could be harmed.
In addition, laws and regulations regarding artificial intelligence and machine learning are evolving rapidly. The technologies 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.
Risks Related to Our Partners and Suppliers
We rely on an unrelated third party to develop, maintain and host certain portions of our food service technology software, and any disruption in the
relationship with that
third party, or any defects in the software provided by that third party, could have a material adverse effect on our reputation,
business, financial condition and results of operations.
We rely upon third party developed software and hosting services combined with our own proprietary hardware and software to offer our unique BOHA!
branded solution to support back-of-house operations in the food
service industry. Certain web-based food service application software and selected
components of our downloadable software applications are licensed from a third-party developer on a non-exclusive basis through 2031 and are subject to a
revenue
sharing arrangement with the developer. We are reliant upon the third-party developer to further develop and maintain its developed software, and
the developer controls the software source code. Therefore, presently, we are highly dependent on
this third-party developer for continued service to our
customers and the further development of our food service technology software products. If the software provider were to terminate operations or
otherwise be unavailable to provide
maintenance, hosting and development services to us and our customers, the availability or usage of our software
products could be disrupted and our customers could be adversely affected. In any such case, we may need to seek comparable software
and services from
other third parties or develop it internally, which could require significant time and expense. There can be no assurance that such software or services
would be available from other sources, or that if available, they would be
of comparable quality and cost. Moreover, any efforts to develop new software,
whether internal or by third parties, would require significant lead time, and there could be an interruption in service during any period in which the
software
provider ceases to provide products and services and new products remain under development. Any such occurrence could materially and
adversely impact our business, financial condition and results of operations.
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Any errors or defects in, or failures of, third party software or applications could result in errors or defects in or failures of our food service technology
products and services, which could be costly to correct
and have a material adverse effect on our reputation, business, financial condition and results of
operations.
We are currently dependent upon a manufacturer located in Thailand for the manufacturing and assembly of substantially all of our printers and
terminals, and any further or
future disruption in the businesses or operations of this manufacturer, political, social or economic instability, war, trade
restrictions or tariffs, severe weather, changes in climate, additional public health crises and other events out of our
control could materially adversely
affect our business, financial condition and results of operations.
In an effort to maximize cost savings and operational benefits, we have outsourced substantially all of the manufacturing and assembly of our printers and
terminals to a contract manufacturer located in Thailand.
As a result, we are dependent on them for the manufacturing of our products, and any disruption
in such manufacturing or the export of products from this manufacturer to the U.S. may adversely affect our business, financial condition and results
of
operations.
Risks affecting the businesses and operations of our manufacturer in Thailand include: political and regional strife; war; labor shortages; severe weather
and natural disasters such as earthquakes, hurricanes,
fires, and floods, whether as a result of climate change or otherwise; lengthy power outages; increased
pricing, financial instability and capacity constraints of shippers; government imposition of tariffs which may impact the cost or
availability of products or
components that we purchase; and concerns with or threats of public health crises, contagious diseases or health epidemics. Tthe risk to our business posed
by any disruption in manufacturing is exacerbated by the
concentration of substantially all of our manufacturing operations in one manufacturer located in
Thailand.
If the contract manufacturer is unable to manufacture our products or continue operating its facilities, as occurred in connection with the COVID-19
pandemic, or if cost increases (as a result of tariffs or
otherwise) make continued reliance on the contract manufacturer impractical, we will have limited
means for the final assembly of a majority of our products until we are able to secure the manufacturing capability at another facility or develop
an
alternative manufacturing facility, which could be costly and time consuming and have a material adverse effect on our operating and financial results.
We may also incur increased business continuity and reputational risks to the extent that we continue to outsource the manufacturing and assembly of our
products to foreign third party service providers. For
example, outsourcing of manufacturing prevents us from exercising control over the assembly of
certain of our products and related operations or processes, including the internal controls associated with operations and processes conducted and the
quality of our products assembled by contract manufacturers. If we are unable to effectively manage and oversee our outsourcing strategy, we may not
realize cost structure efficiencies and our operating and financial results could be materially
adversely affected. Outsourcing also exposes us to increased
risk of infringement or misappropriation of our intellectual property, to which our manufacturers have access. Because our manufacturer is located in Asia,
there is no guarantee that
our intellectual property rights will be protected or enforced to the same extent as under U.S. federal and state laws.
Consequently, we may not be able to prevent third parties from developing or selling products made using our technologies.
We rely on distributors and resellers to sell our products and services.
We use a variety of distribution channels, including OEMs and distributors, to market and sell our products and services. We may be adversely impacted
by any conflicts that could arise between and among our
various sales channels.
Our dependence upon distributors and resellers exposes us to numerous risks, including:
•
loss of channel and the ability to bring new products to market;
•
concentration of credit risk, including disruption in distribution should the distributors, and / or resellers’ financial condition deteriorate;
•
reduced visibility to end user demand and pricing issues which makes forecasting more difficult;
•
distributors or resellers leveraging their buying power to change the terms of pricing, payment and product delivery schedules; and
•
direct competition should a distributor or reseller decide to manufacture printers internally or source printers from a competitor.
We cannot guarantee that resellers will not reduce, delay or eliminate purchases from us, which could have a material adverse effect upon the business,
consolidated results of operations and financial condition.
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We currently rely on third party service providers to host our food service technology software and deliver certain services, and any interruptions or
delays in services from
these third parties could impair the delivery of our products and services, and our business, results of operations, and financial
condition could be materially adversely affected.
We rely on a third-party service provider to host our food service technology software. Third parties also provide services to key aspects of our operations,
including Internet connections and networking, data
storage and processing, trust and safety and security infrastructure. We do not control the operation,
physical security, or data security of any of these third-party providers. Our efforts to use commercially reasonable diligence in the
selection and retention
of such third-party providers may be insufficient or inadequate to prevent or remediate such operational and security risks. Our third-party providers may
be subject to intrusions, computer viruses, denial-of-service
attacks, sabotage, acts of vandalism, acts of terrorism or other misconduct. They are vulnerable
to damage or interruption from power loss, telecommunications failures, fires, floods, earthquakes, hurricanes, tornadoes, and similar events, and
they may
be subject to financial, legal, regulatory, and labor issues, each of which may impose additional costs or requirements on us or prevent these third parties
from providing services to us or our customers on our behalf. From time to time,
our software maintained by these third parties has experienced brief
interruptions in service which we have been able to resolve promptly by working with the third-party providers, and there may be future such interruptions
that could have a
material adverse effect on our customer relationships or be more costly or time-consuming to resolve. In addition, these third parties may
breach their agreements with us, disagree with our interpretation of contract terms or applicable laws and
regulations, refuse to continue or renew these
agreements on commercially reasonable terms or at all, fail to or refuse to process transactions or provide other services adequately, take actions that
degrade the functionality of our platform and
services, increase prices, impose additional costs or requirements on us or our customers, or give preferential
treatment to our competitors. If we are unable to procure alternatives in a timely and efficient manner and on acceptable terms, or at
all, we may be subject
to business disruptions, losses, or costs to remediate any of these deficiencies. The occurrence of any of the above events could result in reputational
damage, legal or regulatory proceedings, loss of customers or other
adverse consequences, any of which could materially adversely affect our business,
results of operations, and financial condition.
Risks Related to Competition, Sales and Marketing
We compete in highly competitive markets, which are likely to become more competitive. Competitors may be able to respond more quickly to new or
emerging technology and
changes in customer requirements.
We face significant competition in developing and selling our printers, terminals, software, consumables and services. Our principal competitors have
substantial marketing, financial, development and personnel
resources. To remain competitive, we believe we must continue to provide:
•
technologically advanced products that satisfy user demands;
•
superior customer service;
•
high levels of quality and reliability; and
•
dependable and efficient distribution networks.
We cannot ensure we will be able to compete successfully against current or future competitors. Increased competition may result in price reductions,
lower gross profit margins and loss of market share, and could
require increased spending on research and development, sales and marketing and customer
support. For example, we believe our largest competitor in the casino and gaming market has resumed supplying product at full capacity which has
resulted in
a more competitive environment in the casino and gaming market going forward and may cause future downward pricing pressure and a loss of
market share that we had gained while the competitor was unable to supply product. Any such occurrence
could negatively impact our worldwide casino
and gaming sales. In addition, some competitors may make strategic acquisitions or establish cooperative relationships with suppliers or companies that
produce complementary products, which may
include relationships with our software developer. Any of these factors could reduce our earnings.
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Our food service technology market operates in an emerging and evolving industry, which makes it difficult to evaluate the future prospects of this
market.
We launched our BOHA! offering in 2019 and have grown our food service technology significantly since then. This is still an emerging market that is
continually evolving as technology develops to automate
back-of-house tasks that were historically performed manually. This evolving nature of the food
service technology market may make it difficult to evaluate our future prospects in this market and the risks and challenges we may encounter. These
risks
and challenges include, but are not limited to, our ability to:
•
accurately forecast our revenue and plan our operating expenses;
•
increase the number of customers (and retain existing customers and their guests) using our platform;
•
successfully compete with current and future competitors;
•
successfully expand our market presence in existing markets and enter new markets and geographies;
•
maintain and enhance the value of our reputation and brand;
•
develop and maintain strategic relationships with other market participants that provide complementary products;
•
adapt to rapidly evolving trends in the ways our customers interact with technology, including through the use of emerging artificial intelligence
and machine learning technologies;
•
timely respond to customer needs with technology developments that enable our products to evolve to meet the changing demands of the
marketplace;
•
avoid interruptions or disruptions in our service; and
•
manage the risk of loss relating to food safety issues if there is a failure of our offerings designed to help in part to assure perishable goods are
safely preserved;
Risks Related to Our Customers
We are dependent on sales to one large customer; the loss of this customer or reduction in orders from this customer could materially affect our sales.
Casino and gaming sales to Light & Wonder represent a material percentage of our net sales. A reduction, delay or cancellation in orders from this
customer, including reductions or delays due to market,
economic, or competitive conditions in the industries in which we serve, could have a material
adverse effect upon our results of operations.
Risks Related to Our International Operations
In addition to maintaining offices in the UK and Macau, we sell and ship a significant portion of our products internationally and rely on third parties
that make up part of
our global salesforce. The international nature of our operations may expose us to certain risks associated with doing business
outside of the U.S., including risks posed by tariffs and changes in trade relations.
We sell a significant amount of our products to customers outside the United States. Shipments to international customers are expected to continue to
account for a material portion of net sales. In addition, our
manufacturer and suppliers are largely located in Thailand. As a result, our products are largely
exported to one of our facilities in the United States, which makes our operations vulnerable to disruptions in trade that could adversely affect
our business
results.
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Our international operations, including our reliance on manufacturers and suppliers located in Thailand, our worldwide sales team, and our sales to
customers located outside the United States, expose us to
disruptions in trade and other associated risks such as:
•
the imposition of additional duties, tariffs including those imposed by the new U.S. presidential administration), quotas, taxes, trade barriers,
capital flow restrictions and other charges on imports and exports by the United States
or the governments of the countries in which we or our
manufacturers and suppliers operate;
•
delays in the delivery of cargo due to port security considerations, labor disputes such as dock strikes, and our reliance on a limited number of
shipping and air carriers, which may experience capacity issues that adversely affect our
ability to ship inventory in a timely manner or for an
acceptable cost;
•
fluctuations in the value of the U.S. dollar against foreign currencies, which could restrict sales, or increase costs of purchasing, in foreign
countries;
•
economic or political instability in any of the countries in which we or our manufacturers or suppliers operate, which could result in a reduction in
demand for our products or impair our foreign assets;
•
a reduced ability or inability to sell in or purchase from certain markets as a result of export or import restrictions;
•
potentially limited intellectual property protection in certain countries, such as China, may limit recourse against infringing products or cause us to
refrain from selling in certain geographic territories;
•
difficulties staffing and managing foreign operations; and
•
economic uncertainties and adverse economic conditions (including inflation and recession).
Our business interruption insurance does not cover all possible situations, and there can be no assurance that the coverage would be adequate to compensate
us for all losses that may occur in the event of a
disruption. In addition, the business interruption insurance would not compensate us for the loss of
opportunity and potential adverse impact, both short-term and long-term, on relations with our existing customers resulting from our inability
to produce
products for them.
Risks Relating to Global Political and Economic Conditions
We purchase component parts and consumable products from third-party and sole-source suppliers, and any interference with this supply chain may
impact our ability to
manufacture and sell our products.
We rely on third-party or sole-source suppliers to provide certain key components for our products. We do not have guaranteed supply contracts with any
of our component suppliers, and our suppliers could delay
shipments, increase prices or cease manufacturing or selling such components to us at any time,
as occurred as a result of such as the shortages in global microchip availability we experienced during much of 2022 and 2023. These disruptions
resulted
in delays in delivery of products to customers and similar disruptions in the future could result in additional delays, even if we are able to source
components from alternate suppliers. Supply chain disruptions have, in the past,
impacted our ability to maintain sufficient inventory on hand. As a result,
we have paid, and if future disruptions occur we may have to pay in the future, increased shipping charges to expedite our receipt of components and
inventory and the
delivery of finished products to our customers. In addition, we have incurred increased costs to obtain certain products and components
from alternate suppliers when our usual suppliers did not have products available for us, and we may incur
such costs in the future if we need to seek
alternate suppliers for any of our components. Cost increases and component shortages may be exacerbated by events beyond our control, such as
changing economic conditions, inflation, currency and
commodity price fluctuations, tariffs (including those imposed by the new U.S. presidential
administration) trade wars, resource availability, transportation costs, weather conditions and natural disasters, political unrest and instability, war
(such as
the ongoing military conflict between Russia and Ukraine and the conflict in the Middle East) and other factors impacting supply and demand pressures.
Recurring or worsening disruptions in the supply chain of such component parts and
consumable products could delay our production or release of our new
products, cause us to incur additional freight costs and hinder our ability to meet our commitments to customers. If we are unable to obtain sufficient
quantity of these
components on commercially reasonable terms or in a timely manner, or if we are unable to obtain alternative sources for the components,
sales of our products could be delayed or halted entirely or we may have to redesign our products, as we did
with certain products in the recent past, to help
meet market demand. In addition, supply chain constraints and the resulting delays affected customer ordering habits and customer demand by leading to a
temporary increase in advance orders in
2022 and into 2023. This resulted in a significant slowdown in customer order and shipment rates in 2024 as
customers struggled to sell their on-hand inventory that has continued into 2025 with respect to one significant international casino and
gaming customer
that has not yet resumed ordering. Further, there can be no assurance that any cost increases attributable to future supply chain disruptions can be fully
offset by price increases, or that we will continue to be able to fulfill
orders on time, and continued or prolonged impacts on our supply chain may result in
lost sales, reduced gross margins or damage to our end-customer relationships, which would have a material adverse effect on our financial results.
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Catastrophic events, political unrest or a downturn in economic conditions may disrupt our business.
Geopolitical events, social unrest, war or the threat of war, including repercussions of the war between Russia and Ukraine, the war in the Middle East,
conflict between China and Taiwan, terrorism, political
instability, acts of public violence, boycotts, labor discord or disruptions, hostilities, pandemics or
other public health crises, natural disasters or other catastrophic events may cause damage or disruption to our operations or the operations
of our
customers, international commerce, and the global economy, and thus could harm our business. In particular, the reactions of governments, markets, and
the general public to such events, many of which are beyond our control, may result in a
number of adverse consequences for our customers, business,
operations, and results of operations.
For example, the continuing war between Ukraine and Russia, as well as the financial and trade-related restrictions associated with Russia and Belarus and
economic sanctions on certain individuals and entities in
Russia and Belarus, have impacted international trade relations, and resulted in sustained increases
in the cost of materials and components. If this war continues to persist or escalates, this may further disrupt global supply chains and could
result in
shortages of key materials or components that our suppliers require to satisfy our needs. Any increases in the cost, or shortages, of raw materials,
components or energy may continue to create supply issues that could constrain
manufacturing levels for our products.
In addition, based on the complex relationships among China, Hong Kong, Taiwan, and the United States, there is risk that political, diplomatic, and
national security influences might lead to trade, technology, or
capital disputes, or disruptions that may affect our business or suppliers in Asia. These
tensions may be exacerbated by continuing or new sanctions imposed in connection with the Russia–Ukraine war, as there continues to be unwillingness on
the
part of China to support ongoing or expanded sanctions, which could distance China from its existing trade partners. More recently, both the United
States and the European Union have considered imposing sanctions directly on Chinese companies
believed to be assisting Russia. Any increase in
geopolitical tensions or expansion of sanctions either in Russia or Belarus or against Chinese companies may have a significant negative impact on our
business or on the regional or global economy.
In the event of a major earthquake, hurricane or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war or terrorist attack,
we may be unable to continue our operations and may
endure system interruptions, reputational harm, breaches of data security, and loss of critical data, all
of which would harm our business, results of operations, and financial condition. In addition, the insurance we maintain would likely not be
adequate to
cover our losses resulting from disasters or other business interruptions. Any downturn in the economy in general, including the impact of the Russia–
Ukraine war and the Middle East war, or in the food service or casino and gaming
industries in particular could result in reduced demand for our products
and could adversely affect our business and results of operations. In addition, heightened security measures or responses to hostilities may cause certain
governments to
restrict the import or export of goods, as has occurred with respect to the export of oil from Russia, which may have an adverse effect on
our ability to buy and sell goods or on the cost to obtain components.
Risks Related to Regulations, Taxation, Governance and the Environment
We recorded a full valuation allowance on the value of our net deferred tax assets in the United States, and we expect to maintain that full valuation
allowance on such assets
until we are able to demonstrate a consistent pattern of profitability.
We currently have deferred tax assets, which may be used to reduce taxable income in the future. We assess the realization of these deferred tax assets on a
quarterly basis, and if we determine that it is more
likely than not that some portion of these assets will not be realized, an income tax valuation allowance
is recorded. During the fourth quarter 2024, while undertaking our quarterly assessment, the Company recorded a $7.3 million valuation
allowance on the
full value of the net deferred tax assets in the United States. We expect to continue to maintain a full tax valuation allowance on such assets until we are
able to demonstrate a consistent pattern of profitability. As a result,
we expect to record no income tax expense or benefit during 2025. We currently have
no net deferred tax assets on our consolidated financial statements.
Changes in tax rates or tax liabilities could affect results.
We are subject to taxation in the United States and certain state and foreign jurisdictions. Significant judgment is required to determine and estimate our tax
liabilities. Our future annual and quarterly tax rates
could be affected by numerous factors, including changes in the (1) applicable tax laws; (2)
composition of earnings in countries with differing tax rates; or (3) recoverability of our deferred tax assets and liabilities. Any of these
developments or
any future changes in federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our results of operations.
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Risks Related to our Indebtedness
The agreement governing our credit facility contains restrictions and limitations that could significantly affect our ability to operate our business, as
well as significantly
affect our liquidity.
On March 3, 2020, we entered into a Loan and Security Agreement (the “Loan Agreement”) governing a credit facility (the “Siena Credit Facility”) with
Siena Lending Group LLC (the “Lendor”). The Loan Agreement
contains a number of significant covenants that could adversely affect our ability to
operate our business, our liquidity, and our results of operations. These covenants restrict, among other things, our ability, and the ability of any future
domestic subsidiary, to:
•
merge, consolidate, form subsidiaries or dispose of assets;
•
acquire assets outside the ordinary course of business;
•
enter into other transactions outside the ordinary course of business;
•
sell, transfer, return or dispose of collateral;
•
make loans to or investments in, or enter into transactions with, affiliates;
•
incur or guarantee indebtedness, incur liens;
•
redeem equity interests while borrowings are outstanding under the credit facility;
•
change our capital structure; or
•
dissolve, divide, change our line of business or cease or suffer a disruption to all or a material portion of our business.
Additionally, the Loan Agreement requires us to comply with a minimum excess availability covenant, which requires excess borrowing availability of at
least $750 thousand and the Loan Agreement requires us to
maintain outstanding borrowings of at least $3 million in principal amount. The breach of any
covenants or obligations in the Loan Agreement, if not otherwise waived or amended, could result in a default under the Loan Agreement and could trigger
acceleration of our obligations thereunder and permit the lender to foreclose on the collateral securing our obligations under the Loan Agreement and
exercise other rights of secured creditors.
Availability under the Siena Credit Facility is subject to a borrowing base, which is based on eligible accounts receivable and inventory. To the extent that
our eligible accounts receivable and inventory decline
in value, our borrowing base will decrease, and the availability under the Siena Credit Facility
currently is and may continue to be less than its stated amount and may decrease. In addition, if at any time the amount of outstanding borrowings
and
letters of credit under that facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to
eliminate the excess.
Our ability to comply with the covenants under the Loan Agreement or to maintain our borrowing base may be affected by events beyond our control,
including deteriorating economic conditions. For example,
reductions in the value of accounts receivable and inventory may occur in the future due to
decreases in sales and production resulting from the impact of future economic uncertainties. Further, certain slow-moving inventory and accounts
receivable that remain unpaid for a specified period of time are excluded from the borrowing base calculation. Thus, a decline in economic conditions
and/or a decline in the financial condition of customers in the industries we serve may
negatively impact the borrowing base both by decreasing the value
of existing accounts and reducing the number and amount of new accounts. If we overestimate our inventory needs due to the uncertainty surrounding
future economic conditions, we
may have inventory that is considered slow-moving and thus excluded from the borrowing base calculation, and any
reduction in production in response to decreased demand would also result in a lower inventory value and thus a lower borrowing base.
Any of these events could require us to seek waivers or amendments of covenants or alternative sources of financing or to reduce expenditures. We cannot
assure you that such waivers, amendments or alternative
financing could be obtained, or if obtained, would be on terms acceptable to us, or that we would
be able to reduce expenditures enough to offset any decrease in the borrowing base, or that we could make such reductions without a material
negative
impact on our business.
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General Risk Factors
General economic conditions could have a material adverse effect on our business, operating results and financial condition.
Our business is subject to general economic conditions. Uncertainty or negative trends in U.S. or international economic and investment climates,
including the impact of developments in U.S.-China trade relations,
as well as economic impacts from the Russia-Ukraine war and the Middle East war,
and any continued inflation attributable in part to supply chain disruptions or any other economic factors, could adversely affect our business. For example,
customers or potential customers could reduce or delay orders, key suppliers could become insolvent, which could result in production delays, and our
customers may become insolvent or be unable to obtain credit. Any of these possible effects
could impact our ability to effectively manage inventory
levels and collect receivables, create unabsorbed costs due to lower net sales, and ultimately decrease our net sales and profitability including write-downs
of assets.
Our stock price may fluctuate significantly.
The market price of our common stock could fluctuate significantly in response to variations in quarterly operating results and other factors, such as:
•
prevailing domestic and international market and economic conditions, and conditions in the industries we serve, including current market
volatility, inflation and rising interest rates;
•
adverse business conditions faced by customers, or bankruptcies or store closures of our customers resulting from adverse economic conditions
due to inflation or otherwise;
•
changes in our business, operations or prospects;
•
developments in our relationships with our customers or strategic partners;
•
announcements of new products or services by us or by our competitors;
•
announcement or completion of acquisitions by us or by our competitors;
•
changes in existing, or adoption of additional, government regulations;
•
developments or announcements with respect to our strategic review process and the pace of progress with respect to that process, and
•
unfavorable or reduced analyst coverage.
