-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rk08LmtbI82p6xydMMxKYJSA+II78uYJN+C1TvKBfQJmyaelaG/eHOm7H6YwCZbs 5tJ1fi6WHbgWRqeoe+wEWA== 0000897101-99-001151.txt : 19991207 0000897101-99-001151.hdr.sgml : 19991207 ACCESSION NUMBER: 0000897101-99-001151 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19991206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TABLE TRAC INC CENTRAL INDEX KEY: 0001090396 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-28383 FILM NUMBER: 99769173 BUSINESS ADDRESS: STREET 1: 4200 KEMRICH CITY: MINNETONKA STATE: MN ZIP: 55345 BUSINESS PHONE: 6129391155 10SB12G 1 U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS Under Section 12(b) or (g) of the Securities Exchange Act of 1934 Table Trac, Inc. (Name of Small Business Issuer in its charter) Nevada 88-0336568 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4200 Kemrich Minnetonka, Minnesota 55345 (Address of principal executive office) (Zip Code) Issuer's telephone number (612) 939-9679 Securities to be registered under Section 12(g) of the Act: Common Shares Charles Clayton 527 Marquette Minneapolis, Minnesota 55402 (612) 338-3738 (Agent for Service) ITEM 1. DESCRIPTION OF BUSINESS GENERAL: 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. 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. 2 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 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 is in the L.C.O. Casino in Hayward, Wisconsin. This test installation was completed on May 26, 1999. 3 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. 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. 4 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1997 Revenues increased in 1997 from $185 to $109,526. The reason is that there was only interest income in 1996 and there were license fees, sales, consulting fees and reimbursed expenses in 1997. Cost of sales increased in 1997 from none in 1996 to $22,262 in 1997. The reason is that there were no sales in 1996. Operating expenses increased in 1997 to $246,945 from $131,035 in 1996 as a result of the increased business activity in 1997. As a result there was a net loss in 1997 of $159,681, compared to a net loss in 1996 of $130,850. The net loss per share in both years was $.06 due to the increased number of shares in 1997. 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. EIGHT MONTHS ENDED AUGUST 31, 1998 COMPARED TO EIGHT MONTHS ENDED AUGUST 31, 1999. Revenues decreased in the eight months ended August 31, 1999 compared to the same period in 1998 from $92,194 to $51,957. Time commitments relating to the test installation precluded the Company from pursuing consulting engagements in 1999. License fees and sales increased in 1999, but not enough to offset the $83,615 in consulting fees in 1998. Cost of goods sold was $28,252 in 1999, compared to none in 1998. Operating expenses increased to $155,594 in 1999 from $95,096 in 1998. The biggest change in 1999 was sales and marketing of $93,437, compared to none in 1998. 5 The result was that there was a net loss of $131,889 in the first eight months of 1999 compared to a net loss of $2,902 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 $.00 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, 1998 was $391,668. 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 future will be increased sales. 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 3. DESCRIPTION OF PROPERTY None ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There are presently 2,919,462 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 the date of this Offering Circular, owns of record, or is 6 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 Percent of Ownership Name Common Stock - --------------------------------------------------------------------------- Sally Hoehne (1) 1,229,100 47% Joseph A. Nielsen 348,501 13% Thomas Kozlowski (2) 60,000 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 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 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. Kozolowski, Mr. Kozolowski is Vice President of Sales and Marketing. Mr. Kozolowski held various table games management positions at 7 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. ITEM 6. EXECUTIVE COMPENSATION Chad Hoehne, the President of the Company received compensation of $36,024 in 1995, $20,000 in 1996, $46,398 in 1997 and $100,792 in 1998. Through August 31, 1999 he has been paid $21,000. ITEM 7. 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. ITEM 8. LEGAL PROCEEDINGS None ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's common stock has not traded at this time. There are 71 holders of the common stock of the Company. There have never been any dividends, cash or otherwise, paid on the common shares of the Company. 