SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission File No. 0-28383
TABLE TRAC, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0336568
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
4200 Kemrich
Minnetonka, Minnesota 55345
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (612) 939-9679
Securities registered pursuant to Section 12(b) of the Act:
2,859,862 Shares Of Common Stock
Securities registered pursuant to Section 12(g) of the Act:
None
Common Stock, (no par value)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ NO ___
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on December 31, 1999, based on the average bid and asked prices of
Common Stock in the over-the-counter market on that date was N/A.
2,859,862 shares of Registrant's Common Stock, no par value were outstanding on
December 31, 1999, prior to the effectiveness of the latest practicable date.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
<PAGE>
CONTENTS
--------
Page
----
PART I
Item 1. BUSINESS 4
Item 2. PROPERTY 7
Item 3. LEGAL PROCEEDINGS 7
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 7
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS 7
Item 6. SELECTED FINANCIAL DATA 7
Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA 9
Item 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 9
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT 10
Item 11. EXECUTIVE COMPENSATION 10
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 11
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 11
3
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K 11
PART I
Item 1. - BUSINESS
- -------
Table Trac, Inc. (the "Company") is a Nevada Corporation, formed on
June 27, 1995, with principal offices in Minnetonka, Minnesota, at 4200 Kemrich.
The Company has developed and is commencing the commercialization of a
proprietary information and management system (Table Trac(TM)) that automates
and monitors the operations of casino table games. The general intent of Table
Trac is a system to acquire, evaluate, and provide immediate access to a new
level of detailed information which has never been available to managers before
now.
Until 1988 there were only two states that allowed legalized gambling.
In 1998 casino gambling is allowed in over 20 states, and large public
corporations manage most of the industry. Legalized gambling in the United
States has taken over as the top revenue earner for all forms of entertainment.
Most departments in the casino industry are already computerized. The
missing link is the table games. Casinos are still using methods for the
confirmation of table game activity that were used over 50 years ago, methods
which only loosely tie manager's estimates to the actual table cash count. This
method can not assure that every drop box dollar is actually counted, or makes
it to the casino's bank account. In today's business world, from the largest
corporation to the local convenience store, all cash transactions are recorded
and verified to the cash count. The Table Trac system brings the casino industry
up to today's computer technology.
The great majority of table games managers were trained in Atlantic
City and Nevada, using "up through the ranks" and "on the job" training methods.
With more casinos opening every week, the need for quality managers and
executives are at an all time high, and, as a result, those managers have been
spread thinly across the nation. The technology of Table Trac helps fill this
void by automating the business side of table games management.
Table Trac was created to provide casino management personnel with
ongoing, comprehensive information about the details of table game activity.
This information, presented in real time mode, links all aspects of actual table
play to responsible parties in the areas of pit operations, accounting, security
and casino management.
4
<PAGE>
The information Table Trac provides complements existing accounting
reports and easily integrates with other casino data processing functions.
Furthermore, Table Trac can be custom-configured to accommodate a casino's
particular policies pertaining to access, either by user or department.
Table Trac is Unix-based and compatible with most hardware platforms.
Most important, it is reliable, secure, and user-friendly.
The heart of the system is the patented (U.S. patent # 5,957,776) table
top hardware design which gathers table drop, inventories, dealer, floor
manager, player, security and drop box information using a dealer-activated
keypad, and on-table magnetic card reader. The dealer depresses various keys
that each correspond with the various denominations of bills being dropped into
the Drop box, and swipes his or others magnetic cards (just like your credit
cards) to send that information to the central computer. The use and operation
of Table Trac does not alter either the pace or routine of the game, which is
important to both management and customers.
Many casinos currently try to monitor these numbers using manager's
estimates with varying degrees of accuracy. The Table Trac system provides upper
management, for the first time, with those real time win/loss and drop figures,
and a verifiable check and balance for the count room. The system gives upper
management access to not only the table numbers by shift, but to data on
individual dealers and supervisors, which has game security value.
On a need-to-know basis, and at the discretion of management, users on
the system are able to view computer screens and know all the details of play of
(i) the entire casino table game status; (ii) the activities of a particular
pit; (iii) the details about a particular table; and, (iv) activity of a
particular dealer or pit boss. Casino defined events can trigger silent
surveillance alarms, and camera pan & zoom commands automatically.
TABLE TRAC INSTALLATIONS
Table Trac's Beta test site was installed in November of 1995, in a 12
table casino in Kenora, Ontario, Canada. This provided the system's first live
test, and it ran successfully from the time it was installed.
The first customer installation was in June of 1996, in a 10 table
casino in northern Minnesota. The system has been operational in that casino
since the date of installation, and the casino has added all of Table Trac's
features and services to their system.
The second customer installation was purchased by the same operator and
installed in its other casino in northern Minnesota in July of 1997. The two
5
<PAGE>
installations were linked together in September of 1997. The player tracking
portion of the two systems is a first of its kind network, which allows players
to use a single club member's card to earn and redeem points at either casino.
The latest test installation was in the L.C.O. Casino in Hayward,
Wisconsin. This test installation was completed on May 26, 1999, the contract
for the installation was signed on March 22, 2000. Results of this installation
are expected in the second quarter of fiscal year 2000.
