Note 1 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2025

Notes to Financial Statements

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company

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

The Company provides system sales and technical support to casinos. System sales include installation, custom casino system configuration and training. In addition, license and technical support are provided under an annual license and service contract.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s use of estimates and assumptions include: for revenue recognition, determining collectability, the nature and timing of satisfaction of performance obligations, and determining the standalone selling price (SSP) of performance obligations, realizability of accounts receivable, and the valuation of allowance for credit losses, the valuation of deferred tax assets and liabilities and inventory valuation. Actual results could differ from those estimates and the difference could be significant.

Concentrations of Risk

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

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

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

Major Customers

The following table summarizes major customers' information for the years ended December 31, 2025 and 2024:

	For the Years ended December 31,
	2025						2024
	% Revenues			% AR			% Revenues			% AR
Major		19.2	%		34.7	%		33.9	%		47.5	%
All Others		80.8	%		65.3	%		66.1	%		52.5	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

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

Revenue Recognition

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

System Sales

Revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services, typically upon installation. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected, when applicable from customers, which are subsequently remitted to governmental authorities.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is a unit of account in ASC 606. A majority of the Company’s systems sales have multiple performance obligations including an obligation to deliver a casino management system and another to provide maintenance services. For system sales with multiple performance obligations, the Company allocates revenue to each performance obligation based on its SSP. See discussion within the significant judgement paragraph regarding our determination of SSP.  At contract inception, management assesses whether it is probable that the company will collect substantially all of the consideration to determine whether the contract meets the criterion for collectability.  The revenue allocated to the casino management system is recognized upon installation.  The Company occasionally enters into contracts that include multiple sites; management has determined that each site installation is a separate performance obligation. In these instances, the Company recognizes revenue upon completion of each performance obligation. In addition, the Company has a contract with a reseller who purchases and resells the Company’s products; monthly the reseller notifies the Company of their successful installations and submits an invoice to the Company for those installations.  The Company also analyzes its standard business practice of using long-term contracts and the history of collecting on extended payment term contracts which include a significant financing component which is usually a market interest rate. The associated interest income is reflected accordingly in the statement of operations. 

Management’s assessment of collectability at both contract inception and on an ongoing basis resulted in the determination that some of our contracts did not meet the criterion for collectability.  The balance of these contracts is not included as part of accounts receivable on the balance sheet.  Accordingly, for these contracts whereby the collectability criterion has not been met, revenue will be recognized as payments are received.

Maintenance Revenue

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

Lease Revenue

The Company derives a portion of its revenue from a sales type leasing arrangement in accordance with ASC 842. The Company leases hardware to a customer and receives monthly payments.  Revenue is recognized ratably over the contract period.

Service Revenue and Other Revenue

Other revenue includes DataTrac, KioskTrac and Kiosks, SlotSUITE and other promotional programs and sales of equipment. Service revenue is recognized upon completion of the services and are billed in arrears. Revenue is recognized for DataTrac, SlotSUITE and other promotional programs ratably over the contract period. Revenue is recognized for kiosks and sales of equipment upon shipment.  The SSP for service revenue is established based upon actual selling prices for the services or prior similar arrangements.  During 2024, the Company recognized variable consideration of $275,000 which resulted in a reduction of revenue related to the Company paying a one time cash consideration to a customer as a result of certain promotional software not performing in accordance with agreed upon specifications.

The Company offers qualified customers a licensing agreement. Licensing revenue is recognized after the intellectual property (CMS system), the performance obligation, is delivered and in its operational and functional state. The SSP selling price for licensing revenue is established based upon actual selling prices for the license. 

The following table summarizes disaggregated revenues by major product line for the years ended December 31, 2025 and 2024, respectively:

	Twelve months ended December 31,
	2025		2024		2025			2024
					(percent of revenues)
System revenue	$	2,923,354	$	4,090,263		26.5	%		36.6	%
Maintenance revenue		6,152,538		5,378,620		55.7	%		48.2	%
Lease revenue		53,680		0		0.5	%		0.0	%
Service and other revenue		1,918,665		1,695,143		17.4	%		15.2	%
Total revenues	$	11,048,237	$	11,164,026		100.0	%		100.0	%

System, sales-type lease, and certain other revenue is recorded at a point in time. Maintenance and service revenue is recorded over time.

