Pink Sheets

TBTC, chart, website, sec, make information systems for casinos that sit right on the casino tables. They rely on a patent #5,957,776 which was filed in 1996 (and so would normally expire in 2016) and approved in 2000. Table Trac is the assignee. They just started installing live systems in Q4 2003 and revenues have been ramping up very fast. However, cash flow has been terrible as the casinos have been apparently buying on extremely bad credit terms for TBTC.

2004 10-K incorporated in Nevada. Formed in 1995. Offices in Minnetonka, MN. 3,831,534 shares of stock.

This device sits on the table. It automatically detects the chip inventory in the chip tray and sends a signal if the tray gets too empty or full. It has a "demonination input device for recording cash amounts deposited into a lock box coupled to a gaming table". A remote computer monitors multiple tables. A player's seat position is recorded. The dealer can send a signal to security if a particular player is suspicious for any reason.

This seems like a fairly broad patent and perhaps it could be challenged, I don't know. But generally, the faster this company ramps up revenue, the better the future would be. But most important for defending the business's moat is this:

The Company has also developed related systems for casino management, including promotions administration and delivery systems, self service customer kiosks, marketing analysis, and vault operations module for chip banks, all of which are in use at its customer's facilities.

The systems run on Linux servers with graphical user interfaces (like KDE or GNOME). It has a SQL database server, which makes sense.

The company has 9 years of experience in the industry. As of the 10-K, there were 8 casinos in Minnesota and Wisconsin that had these installed and with contracts.

Table Trac is available for an installation and monthly license fee from the Company for casinos with a minimum number of tables. System sales includes installation, custom system configuration, and training. License and technical support are provided under annual service contract. Custom screens and reports will be designed, if requested by the casino, at additional cost.

The company does its own manufacturing, but could outsource (they should do so eventually). Only 3 full-time employees on Dec 31, 2004. Some possible competition, but nothing equivalent. Three original company customers from back to 1996 upgraded to the new product.

The Company is aware of two companies pursuing a technology which automates player ratings completely. If successfully completed, the company does not expect these systems to compete with Table Trac's solution in the markets it pursues due to a prohibitive product cost that is projected.

This was also in the 2003 10-K.

Chad B. Hoehne, 42, Chairman, CEO, President, Founder. BS in business admin from Mankato State U. Worked for Micro Control Company 1985-1993. Owns 32% of the business, small amount in stock options. Salary of $149K in 2004 (was only $77K before that).

Robert R. Siqveland, 60, Dir of Marketing, Corporate Secretary. Investment advisor and VC for 25 years. Worked for Table Trac for 6 years. 225K shares of options.

Vic Taucer, 50, Director, Consults for over 200 gaming casinos, mostly regarding table games. 26 years experience in the industry. Director of Casino Training for the new Paris resort in Vegas. Casino Training Director and Pit Manager at Ceasers Palace, etc. Professor of Casino Mgmt for a community college in Nevada.

Total outstanding options: 492K (at 13 cents)
Total remaining to be issued: 507K

No related party transactions.

Auditors are Carver Moquist & O'Connor, LLC. Billed $15K for audit services. No other fees. No audit committee (and no audit expert). Going concern qualification by auditors back in 2004 and 2003. The 2005 opinion doesn't have it.

Started out 2003 with 3.6 million shares.
Converted pfd stock into 62.5K shares
Private placement of 150K shares
Nothing else (except the 493K options)

Total assets: $68K
cash: $20K
AR: $26K
patent (net): $16K

Total liabilities: $17K
Equity: $51K

Sales: $595K
gross margins: 85%
SG&A: $400K (up from $266K)
net income: $104K (prior year was $97K loss)

assets and liabilities: ($21K)
deferred revenue: ($89K)
cash flow from ops: $3.2K

Nothing else!

System sales revenue is recognized on installation and title, loss-risk exchange, etc. No amortization. Some support and training is still due from the company.
License and maintenance revenue is recognized ratably over the contract period.
Service revenue is recognized after performed.
R&D is charged when incurred.

Furniture and equipment depreciation is 2-5 years. Hehe, get this, all furniture and fixtures were depreciated at the end of 2001. It's probably fairly old by now. Patent is amortized over 17 years.

A lot of NOLs flowed to shareholders when the company was a subchapter S corp until 1999.

As we see from AR (especially later on), the company grants generous credit to customers. All revenues in 2003 and 2004 were from 8 customers. 2 customers accounted for 78% of revenues and 71% of AR.

Famous last words:

Management believes that receivables are fully collectible. While the ultimate loss may differ, management believes that any additional 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 outcome will change during the next year.

Operating lease liability for 2005: $13.2K (is this like someone's apartment?)

Massive NOL asset of $323K

(end of 10-K)