8 ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES Name Date Shares Cost Tony Baker 6/95 92,250 $80.00 Willard Blake 11/95 20,500 $10.00 Steve Briemhurst 6/95 92,250 $80.00 David Colehour 6/95 20,500 $10.00 Dale Dockendorf 6/95 20,500 $10.00 Dick Farley 6/95 20,500 $10.00 Sally Hoehne 6/95 1,229,100 $570.00 Duane McFarland 6/95 20,500 $10.00 Dennis Miller 6/95 51,250 Services Charles Clayton 5/97 51,250 Services Lloyd Nelson 6/95 20,500 $10.00 Joseph Nielsen 6/95 348,501 $100.00 Janice Sparks 6/95 20,500 $10.00 Jodie Tuckner 6/95 20,500 $10.00 Dan Kaufman 5/97 20,000 Services Katherine Dahlquist 5/97 5,000 $10,000.00 Helen Reierson 5/97 31,250 $35,000.00 Susan Stucke 5/97 13,750 $25,000.00 Robert Siqveland 5/97 12,500 Services Joe Cumberland 5/97 15,000 $30,000.00 Harvey Vogel 5/97 12,500 $25,000.00 Douglas Evans 5/97 12,500 $25,000.00 Chris Schuneman 5/97 5,000 $10,000.00 Jeffrey Phelan 5/97 12,500 Services Chad Hoehne 5/97 12,500 Services Evelyn Nelson 6/95 20,500 $10.00 Peter Eckhoff 5/97 250 Services Donald McKush 5/97 12,500 Services Janell Rucci 5/97 2,500 $5,000.00 Mark Welsh 5/97 8,750 $10,000.00 Mitch Miller 5/97 7,500 $15,500.00 John Priscilla 5/97 124,999 $70,500.00 Virgil Miller 5/97 124,999 $70,500.00 Michael Costello 1/99 12,000 $6,000.00 Dale Bistodeau 1/99 20,000 $10,000.00 Duane McFarland 1/99 20,000 $10,000.00 Duane Speed 1/99 24,000 $12,000.00 David Ashfield 1/99 12,000 $6,000.00 Thomas Kozlowski 2/99 60,000 Services Duane McFarland 4/99 20,000 $20,000.00 Michael Nelson 4/99 10,000 $10,000.00 Jerry Elliott 4/99 20,000 $20,000.00 9 Michael Reichert 4/99 5,000 $5,000.00 Uniplan/Matrix, Inc. 4/99 2,000 $2,000.00 Ronald Crognale 4/99 5,000 $5,000.00 Judy Nelson 4/99 10,000 $10,000.00 Dale Bistodeau 4/99 10,000 $10,000.00 Ben Case 4/99 5,000 $5,000.00 Burdette Bernston 4/99 10,000 $10,000.00 Annemarie Bristow 4/99 2,363 $2,363.00 Eugene Mason 4/99 2,500 $2,500.00 Randy Boyd 4/99 1,000 $1,000.00 G. Christian Crosby 4/99 5,000 $5,000.00 Patricia King 4/99 6,000 $6,000.00 Robin Norton 5/99 2,000 $2,000.00 Lyle Maschoff 5/99 4,500 $4,500.00 Craig Geller 5/99 5,000 $5,000.00 Walter Schoenborn 5/99 2,500 $2,500.00 John Priscilla 5/99 10,450 Settlement Virgil Miller 5/99 7,950 Settlement James Thomas 6/99 10,000 $10,000.00 Glenn Baillie 6/99 5,000 $5,000.00 Gene Joseph 6/99 10,000 $10,000.00 Gordon Hamilton 6/99 5,000 $5,000.00 Fred Blum 7/99 2,000 $2,000.00 James Orr 7/99 10,000 $10,000.00 Michael Jordan 7/99 2,500 $2,500.00 Lyle Hicks 7/99 10,000 $10,000.00 Lyle Maschoff 7/99 2,000 $2,000.00 Dale Bistodeau 7/99 40,000 $40,000.00 Duane McFarland 7/99 15,000 $15,000.00 Kevin Foster 7/99 2,000 $2,000.00 Robert Schachtseneider 7/99 10,000 $10,000.00 Thomas Gitis 7/99 5,000 $5,000.00 David Epstein 7/99 2,500 $2,500.00 Edward B. Steffner 8/99 5,000 $5,000.00 John Egart 8/99 5,000 $5,000.00 John Kilby 8/99 1,500 $1,500.00 There was no underwriter on the sales of any of the securities, and no commissions were paid, except for sales in 1999. The sales in 1999 were pursuant to a private placement, and a commission of 10% was paid. The registrant believes that all transactions were transactions not involving any public offering within the meaning of Section 4(2) of the Securities Act of 1933, since (a) each of the transactions involved the offering of such securities to a substantially limited number of persons; (b) each person took the securities as an investment for his own account and not with a view to distribution; (c) each person 10 had access to information equivalent to that which would be included in a registration statement on the applicable form under the Act; (d) each person had knowledge and experience in business and financial matters to understand the merits and risk of the investment; therefore no registration statement need be in effect prior to such issuances. ITEM 11. DESCRIPTION OF SECURITIES The Company has authorized 5,000,000 shares of common stock, no par value. Each holder of common stock has one vote per share on all matters voted upon by the shareholders. Such voting rights are noncumulative so that shareholders holding more than 50% of the outstanding shares of common stock are able to elect all members of the Board of Directors. There are no preemptive rights or other rights of subscription. Each share of common stock is entitled to participate equally in dividends as and when declared by the Board of Directors of the Company out of funds legally available, and is entitled to participate equally in the distribution of assets in the event of liquidation. All shares, when issued and fully paid, are nonassessable and are not subject to redemption or conversion and have no conversion rights. Risk Factor - Penny Stock Regulation. Broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stock generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. If the Company's securities become subject to the penny stock rules, investors in this offering may find it more difficult to sell their securities. 11 ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS Nevada Statutes, contain an extensive indemnification provision which requires mandatory indemnification by a corporation of any officer, director and affiliated person who was or is a party, or who is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a member, director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a member, director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, and against judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In some instances a court must approve such indemnification. ITEM 13. FINANCIAL STATEMENTS Please see the attached Financial Statements. ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS (a) Please see the attached Financial Statements (b) Exhibits: 3. Articles of Incorporation and bylaws 12 SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 18, 1999 Table Trac, Inc. ____/s/____________________________ Chad E. Hoehne, President, Director ____/s/____________________________ Thomas P. Kozlowski, Vice President ____/s/____________________________ Joseph A. Nielsen, Secretary 13 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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of its operations and its cash flows for the years then ended and from June 27, 1995 (inception), to December 31, 1998, 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 April 21, 1999 14 TABLE TRAC, INC. (A Development Stage Company) BALANCE SHEETS
