UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




Form
10-K




ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF
1934




For the
fiscal year ended December 31, 2009




Commission
File No. 0-28383




TABLE TRAC,
INC.


(Exact
name of registrant as specified in its charter)






Nevada
            
            88-0336568(State or other
      jurisdiction of Incorporation or Organization)
            
            (IRS Employer
      Identification No.)15612 Highway 7, Suite 331
      Minnetonka, Minnesota
            
            55345(Address of
      principal executive office)
            
            (Zip
      Code)




Registrant’s
telephone number, including area code: (952) 548-8877




Securities
registered pursuant to Section 12(b) of the Act:


None




Securities
registered pursuant to Section 12(g) of the Act:




Common
Stock, par value $0.001


(Title of
Class)




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes o No x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No x




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “accelerated filer,” “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check one):






Large accelerated
      filer o
            Accelerated filer
      o
            Non-accelerated
      filer o
            Smaller reporting
      company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule12b-2
of the Act). o
Yes x
No




The
aggregate market value of the Registrant’s common stock held by non-affiliates
as of March 24, 2010 was $3,325,000, based on the most recent sales price of the
common stock of the Company ($1.25 per share). As of March 24, 2010, about
2,660,000 shares of outstanding common stock were held by persons other than
officers, directors and more than 5% stockholders. As of March 24, 2010, the
Company had outstanding 4,162,234 shares of common stock, $0.001 par
value.









PART
I




Item
1. Business.




General




Table
Trac, Inc. (the “Company” or “Table Trac”) is a Nevada Corporation, formed on
June 27, 1995, with principal offices in Minnetonka, Minnesota.




The
Company has developed and patented (U.S. patent # 5,957,776) a proprietary
information and management system (Table Trac) that automates and monitors the
operations of casino table games. In addition to table games management, Table
Trac has been adding functionality to related casino system modules for guest
rewards and loyalty club, marketing analysis, guest service, promotions
administration / management, vault/cage management and audit / accounting.
Aggregated together, all of these modules have become the “Casino Trac” product,
a full featured Casino Management System (CMS) offering a powerful combination
of value, efficiency and reliability for casinos looking to add or upgrade their
casino systems.




With its
newly developed web services based technology, Table Trac is now offering to its
customers, systems of uncompromising efficiency, reliability and value. Table
Trac is positioned to continue gaining customers while competing for a broad
cross section of casinos that are seeking to reduce the cost of their systems
and improve the reliability and accountability of their operations.




2




With a
focus on the Company’s expanding marketing efforts and trade show presence, we
are working to expand our name recognition within the gaming segment in order to
capitalize on a rising demand for our affordable solutions.




TABLE TRAC
INSTALLATIONS




Table
Trac currently has systems installed with on-going support and maintenance
contracts at 22 casinos in Minnesota, Wisconsin, Florida, Oklahoma, Central
America, and South America.




AVAILABILITY
OF TABLE TRAC




Table
Trac systems are available for purchase from the Company to any legal gambling
casino in the U.S. and most legal casinos operating outside the U.S. Systems are
purchased, installed and sold with a monthly license and maintenance contract
whereby Table Trac performs required maintenance on its systems to assure
trouble-free operations.




MANUFACTURING
CAPABILITIES




The
Company designs and manufactures its own Table Trac table units and gaming
machine interface boards, using the services of third party electronics assembly
houses. The Company is aware of local electronic manufacturers offering
equivalent manufacturing capability, whose services the Company could readily
hire as needed.




TRADEMARKS AND
PATENTS




The
Company filed for its provisional patent application in August 1995, and filed
for its Final Application in August 1996. This application was approved and
issued on September 28, 2000, as patent number 5,957,776.




The
Company filed to register its trademark (“TABLE TRAC”) in September 1996. The
trademark was issued on September 7, 2000, as trademark number 2,275,137. A
re-application for this mark has been filed.




ENVIRONMENTAL
COMPLIANCE




The
Company believes that it is in compliance with all current federal and state
environmental laws.




EMPLOYEES




As of
December 31, 2009, the Company had 10 full-time employees and engaged the
full-time services of 2.5 contract specialists. As of December 31, 2008, the
Company had 12 full-time employees and engaged the full-time services of 2
contract specialists.




