TABLE TRAC, INC. The following discussion 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. These forward-looking statements are based upon our current expectations and projections about future events. Whenever used in this report, the words "believe," "anticipate," "intend," "estimate," "expect" and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or 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 forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future.
Some, but not all, of the factors that could cause actual results to differ from those implied by the forward-looking statements in this report are more fully described in the "Risk Factors" section of this report.
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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.
Due to the recent outbreak of the coronavirus in the
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 at
Subsequent to
The Company is currently serving gaming establishments in thirteen
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. In
The Company's cash position at
Net cash used in investing activities was
Net cash used in financing activities was
On
RESULTS OF OPERATIONS, YEAR ENDED
The most significant events that affected the 2019 results of operations were
the Company's (1) installation of 29 casino management systems at seven
operating entities; (2) expansion into the
During 2019, the Company delivered product with a value of approximately
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See Note 1: Revenue, disaggregated revenues by major product line table
Total revenues decreased
During 2019, the Company delivered a total of twenty nine systems, domestically,
in the
Cost of sales decreased to
Years ended December 31,
2019 2018 2019 2018
(percent of revenues)
System $ 1,043,583 $ 2,281,997 13.90 % 29.19 %
Maintenance 218,157 112,597 2.91 % 1.44 %
Service and other 453,314 105,813 6.04 % 1.35 %
Total cost of sales $ 1,715,054 $ 2,500,407 22.9 % 32.0 %
Gross profit $ 5,790,317 $ 5,318,290 77.1 % 68.0 %
The gross profit in 2019 was
Customer deposits - short-term decreased to
Contract liabilities - long-term increased to
Total operating expenses increased to
The income tax expense was
The net income for 2019 was
The basic and diluted earnings per share in 2019 were
OFF-BALANCE SHEET ARRANGEMENTS
None.
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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
Revenue Recognition
The Company derives revenues from the sales of systems, licenses and maintenance fees, and services, and rental agreements.
System Sales
Revenue is recognized upon transfer of control of promised products or 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.
Maintenance Revenue
Maintenance revenue is recognized ratably over the contract period. The stand-alone selling price for maintenance is based upon the renewal rate for contracted services.
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Service Revenue and Other Revenue
Service revenue is recognized after the services are performed and collection of the resulting receivable is reasonably assured. The stand-alone selling price for service revenue is established based upon actual selling prices for the services or prior similar arrangements.
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. The Company may offer customers a rental contract. Revenues are billed monthly on a per-game per-day basis. There is an option to purchase the system after the rental contract expires at a pre-determined residual value.
See also Note 1. Deferred System Sales Costs
Incremental cost to obtain and fulfil a contract are deferred and amortized over
the related system contract term. These costs are recognized on a straight-line
basis over the term of the contract which is generally 18-48 months beginning
when revenues are generated. These costs are the most significant component of
other long-term assets on the balance sheet, and are
Accounts Receivable / Allowance for Doubtful Accounts
Accounts receivable are initially recorded at the invoiced amount and carried on the balance sheet at net realizable value, which includes foreign currency translation as of each balance sheet date. Accounts receivable include unsecured regular customer receivables and unsecured amounts from financed contracts coming due within 12 months. Amounts from financed contracts due beyond 12 months are recorded as "Long-term accounts receivable - financed contracts." Interest is recorded upon receipt to other income on the statements of operations. An allowance for doubtful accounts is recorded when the Company believes the amounts may not be collected. Management believes that receivables, net of the allowance for doubtful accounts, 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 (which approximates first in, first
out method) is used to value inventory. Inventory is reviewed annually 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 no obsolescence reserve at
Income Taxes
Income taxes are provided for using the 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.
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