AVAILABILITY OF TABLE TRAC:
Table Trac is available for an installation and monthly license fee
from the Company for casinos with a minimum number of tables. Base License
includes full installation, a custom casino system configuration, training, and
technical support during the life of the License agreement. Software upgrades
will be provided to casinos at the Company's cost of installation. Custom
screens and reports will be designed, if requested by the casino, at additional
cost.
MANUFACTURING CAPABILITIES
Table Trac has secured the manufacturing resources of Micro Dynamics,
Inc. of Eden Prairie MN. The president of Table Trac has worked with Micro
Dynamics on various projects over the last 9 years. Micro Dynamics is a custom
3rd party manufacturer of sophisticated electronics, with both through hole and
surface mount automated manufacturing technology capable of producing Table Trac
units at the rate of over 500 a day.
TRADEMARKS AND PATENTS
Table Trac's management has actively pursued trademark and patent
protection for the Company and its products. In the course of it existence,
Table Trac has spent in excess of $24,000 to secure those protections.
The Company filed its provisional patent application in August of 1995,
and filed its Final Application in August 1996. This application has been
approved and was issued on September 28, 1999, as patent number 5,957,776.
The Company filed to register its Trademark ("TABLE TRAC") in September
of 1996. The Mark was Published October 1997. The Mark received one objection by
Bally Gaming International in Feb of 1998. That objection was answered in May of
1998, and has now been settled, with no expense to the Company. The Trademark
was issued on September 7, 1999, as Trademark number 2,275,137.
6
<PAGE>
RECENT DEVELOPMENTS
With the system developed, site tested, and commercial viability
established, the Company has turned its focus to sales and marketing. Mr. Thomas
Kozlowski has agreed to join Table Trac bringing over 20 years experience inside
the casino management community, and most importantly, within the table games
specialty of that industry. Mr. Kozlowski identified Table Trac as the
automation of the methods he personally taught and used himself to implement
internal controls and troubleshoot table games departments in his consulting
experience.
Item 2. - PROPERTY
- -------
None
Item 3. - LEGAL PROCEEDINGS
- -------
None
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------
None.
PART II
Item 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
- ------- STOCKHOLDER MATTERS
The Company's common stock has not been traded.
Item 6. - SELECTED FINANCIAL DATA
- -------
Fiscal Years Ended December 31,
-------------------------------
1999 1998
---- ----
Income Statement Data
- ---------------------
Net Sales $ 36,276 $109,388
Total Revenues $ 60,537 $125,001
Net Income (loss) $(139,112) $(30,195)
Per Share Data
- --------------
Net Income (loss) $ (.05) $ (.01)
7
<PAGE>
As of December 31,
------------------
1999 1998
---- ----
Balance Sheet Data
- ------------------
Total Assets $ 170,019 $101,265
Total Liabilities $ 126,096 $133,529
Stockholders' Equity (Deficit) $ 43,923 $(32,264)
Item 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998.
Revenues increased in 1998 to $125,001 from $109,526 in 1997. There
were increased license fees, no sales, and increased consulting fees in 1998 to
account for the difference.
Costs of sales decreased in 1998 to $1,849 from $22,262 in 1997 as a
result of no sales in 1998.
Operating expenses decreased in 1998, to $153,347 from $246,945. The
major changes were no interest expense in 1998 and there were decreased
professional fees.
The result was that there was a net loss of $30,195 in 1998, compared
to a net loss of $159,681 in 1997. The net loss per share in 1998 was $.01
compared to a net loss per share of $.06 in 1997.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1999.
Revenues decreased in the year ended December 31, 1999 compared to the
same period in 1998 from $125,001 to $60,537. License fees and sales increased
in 1999, but not enough to offset the lower consulting fees, which decreased
from $109,388 to $0.
Cost of goods sold was $25,319 in 1999, compared to $1,849 in 1998.
Operating expenses increased to $161,988 in 1999 from $153,347 in 1998. The
biggest change in 1999 was sales and marketing of $50,331, compared to $200 in
1998.
8
<PAGE>
The result was that there was a net loss of $139,112 in the year of
1999 compared to a net loss of $30,195 in the same period of 1998. The net loss
per share for the period in 1999 was $.05, compared to a net loss per share of
$.01 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Table Trac, Inc. has historically had more expenses than income in each
year of its operations. The accumulated deficit from inception to December 31,
1999 was $531,130. It has been able to maintain a positive cash position solely
through financing activities.
The Company, however, is not capital intensive. The basic product of
the Company is its computer software developed by its President. All
manufacturing is done after an order is received by an outside manufacturer, so
there is little inventory held by the Company of its product. The installation
is done by the President, after an order is received. The office of the Company
is in the home of the President, and no rent is charged.
There are no known trends, events or uncertainties that are likely to
have a material impact on the short or long term liquidity. The primary source
of liquidity in the long term will be increased sales. In an attempt to insure
adequate liquidity the Company is presently attempting to raise $700,000 through
a private placement of convertible debentures. If successful, the Company will
use net proceeds of $630,000 for debt retirement of $61,250, sales and marketing
of $211,250 and working capital of $357,500. There are no material commitments
for capital expenditures. There are no known trends, events or uncertainties
reasonably expected to have a material impact on the net sales or revenues or
income from continuing operations. There are no significant elements of income
or loss that do not arise from continuing operations. There are no seasonal
aspects to the business of Table Trac, Inc.