December 31, ----------------------------- August 31, August 31, 1997 1998 1998 1999 --------- --------- ---------- ---------- (Unaudited) (Unaudited) ASSETS Current assets: Cash $ 78 $ 9,008 $ 67 $128,941 Accounts receivable: Trade 5,672 5,173 3,386 5,451 Refundable payroll taxes 1,106 1,106 1,106 -- Prepaid insurance -- 180 -- 180 -------- -------- -------- -------- Total current assets 6,856 15,467 4,559 134,572 -------- -------- -------- -------- Furniture and equipment 22,225 22,731 22,507 22,731 Less accumulated depreciation 9,165 14,840 12,948 18,623 -------- -------- -------- -------- Net fixed assets 13,060 7,891 9,559 4,108 -------- -------- -------- -------- Other assets: Accounts receivable - stockholders 37,590 25,840 39,140 43,680 Inventory 31,760 30,045 33,060 32,453 Organization costs, net of accumulated amortization of $735 in 1998 and $530 in 1997 495 290 358 154 Patent, net of accumulated amortization $-0- in 1998 and 1997 14,958 21,732 18,312 23,607 -------- -------- -------- -------- Total other assets 84,803 77,907 90,870 99,894 -------- -------- -------- -------- - ------------------------------------------------------------------------------------------------------------------- Total assets $104,719 $101,265 $104,988 $238,574 ======== ======== ======== ======== - -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. TABLE TRAC, INC. (A Development Stage Company) BALANCE SHEETS
December 31, ---------------------------- August 31, August 31, 1997 1998 1998 1999 --------- --------- --------- --------- (Unaudited) (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 1,356 $ 2,766 $ 2,656 $ 665 Accrued payroll and related 932 2,263 2,803 609 Notes payable - stockholders 50,000 50,000 50,000 50,000 Debentures payable - stockholders 75,000 72,500 72,500 72,500 Bridge financing -- 6,000 -- -- --------- --------- --------- --------- Total current liabilities 124,788 133,529 127,959 123,774 --------- --------- --------- --------- Stockholders' equity (deficit): Common stock, no par value; authorized 5,000,000 shares, issued: 2,919,862 in 1999 (unaudited), 2,580,999 in 1998 and 2,562,999 in 1997 341,404 359,404 341,404 636,357 Deficit accumulated during the development stage (361,473) (391,668) (364,375) (523,557) --------- --------- --------- --------- Total stockholders' equity (deficit) (20,069) (32,264) (22,971) 114,800 --------- --------- --------- --------- - ----------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity (deficit) $ 104,719 $ 101,265 $ 104,988 $ 238,574 ========= ========= ========= ========= - -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. TABLE TRAC, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS
Inception Eight Eight (June 27, Month Month Years Ended 1995) Period Period December 31, To Ended Ended -------------------------- December 31, Aug. 31, Aug. 31, 1997 1998 1998 1998 1999 --------- --------- ------------ --------- --------- (Unaudited) (Unaudited) Revenues: License fees $ 7,000 $ 15,351 $ 72,351 $ 8,579 $ 13,658 Sales 53,187 - 53,187 - 37,464 Consulting fees 44,225 109,388 153,613 83,615 - Reimbursed expenses 5,114 262 5,376 - 165 Interest income - - 948 - 670 --------- --------- --------- --------- --------- Total revenues 109,526 125,001 285,475 92,194 51,957 Cost of goods sold 22,262 1,849 24,111 - 28,252 --------- --------- --------- --------- --------- Gross profit 87,264 123,152 261,364 92,194 23,705 --------- --------- --------- --------- --------- Expense: Amortization 205 205 735 137 541 Automobile 3,180 1,829 10,570 1,177 1,169 Commissions 2,528 1,560 4,088 920 1,480 Computer 724 859 3,715 525 1,434 Depreciation 5,572 5,674 14,840 3,783 3,783 Insurance 718 730 1,884 487 - Interest 53,115 - 83,115 - 100 Office 969 2,380 8,905 731 3,553 Payroll and related 102,145 107,889 266,138 75,133 22,991 Postage and delivery 267 338 1,772 119 979 Professional fees 61,300 17,965 187,196 5,075 15,996 Research and development 2,617 54 10,623 54 1,000 Sales and marketing - 200 1,568 - 93,437 Telephone 8,397 8,086 26,216 5,427 8,396 Travel and entertainment 5,208 5,578 31,667 1,528 735 --------- --------- --------- --------- --------- Total expense 246,945 153,347 653,032 95,096 155,594 --------- --------- --------- --------- --------- Net income (loss) $(159,681) $ (30,195) $(391,668) $ (2,902) $(131,889) ========= ========= ========= ========= ========= Basic earnings (loss) per share $ (.06) $ (.01) $ (.16) $ (.00) $ (.05) ========= ========= ========= ========= ========= Weighted average number of shares outstanding 2,520,382 2,563,689 2,363,084 2,562,999 2,690,212 ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. TABLE TRAC, INC. (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock Deficit -------------------------- During Number of Subscriptions Development Shares Amount Receivable Stage Total --------- --------- --------- --------- --------- 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) 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 in 1999 under bridge financing in (unaudited) 6,000 6,000 - - 6,000 Shares issued for services in February 1997 (unaudited) 60,000 60,000 - - 60,000 Shares issued in 1999 under Circular 504 offering, net of offering expenses of $59,910 (unaudited) 272,863 212,953 - - 212,953 Net loss January 1, 1999 to August 31, 1999 (unaudited) - - - (131,889) (131,889) --------- --------- --------- --------- --------- Balance at August 31, 1999 (unaudited) 2,919,862 $ 636,357 $ - $(523,557) $ 114,800 ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. TABLE TRAC, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash
