Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operation.

The following Management's Discussion and Analysis should be read in conjunction with our audited financial statements and related notes that appear elsewhere in this filing.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements made in this report are "forward-looking statements," as that term is defined under Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as "may," "will," "believe," "anticipate," "intend," "estimate," "expect" and similar expressions. The forward-looking statements in this report are primarily located in the material set forth under the headings "Description of Business," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," but are found in other parts of this report as well. These statements are based upon management's current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks and uncertainties and other important factors, including those described in this report under Part I, Item 1A "Risk Factors" as well as in our other SEC filings. Forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no and expressly disclaim any obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

Industry data and other statistical information used in this report are based on independent publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, derived from our review of internal surveys and the independent sources listed above. Although we believe these sources are reliable, we have not independently verified the information.

BACKLOG

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

The Company had three projects in its backlog as of December 31, 2025. The Company had five projects in its backlog at December 31, 2024. As of the filing date of this report, the Company has signed four new contracts with customers in 2026.

The Company is currently serving gaming establishments in seventeen states inthe U.S., as well as countries in Central and South America, the Caribbean and Australia. The Company aims to pursue further opportunities and strategic partnerships.

LIQUIDITY AND CAPITAL RESOURCES

Management believes that the Company has adequate cash to meet its obligations and continue operations for both existing customer contracts and ongoing product development for at least the next twelve months from the date of this filing. The Company's primary sources of liquidity are cash, cash equivalents, short term investments, receivables, and future cash generated from operations.

In addition, the Company has a $500,000 line of credit with a lender. No amount was outstanding or drawn from this line of credit during the year ended December 31, 2025. The line of credit expires on February 1, 2027.

The Company's cash and cash equivalents position at December 31, 2025was $8,235,788, an increase of $5,978,092from $2,257,696 at December 31, 2024. This increase was primarily the result of the Company investment in certificates of deposit maturing during the 2025. The Company's short-term investments were $0 as of December 31, 2025, as compared to $4,627,744 as of December 31, 2024.

Net cash flows provided by operating activities during the year ended December 31, 2025was $1,806,481 a decrease of $211,572 from $2,018,053 for the year ended December 31, 2024. This decrease was primarily due to a decrease in customer deposits offset by a decrease in inventory.

Net cash provided by investing activities was $4,534,991 during the year ended December 31, 2025, compared to cash used in investing activities of $3,111,075 for the year ended December 31, 2024. This increase relative to 2024 was primarily due to proceeds from maturing certificates of deposit of $4,725,286. We used no cash to purchase certificates of deposit in 2025, as compared to $6,561,614 in 2024.

Net cash used in financing activities was $363,380 for the year ending December 31, 2025, compared to net cash used in financing activities of $139,053. This increase relative to 2024 was primarily due to higher total dividend payments of $371,240.

On December 31, 2025, total stockholders' equity was $12,844,464 compared to $11,462,081 on December 31, 2024, an increase of $1,382,383or 12.1%, which was primarily due to 2025net income.

The Company did not have any off-balance sheet arrangements as of December 31, 2025.

RESULTS OF OPERATIONS, FOR THE YEAR ENDED December 31, 2025COMPARED TO YEAR ENDED December 31, 2024

The most significant events that affected the 2025results of operations were the Company's installation of eight casino management systems and expanding five existing customers systems.

Revenue

See Note 1: Revenue, disaggregated revenues by major product line table

Total revenues decreased $115,789, a 1.0% decrease, during the year ended December 31, 2025, compared to the year ended December 31, 2024, as a result of increases in maintenance and other revenue. System sales decreased $1,166,909, a 28.5% decrease, due to a decrease in the number and size of site installations in 2025 compared to 2024. Maintenance revenue increased $773,918, an 14.4% increase, due to the increase in our customer base and rates from 2024 to 2025. Service and other revenue, which includes DataTrac, KioskTrac, KioskTrac Mobile, SlotSUITE, RePrintEnroll kiosks and licensing agreements increased $223,522, or approximately 13%, as a result of an increase in DataTrac services, SlotSUITE and promotional kiosk products sold in 2025 compared to 2024.

During 2025, the Company delivered a total of eight systems, expanded five existing customers. During2024, the Company delivered eight systems.

Cost of Sales and Gross Profit

Cost of sales decreased 11.6% to $2,890,020in 2025from $3,270,733in 2024. The decrease of $380,713 was primarily due to a decrease in volume, type and size of installations. The following table summarizes our cost of sales:

		Year Ended December 31,
		2025				2024				2025				2024
										(percent of revenues)				(percent of revenues)
System		$	748,463			$	1,209,320				6.8	%			10.8	%
Maintenance			1,287,384				1,042,247				11.7	%			9.3	%
Lease			31,740				0				0.3	%			0.0	%
Service and other			822,433				1,019,166				7.4	%			9.1	%
Total cost of sales		$	2,890,020			$	3,270,733				26.3	%			29.2	%
Gross profit		$	8,158,217			$	7,893,293				73.7	%			70.8	%

The gross profit in 2025 totaled $8,158,217, or 73.7% of sales, compared with $7,893,293, or 70.8% of sales, in 2024. The increase in gross margin in 2025 was primarily attributable to a higher proportion of system upgrade projects performed for existing customers. These upgrade projects generally produced higher margins than traditional installations due to reduced labor requirements and the use of standardized components, which lowered overall project costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 6%to $6,554,624in 2025from $6,175,668in 2024. This increase of $378,956was primarily due to an increase in the Company's research and development efforts.