YEAR 2000 COMPLIANCE
The computers used by the Company are year 2000 compliant. The software
developed by the Company is year 2000 compliant. Based on the assessments to
this date management believes that future costs relating to the year 2000 issue
will not have a material effect on its financial position, results of operations
or cash flows.
Item 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------
The financial statements are attached following Item 14.
Item 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
- ------- DISCLOSURE.
None.
9
<PAGE>
PART III
Item 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- --------
The executive officers and directors of the Company, with a brief
description, are as follows:
Name Age Position
- ---- --- --------
Chad E. Hoehne 36 Chairman, President
Thomas P. Kozlowski 38 Vice President Sales and Marketing
Joseph A. Nielsen 44 Secretary
Chad E. Hoehne, Mr. Hoehne is the Chairman and President of the
Company. He has a BS degree in Business Administration from Mankato State
University. Mr. Hoehne was employed by Micro Control Company from 1985 to 1993,
he was the founder and President of Live Media Broadcast during 1993, he was the
Chief Financial Officer of IDC Holdings, Ltd. in 1994, and began work on the
Company in December, 1994.
Thomas P. Kozlowski, Mr. Kozlowski is Vice President of Sales and
Marketing. Mr. Kozolowski held various table games management positions at
Resorts International, Sands, cruise liner "Galileo," and the six ship fleet of
High Seas Entertainment in Athens, Greece from 1978 to 1987 when he formed
Worldwide Gaming, a consulting firm for several casinos, specializing in
marketing and security control. He continued in this position until November,
1998 when he joined Table Trac.
Joseph A. Nielsen, Mr. Nielsen is the Secretary. Mr. Nielsen was a
securities broker for many years. Mr. Nielsen was self employed as a financial
consultant in 1993 until he joined with Mr. Hoehne to form the Company in 1994.
During 1996-1997 he was also a financial consultant to Equisure, Inc.
The directors of the Company are elected annually by the shareholders
for a term of one year or until their successors are elected and qualified. The
officers serve at the pleasure of the Board of Directors.
10
<PAGE>
Item 11. - EXECUTIVE COMPENSATION.
- --------
Chad Hoehne, the President of the Company received compensation of
$36,024 in 1995, $20,000 in 1996, $46,398 in 1997, $100,792 in 1998, and $38,000
in 1999.
Item 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- -------- AND MANAGEMENT.
There are presently 2,859,862 shares of the Company's common shares
outstanding. The following table sets forth the information as to the ownership
of each person who, as of this date, owns of record, or is known by the Company
to own beneficially, more than five per cent of the Company's common stock, and
the officers and directors of the Company.
Shares of
Name Common Stock Percent of Ownership
- --------------------------------------------------------------------------------
Sally Hoehne (1) 1,229,100 47%
Joseph A. Nielsen 348,501 13%
Thomas Kozlowski (2)
Directors and Officers 1,637,601 62%
as a group
(1) Sally Hoehne is the wife of the President of the Company Chad Hoehne.
(2) Mr. Kozlowski has options to purchase 175,000 shares of the Company at
a price of $.30 per share.
Item 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------
Chad Hoehne, President of the Company, is the principle of CJSS
Investors, LLC. There have been consulting fees generated by Mr. Hoehne that
have been billed through CJSS Investors, LLC. Most of the revenue from the
consulting has been remitted to the Company from CJSS Investors, LLC. There is
no formal agreement between the Company and CJSS Investors, LLC for the
President to perform these services, or to remit proceeds to the Company.
11
<PAGE>
PART IV
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
- -------- REPORTS ON FORM 8-K.
(a) Attached are the Financial Statements and Independent Auditor's
Report on Examination of Financial Statements for the years ended
December 31, 1999 and December 31, 1998.
(b) Attached are the following Financial Statement Schedules and
Auditors Report on Schedules,
None
All schedules are omitted because they are not required or not
applicable or the information is shown in the financial statements or
notes thereto.
(c) No report was filed on Form 8-K.
(d) There are no exhibits.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated March 28, 2000
TABLE TRAC, INC.
/s/ Joseph Nielsen
by_____________________________________
Joseph Nielsen Secretary/Treasurer
13
<PAGE>
TABLE TRAC, INC.
(A Development Company)
FINANCIAL STATEMENTS
PERIOD FROM INCEPTION (JUNE 27, 1995) TO
DECEMBER 31, 1999
<PAGE>
TABLE TRAC, INC.
(A Development Company)
FINANCIAL STATEMENTS
PERIOD FROM INCEPTION (JUNE 27, 1995) TO
DECEMBER 31, 1999
Page
----
Independent Auditors' Report............................................... 1
Financial Statements:
Balance Sheets........................................................... 2
Statements of Operations................................................. 4
Statements of Stockholders' Equity (Deficit)............................. 5
Statements of Cash Flows................................................. 6
Notes to Financial Statements............................................ 7
<PAGE>
CALLAHAN, JOHNSTON & ASSOCIATES, LLC
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
To The Board of Directors and
Stockholders of Table Trac, Inc.