3




COMPETITION




In many
ways, the woes of the economy caught up to the gaming industry in 2009, and it
did affect all of the systems companies, including Table Trac. The primary
market for Table Trac – small to mid-size casinos – were not immune from the
downturn in the economy as fewer patrons visited casinos all across the country.
More so, many operational and marketing budgets in the gaming industry at the
operations level – of which Table Trac relies on for its system sales – were
constrained in these past 12 months. In one of our jurisdictions, Alabama, all
charity bingo operations in that state were closed down by the Governor, and
with it, our assets in the Bada Bingo Casino. That said, on a comparative basis,
Table Trac survived in much better shape than many of our competitors. One of
our biggest competitors lost their financing arm, and as a result, have been
pushed to “cash only” sales. Table Trac has done an excellent job of managing
its budget and cash, and many new opportunities have surfaced that are in need
of financing, and we are in the enviable position of being able to provide it.
Our systems sales prospects will be discussed in the Recent Developments
section, but what we are now seeing is that which is beginning to provide
separation between Table Trac and its competitors: the internal development of
our technology and our ancillary products which is giving us both a state of the
art reputation as well as an additional revenue source. Table Trac has developed
exciting promotional kiosk products, an upgraded version of its software, new
tiering products for our customers, innovative marketing programs, TT TV
programs, and other creations that are keeping us ahead of the
curve.




BUSINESS
SEGMENTS




The
Company operates as one reporting segment.




RECENT
DEVELOPMENTS




Table
Trac’s new developments in the areas of software development, technology
development, new products, and new marketing promotions and products for
customers have been mentioned in the Competition section. In the last quarter of
2009, Table Trac made many significant advances in its corporate structure. We
began implementation of Sarbanes/Oxley, new policies and procedures manuals, new
company employee handbook, and have added two additional independent Board
members with new committees and responsibilities, to name a few. Most recently,
we created a new set of marketing and sales materials highlighting our product
offerings and the Company.  These materials have also been prepared in
Spanish to capitalize on our growing presence and potential opportunities in the
Caribbean and Latin America gaming markets. In August 2009, we presented and
showcased our products and offerings at the Oklahoma Indian Gaming Association
Trade Show. The G2E show was also very successful in regard to establishing new
and valuable contacts in new jurisdictions. Last month, we were represented at
the Caribbean Gaming show, and we are going to have an impressive booth
presentation at the NIGA show in San Diego next month. Last month we announced a
letter of intent for a systems sale in Deadwood, S.D. Our paperwork is awaiting
approval from the South Dakota Gaming Commission. We are very optimistic about
the receptivity to Table Trac from several Tribal casinos in Montana. In Ohio,
we met with state officials to demonstrate and discuss the robustness of our
casino management system as a central monitoring system alternative for that
jurisdictions’ burgeoning racino market. We are in final negotiations with
another customer in Oklahoma, and have recently met with yet another potential
customer there. We do have presentations set with prospects in California, and
have people in place to sell our products in the state of Washington. Perhaps
our biggest potential opportunity is in Alabama, where political unrest has held
off gaming development, but when it does clear up, and we’re told it will, we
have great opportunities with key personnel and contacts. We are even seeing
some interest in Mexico. Where 2009 was a slowdown for Table Trac’s expansion,
we are very excited and optimistic about 2010. A 3 for 1 stock split was
approved at the Shareholder meeting in December 2009, and we have been waiting
for the right time, with the right news to put it into effect. We have been
interviewing Investor Relations firms to provide the strength and support we are
seeking in a post split stock market.




4




Item
2. Properties.




We lease
office space in Minnetonka, Minnesota, pursuant to a lease that expires in May
2011. We believe our facilities will be sufficient to meet our current
requirements and that additional space at or near the current location will be
available at a reasonable cost if additional space is required in the
future.




Item
3. Legal Proceedings.




None.




Item
4. Submission of Matters to a Vote of Security Holders.




2009
ANNUAL MEETING OF STOCKHOLDERS was held on December 15, 2009 at the Comfort
Inn-Plymouth, 3000 Harbor Lane North, at 4:00 p.m. local time on Tuesday,
December 15, 2009, with respect to the following:




1.
Ratified the appointment of Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
(f/k/a Carver Moquist & O’Connor, LLC) as our independent registered public
accounting firm for fiscal 2009;




2.
Elected five directors to our Board of Directors; (01) Chad Hoehne (02) Robert
Siqveland (03) Thomas Oliveri (04) Glenn Goulet (05) Scott E. Smith




3. Voted
to approve the amendment to the Articles of Incorporation to increase the number
of shares of capital stock authorized for issuance to a total of
25,000,000;




4. Voted
to approve the amendment to the Articles of Incorporation to vest the Board of
Directors with the power and authority to designate separate classes of capital
stock; and




5. No
other matters came before the meeting.




5




PART
II




Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.