In addition, the stock market may experience significant price fluctuations year-to-year. Broad market fluctuations, general economic conditions and
specific conditions in the industries in which we operate may
adversely affect the market price of our common stock.
Unfavorable analyst coverage or a reduction in analyst coverage of our common stock may adversely affect the price of our common stock.
The trading market for our common stock relies in part on the research and reports that industry or financial analysts may publish about us, our business,
our markets and our competitors. We currently have limited
analyst coverage, and many investment banks no longer find it profitable to provide securities
research on micro-cap and small-cap companies. If securities analysts do not cover our common stock in the future, the lack of research coverage may
adversely affect the market price of our common stock. Furthermore, if one or more of the analysts who cover us downgrade our stock, or if those analysts
issue other unfavorable commentary about us or our business, our stock price may decline.
Our common stock is traded on the Nasdaq Global Market. During the year ended December 31, 2024, the average daily trading volume for our common
stock as reported by the Nasdaq Global Market was approximately
22,000 shares. We are uncertain whether a more active trading market in our common
stock will develop. As a result, relatively small trades may have a significant impact on the market price of our common stock, which could increase the
volatility and depress the price of our common stock.
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Our common stock is thinly traded, and investors may be unable to sell their shares at their desired prices, or at all, and sales of large blocks of shares
may adversely
affect the price of our common stock.
Our common stock has historically been sporadically or “thinly” traded, meaning that the number of persons interested in purchasing shares of our common
stock at prevailing prices at any given time may be
relatively small. This could lead to wide fluctuations in our share price. Investors may be unable to sell
their common stock at or above their purchase price, which may result in substantial losses. As a consequence of this lack of liquidity,
the trading of
relatively small quantities of shares by our stockholders may disproportionately influence the price of shares of our common stock in either direction. The
price of shares of our common stock could, for example, decline
precipitously in the event a large number of shares of our common stock are sold on the
market without commensurate demand, while an issuer with a more robust daily trading volume for its common stock might better absorb those sales
without an
adverse impact on its share price.
If we raise additional capital in the future, existing stockholder ownership interest in the Company could be diluted or otherwise adversely impacted,
and future sales of our
common stock or other financing arrangements may cause our stock price to decline.
In the future, we may sell additional shares of our common stock in public or private offerings, or we may obtain funds through a credit facility or by
issuing debt or preferred securities. We may also issue
additional shares of our common stock to finance future acquisitions. Shares of our common stock
are also available for future issuance and sale pursuant to stock options and other equity awards that we have granted to our employees, and in the
future,
we may grant additional stock options, restricted stock units and other forms of equity compensation to our employees. Any issuance of equity we may
undertake in the future to raise additional capital could cause the price of our common
stock to decline, or require us to issue shares at a price that is lower
than that paid by holders of our common stock in the past, which would result in those newly issued shares being dilutive. Sales of our common stock or
the perception that
such sales could occur may adversely affect prevailing market prices for shares of our common stock and could impair our ability to
raise capital through future offerings. The lender under our existing debt agreement has rights that are senior to
your rights as a common stockholder, and if
we obtain funds in the future through a credit facility or through the issuance of debt or preferred securities, the lenders of such facility or the holders of
such securities would likely also have
rights senior to the rights of our common stockholders, which could impair the value of our common stock.
We do not intend to pay dividends for the foreseeable future, so investors must rely on price appreciation to realize a gain on their investment.
We have not declared or paid cash dividends on our capital stock since November 2019. We currently intend to retain any future earnings to finance our
operations and the expansion of our food service technology
business, and we do not anticipate declaring or paying any dividends to holders of our
common stock in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Accordingly,
investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize future gains on their
investments.
The Company’s goodwill may become impaired, which could require a significant charge to earnings be recognized.
In accordance with GAAP, we review goodwill at least annually and when an event occurs or circumstances change that indicate that the carrying value
may not be recoverable, including as a result of declines in
stock price, market capitalization, reduced future cash flow estimates or slower growth rates in
our industry. Future operating results used in the assumptions underlying such as sales or profit forecasts, may not materialize, and the Company may
be
required to record a significant charge to earnings in the financial statements for the period in which any impairment is determined, resulting in a decrease
in our earnings or an increase in our losses in such period and an unfavorable impact
on our results of operations.
We cannot provide any assurance that current laws, or any laws enacted in the future, will not have a material adverse effect on our business.
Our operations are subject to laws, rules, regulations, including environmental regulations, government policies and other requirements in a variety of
jurisdictions, including those in which we conduct business.
Changes in such laws, rules, regulations, policies or requirements could result in the need to
modify our products, could delay the development of new products and could affect the demand for our products, which may have an adverse impact on
our
future operating results. If we do not comply with applicable laws, rules and regulations we could be subject to costs and liabilities and our business
may be adversely impacted.
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We take advantage of specified scaled disclosure requirements applicable to a “smaller reporting company” under Regulation S-K, and the information
that we provide to
stockholders may therefore be different than they might receive from other public companies. If some investors find our shares of
common stock less attractive as a result of this scaled disclosure, there may be a less active trading market for
our shares of common stock, which may
increase the volatility of the market price of our common stock.
We are a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K. As a smaller reporting company, we take advantage of specified
scaled disclosure and other requirements that are otherwise
applicable generally to public companies.
We intend to continue to take advantage of certain of the scaled disclosure requirements of smaller reporting companies and may continue to do so until we
are no longer a smaller reporting company. We will cease to
be a smaller reporting company if we have (i) equal to or greater than $250 million in market
value of our shares held by non-affiliates as of the last business day of our second fiscal quarter, (ii) equal to or greater than $100 million in
annual revenue
for the most recent fiscal year or (iii) less than $100 million in annual revenue for the most recent fiscal year and the market value of our shares held by
non-affiliates exceeds $700 million as of the last business day of our
second fiscal quarter. We choose to take advantage of some but not all of these scaled
disclosure requirements; therefore, the information that we provide stockholders may be different than one might get from other public companies.
We are also a “non-accelerated filer” within the meaning of Rule 12b-2 promulgated under the Exchange Act, and we are not required to comply with the
auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, as amended, with respect to management’s assessment of our internal
control over financial reporting. Therefore, our internal control over financial reporting will not receive the level of review provided by the
process relating
to the auditor attestation included in annual reports of issuers that are subject to the auditor attestation requirements.
We cannot predict if investors will find our securities less attractive because we rely on these available exemptions. If some investors find our shares of
common stock less attractive as a result, there may be a
less active trading market for our shares of common stock and the market price of such shares of
common stock may be more volatile.
Our Amended and Restated By-Laws designate certain Delaware courts as the sole and exclusive forum for certain types of actions and proceedings
that may be initiated by our
stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our
directors, officers or stockholders.
Our Amended and Restated By-Laws (the “By-Laws”) provide that, unless we consent in writing to the selection of an alternative forum, to the fullest
extent permitted by law, all Internal Corporate Claims must be
brought solely and exclusively in the Court of Chancery of the State of Delaware (or, if such
court declines to accept jurisdiction, the Superior Court of the State of Delaware, or, if such other court declines to accept jurisdiction, the United
States
District Court for the District of Delaware). The By-Laws define “Internal Corporate Claims” to mean claims, including claims in the right of the Company,
brought by a current or former stockholder (including a current or former beneficial
owner) (i) that are based upon a violation of a duty by a current or
former director or officer or stockholder in such capacity or (ii) as to which the General Corporation Law of the State of Delaware confers jurisdiction upon
the Court of
Chancery of the State of Delaware.
This choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum
that it finds favorable for disputes with us or our
directors, officers or other stockholders, which may discourage such lawsuits against us and our directors,
officers and stockholders. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in
respect of, one or more of
the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could
adversely affect our business, financial condition or results of
operations. The choice of forum provision in the By-Laws will not preclude or contract the
scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Exchange Act or the Securities
Act
or the respective rules and regulations promulgated thereunder.
Item 1B.
Unresolved Staff Comments.
Not applicable.
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Item 1C. Cybersecurity
Risk Management and Strategy
The Company’s Board of Directors recognizes the critical importance of maintaining the trust and confidence of our customers, clients, business
partners
and employees. The Board of Directors is actively involved in oversight of the Company’s risk management program, and cybersecurity represents an
important component of the Company’s overall approach to enterprise risk management (“ERM”).
The Company’s cybersecurity policies, standards,
processes and practices are fully integrated into the Company’s ERM program and are based on recognized frameworks established by the National
Institute of Standards and Technology, the International Organization for Standardization and other applicable industry standards. In general, the
Company
seeks to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security and
availability of the information that the Company collects and stores by identifying,
preventing and mitigating cybersecurity threats and effectively
responding to cybersecurity incidents when they occur. As one of the critical elements of the Company’s overall ERM approach, the Company’s
cybersecurity
program is focused on the following key areas:
•
Governance: As discussed in more detail under the heading “Governance,” the Board of Directors’ oversight of cybersecurity risk management is
supported by the Audit Committee of the Board of
Directors (the “Audit Committee”), which regularly interacts with the Company’s ERM
function, the Company’s Vice President of Information Technology, other members of management and relevant management committees and
councils, including
management’s Sarbanes-Oxley & Cybersecurity Steering Committee.
•
Collaborative Approach: The Company has implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating
cybersecurity threats and incidents, while also
implementing controls and procedures that are designed to provide for the prompt and appropriate
internal reporting of certain cybersecurity incidents, either in the form of a single unauthorized occurrence or a series of unauthorized
occurrences,
so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
•
Technical Safeguards: The Company deploys technical safeguards that are designed to protect the Company’s information systems from
cybersecurity threats, including firewalls, intrusion
prevention and detection systems, anti-malware functionality and access controls, which are
evaluated and improved through vulnerability assessments and cybersecurity threat intelligence.
•
Incidence Response and Recovery Planning: The Company has established and maintains comprehensive incident response and recovery plans
intended to fully and timely address the Company’s
response to a cybersecurity incident, and such plans are tested and evaluated on a regular
basis.
•
Third-Party Risk Management: The Company maintains a comprehensive, risk-based
approach to identifying and overseeing cybersecurity
risks presented by third parties, including vendors, service providers and other external users of the Company’s systems, as well as the systems of
third parties that could adversely
impact our business in the event of a cybersecurity incident affecting those third-party systems.
•
Education and Awareness: The Company provides regular, mandatory training for personnel regarding cybersecurity threats as a means to equip
the Company’s personnel with effective tools to
proactively address cybersecurity threats and prevent incursions and to communicate the
Company’s evolving information security policies, standards, processes and practices. Our awareness program includes assessment of our
personnel’s
preparedness through regular phishing e-mail alerts, highlighted banners that warn about external senders, and tests administered to
help the Company’s personnel interrogate, navigate around, and avoid clicking suspicious and unfamiliar
links from unknown senders.
The Company engages in the periodic assessment and testing of the Company’s policies, standards, processes and practices that are designed to
address
cybersecurity threats and incidents. These efforts include a wide range of activities, including audits, assessments, tabletop exercises, threat modeling,
vulnerability testing and other exercises focused on evaluating the effectiveness of
our cybersecurity measures and planning. The Company engages third
parties to perform assessments on our cybersecurity measures,
including information security maturity assessments, audits and independent reviews of our
information security control environment and operating effectiveness. The results of such assessments, audits and reviews are periodically reported to the
Audit Committee and the Board of Directors, and the Company adjusts its cybersecurity policies, standards, processes and practices as appropriate based
on the information provided by these assessments, audits and reviews.
Governance
The Board of Directors, in coordination with the Audit Committee, oversees the Company’s ERM process, including the management of risks arising
from
cybersecurity threats. The Board of Directors and the Audit Committee each receive presentations and
reports on cybersecurity risks, which address a wide
range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment,
technological trends and information
security considerations arising with respect to the Company’s peers and third parties. The Board of Directors and the
Audit Committee also receive prompt and timely information regarding any cybersecurity incident that meets established reporting
thresholds or that
management otherwise deems to be significant, as well as ongoing updates regarding any such incident until it has been addressed. On an annual basis, the
Board of Directors and Audit Committee discuss the Company’s approach to cybersecurity risk management with the members of management’s Sarbanes-
Oxley & Cybersecurity Steering Committee, which includes the Company’s President and Chief Financial Officer (“CFO”) and Vice President of
Information Technology.
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The Sarbanes-Oxley & Cybersecurity Steering Committee, in coordination with the Company’s outside legal counsel, works collaboratively across the
Company and with various consultants to implement a program designed to protect the Company’s information systems from
cybersecurity threats and to
promptly respond to any cybersecurity incidents in accordance with the Company’s incident response and recovery plans.
The Vice President of
Information Technology has served in various roles in information technology and information security for over 25 years and holds undergraduate and
graduate degrees in
computer science. As described in more detail above under the heading “Information about our Executive Officers,” the Company’s
Chief Executive Officer and the President and CFO each hold undergraduate and graduate degrees in their respective
fields, and each has over 30 years of
experience managing risks at the Company and at similar companies, including risks arising from cybersecurity threats.
Cybersecurity threats, including as a result of previous cybersecurity incidents, have not materially affected, and are not reasonably likely to materially
affect, the Company, including its business strategy, results of operations or financial condition.
Item 2.
Properties.
Our principal facilities as of December 31, 2024 are listed below. We believe that all facilities generally are in good condition, adequately maintained and
suitable for their present and currently contemplated
uses.
Location
Operations Conducted
Size
(Approx. Sq. Ft.)
Owned
or Leased
Lease
Expiration Date
Hamden, Connecticut
Executive offices and sales office
11,100
Leased
October 31, 2025
Ithaca, New York
Hardware design and development, assembly and
service facility
73,900
Leased
May 31, 2026
Las Vegas, Nevada
Software design and development and casino and
gaming sales office
19,600
Leased
November 30, 2025
Doncaster, UK
Sales office and service center
6,000
Leased
August 24, 2026
Macau, China
Sales office
180
Leased
April 30, 2025
110,780
Item 3.
Legal Proceedings.
The Company may, in the ordinary course of business, become a party to litigation involving collection matters, contract claims and other legal proceedings
relating to the conduct of its business. As of December
31, 2024, we are not involved in any pending or, to our knowledge, threatened legal proceedings,
including legal proceedings contemplated by governmental authorities, the outcome of which we believe would be material to our financial condition or
results of operations.
Item 4.
Mine Safety Disclosures.
Not applicable.
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Index
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is traded on the Nasdaq Global Market under the symbol TACT. As of February 28, 2025, there were 191 holders of record of the
common stock.
Issuer Purchases of Equity Securities
During the fourth quarter of 2024, we did not repurchase any shares of our common stock.
Dividend Policy
The Company does not currently pay cash dividends and does not intend to do so in the foreseeable future.
Sales of Unregistered Securities
None.
Item 6.
[Reserved]
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto.
Recent Developments
The Company’s previously announced strategic review process remains active. Management and the Company’s Board of Directors are focused on the
process. The Company is
determined to consider any and all options that increase and/or deliver stockholder value. The Company will provide further
updates on this process when it determines that additional disclosure is appropriate or required. For information
regarding the risks related to the strategic
review process, please see Part I, Item 1A, Risk Factors under the sub-caption “Our success may depend in part on our ability to identify and pursue the
best long-term strategy for our businesses.”
Current Trends
After strong demand during most of 2023 due in part to our primary competitor’s struggle to deliver products in the face of supply chain constraints, in late
2023, we began to see indications of a
temporary slowdown in demand in the casino and gaming market, as customers that had built up excess inventory
due to supply chain concerns advised us that they would temporarily reduce orders until their stock normalized. This slowdown impacted
our results in the
fourth quarter of 2023 and the first nine months of 2024. We currently believe all major customers, with the exception of one large international casino and
gaming customer, were able to sell through their on-hand inventory and
resumed ordering. Though we expect our 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.
Further, our primary
competitor in the casino and gaming market has resumed supplying product at what we believe is their full capacity. The return of this
competitor has resulted in some downward pricing pressure in certain geographies of that market which may
continue and may negatively impact our
worldwide casino and gaming sales. In addition, during 2022 and 2023, we experienced cost increases as a result of supply chain constraints, most of which
we have been able to offset by increasing prices of
our products. However, pricing pressure has subsequently caused us to lower prices again and there can
be no guarantee that we will be able to increase prices sufficiently to offset any future similar cost increases, which generally cannot be
predicted, and we
may be further impacted by supply chain disruptions, inflation and other global economic conditions that may affect the markets we serve and from which
we source our supplies and parts.
In February and March 2025, the U.S. presidential administration began implementing certain orders imposing new tariffs on foreign imports impacting
multiple commodities and industries and multiple
countries, including Canada and Mexico. In addition, the Canadian and Mexican governments have
indicated they may retaliate with tariffs on U.S. goods. While at this time we do not expect any potential tariffs imposed by Canada and Mexico to have
a
material impact on our business, we are currently monitoring the ongoing trade dispute among the United States, Canada and Mexico and any future
potential impact of these tariffs, and any additional tariffs that may be imposed or retaliatory
actions that may be taken, and their impact to our business and
financial condition.
For additional discussion of our business, refer to Part I, Item 1. Business, of this Form 10-K.
Critical Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires
management to make use of estimates, judgments and assumptions
that affect both Balance Sheet items and Statement of Operations categories. Such
estimates and judgments are based upon historical experience and certain assumptions that are believed to be reasonable in the particular circumstances;
however,
due to the inherent uncertainties in developing estimates, actual results could differ from the original estimates, requiring adjustments to these
balances in future periods.
We base our estimates on historical experience, forecasts and on various other assumptions that are believed to be reasonable under the circumstances;
however actual results may differ from those
estimates under different assumptions or conditions. The methods, estimates and judgments we use in
applying our accounting policies have a significant impact on the results we report in our financial statements. Some of our accounting policies
require us
to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.
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The following accounting policies are those that we believe to be most critical in the preparation of our financial statements. These items utilize
assumptions and estimates about the effect of future events
that are inherently uncertain and are therefore based on our judgment. Refer to Note 2 –
Summary of significant accounting policies in the accompanying Consolidated Financial Statements for a complete listing of our significant accounting
policies. We also have other policies that we consider key accounting policies; however, these policies typically do not require us to make estimates or
judgments that are difficult or subjective.
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, consumables 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.
Accounts Receivable – We have standardized credit granting and review policies and procedures for all customer accounts, including: credit reviews of all
new customer accounts; ongoing credit evaluations of current customers; credit limits and payment terms based on available credit information; and
adjustments to credit limits based upon payment history and the customer’s current
creditworthiness. We also provide an estimate for expected credit
losses based on an expected loss methodology which considers a broad range of information to estimate expected credit losses, including historical
information, current economic conditions and a reasonable forecast period. Our reserve for expected credit losses as of December 31, 2024 was $0.5
million, or 7.0% of outstanding trade accounts receivable, which we believe is
appropriate considering the overall quality of our accounts receivable.
Although credit losses have historically been within expectations and the reserves established, there is no assurance that our credit loss experience will
continue to be
consistent with historical experience. While we believe that our allowance for credit losses is adequate and represents our best estimate of
future losses, we will continue to monitor customer liquidity and other
economic conditions, which may result in changes to our estimates.
Inventories – The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory that
is not of saleable quality. The
determination of obsolete or excess inventory requires us to estimate the future demand for our products. We record valuation reserves on our inventory for
estimated excess and obsolete inventory and lower of
cost or net realizable value concerns equal to the difference between the cost of inventory and the
estimated realizable value based upon assumptions about future product demand, market conditions and product selling prices. If future product
demand,
market conditions or product selling prices are less than those projected by management or if continued modifications to products are required to meet
specifications or other customer requirements, increases to inventory reserves may
be required which would have a negative impact on our gross margin.
Goodwill and Intangible Assets – We evaluate goodwill and other indefinite-lived intangible assets for impairment annually
and when an event occurs or
circumstances change that indicate that the carrying value may not be recoverable. The Company utilizes the option to first assess qualitative factors to
determine whether it is necessary to perform the Step
1 quantitative goodwill impairment test in accordance with the applicable accounting standards.
Under the qualitative assessment, management considers relevant events and circumstances including, but not limited to, macroeconomic conditions,
industry and market considerations, Company performance, and events directly affecting the Company. If the Company determines that the Step 1
quantitative impairment test is required, management estimates the fair value of the reporting unit
primarily using the income approach. Under the income
approach, we use a discounted cash flow methodology to derive an indication of value, which requires management to make significant estimates and
assumptions
related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-
term discount rates, among others. Factors considered that may trigger an interim period
impairment review of either acquired goodwill or intangible
assets are: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of
acquired assets or the
strategy for the overall business; significant negative industry or economic trends; and significant decline in market capitalization
relative to net book value. Finite lived intangible assets are amortized and are tested for impairment when
appropriate.
As of December 31, 2024, upon the completion of our annual assessment for impairment, we have determined that no goodwill or intangible asset
impairment has occurred and the fair value of the Company was
substantially higher than our carrying value.
We have evaluated the recoverability of the assets on our Consolidated Balance Sheet as of December 31, 2024 in accordance with relevant authoritative
accounting literature. We have considered the effects caused by
the global supply chain disruptions, inflation and macroeconomic factors potentially
impacting accounts receivable, inventory, investments, intangible assets, goodwill and other assets and liabilities. Where forward-looking estimates are
required, we made a good-faith estimate based on information available as of the balance sheet date. We have continued to monitor for indicators of
impairment through the date of this Form 10-K and reflected accordingly in the accompanying
consolidated financial statements.
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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 of 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. 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 previous three
fiscal years (2022 through 2024) combined with a near term outlook of future taxable losses. 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 allowance, may be reversed based on changes in facts and circumstances.
Significant judgment is required in determining the provision for income taxes and, in particular, any valuation allowance or tax reserves with respect to
our deferred tax assets and uncertain tax positions. On a
quarterly basis, we evaluate the recoverability of our deferred tax assets based upon historical
results and forecasted taxable income over future years, and match this forecast against the basis differences, deductions available in future years
and the
limitations allowed for net operating loss and tax credit carryforwards to ensure that there is adequate support for the realization of the deferred tax assets.
Although we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for a valuation
allowance, in the event we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an adjustment to the
valuation
allowance or tax reserves would be charged as a reduction to income in the period such determination was made. Likewise, should we determine
that we would be able to realize future deferred tax assets in excess of its net recorded amount, an
adjustment to the valuation allowance would increase net
income in the period such determination was made.
Share-Based Compensation – We calculate share-based compensation expense in accordance with ASC 718, “Compensation – Stock Compensation”
using the
Black-Scholes option-pricing model to calculate the fair value of share-based awards. The key assumptions for this valuation method include the
expected term of an option grant, stock price volatility, risk-free interest rate, and dividend
yield. We account for forfeitures as they occur.
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Results of Operations: Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Net Sales. Net sales, which include printer, terminal and software sales as well as sales of replacement parts, consumables and maintenance and repair
services, by market for the years ended December 31, 2024 and 2023 are detailed in the below table.
Year Ended
Year Ended
(In thousands, except percentages)
December 31, 2024
December 31, 2023
$ Change
% Change
Food service technology
$
16,101
37.1% $
16,308
22.5% $
(207)
(1.3%)
POS automation
3,361
7.8%
6,922
9.5%
(3,561)
(51.4%)
Casino and gaming
20,348
46.9%
41,192
56.7%
(20,844)
(50.6%)
TSG
3,574
8.2%
8,209
11.3%
(4,635)
(56.5%)
$
43,384
100.0% $
72,631
100.0% $
(29,247)
(40.3%)
International*
$
9,899
22.8% $
14,571
20.1% $
(4,672)
(32.1%)
*
International sales do not include sales of products to domestic distributors or other customers who in turn ship those products to international
destinations.