Minnetonka, Minnesota
We have audited the accompanying balance sheets of Table Trac, Inc. (a
development stage company) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended and for the period from June 27, 1995 (inception), to December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Table Trac, Inc. as of December
31, 1999 and 1998, and the results of its operations and its cash flows for the
years then ended and from June 27, 1995 (inception), to December 31, 1999, in
conformity with generally accepted accounting principles.
As described in Note 2 to the financial statements, the ultimate recoverability
of investments in the development stage and patent costs is dependent on future
profitable operations, which presently cannot be determined.
/s/ Callahan, Johnston & Associates, LLC
CALLAHAN, JOHNSTON & ASSOCIATES, LLC
Minneapolis, Minnesota
March 22, 2000
- --------------------------------------------------------------------------------
7850 METRO PARKWAY, SUITE 207, MINNEAPOLIS, MN 55425
TELEPHONE: (612)858-7207 FAX: (612)858-7202
EMAIL: [email protected]
<PAGE>
TABLE TRAC, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31,
---------------------------
1999 1998
--------- ---------
ASSETS
------
Current assets:
Cash $ 77,621 $ 9,008
Accounts receivable:
Trade 3,933 5,173
Refundable payroll taxes -- 1,106
Prepaid expenses 3,043 180
--------- ---------
Total current assets 84,597 15,467
--------- ---------
Furniture and equipment 22,731 22,731
Less accumulated depreciation 19,156 14,840
--------- ---------
Net fixed assets 3,575 7,891
--------- ---------
Other assets:
Accounts receivable - stockholders 36,130 25,840
Inventory 22,227 30,045
Organization costs, net of accumulated
amortization of $940 in 1999 and $735
in 1998 85 290
Patent, net of accumulated amortization of
$606 in 1999 and $-0- in 1998 23,405 21,732
--------- ---------
Total other assets 81,847 77,907
--------- ---------
Total assets $ 170,019 $ 101,265
========= =========
The accompanying notes are an integral part of
these financial statements.
2
<PAGE>
TABLE TRAC, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31,
---------------------------
1999 1998
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Accounts payable $ 1,470 $ 2,766
Accrued payroll and related 2,126 2,263
Notes payable - stockholders 72,500 50,000
Debentures payable - stockholders 50,000 72,500
Bridge financing -- 6,000
--------- ---------
Total current liabilities 126,096 133,529
--------- ---------
Stockholders' equity (deficit):
Common stock, no par value; authorized
8,000,000 shares, issued: 2,859,862 in
1998, 2,580,999 in 1998 574,703 359,404
Deficit accumulated during the
development stage (530,780) (391,668)
--------- ---------
Total stockholders' equity (deficit) 43,923 (32,264)
--------- ---------
Total liabilities and stockholders'
equity (deficit) $ 170,019 $ 101,265
========= =========
The accompanying notes are an integral part of
these financial statements.
3
<PAGE>
TABLE TRAC, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Inception
(June 27,
Years Ended 1995)
December 31, To
--------------------------- December 31,
1999 1998 1999
----------- ----------- -----------
Revenues:
License fees $ 22,359 $ 15,351 $ 94,710
Sales 36,276 -- 89,464
Consulting fees -- 109,388 153,613
Reimbursed expenses 173 262 5,548
Interest income 1,729 -- 2,677
---------- ---------- ----------
Total revenues 60,537 125,001 346,012
Cost of goods sold 25,319 1,849 49,430
---------- ---------- ----------
Gross profit 35,218 123,152 296,582
---------- ---------- ----------
Expense:
Sales and marketing 50,331 200 51,189
Amortization 811 205 1,546
Automobile 2,929 1,829 13,499
Commissions 1,480 1,560 5,568
Computer 1,852 859 5,567
Depreciation 4,316 5,674 21,547
Interest 100 -- 83,215
Office 8,947 3,448 20,179
Payroll and related 41,405 107,889 307,543
Professional fees 31,846 17,965 219,042
Research and development 1,475 54 12,098
Telephone 14,347 8,086 40,563
Travel and entertainment 2,149 5,578 33,814
---------- ---------- ----------
Total expense 161,988 153,347 815,370
---------- ---------- ----------
Net income (loss) before
other expense (126,770) (30,195) (518,788)
Other expense:
Inventory write down 12,342 -- 12,342
---------- ---------- ----------
Net income (loss) $ (139,112) $ (30,195) $ (531,130)
========== ========== ==========
Basic earnings (loss) per share $ (.05) $ (.01) $ (.22)
========== ========== ==========
Weighted average number of
shares outstanding 2,748,474 2,563,689 2,448,118
========== ========== ==========
The accompanying notes are an integral part of
these financial statements.
