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TBTC > SEC Filings for TBTC > Form 10-Q on 13-Nov-2013All Recent SEC Filings

Show all filings for TABLE TRAC INC

Form 10-Q for TABLE TRAC INC


13-Nov-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Our Management's Discussion and Analysis of Financial Condition and Results of Operations set forth below should be read in conjunction with our audited financial statements, and notes thereto, contained in our Form 10-K filed with the SEC on March 28, 2013 relating to our year ended December 31, 2012.

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Forward-Looking Statements

Some of the statements made in this section of our report are forward-looking statements. These forward-looking statements generally relate to and are based upon our current plans, expectations, assumptions and projections about future events. Our management currently believes that the various plans, expectations, and assumptions reflected in or suggested by these forward-looking statements are reasonable. Nevertheless, all forward-looking statements involve risks and uncertainties and our actual actions or future results may be materially different from the plans, objectives or expectations, or our assumptions and projections underlying our present plans, objectives and expectations, which are expressed in this report.

In light of the foregoing, prospective investors are cautioned that the forward-looking statements included in this filing may ultimately prove to be inaccurate-even materially inaccurate. Because of the significant uncertainties inherent in such forward-looking statements, the inclusion of such information should not be regarded as a representation or warranty by Table Trac, Inc. or any other person that our objectives, plans, expectations or projections that are contained in this filing will be achieved in any specified time frame, if ever.

General Overview

Table Trac is a Nevada corporation, formed on June 27, 1995, with principal offices in Minnetonka, Minnesota. The Company has developed and patented (U. S. patent number 5,957,776) a proprietary information and management system (Table Trac) that automates and monitors the operations of casino table games.

In the third quarter 2013, Table Trac signed contracts with the Alturas Indian Rancheria and the Torres Martinez Desert Cahuilla Indians, to install the Company's CasinoTrac casino management system at each of their respective California gaming venues, the Desert Rose Casino and the Red Earth Casino, respectively. The Company now has four casino management system contracts in California. The Company also placed three CountR cash redemption kiosks with customers in the U.S. The Company sold a table games management system to one of its existing clients in the third quarter. At the end of the quarter, this table games management system and one other casino management system remained in backlog and are expected to be installed in the fourth quarter.

The Company completed three casino management system installations in the third quarter.

In the third quarter of 2013, the Company exhibited at the Oklahoma Indian Gaming Association's trade show and conference and attended the Global Gaming Expo (G2E) in Las Vegas. G2E is one of the industry's largest and most attended trade show and conference.

Discussion of Critical Accounting Policies

There were no changes to our accounting policies for the quarter. For our existing policies, see Note 1 in our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012.

Results of Operations - Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

During the three months ended September 30, 2013, income from operations was $177,785 compared to a loss of $46,804 for the three months ended September 30, 2012. The major components of revenues, cost of sales and selling, general and administrative expenses are discussed below.

Revenues

Revenues totaled $1,221,370 for the three months ended September 30, 2013 compared to $994,818 for the three months ended September 30, 2012. The following table summarizes our revenues for the three months ended September 30, 2013 and 2012, respectively:

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                                        Three Months Ended September 30,
                                   2013         2012        2013          2012
                                                          (percent of revenues)
System sales                   $   716,552   $ 443,051        58.7%         44.5%
License and maintenance fees       253,188     290,711        20.7%         29.2%
Other sales                        251,630     261,056        20.6%         26.3%
Total revenues                 $ 1,221,370   $ 994,818       100.0%        100.0%

During the three months ended September 30, 2013, the Company delivered three systems compared to two systems during the same period in 2012.

Cost of Sales

Cost of sales for the three months ended September 30, 2013 increased to
$384,423 from $277,893 for the three months ended September 30, 2012. The
following table summarizes our cost of sales for the three months ended
September 30, 2013 and 2012, respectively:

                                        Three Months Ended September 30,
                                    2013         2012        2013          2012
                                                           (percent of revenues)
System sales                   $   168,210    $  68,714        13.8%          6.9%
License and maintenance fees        48,984       41,571         4.0%          4.2%
Other sales                        167,228      167,608        13.7%         16.8%
Total cost of sales            $   384,422    $ 277,893        31.5%         27.9%

Gross profit                   $   836,948    $ 716,925        68.5%         72.1%

The Company's gross profit was 68.5% and 72.1% for the three months ended September 30, 2013 and 2012, respectively. This decrease is primarily due to the concentration of hardware on the systems sales during the quarter.

Selling, General and Administrative Expenses

For the three months ended September 30, 2013, selling, general and administrative expenses were $659,163 compared to $763,729 for the same period in 2012. Our most significant changes in operating expenses from the three-month interim periods related to research and development programming costs and professional fees - consulting. A discussion of the various components of our operating expenses for the three months ended September 30, 2013 and 2012 appears below:

Research and development programming costs. Research and development programming costs decreased for the three months ended September 30, 2013, to $7,076 compared to $72,395 for the same period in 2012. The decrease is related primarily to the absence of 2013 costs associated with the Tipping Point interface and its applications within our core casino management system.

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Professional Fees. Professional fees decreased for the three months ended September 30, 2013 to $26,445 compared to $61,387 for the same period in 2012. The decrease is mostly related to the absence of costs associated with industry consultants and recruiting fees for an open position with the Company during the current quarter.