Net sales for 2024 decreased $29.2 million, or 40%, from 2023. Printer, terminal and other hardware sales volume decreased by 47% to approximately
79,000 units for 2024, driven by large unit volume decreases
across all markets, including a 50% decrease in unit volume from the casino and gaming
market, a 42% 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% during 2024
compared to 2023 due to general inflationary pressures.
International sales for 2024 decreased $4.7 million, or 32%, compared to 2023 predominantly due to lower sales in our casino and gaming market.
Food service technology (“FST”). Our primary offering in the food service technology market is our line of BOHA! products, the BOHA! product suite
combines our latest
generation terminal or workstation, which include 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 applications for both Android and iOS operating systems, including
applications for temperature monitoring, temperature taking and checklists 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 sensors and
gateways. The BOHA! Terminal and the more recently launched Terminal 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, and 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 2 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 establishments 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 and service contracts, and
technical support services. Sales of our worldwide food service technology products for the years
ended December 31, 2024 and 2023 were as follows:
Year Ended
Year Ended
(In thousands, except percentages)
December 31, 2024
December 31, 2023
$ Change
% Change
Domestic
$
14,719
91.4% $
15,159
93.0% $
(440)
(2.9%)
International
1,382
8.6%
1,149
7.0%
233
20.3%
$
16,101
100.0% $
16,308
100.0% $
(207)
(1.3%)
Year Ended
Year Ended
(In thousands, except percentages)
December 31, 2024
December 31, 2023
$ Change
% Change
Hardware
$
5,319
33.0% $
5,170
31.7% $
149
2.9%
Software, labels and other recurring
revenue
10,782
67.0%
11,138
68.3%
(356)
(3.2%)
$
16,101
100.0% $
16,308
100.0% $
(207)
(1.3%)
26
Index
Sales in food service technology decreased 1% in 2024 compared to 2023 driven by a 3% decrease in sales of BOHA! software, labels and other recurring
revenue, partially offset by a 3% increase in hardware sales.
Despite the loss of a significant customer (as further explained below) FST software, labels
and recurring revenue experienced only a slight decline of 3% due to the growth of the installed base of BOHA! Terminal 2. Hardware sales increased
largely due to increased sales of our BOHA! Terminal 2. Hardware sales were also impacted by a 94% decrease in sales of our AccuDate 9700 terminals
which we discontinued at the end of 2023 and 77% lower sales of our legacy BOHA! Terminal
(including those of the lost customer explained further
below). These decreases were more than offset by strong sales of our BOHA! Terminal 2 (that replaced the original BOHA! Terminal) to a large
international QSR customer as well as increased
sales of Workstations.
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 service a small percentage of ongoing units and
may have some additional sales to this customer in the future.
We expect FST revenue to be higher in 2025 than in 2024 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).
POS automation. Revenue from the POS automation market includes sales of our Ithaca 9000 thermal printer used primarily by McDonald’s, and to a much
lesser extent, other
quick-service restaurants located either at the checkout counter or within self-service kiosks to print receipts for consumers or print
liner-less labels. Sales of our worldwide POS automation products for the years ended December 31, 2024 and
2023 were as follows:
Year Ended
Year Ended
(In thousands, except percentages)
December 31, 2024
December 31, 2023
$ Change
% Change
Domestic
$
3,361
100.0% $
6,805
98.3% $
(3,444)
(50.6%)
International
--
--
117
1.7%
(117)
(100.0%)
$
3,361
100.0% $
6,922
100.0% $
(3,561)
(51.4%)
The decrease in POS automation revenue in 2024 compared to 2023 was driven by a 51% decrease in domestic sales largely due to unusually high sales
during 2023, as we increased production and began to fulfill our
large backlog of sales orders following supply chain slowdowns in 2022. During 2024, we
experienced renewed competitive pressure that has resulted in a return to a more normalized level of sales as well as a reduction in our average selling
prices
We expect POS automation sales to be lower in 2025 compared to 2024 as we expect to continue to face competitive pressure in this market.
Casino and gaming. Revenue from the 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, racetracks 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. 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 and to print them in real time at the slot machine. Sales of our worldwide casino and gaming products for the years
ended December 31, 2024 and 2023 were as follows:
Year Ended
Year Ended
(In thousands, except percentages)
December 31, 2024
December 31, 2023
$ Change
% Change
Domestic
$
12,522
61.5% $
28,715
69.7% $
(16,193)
(56.4%)
International
7,826
38.5%
12,477
30.3%
(4,651)
(37.3%)
$
20,348
100.0% $
41,192
100.0% $
(20,844)
(50.6%)
The 56% decrease in domestic sales of our casino and gaming products during 2024 compared to 2023 was primarily due to a 50% decrease in sales unit
volume. Sales during 2023 were unusually high due to our largest
competitor’s inability to supply product to customers as a result of supply chain issues.
In addition, entering 2024, many of our customers had accumulated higher-than-normal levels of inventory of our product as a hedge during the worldwide
supply chain crisis during 2022 and 2023. As a result, during 2024, we experienced a significant slowdown in their order and shipment rates as they
worked through this excess inventory. In addition, we believe our sales in the second half of
2024 were impacted by softness in overall demand in the
industry.
27
Index
International sales of our casino and gaming products decreased 37% during 2024 compared to 2023. Similar to our domestic customers, our international
customers also began to slow their order rates in late 2023
and continuing through 2024 due to higher-than-normal inventory levels and in response to
softness in overall demand in the industry.
As of the end of 2024, we believe all our major casino and gaming customers have worked through the majority of their on-hand inventory and have begun
to order again, with the exception of one large international
customer. In addition, we expect the demand softness we experienced in the worldwide casino
and gaming market in late 2024 to begin to improve in 2025. As a result, we expect our casino and gaming sales to be higher in 2025 compared to 2024.
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 services and shipping and handling charges. Sales in our worldwide TSG market for the years ended December
31, 2024 and 2023 were as follows:
Year Ended
Year Ended
(In thousands, except percentages)
December 31, 2024
December 31, 2023
$ Change
% Change
Domestic
$
2,883
80.7% $
7,381
89.9% $
(4,498)
(60.9%)
International
691
19.3%
828
10.1%
(137)
(16.5%)
$
3,574
100.0% $
8,209
100.0% $
(4,635)
(56.5%)
The large decrease in domestic revenue from TSG during 2024 as compared to 2023 resulted primarily from a 75% decrease in sales of replacement parts
and accessories. During 2023, we experienced unusually high
sales of approximately $4.1 million from the final purchases of spare parts for our legacy
lottery printer that did not repeat in 2024. We do not expect any future sales of these spare parts. Also contributing to the decline was a 57% decrease
in
consumable sales as we are no longer focused on these legacy products (POS paper and ribbons) and expect to cease selling these products by the end of
2025.
Internationally, TSG revenue decreased 17% during 2024 compared to 2023, due primarily to a decline in sales of replacement parts and accessories to
international casino and gaming customers.
We expect TSG sales to be somewhat lower in 2025 compared to 2024 as we expect to cease selling our legacy consumable products by the end of 2025.
Gross Profit. Gross profit information for the years ended December 31, 2024 and 2023 is summarized below (in thousands, except
percentages):
Year Ended December 31,
Percent
Percent of
Percent of
2024
2023
Change
Total Sales - 2024
Total Sales - 2023
$
21,482 $
38,400
(44.1%)
49.5%
52.9%
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! products and royalty payments to third-parties, including to the third party licensor of
our food
service technology software products. Gross profit decreased $16.9 million, or 44%. Gross margin also decreased 340 basis points to 49.5% in
2024 compared to 52.9% in 2023. Both gross profit and gross margin declined primarily due to a 40%
decline in overall sales including a 51% decline in
sales of higher margin casino and gaming printers. Gross margin for 2024 was also impacted by competitive price adjustments.
We expect gross margin for 2025 to be in the mid 40% to high 40% range.
Operating Expenses - Engineering, Design and Product Development. Engineering, design and product development information for the years
ended
December 31, 2024 and 2023 is summarized below (in thousands, except percentages):
Year Ended December 31,
Percent
Percent of
Percent of
2024
2023
Change
Total Sales - 2024
Total Sales - 2023
$
6,977 $
9,442
(26.1%)
16.1%
13.0%
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 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 to be higher in 2025 compared to 2024 due to typical inflationary and cost of living increases in such expenses.
28
Index
Operating Expenses - Selling and Marketing. Selling and marketing information for the years ended
December 31, 2024 and 2023 is summarized below
(in thousands, except percentages):
Year Ended December 31,
Percent
Percent of
Percent of
2024
2023
Change
Total Sales - 2024
Total Sales - 2023
$
8,195 $
9,934
(17.5%)
18.9%
13.7%
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 decreased $1.7 million, or 18%, during 2024 compared to 2023 primarily due to cost
reduction
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.
Operating Expenses - General and Administrative. General and administrative information for the years ended December 31, 2024 and 2023 is
summarized below (in thousands, except percentages):
Year Ended December 31,
Percent
Percent of
Percent of
2024
2023
Change
Total Sales - 2024
Total Sales - 2023
$
9,936 $
13,318
(25.4%)
22.9%
18.3%
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,
professional and legal expenses, information technology expenses, and other expenses related to being a publicly traded company. General and
administrative expenses decreased $3.4 million, or 25%, during 2024 compared to 2023 due in large part to a $1.5 million severance charge incurred in
2023 related to the resignation of the Company’s former Chief Executive Officer in April 2023,
as well as expense reduction initiatives we commenced in
the third quarter of 2023 and 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. Operating (loss) income information for the years ended December 31, 2024 and 2023 is summarized below (in
thousands,
except percentages):
Year Ended December 31,
Percent
Percent of
Percent of
2024
2023
Change
Total Sales – 2024
Total Sales – 2023
$
(3,626) $
5,706
(163.5%)
(8.4%)
7.9%
Our operating income decreased $9.3 million, or 164%, during 2024 compared to 2023 as a $16.9 million or 44% decrease in gross profit on 40% lower
sales, was partially offset by a $7.6 million or 23% decrease in
operating expenses (including the $1.5 million severance charge in 2023 discussed above in
“General and Administrative”) in 2024 compared to 2023.
Interest, net. We recorded net interest income of $147 thousand in 2024 compared to net interest expense of
$255 thousand in 2023. During 2023 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. 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.
Other, net. We recorded other expense of $89 thousand in 2024 compared to other income of $452
thousand in 2023. The other expense for 2024 is
related to higher foreign exchange losses recorded by our UK subsidiary during 2024. During the fourth quarter of 2023, we completed an asset sale of our
Printrex product line (essentially
inventory on-hand) and recorded a non-operating gain of approximately $426 thousand. Prior to this sale, the last
TransAct sales of Printrex products occurred in 2021.
Income Taxes. We recorded income tax
expense in 2024 of $6.3 million at an effective tax rate of (176.4%), compared to income tax expense in 2023 of
$1.2 million at an effective tax rate of 19.6%. 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 in the Consolidated Financial Statements).
Net (Loss) Income. As a result of the above, we reported a net loss for the year ended December 31, 2024 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.
29
Index
Liquidity and Capital Resources
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, access to bank lines of credit and our ability to attract long-term
capital with satisfactory terms.
Internal cash generation together with currently available cash and cash equivalents, available borrowing facilities and an ability to access credit lines at
market-competitive rates, if needed, are expected to be
sufficient to fund operations, capital expenditures, and any increase in working capital that would be
required to accommodate our anticipated level of business activity for the 2025 fiscal year and beyond.
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.. 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 are expected to be approximately $2.0 million 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.
Cash Flow
During 2024, our cash balance increased $2.1 million, or 16% (versus an increase of $4.4 million in 2023) due primarily to operating activities, including a
reduction in accounts
receivable of $3.3 million and a reduction of inventory of $1.6 million. Financing activities also provided a net increase in cash of
$0.6 million due to the increase in 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). We had $14.4 million in cash and cash equivalents as of December 31,
2024, of which $168 thousand was held by our UK subsidiary.
Operating activities: The following significant factors primarily affected our cash provided by operating activities of $1.8 million in 2024 as compared to
cash provided by operating activities of $5.5 million in 2023.
For 2024:
•
We reported a net loss of $9.9 million.
•
We recorded depreciation and amortization of $1.0 million and share-based compensation expense of $1.2 million.
•
We recorded a decrease in our net deferred tax assets of $6.3 million due to an income tax charge of $7.3 million related to the write down of our
U.S. net deferred income tax asset
•
Accounts receivable decreased $3.3 million primarily due to lower sales volume in 2024.
•
Inventories decreased $1.6 million primarily due to lower sales volume in 2024. We expect inventories to continue to decline in 2025 due to an
inventory reduction program we put into place in the latter part
of 2024.
•
Accrued liabilities and other liabilities decreased $1.8 million due to lower employee bonus and payroll accruals in 2024 compared to 2023.
For 2023:
•
We reported net income of $4.7 million.
•
We recorded depreciation and amortization of $1.5 million and share-based compensation expense of $0.9 million.
•
We recorded a decrease in our deferred tax assets of $1.0 million due to our net income in 2023.
•
Accounts receivable decreased $4.2 million primarily due to decreased sales volume during the fourth quarter of 2023.
•
Inventories increased $5.7 million primarily due to strategic purchases, including initial stocking orders related to the launch of BOHA! Terminal
2 and Epic TR80 in the fourth quarter of 2023, and declining
sales during the four quarters in 2023.
•
Accounts payable used $3.0 million in cash due to increased inventory purchases and the timing of cash disbursements.
Investing activities: Our capital expenditures were $0.3 million and $0.9 million in 2024 and 2023, respectively.
Expenditures for both years were related
to new product tooling and computer and networking equipment.
Financing activities: 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.
30
Index
Resource Sufficiency
Over the past two years, we have been impacted by global supply chain issues, increased shipping costs, increased interest rates and inflationary pressures.
After experiencing lingering effects of the COVID-19
pandemic through 2022, our operating results and operating cash flow improved significantly during
2023 due largely to certain competitors’ inability to supply products in both the POS automation and casino and gaming markets. In late 2023, we
began to
see indications of a temporary slowdown in demand in the casino and gaming market, as customers that had built up excess inventory due to supply chain
concerns advised us that they would temporarily reduce orders until their stock
normalized. This slowdown impacted our results in the fourth quarter of
2023 and during the year ended December 31, 2024. Given the continued uncertainty related to the impact of external factors on the food service and
casino industries, we
continue to monitor our cash generation, usage and preservation including the management of working capital to generate cash.
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 expenditures 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.
Credit Facility and Borrowings
On March 13, 2020, we entered into the Loan and Security Agreement (the “Loan Agreement”) governing a credit facility (the “Siena Credit Facility”)
with Siena Lending Group LLC (the “Lender”). The Siena Credit
Facility provides for a revolving credit line of up to $10.0 million and was originally
scheduled to expire on March 13, 2023, prior to being extended, as discussed below. 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 and restricts, among other things, our ability to incur additional indebtedness and
create other liens. On 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, we remained in
compliance with our excess availability covenant.
On July 19, 2022, the Company and the Lender entered into Amendment No. 2 (“Siena Credit Facility Amendment No. 2”) to the Loan Agreement as
amended by Siena Credit Facility Amendment No. 1. Also on July 19, 2022,
the Company and the Lender entered into an Amended and Restated Fee
Letter (the “Amended Fee Letter”) in connection with Siena Credit Facility Amendment No. 2. Siena Credit Facility Amendment No. 2 did not modify the
aggregate amount of the
revolving commitment or the interest rate applicable to the loans. Among other changes, Siena Credit Facility Amendment No. 2
extended the maturity date from March 13, 2023 to March 13, 2025. In addition, the Amended Fee Letter required the
Company to maintain outstanding
borrowings of at least $2.25 million in principal amount or, during any period during which the Lender had control of the Company’s deposit account in
accordance with the Loan Agreement, as amended by Siena Credit
Facility Amendment No. 2, to pay interest on at least $2,250,000 in principal amount of
outstanding borrowings, whether or not such amount of loans was actually outstanding.
On May 1, 2023, the Company and the Lender agreed to a letter amendment (Amendment No. 3) to the Loan Agreement. Prior to such amendment, Section
7.1(m) of the Loan Agreement required that any successor to the
Company’s former Chief Executive Officer be reasonably acceptable to the Lender. This
amendment confirmed that Mr. John Dillon, the Company’s current Chief Executive Officer, is an acceptable successor, and applied the same requirement
to any
future successor to Mr. Dillon as Chief Executive Officer.
On November 30, 2024, the Company and the Lender entered into Amendment No. 4 (“Siena Credit Facility Amendment No. 4”) to the Loan Agreement.
The changes to the Loan Agreement provided for in Siena Credit
Facility Amendment No. 4 include, among other things, the extension of the maturity date
from March 13, 2025 to March 31, 2027. Also on November 20, 2024, the Company and the Lender entered into a Second Amended and Restated Fee
Letter (the
“Second Amended Fee Letter”) in connection with Siena Credit Facility Amendment No. 4. The Second Amended Fee Letter increases the
minimum borrowing amount from $2.25 million to $3.0 million, such that the Company is required to either maintain
outstanding borrowings of at least
$3,000,000 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, as amended through Siena Credit Facility Amendment
No. 4, to pay interest on at least $3,000,000 principal amount of loans, whether or not
such amount of loans is actually outstanding. The Second Amended Fee Letter also extends the dates before which a prepayment and termination of the
Loan
Agreement requires the Company to pay to the Lender an early payment/termination premium, providing for (i) a two percent premium for
prepayment on or prior to March 31, 2025, (ii) a one percent premium for prepayment from April 1, 2025 through
March 31, 2026, and no premium for
prepayment thereafter.
As of December 31, 2024, we had $3.0 million of outstanding borrowings under the Siena Credit Facility and $3.2 million of net borrowing capacity
available under the Siena Credit Facility.
As stated above, we continue to monitor our cash generation, usage and preservation including the management of working capital to generate cash and
continue to evaluate alternative sources of funding as necessary.
31
Index
Stock Repurchase Program
During 2024 and 2023, we did not repurchase any shares of our common stock.
Shareholders’ Equity
Shareholders’ equity decreased $8.8 million, or 22%, to $30.6 million at December 31, 2024 from $39.4 million at December 31, 2023. The decrease was
primarily due to a net loss of $9.9 million in 2024, including a
$7.3 million write down of the deferred income tax asset, partially offset by share-based
compensation expense related to stock awards of $1.2 million (net of withholding taxes paid by relinquishment of shares) in 2024.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
TransAct is a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, and is not required to provide information under this item.
Item 8.
Financial Statements and Supplementary Data.
The financial statements of the Company are annexed to this Form 10-K as pages F-4 through F-22. The “Report of Independent Registered Public
Accounting Firm” is annexed to this Form 10-K as of page F-2. An index
to such materials appears on page F-1.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our
disclosure controls and procedures, as defined in Rule 13a-15
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of
December 31, 2024. Based on this evaluation of our disclosure controls and procedures as of December 31, 2024, our CEO and CFO concluded that, as of
December 31, 2024, our disclosure controls and procedures were
effective at the reasonable assurance level.
Our management, including our CEO and CFO, has concluded that our consolidated financial statements, included in this Form 10-K, fairly present, in all
material respects, our financial condition, results of
operations and cash flows for the periods presented in conformity with GAAP, and that they can be
relied upon.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the
Exchange Act, to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a
material effect on the financial statements.
Our management assessed our internal control over financial reporting as of December 31, 2024. Our management based its assessment on criteria
established in Internal Control–Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In the opinion
of management, TransAct maintained effective internal control over financial reporting as of December 31, 2024.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three
months ended December 31, 2024 that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Other Information.
(a) None
(b) During the fourth quarter of 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1trading arrangement” or “non-Rule
10b5-1trading arrangement,” as each term is defined in Item 408(a) of
Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.
Not applicable.
32
Index
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
Set forth in Part I, Item 1. Business of this Form 10-K, under the heading “Information about our Executive Officers,” is certain information regarding our
executive officers, and information regarding our code of
ethics is set forth below. The remaining information in response to this item is incorporated
herein by reference to the disclosure, if any; that will be contained, as applicable, under the headings “Proposal 1: Election of Directors,”
“Delinquent
Section 16(a) Reports,” “Corporate Governance – Director Nomination Process,” “Corporate Governance – Committees of the Board” and “Executive
Compensation – Insider Trading Policy” in our Proxy Statement for our 2025 Annual Meeting of
Stockholders (the “Proxy Statement”), which will be filed
within 120 days after the end of the year covered by this Form 10-K.
Code of Ethics
We maintain a Standards of Business Conduct and Code of Ethics (“Standards of Business Conduct”) that includes our code of ethics that is applicable to
all employees, including our Chief Executive Officer, Chief
Financial Officer, Chief Accounting Officer and Controller. Our Standards of Business
Conduct, which require continued observance of high ethical standards, such as honesty, integrity and compliance with the law in the conduct of our
business,
are available for public access on our website at https://transacttech.gcs-web.com/governance/documents-charters. Any person may request a
copy of our Standards of Business Conduct free of charge by calling (203) 859-6800. We will disclose on
our website at https://transacttech.gcs-
web.com/governance/documents-charters any amendment to or waiver of a provision of the Standards of Business Conduct as may be required and within
the time period specified under the applicable SEC and
Nasdaq rules.
Item 11.
Executive Compensation.
The information in response to this item will be contained in the Proxy Statement under the headings “Executive Compensation,” “Summary Compensation
Table,” “Outstanding Equity Awards at 2024 Fiscal Year-End,”
“Potential Payments Upon Termination or Change in Control,” “Pay Versus Performance,”
and “Director Compensation for Fiscal Year 2024” and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Set forth below is certain information regarding our equity compensation plans. The remaining information in response to this item will be contained in the
Proxy Statement under the heading, “Security Ownership of
Certain Beneficial Owners and Management,” and is incorporated herein by reference.
Equity Compensation Plan Information
Information regarding our equity compensation plans as of December 31, 2024 is as follows:
Plan category
(a)
Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
(b)
Weighted-
average
exercise price
of outstanding
options, warrants
and rights
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a)
Equity compensation plans approved by security holders:
2005 Equity Incentive Plan
– $
–
–
2014 Equity Incentive Plan
1,753,678
8.41
655,672
Total
1,753,678 $
8.41
655,672
In May 2014, our stockholders approved the adoption of the 2014 Equity Incentive Plan. In May 2020, our stockholders approved an amendment and
restatement of the 2014 Equity Incentive Plan to
increase the number of shares of common stock which may be subject to awards granted under the plan
from 1,400,000 to 2,200,000 shares. In June 2023, our stockholders approved an amendment and restatement of the 2014 Equity Incentive Plan to
increase
the number of shares of common stock which may be subject to awards granted under the plan from 2,200,000 to its current level of 2,900,000 and to
change the date of adoption of the 2014 Equity Incentive Plan to April 17, 2023 (thereby
extending its expiration date to April 17, 2033). The Company
also maintains the 2005 Equity Incentive Plan; however no new awards are be available for future issuance under this plan. Both plans generally provide
for awards in the form of: (i)
incentive stock options, (ii) non-qualified stock options, (iii) restricted stock, (iv) restricted stock units (which may include
performance-based vesting), (v) stock appreciation rights or (vi) limited stock appreciation rights. The Company
does not have any equity plans that have
not been approved by its stockholders.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
The information in response to this item will be contained in the Proxy Statement under the headings “Certain Relationships and Related Transactions” and
“Corporate Governance-Board Leadership Structure and
Independence” and is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services.