Market Information: The
Company’s common stock trades on the OTCBB.




2009Price
      per Share Calendar Year
            
            High
            
            
            LowAnnual
      Price per Share
            
            $
            2.45
            
            
            $
            1.01First
      Quarter, January -March
            
            $
            2.45
            
            
            $
            1.15Second
      Quarter, April - June
            
            $
            2.15
            
            
            $
            1.21Third
      Quarter, July - September
            
            $
            2.14
            
            
            $
            1.45Fourth
      Quarter, October - December
            
            $
            2.10
            
            
            $
            1.01









2008Price
      per Share Calendar Year
            
            High
            
            
            LowAnnual
      Price per Share
            
            $
            4.35
            
            
            $
            1.40First
      Quarter, January -March
            
            $
            4.35
            
            
            $
            3.70Second
      Quarter, April - June
            
            $
            4.10
            
            
            $
            2.95Third
      Quarter, July - September
            
            $
            3.90
            
            
            $
            2.95Fourth
      Quarter, October - December
            
            $
            3.25
            
            
            $
            1.40




Holders: There are
approximately 200 shareholders in the Company.




Dividends:




The
Company declared a $0.05 per share dividend to be paid to shareholders of record
as of April 1, 2008. Payment was made on April 9, 2008.




No
dividends were declared or paid in 2009.




Equity
Compensation:




In
January 2009, the Company repurchased 625 shares of its stock for a total
purchase cost of $942. As of March 31, 2009, the Company held 32,825 shares of
its common stock in treasury valued at a total cost of $46,689. On April 14,
2009, the Company issued 31,825 shares of its repurchased stock to its employees
through its employee bonus program. The issuance of the 31,825 shares of
treasury stock was valued at the trading value of the Company’s common stock at
the date of issuance of $1.60 per share or $50,920. The total cost of $51,632,
which includes transaction costs of $712, was recognized as stock compensation
expense in the Company’s statement of income. The difference between the initial
cost of purchase of the treasury stock and the trading value of the reissued
treasury stock of $6,365 was recorded as a credit to additional paid-in-capital
stock in the Company’s balance sheet. As of December 31, 2009, the Company holds
1,000 common stock shares in treasury at a total cost of $1,422 for future
employee issuances under the bonus program.




6




On May
22, 2008, the Company issued 6,000 shares of restricted common stock valued at
$15,750 to a consultant for professional services rendered during the six months
ended June 30, 2008.




Securities
Authorized Under Equity Compensation Plans




The
following table lists the securities authorized for issuance under any equity
compensation plans approved by our shareholders and any equity compensation
plans not approved by our shareholders.




Equity
Compensation Plan Information




Plan
      category
            
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights (a)
            
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
    (b)
            
            
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column a)
      (c)Equity
      compensation plans approved by security holders
            
            
            337,500
            
            
            $
            0.13
            
            
            
            370,000Equity
      compensation plans not approved by security holders
            
            
            - 0
      -
            
            
            
            - 0
      -
            
            
            
            - 0
      -




7


Equity
Repurchases




In
January 2009, the Company repurchased 625 shares of its stock for a total
purchase cost of $942.




In the
fourth quarter of 2008, the Company re-purchased 32,200 shares of its stock for
a total cost of $45,747.




Pursuant
to Rule 10B - 18, ISSUER PURCHASES OF EQUITY SECURITIES




Period
            
            (a)
      Total Number of Shares(or Units) Purchased
            
            
            (b)Average
      Price Paid per Share (or Unit)
            
            
            (c)
      Total Number of Shares (or Units) Purchased as Part of Publicly Announced
      Plans or Programs
            
            
            (d)
      Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May
      Yet Be Purchased Under the Plans or ProgramsOctober
      2008
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            N/ANovember
      2008
            
            
            31,100
            
            
            $
            1.40
            
            
            
            0
            
            
            
            N/ADecember
      2008
            
            
            1,100
            
            
            $
            1.40
            
            
            
            0
            
            
            
            N/ATotal
            
            
            32,200
            
            
            $
            1.40
            
            
            
            0January
      2009
            
            
            625
            
            
            $
            1.40
            
            
            
            0
            
            
            
            N/ATotal
            
            
            32,825
            
            
            $
            1.40
            
            
            
            0
            
            
            
            N/A




Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operation.