Other Income

Other income totaled $7,076 in 2025 compared to $2,587 in 2024.

Interest Income

Interest income increased to $477,951 in 2025, compared to $388,716 in 2024, primarily due to the increase of interest income from cash being invested into multiple certificates of deposit as well as a high yield savings account.

Income Tax Expense

The income tax expense was $462,000 in 2025, for an effective rate of 22.2%, compared to income tax expense of $532,500 for an effective rate of 25.3% in 2024. The change in the effective rate is primarily due to changes in generation/utilization of tax credits.

Net Income

The net income for 2025 was $1,626,620 compared to net income of $1,576,428 for 2024, whichis a increase of $50,192.

The basic and diluted earnings per share in 2025were $ 0.35, compared to basic and diluted earnings per share of $ 0.34 in 2024.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates these estimates, including those related to revenue recognition. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that the Company believes have the most effect on its reported financial position and results of operations are as follows:

Revenue Recognition

The Company derives revenues from the sales of systems, licenses and maintenance fees, hardware leasing and services.

System Sales

Revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected, when applicable from customers, which are subsequently remitted to governmental authorities.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is a unit of account in ASC 606. A majority of the Company's systems sales have multiple performance obligations including an obligation to deliver a casino management system and another to provide maintenance services. For system sales with multiple performance obligations, the Company allocates revenue to each performance obligation based on its Standalone Selling Price ("SSP"). See discussion within the significant judgement paragraph regarding our determination of SSP. At contract inception, management assesses whether it is probable that the company will collect substantially all of the consideration to determine whether the contract meets the criterion for collectability. The revenue allocated to the casino management system is recognized upon installation. The Company occasionally enters into contracts that include multiple sites; management has determined that each site installation is a separate performance obligation. In these instances, the Company recognizes revenue upon completion of each performance obligation. In addition, the Company has a contract with a reseller who purchases and resells the Company's products; monthly the reseller notifies the Company of their successful installations and submits an invoice to the Company for those installations. The Company also analyzes its standard business practice of using long-term contracts and the history of collecting on extended payment term contracts which include a significant financing component which is usually a market interest rate. The associated interest income is reflected accordingly on the statement of operations.

Management's assessment of collectability at both contract inception and on an ongoing basis resulted in the determination that some of our contracts did not meet the criterion for collectability. The balance of these contracts are not included as part of accounts receivable on the balance sheet. Accordingly, for these contracts whereby the collectability criterion has not been met, revenue will be recognized as payments are received. During the years ended December 31, 2025 and 2024, the Company has determined that approximately $887,500 and $1,229,290 for these systems did not meet the revenue recognition collectability criterion. Management considered the following facts and circumstances in its determination: these installations are subject to different regulators than our current customer base; Payments have not been received for items invoiced; one customer has a large debtor in a senior position to Table Trac. Both contracts will continue to be recognized on a cash basis subject to ongoing collectability assessment. A change in the collectability assessment in a future period may allow the Company to recognize revenue prior to collecting cash. The company has received substantially all of the site's inventory installed.

Maintenance Revenue

Maintenance revenue is recognized ratably over the contract period. The SSP for maintenance is based upon the renewal rate for contracted services.

Lease Revenue

The Company derives a portion of its revenue from a sales type leasing arrangement in accordance with ASC 842. The Company leases hardware to a customer and receives monthly payments.

Service Revenue and Other Revenue

Service revenue is recognized upon completion of the services and are billed in arrears. The SSP for service revenue is established based upon actual selling prices for the services or prior similar arrangements.

Other revenue includes DataTrac, kiosks and related promotional programs and miscellaneous sales of equipment. Revenue is recognized upon completion of services or delivery of equipment and is billed in arrears. During 2024, the Company recognized variable consideration of $275,000 which resulted in a reduction of revenue in those periods related to the Company paying the one time cash consideration to a customer as a result of certain promotional software not performing in accordance with agreed upon specifications.

The Company offers qualified customers a licensing agreement. Licensing revenue is recognized after the intellectual property (CMS system), the performance obligation, is delivered and in its operational and functional state. The stand-alone selling price for licensing revenue is established based upon actual selling prices for the license.

See also Note 1.

Accounts Receivable / Allowance for Credit Losses

Accounts receivable are initially recorded at the invoiced amount and carried on the balance sheet at net realizable value as of each balance sheet date. The company offers customers extended payment terms for periods of 6 to 72 months and as amounts under these long-term accounts receivable become due within one year, they are reclassified to the current portion of accounts receivable. For receivables related to contracts that contain an interest rate, interest is recorded upon receipt to interest income on the statements of operations. An allowance for credit losses is recorded when the Company believes the amounts may not be collected. Management believes that receivables, net of the allowance for credit losses, are fully collectible. Accounts receivable are written off when management determines collection is no longer likely. While the ultimate result may differ, management believes that any write-off not allowed for will not have a material impact on the Company's financial position.

Inventory

Inventory, consisting of finished goods, is stated at the lower of cost or net realizable value. The average cost method is used to value inventory. Inventory is reviewed quarterly for the lower of cost or net realizable value and obsolescence. Any material cost found to be above market value or considered obsolete is written down accordingly. The Company had $8,597 and$7,697 of obsolescence reserves at December 31, 2025 and 2024, respectively.

Income Taxes

Income taxes are provided for using the asset and liability method of accounting. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

Recently Issued and Adopted Accounting Pronouncements

A description of recently issued and adopted accounting pronouncements, if any, is contained in Note 1 of the Notes to Consolidated Financial Statements.