The accompanying unaudited condensed financial statements of Table Trac, Inc. (the “Company,” or “Table Trac”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Certain information normally included in financial statements and related footnotes prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The condensed balance sheet as of June 30, 2025 and the condensed statements of operations, stockholders’ equity and cash flows for the three and six months ended June 30, 2025 and 2024 are unaudited but include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position at such date and the operating results and cash flows for the interim periods presented.

The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Table Trac, Inc. Annual Report on Form 10-K for the year ended December 31, 2024.

Table Trac was formed under the laws of the State of Nevada in June 1995. The Company has offices in Minnetonka, Minnesota, Las Vegas, Nevada and Oklahoma City, Oklahoma. The Company has developed and sells an information and management system that automates and monitors various aspects of the operations of casinos.

Table Trac provides system sales and technical support to casinos. System sales include installation, custom casino system configurations, and training. In addition, license, technical support and other services are provided under separate license and service contracts.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s use of estimates and assumptions include: for revenue recognition, determining collectibility, the nature and timing of satisfaction of performance obligations, and determining the standalone selling price (“SSP”) of performance obligations, realizability of accounts receivable and revenue, and the valuation of allowance for credit losses, deferred tax assets and liabilities, and inventory. Actual results could differ from those estimates, and the difference could be significant. For further information about our critical accounting estimates, see the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Policies and Estimates” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

There were no changes in critical accounting estimates or assumptions for the six months ended June 30, 2025.

The Company’s significant accounting policies are described in Note 1 of the financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024.

The Company maintains cash balances with various financial institutions. These balances may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limits. To mitigate this risk, the Company participates in the IntraFi Network DepositsSM (formerly known as CDARS® and ICS®), a program that allows depositors to access multi-million-dollar FDIC insurance coverage on large deposits through a network of participating banks.

Through the IntraFi program, the Company’s funds are placed into deposit accounts at multiple member banks in increments below the FDIC insurance limit of $250,000 per institution, per ownership category. This structure enables full FDIC insurance coverage while maintaining liquidity and risk diversification. All funds placed through IntraFi remain obligations of the originating financial institution, and the Company receives a consolidated statement detailing all covered deposits.

Management believes that participation in the IntraFi Network reduces the concentration and credit risk associated with uninsured deposits and enhances the safety of the Company’s cash holdings.

Cash equivalents represent money market funds or short-term investments with original maturities of three months or less from the date of purchase.

The Company's stock-based compensation consists of stock options and restricted stock issued to certain company employees, directors and non-employees. The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, directors and non-employees. The compensation expense for the Company’s stock-based payments is based on estimated fair values at the time of the grant.

The Company determines the fair value of restricted stock awards on the date of grant using the closing traded price on that date. The Company’s restricted stock awards are subject to vesting requirements and the corresponding compensation is recorded ratably over the service period.

For stock options, the Company recognizes compensation expense based on an estimated grant date fair value using the Black-Scholes option-pricing model. The Company has elected to account for forfeitures as they occur and to use the simplified method to determine the expected life of stock options.

The Company derives revenues from the sale or leasing of systems, licenses and maintenance fees and other services.

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 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.

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

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 is recognized upon completion of the services and is 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.

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 SSP for licensing revenue is established based upon actual selling prices for the license.

The following table summarizes disaggregated revenues by major product line for the three months ended June 30, 2025 and 2024, respectively:

See Major Customers for disaggregated revenue information about primary geographical markets.

Contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is required to determine the SSP for each distinct performance obligation, including lease and non-lease components. We use a single amount to estimate SSP when we sell a product or service separately.

In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we perform a gross margin analysis using information such as the size of the customer and geographic region in determining the SSP.

We recognize a contract asset when our performance under a contract precedes our receipt of consideration from a customer, or before payment is due, and our receipt of consideration is conditional upon factors other than the passage of time. Our contract asset consists of our in-process installations, for which we have an enforceable right to collect consideration (including a reasonable profit) in the event the services are cancelled by customers. As of June 30, 2025 and December 31, 2024 we recorded a contract asset of approximately $65,742 and $68,400, respectively, as a component of accounts receivable.

As of January 1, 2024, the balance of accounts receivable, net and customer deposits were $3,000,544 and $785,805, respectively.

The collectability assessment requires the company to use judgement and consider all relevant facts and circumstances. Management exercises judgment in its assessment of collectability of customer funds by considering payment history, current credit status, and available information about the financial condition of the customer, among other factors. As of June 30, 2025 and December 31, 2024, approximately $1,051,907 and $1,229,290 for systems installed under contract have not been recorded as revenue or included in accounts receivable based on the collectability assessment performed by the Company. In accordance with this assessment, the contracts will be assessed in subsequent quarters at which time they may be deemed collectable and the outstanding remaining system revenue will be recognized accordingly.