4
<PAGE>
TABLE TRAC, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Deficit
--------------------- During
Number of Subscriptions Development
Shares Amount Receivable Stage Total
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Founders stock 1,660,500 $ 1,070 $ (170) $ -- $ 900
Shares issued for technology rights 82,000 40 -- -- 40
Shares issued to debenture holders 205,000 100 -- -- 100
Stock issued for legal services and
organization costs 102,500 2,050 -- -- 2,050
1995 net loss -- -- -- (70,942) (70,942)
--------- --------- --------- --------- ---------
Balance at December 31, 1995 2,050,000 3,260 (170) (70,942) (67,852)
Collection of subscription receivable -- -- 170 -- 170
Shares issued to promissory
note holders 2,500 5,000 -- -- 5,000
Proceeds from stock sales in 1996 353,999 146,894 -- -- 146,894
1996 net loss -- -- -- (130,850) (130,850)
--------- --------- --------- --------- ---------
2,406,499 155,154 -- (201,792) (46,638)
Proceeds from stock sales in
January 1997 and February 1997 40,000 80,000 -- -- 80,000
Shares issued for services in May 1997 91,500 56,250 -- -- 56,250
Shares issued in lieu of interest on
notes payable - stockholders in
May 1997 25,000 50,000 -- -- 50,000
1997 net loss -- -- -- (159,681) (159,681)
--------- --------- --------- --------- ---------
Balance at December 31, 1997 2,562,999 341,404 -- (361,473) (20,069)
</TABLE>
(Continued)
5
<PAGE>
TABLE TRAC, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Deficit
--------------------- During
Number of Subscriptions Development
Shares Amount Receivable Stage Total
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shares issued part of bridge
financing in December 1998 18,000 18,000 -- -- 18,000
1998 net loss -- -- -- (30,195) (30,195)
--------- --------- --------- --------- ---------
Balance at December 31, 1998 2,580,999 359,404 -- (391,668) (32,264)
Shares issued part of bridge
financing in January 1999 12,000 6,000 -- -- 6,000
Shares issued under 504D offering
April 1999 to August 1999, net
of offering expenses of $63,745 266,863 209,299 -- -- 209,299
1999 net loss -- -- -- (139,112) (139,112)
--------- --------- --------- --------- ---------
Balance at December 31, 1999 2,859,862 $ 574,703 $ -- $(530,780) $ 43,923
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
6
<PAGE>
TABLE TRAC, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Inception
(June 27,
Years Ended 1995)
December 31, To
------------------------- December 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(139,112) $ (30,195) $(530,780)
Adjustments to reconcile net
loss to cash flows from
operating activities:
Depreciation 4,316 5,674 19,156
Amortization 811 205 1,546
Stock issued for services -- -- 57,275
Stock issued for interest -- -- 55,000
Accounts receivable (7,944) 12,249 (40,063)
Prepaid expenses (2,863) (180) (3,043)
Inventory 7,818 1,715 (22,227)
Accounts payable (1,296) 1,410 1,470
Accrued payroll and related (137) 1,333 2,126
--------- --------- ---------
Net cash flows from
operating activities (138,407) (7,789) (459,540)
--------- --------- ---------
Cash flows from investing activities:
Purchases of furniture and
equipment -- (507) (22,691)
Incurrence of patent costs (2,279) (6,774) (24,011)
--------- --------- ---------
Net cash flows from investing activities (2,279) (7,281) (46,702)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from common stock 215,299 18,000 461,363
Proceeds from notes payable -
stockholders -- -- 50,000
Proceeds from debentures payable -
stockholders -- -- 100,000
Repayments on debentures payable -
stockholders -- -- (27,500)
Proceeds from bridge financing (6,000) 6,000 --
Proceeds on note payable - bank -- -- 10,000
Repayment of note payable - bank -- -- (10,000)
--------- --------- ---------
Net cash flows from financing activities 209,299 24,000 583,863
--------- --------- ---------
Increase (decrease) in cash 68,613 8,930 77,621
Cash - beginning of period 9,008 78 --
--------- --------- ------
Cash - end of period $ 77,621 $ 9,008 $ 77,621
========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
7
<PAGE>
TABLE TRAC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO
DECEMBER 31, 1999
1. Summary of Significant Accounting Policies and
Other Information
Company
Table Trac, Inc. was formed under the laws of the State of Nevada in
June 1995. The Corporation has its offices in Minnetonka, Minnesota. The
Company has developed and is beginning the commercialization of an
information and management system that automates various aspects of the
operations of casino table games, Table Trac(TM).
Table Trac is available for an installation and monthly license fee from
the Company for casinos with a minimum number of tables. Base license
includes all installation, a custom casino system configuration,
training, and technical support during the life of the License
agreement. Custom screens and reports will be designed, if requested by
the casino, at additional cost.
Revenue Recognition
Revenues are recorded at the time of shipment of products or performance
of services. Monthly license fees are recorded over the lives of the
respective contracts or as earned.
Furniture and Equipment
Furniture and equipment are recorded at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of two to
five years. Expenditures for maintenance and repairs are charged to
operations when incurred. Deduction is made for retirements resulting
from renewals or betterments.
Depreciation expense was $4,316 in 1999 and $21,547 in 1998 from
inception to date.
(Continued)
8
<PAGE>
1. Summary of Significant Accounting Policies and
Other Information (Continued)
Intangible Assets
Organization costs are carried at cost and are being amortized over
sixty months using the straight-line method.