The information in response to this item will be contained in the Proxy Statement under the headings, “Policy Regarding Pre-Approval of Services
Provided by the Independent Registered Public Accounting Firm” and
“Independent Registered Public Accounting Firm’s Services and Fees” and is
incorporated herein by reference.
33
Index
PART IV
Item 15.
Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this Form 10-K:
1.
Financial Statements.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2024 and 2023
Consolidated Statements of Operations for the years ended December 31, 2024 and 2023
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2024 and 2023
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2024 and 2023
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023
Notes to Consolidated Financial Statements
2.
Schedules.
All schedules are omitted because they are either inapplicable or not required, or because the information required therein is included in the Consolidated
Financial Statements and Notes thereto.
3.
Exhibits
Exhibit Index
3.1(a)
Certificate of Incorporation of TransAct Technologies Incorporated (conformed copy) (incorporated by reference to Exhibit 3.2 of the
Company’s Quarterly Report on Form 10-Q (SEC File No.
000-21121) filed with the SEC on August 18, 2022).
3.1(b)
Certificate of Designation, Series A Preferred Stock, filed with the Secretary of State of Delaware on December 2, 1997 (incorporated by
reference to Exhibit C of the Form of
Amended and Restated Rights Agreement, dated as of February 16, 1999, between TransAct
Technologies Incorporated and American Stock Transfer & Trust Company filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K
(SEC File No. 000-21121) filed with the SEC on February 18, 1999.
3.1(c)
Certificate of Designation, Series B Preferred Stock, filed with the Secretary of State of Delaware on April 6, 2000 (incorporated by reference
to Exhibit 3.1(c) of the Company’s Quarterly
Report on Form 10-Q (SEC File No. 000-21121) filed with the SEC on May 8, 2000).
3.2
Amended and Restated By-Laws of TransAct Technologies Incorporated (incorporated by reference to Exhibit 3.2 of the Company’s Annual
Report on Form 10-K (SEC File No. 000-21121) filed with
the SEC on March 28, 2023).
4.1
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1/A (No.
333-06895) filed with the SEC on August 1, 1996).
4.2
Description of Securities (incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K (SEC File No. 000-21121)
filed with the SEC on March 13, 2024).
10.1(x)
2005 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K (SEC File No. 000-
21121) filed with the SEC on June 1, 2005).
10.2(x)
TransAct Technologies Incorporated 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report
on Form 8-K (SEC File No. 000-21121) filed with the
SEC on May 19, 2014).
10.3(x)
Amendment to 2014 Equity Incentive Plan approved by Shareholders on May 22, 2017 (incorporated by reference to Exhibit 10.1 of the
Company’s Quarterly Report on Form 10-Q (SEC File No.
000-21121) filed with the SEC on August 9, 2017).
10.4(x)
TransAct Technologies Incorporated 2014 Equity Incentive Plan, as Amended and Restated in 2020 (incorporated by reference to Exhibit I to
the Definitive Proxy Statement on Schedule 14A filed
with the Commission on April 23, 2020, File No. 000-21121).
10.5(x)
TransAct Technologies Incorporated 2014 Equity Incentive Plan, as Amended and Restated in 2023 (incorporated by reference to Exhibit I to
the Definitive Proxy Statement on Schedule 14A filed
with the Commission on April 21, 2023, File No. 000-21121).
10.6(x)
2014 Equity Incentive Plan Time-based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 of the Company’s
Quarterly Report on Form 10-Q (SEC File No. 000-21121) filed
with the SEC on May 6, 2016).
10.7(x)
2014 Equity Incentive Plan Performance-based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 of the Company’s
Quarterly Report on Form 10-Q (SEC File No.
000-211121) filed with the SEC on August 8, 2016).
10.8(x)
2014 Equity Incentive Plan Non-statutory Stock Option Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current
Report on Form 8-K (SEC File No. 000-21121) filed with the
SEC on May 19, 2014).
10.10(x)
Severance Agreement by and between TransAct Technologies Incorporated and Brent Richtsmeier, dated as of January 1, 2021 (incorporated
by reference to Exhibit 10.4 to the Company’s Quarterly
Report on Form 10-Q (SEC File No. 000-21121) filed with the SEC on May 15,
2023).
10.11(x)*
Severance Agreement by and between TransAct and Tracey S. Winslow, dated as of December 22, 2023.
10.12(x)*
Severance Agreement by and between TransAct and William J. DeFrances, dated as of August 3, 2022.
34
Index
10.13(x)
Executive Employment Agreement by and between TransAct Technologies Incorporated and John M. Dillon, dated as of September 4, 2024
(incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (SEC File No. 000-21121) filed with the SEC on
September 6, 2024).
10.14(x)
Executive Employment Agreement by and between TransAct Technologies Incorporated and Steven A. DeMartino, dated as of September 4,
2024 (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K (SEC File No. 000-21121) filed with the SEC
on September 6, 2024).
10.15
Lease Agreement between Bomax Properties, LLC and TransAct, dated July 18, 2001 (incorporated by reference to Exhibit 10.16 to the
Company’s Annual Report on Form 10-K (SEC File No.
000-21121) filed with the SEC on March 13, 2024).
10.16
Amendment No. 1 to Lease Agreement between Bomax Properties, LLC and TransAct, dated May 8, 2012 (incorporated by reference to
Exhibit 10.16 of the Company’s Quarterly Report on Form 10-Q
(SEC File No. 000-21121) filed with the SEC on May 10, 2012).
10.17
Amendment No. 2 to Lease Agreement between Bomax Properties, LLC and TransAct, dated January 14, 2016 (incorporated by reference to
Exhibit 10.13 of the Company’s Annual Report on Form 10-K
(SEC File No. 000-21121) filed with the SEC on March 11, 2016).
10.18
Amendment No. 3 to Lease Agreement between Bomax Properties, LLC and TransAct, dated February 29, 2020 (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K
(SEC File No. 000-21121) filed with the SEC on March 4, 2020).
10.19*
Amendment No. 4 to Lease Agreement between Bomax Properties, LLC and TransAct, dated July 15, 2022.
10.20
Amendment No. 5 to Lease Agreement between Bomax Properties, LLC and TransAct, dated May 31, 2024 (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
(SEC File No. 000-21121) filed with the SEC on August 9, 2024).
10.21
Lease Agreement by and between Las Vegas Airport Properties LLC and TransAct dated December 2, 2004 (incorporated by reference to
Exhibit 10.13 of the Company’s Annual Report on Form 10-K
(SEC File No. 000-21121) filed with the SEC on March 16, 2005).
10.22
First Amendment to Lease Agreement by and between CIP Hughes Center LLC and TransAct dated August 24, 2009 (incorporated by
reference to Exhibit 10.19 of the Company’s Annual Report on Form
10-K (SEC File No. 000-21121) filed with the SEC on March 16, 2010).
10.23
Second Amendment to Lease Agreement by and between The Realty Associates Fund IX LP and TransAct dated June 30, 2015 (incorporated
by reference to Exhibit 10.2 of the Company’s Quarterly
Report on Form 10-Q (SEC File No. 000-21121) filed with the SEC on August 7,
2015).
10.24
Lease Agreement by and between 2319 Hamden Center I, L.L.C. and TransAct dated November 27, 2006 (incorporated by reference to
Exhibit 10.14 of the Company’s Annual Report on Form 10-K (SEC
File No. 000-21121) filed with the SEC on March 15, 2007).
10.25
First Amendment to Lease by and between 2319 Hamden Center I, L.L.C. and TransAct dated January 3, 2017 (incorporated by reference to
Exhibit 10.20 of the Company’s Annual Report on Form
10-K (SEC File No. 000-21121) filed with the SEC on March 16, 2017).
10.26
Second Amendment to Lease by and between 2319 Hamden Center I, L.L.C. and TransAct Technologies dated April 30, 2021 (incorporated
by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
(SEC File No. 000-21121) filed with the SEC on May 13,
2021).
10.27
Loan and Security Agreement, dated as of March 13, 2020, among Siena Lending Group LLC, TransAct Technologies Incorporated and the
other Loan Parties from time to time party thereto
(incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-
Q (SEC File No. 000-21121) filed with the SEC on May 22, 2020).
10.28
Amendment No. 1 To Loan and Security Agreement, dated as of July 21, 2021, among Siena Lending Group and TransAct Technologies
Incorporated (incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K (SEC File No. 000-21121) filed with
the SEC on July 26, 2021)
10.29
Amendment No. 2 To Loan and Security Agreement, dated as of July 19, 2022, between Siena Lending Group LLC and TransAct
Technologies Incorporated (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (SEC File No. 000-
21121) filed with the SEC on July 25, 2022).
10.30
Amended and Restated Fee Letter, dated as of July 19, 2022, between Siena Lending Group LLC and TransAct Technologies Incorporated
(incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K (SEC File No. 000-21121) filed with the SEC on
July 25, 2022).
10.31
Letter Amendment, dated May 1, 2023, to Loan and Security Agreement between Siena Lending Group LLC and TransAct Technologies
Incorporated (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (SEC File No. 000-21121) filed with
the SEC on May 4, 2023).
35
Index
10.32
Amendment No. 4 To Loan and Security Agreement, dated as of November 20, 2024, between Siena Lending Group LLC and TransAct
Technologies Incorporated (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (SEC File No. 000-
21121) filed with the SEC on November 21,2024).
10.33
Second Amended and Restated Fee Letter, dated as of November 20, 2024, between Siena Lending Group LLC and TransAct Technologies
Incorporated (incorporated by reference to Exhibit 10.2 to
the Company’s Current Report on Form 8-K (SEC File No. 000-21121) filed with
the SEC on November 21, 2024).
10.34†
Master License Agreement dated February 22, 2019 and amendments thereto (incorporated by reference to Exhibit 10.24 to the Company’s
Annual Report on Form 10-K (SEC File No. 000-21121) filed
with the SEC on March 12, 2021).
10.35†
Master Development and License Agreement dated July 20, 2018 (incorporated by reference to Exhibit 10.25 to the Company’s Annual
Report on Form 10-K (SEC File No. 000-21121) filed with the SEC on March 12, 2021).
19*
TransAct Technologies Incorporated Insider Trading Policy.
21
Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K (SEC File No. 000-
21121) filed with the SEC on March 12, 2021).
23.1*
Consent of Marcum LLP.
31.1*
Rule 13a-14(a) Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Rule 13a-14(a) Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
32‡
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
97
TransAct Technologies Incorporated Clawback Policy in the Event of a Financial Restatement (incorporated by reference to Exhibit 97 to the
Company’s Annual Report on Form 10-K (SEC File No. 000-21121) filed
with the SEC on March 13, 2024).
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document).
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
(x) Management contract or compensatory plan or arrangement.
*
These exhibits are filed herewith.
†
Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Item (601)(b)(10) of Regulation S-K.
‡
These exhibits are furnished herewith.
(b) Exhibits.
The Exhibits required by Item 601 of Regulation S-K under the Exchange Act are included in the Exhibit Index above under a(3) of this Item 15.
(c) Financial Statement Schedules.
See the Notes to the Consolidated Financial Statements included in this Form 10-K.
Item 16.
Form 10-K Summary.
None.
36
Index
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly
authorized.
TRANSACT TECHNOLOGIES INCORPORATED
By:
/s/ John M. Dillon
Name:
John M. Dillon
Title:
Chief Executive Officer
Date: March 24, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ John M. Dillon
Chief Executive Officer and Director
March 24, 2024
John M. Dillon
(Principal Executive Officer)
/s/ Steven A. DeMartino
President, Chief Financial Officer, Treasurer and Secretary
March 24, 2024
Steven A. DeMartino
(Principal Financial Officer)
/s/ William J. DeFrances
Vice President and Chief Accounting Officer
March 24, 2024
William J. DeFrances
(Principal Accounting Officer)
/s/ Haydee Ortiz Olinger
Chair of the Board
March 24, 2024
Haydee Ortiz Olinger
/s/ Audrey P. Dunning
Director
March 24, 2024
Audrey P. Dunning
/s/ Daniel M. Friedberg
Director
March 24, 2024
Daniel M. Friedberg
/s/ Randall S. Friedman
Director
March 24, 2024
Randall S. Friedman
/s/ Emanuel P. N. Hilario
Director
March 24, 2024
Emanuel P. N. Hilario
37
Index
TRANSACT TECHNOLOGIES INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 688)
F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-5
Consolidated Statements of Operations for the years ended December 31, 2024 and 2023
F-6
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2024 and 2023
F-7
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2024 and 2023
F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023
F-9
Notes to Consolidated Financial Statements
F-10
F-1
Index
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
TransAct Technologies Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TransAct
Technologies Incorporated (the “Company”) as of December 31, 2024 and
2023, the related consolidated statements of operations, comprehensive (loss) income,
changes in shareholders’ equity and cash flows for each of the two
years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with
accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the
accounts or disclosures to which they relate.
Valuation of Inventories - Excess and Obsolete Inventory Reserve
As described in Note 2 to the consolidated financial statements, inventories are stated at the lower of average cost or net realizable value. The Company
reviews net realizable value based on estimated selling prices in the ordinary course of business less estimated costs of completions, disposal and
transportation, historical usage and estimates of future demand. Based on these reviews, inventory
write-downs are recorded, as necessary, to reflect
estimated obsolescence, excess quantities, and net realizable value.
F-2
Index
A majority of the Company’s excess and obsolete inventory reserve relates to excess quantities of products, based on the Company’s inventory levels and
future product purchase commitments compared to assumptions relating to future demand and market conditions. As of December 31, 2024, the
Company’s consolidated inventories balance was $16.161 million.
The principal considerations for our determination that the Company’s valuation of inventories, specifically the excess and obsolete inventory reserve, was
a
critical audit matter included the following: (1) management identifies inventories as a critical accounting estimate, and (2) there were significant
judgments made by management in estimating the excess and obsolete inventory reserve, including
developing assumptions related to future product
demand based on historical usage and current market conditions. This in turn led to a high degree of auditor judgment in performing our audit procedures,
which were designed to evaluate the
reasonableness of audit evidence related to management’s assumptions of future product demand.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included, among others,
•
Obtained an understanding of the Company’s accounting policy related to inventory, specifically as it relates to the excess and obsolete inventory
reserve and ensure it
is relevant to the accounting standards and consistent applied to prior periods;
•
Recalculated the inventory reserve based on the Company's policy and our knowledge obtained above. Ensure mathematical accuracy and test the
computations for a sample of
inventory items;
•
Evaluated management’s methodology and process for developing the excess and obsolete inventory reserve, including estimating assumptions
related to future product
demand based on historical usage and current market conditions;
•
Tested management’s calculation of the excess and obsolete inventory reserve, which included evaluating the completeness and accuracy of
underlying data used by
management in the calculation, principally inputs such as actual usage and management’s determination of future
estimated consumption of inventory and comparing them to historical amounts;
•
Performed observation of inventory at various Company locations to ensure the quantities are in working order and identify damaged or poor
conditioned
inventory.
Evaluation of the Realizability of Deferred Tax Assets
As described in Note 2 to the consolidated financial statements, the income tax amounts are accounted for under the liability method in accordance with
ASC
740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amount of existing assets and liabilities and their
respective tax bases and operating loss and tax
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled.
As described in Note 11 to the consolidated financial statements, at December 31, 2024, the Company had deferred tax assets of $8.3 million. These
deferred
tax assets consist primarily deductible temporary differences related to $3.7 million of capitalized R&D expenses, $0.9 million of R&D credit
carryforward, $0.85 million of stock compensation expense, $1 million for inventory reserves and $1.2
million in net operating losses. The Company
recognizes deferred tax assets to the extent it is more likely than not that the assets will be realized. The Company considered positive and negative
evidence, including future reversals of existing taxable
temporary differences, projected future taxable income, tax planning strategies, and recent results of
operations. To the extent that the Company believes realization is not likely, the Company has established a valuation allowance.
F-3
Index
We identified the evaluation of the realizability of deferred tax assets as a critical audit matter. The evaluation of the realizability of deferred tax
assets
required subjective auditor judgment to assess the projections of future taxable income, specifically projected revenue growth rates, over the periods in
which those temporary differences become deductible.
The following are the primary procedures we performed to address this critical audit matter.
•
Reviewed the Company’s overall tax position by reviewing its income tax returns and related provision and deferred tax analysis. This allowed us
to understand the
nature and timing that has led to the recognition of these deferred tax assets;
•
Evaluated the Company’s process to assess the “more likely than not” scenario and review the Company’s position paper on its deferred tax
position including our
evaluation of their negative factors and positive factors related to the assessment;
•
Reviewed and recalculated the company’s analysis of the deferred tax calculation to ensure accuracy in the schedule and ensure that the Company
has reflected the
current tax laws and regulations;
•
Evaluated the timing and impact of the reversal of the deferred tax liabilities and how they impact or utilized the deferred tax assets. We
considered the
Company’s historical profitability trends and cumulative profits over a reasonable period of time;
•
Evaluated the Company’s projected revenue and net income (loss) growth rates used to project future taxable income by comparing them to
(1)
historical and projected growth rates of peer entities and (2) historical growth rates of the Company.
•
Performed a sensitivity analysis to assess the impact of reasonably possible changes in the projected future taxable income, including
changes to
projected revenue growth rates, on the Company’s determination of the realizability of deferred tax assets.
/s/Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2020.
Hartford, Connecticut
March 24, 2025
F-4
Index
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
2024
December 31,
2023
Assets:
Current assets:
Cash and cash equivalents
$
14,394 $
12,321
Accounts receivable, net of allowance for expected credit losses of $474 and $768
6,507
9,824
Inventories
16,161
17,759
Prepaid income taxes
401
322
Other current assets
899
773
Total current assets
38,362
40,999
Fixed assets, net of accumulated depreciation of $19,468
and $18,646
1,818
2,421
Right-of-use assets, net
1,141
1,602
Goodwill
2,621
2,621
Deferred tax assets
–
6,304
Intangible assets, net of accumulated amortization of $1,606 and $1,518
–
88
Other assets
92
163
5,672
13,199
Total assets
$
44,034 $
54,198
Liabilities and Shareholders’ Equity:
Current liabilities:
Revolving loan payable
$
3,000 $
2,250
Accounts payable
4,569
4,431
Accrued liabilities
3,253
4,947
Lease liabilities
955
929
Deferred revenue
1,107
1,079
Total current liabilities
12,884
13,636
Deferred revenue, net of current portion
246
209
Lease liabilities, net of current portion
231
720
Other liabilities
40
219
517
1,148
Total liabilities
13,401
14,784
Commitments and contingencies (see Notes 9 and 15)
Shareholders’ equity:
Preferred stock, $0.01 value, 4,800,000 authorized, none issued and outstanding
–
–
Preferred stock, Series A, $0.01 par value, 200,000 authorized, none issued and outstanding
–
–
Common stock, $0.01 par value, 20,000,000 authorized at December 31, 2024 and 2023; 14,068,049 and
14,003,653 shares
issued; 10,023,207 and 9,958,811
shares outstanding, at December 31, 2024 and 2023,
respectively
141
140
Additional paid-in capital
58,141
57,055
Retained earnings
4,515
14,378
Accumulated other comprehensive loss, net of tax
(54)
(49)
Treasury stock, 4,044,842 shares, at cost
(32,110)
(32,110)
Total shareholders’ equity
30,633
39,414
Total liabilities and shareholders’ equity
$
44,034 $
54,198
See accompanying notes to Consolidated Financial Statements.
F-5
Index
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Years Ended December 31,
2024
2023
Net sales
$
43,384 $
72,631
Cost of sales
21,902
34,231
Gross profit
21,482
38,400
Operating expenses:
Engineering, design and product development
6,977
9,442
Selling and marketing
8,195
9,934
General and administrative
9,936
13,318
25,108
32,694
Operating (loss) income
(3,626)
5,706
Interest and other income (expense):
Interest expense
(322)
(310)
Interest income
469
55
Other, net
(89)
452
58
197
(Loss) income before income taxes
(3,568)
5,903
Income tax expense
(6,295)
(1,155)
Net (loss) income
$
(9,863) $
4,748
Net (loss) income per common share:
Basic
$
(0.99) $
0.48
Diluted
$
(0.99) $
0.47
Shares used in per-share calculation:
Basic
9,997
9,951
Diluted
9,997
10,021
See accompanying notes to Consolidated Financial Statements.
F-6
Index
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
Years Ended December 31,
2024
2023
Net (loss) income
$
(9,863) $
4,748
Foreign currency translation adjustment, net of tax
(5)
30
Comprehensive (loss) income
$
(9,868) $
4,778
See accompanying notes to Consolidated Financial Statements.
F-7
Index
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(in thousands, except share data)
Common Stock
Additional
Paid-in
Retained
Treasury
Accumulated
Other
Comprehensive
Total
Shares
Amount
Capital
Earnings
Stock
Income (Loss)
Equity
Balance, December 31, 2022
9,911,883 $
139 $
56,282 $
9,630 $
(32,110) $
(79) $
33,862
Issuance of common stock
from exercise of stock
options
1,875
–
–
–
–
–
–
Issuance of common stock
on restricted stock units
58,705
1
–
–
–
–
1
Relinquishment of stock
awards and deferred
stock units to pay
withholding taxes
(13,652)
–
(87)
–
–
–
(87)
Share-based compensation
expense
–
–
860
–
–
–
860
Foreign currency
translation adjustment,
net of tax
–
–
–
–
–
30
30
Net income
–
–
–
4,748
–
–
4,748
Balance, December 31, 2023
9,958,811
140
57,055
14,378
(32,110)
(49)
39,414
Issuance of common stock
on restricted stock units
74,995
1
–
–
–
–
1
Relinquishment of stock
awards and deferred
stock units to pay
withholding taxes
(10,599)
–
(71)
–
–
–
(71)
Share-based compensation
expense
–
–
1,157
–
–
–
1,157
Foreign currency
translation adjustment,
net of tax
–
–
–
–
–
(5)
(5)
Net loss
–
–
–
(9,863)
–
–
(9,863)
Balance, December 31, 2024
10,023,207 $
141 $
58,141 $
4,515 $
(32,110) $
(54) $
30,633
See accompanying notes to Consolidated Financial Statements.
F-8
Index
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2024
2023
Cash flows from operating activities:
Net (loss) income
$
(9,863) $
4,748
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Share-based compensation expense
1,157
860
Depreciation and amortization
1,037
1,489
Deferred income taxes
6,304
1,020
Foreign currency transaction losses (gains)
89
(30)
Changes in operating assets and liabilities:
Accounts receivable
3,315
4,248
Employee retention credit receivable
–
1,500
Inventories
1,607
(5,658)
Prepaid income taxes
(80)
(322)
Other current and long-term assets
(43)
(10)
Accounts payable
149
(2,988)
Accrued liabilities and other liabilities
(1,811)
650
Net cash provided by operating activities
1,861
5,507
Cash flows from investing activities:
Capital expenditures
(322)
(901)
Net cash used in investing activities
(322)
(901)
Cash flows from financing activities:
Proceeds from bank borrowings
750
–
Withholding taxes paid on stock issuance
(71)
(87)
Payment of bank financing costs
(45)
–
Net cash provided by (used in) financing activities
634
(87)
Effect of exchange rate changes on cash and cash equivalents
(100)
(144)
Increase in cash and cash equivalents
2,073
4,375
Cash and cash equivalents, beginning of period
12,321
7,946
Cash and cash equivalents, end of period
$
14,394 $
12,321
Supplemental cash flow information:
Interest paid
$
272 $
268
Income taxes paid
499
160
Non-cash capital expenditures
9
23
See accompanying notes to Consolidated Financial Statements.