Inception Eight Eight (June 27, Month Month Years Ended 1995) Period Period December 31, To Ended Ended --------------------------- December 31, Aug. 31, Aug. 31, 1997 1998 1998 1998 1999 --------- --------- ------------ --------- -------- (Unaudited) (Unaudited) Cash flows from operating activities: Net loss $(159,681) $(30,195) $(391,668) $(2,902) $(131,889) Adjustments to reconcile net loss to cash flows from operating activities: Depreciation 5,572 5,674 14,840 3,783 3,783 Amortization 205 205 735 137 541 Stock issued for services 56,250 -- 57,275 -- 60,000 Stock issued for interest 50,000 -- 55,000 -- -- Accounts receivable (12,968) 12,249 (32,119) 454 (17,012) Prepaid insurance -- (180) (180) -- -- Inventory 17,448 1,715 (30,045) (1,300) (2,408) Checks written in excess of cash in bank (6,250) -- -- -- -- Accounts payable (13,720) 1,410 2,766 1,300 (2,101) Accrued payroll and related 774 1,333 2,263 1,871 (2,263) --------- -------- --------- ------- --------- Net cash flows from operating activities (62,370) (7,789) (321,133) 3,343 (90,740) --------- -------- --------- ------- --------- Cash flows from investing activities: Purchases of furniture and equipment (10,926) (507) (22,691) -- -- Incurrence of patent costs (4,193) (6,774) (21,732) (3,354) (2,280) --------- -------- --------- ------- --------- Net cash flows from investing activities (15,119) (7,281) (44,423) (3,354) (2,280) --------- -------- --------- ------- --------- Cash flows from financing activities: Proceeds from common stock 80,000 18,000 246,064 -- 218,953 Proceeds from notes payable - stockholders -- -- 50,000 -- -- Proceeds from debentures payable - stockholders -- -- 100,000 -- -- Repayments on debentures payable stockholders (2,500) -- (27,500) -- -- Bridge financing, net -- 6,000 6,000 -- (6,000) Proceeds on note payable - bank 10,000 -- 10,000 -- -- Repayment of note payable - bank (10,000) -- (10,000) -- -- --------- -------- --------- ------- --------- Net cash flows from financing activities 77,500 24,000 374,564 -- 212,953 --------- -------- --------- ------- --------- Increase (decrease) in cash 11 8,930 9,008 (11) 119,933 Cash - beginning of period 67 78 -- 78 9,008 --------- -------- --------- ------- --------- Cash - end of period $ 78 $ 9,008 $ 9,008 $ 67 $ 128,941 ========= ======== ========= ======= =========
The accompanying notes are an integral part of these financial statements. TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 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 $3,783 in 1999 (unaudited), $5,674 in 1998, $5,572 in 1997, $2,872 in 1996 and $14,840 from inception to December 31, 1998. (Continued) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 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. Patents are carried at cost and will be amortized over seventeen years using the straight-line method commencing in July 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 ------------ Through December 31, 1998 the Company was treated as a Subchapter S corporation whereby revenues and expenses flowed through to stockholders for inclusion on their individual returns. Accordingly, no income tax provision has been provided in the accompanying financial statements from inception through December 31, 1998 The Company terminated its S election in 1999 (unaudited). 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. (Continued) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 1. Summary of Significant Accounting Policies and Other Information ---------------------------------------------------------------- (Continued) Concentrations, Risks and Uncertainties (Continued) --------------------------------------- Accounts Receivable - Stockholders ---------------------------------- Accounts receivable - stockholders consists of amounts advanced to the Company's President 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) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 1. Summary of Significant Accounting Policies and Other Information ---------------------------------------------------------------- (Continued) Concentrations, Risks and Uncertainties (Continued) --------------------------------------- Customer Concentrations and Receivables --------------------------------------- The Company sells to domestic companies and grants limited uncollateralized credit to customers based on credit worthiness. From inception to December 31, 1998, one major customer comprised 100% of the Company's revenues from installation and licensing fees from installations of the Company's Table Trac(TM) system. See Note 9. Consulting services performed by the Company's President are 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) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 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. (Continued) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 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 diving net income by the weighted-average number of common shares outstanding for the year. Dilutes EPS reflects the potential dilution from stock options 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. There were no options outstanding at December 31, 1998, and accordingly, only basic earnings per share is presented in the accompanying financial statements. Outstanding Weighted --------------------- Average Shares Days Shares ------ ---- ------ 