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TBTC > SEC Filings for TBTC > Form 10-Q on 14-May-2014All Recent SEC Filings

Show all filings for TABLE TRAC INC

Form 10-Q for TABLE TRAC INC


14-May-2014

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 26, 2014 relating to our year ended December 31, 2013.

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 our 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, Inc. (the "Company" or "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 # 5,957,776) a proprietary information and management system (called our "Table Trac" system) that automates and monitors the operations of casino table game operations. In addition to its table games management system, Table Trac has been adding functionality to related casino system modules for guest rewards and loyalty club, marketing analysis, guest service, promotions, administration / management, vault / cage management and audit / accounting tasks. Aggregated together, all of these modules have become the "Casino Trac" product, a full-featured Casino Management System (CMS) offering what we believe to be a powerful combination of value, efficiency and reliability for casinos seeking to add or upgrade their casino systems.

The Company sells systems and technical support to casinos. The open-architecture of the Table Trac system is designed to provide operators with a scalable and flexible system that can interconnect and operate with most third-party software or hardware. Key products and services include modules designed to drive player tracking programs and kiosk promotions, as well as vault and cage controls. The Company's systems meet strict auditing, accounting and regulatory requirements applicable to the gaming industry. The Company has developed a patented, real-time system that automates and monitors the operations of casino gaming tables. The Company continues to increase its market share by expanding its product offerings to include new system features, and ancillary products.

In the first quarter, the Company completed the installation of one casino management system it had in backlog. The Company also placed two CountR cash redemption kiosks with customers in the U.S. At the end of the quarter, the Company had casino management systems, table games management systems and ancillary products installed with on-going support and maintenance contracts at forty-seven casinos worldwide.

During the first quarter the Company attended the ICE Gaming Show and the Caribbean Gaming Show.

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, 2013.

Results of Operations - Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

During the three months ended March 31, 2014, income from operations was $95,832 compared to a loss of $17,098 for the three months ended March 31, 2013. The major components of revenues, cost of sales and selling, general and administrative expenses are discussed below.

Revenues



Revenues totaled $1,168,210 for the three months ended March 31, 2014 compared
to $909,323 for the three months ended March 31, 2013. The following table
summarizes our revenues for the three months ended March 31, 2014 and 2013,
respectively:

                                             Three Months Ended March 31,
                                  2014           2013           2014             2013
                                                               (percent of revenues)
System sales                   $   663,853       543,593            56.8 %         59.8 %
License and maintenance fees       306,420       235,719            26.2 %         25.9 %
Other sales                        197,937       130,011            17.0 %         14.3 %

Total revenues $ 1,168,210 $ 909,323 100.0 % 100.0 %

During the three months ended March 31, 2014, the Company sold one larger system to an existing customer compared to one add-on system to an existing customer during the same period in 2013. Other sales, which include sales of printers, kiosk software, and rental sales, increased over 2013 as a result of additional CountR kiosk sales.

Cost of Sales

Cost of sales for the three months ended March 31, 2014 increased to $322,034 from $204,586 for the three months ended March 31, 2013. The following table summarizes our cost of sales for the three months ended March 31, 2014 and 2013, respectively:

                                            Three Months Ended March 31,
                                 2014          2013           2014             2013
                                                              (percent of revenues)
System sales                   $ 228,423       124,951           19.6 %           13.7 %
License and maintenance fees      25,504        49,650            2.2 %            5.5 %
Other sales                       68,107        29,885            5.8 %            3.3 %
Total cost of sales            $ 322,034     $ 204,486           27.6 %           22.5 %

The Company's gross profit was 72.4% and 77.5% for the three months ended March 31, 2014 and 2013, respectively. This decrease is primarily due to the additional CountR kiosk sold in 2014 compared to 2013.

Selling, General and Administrative Expenses

For the three months ended March 31, 2014, selling, general and administrative expenses were $750,344 compared to $721,835 for the same period in 2013. Our most significant changes in operating expenses from the two three-month interim periods are related to payroll and related expenses and travel and entertainment expenses. A discussion of the various components of our operating expenses for the three months ended March 31, 2014 and 2013 appears below:

Payroll and related expenses. Research and development programming costs increased for the three months ended March 31, 2014, to $451,911 compared to $416,080 for the same period in 2013. The increase is related primarily to the addition of two employees in 2014 compared to 2013.

Travel and entertainment expenses. Travel and entertainment expenses decreased for the three months ended March 31, 2014 to $23,394 compared to $40,675 for the same period in 2013. The decrease is mostly related to a trade show that was held during the first quarter of 2013, but will be in the second quarter of 2014.

Interest Income

For the three months ended March 31, 2014, interest income was $24,613 compared to $21,842 for 2013. This increase is primarily related to the more contracts financed through the Company in 2014 compared to the same period in 2013.

Tax Provision

The income tax expense for the three months ended March 31, 2014 was $44,000 which was calculated at a 36.5% effective rate, compared to $5,000 for the same period in 2013, which was calculated at a 105.4% effective rate. The decrease 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 March 31, 2014, was $120,445 compared to $4,744 for same period in 2013. Net income for the three months ended March 31, 2014 was $76,445 compared to net loss of $256 for the same period in 2013. The basic earnings per share was $0.02 compared to basic loss per share of $0.00 for the three months ended March 31, 2014 and 2013, 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 one installation project for a casino management system in its backlog at May 14, 2014.

The Company is currently serving gaming establishments in ten U.S. 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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