Significant Judgments

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

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

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

We recognize a contract asset when our performance under a contract precedes our receipt of consideration from a customer, or before payment is due, and our receipt of consideration is conditional upon factors other than the passage of time. A contract asset is recognized when we have an unconditional right to payment for our performance. Our contract asset consist of our in-process installations, for which we have an enforceable right to collect consideration (including a reasonable profit) in the event the services are cancelled by customers.  As of  December 31, 2025 and 2024, we recorded a contract asset of approximately $295,400 and $68,400 respectively as a component of accounts receivable.

Customer deposits are received upon the execution of a contract.  Upon successful installation or delivery of a contract, the deposit is recognized as revenue.  For the year ending December 31, 2025, customer deposits decreased $756,851 mainly because of the decrease in contracts in backlog at the end of 2025.

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

The collectability assessment requires the company to use judgement and consider all relevant facts and circumstances. Management exercises judgment in its assessment of collectability of customer funds by considering payment history, current credit status, and available information about the financial condition of the customer, among other factors.  As of  December 31, 2025 and 2024, approximately $887,492 and $1,229,290 for systems installed under contract have not been recorded as revenue or included in accounts receivable based on the collectability assessment performed by the Company.  In accordance with this assessment, the contracts will be assessed in subsequent periods at which time they  may be deemed collectable and the outstanding remaining system revenue will be recognized accordingly.

The collectability assessment requires the company to use judgement and consider all relevant facts and circumstances. 

We evaluate the interest rates in customer contracts with extended payment terms, representing a significant financing component. These rates range from approximately 2% to 7% and we believe those to be appropriate market interest rates for the financing component.

Geographic Concentrations

The Company sells its technologies and services to casinos in the United States, Australia, Japan, the Caribbean and countries in both Central and South America. For 2025 and 2024, 93.7% and 93.6% of the Company’s revenues were from the United States, all other geographical locations were less than 10%.

As of December 31, 2025 and 2024, 94.1% and 93.1% of the Company’s accounts receivable were from the United States, all other geographical locations were less than 10%.

Fair Value of Financial Instruments

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

Cash and Cash Equivalents

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

Short-term Investments

The Company does not currently have any certificates of deposit ("CD") being held at a bank.  Certificates of deposit held for investment with an original maturity greater than three months are carried at cost plus accrued interest and reported as short-term investments on the balance sheet.  Interest is paid at maturity.  At times, certain certificates  may exceed amounts insured by the FDIC. The Company determines the appropriate classification as short-term or long-term at the time of purchase based on original maturities and management's reasonable redemption expectation. The Company reevaluates such classification at each balance sheet date.  The total short-term investments were $0 and $4,627,744 as of December 31, 2025 and 2024, respectively.

Accounts Receivable / Allowance for Credit Losses

Accounts receivable are initially recorded at the invoiced amount and carried on the balance sheet at net realizable value as of each balance sheet date.  For receivables related to contracts that contain an interest rate, interest income is recorded upon receipt on the statements of operations.  We maintain an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as general and administrative expense in the Statements of Operations. We assess collectibility by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectibility issues. In determining the amount of the allowance for credit losses, we consider historical collectibility based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information and current market conditions.  The Company has adopted the practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets.  Management believes that receivables, net of the allowance for credit losses, are fully collectable. Accounts receivable are written off when management determines collection is no longer likely. While the ultimate result  may differ, management believes that any write-off 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 is used to value inventory. Inventory is reviewed quarterly for the lower of cost or net realizable value and obsolescence. Any material cost found to be above net realizable value or considered obsolete is written down accordingly. The Company had $8,597 and $7,697 of obsolescence reserve at December 31, 2025 and 2024, respectively. The total inventory value was $1,615,469 and $1,935,679 as of December 31, 2025 and 2024, respectively, which included work-in-process of $97,942 and $147,724 as of December 31, 2025 and 2024, respectively, and the remaining amount is comprised of finished goods. At  December 31, 2025 and 2024, the Company had $53,192 and $50,068 of prepaid inventory as a component of prepaid expenses, respectively.