6/27/95 to 12/31/98 2,050,000 1,283 2,050,000 8/4/96 to 12/31/98 2,500 880 1,715 9/4/96 to 12/31/98 353,999 849 234,252 1/21/97 to 12/31/98 15,000 710 8,301 2/17/97 to 12/31/98 12,500 683 6,654 2/19/97 to 12/31/98 12,500 681 6,635 5/1/97 to 12/31/98 91,500 610 43,503 5/4/97 to 12/31/98 25,000 607 11,828 12/18/98 to 12/31/98 18,000 14 196 --------- --------- Inception to 12/31/98 2,580,999 2,363,084 ========= ========= (Continued) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 1. Summary of Significant Accounting Policies and Other Information ---------------------------------------------------------------- (Continued) Earnings Per Share (Continued) ------------------ Weighted-average shares for basic EPS At December 31, 1996 2,166,440 ========= At December 31, 1997 2,520,382 ========= At December 31, 1998 2,563,689 ========= At August 31, 1998 (unaudited) 2,562,999 ========= At August 31, 1999 (unaudited) 2,690,212 ========= Inception (June 27, 1995) to December 31, 1998 2,363,084 ========= Inception (June 27, 1995) to August 31, 1999 (unaudited) 2,415,175 ========= Advertising Expenses -------------------- Advertising expenses are included in sales and marketing expenses in the accompanying financial statements and are recognized in the period incurred. Advertising expenses totaled $-0- in 1999 (unaudited), $200 in 1998, $-0- in 1997, and $1,568 from inception to December 31, 1998. 2. Development Stage Company - -- ------------------------- From inception to December 31, 1998, 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) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 2. Development Stage Company (Continued) ------------------------- The Company is presently attempting to raise $900,000 through a Circular 504 offering. If successful, the Company will use approximately $810,000 in net proceeds, if all shares are sold, to provide: $400,000 for sales and marketing; and $410,000 in working capital. 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. Gross proceeds of $272,863 (unaudited) have been raised under this offering. Offering costs of $59,910 (unaudited) have been incurred with respect to 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. (Continued) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 3. Related Party Transactions (Continued) -------------------------- 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. 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) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 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, 1998, 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 repaid in 1999 from proceeds from this offering. 7. Common Stock ------------ 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) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 8. Supplemental Cash Flow Information ---------------------------------- Cash paid during the year for: August 31, ----------------- 1997 1998 1999 1998 ---- ---- ---- ---- (Unaudited) ----------------- Interest $ - $ - $100 $ - ==== ==== ==== ==== 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, 1998, 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, 1998, the Company has issued 151,500 shares of common stock in lieu of compensation. Expense of $117,565 was recorded relating to these issuances. Inception to August 31, 1999, the Company has issued 211,500 (unaudited) shares of common stock in lieu of compensation. Expense of $177,565 (unaudited) was recorded relating to these issuances. 9. Subsequent Events ----------------- Bridge Financing ---------------- In January 1999, the Company issued 6,000 shares of its common stock for $6,000 as bridge financing toward its proposed Circular 504 offering. (Continued) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 9. Subsequent Events (Continued) ----------------- Circular 504 Offering --------------------- Effective February 22, 1999, the Company commenced a Circular 504 offering to sell on a "best efforts basis" up to 900,000 shares of the Company's common stock at $1.00 per share. Net proceeds to the Company are approximated at $810,000 and will be used as follows: Sales and marketing $ 400,000 Working capital 410,000 --------- $ 810,000 ========= As a part of this offering the Company will grant 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. Gross proceeds of $272,863 (unaudited) have been raised under this offering. Offering costs of $59,910 (unaudited) have been incurred with respect to this offering. 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. A signing bonus of 60,000 shares of the Company's common stock, post splits, was issued as a part of this agreement. The Company also granted an option to this employee to purchase 175,000 shares of its common stock at $.30 per share, with exercise rights beginning February 23, 2000 and ending August 30, 2007. (Continued) TABLE TRAC, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (JUNE 27, 1995) TO DECEMBER 31, 1998 AUGUST 31, 1999 (UNAUDITED) 9. Subsequent Events (Continued) ----------------- Patent Approval --------------- In March 1999, the Company received approval for its table game control system patent. Management feels strongly that the extent of the patent will enable the Company to adequately protect its technology. Copies of this patent may be obtained from the U.S. Department of Commerce, Patent and Trademark Office, 2900 Crystal Drive, Arlington, VA 22202, Application Serial Number 08/689, 351. Test Installation ----------------- In May 1999, the Company automated the table games and player tracking systems for a Wisconsin casino on a trial basis running through September 1, 1999. Final acceptance of these systems by this casino would significantly expand the Company's customer base and revenues. CONSENT OF INDEPENDENT AUDITORS To The Board of Directors and Stockholders of Table Trac, Inc. Minnetonka, Minnesota We hereby consent to use of the audited balance sheets of Table Trac, Inc. (a development stage company) as of December 31, 1998 and 1997, 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, 1998 in the Form 10 filing. /s/ Callahan, Johnston & Associates, LLC CALLAHAN, JOHNSTON & ASSOCIATES, LLC Minneapolis, Minnesota April 21, 1999 EX-3. 