In March 1999, the Company received patent number 5,957,776 relating to
its table game control system. Management feels strongly that the extent
of the patent will enable the Company to adequately protect its
technology. Expenses incurred in obtaining this patent are carried at
cost and are being amortized over seventeen years using the
straight-line method commencing in 1999.
Stock-Based Consideration
The Company has applied the fair value-based method of accounting for
employee and nonemployee stock-based consideration and/or compensation
in accordance with FASB Statement 123.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
which requires the use of the "liability method" of accounting for
income taxes. Accordingly, deferred tax liabilities and assets are
determined based on the differences between the financial statement and
tax bases of assets and liabilities, using enacted tax rates in effect
for the year in which the differences are expected to reverse.
The Company's net operating loss carryforwards are fully allowed for at
December 31, 1999. See Note 10.
Prior to 1999 the Company was treated as a Subchapter S corporation
whereby revenues and expenses flow through to stockholders for inclusion
on their individual returns. Accordingly, no income tax provision was
provided in the Company's financial statements through December 31,
1998.
(Continued)
9
<PAGE>
1. Summary of Significant Accounting Policies and
Other Information (Continued)
Concentrations, Risks and Uncertainties
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Accounts Receivable - Stockholders
Accounts receivable - stockholders consists of amounts advanced
to the Company's President, its secretary, and one former
employee of the Company. These amounts are noninterest bearing,
unsecured, and due on demand. The Company feels all amounts are
collectible. While the ultimate amount collectible may differ,
management believes that any collection loss will not have a
material impact on the Company's financial position. Due to
uncertainties in the collection process, however, it is at least
reasonably possible that management's estimate of the
collectibility will change during the next year. That amount
cannot be estimated.
Inventory
Inventory is recorded at the lower of cost (determined on a
first-in, first-out basis) or market. Inventory levels
significantly exceed the Company's current requirements. The
Company is currently offering shares for sale to raise monies
for sales and marketing. The Company believes that these efforts
will be successful and that inventory will be realized in the
normal course of operations. No estimate can be made of the
range of loss that is reasonably possible should the Company be
unsuccessful.
(Continued)
10
<PAGE>
1. Summary of Significant Accounting Policies and
Other Information (Continued)
Concentrations, Risks and Uncertainties (Continued)
Inventory (Continued)
In 1999, the Company recorded an inventory write down of $12,342
relating to Version 1 components still on hand. Although still
usable as backup components, the Company felt this lower of cost
or market adjustment was warranted.
Customer Concentrations and Receivables
The Company sells to domestic companies and grants limited
uncollateralized credit to customers based on credit worthiness.
One major customer comprises 100% of the Company's revenues from
installation and licensing fees from installations of the
Company's Table Trac(TM) system.
Consulting services performed by the Company's President were
performed and billed almost exclusively through CJSS Investors,
a related party. CJSS Investors, in turn, remits all or a
portion of these revenues to the Company to compensate the
Company for services provided by its President. No formal
agreement exists requiring CJSS Investors to continue to utilize
the Company's President to perform these consulting services or
to compensate the Company for services that are provided.
Contingent Debenture Interest
As discussed in Note 5, payment of interest on the debentures is
contingent on the Company achieving profitable operations. It is
reasonably possible the Company will achieve profitable
operations and this $72,500 obligation will be incurred.
(Continued)
11
<PAGE>
1. Summary of Significant Accounting Policies and
Other Information (Continued)
Concentrations, Risks and Uncertainties (Continued)
Competition
The Company is unaware of any competitor actively pursuing its
target market; however, many of the Company's likely competitors
have substantially greater resources and experience than the
Company.
Supplier Concentration
The Company maintains one relationship for manufacture of Table
Trac units. The Company is aware of other local electronic
manufacturers offering equivalent manufacturing capability whose
services the Company could readily hire if this primary supplier
fails.
Key Personnel
Marketing efforts, consulting services and technical and
administrative efforts of the Company's President have accounted
for 100% of the Company's revenues inception to date. No
employment agreement exists with the Company's President.
Long-Lives Assets
In accordance with SFAS 121, Accounting For The Impairment Of Long-Lived
Assets And For Long-Lived Assets To Be Disposed Of, the Company reviews
its long-lived assets and intangibles related to those assets
periodically to determine potential impairment by comparing the carrying
value of the long-lived assets outstanding with estimated future cash
flows expected to result from the use of the assets, including cash
flows from disposition. Should the sum of the expected future cash flows
be less than the carrying value, the Company would recognize an
impairment loss. An impairment loss would be measured by comparing the
amount by which the carrying value exceeds the fair value of the
long-lived assets and intangibles. To date, management has determined
that no impairment of long-lived assets exists.
(Continued)
12
<PAGE>
1. Summary of Significant Accounting Policies and
Other Information (Continued)
Earnings Per Share
The Company has implemented FASB 128: Earnings Per Share. FASB 128
replaces the presentation of primary EPS with basic EPS. Basic EPS
excludes dilution and is computed by dividing net income by the
weighted-average number of common shares outstanding for the year.