F-9
Index
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of business
TransAct Technologies Incorporated (together with its subsidiaries, “TransAct,” the “Company,” “we,” “us,” or “our”), which has its headquarters in
Hamden, Connecticut and its primary operating facility in Ithaca, New York, operates in one operating segment: software-driven technology
and printing
solutions for high growth markets including food service technology, casino and gaming and “point of sale” (“POS”) automation markets. Our solutions
are designed from the ground up based on market and customer requirements and are sold
under the BOHA!TM, AccuDate™, Epic, Ithaca®, and
EPICENTRAL® product brands. We sell our products to original equipment manufacturers, value-added resellers, select distributors, and 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. TransAct also provides world-class service, spare parts, accessories and printing supplies to its
growing worldwide installed base of
products. We also generate revenue from the after-market side of the business, providing printer and terminal service, consumables and spare parts in
addition to revenue from our two software solutions; (i) our line of BOHA! software applications used to automate the back-of-house operations of
restaurants, convenience stores and
food service operators and (ii) the EPICENTRAL Print System (“EPICENTRAL”), that enables casino operators to
create promotional coupons and marketing messages and print them in real time at the slot machine.
After strong demand during most of 2023 due in part to our primary competitor’s struggle to deliver products in the face
of supply chain constraints, in late
2023, we began to see indications of a temporary slowdown in demand in the casino and gaming market, as customers that had built up excess inventory
due to supply chain concerns advised us that they would
temporarily reduce orders until their stock normalized. This slowdown impacted our results in the
fourth quarter of 2023 and during the year ended December 31, 2024. After reviewing whether conditions and/or events raise substantial doubt about our
ability to meet future financial obligations over the 12 months following the date on which the Consolidated Financial Statements included in this Annual
Report on Form 10-K (this “Form 10-K”) were issued, including consideration of the actions
taken to manage expenses and liquidity, we believe that our
net cash to be provided by operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility will
provide sufficient liquidity to fund
our current obligations, capital spending, and working capital requirements and to comply with the financial covenants
of our credit facility over at least 12 months following such issuance date.
Use of Assumptions and Estimates
Management’s belief that the Company will
be able to fund its planned operations over the 12 months following the date on which the Consolidated
Financial Statements were issued is based on assumptions which involve significant judgment and estimates of future revenues, inflation,
interest rates,
capital expenditures and other operating costs. Our current assumption is that consumer traffic will continue to remain strong ay casinos and restaurants
during 2025. We cannot predict the ultimate impact of the current economic
environment, including inflation, interest rates and supply chain disruptions on
our customers, which may impact sales. We believe that we are positioned to withstand the impact of any potential economic downturn and we would be
able to take
additional financial and operational actions to cut costs and/or increase liquidity.
In addition, the presentation of the accompanying audited Consolidated Financial Statements requires us to make estimates
and judgments that affect the
reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Our estimates include those related to
revenue recognition, accounts receivable, inventory
obsolescence, goodwill and intangible assets, the valuation of deferred tax assets and liabilities,
depreciable lives of equipment, share-based compensation and contingent liabilities. We base our estimates on historical experience and on various
other
assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates used.
Smaller Reporting Company
As a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, we may choose to prepare our disclosures relying on certain scaled
disclosure requirements for smaller reporting companies in Regulation S-K and in Article 8 of Regulation S-X.
The scaled disclosure requirements for smaller reporting companies permit us (i) to include less extensive narrative disclosure than required of other
reporting companies, particularly in the description of executive compensation in our proxy statement and (ii) to provide audited financial statements for
two fiscal years in our Form 10-K, in contrast to other reporting companies, which must provide
audited financial statements for three years.
We will cease to be a smaller reporting company if we have (i) equal to or greater than $250 million in market value of our shares held by non-affiliates as
of the last
business day of our second fiscal quarter, (ii) equal to or greater than $100 million in annual revenue for the most recent fiscal year or (iii) less
than $100 million in annual revenue for the most recent fiscal year and the market value of our
shares held by non-affiliates exceeds $700 million as of the
last business day of our second fiscal quarter.
F-10
Index
2. Summary of significant accounting policies
Principles of consolidation: The accompanying Consolidated Financial Statements include the
audited Consolidated Financial Statements of TransAct and
its wholly-owned subsidiaries, which require consolidation, after the elimination of intercompany accounts, transactions and unrealized profit.
Certain amounts for prior years have been reclassified to conform to the current year presentation.
Use of estimates: The preparation of Consolidated Financial
Statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses,
and
disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of sales and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents: We consider all highly
liquid investments with a maturity date of three months or less at date of purchase to be cash
equivalents.
Accounts receivable and credit losses: The Company records accounts receivable when the right to consideration becomes
unconditional. We establish an
allowance for expected credit losses to ensure trade receivables are valued appropriately.
We are exposed to credit losses primarily through our net sales of products and services to our customers which are recorded as Accounts Receivable, net
on the
Consolidated Balance Sheets. We evaluate each customer’s ability to pay through assessing customer creditworthiness, historical experience and
current economic conditions through a reasonable forecast period. Factors considered in our evaluation of
assessing collectability and risk include:
underlying value of any collateral or security interests, significant past due balances, historical losses and existing economic conditions including country
and political risk. There can be no assurance
that actual results will not differ from estimates or that consideration of these factors in the future will not
result in an increase or decrease to the allowance for credit losses. We may require collateral or prepayment to mitigate credit risk.
We estimate expected credit losses of financial assets with similar risk characteristics. We determine an asset is impaired when our assessment identifies
there is a
risk that we will be unable to collect amounts due according to the contractual terms of the agreement. We monitor our ongoing credit exposure
through reviews of customer balances against contract terms and due dates, current economic conditions
and dispute resolution. Estimated credit losses are
written off in the period in which the financial asset is no longer collectible.
The following table summarizes the activity
recorded in the allowance for expected credit losses related to accounts receivable:
Years Ended December 31,
(In thousands)
2024
2023
Balance, beginning of period
$
768 $
351
Additions charged to costs and expenses
–
606
Deductions
(294)
(189)
Balance, end of period
$
474 $
768
Inventories: Inventories are stated at the lower
of average cost or net realizable value. We review net realizable value based on estimated selling prices in
the ordinary course of business less estimated costs of completion, disposal and transportation, historical usage and estimates of future
demand. Based on
these reviews, inventory write-downs are recorded, as necessary, to reflect estimated obsolescence, excess quantities and net realizable value.
Fixed assets: Fixed assets are stated at cost. Depreciation is recorded using the
straight-line method over the estimated useful lives. The estimated useful
life of tooling is five years; machinery and equipment is ten years; furniture and office equipment is five years
to ten years; and computer software and
equipment is three years to seven years. Leasehold improvements are amortized over the shorter of the term of the
lease or the useful life of the asset.
Costs related to repairs and maintenance are expensed as incurred. The costs of sold or retired assets are removed from the related asset and accumulated
depreciation accounts and any gain or loss is
recognized. Depreciation expense was $0.9 and $1.3 million in 2024 and 2023, respectively.
F-11
Index
Leases: We account for leases in accordance with ASC 842, “Leases” (“ASC 842”), which requires lessees to apply a
dual approach, classifying leases as
either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification
determines whether lease expense is recognized based on
an effective interest method for finance leases or on a straight-line basis over the term of the lease
for operating leases. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12
months
regardless of their classification. Leases with a term of 12 months or less are accounted for based on existing guidance for operating leases. If risks and
rewards are conveyed without the transfer of control, the lease is treated as
financing. If the lessor does not convey risks and rewards or control, the lease is
treated as operating.
We elected certain practical expedients available under ASC 842 upon adoption. We applied the practical expedient for short-term leases. We have
lease
agreements that include lease and non-lease components, and we did not elect the practical expedients to combine these components for any of our leases.
We enter into lease agreements for the use of real estate space and certain equipment under operating leases and we have no financing or sales-type
leases.
We determine if an arrangement contains a lease at inception. Our leases are included in “Right-of-use assets, net” and “Lease liabilities” in our
Consolidated Balance Sheets.
Right of use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments
arising from the lease. Lease right of use assets and liabilities are recognized at the commencement date of the lease based on the present value of lease
payments over the lease term.
Lease expense is recognized on a straight-line basis over the lease term. As most of our leases do not provide an implicit rate, the Company
determines its
incremental borrowing rate by using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an
amount equal to the lease payments in a similar economic environment. Our lease
right of use asset excludes lease incentives. Our leases have remaining
lease terms of one year to three years, some of which include options to extend. The exercise of lease renewal options is at our sole discretion and our lease
right of use assets
and liabilities reflect only the options we are reasonably certain that we will exercise.
Goodwill and Intangible assets: We acquire
businesses in purchase transactions that result in the recognition of goodwill and intangible assets. The
determination of the value of intangible assets requires management to make estimates and assumptions. In accordance with ASC 350-20 “Goodwill,”
acquired goodwill is not amortized but is subject to impairment testing at least annually and when an event occurs or circumstances change that indicate it
is more likely than not an impairment exists. We perform a fair value-based impairment test
to the carrying value of goodwill and indefinite-lived
intangible assets on an annual basis and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis.
The Company utilizes the option to
first assess qualitative factors to determine whether it is necessary to perform the Step 1 quantitative goodwill
impairment test in accordance with the applicable accounting standards. Under the qualitative assessment, management considers relevant
events and
circumstances including but not limited to macroeconomic conditions, industry and market considerations, Company performance and events directly
affecting the Company. If the Company determines that the Step 1 quantitative impairment test
is required, management estimates the fair value of the
reporting unit primarily using the income approach, which reflects management’s cash flow projections, and also evaluates the fair value using the market
approach. Factors considered that may
trigger an interim period impairment review of either acquired goodwill or intangible assets are: significant
underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of acquired
assets or the
strategy for the overall business; significant negative industry or economic trends; and significant decline in market capitalization relative to net book
value. Finite lived intangible assets are amortized and are tested for impairment
when appropriate. All of our finite lived intangible assets are fully
amortized as of December 31, 2024.
As of December 31, 2024, we have determined that no
goodwill or intangible asset impairment has occurred and the fair value of goodwill was
substantially higher than our carrying value based on our assessment as of December 31, 2024 when our annual review for impairment was performed.
F-12
Index
Revenue recognition: We account for revenue in accordance with ASC Topic 606: Revenue
from Contracts with Customers. In accordance with ASC 606,
a performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer. Some of our contracts with
customers contain a single performance
obligation, while other contracts contain multiple performance obligations (most commonly when contracts include
a hardware product, software and extended warranties). A contract’s transaction price is allocated to each distinct performance
obligation and recognized
as revenue when, or as, the performance obligation is satisfied.
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the
customer.
To the extent the transaction price includes variable consideration, such as price protection, reserves for returns and other allowances, the Company
estimates the amount of variable consideration that should be included in the transaction
price utilizing either the “expected value” method or the “most
likely amount” method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the
Company’s judgment, it is probable
that a significant future reversal of cumulative revenue under the contract will not occur.
For a majority of our revenue, which consists of printers, terminals, consumables, and replacement parts, the Company recognizes revenue as of a
point of
time. The transaction price is recognized upon shipment of the order when control of the goods is transferred to the customer and at the time the
performance obligation is fulfilled. We also sell a software solution in our casino and
gaming market, EPICENTRAL, that enables casino operators to
create promotional coupons and marketing messages and to print them in real time at the slot machine. EPICENTRAL is primarily comprised of both a
software component, which is licensed to
the customer, and a hardware component. EPICENTRAL software and hardware are integrated to deliver the
system’s full functionality. The transaction prices from EPICENTRAL software license and hardware are recognized upon installation and formal
acceptance by the customer when control of the license is transferred to the customer. For out-of-warranty repairs, the transaction price is recognized after
the repair work is completed and the printer or terminal is returned to the customer, as
control of the product is transferred to the customer and our
performance obligation is completed.
Performance obligations are satisfied over time if the customer receives the benefits as we perform work, if the customer controls the asset as it
is being
produced, or if the product being produced for the customer has no alternative use and we have a contractual right to payment. For our separately priced
extended warranty, BOHA! cloud-based software applications, technical support for our
food service technology terminals and maintenance agreements
(including free one-year maintenance received by customers upon completion of
EPICENTRAL installation) revenue is recognized over time as the
customer receives the benefit. The transaction price from the maintenance services is recognized ratably over time, using output methods, as control of the
services is transferred to
the customer. Our cloud-based BOHA! software allows customers to use hosted software over the contract period on a
subscription basis without taking possession of the software and the subscription price is recognized ratably over the contract
period. For extended
warranties, the transaction price is recognized ratably over the warranty period, using output methods, as control of the services is transferred to the
customer.
When there is more than one performance obligation in a customer arrangement, the Company typically uses the “standalone selling price” method to
determine the transaction price to allocate to each performance obligation. The Company sells the performance obligations separately and has established
standalone selling prices for its products and services. In the case of an overall price
discount, the discount is applied to each performance obligation
proportionately based on standalone selling price. To determine the standalone selling price for initial EPICENTRAL installations, the Company uses the
adjusted market assessment
approach.
For contracts with terms of less than 12 months, the Company expenses sales commissions as they are incurred, since the expected amortization period
of
the cost to obtain a contract is less than 12 months.
F-13
Index
Disaggregation of revenue
The following table disaggregates our revenue by market type, as we believe it best depicts how the nature, amount, timing and uncertainty of our
revenue
and cash flows are affected by economic factors. Sales and usage-based taxes are excluded from revenues.
Year Ended December 31, 2024
(In thousands)
United States
International
Total
Food service technology
$
14,719
$
1,382 $
16,101
POS automation
3,361
–
3,361
Casino and gaming
12,522
7,826
20,348
TransAct Services Group
2,883
691
3,574
Total net sales
$
33,485
$
9,899 $
43,384
Year Ended December 31, 2023
(In thousands)
United States
International
Total
Food service technology
$
15,159
$
1,149 $
16,308
POS automation
6,805
117
6,922
Casino and gaming
28,715
12,477
41,192
TransAct Services Group
7,381
828
8,209
Total net sales
$
58,060
$
14,571 $
72,631
Contract balances
Contract assets consist of unbilled receivables. Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the
customer
being invoiced. An 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, net” and “Other Assets” on the
Consolidated Balance Sheets. We first recorded contract assets during 2020 upon the start of a long-term BOHA! contract.
Contract liabilities consist of customer prepayments and deferred revenue. Customer prepayments are reported as “Accrued Liabilities” in current
liabilities in the Consolidated Balance Sheets and represent customer payments made in advance of performance obligations in instances where credit has
not been extended and is recognized as revenue when the performance obligation is complete.
Deferred revenue 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 subscriptions for our BOHA! software applications, and is recognized as revenue as (or when) we perform
under the contract. During the year ended December 31, 2024, we recognized revenue of $1.1 million related to our contract liabilities as of December 31,
2023.
Net contract (liabilities) assets consist of the following:
December 31,
(In thousands)
2024
2023
Unbilled receivables, current
$
106 $
145
Unbilled receivables, non-current
32
120
Customer pre-payments
(164)
(155)
Deferred revenue, current
(1,107)
(1,079)
Deferred revenue, non-current
(246)
(209)
Net contract (liabilities) assets
$
(1,379) $
(1,178)
Remaining performance obligations
Remaining performance obligations represent the transaction price of firm orders for which a good or service has not been delivered to our
customer. As of
December 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $6.3 million. The Company expects
to recognize revenue on $6.0
million of its remaining performance obligations within the next 12 months following December 31, 2024, $0.2 million
within the next 24 months
following December 31, 2024 and the balance of these remaining performance obligations within the next 36 months following
December 31, 2024.
F-14
Index
Concentration of credit risk: Financial instruments that potentially expose us to
concentrations of credit risk are limited to cash and cash equivalents held
by our banks in excess of insured limits and accounts receivable.
Accounts receivable from customers representing 10% or more of total accounts receivable, net during the years ended December 31, 2024 and 2023 were
as
follows:
December 31,
2024
2023
Light & Wonder Gaming, Inc.
15%
3%
International Gaming Technology (“IGT”)
6%
28%
Sales to customers representing 10% or more of total net sales during the years ended December 31, 2024 and 2023 were as follows:
December 31,
2024
2023
Light & Wonder Gaming, Inc.
11%
6%
IGT
6%
15%
Engineering, design and product development: Engineering, design and product
development expenses include expenses incurred in connection with
specialized engineering and design to introduce new products and to customize existing products, and are expensed as a component of operating expenses
as incurred. We recorded $7.0 million and $9.4 million of research
and development expenses in 2024 and 2023,
respectively.
Costs incurred in the engineering, design and product development of a computer software product are charged to expense until technological
feasibility
has been established, at which point all material software costs are capitalized within Intangible assets in our Consolidated Balance Sheet until the product
is available for general release to customers. While judgment is required in
determining when technological feasibility of a product is established, we have
determined that it is reached after all high-risk development issues have been documented in a formal detailed plan design. The amortization of these costs
has been
included in cost of sales over the estimated life of the product.
Advertising: Advertising costs are expensed as incurred. Advertising expenses, which are included in
selling and marketing expense on the accompanying
Consolidated Statements of Operations for 2024 and 2023 totaled $1.2 million and $1.7 million, respectively. These expenses include items such as
consulting, professional services, tradeshows, and print advertising.
Income taxes: The income tax amounts reflected in the accompanying Consolidated Financial Statements
are accounted for under the liability method in
accordance with ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which
those temporary
differences are expected to be recovered or settled. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the
Company will not realize some portion of the deferred tax assets through
future operations. In accordance with ASC 740, we identified, evaluated and
measured the amount of benefits to be recognized for our tax return positions. See Note 11 – Income Taxes.
Foreign currency translation: The financial position and results of operations of our
foreign subsidiary in the UK are measured using local currency as the
functional currency. Assets and liabilities of such subsidiary have been translated into U.S. dollars at the year-end exchange rate, related sales and expenses
have been
translated at the weighted average rate for the period, and shareholders’ equity has been translated at historical exchange rates. The resulting
translation gains or losses, net of tax, are recorded in shareholders’ equity as a cumulative
translation adjustment, which is a component of accumulated
other comprehensive income and loss. Foreign currency transaction gains and losses, including those related to intercompany balances, are recognized in
Other, net on the Consolidated
Statements of Operations.
F-15
Index
Share-based payments: At December 31, 2024, we have share-based employee compensation plans, which are described more fully in Note 10 - Stock
incentive plans. We account for those plans
under the recognition and measurement principles of ASC 718, “Compensation – Stock Compensation.”
Share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the
employee’s requisite service period.
We use the Black-Scholes option-pricing model to calculate the fair value of share-based awards. The key assumptions for this valuation method
include
the expected term of the option, our stock price volatility, risk-free interest rate, dividend yield, market price of our underlying stock and exercise price.
Many of these assumptions require judgment and are highly sensitive in the
determination of compensation expense. Forfeitures are recognized as they
occur.
Net income (loss) per share: We report net income or loss per share in accordance with ASC 260, “Earnings per Share (EPS).” Under this guidance, basic
EPS, which excludes dilution, is computed by
dividing income or loss available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock
were
exercised or converted into common stock. Diluted EPS includes in-the-money stock options using the treasury stock method. During a loss period, the
assumed exercise of in-the-money stock options has an anti-dilutive effect, and therefore,
these instruments are excluded from the computation of diluted
EPS. See Note 12 - Earnings per share.
Recently issued accounting pronouncements:
On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The
amendments improve reportable segment disclosures
requirements and clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure
requirements for entities with a single
reportable segment and contain other disclosure requirements. These amendments are effective for fiscal years
beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. These segment disclosure requirements
must be applied
retrospectively to all periods presented in the financial statements. We adopted this standard effective January 1, 2024, and this standard did not have a
material impact on the Company’s Consolidated Financial Statements. We
have adopted this standard for our fiscal year 2024 annual financial statements
and interim financial statements thereafter and have applied this standard retrospectively for all prior periods presented in the financial statements. See Note
7
– Segment Reporting for further information.
On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). This ASU requires the use of consistent categories and greater
disaggregation in tax rate reconciliations and income taxes
paid disclosures. These amendments are effective for fiscal years beginning after December 15,
2024. These income tax disclosure requirements can be applied either prospectively or retrospectively to all periods presented in the financial
statements.
We are currently evaluating the impact of adopting this standard; however, we do not expect it to have a material impact on our Consolidated Financial
Statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures
(Subtopic 220-40):
Disaggregation of 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 items 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. Early
adoption is permitted. Adoption of this ASU will result in additional disclosure, but will not impact our
consolidated financial position, results of operations, or cash flows.
3. Inventories
The components of inventories are:
December 31,
(In thousands)
2024
2023
Raw materials and purchased component parts
$
8,413 $
8,432
Finished goods
7,748
9,327
$
16,161 $
17,759
F-16
Index
4. Fixed assets, net
The components of fixed assets, net are:
December 31,
(In thousands)
2024
2023
Tooling, machinery and equipment
$
7,828 $
7,562
Furniture and office equipment
2,078
2,078
Computer software and equipment
8,412
8,190
Leasehold improvements
2,895
2,895
21,213
20,725
Less: Accumulated depreciation and amortization
(19,468)
(18,646)
1,745
2,079
Construction in-process
73
342
$
1,818 $
2,421
5. Intangible assets, net
Identifiable intangible assets are recorded in Intangible assets, net in the accompanying Consolidated Balance Sheets and are comprised of the following:
December 31,
2024
2023
(In thousands)
Gross Amount
Accumulated
Amortization Gross Amount
Accumulated
Amortization
Purchased technology
$
1,591
$
(1,591) $
1,591 $
(1,503)
Patents
15
(15)
15
(15)
Total
$
1,606
$
(1,606) $
1,606 $
(1,518)
Amortization expense was $88 thousand and
$154 thousand in 2024 and
2023, respectively. We currently do not anticipate any amortization expense for
each of the next five years ending December 31.
6. Accrued liabilities
The components of accrued liabilities are:
December 31,
(In thousands)
2024
2023
Salaries and compensation related
$
1,786 $
3,455
Taxes
725
870
Professional and consulting
200
161
Other
542
461
$
3,253 $
4,947
F-17
Index
7. Segment reporting
We apply the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, “Segment Reporting.”
We
view our operations and manage our business as one segment: the design, development and marketing of software-driven technology and
printing
solutions and the sale of printer and terminal related software, services, supplies and spare parts. Factors used to identify TransAct’s single operating
segment include the 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 products and services and a similar class of
customers within our
core markets (distributors, resellers, original equipment manufacturers (“OEMs”) and end users). Other factors used to identify
TransAct’s single operating segment include the organizational structure of the Company and the financial information
available for evaluation by the chief
operating decision-maker (“CODM”) in making decisions about how to allocate resources and assess performance. The Company’s chief operating
decision makers, who are 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.
