Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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 unaudited financial statements, and notes thereto, contained in this Quarterly Report on Form 10-Q, as well as our audited financial statements, and notes thereto, contained in our Form 10-K filed with the SEC on March 24, 2026 relating to our year ended December 31, 2025.

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. The words "anticipate," "intend," "plan," "believe," "could," "project," "estimate," "expect," "strategy," "likely," "may," "should," "will" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. 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, as a result of many factors, including, but not limited to, those set forth under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 and in our other filings with the Securities and Exchange Commission.

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 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. is a Nevada corporation, formed on June 27, 1995, with its principal office in Minnetonka, Minnesota.

The Company continues to expand its intellectual property portfolio through both issued patents and ongoing patent development initiatives designed to support its core casino management and gaming technology platforms.

In August 2022 and September 2020, the Company was granted U.S. Patents No. 11,417,169 and No. 10,769,885 B2, respectively, relating to its April 2017 patent applications (Application Nos. 16/984,755 and 15/946,227), titled "Systems and Methods of Facilitating Interactions Between an Electronic Gaming Machine, Game Player, and a Control System."

In June 2021, the Company was granted U.S. Patent No. 11,024,116 related to its May 2020 application (Application No. 16/884,731), titled "Dynamic Automated Social Distancing on Electronic Gaming Machines."

In addition, the Company renewed its trademark for "Table Trac" (Registration No. 5,529,779), originally granted July 31, 2018, and obtained a trademark registration for "CasinoTrac," which was registered on July 23, 2019.

The Company has also filed, and expects to continue filing, additional patent applications relating to new and enhanced technologies, including an artificial intelligence-based training system for pit bosses, a system for managing gaming tickets, and a system for tracking progressive jackpots. These patent applications reflect the Company's ongoing focus on innovation and the development of proprietary solutions to enhance casino operations and data-driven decision-making.

The Company has also filed patent applications related to its gaming ticket management system, which is designed to reduce reliance on coin-based payouts by enabling accurate accounting and automated rounding of ticket exchanges to defined denominations. The Company has filed patent applications related to its progressive jackpot tracking system, which is designed to interface with a wide range of progressive jackpot configurations and improve the efficiency of tracking jackpot activity across the casino floor. These systems incorporate data-driven and artificial intelligence-based technologies intended to improve operational visibility and processing efficiency.

The Company sells and leases systems and technical support to casinos. The open architecture of CasinoTrac is designed to provide operators with a secure, 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 are designed to 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.

During the first quarter of 2026, the Company delivered three new systems and upgraded three existing system. At the end of the quarter, the Company had casino management systems, table games management systems, DataTrac, KioskTrac, KioskTrac Mobile, SlotSUITE, RePrintEnroll kiosks installed with on-going support and maintenance contracts with over 115 casino operators in over 300 casinos worldwide. Sales to customers in the United States represented 95.1% of the Company's total revenues for the three month period ending March 31, 2026.

Results of Operations - Three Months Ended March 31, 2026 Compared to Three months ended March 31, 2025

During the three months ended March 31, 2026, income from operations was $1,160,508 compared to income from operations of $942,627, for the three months ended March 31, 2025. The major components of revenues, cost of sales and selling, general and administrative expenses, and the reasons for changes in each, are discussed below.

Revenues

Revenues totaled $3,914,339 for the three months ended March 31, 2026 compared to $ 3,535,933, for the three months ended March 31, 2025.

Refer to Note 1 - Revenue, including disaggregated revenues by major product line table, and Major Customers

During the three months ended March 31, 2026, the Company delivered three new systems and upgraded three existing system. During the same period in 2025, the Company delivered five systems and expanded three existing customers.

Cost of Sales and Gross Profit

Cost of sales increased to $1,253,284 for the three months ended March 31, 2026 from $932,323, for the three months ended March 31, 2025 due primarily to the size of each install completed during the three months ended March 31, 2026. The following table summarizes our cost of sales for the three months ended March 31, 2026 and 2025, respectively:

		Three Months Ended March 31,
		2026				2025				2026				2025
										(percent of revenues)				(percent of revenues)
System		$	702,501			$	490,268				17.9	%			13.9	%
Maintenance			271,229				254,008				6.9	%			7.2	%
Service and other			279,554				188,047				7.1	%			5.3	%
Total cost of sales		$	1,253,284			$	932,323				32.0	%			26.4	%
Gross profit		$	2,661,055			$	2,603,610				68.0	%			73.6	%

The Company's gross profit was 68.0% and 73.6% for the three months ended March 31, 2026 and 2025, respectively. This decrease is a result of the increased relative labor costs associated with the two additional system installations with added complexities which were installed in the three months ended March 31, 2026.

Selling, General and Administrative Expenses

For the three months ended March 31, 2026, selling, general and administrative expenses were $1,500,547 compared to $1,660,983 for the same period in 2025. This decrease was a result of lower gross wages due to our lower head count and a decrease in some of our sales and marketing spending.

Interest Income

For the three months ended March 31, 2026, interest income was $96,981 compared to $117,680 for the same period in 2025. This decrease was a result of the company having no short-term investments in the 2026 period.

Tax Provision

The income tax expense for the three months ended March 31, 2026 was $286,000 as compared to $283,570, for the three months ended March 31, 2025. See Note 8 for an explanation of the decrease in the effective tax rate.

Net Income

Income before taxes for the three months ended March 31, 2026 was $1,257,489 compared to income before taxes for the three months ended March 31, 2025 of $1,065,809. Net income for the three months ended March 31, 2026 was $971,489 compared to net income of $782,239 for the three months ended March 31, 2025. The basic and diluted income per share was $0.21 compared to basic and diluted income per share of $0.17 for the three months ended March 31, 2026 and 2025, respectively.

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 system installations in its backlog at March 31, 2026. The Company had five system installations in its backlog as of March 31, 2025. As of the filing date of this report, the Company has signed no new contracts.

The Company is currently serving gaming establishments in seventeen U.S. states, 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 12 months from the date of this filing. The Company has a $500,000 line of credit and as of March 31, 2026, there were no borrowings outstanding under the line of credit. The Company's primary sources of liquidity are cash and cash equivalents, short-term investments, receivables and future cash generated from operations. As of March 31, 2026, the Company had total cash and cash equivalents of $8,122,868. Management is not aware of any trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Company's liquidity increasing or decreasing in any material way.

Net cash provided by operations for the three months ended March 31, 2026 was $444,090 compared to $734,810 for the three month period ending March 31, 2025. This decrease was a result of a number of factors including an increase in accounts receivable and a decrease in accrued expenses, offset by a decrease in customer deposits and an increase in income.

For the three months ended March 31, 2026 net cash provided by investing activities was $0 compared to cash provided by investing activities of $2,570,085 for the same period in 2025. This decrease was a result of the Company not having certificates of deposit maturing in the three months ended March 31, 2026.

For the three months ended March 31, 2026 net cash used in financing activities was $557,010 compared to $92,789 for the same period in 2025, due to the payment of a special cash dividend in the three months ended March 31, 2026.

See Note 10, "Subsequent Event" of the Notes to Condensed Financial Statements in Part I, Item 1, "Financial Statements," for information regarding our cash dividend following the end of the fiscal quarter. The declaration, amount and payment of any future cash dividends on the Company's common stock will be at the discretion of the Board of Directors.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of March 31, 2026.