Diluted EPS reflects the potential dilution from stock options and
warrants and is computed using the treasury stock method. Under the
treasury stock method stock options are assumed to have been exercised
at the beginning of the period if the exercise price exceeds the average
market price during the period. Stock options and warrants are excluded
in the EPS calculation due to their antidulitive effect.
Weighted-average shares for basic EPS
At December 31, 1998 2,563,689
=========
At December 31, 1999 2,748,474
=========
Inception (June 27, 1995) to December 31, 1999 2,448,118
=========
2. Development Stage Company
From inception to December 31, 1999, the Company is deemed to be in the
development stage. To date the Company has devoted the majority of its
efforts to: raising capital; research and development and patenting of
its Table Trac(TM) system; establishing sources of supply; and
developing markets. Planned principal operations have commenced, but
there have not been significant revenues from installation and licensing
fees from the Table Trac(TM) system to date. The Company sees consulting
services as incidental to the Company's primary purposes.
(Continued)
13
<PAGE>
2. Development Stage Company (Continued)
The Company is presently attempting to raise $700,000 through a private
placement of convertible debentures. If successful, the Company will use
approximately $630,000 in net proceeds, if all debentures are sold, to
provide: $211,250 for sales and marketing; and $357,500 in working
capital and $61,250 to retire debt (see Note 11). The Company feels
these efforts will allow it to successfully market to and expand its
casino customer base. Ultimately the Company feels it will be able to:
gain acceptance by the casinos; install and license its Table Trac(TM)
system; and achieve profitable operations and thereby realize assets and
settle obligations in the normal course of operations. No estimate can
be made of the range of loss that is reasonably possible should the
Company be unsuccessful.
As of the date of our audit, March 15, 2000 no proceeds have been raised
under this offering.
3. Related Party Transactions
Common Stock Issued for Contributed Assets
A designate of the Company's founder and President received 1,230,000
shares of common stock upon formation of the Company in exchange for
$570 and the President's assignment of the software for the Table Trac
system which he had developed to date and all design work and concept
development, including all future rights, title and interest to
inventions, improvements and application of and to certain Letters of
Patent to be obtained. Assets received were valued at their fair value
of $30 at the date of assignment.
Other Rent
The Company currently receives office space and use of certain furniture
from its President and largest stockholder under a month-to-month
agreement at no cost. No value has been reflected for this donated
rentals in the accompanying financial statements.
(Continued)
14
<PAGE>
4. Notes Payable - Stockholders
In September 1996, the Company entered into two $25,000 promissory
notes. As an inducement to loan the Company these monies each of the
note holders was also granted 1,250, post split, shares of the Company's
common stock. In 1997, the Company settled all interest ultimately owing
relating to these notes by granting each note holder 12,500, post split,
shares of the Company's common stock.
The notes payable - stockholders are currently noninterest bearing,
unsecured, and due on demand.
5. Debentures Payable - Stockholders
In 1995, the Company sold $10,000 debentures to ten individuals. Each
debenture holder also received the right to subscribe to 20,500, post
splits, shares of the Company's common stock for $10. Each of these
debenture holders exercised their stock rights and 205,000, post splits,
shares were issued under these agreements. These debentures are
unsecured and bear simple interest at a rate of 100%, once, for the life
of the debentures. Payment of this interest on these debentures is
contingent on future earnings. Repayment of these debentures, including
interest, was scheduled to occur from June 1996 to May 1997. Scheduled
payments were made from June 1996 to September 1996. Subsequent to that
date, cash flows have prohibited all but one partial payment in March
1997.
(Continued)
15
<PAGE>
5. Debentures Payable - Stockholders (Continued)
These debentures are currently due and are reflected as current in the
accompanying financial statements. If the Company is successful in
achieving profitable operations, it will further be obligated to pay the
contingent debenture interest.
Debenture principal due $ 72,500
Contingent debenture interest 72,500
---------
Potential obligation $ 145,000
=========
At December 31, 1999, it is at least reasonably possible the Company
will achieve profitable operations and will be required to settle the
potential obligation of $145,000.
6. Bridge Financing
In December 1998, the Company borrowed $6,000 as bridge financing toward
its proposed Circular 504 offering. This amount was unsecured,
noninterest bearing, and was repaid in 1999 from proceeds from this
offering. The Company issued a warrant in connection with this bridge
financing. See Note 7.
7. Common Stock
Stock Splits/Reverse Splits
On July 10, 1996, the Company approved a 41-for-1 split of its
common stock. On February 5, 1999, the Company approved a
1-for-2 reverse stock split. All references to number of shares,
except for shares authorized, have been adjusted to reflect
these splits on a retroactive basis.
(Continued)
16
<PAGE>
7. Common Stock (Continued)
Circular 504 Offering
The Company sold 266,863 shares of its common stock under this
offering. Proceeds of $273,044 are reflected net of offering
costs of $63,745 in the accompanying financial statements.
Proceeds from this offering were used for sales and marketing
and to provide working capital.
As a part of this offering the Company granted an option to its
underwriter to purchase up to 90,000 shares of common stock
exercisable at $1.25 per share on the basis of one warrant for
each 10 shares sold.