2 ARTICLES OF INCORPORATION AND BYLAWS EXHIBIT 3. SECRETARY OF STATE OF THE STATE OF NEVADA ARTICLES JUN 27 1995 OF INCORPORATION No. 10678-95 TABLE TRAC, INC. DEAN HELLER SECRETARY OF STATE A Nevada Corporation I, the undersigned, being the original incorporator herein named, for the purpose of forming a corporation under Chapter 78 of the Nevada Revised Status, do make and file these Articles of Incorporation hereby declaring and certifying that these facts herein stated are true: ARTICLE I. NAME The name of the corporation is TABLE TRAC, INC. ARTICLE II. PURPOSE The purpose of this corporation is to engage in any lawful activity. ARTICLE III. RESIDENT AGENT & REGISTERED OFFICE Section 3.01 Resident Agent. The name and address of the resident agent for service of process is the Law Offices of Albert D. Massi, Esquire, 3202 West Charleston Blvd., Las Vegas, Nevada 89102. Section 3.02 Registered Office. The address of its registered office is 3202 West Charleston Blvd., Las Vegas, Nevada 89102. Section 3.03 Other Offices. The corporation may also maintain offices for the transaction of any business at such other places within or without the State of Nevada as it may from time to time determine. Corporate business of every kind and nature may be conducted, and meeting of directors and stockholders held outside the State of Nevada with the same effect as if in the State of Nevada. ARTICLE IV. SHARES OF STOCK The amount of the total authorized capital stock of this corporation is 2500 shares with no par value. The initial number of stockholders shall be less than fifteen (15). The capital stock of the Corporation after the amount of subscription price has been paid, shall not be subject to pay the debts of the Corporation, and no capital issued as fully paid up shall never be assessable or assessed. ARTICLE V. DIRECTORS Section 5.01 GOVERNING BOARD. The members of the governing board of the Corporation shall be styled as Directors. Section 5.02 INITIAL BOARD OF DIRECTORS. The initial Board of Directors shall consist of two (2) members. The names and addresses of the initial Directors are as follows: Name Address Chad Hoehne 4200 Kemrich Circle Minnetonka, MN 55345 Joseph Nielson 2264 Boulder Ridge Lane Woodbury, MN 55125 These individuals shall serve as Directors until the First Annual Meeting of the stockholders or until their successors shall have been elected and qualified. Section 5.03 Change in Number of Directors. The number of specific or total Directors may be increased or decreased by a duly adopted amendment to the By-Laws of the Corporation. ARTICLE VI. INCORPORATOR AND SHAREHOLDERS The name and address of the incorporator is DENNIS J. MILLER, ESQUIRE, 5700 Corporate Drive, Suite 850, Pittsburgh, Pennsylvania 15237. The names and addresses of the shareholders are: Chad Hoehne 4200 Kemrich Circle Minnetonka, MN 55345 Joseph Neilson 2264 Older Ridge Lane Woodbury, MN 55125 ARTICLE VII. DIRECTORS` AND OFFICERS' LIABILITY A Director or Officer of the Corporation shall not be personally liable to this Corporation or its stockholders for damages for breach of fiduciary duty as a Director or Officer, but this Article shall not eliminate or limit the liability of a Director or Officer, for (1) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (2) the payment of distributions in violation of N.R.S. 78.300. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a Director or Officer of the Corporation for acts or omissions prior to such repeal or modification. ARTICLE VIII. INDEMNITY Every person who was or is a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil or criminal, administrative or investigative, by reason of the fact that he, or a person of whom he is the legal representative, is or was a Director or Officer of the Corporation, or is or was serving at the request of the Corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be held harmless to the fullest extent legally permissible under the laws of the State of Nevada from time to time against all expenses, liability and loss (including attorneys' fees, judgment, fines and amounts paid or to be paid in settlement) reasonable incurred or suffered by him in connection herewith. Such right to indemnification shall be a contract right, which may be enforced in any manner desired by such person. The expenses of Officers and Directors incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Director or Officer to repay the amount if it is ultimately determined by a Court of competent jurisdiction that he is not entitled to be indemnified by the Corporation. Such right of indemnification shall not be exclusive of any other right which such Directors, Officers or representatives may have or hereafter acquire, and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any By-Law, agreement, vote of stockholders, provision of law, or otherwise, as well as their rights under this Article. Without