The
following discussion should be read in conjunction with our audited financial
statements and related notes that appear elsewhere in this filing.




Cautionary
Note Regarding Forward-Looking Statements




Some of
the statements made in this section of our report are forward-looking
statements. These forward-looking statements generally relate to and are based
upon our current plans, expectations, assumptions and projections about future
events. Our management currently believes that the various plans, expectations,
and assumptions reflected in or suggested by these forward-looking statements
are reasonable. Nevertheless, all forward-looking statements involve risks and
uncertainties and our actual future results may be materially different from the
plans, objectives or expectations, or our assumptions and projections underlying
our present plans, objectives and expectations, which are expressed in this
section.




8




In light
of the foregoing, prospective investors are cautioned that the forward-looking
statements included in this filing may ultimately prove to be inaccurate-even
materially inaccurate. Because of the significant uncertainties inherent in such
forward-looking statements, the inclusion of such information should not be
regarded as a representation or warranty by Table Trac, Inc. or any other person
that our objectives, plans, expectations or projections that are contained in
this filing will be achieved in any specified time frame, if ever. We undertake
no obligation to publicly release any revisions to the forward-looking
statements or reflect events or circumstances after the date of this
document.




1.
LIQUIDITY




Management
is not aware of any trends or any known demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in the
registrant’s liquidity increasing or decreasing in any material way. Management
believes that the Company has adequate cash to meet its obligations and continue
operations for both existing customer contracts and ongoing product development
for the next twelve months.




The
Company’s cash position at December 31, 2009 was $1,320,946, an increase of
$107,993 from $1,212,953 at December 31, 2008.




Net cash
flows provided by operating activities during the year ended December 31, 2009
was $376,878 compared with net cash flows provided by operating activities of
$891,422 for the same period in 2008. This decrease of $514,544 was caused
primarily by fewer completed installations. See item 3 for additional
detail.




Net cash
flows used in investing activities was $267,943 during the year ended December
31, 2009, compared to $35,065 for the same period in 2008. This increase was
primarily due to a $250,000 loan that was made to one of our customers to help
them get their new casino operation started.




Net cash
used in financing activities was $942 during the year ended December 31, 2009,
compared to net cash flows used in financing activities of $253,559 for the same
period in 2008. The change was due to the payment of a shareholder dividend on
April 9, 2008 at $0.05 per share totaling $207,812 and the Company purchased
treasury stock of $45,747 in 2008 compared to only $942 in 2009. No dividend was
paid in 2009.




On
December 31, 2009, total stockholder’s equity was $2,421,048. This compared to a
stockholder’s equity of $2,354,792 in 2008, which is an increase of $66,256 or
3%.




2.
CAPITAL RESOURCES.




The
Company is not capital intensive. The basic product of the Company is computer
software developed by its employees. Most manufacturing is done after the
Company receives an order, so there is little product inventory held by the
Company.




9




3. RESULTS OF OPERATIONS, YEAR ENDED
DECEMBER 31, 2009 COMPARED TO YEAR ENDED DECEMBER 31, 2008.




The most
significant events that affected the results of operations were the result of
unusual events and significant economic changes that materially affected the
amount of reported income from the year’s operations, and occurred to three of
our existing customers as explained below:




On April
6, 2006, bingo games in Walker County, Alabama were ratified by constitutional
amendment. The operation of bingo games for prizes or money by certain nonprofit
organizations for charitable, educational, or other lawful purposes shall be
legal. On October 26, 2009, the Circuit Court of Walker County issued an order
concluding that electronic bingo in Walker County constituted the operation of
an illegal lottery. This court order affected one of the Company’s customers
causing that customer to discontinue its business operations. Prior to October
2009, the Company loaned this customer $250,000 to help them fund their business
start-up and the Company installed a Table Trac System at the Company’s cost in
return for future revenue based on a participation formula of the casino’s
earnings. Since the agreement between the customer and the Company was a
participation-based contract and the Company owned the casino tracking system
and associated hardware, the Company took immediate action to secure physical
possession of the equipment installed. The result to Table Trac Inc. profits was
a reduction to the profits from operations by $324,380, which included writing
off the $250,000 loan, $45,796 of participation revenue recorded on the accrual
basis and $28,584 of deferred system sales costs. The Company also lost the
opportunity to collect an additional $101,530 in interest earned under the
$250,000 loan agreement then in place before the Walker County judge’s
decision.