We evaluate the interest rates in customer contracts with extended payment terms, representing a significant financing component. These rates range from approximately 2% to 8% and we believe those to be appropriate market interest rates for the financing component.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. Fair value estimates are at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and matters of significant judgment and therefore cannot be determined with precision. The Company considers the carrying values of its financial instruments to approximate fair value due to their short-term nature.

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

The Company currently has one certificate of deposit ("CD") being held at a bank with an original maturity of eleven months. This CD matures in November 2025 and has an interest rate of 4.50%. The Company had two certificates of deposit ("CD") being held at a bank as of December 31, 2024; with original maturities of seven to eleven months, respectively. One CD matured in February 2025 and carried an interest rate of 4.70%, while the other matures in November 2025 and has an interest rate of 4.50%. Certificates of deposit held for investment with an original maturity greater than three months are carried at cost plus accrued interest and reported as short-term investments on the balance sheets. Interest is paid at maturity. At times, certain certificates may exceed amounts insured by the FDIC. The Company determines the appropriate classification as short-term or long-term at the time of purchase based on original maturities and management's reasonable redemption expectation. The Company reevaluates such classification at each balance sheet date.

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. For receivables related to contracts that contain an interest rate, interest income is recorded upon receipt in the statements of operations. We maintain an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as general and administrative expense in the Condensed Statements of Operations. We assess collectibility by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectibility issues. In determining the amount of the allowance for credit losses, we consider historical collectibility based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions. Management believes that receivables, net of the allowance for credit losses, are fully collectable. 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 will not have a material impact on the Company’s financial position.

The following table summarizes the Company's major customers' information for the three and six months ended June 30, 2025 and 2024:

For the three month periods ending June 30, 2025 and 2024, sales to customers in the United States represent 85.7% and 95.5%, of total revenues, respectively.

A major customer is defined as any customer that represents at least 10% of revenue for a given period or 10% of outstanding account receivable at the end of a period.

Inventory, consisting primarily 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 net realizable value or considered obsolete is written down accordingly. The Company had an obsolescence reserve of $7,697 at June 30, 2025 and December 31, 2024. The total inventory value was $1,529,437 and $1,935,679, as of June 30, 2025 and December 31, 2024, respectively, which included work-in-process of $87,484 and $147,724 as of June 30, 2025 and December 31, 2024, respectively, and the remaining amount is comprised of finished goods. As of June 30, 2025 and December 31, 2024, the Company had $62,754 and $50,068, respectively, of prepaid inventory as a component of prepaid expenses.

Net investment in leases are recognized when the Company's leases qualify as sales-type leases. The net investment in leases are initially measured at the present value of the fixed lease payments, discounted at the rate implicit in the lease.

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets which range from two to five years. Repair and maintenance costs are expensed as incurred; major renewals and improvements are capitalized. As items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in operating income.

The Company periodically assesses the recoverability of long-lived assets and certain identifiable intangible assets by reviewing for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset groups. If such assets groups are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

The Company determines if an arrangement is a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the underlying asset and the right to direct how and for what purpose the asset is used. Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company has elected to use the incremental borrowing rate in determining the present value of lease payments for all asset classes. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For lease agreements that contain both lease and non-lease components, the Company has elected to account for the lease and non-lease components as a single lease component. The Company has elected to not apply the requirements of ASC 842 for short-term leases. Short-term leases are defined as leases that, at the commencement date, have lease terms of twelve months or less.

We expense software development costs, including cost to develop software products to be sold, licensed or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products. During 2025 no new costs were capitalized for the six months ended June 30, 2025 and 2024 . Capitalized software development costs are currently amortized straight-line over a five year period, which reflects the pattern in which the assets' future economic benefits are expected to be consumed.

Expenditures for research and product development costs, before technological feasibility is reached are expensed as incurred. Research and development expenses were $256,200 and $34,195 for the six months ended June 30, 2025 and 2024, respectively, and are included in selling, general and administrative expenses on the condensed statements of operations.

Basic earnings per share is computed by dividing net income by the weighted average shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares from the assumed exercise of stock options and restricted stock shares subject to vesting. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from the exercise were used to acquire shares of common stock at the average market price during the reporting period. Restricted stock shares are included in basic shares as of the beginning of the period in which the vesting conditions are satisfied. (See Note 8).