limiting the application of the foregoing, the Board of Directors may adopt ByLaws from time to time with respect to indemnification, to provide at all times the fullest indemnification permitted by the laws of the State of Nevada, and may cause the Corporation to purchase and maintain insurance on behalf of any person who is or was a Director or Officer of the Corporation as Director or Officer of another Corporation, or as its representative in a partnership, joint venture, trust or other enterprises against such person and incurred in any such capacity or arising out of such status, whether or not the Corporation would have the power to indemnify such person. The indemnification provided in this Article shall continue as to a person who has ceased to be a Director , Officer , employee or agent, and shall inure to the benefit of the heirs, executors and administrators of such person. ARTICLE IX AMENDMENTS This Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation or its By-Laws, in the manner now or hereafter prescribed by statute or by these Articles of Incorporation or said By-Laws, and all rights conferred upon by the stockholders are granted subject to this reservation. ARTICLE X. POWERS OF DIRECTORS In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: (a) Subject to the By-Laws, if any, adopted by the stockholders, to make, alter or repeal the By-Laws of the Corporation; (b) To authorize and cause to be executed mortgages and liens, with or without limit to amount, upon the real and personal property of the Corporation; (c) To authorize the guarantee by the Corporation of securities, evidences of indebtedness and obligations of other persons, corporations and businesses; (d) To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve; and (e) By resolution adopted by a majority of the whole Board, to designate one or more committees, each committee to consist of one or more of the Directors of the Corporation, which, to the extent provided in the resolution or in the By-Laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have name or names as may be stated in the By-Laws of the Corporation or as may be determined from time to time by resolution adopted by the Board of Directors. All corporate powers of the Corporation shall be exercised by the Board of Directors except as otherwise provided herein or by law. IN WITNESS WHEREOF, I have set my hand and seal this 2nd day of June, 1995, hereby declaring and certifying that the facts stated herein above are true. ------------------------------------- DENNIS J. MILLER, Incorporator ACKNOWLEDGEMENT COMMONWEALTH OF PENNSYLVANIA : : SS: COUNTY OF ALLEGHENY : On this 2ND. day of June, 1995, personally appeared before me, a Notary Public, DENNIS J. MILLER, who acknowledged to me that he executed the foregoing instrument. NOTARIAL SEAL COLLEEN R DOUGLAS, NOTARY PUBLIC ROSS TWP. ALLEGHENY COUNTY, MY commission expires APRIL 27 1996 (SEAL) Dean Heller STATE OF NEVADA TELEPHONE 702-697.5203 SECRETARY OF STATE OFFICE OF THE SECRETARY OF STATE Fax 762.687.3471 101 N. CARSON ST., STE.3 Web site http//sos.state.nv.us CARSON CITY. NEVADA 89701-4786 FILING Fee.
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION ----------------------------------------------------- FOR. PROFIT NEVADA CORPORATIONS ------------------------------- (PURSUANT TO NRS 78.385 AND 78.390 - AFTER ISSUANCE OF STOCK) - REMIT IN DUPLICATE - 1. Name of corporation: TABLE TRAC, INC. 2. The Articles have been amended as follows (provide article numbers, if available): IV. The amount of the total authorized capital stock of this corporation is 5,000,000 shares with no par value. The initial number of stockholders shall be less than fifteen (15). The capital stock of the Corporation after the amount of subscription price has been paid, shall not be subject to pay the debts of the Corporation, and no capital issued as fully paid up shall never be assessable or assessed. 3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation have voted in favor of the amendment is:--. adopted. 4 Signatures: President or Vice President Secretary or Asst. Secretary (acknowledgement required) (acknowledgement not required) State of: MN Country of: Hennepin This instrument was acknowledged before me on May 7th, 1999, by Chad Hoehne (name of person) as President as designated to sign this certificate of TABLE TRAC, INC Notary Signature CATHERINE C. MCLAUGHLIN, notary public Minnesota, CARVER COUNTY, My Comm. Expires Jan 31, 2000 *If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof. IMPORTANT: Failure to include any of the above information and remit the proper fees may cause this filing to be rejected. BY-LAWS OF TABLE TRAC, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Regular Meetings. Regular meetings of shareholders may be called by the Chief Executive Officer, the Secretary, the Board of Directors, or by shareholder demanded in accordance with Nevada Statutes No meeting shall be designated a regular meeting unless specifically described as such in the notice of meeting or unless all the shareholders are present in person or by proxy, and none of them objects to this designation. 1.2 Special Meetings. Special meetings of the shareholders may be called for any purpose or purposes at any time by the Chief Executive Officer, Chief Financial Officer, two or more directors, or by shareholder demand in accordance with Nevada Statutes. 1.3 Time and Place of Shareholder Meeting. Except as otherwise provided by statute, any meeting of shareholders shall be held on the date and at the time and place fixed by the Chief Executive Officer or the Board of Directors of the corporation. 