Stock Options and Warrants
As part of the employment discussed in Note 8 the Company
granted an option to this employee to purchase 175,000 shares of
its common stock at $.30 per share, with exercise rights
beginning December 29, 2000 and ending August 30, 2007. Employee
shall have the right to exercise the option immediately should
the Company enter into a binding letter of intent for the sale
of all or substantially all of the Company.
The Company granted a five year warrant as part of the bridge
financing referred to in Note 6. This warrant is to purchase
6,000 shares of the Company's common stock at $1.25 per share.
The Company granted a five year warrant to the underwriter of
its 1999 504 offering to purchase 28,186 shares of the Company's
common stock at $1.25 per share.
(Continued)
17
<PAGE>
8. Employment Agreement / Exclusive World Wide Marketing Rights
On February 23, 1999, the Company entered into an employment agreement
with its Vice President of Marketing which grants this individual
exclusive world wide marketing rights to the Company's products. This
agreement will remain in force provided this individual meets
performance goals as outlined in the agreement. This agreement was
modified by an amendment dated December 29, 1999. The Company also
granted an option to this employee. See Note 7.
9. Supplemental Cash Flow Information
Cash paid during the year for:
Inception
1999 1998 To Date
---- ---- --------
Interest $ -- $ -- $ --
==== ==== ====
Income taxes $ -- $ -- $ --
==== ==== ====
Summary of Non Cash Activity:
The Company issued 82,000 shares of additional founders' common stock
for technology valued at $40.
The Company issued 102,500 shares of common stock for legal fees and
organizational fees valued at $2,050.
Inception to December 31, 1999, the Company has issued 27,500 shares of
common stock in lieu of interest on the notes payable stockholders.
Interest expense of $55,000 was recorded relating to these issuances.
Inception to December 31, 1999, the Company has issued 151,500 shares of
common stock in lieu of compensation. Expense of $117,565 was recorded
relating to these issuances.
(Continued)
18
<PAGE>
10. Income Taxes
The Company was treated as a subchapter S corporation from inception
through December 31, 1998. Income taxes for 1999 consisted of the
following:
1999 1998
--------- --------
Current:
Federal $ -- $ N/A
State -- ========
State minimum fee --
-------
--
-------
Deferred:
Federal --
State --
-------
--
-------
Income tax benefit (expense) $ --
=======
The reconciliation between expected federal income tax rates is as
follows:
1999
-----------------------
Amount Percent 1998
--------- --------- --------
Expected federal tax $ (42,500) (34%) N/A
Surtax exemption 12,500 10 ========
State income tax, net of
federal tax benefit (8,100) (6)
Valuation and utilization
of net operating loss
carryforwards 38,100 30
State minimum fee -- --
--------- -----
$ -- --%
========= =====
(Continued)
19
<PAGE>
10. Income Taxes (Continued)
The Company has fully allowed for its net operating carryforwards as
follows:
Deferred tax asset relating to net
operating loss carryforwards $ 38,100
Valuation allowance (38,100)
--------
Deferred tax asset $ --
========
At December 31, 1999, the Company has carryforwards available to offset
future taxable income as follows:
Federal State
--------- --------
2014 $ 125,000 $125,000
========= ========
11. Subsequent Events
Private Placement
The Company is presently attempting to raise $700,000 through a private
placement of convertible debentures. If successful, the Company will use
net proceeds of $630,000 for:
Sales and marketing $211,250
Working capital 357,500
Ratio debt 61,250
--------
$630,000
========
(Continued)
20
<PAGE>
11. Subsequent Events (Continued)
Private Placement (Continued)
Each debenture will be $10,000 and will bear interest at 10% payable
monthly starting one month after purchase for a period of twelve months.
Commencing in the thirteenth month debenture holders will receive
interest plus 9% of the principal each month until paid in full. The
holder may convert the debenture into common stock of the Company at an
exercise price of $2.00 per share of the amount of unpaid debenture at
the date of conversion at any time before the debenture is paid in full.
The Company will grant the underwriter a five year warrant to purchase
500 shares of the Company's common stock for each debenture sold, up to
35,000 shares of common stock exercisable at $2.20 per share.
No debentures have been sold through the date of the audit.
LCO Casino
On March 22, 2000 the Company received a major order from LCO Casino in
Hayward, Wisconsin through a distributor, Data Financial Business
Services, Inc., a Wisconsin licensed gaming vendor. This agreement is
for the installation of the Table Trac System and Table Trac Players
Club upgrade for $66,127. This agreement also provides for ongoing
license and maintenance fees. Installation is expected in the second
quarter of 2000.
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 77,621
<SECURITIES> 0
<RECEIVABLES> 3,933
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 84,597
<PP&E> 22,731
<DEPRECIATION> (19,156)
<TOTAL-ASSETS> 170,019
<CURRENT-LIABILITIES> 126,096
<BONDS> 0
0
0
<COMMON> 574,703
<OTHER-SE> (530,780)
<TOTAL-LIABILITY-AND-EQUITY> 170,019
<SALES> 36,276
<TOTAL-REVENUES> 60,537
<CGS> 25,319
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 161,788
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (139,112)
<INCOME-TAX> 0
<INCOME-CONTINUING> (139,112)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (139,112)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