Net Investment in Sales Type Lease

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

Property and Equipment

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

Long-lived Assets

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

Leases

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

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

Rent expense, including the effects of lease incentives, is recognized on a straight-line basis over the term of the lease.

Income Taxes

The Company accounts for income taxes by following the asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, operating loss, and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. 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. The impact of the tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted. Management believes that any write-off not allowed will not have a material impact on the Company’s financial position.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Based on its evaluation, the Company believes that it has no significant unrecognized tax positions. The Company’s evaluation was performed for the tax years ended December 31, 2022 through 2025, which are the tax years that remain subject to examination by major tax jurisdictions as of December 31, 2025. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to its financial results. In accordance with current guidance, the Company classifies interest and penalties as income tax expense as incurred.

Research and Development

Expenditures for research and product development costs, before technological feasibility is reached are expensed as incurred. Research and development expenses were $771,060 and $243,357 for the years ended December 31, 2025 and 2024, respectively, and are included in selling, general and administrative expenses on the statements of operations.

Software Development Costs

We expense software development costs, including cost to develop software products to be sold, licensed or marketed to external users, before technological feasibility is reached.  Technological feasibility is typically reached shortly before the release of such products.  These costs are capitalized and amortized equally over the next five years.

Stock-based Compensation

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

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

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

Basic and Diluted Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares from the assumed exercise of stock options and restricted stock shares subject to vesting. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from the exercise were used to acquire shares of common stock at the average market price during the reporting period. (See Note 10).

Recently Adopted Accounting Pronouncements

On January 1, 2025, the Company adopted on a retrospective basis Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures. This standard enhances the transparency and decision usefulness of income tax disclosures by requiring additional disaggregated information about a reporting entity’s effective tax rate reconciliation and income taxes paid. The amendments primarily impact disclosure requirements and do not change the underlying recognition or measurement of income taxes.  Upon adoption, the Company applied the guidance retrospectively. The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated financial statements, results of operations, or cash flows, as the standard only modifies disclosure requirements. The Company has updated its income tax disclosures to comply with the new guidance.

On January 1, 2025, the Company adopted ASU No. 2025-05, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses for Accounts Receivable and Contract Assets. This standard aims to reduce the cost and complexity of estimating credit losses while maintaining decision-useful information for financial statement users. The guidance allows all entities to elect a practical expedient related to developing forecasts as part of estimating expected credit losses that assumes the current conditions as of the balance sheet date do not change for the remaining life of the asset. Upon adoption, the Company applied the guidance prospectively. The adoption of ASU 2025-05 did not have a material impact on the Company’s financial statements, results of operations, or cash flows.

On January 1, 2024, the Company retrospectively adopted ASU 2023-07, Segment Reporting, which amended ASC 280 and requires public companies to disclose segment data based on how management makes decisions about allocating resources to segments and evaluating performance

The Company conducts its business activities and reports financial results as a single reportable segment, casino products segment. Using the management approach, qualitative and quantitative criteria established by ASC 280, the Company has determined it has a single reportable segment. The Chief Operating Decision Maker (“CODM”) makes decisions about allocating resources and assessing performance in a manner consistent with the way the Company operates its business and presents their financial results, using net income that is also reported on the income statement as net income. There are no reconciling items to the income statement. The measurement of segment assets is reported on the balance sheet as total assets. The CODM uses pre-tax net income to evaluate income generated from segment assets (return on assets) and assesses significant expenses such as hardware, labor and installation costs in deciding whether to reinvest profits into the  casino products segment. The Company’s CODM is the CEO. All of the Company’s customers are based in the United States. The nature of business and accounting policies of the casino products segment are the same as described in the organization and nature of business and summary of significant accounting policies.