1.4 Notice of Shareholder Meeting. Except as otherwise provided by statute, written notice of the date, time, and place of any meeting of shareholders shall be given to every holder of voting shares at such address as appears on the stock book of the corporation at least five days prior to the meeting if by mail, or two days prior to the meeting if by telex, telegram, or in person. 1.5 Voting. Except where a greater percentage is required by statute, the shareholders shall take action by the affirmative vote of the holders of a majority of the votes of the shares present. 1 ARTICLE II DIRECTORS 2.1 Number, Term of Office. The number of directors of the corporation shall be as determined from time to time by the shareholders. Directors need not be shareholders. Each director shall hold office for an indefinite term, not to exceed five years, that expires at the regular meeting of shareholders next held after the director's election and until a successor is elected and has qualified, or until the earlier death, resignation, removal, or disqualification of the director. 2.2 Removal. The Board of Directors or the shareholders may remove any director of the corporation at any time, for cause or without cause. New directors may be elected at a meeting at which directors are removed. 2.3 Board Meetings, Notice. The Chief Executive Officer (if a director), the Chairman of the Board of Directors (if one is elected) or Directors comprising at least one third of the number of directors then in office may call a Board meeting by giving five days notice if by mail, or two days notice if by telephone, telex, telegram, or in person, to all directors of the day or date and time of the meeting. Meetings of the Board of Directors may be held at the day or date, time, and place, as shall be determined by the Board. If the day or date, time, and place have been announced at a previous meeting of the Board, or if a meeting schedule is adopted by the Board, no notice is required. In absence of a designation by the Board of Directors, Board meetings shall be held at the principal executive offices of the corporation. 2.4 (a) Advance Written Consent or Opposition. Any member of the Board or a committee thereof, as the case may be, may give advance written consent or opposition to a proposal to be acted on at a Board or committee meeting. If a director or committee member is not present at the meeting, advance written consent or opposition to a proposal does not constitute presence for the purpose of determining whether a quorum exists, but such advance written consent or opposition shall be a vote in favor of or against the proposal or resolution acted upon at the meeting is substantially the same or has substantially the same effect as the proposal or resolution to which the member of the Board or committee has consented or objected. (b) Action Without Meeting. Any action, other than an action requiring shareholder approval, may be taken by written action signed by the number of directors that would be required to take the same action at a meeting of the Board at which all directors were present. An action 2 requiring shareholder approval required or permitted to be taken at a board meeting may be taken by written action signed by all the directors. Any such written action is effective when signed by the required number of directors, unless a different effective time is provided in the written action. When written action is taken by less than all directors, all directors shall be notified immediately of its text and effective date. Failure to provide the notice does not invalidate the written action. A director who does not sign or consent to the written action has no liability for the action or actions taken. ARTICLE III OFFICERS 3.1 Election; Term of Office; Removal. The Board of Directors shall elect a Chief Executive Officer and Chief Financial Officer, and may elect such other officers as it may deem necessary for the operation and management of the corporation, each of whom shall have the duties and responsibilities incident to the offices which they hold or as determined by the Board. Officers need not be directors or shareholders. Without limiting the foregoing, the Board may elect a Chairman of the Board, President, one or more Vice Presidents, a Treasurer, a Secretary and such assistant officers as it may designate with titles to describe their duties, functions or special responsibilities. Officers shall hold office at the will of the Board for an indefinite term until their successors are elected and qualified. Any officer elected or appointed by the Board of Directors may be removed by the Board at any time with or without cause. ARTICLE IV AMENDMENTS 4.1 Subject to the power of shareholders to adopt, amend, or repeal these Bylaws as provided in Nevada Statutes any Bylaw may be amended or repealed by the Board of Directors at any meeting, provided that, after adoption of the initial Bylaws, the Board shall not adopt, amend, or repeal a Bylaw fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the Board, or fixing the number of directors or their classifications, qualifications, or terms of office. The Board may adopt or amend a Bylaw to increase the number of directors. 3 ARTICLE V INDEMNIFICATION 5.1 The corporation shall indemnify persons for such expenses and liabilities in such manner, under such circumstances, and to the extent required by Nevada Statutes. 4 -----END PRIVACY-ENHANCED MESSAGE-----