We generally use measures of sales, gross margin percentage, net income, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and
adjusted EBITDA to make operational and strategic decisions. These financial measures are compared to budgeted and forecasted amounts by the CODMs
on a regular basis 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.
The following table provides the operating financial results of our segment:
December 31,
(In thousands)
2024
2023
Revenues
$
43,384 $
72,631
Cost of materials sold
15,268
25,990
Compensation costs
18,323
20,004
Professional services
3,493
4,965
Occupancy costs
1,477
1,485
Marketing expenses
1,109
1,715
IT expenses
1,255
1,203
Severance expense
75
1,785
Depreciation and amortization
1,037
1,489
Other segment expenses(1)
4,973
8,289
(3,626)
5,706
Interest income
469
55
Interest expense
(322)
(310)
Other (expense) income
(89)
452
Income tax benefit (expense)
(6,295)
(1,155)
Net (loss) income
$
(9,863) $
4,748
(1) Other Segment expenses included in Segment net income primarily include other cost of goods sold, other administrative costs and engineering costs.
F-18
Index
A reconciliation of net (loss) income to EBITDA and adjusted EBITDA follows:
Years Ended December 31,
(In thousands)
2024
2023
Net (loss) income
$
(9,863) $
4,748
Interest (income) expense, net
(147)
255
Income tax expense
6,295
1,155
Depreciation and amortization
1,037
1,489
EBITDA
(2,678)
7,647
Share-based compensation
1,157
860
Adjusted EBITDA(1)
$
(1,521) $
8,507
(1) Adjusted EBITDA in 2023 includes a $1.5 million severance charge related to the
resignation of the Company’s former Chief Executive Officer.
Please see Note 14 for net sales and long-lived assets by geographic area.
8. Retirement savings plan
We maintain a 401(k) plan under which all full-time employees are eligible to participate at the beginning of the month immediately following their date
of
hire. We match employees’ contributions at a rate of 50% of employees’ contributions up to the first 6% of the employees’ compensation contributed to
the 401(k) plan. Our matching contributions, net of applied forfeitures, were $364 thousand and $230 thousand in 2024 and 2023, respectively.
9. Borrowings
Credit Facility
On March 13, 2020, we entered into the
Loan and Security Agreement (the “Loan Agreement”) governing a credit facility (the “Siena Credit Facility”)
with Siena Lending Group LLC (the “Lender”). The Siena Credit Facility provides for a revolving credit line of up to $10.0 million and was originally
scheduled to expire on March 13, 2023, prior to being extended, as discussed below. 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%. The total deferred financing costs
related to expenses incurred to complete the Siena Credit Facility were $245 thousand which were reported as “Other current assets” in current assets and
“Other assets” in non-current assets in the Consolidated Balance
Sheets. 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 and restricts, among other things, our ability to incur additional indebtedness and
create other liens. On 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, we remained in
compliance with our excess availability covenant.
On July 19, 2022, the Company and the Lender entered into Amendment No. 2 (“Siena Credit Facility Amendment No. 2”) to the Loan Agreement as
amended
by Siena Credit Facility Amendment No. 1. Also on July 19, 2022, the Company and the Lender entered into an Amended and Restated Fee
Letter (the “Amended Fee Letter”) in connection with Siena Credit Facility Amendment No. 2. Siena Credit Facility
Amendment No. 2 did not modify the
aggregate amount of the revolving commitment or the interest rate applicable to the loans. Among other changes, Siena Credit Facility Amendment No. 2
extended the maturity date from March 13, 2023 to March 13, 2025.
In addition, the Amended Fee Letter required the Company to maintain outstanding
borrowings of at least $2.25 million in principal amount
or, during any period during which the Lender had control of the Company’s deposit account in
accordance with the Loan Agreement, as amended by Siena Credit Facility Amendment No. 2, to pay interest on at least $2.25 million in principal amount
of outstanding borrowings, whether or not such amount of loans was actually outstanding.
F-19
Index
On May 1, 2023, the Company and the Lender agreed to a letter amendment (Amendment No. 3) to the Loan Agreement. Prior to such amendment, Section
7.1(m)
of the Loan Agreement required that any successor to the Company’s former Chief Executive Officer be reasonably acceptable to the Lender. This
amendment confirmed that Mr. John Dillon, the Company’s current Chief Executive Officer, is an acceptable
successor, and applied the same requirement
to any future successor to Mr. Dillon as Chief Executive Officer.
On November 20, 2024, the Company and the Lender entered into Amendment No. 4 (“Siena Credit Facility Amendment No. 4”) to the Loan Agreement.
The
changes to the Loan Agreement provided for in Siena Credit Facility Amendment No. 4 include, among other things, the extension of the maturity date
from March 13, 2025 to March 31, 2027. Also on November 20, 2024, the Company and the Lender entered
into a Second Amended and Restated Fee
Letter (the “Second Amended Fee Letter”) in connection with Siena Credit Facility Amendment No. 4. The Second Amended Fee Letter increases the
minimum borrowing amount from $2.25 million to $3.0 million, such that the
Company is required to either maintain outstanding borrowings 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, as amended by Siena Credit Facility Amendment No. 4, to pay interest on at least $3.0 million principal amount of loans, whether or not such
amount of loans is actually outstanding. The Second Amended Fee Letter also extends the dates before which a prepayment and
termination of the Loan
Agreement requires the Company to pay to the Lender an early payment/termination premium, providing for (i) a two percent
premium for prepayment on
or prior to March 31, 2025, (ii) a one percent premium for prepayment from April 1, 2025 through March 31, 2026,
and no premium for prepayment
thereafter.
As of December 31, 2024 and 2023, we had $3.0 million and $2.3 million, respectively, of outstanding borrowings under the Siena Credit Facility at
interest rates of 9.25% and 10.25%, respectively. We had $3.2 million of net borrowing capacity available under the Siena Credit Facility at December 31,
2024.
10. Stock incentive plans
Stock incentive plans. We currently have two
stock incentive plans: the 2005 Equity Incentive Plan and the 2014 Equity Incentive Plan, which provide for
awards to executives, key employees, directors and consultants. The plans generally provide for awards in the form of: (i) incentive stock
options, (ii) non-
qualified stock options, (iii) restricted stock, (iv) restricted stock units (which may include performance-based vesting), (v) stock appreciation rights or (vi)
limited stock appreciation rights. Awards granted under these plans
have exercise prices equal to 100% of the fair market value of the common stock at the
date of grant. Awards granted have a ten-year term and generally vest over a two-year
to four-year period, unless automatically accelerated for certain
defined events. As of May 2014, no new awards may be made under the
2005 Equity Incentive Plan. Under our 2014 Equity Incentive Plan, as amended
in May 2023, we are authorized to grant awards of up to 2.9
million shares of TransAct common stock. At December 31, 2024, 655,672 shares of common
stock remained available for issuance under the 2014 Equity Incentive Plan.
Under the assumptions indicated below, the weighted-average per share fair value of stock option grants for 2024 and 2023 was $3.98 and $4.16,
respectively. We also
issued restricted stock units for certain executives and directors that vest over a specified period of time, and in some instances
require achieving certain performance metrics. The weighted-average per share fair value of these restricted stock
units was $5.81 and $7.21 in
2024 and
2023,
respectively. The per share fair value of restricted stock units is the trading value of the stock on the date of the grant.
The table below indicates the key assumptions (on a weighted-average basis) used in the option valuation calculations for options granted in 2024 and 2023
and a discussion of our
methodology for developing each of the assumptions used in the valuation model:
Years ended December 31,
2024
2023
Expected option term (in years)
6.1
7.0
Expected volatility
57.7%
55.6%
Risk-free interest rate
4.3%
4.2%
Dividend yield
0.0%
0.0%
Expected Option Term - This is the weighted average period of time over which the options granted are expected to remain outstanding giving
consideration to our historical exercise patterns. Options granted
have a maximum term of ten years and an increase in the expected term will increase
compensation expense.
Expected Volatility – The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over
the most recent period approximately equal to the expected option term of
the grant. An increase in the expected volatility factor will increase
compensation expense.
F-20
Index
Risk-Free Interest Rate - This is the U.S. Treasury rate in effect at the time of grant having a term approximately equal to the expected term of the option.
An increase in the risk-free interest rate will
increase compensation expense.
Dividend Yield –The dividend yield is calculated by dividing the annual dividend declared per common share by the weighted average market value of our
common stock on the date of grant. An increase in the dividend yield will
decrease compensation expense.
We recorded $1.2 and $0.9 million of share-based compensation expense for 2024
and 2023, respectively, included primarily in general and administrative
expense in our Consolidated Statements of Operations. We also
recorded income tax benefits of $0.3 million in 2024 and $0.2 million in 2023, related to
such share-based compensation. At December 31,
2024, these benefits are recorded as a deferred tax asset in the Consolidated Balance Sheets.
Equity award activity in the 2005 Equity Incentive Plan and the 2014 Equity Incentive Plan, as amended, is summarized below:
Stock Options
Restricted Stock Units
Number of
Shares
Average Price*
Number of
Units
Average
Price**
Outstanding at December 31, 2023
1,314,475
$
8.82
184,536 $
7.76
Granted
179,700
6.80
267,024
5.81
Exercised
–
–
(74,995)
7.41
Forfeited
(7,750)
7.11
–
–
Expired
(109,312)
10.71
–
–
Outstanding at December 31, 2024
1,377,113
$
8.41
376,565 $
6.44
*
weighted average exercise price per share
**
weighted average grant stock price per share
The following summarizes information about equity awards outstanding that are vested and expect to vest and equity awards that are exercisable at
December 31, 2024:
Equity Awards Vested and Expected to Vest
Equity Awards That Are Exercisable
Awards
Average
Price*
Aggregate
Intrinsic
Value
Remaining
Term**
Awards
Average
Price*
Aggregate
Intrinsic
Value
Remaining
Term**
Stock Options
1,377,113
$
8.41
$
–
4.1
973,963 $
8.96 $
–
2.2
Restricted stock units
376,565
–
1,540
2.1
–
–
–
–
*
weighted average exercise price per share
**
weighted-average contractual remaining term in
years
Shares that are issued upon exercise of employee stock awards are newly issued shares and not issued from treasury stock. As of December 31, 2024,
unrecognized compensation cost related to non-vested equity awards granted under our stock incentive plans is approximately $2.7 million, which is
expected to be recognized over a weighted average period of 2.7 years.
The total fair value of awards vested was $0.9
million and $1.3 million during the years ended December 31, 2024 and 2023, respectively. The total
intrinsic value (which
is the amount by which the stock price exceeded the exercise price on the date of exercise) of stock options exercised during the
years ended December 31, 2024
and 2023 was zero and $3 thousand, respectively, and cash received from option exercises was zero in both 2024 and
2023. Zero and 1,875 stock options were exercised during the year ended December 31, 2024
and 2023, respectively. We recorded zero
realized tax
provision in 2024 and 2023
from equity-based awards, related to options exercised.
F-21
Index
11. Income taxes
The components of the income tax expense are as follows:
December 31,
(In thousands)
2024
2023
Current:
Federal
$
(154) $
(1)
State
37
51
Foreign
108
85
(9)
135
Deferred:
Federal
5,991
825
State
293
132
Foreign
20
63
6,304
1,020
Income tax expense
$
6,295 $
1,155
Our effective tax rates were (176.4%) and 19.6% for 2024 and 2023, respectively. Our 2024 tax rate was impacted by 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.
At December 31, 2024, we have $276 thousand of federal net operating loss carryforwards which can be carried over indefinitely, $135 thousand of state
net operating loss carryforwards which expire in various years, $903
thousand of R&D credit carryforwards which can be carried forward for 20 years, and
no state tax credit carryforwards. All of these items have a full valuation allowance against them as of December 31, 2024. Foreign income before taxes
was $79 thousand and $322 thousand in 2024 and 2023, respectively.
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated
Financial Statements. Our
deferred tax assets and liabilities were comprised of the following:
December 31,
(In thousands)
2024
2023
Deferred tax assets:
Federal net operating losses
$
276 $
–
Foreign net operating losses
802
733
State net operating losses
135
84
Accrued severance
20
165
Capitalized R&D expenses
3,708
3,127
Inventory reserves
1,047
896
Deferred revenue
7
31
Warranty reserve
29
24
Stock compensation expense
853
790
Other accrued compensation
165
404
R&D credit carryforward
903
695
Other Assets
379
360
Gross deferred tax assets
8,324
7,309
Valuation allowance
(8,103)
(719)
Net deferred tax assets
221
6,590
Deferred tax liabilities:
Depreciation and amortization
179
237
Other
42
49
Net deferred tax liabilities
221
286
Total net deferred tax assets
$
– $
6,304
F-22
Index
As of December 31, 2024 and 2023, we had $8.1 million and $719 thousand, respectively,
of valuation allowance against our deferred income tax assets.
The following table summarizes the activity recorded in the valuation allowance on the deferred tax assets:
Year Ended December 31,
(In thousands)
2024
2023
Balance, beginning of period
$
719 $
656
Additions charged to income tax provision
7,384
63
Balance, end of period
$
8,103 $
719
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, 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, 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. 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 experienced over the
previous three fiscal years (2022 through 2024) combined with a near term outlook of
future taxable losses. The need for this valuation allowance will be
assessed on a continuous basis in future periods and, as a result, a portion, or all of the allowance, may be reversed based on changes in facts and
circumstances.
Differences between the U.S. statutory federal income tax rate and our effective income tax rate are analyzed below:
Year Ended December 31,
2024
2023
Federal statutory rate
21.0%
21.0%
R&D credit
8.8
(5.9)
Foreign-derived intangible income deduction
–
(1.7)
Stock award excess tax benefit
(0.7)
0.4
State income taxes, net of federal income taxes
1.0
2.5
Business meals and entertainment
(0.4)
0.3
Executive compensation limitation
–
0.6
Uncertain tax positions
(0.2)
0.5
Stock option cancellations
(2.0)
0.6
Change in valuation allowance
(206.9)
1.0
Other
3.0
0.3
Effective tax rate
(176.4%)
19.6%
F-23
Index
We had $203 and $197 thousand of total gross unrecognized tax benefits at December 31, 2024 and 2023, respectively that, if recognized, would favorably
affect the
effective income tax rate in any future periods. We are not aware of any events that could occur within the next twelve months that could cause a
significant change in the total amount of unrecognized tax benefits. A tabular reconciliation of the
gross amounts of unrecognized tax benefits at the
beginning and end of the year is as follows:
December 31,
(In thousands)
2024
2023
Balance, beginning of period
$
197 $
142
Tax positions taken during the current period
31
83
Reductions for tax positions in prior years
(25)
–
Lapse of statute of limitations
–
(28)
Balance, end of period
$
203 $
197
We recognize interest and penalties related to uncertain tax positions in the income tax provision.
We are subject to U.S. federal income tax as well as income tax of certain state and foreign jurisdictions. We have substantially concluded all U.S.
federal
income tax, state and local, and foreign tax matters through 2019. However, our federal tax returns for the years 2021 through 2024 remain open to
examination. Various state and foreign tax jurisdiction tax years remain open to examination as
well, though we believe that any additional assessment
would be immaterial to the Consolidated Financial Statements.
12. Earnings per share
Earnings per share was computed as follows (in thousands, except per share amounts):
Years Ended December 31,
2024
2023
Net (loss) income
$
(9,863) $
4,748
Shares:
Basic: Weighted average common shares outstanding
9,997
9,951
Add: Dilutive effect of outstanding equity awards as determined by the treasury stock method
–
70
Diluted: Weighted average common and common equivalent shares outstanding
9,997
10,021
Net (loss) income per common share:
Basic
$
(0.99) $
0.48
Diluted
(0.99)
0.47
The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options, restricted
stock units
and performance stock awards, when the average market price of the common stock is lower than the exercise price of the related stock award during the
period. These outstanding stock awards are not included in the computation of diluted
earnings per share because the effect would be anti-dilutive.
Furthermore, in periods when a net loss is reported, such as in 2024, basic and diluted net loss per common share are calculated using the same method.
Anti-dilutive option awards
excluded from the computation of earnings per dilutive share were 1.4 million and 1.1 million at December 31, 2024 and 2023,
respectively. Anti-dilutive restricted stock awards excluded from the computation of earnings per dilutive share were 0.3 million and zero at December 31,
2024
and 2023, respectively. Anti-dilutive performance stock awards excluded from the computation of earnings per dilutive share were 0.1
million and
zero at December 31, 2024 and 2023, respectively.
F-24
Index
13. Stock repurchase program
We use the cost method to account for treasury stock purchases, under which the price paid for the stock is charged to the treasury stock account.
Repurchases of our common stock are accounted for as of the settlement date. During 2024 and 2023, we did not repurchase any shares of our common
stock.
From January 1, 2005 through December 31, 2019, we repurchased a total of 4,044,842 shares of common stock for $32.1 million, at an average
price of $7.94
per share.
14. Geographic area information
Information regarding our operations by geographic area is contained in the following table. These amounts in the geographic area table are based on the
location of the customer and asset.
Years Ended December 31,
(In thousands)
2024
2023
Net sales:
United States
$
33,485 $
58,060
International
9,899
14,571
Total
$
43,384 $
72,631
Fixed assets, net:
United States
$
831 $
945
International
987
1,476
Total
$
1,818 $
2,421
Sales to international customers were 23%
and 20% of total sales in 2024
and 2023, respectively. Sales to Europe represented 55% and 64%, sales to the
Pacific Rim (which includes Australia and Asia) represented 34% and 29%, and sales to Canada
represented 10% and 4% of
total international sales in
2024 and 2023,
respectively. International long-lived assets consist of net fixed assets located at our foreign subsidiary in the UK, as well as our contract
manufacturer in Thailand.
15. Leases
Operating lease expense was $1.0 million and $1.1 million for the years ended December 31, 2024 and 2023,
respectively, and is reported as “Cost of
sales,” “Engineering, design and product development expense,” “Selling and marketing expense,” and “General and administrative expense” in the
Consolidated Statements of Operations. Operating costs include short-term lease costs.
The following information represents supplemental disclosure for the statement of cash flows related to operating leases (in thousands):
Years Ended December 31,
2024
2023
Operating cash outflows from leases
$
1,022 $
1,013
The following summarizes additional information related to our leases:
Years Ended December 31,
2024
2023
Weighted average remaining lease term (in years)
1.2
1.7
Weighted average discount rate
7.7%
4.4%
F-25
Index
The maturity of the Company’s operating lease liabilities are as follows (in thousands):
December 31, 2024
2025
$
1,014
2026
237
Total undiscounted lease payments
1,251
Less imputed interest
65
Total lease liabilities
$
1,186
16. Quarterly results of operations (unaudited)
Our quarterly results of operations for 2024
and 2023 are as follows:
Quarter Ended
(In thousands, except per share amounts)
March 31
June 30
September 30 December 31
2024:
Net sales
$
10,687
$
11,599 $
10,867 $
10,231
Gross profit
5,624
6,110
5,227
4,521
Net loss
(1,036)
(319)
(551)
(7,957)
Net loss per common share:
Basic
(0.10)
(0.03)
(0.06)
(0.79)
Diluted
(0.10)
(0.03)
(0.06)
(0.79)
2023:
Net sales
$
22,270
$
19,906 $
17,190 $
13,265
Gross profit
12,255
10,858
8,916
6,371
Net income (loss)
3,139
765
906
(62)
Net income (loss) per common share:
Basic
0.32
0.08
0.09
(0.01)
Diluted
0.31
0.08
0.09
(0.01)
17. Related party transactions
One of the Company’s directors serves as President and Chief Executive Officer of The One Group Hospitality, Inc. The
Company sold various food
service technology products to The One Group Hospitality, Inc. on an arms’ length basis totaling $117 thousand
and $246 thousand in 2024 and 2023,
respectively. The Company’s accounts receivable from The One Group Hospitality, Inc. amounted to $5 thousand and $34 thousand at December
31, 2024
and 2023, respectively.
18. Subsequent events
The Company has evaluated all events or transactions that occurred up to the date the consolidated financial statements were available to issue. Based
upon this review,
the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial
statements.
F-26
Exhibit 10.11
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is entered into as of the 22nd day of December 2023, by and between Tracey Winslow, an individual
with a residence address of 1251 Sleepy Hollow Rd., Venice, FL 34285 (the "Executive"), and TransAct Technologies Incorporated, a Delaware
corporation with a mailing address of One Hamden Center, 2319 Whitney Avenue, Suite 3B, Hamden, Connecticut 06518 (the "Company"). As used in
this Agreement, the "Company" shall also include all subsidiaries of the Company, as the context
requires.
INTRODUCTION
1. The Company is in the business of developing, manufacturing and marketing market-specific solutions including printers, terminals, software
and other products for transaction-based and
other industries (the "Business").
2. The Company desires that the Executive serve in the position of Chief Revenue Officer with the Company and that the Company be able to rely
upon her advice when requested as to the best
interests of the Company, and its shareholders.
3. The Board of Directors of the Company believes the Executive can best serve the Company without the distractions of personal uncertainties and
risks that might be created in the event a
change in control of the Company is proposed or her employment by the Company is terminated.
4. The Company and Executive are parties to a Severance Agreement dated June 29, 2005 (the “2005 Agreement) and a December 23, 2008
Amendment to the 2005 Agreement (the “2008 Amendment”). The
2005 Agreement and the 2008 Amendment together shall be referred to as the “Prior
Severance Agreement”. The Company and Executive desire to enter into this Severance Agreement that will replace and supersede the Prior Severance
Agreement.
AGREEMENT
In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:
1. Definitions. The following terms shall have the meanings indicated for the purposes of this Agreement:
(a) "Cause" shall mean: (i) the death or disability of the Executive (For purposes of this Agreement, "disability" shall mean the Executive's
incapacity due to physical or mental
illness which has caused the Executive to be absent from the full-time performance of her duties with the Company for
a period of six (6) consecutive months.) (ii) any action or inaction by the Executive that constitutes larceny, fraud, gross
negligence, a willful or negligent
misrepresentation to the directors or officers of the Company, their successors or assigns, or a crime involving moral turpitude; or (iii) the refusal of the
Executive to follow the reasonable and lawful
instructions of the CEO or the Board of Directors of the Company with respect to the services to be rendered
and the manner of rendering such services by Executive, provided such refusal is material and repetitive and is not justified or excused
either by the terms
of this Agreement or by actions taken by the Company in violation of this Agreement, and with respect to the first two refusals Executive has been given
reasonable written notice and explanation thereof and reasonable
opportunity to cure and no cure has been effected within a reasonable time after such
notice.
(b) "Change in Control" will be deemed to have occurred if: (1) the Company effectuates a Takeover Transaction; or (2) any election of
directors of the Company (whether by the directors then
in office or by the stockholders at a meeting or by written consent) where a majority of the
directors in office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors
immediately preceding such election; or (3) the Company effectuates a complete liquidation of the Company or a sale or disposition of all or substantially
all of its assets. A "Change in Control" shall not be deemed to include, however, a merger
or sale of stock, assets or business of the Company if the
Executive immediately after such event owns, or in connection with such event immediately acquires (other than in the Executive's capacity as an equity
holder of the Company or as a
beneficiary of its employee stock ownership plan or profit sharing plan), any stock of the buyer or any affiliate thereof.