Interest Income

For the three months ended September 30, 2013, interest income was $28,180 compared to $44,683 for 2012. This decrease is primarily related to contracts being further along their amortization schedules along with variances of interest rates through the Company in 2013 compared to the same period in 2012.

Tax Provision

The income tax expense for the three months ended September 30, 2013 was $50,155 which was calculated at a 24.4% effective rate, compared to the tax expense of $2,250 for the same period in 2012, which was calculated at a 106.1% effective rate. The increase in the quarterly effective rate is primarily related to the annual tax impact affected by the current quarterly results.

Net Income (loss)

Income before taxes for the three months ended September 30, 2013, was $205,965 compared to net loss before taxes of $2,121 for same period in 2012. Net income for the three months ended September 30, 2013 was $155,810 compared to net loss of $4,371 for the same period in 2012. The basic earnings per share was $0.03 compared to basic loss per share of $0.00 for the three months ended September 30, 2013 and 2012, respectively.

Results of Operations - Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012

During the nine months ended September 30, 2013, income from operations was $453,255 compared to a loss of $385,001 for the nine months ended September 30, 2012. The major components of revenues, cost of sales and selling, general and administrative expenses are discussed below.

Revenues

Revenues totaled $3,555,736 for the nine months ended September 30, 2013
compared to $2,771,943 for the nine months ended September 30, 2012. The
following table summarizes our revenues for the nine months ended September 30,
2013 and 2012, respectively:

                                         Nine Months Ended September 30,
                                   2013          2012         2013          2012
                                                            (percent of revenues)
System sales                   $ 2,243,319   $ 1,397,183        63.1%         50.4%
License and maintenance fees       721,741       808,772        20.3%         29.2%
Other sales                        590,676       565,988        16.6%         20.4%
Total revenues                 $ 3,555,736   $ 2,771,943       100.0%        100.0%

During the nine months ended September 30, 2013, the Company sold six systems compared to five systems installed during the same period in 2012. Other sales, which include sales of printers, kiosk software, mailing services and rental sales, increased over 2012 as a result of additional rental sales.

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Cost of Sales

Cost of sales for the nine months ended September 30, 2013 increased to
$1,010,314 from $701,487 for the nine months ended September 30, 2012. The
following table summarizes our cost of sales for the nine months ended September
30, 2013 and 2012, respectively:

                                         Nine Months Ended September 30,
                                   2013          2012         2013          2012
                                                            (percent of revenues)
System sales                   $   505,561   $   244,595        14.2%          8.8%
License and maintenance fees       148,368       110,571         4.2%          4.0%
Other sales                        356,385       346,321        10.0%         12.5%
Total cost of sales            $ 1,010,314   $   701,487        28.4%         25.3%

Gross profit                   $ 2,545,422   $ 2,070,456        71.6%         74.7%

The Company's gross profit was 71.6% and 74.7% for the nine months ended September 30, 2013 and 2012, respectively. The decrease is primarily due to the concentration of hardware on the systems sales during the first nine months of 2013 compared to the first nine months of 2012.

Selling, General and Administrative Expenses

For the nine months ended September 30, 2013, selling, general and administrative expenses were $2,092,167 compared to $2,455,457 for the same period in 2012. Our most significant changes in operating expenses from the nine-month interim periods related to research and development programming costs and professional fees - consulting. A discussion of the various components of our operating expenses for the nine months ended September 30, 2013 and 2012 appears below:

Research and development programming costs. Research and development programming costs decreased for the nine months ended September 30, 2013, to $15,837 compared to $370,241 for the same period in 2012. The decrease is related primarily to the absence of 2013 costs associated with the Tipping Point interface and its applications within our core casino management system.

Professional Fees - Consulting. Professional fees - consulting decreased for the nine months ended September 30, 2013 to $1,000 compared to $51,070 for the same period in 2012. The decrease is mostly related to the absence of costs associated with GLI review and approval.

Interest Income

For the nine months ended September 30, 2013, interest income was $66,469 compared to $96,906 for 2012. This decrease is primarily related to contracts being further along their amortization schedules along with variances of interest rates through the Company in 2013 compared to the same period in 2012.

Tax Provision

The income tax expense for the nine months ended September 30, 2013 was $168,655 which was calculated at a 32.5% effective rate, compared to the tax benefit of $89,525 for the same period in 2012, which was calculated at a 31.1% effective rate. The increase in the quarterly effective rate is primarily related to the annual tax impact affected by the current quarterly results.

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Net Income (loss)

Income before taxes for the nine months ended September 30, 2013, was $519,724 compared to net loss before taxes of $288,095 for same period in 2012. Net income for the nine months ended September 30, 2013 was $351,069 compared to net loss of $198,570 for the same period in 2012. The basic earnings per share was $0.07 compared to basic loss per share of $0.04 for the nine months ended September 30, 2013 and 2012, respectively.

Backlog

The Company's backlog generally consists of incomplete system installations and expansion of offerings for currently installed and supported systems.

The Company has two installation projects for a casino management system and table games management system in its backlog at September 30, 2013.

The Company is currently serving gaming establishments in ten US states, as well as countries in Central and South America, and the Caribbean. The Company has a pipeline of opportunities and strategic partnerships that it is pursuing.

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