(c) A "Takeover Transaction" shall mean (i) a merger or consolidation of the Company with, or an acquisition of the Company or all or
substantially all of its assets by, any other corporation,
other than a merger, consolidation or acquisition in which the individuals who were members of the
Board of Directors of the Company immediately prior to such transaction continue to constitute a majority of the Board of Directors of the
surviving
corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a
period of not less than twelve (12) months following the closing of such
transaction, or (ii) when any person or entity or group of persons or entities (other
than any trustee or other fiduciary holding securities under an employee benefit plan of the Company) either related or acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Company representing more than
fifty percent (50%) of the total number of votes that may be cast for the election of
directors of the Company.
(d) "Terminating Event" shall mean: (i) termination by the Company of the employment of the Executive for any reason other than
retirement or for Cause, occurring within twelve (12) months
after a Change of Control; or (ii) resignation of the Executive from the employ of the
Company, while the Executive is not receiving payments or benefits from the Company by reason of the Executive's disability, subsequent to any of the
following
events occurring within twelve (12) months after a Change of Control: (A) a significant reduction in the nature or scope of the Executive's
responsibilities, authorities, powers, functions or duties from the responsibilities, authorities,
powers, functions or duties exercised by the Executive
immediately prior to the Change in Control; (B) a decrease in the salary payable by the Company to the Executive from the salary payable to the Executive
immediately prior to the Change in
Control except for across-the-board salary reductions similarly affecting all management personnel of the Company; or
(C) the relocation of the Executive’s principal place of employment (without her consent) to a location more than 50 miles from
its current location (unless
such new location is closer to the Executive's then residence) provided, however, that a Terminating Event shall not be deemed to have occurred solely as a
result of the Executive being an employee of any direct or
indirect successor to the business or assets of the Company, rather than continuing as an
employee of the Company, following a Change in Control; or (D) any other action or inaction that constitutes a material breach of the Agreement by the
Company, including without limitation Section 11. It is further understood that a resignation shall qualify as a "terminating event" only if: (i) the
Executive gives the Company notice, within ninety (90) days of its first existence or
occurrence (without the consent of the Executive) of any or any
combination of the events described in this Section 1(e)(ii); (ii) the Company fails to cure the eligibility condition(s) within thirty (30) days of receiving
such notice; and (iii)
the Executive separates from service not later than 30 days following the end of such thirty-day period.
(e) "Separation from Service" for purposes of the Agreement shall mean a "separation from service" (as defined at Section 1.409A-1(h) of
the Treasury Regulations) from the Company and from all
other corporations and trades or businesses, if any, that would be treated as a single "service
recipient" with the Company under Section 1.409A-1(h)(3) of the Treasury Regulations.
2. Severance.
(a) Without Cause. If the Company terminates the employment of the Executive without Cause, other than as a result of a Terminating
Event, then commencing on the date of such
termination and for a period of one (1) year thereafter, the Company shall provide Executive with a severance
package which shall consist of the following payments: (i) the Executive's then current annual base salary payable in equal
installments in connection with
the Company’s regular payroll dates and procedures; (ii) the Executive's annual target bonus amount under the Company’s Executive Incentive
Compensation Plan (“EIC”), if any, pro-rated for the portion of the fiscal
year occurring prior to termination, payable in equal installments in connection
with the Company’s regular payroll dates and procedures; and (iii) subject to any employee contribution applicable to the Executive on the date of
termination,
contribution to the cost of the Executive’s participation in the Company’s group medical and dental plans, provided that the Executive is
entitled to continue such participation under applicable law and plan terms.
(b) With a Terminating Event. If the Company terminates the employment of the Executive as a result of a Terminating Event, then commencing on the
date of such termination and for a period equal to one (1)
year thereafter, the Company shall provide Executive with a severance package which shall
consist of the following payments: (i) the Executive's then current annual base salary payable in equal installments in connection with the Company’s
regular payroll dates and procedures; (ii) the Executive's annual target bonus amount under the Company's Executive Incentive Compensation Plan, if any,
payable in equal installments in connection with the Company’s regular payroll dates and
procedures; and (iii) subject to any employee contribution
applicable to the Executive on the date of termination, contribution to the cost of the Executive’s participation in the Company’s group medical and dental
plans, provided that the
Executive is entitled to continue such participation under applicable law and plan terms. In addition, if the Company terminates the
employment of the Executive as a result of a Terminating Event, then the Company shall cause the immediate
vesting of all options granted by the
Company to the Executive under the Company's stock plans. At any time when the Company is obligated to make installment payments under Section 2(b),
the Company shall, ten (10) days after receipt of a written
request from the Executive, pay the Executive an amount equal to the balance of the amounts
payable under Section 2(b)(i)-(ii), provided that the obligation of the Company to continue to contribute to medical and dental benefits pursuant to
Section
2(b)(iii) or to make installment payments under 2(b)(i)-(ii) shall cease upon the payment of such amount; provided, that this sentence shall not apply to any
portion of the amounts payable under
Section 2(b)(i)-(ii) that constitutes or includes nonqualified deferred compensation subject to Section 409A of the
Internal Revenue Code of 1986, as amended (the "Code").
(c) General Release. As a condition precedent to receiving any severance payment, the Executive shall execute a general release of any and
all claims which Executive or her heirs,
executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and
their past, present and future employees, officers, directors, agents and attorneys. Any such release must be executed in a form
prescribed by or acceptable
to the Company and delivered to the Company not later than sixty (60) days following the Executive's separation from service. If the Executive's properly
executed release is timely delivered to the Company and the
Executive does not revoke the release within seven (7) days thereafter or within such shorter
period as the Company may prescribe, the severance benefits payable hereunder shall commence upon the expiration of such seven-day or shorter period;
provided, that the first such payment shall include any amounts that would have been paid earlier but for the provisions of this subsection (c).
(d) Withholding. All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be
withheld by the Employer under applicable law.
(e) Effect of Breach. In the event that the Executive breaches Section 3 of this Agreement, he shall forfeit any right to severance payments
or benefits contribution hereunder
and shall be required to return any severance payments or benefits contributions provided prior to such breach within ten
(10) days after a written demand by the Company.
3. Non-Competition. During Executive's employment with the Company and (a) in the case of termination other than as a result of a
Terminating Event, for one (1) year following
the termination of Executive's employment with the Company or (b) in the case of termination as a result of a
Terminating Event, for one (1) year following the termination of Executive's employment with the Company, Executive will not directly or
indirectly
whether as a partner, consultant, agent, employee, co-venturer, greater than two percent owner or otherwise or through any other person (as hereafter
defined): (a) be engaged in any business or activity which is competitive with the
business of the Company in any part of the world in which the Company
is at the time of the Executive's termination engaged in selling their products directly or indirectly; or (b) attempt to recruit any employee of the Company,
assist in their
hiring by any other person, or encourage any employee to terminate her or her employment with the Company; or (c) encourage any customer
of the Company to conduct with any other Person any business or activity which such customer conducts or
could conduct with the Company. For purpose
of this Section 3, the term "Company" shall include any person controlling, under common control with or controlled by, the Company.
For purposes of this Agreement, the term "Person" shall mean an individual or corporation, association or partnership in estate or trust or any other
entity or organization.
The Executive recognizes and agrees that because a violation by her of this Section 3 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages
would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any
such violation, without the necessity of posting a bond.
Executive expressly agrees that the character, duration and scope of this covenant not to compete are reasonable in light of the circumstances as they
exist at the date upon which this
Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction
at a later date that the character, duration or geographical scope of this covenant not to compete is unreasonable in light of
the circumstances as they then
exist, then it is the intention of both Executive and the Company that this covenant not to compete shall be construed by the court in such a manner as to
impose only those restrictions on the conduct of Executive
which are reasonable in light of the circumstances as they then exist and necessary to provide
the Company the intended benefit of this covenant to compete.
4. Confidentiality Covenants. Executive understands that the Company may impart to her confidential business information including, without
limitation, designs, financial
information, personnel information, strategic plans, product development information and the like (collectively "Confidential
Information"). Executive hereby acknowledges Company's exclusive ownership of such Confidential Information.
Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company; (2) only to communicate the
Confidential Information to fellow employees, agents
and representatives of the Company on a need-to-know basis; and (3) not to otherwise disclose or use
any Confidential Information. Upon demand by the Company or upon termination of Executive's employment, Executive will deliver to the Company all
property of the Company including, but not limited to, all manuals, documents, photographs, recordings, and any other instrument or device by which,
through which, or on which Confidential Information has been recorded and/or preserved, which are
in Executive's possession, custody or control.
Executive acknowledges that for purposes of this Section 4 the term "Company" means any person or entity now or hereafter during the term of this
Agreement which controls, is under common control
with, or is controlled by, the Company.
The Executive recognizes and agrees that because a violation by her of this Section 4 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages
would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any
such violation, without the necessity of posting a bond.
5. Governing Law/Jurisdiction. This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of
Connecticut. The parties agree that
this Agreement was made and entered into in Connecticut and each party hereby consents to the jurisdiction of a
competent court in Connecticut to hear any dispute arising out of this Agreement.
6. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and
thereof and supercedes any and all
previous agreements, written and oral, regarding the subject matter hereof between the parties hereto. This Agreement
shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.
7. Notices. All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be
in writing and shall be deemed to
have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or
certified mail, return receipt requested.
(a) To the Company at:
One Hamden Center
2319 Whitney Avenue, Suite 3B
Hamden, CT 06518
Attn: CEO/President
(b) To the Executive at:
1251 Sleepy Hollow Rd
Venice, FL 34285
Any such notice or other communication will be considered to have been given (i) on the date of delivery in person, (ii) on the third day after
mailing by certified mail, provided that receipt
of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial
overnight courier or (iv) on the date of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone
confirmation of receipt.
Either party may, by notice given to the other party in accordance with this section, designate another address or person for receipt of notices
hereunder.
8. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any
extent be invalid or
unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those
as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby,
and each term of this Agreement shall be valid
and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended
and given such interpretation as to achieve
the economic intent of this Agreement.
9. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to
exercise any right or privilege
herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to
remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any
provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other
provision of this Agreement.
10. Successors and Assignment. Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the
prior written consent of the other; provided, however, that the Company may assign its rights and obligations
under this Agreement without the consent of the Executive in the event that the Company shall hereafter affect a reorganization,
consolidate with, or merge
into, any other Person or transfer all or substantially all of its properties or assets to any other Person. This Agreement shall inure to the benefit of and be
binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
11. Executive Incentive Compensation Plan. During the twelve (12) month period subsequent to any Change in Control, neither the Company,
nor, if applicable, any successor to the
Company, will eliminate the Executive's participation in the Company's Executive Incentive Compensation Plan or
reduce the Executive's target bonus amount under that plan.
12. Section 409A.
(a) In General. To the extent any portion of the payments to be made under the Agreement constitute deferred compensation subject to
Section 409A of the Code, such payments shall
be made in accordance with the payment schedule provided in Section 2 of the Agreement, but not earlier
than the 67th day following the date of the Involuntary Termination.
(b) Specified Employee. Notwithstanding any other provision of the Agreement, if, at the time of separation from service, the
Executive is a specified employee as hereinafter
defined, any and all amounts payable in connection with such separation from service that constitute
deferred compensation subject to Section 409A of the Code, as determined by the Company in its sole discretion, and that would (but for this
sentence) be
payable within six (6) months following such separation from service, shall instead be paid on the date that follows the date of such separation from service
by six (6) months and one (1) day, without interest. For purposes of the
preceding sentence, the term "specified employee" means an individual who is
determined by the Company to be a specified employee as defined in subsection (a)(2)(B)(i) of Section 409A of the Code. The Company may, but need not,
elect in writing,
subject to the applicable limitations under Section 409A of the Code, any of the special elective rules prescribed in Section 1.409A-1(i) of
the Treasury Regulations for purposes of determining "specified employee" status. Any such written
election shall be deemed part of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
TRANSACT TECHNOLOGIES INCORPORATED
By:
/s/ Steven A. DeMartino
Name:
Steven A. DeMartino
Title:
President, CFO, Treasurer and Secretary
EXECUTIVE:
By:
/s/ Tracey Winslow
Name:
Tracey Winslow
Title:
Chief Revenue Officer
Exhibit 10.12
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is entered into as of the 3rd day of August 2022, by and between
William J. DeFrances, an
individual with a residence address of 80 Seraphin Court, Hamden, CT 06518 (the "Executive"), and TransAct Technologies Incorporated, a
Delaware
corporation with a mailing address of One Hamden Center, 2319 Whitney Avenue, 3B, Hamden, Connecticut 06518 (the "Company"). As used in this
Agreement, the "Company" shall also include all subsidiaries of the Company, as the context
requires.
INTRODUCTION
1. The Company is in the business of developing, manufacturing and marketing market-specific solutions including printers, terminals, software
and other products for transaction-based and
other industries (the "Business").
2. The Company desires that the Executive serve in his position with the Company and that the Company be able to rely upon his advice when
requested as to the best interests of the Company,
and its shareholders.
3. The Board of Directors of the Company believes the Executive can best serve the Company without the distractions of personal uncertainties and
risks that might be created in the event a
change in control of the Company is proposed or his employment by the Company is terminated.
AGREEMENT
In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:
1. Definitions. The following terms shall have the meanings indicated for the purposes of this Agreement:
(a) "Cause" shall mean: (i) the death or disability of the Executive (For purposes of this Agreement, "disability" shall mean the Executive's
incapacity due to physical or mental illness which
has caused the Executive to be absent from the full-time performance of his duties with the Company for
a period of six (6) consecutive months.) (ii) any action or inaction by the Executive that constitutes larceny, fraud, gross negligence, a
willful or negligent
misrepresentation to the directors or officers of the Company, their successors or assigns, or a crime involving moral turpitude; or (iii) the refusal of the
Executive to follow the reasonable and lawful instructions of the
CEO or the Board of Directors of the Company with respect to the services to be rendered
and the manner of rendering such services by Executive, provided such refusal is material and repetitive and is not justified or excused either by the terms
of this Agreement or by actions taken by the Company in violation of this Agreement, and with respect to the first two refusals Executive has been given
reasonable written notice and explanation thereof and reasonable opportunity to cure and no
cure has been effected within a reasonable time after such
notice.
(b) "Change in Control" will be deemed to have occurred if: (1) the Company effectuates a Takeover Transaction; or (2) any election of
directors of the Company (whether by the directors then
in office or by the stockholders at a meeting or by written consent) where a majority of the
directors in office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors
immediately preceding such election; or (3) the Company effectuates a complete liquidation of the Company or a sale or disposition of all or substantially
all of its assets. A "Change in Control" shall not be deemed to include, however, a merger
or sale of stock, assets or business of the Company if the
Executive immediately after such event owns, or in connection with such event immediately acquires (other than in the Executive's capacity as an equity
holder of the Company or as a
beneficiary of its employee stock ownership plan or profit sharing plan), any stock of the buyer or any affiliate thereof.
(c) A "Takeover Transaction" shall mean (i) a merger or consolidation of the Company with, or an acquisition of the Company or all or
substantially all of its assets by, any other corporation,
other than a merger, consolidation or acquisition in which the individuals who were members of the
Board of Directors of the Company immediately prior to such transaction continue to constitute a majority of the Board of Directors of the
surviving
corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a
period of not less than twelve (12) months following the closing of such
transaction, or (ii) when any person or entity or group of persons or entities (other
than any trustee or other fiduciary holding securities under an employee benefit plan of the Company) either related or acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Company representing more than
fifty percent (50%) of the total number of votes that may be cast for the election of
directors of the Company.
(d) "Terminating Event" shall mean: (i) termination by the Company of the employment of the Executive for any reason other than
retirement or for Cause, occurring within twelve (12) months
after a Change of Control; or (ii) resignation of the Executive from the employ of the
Company, while the Executive is not receiving payments or benefits from the Company by reason of the Executive's disability, subsequent to any of the
following
events occurring within twelve (12) months after a Change of Control: (A) a significant reduction in the nature or scope of the Executive's
responsibilities, authorities, powers, functions or duties from the responsibilities, authorities,
powers, functions or duties exercised by the Executive
immediately prior to the Change in Control; (B) a decrease in the salary payable by the Company to the Executive from the salary payable to the Executive
immediately prior to the Change in
Control except for across-the-board salary reductions similarly affecting all management personnel of the Company; or
(C) the relocation of the Executive’s principal place of employment (without his consent) to a location more than 50 miles from
its current location (unless
such new location is closer to the Executive's then residence) provided, however, that a Terminating Event shall not be deemed to have occurred solely as a
result of the Executive being an employee of any direct or
indirect successor to the business or assets of the Company, rather than continuing as an
employee of the Company, following a Change in Control; or (D) any other action or inaction that constitutes a material breach of the Agreement by the
Company, including without limitation Section 11. It is further understood that a resignation shall qualify as a "terminating event" only if: (i) the
Executive gives the Company notice, within ninety (90) days of its first existence or
occurrence (without the consent of the Executive) of any or any
combination of the events described in this Section 1(e)(ii); (ii) the Company fails to cure the eligibility condition(s) within thirty (30) days of receiving
such notice; and (iii)
the Executive separates from service not later than 30 days following the end of such thirty-day period.
(e) "Separation from Service" for purposes of the Agreement shall mean a "separation from service" (as defined at Section 1.409A-1(h) of
the Treasury Regulations) from the Company and from all
other corporations and trades or businesses, if any, that would be treated as a single "service
recipient" with the Company under Section 1.409A-1(h)(3) of the Treasury Regulations.
2. Severance.
(a) Without Cause. If the Company terminates the employment of the Executive without Cause, other than as a result of a Terminating
Event, then commencing on the date of such
termination and for a period of six (6) months thereafter, the Company shall provide Executive with a
severance package which shall consist of the following: (i) payment on the first business day of each month of an amount equal to one-twelfth
of the
Executive's then current annual base salary; (ii) payment on the first business day of each month of an amount equal to one-sixth of the Executive's annual
target bonus amount under the Company’s Executive Incentive Compensation Plan
(“EIC”), pro-rated for the portion of the fiscal year occurring prior to
termination; and (iii) subject to any employee contribution applicable to the Executive on the date of termination, contribution to the cost of the Executive’s
participation
in the Company’s group medical and dental plans, provided that the Executive is entitled to continue such participation under applicable law
and plan terms.
(b) With a Terminating Event. If the Company terminates the employment of the Executive as a result of a Terminating Event, then
commencing on the date of such termination and for a
period equal to one (1) year thereafter, the Company shall provide Executive with a severance
package which shall consist of the following: (i) payment on the first business day of each month an amount equal to one-twelfth of the Executive's
then
current annual base salary; (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus
amount under the Company's Executive Incentive Compensation Plan; and (iii) subject to
any employee contribution applicable to the Executive on the
date of termination, contribution to the cost of the Executive’s participation in the Company’s group medical and dental plans, provided that the Executive
is entitled to continue such
participation under applicable law and plan terms. In addition, if the Company terminates the employment of the Executive as a
result of a Terminating Event, then the Company shall cause the immediate vesting of all options granted by the
Company to the Executive under the
Company's stock plans. At any time when the Company is obligated to make monthly payments under Section 2(b), the Company shall, ten (10) days after
receipt of a written request from the Executive, pay the
Executive an amount equal to the balance of the amounts payable under Section 2(b)(i)-(ii),
provided that the obligation of the Company to continue to contribute to medical and dental benefits pursuant to Section 2(b)(iii) or to make monthly
payments under 2(b)(i)-(ii) shall cease upon the payment of such amount; provided, that this sentence shall not apply to any portion of the amounts payable
under Section 2(b)(i)-(ii) that constitutes or
includes nonqualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as
amended (the "Code").
(c) General Release. As a condition precedent to receiving any severance payment, the Executive shall execute a general release of any and
all claims which Executive or his heirs,
executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and
their past, present and future employees, officers, directors, agents and attorneys. Any such release must be executed in a form
prescribed by or acceptable
to the Company and delivered to the Company not later than sixty (60) days following the Executive's separation from service. If the Executive's properly
executed release is timely delivered to the Company and the
Executive does not revoke the release within seven (7) days thereafter or within such shorter
period as the Company may prescribe, the severance benefits payable hereunder shall commence upon the expiration of such seven-day or shorter period;
provided, that the first such payment shall include any amounts that would have been paid earlier but for the provisions of this subsection (c).
(d) Withholding. All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be
withheld by the Employer under applicable law.
(e) Effect of Breach. In the event that the Executive breaches Section 3 of this Agreement, he shall forfeit any right to severance payments
or benefits contribution hereunder and shall
be required to return any severance payments or benefits contributions provided prior to such breach within ten
(10) days after a written demand by the Company.
3. Non-Competition. During Executive's employment with the Company and (a) in the case of termination other than as a result of a
Terminating Event, for six (6) months following
the termination of Executive's employment with the Company or (b) in the case of termination as a result
of a Terminating Event, for one (1) year following the termination of Executive's employment with the Company, Executive will not directly or
indirectly
whether as a partner, consultant, agent, employee, co-venturer, greater than two percent owner or otherwise or through any other person (as hereafter
defined): (a) be engaged in any business or activity which is competitive with the
business of the Company in any part of the world in which the Company
is at the time of the Executive's termination engaged in selling their products directly or indirectly; or (b) attempt to recruit any employee of the Company,
assist in their
hiring by any other person, or encourage any employee to terminate his or her employment with the Company; or (c) encourage any customer
of the Company to conduct with any other Person any business or activity which such customer conducts or
could conduct with the Company. For purpose
of this Section 3, the term "Company" shall include any person controlling, under common control with or controlled by, the Company.
For purposes of this Agreement, the term "Person" shall mean an individual or corporation, association or partnership in estate or trust or any other
entity or organization.
The Executive recognizes and agrees that because a violation by him of this Section 3 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages
would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any
such violation, without the necessity of posting a bond.
Executive expressly agrees that the character, duration and scope of this covenant not to compete are reasonable in light of the circumstances as they
exist at the date upon which this
Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction
at a later date that the character, duration or geographical scope of this covenant not to compete is unreasonable in light of
the circumstances as they then
exist, then it is the intention of both Executive and the Company that this covenant not to compete shall be construed by the court in such a manner as to
impose only those restrictions on the conduct of Executive
which are reasonable in light of the circumstances as they then exist and necessary to provide
the Company the intended benefit of this covenant to compete.
4. Confidentiality Covenants. Executive understands that the Company may impart to his confidential business information including, without
limitation, designs, financial
information, personnel information, strategic plans, product development information and the like (collectively "Confidential
Information"). Executive hereby acknowledges Company's exclusive ownership of such Confidential Information.
Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company; (2) only to communicate the
Confidential Information to fellow employees, agents
and representatives of the Company on a need-to-know basis; and (3) not to otherwise disclose or use
any Confidential Information. Upon demand by the Company or upon termination of Executive's employment, Executive will deliver to the Company all
property of the Company including, but not limited to, all manuals, documents, photographs, recordings, and any other instrument or device by which,
through which, or on which Confidential Information has been recorded and/or preserved, which are
in Executive's possession, custody or control.
Executive acknowledges that for purposes of this Section 4 the term "Company" means any person or entity now or hereafter during the term of this
Agreement which controls, is under common control
with, or is controlled by, the Company.
The Executive recognizes and agrees that because a violation by him of this Section 4 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages
would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any
such violation, without the necessity of posting a bond.
5. Governing Law/Jurisdiction. This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of
Connecticut. The parties agree that
this Agreement was made and entered into in Connecticut and each party hereby consents to the jurisdiction of a
competent court in Connecticut to hear any dispute arising out of this Agreement.
6. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and
thereof and supercedes any and all
previous agreements, written and oral, regarding the subject matter hereof between the parties hereto. This Agreement
shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.
7. Notices. All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be
in writing and shall be deemed to
have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or
certified mail, return receipt requested.
(a) To the Company at:
One Hamden Center
2319 Whitney Avenue, Ste. 3B
Hamden, CT 06518
Attn: CEO/President
(b) To the Executive at:
80 Seraphin Court
Hamden, CT 06518
Any such notice or other communication will be considered to have been given (i) on the date of delivery in person, (ii) on the third day after
mailing by certified mail, provided that receipt
of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial
overnight courier or (iv) on the date of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone
confirmation of receipt.
Either party may, by notice given to the other party in accordance with this section, designate another address or person for receipt of notices
hereunder.
8. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any
extent be invalid or unenforceable,
the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those
as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of
this Agreement shall be valid
and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended
and given such interpretation as to achieve the economic
intent of this Agreement.
9. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to
exercise any right or
privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to
remain in full force and effect. Any waiver by any party of any violation of, breach of or default under
any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other
provision of this Agreement.
10. Successors and Assignment. Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may assign its rights and obligations
under this Agreement without the consent of the Executive in the event that the Company shall hereafter affect a reorganization,
consolidate with, or merge
into, any other Person or transfer all or substantially all of its properties or assets to any other Person. This Agreement shall inure to the benefit of and be
binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
11. Executive Incentive Compensation Plan. During the twelve (12) month period subsequent to any Change in Control, neither the Company,
nor, if applicable, any successor to the
Company, will eliminate the Executive's participation in the Company's Executive Incentive Compensation Plan or
reduce the Executive's target bonus amount under that plan.
12. Section 409A.
(a) In General. To the extent any portion of the payments to be made under the Agreement constitute deferred compensation subject to
Section 409A of the Code, such payments shall
be made in accordance with the payment schedule provided in Section 2 of the Agreement, but not earlier
than the 67th day following the date of the Involuntary Termination.
(b) Specified Employee. Notwithstanding any other provision of the Agreement, if, at the time of separation from service, the
Executive is a specified employee as hereinafter
defined, any and all amounts payable in connection with such separation from service that constitute
deferred compensation subject to Section 409A of the Code, as determined by the Company in its sole discretion, and that would (but for this
sentence) be
payable within six (6) months following such separation from service, shall instead be paid on the date that follows the date of such separation from service
by six (6) months and one (1) day, without interest. For purposes of the
preceding sentence, the term "specified employee" means an individual who is
determined by the Company to be a specified employee as defined in subsection (a)(2)(B)(i) of Section 409A of the Code. The Company may, but need not,
elect in writing,
subject to the applicable limitations under Section 409A of the Code, any of the special elective rules prescribed in Section 1.409A-1(i) of
the Treasury Regulations for purposes of determining "specified employee" status. Any such written
election shall be deemed part of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
TRANSACT TECHNOLOGIES INCORPORATED
By:
/s/ Steven A. DeMartino
Name:
Steven A. DeMartino
Title:
President, CFO, Treasurer and Secretary
EXECUTIVE:
By:
/s/ William J. DeFrances
Name:
William J. DeFrances
Title:
Vice President and Chief Accounting Officer
Exhibit 10.19
AMENDMENT NO. 4 TO LEASE AGREEMENT
This Amendment No. 4 to Lease Agreement (this “Amendment”) dated as of the 11th day of July, 2022, made by
and between BOMAX
HOLDINGS LLC, a New York limited liability company with an address at 3 East Evergreen Road, #1045, New City, New York 10965-5101
(“Landlord”) and TRANSACT TECHNOLOGIES INCORPORATED, a Delaware corporation with an
address 1 Hamden Center, 2319 Whitney Avenue,
Suite 3B (“Tenant”)
WITNESSETH
WHEREAS, Landlord and Tenant are, respectively, the Landlord and the Tenant under the Lease dated July 18, 2001, as amended by: (i)
Amendment No. 1 to Lease Agreement dated as of May 8, 2012,
(ii) Amendment No. 2 to Lease Agreement dated as of January 14, 2016, and (iii)
Amendment No. 3 to Lease Agreement dated as of February 28, 2020 (as amended, the “Lease”) with respect to the property known as 20 Bomax Drive,
Village of
Lansing, County of Tompkins, State of New York (the “Property) as more particularly described in the Lease; and
WHEREAS Bomax Properties LLC, assigned the Lease to Landlord, and Landlord assumed the Lease as of March 3rd
2022; and
WHEREAS, Landlord and Tenant desire to modify certain of the Lease terms;
Notwithstanding any clause in this Lease to the contrary, the following provisions shall prevail:
1.
Tenant shall maintain, at all times during the Lease Term (as defined in the Lease), comprehensive general liability insurance issued by an
insurance company licensed to do business in the State of New York that is reasonably
satisfactory to Landlord. During the Lease Term, Tenant
shall provide Landlord with certificate(s) of insurance in a form reasonably acceptable to Landlord evidencing the foregoing insurance so
maintained by Tenant and naming Landlord
and Landlord’s mortgagees, if any, as additional insured parties. The insurance limit coverage will be
$2M General Aggregate/$1M each occurrence and $100,000.00 in property damage coverage.
2.
The remaining provisions of the Lease shall remain in full force and effect, except as the same may be in conflict with this Amendment.
3.
This Amendment may be signed in counterparts and all copies are the same as the originals.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment to the Lease as of the date and year first above written.
LANDLORD:
TENANT:
Bomax Holdings LLC
TransAct Technologies Incorporated
By:
/s/ Mark Junger
By:
/s/ Steven A. DeMartino
Name: Mark Junger
Name: Steven A. DeMartino
Title:
Managing Member
Title:
President and CFO
EXHIBIT 19
TRANSACT TECHNOLOGIES INCORPORATED
INSIDER TRADING POLICY
1. PURPOSE
This Insider Trading Policy (this “Policy”) provides insider trading guidelines to Directors, Officers and employees of TransAct
Technologies
Incorporated (the “Company”), as well as to other persons or entities informed by management to be subject to this Policy (each a “Covered Person” and
collectively “Covered Persons”). Additionally, this Policy applies to family members, other members of a person’s household and entities controlled by a
person covered by this Policy, as described further
below.
This Policy provides guidelines with respect to transactions in, and gifts of, securities of the Company, and the treatment of confidential
information about the Company and
the companies with which the Company has a business relationship. The Company has adopted this Policy to promote
compliance with federal, state and foreign securities laws that prohibit Covered Persons, if they are aware of material nonpublic
information (“MNPI”)
about the Company, from (i) buying, selling, recommending or making other transfers of securities of the Company, and (ii) providing MNPI to other
persons, including relatives, friends
and business acquaintances, who may trade on the basis of that information. The consequences of an insider trading
violation can be severe, both for a Covered Person and for the Company. The Company has adopted this Policy to protect Covered
Persons and the
Company from the serious liabilities and penalties that can result from such violations.
2. INDIVIDUAL RESPONSIBILITY
Each individual subject to this Policy is responsible for complying with this Policy in all respects and ensuring that any family member or other
person or entity whose
transactions are subject to this Policy also complies. In all cases, the responsibility for determining whether an individual is in
possession of MNPI rests with that individual, and any action on the part of the Company, any Director, Officer or
any other employee of the Company
pursuant to this Policy (or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws.
3. STATEMENT OF GENERAL POLICY
It is the policy of the Company to prohibit the unauthorized disclosure of any nonpublic information acquired in the workplace and the misuse of
MNPI in securities trading.
This Policy sets forth procedures that Covered Persons are required to follow.
•
This Policy applies to all transactions in the Company’s securities, including, without limitation, common stock, preferred stock and debt
securities, as well as transactions in the securities of the Company’s customers and other
companies with which the Company has business
relationships, as applicable (collectively, “Securities”).
•
It is not possible to define all categories of “material” information. There is no bright-line standard for assessing materiality; rather, materiality is
based on an assessment of all of the facts
and circumstances, and is often evaluated by enforcement authorities with the benefit of hindsight.
However, information should generally be regarded as material if: (i) there is a substantial likelihood that a reasonable investor would
consider it
important in making his or her investment decisions, or (ii) the information is reasonably certain to have a substantial effect on the price of a
company’s securities.
•
Information is considered “nonpublic” if it has not been disseminated in a manner making it available to investors generally, such as through
disclosure in an annual, quarterly or current report
filed with the Securities and Exchange Commission (the “SEC”), inclusion in a press release,
or wide reporting in the media, and until investors have had a reasonable period of time to react to the
information. Generally, at least two (2) full
trading days following the dissemination of the information to the public is sufficient time for information to no longer be considered “nonpublic.”
•
In accordance with federal law, this Policy prohibits Covered Persons from trading in Securities while in possession of MNPI about the Company,
which is also known as “inside information.”
•
Anyone subject to this policy who is unsure whether the information that he or she possesses is material or nonpublic should consult the Chief
Financial Officer of the Company for guidance before trading in any Securities.
4. APPLICABILITY OF POLICY
•
In addition to all Covered Persons, this Policy also applies to family members who reside in a Covered Person’s household (including a spouse, a
child away at college, stepchildren, grandchildren, parents, stepparents, grandparents,
siblings and in-laws), anyone else who lives in a Covered
Person’s household, and any family members who do not live in a Covered Person’s household but whose transactions in Company Securities are
directed by a Covered Person or are
subject to a Covered Person’s influence or control, such as parents or children who consult with a Covered
Person before they trade in Securities. Covered Persons are responsible for the transactions of these other individuals and therefore
should make
them aware of the need to confer with such Covered Persons before they trade in Securities, and each such Covered Person should treat all such
transactions for purposes of this Policy and applicable securities laws as if the
transactions were for such Covered Person’s own account.
•
This Policy applies to any entities that a Covered Person influences or controls, including any corporations, partnerships or trusts (collectively
referred to as “Controlled Entities”), and
transactions by these Controlled Entities should be treated for purposes of this Policy and applicable
securities laws as if they were for such Covered Person’s own account.
•
This Policy establishes additional prohibitions that apply to Covered Persons who have access to confidential business and financial information
about the Company, including, without limitation, employees and consultants working in or
with the Company’s finance group (“Inside
Employees/Consultants”). These persons are required to adhere to these additional prohibitions.
•
This Policy and the guidelines described herein also apply to MNPI relating to other companies, including, but not limited to, the Company’s
customers, vendors, suppliers and other related parties, when that information is obtained in
the course of employment with, or other services
performed on behalf of, the Company. All persons subject to this Policy must avoid trading in securities of customers, vendors, suppliers and
other related parties using MNPI received from
such parties.
•
This Policy prohibits the disclosure and dissemination of MNPI about a company, either within or outside the Company, except on a reasonable
need-to-know basis that furthers a legitimate business purpose of such company or the Company.
Unlawfully disclosing or “tipping” MNPI about
a company to others, who then trade while in possession of MNPI, may give rise to claims against the “tipper” of the information.
•
This Policy will continue to apply to former and retired Directors and Officers until the later of: (i) the expiration of two (2) full trading days after
any MNPI known to such persons has become public or is no longer material; and (ii)
the expiration of ninety (90) calendar days following
termination of service with the Company.
4. CERTAIN EXCEPTIONS TO THE POLICY
This Policy does NOT apply in the case of the following transactions, except as specifically noted:
•
Certain Stock Option Exercises. This Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company’s
equity plans, including the withholding of shares
of stock to satisfy the exercise price of an option or tax withholding obligations that do not
involve market transactions in Company securities. However, this Policy does apply to broker-assisted cashless exercises of stock
options and to
any other market sale (whether of the purchased option shares or other shares owned by the Covered Person) for the purpose of generating the
cash needed to pay the exercise price of an option or
to pay taxes.
•
Pre-Existing/10b5-1 Trading Plans. Notwithstanding the general prohibition set forth above, a Covered Person may effect transactions in
Securities during a Blackout Period (as defined in Section
5 of this Policy), or at a time when the Covered Person is in possession of MNPI, if
such transactions are pursuant to a trading program that complies with the requirements of Rule 10b5-1 under the Securities Exchange Act of
1934, as
amended (the “Exchange Act”). Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability under Rule 10b-5.
In order to be eligible to rely on this defense, a Covered Person
must enter into a Rule 10b5-1 plan for transactions in Securities that meets certain
conditions specified in the Rule (a “Rule 10b5-1 Plan”). If the plan meets the requirements of Rule 10b5-1,
transactions in Securities may occur
even when the person who has entered into the plan is aware of MNPI. To comply with this Policy, a Rule 10b5-1 Plan must be approved by the
Chief Financial Officer and meet the requirements of Rule
10b5-1, as generally set forth below:
o
A Rule 10b5-1 Plan must be entered into at a time when the person entering into the plan is not aware of MNPI.
o
Once the plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they
are to be traded or the date of the trade. The plan must either specify the amount, pricing and
timing of transactions in advance or a
formula to make such determinations or delegate discretion on these matters to an independent third party.
o
The plan must include a cooling-off period after the plan is adopted before trading can commence that, for Directors or Officers, ends on
the later of 90 days after the adoption of the Rule 10b5-1 Plan or two business days following the
disclosure of the Company’s financial
results in an SEC periodic report for the fiscal quarter in which the plan was adopted (but in any event, the required cooling-off period is
subject to a maximum of 120 days after adoption of the plan),
and for persons other than Directors or Officers, 30 days following the
adoption or modification of a Rule 10b5-1 Plan.
o
A person may not enter into overlapping Rule 10b5-1 Plans (subject to certain exceptions) and may only enter into one single-trade Rule
10b5-1 Plan during any 12-month period (subject to certain exceptions).
o
Directors and Officers must include a representation in their Rule 10b5-1 Plan certifying that: (i) they are not aware of any MNPI; and (ii)
they are adopting the Rule 10b5-1 Plan in good faith and not as part of a plan or scheme to
evade the prohibitions in Rule 10b-5.
o
All persons entering into a Rule 10b5-1 Plan must act in good faith with respect to that plan.
Any Rule 10b5-1 Plan must be submitted for approval to the Chief Financial Officer at least three business days prior to the entry into the Rule
10b5-1 Plan. No
further pre-approval of transactions conducted pursuant to the Rule 10b5-1 Plan will be required.
•
Tax Withholding by the Company. This Policy does not apply to the withholding of stock to pay applicable withholding taxes upon the vesting of
restricted stock, restricted stock units or
other equity awards. However, Securities may not be sold to satisfy tax obligations during a Blackout
Period (as defined in Section 5 of this Policy), or such time that the participant is in possession of MNPI absent an approved
Rule 10b5-1 Plan.
•
401(k) Plan. This Policy does not apply to purchases of Securities in a Company 401(k) Plan resulting from a Covered Person’s periodic
contribution of money to the plan pursuant to his or
her payroll deduction election. This Policy does apply, however, to certain elections a
Covered Person may make under such a Company 401(k) Plan, including: (i) an election to increase the percentage of his or her periodic
contributions that will be allocated to his or her Company stock account; (ii) an election to make an intra-plan transfer of an existing account
balance into or out of his or her Company stock account; and (iii) any transaction that would
result in the liquidation of some or all of his or her
Company stock account balance.
•
Employee Stock Purchase Plan. Purchases of Securities under any Company employee stock purchase plan, through periodic contributions to the
plan in accordance with an election made by a Covered
Person at enrollment. However, a Covered Person may not elect to participate in such a
plan for any enrollment period during a Blackout Period (as defined in Section 5 of this Policy). This Policy also applies to any open market
sales
of Securities purchased pursuant to such a plan by a Covered Person.
•
Dividend Reinvestment Plan. Purchases of Securities under any Company dividend reinvestment plan that results from a Covered Person’s
reinvestment of dividends paid on Securities. However,
voluntary purchases of Securities resulting from additional contributions a Covered
Person makes to a Company dividend reinvestment plan, and to such Covered Person’s election to participate in such plan, or increase the level of
participation in such plan, are subject to this Policy. This Policy also applies to open market sales by a Covered Person of Securities purchased
pursuant to the plan.
•
Other Similar Transactions. Any other purchase of Securities from the Company or sales of Securities to the Company, or any private transaction
in Securities solely between Directors and/or
Officers who have access to, or are aware of, the same MNPI are not subject to this Policy.
•
Bona fide gifts. Bona fide gifts of Securities are not transactions subject to any part of this Policy other than the pre-approval and pre-clearance
requirement set forth in Section 5
under the heading “Pre-Approval & Pre-Clearance of Transactions in and Gifts of Securities,” below, unless the
person making the gift knows or has reason to believe that the recipient intends to
sell the Securities while the Covered Person is aware of MNPI.
5. TRADING RESTRICTIONS AND PROCEDURES
Directors, Designated Officers & Inside Employees/Consultants
•
Definition of Designated Officers. All Officers of the Company who are “executive officers” for purposes of Section 16 of the Exchange Act shall
each be considered a “Designated Officer” (collectively, “Designated Officers”).
•
Pre-Approval & Pre-Clearance of Transactions in and Gifts of Securities. Any transaction in or gift of Securities by a Director, Designated Officer
or Inside Employee/Consultant (as defined in
Section 3 of this Policy), must be pre-approved and pre-cleared by the Chief Financial Officer of the
Company, or such other officer of the Company as the Chief Financial Officer may designate from time to time.
•
Blackout Periods. Directors, Designated Officers and Inside Employees/Consultants are prohibited from trading in Securities from the date that is
fifteen (15) calendar days prior to the close of
each fiscal quarter or year through the expiration of the second (2nd) full trading day following the
date of public disclosure of the Company’s financial performance and results of operations for that fiscal quarter or year (the “Blackout Period”).
Additional Blackout Periods may be imposed on such persons and certain or all other Covered Persons at such times as deemed appropriate by
management or the Board of Directors of the
Company (the “Board”). Due to the confidential nature of the circumstances that may trigger such
event-specific Blackout Periods, the reason for the Blackout Period may not be disclosed and the
existence of the Blackout Period may be
considered MNPI and, therefore, should not be shared.
•
Window Periods. Any transaction by a Director, Designated Officer or Inside Employee/Consultant that has been pre-approved and pre-cleared
shall be effected only during the period of time
designated for trading by the Company. “Window Periods” will commence after the second (2nd)
full trading day following the release of the Company’s financial performance and results of operations
for each fiscal quarterly or annual period,
and will continue until fifteen (15) calendar days prior to the close of the next fiscal quarterly or annual period, unless management or the Board
imposes a Blackout Period covering such period,
or any portion thereof, in which case the Window Period will not open or will close earlier than
in accordance with such schedule, as determined by management or the Board.
•
Material Nonpublic Information. Any Covered Person possessing MNPI concerning the Company, even if during a Window Period, should not
engage in any transactions in Securities until such MNPI has
been known publicly for at least two (2) full trading days, whether or not the
Company has recommended a suspension of trading to that person, or until such information otherwise ceases to constitute MNPI.
•
Section 16. Directors and Designated Officers are subject to the reporting and short swing profit recovery provisions of Section 16 of the
Exchange Act and must comply with the applicable
reporting requirements under the Exchange Act and avoid engaging in short swing
transactions, whether or not in possession of MNPI, and whether or not such show swing transactions would be deemed to result in a short swing
profit.
6. PROHIBITED TRANSACTIONS
Trading in Securities by a Covered Person is subject to the following additional limitations, regardless of whether the Covered Person is in
possession of MNPI:
•
Short Sales. Covered Persons may not engage in short sales of Securities (i.e., sales of securities that the seller does not own), including a “sale
against the box” (i.e., a short sale where the
seller owns the securities but delays delivery, i.e., retains both the short and long positions).
•
Publicly Traded Options. Covered Persons may not engage in speculative trading, including transactions in publicly traded options of the
Company, such as puts, calls, warrants, and other
derivative securities, on an exchange or in any other organized market.
•
Hedging or Monetization Transactions. No Covered Person is permitted to enter into any hedging transaction with respect to Securities,
including, but not limited to, the purchase or use of,
directly or indirectly through any other persons or entities, any stock option, prepaid variable
forward contracts, equity swaps, collars, exchange funds or any other instruments designed to offset any decrease in the market value of
Securities.
•
Margin Accounts and Pledging of Securities. Covered Persons may not pledge any of the Securities owned by them. Securities held in a margin
account or pledged as collateral for a loan may be
sold without a Covered Person’s consent by the broker, if such Covered Person fails to meet a
margin call, or by the lender in foreclosure, if such Covered Person defaults on the loan, and may occur at a time when a Covered Person is aware
of MNPI or otherwise is not permitted to trade in Securities for a loan. As a result, no Covered Person may place Securities in margin accounts,
unless the margin accounts are treated as non-marginable by the brokerage firm.
•
No Tipping. Covered Persons may not pass MNPI on to others or recommend to anyone the purchase or sale of any Securities when aware of such
information. This practice is known as “tipping” and
violates the federal securities laws, even if a Covered Person did not trade or gain any
benefit from another person’s trading.
•
Post-Termination Transactions. If a Covered Person is aware of MNPI at the time he or she terminates his or her employment or services with the
Company, he or she may not trade in Securities
until such information has become public or is no longer material.
7. PENALTIES
Violations of any portion of this Policy may result in disciplinary action, including, without limitation, suspension without pay, demotion, salary
reduction, disqualification
for bonuses and/or equity incentives, or discharge from employment or service with the Company. In addition, violations of
insider trading requirements may subject a Covered Person to civil and criminal penalties, fines and jail terms. Serious
sanctions could also be imposed
against supervisors or managers of violators, as well as against the Company.
Covered Persons should contact the Company’s Chief Financial Officer concerning questions about trading in Securities.
Exhibit 23.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statement of TransAct Technologies Incorporated on Form S-8 File Nos. 333-203184,
333-132624, 333-170515,
333-221514, 333-248054 and 333-273888 of our report dated March 24, 2025, with respect to our audits of the consolidated
financial statements of
TransAct Technologies Incorporated as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023,
which report is included in this Annual Report on Form 10-K of TransAct Technologies Incorporated for the year ended December
31, 2024.
/s/ Marcum llp
Hartford, CT
March 24, 2025
Exhibit 31.1
RULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER IN ACCODANCE WITH SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, John M. Dillon, certify that:
1.
I have reviewed this Annual Report on Form 10-K of TransAct Technologies Incorporated;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 24, 2025
/s/ John M. Dillon
John M. Dillon
Chief Executive Officer
Exhibit 31.2
RULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER IN ACCODANCE WITH SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Steven A. DeMartino, certify that:
1.
I have reviewed this Annual Report on Form 10-K of TransAct Technologies Incorporated;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 24, 2025
/s/ Steven A. DeMartino
Steven A. DeMartino
President, Chief Financial Officer, Treasurer and Secretary
Exhibit 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of TransAct Technologies Incorporated (the “Company”) on Form 10-K for the year ended December 31, 2024, as
filed with the Securities and Exchange Commission on the date hereof
(the “Report”), each of the undersigned officers of the Company certifies, pursuant
to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: March 24, 2025
/s/ John M. Dillon
John M. Dillon
Chief Executive Officer
Date: March 24, 2025
/s/ Steven A. DeMartino
Steven A. DeMartino
President, Chief Financial Officer, Treasurer and Secretary