The
Company had a participation revenue agreement with another customer who filed
for Chapter 11 bankruptcy, precipitating the write off of $37,934 of accounts
receivable.




The
Company has an installment sale agreement with an international customer that
has been slow to pay and made no installment payments in 2009. The customer
experienced a fire to its property and has asked for time to recover. As such,
due to the uncertainty of collection, the Company recorded an allowance for
doubtful accounts in the 4th quarter
of 2009 in the amount of $182,054 for this customer; however, collection efforts
continue and the customer continues to promise payment.




The
previous three events are unusual to our business, not in our 15 years of
operations has any of our customers been ordered out of business or closed due
to financial difficulties. In the 2009 economy and with new regulatory
opportunities and threats arising, additional scrutiny will be given to credit
and operational worthiness before credit is extended by the Company to our
potential customers.




10




As a
result, $544,368 was added as operational expense for the year ended December
31, 2009 that are the result of these unusual events, compared to $0 for the
year ended December 31, 2008.




Inflation
for the previous three years ending December 31, 2009 has been negligible having
no effect on the Company’s operations. The outlook for inflation may put the
Company’s cash holdings at risk for a loss of real value. The Company will
evaluate inflation pressure and take steps to place its available cash and cash
equivalents into conservative investment vehicles.




Revenues
decreased from $ 4,621,514 in 2008 to $3,219,263 in 2009. The decrease of
$1,402,251 was due to fewer completed installations. In 2008, we installed eight
systems compared to four in 2009. Ongoing maintenance revenue has increased from
approximately $794,000 in 2008 to approximately $956,000 in 2009, an increase of
approximately $162,000 or 20%.




A
breakout of our revenue by type is as follows:




Sales
      Analysis
            
            2009
            
            
            2008
            
            
            ChangeSystem
      Sales
            
            $
            1,710,439
            
            
            $
            3,773,068
            
            
            $
            (
      2,062,629
            )
            
            
            (54.7
            %)Other
      Sales
            
            
            552,808
            
            
            
            54,179
            
            
            
            498,629
            
            
            
            920.3
            %License
      & Maintenance
            
            
            956,016
            
            
            
            794,267
            
            
            
            161,749
            
            
            
            20.4
            %Total
      Revenue
            
            $
            3,219,263
            
            
            $
            4,621,514
            
            
            $
            (1,402,251
            )
            
            
            (30.3
            %)




The
decrease of $1,402,251 was due to fewer completed installations along with extra
equipment and games sales offset by additional maintenance revenues from new
installations. In 2008, we installed eight systems compared to four in 2009. Our
pricing for 2009 remained consistent with 2008.




Cost of
sales decreased to $753,124 in 2009 from $1,105,501 in 2008. The decrease of
$352,377 was primarily due to fewer completed installations.




A
breakout of our cost of sales by type is as follows:




Cost
      of Sales Analysis
            
            2009
            
            
            2008
            
            
            ChangeSystem
      Sales
            
            $
            614,084
            
            
            $
            1,042,277
            
            
            $
            (
      428,193
            )
            
            
            (41.1
            %)Other
      Sales
            
            
            119,352
            
            
            
            46,867
            
            
            
            72,485
            
            
            
            154.7
            %License
      & Maintenance
            
            
            19,688
            
            
            
            16,357
            
            
            
            3,331
            
            
            
            20.4
            %Total
      Cost of Goods Sold
            
            $
            753,124
            
            
            $
            1,105,501
            
            
            $
            (352,377
            )
            
            
            (31.9
            %)




11




Deferred
revenues decreased from $389,297 in 2008 to $0 in 2009. The balance represents
down payments received for in-process system installations at year-end. The
deferred revenue is non-refundable and are recognized as revenue when the system
installations are completed. As of December 31, 2009, the Company was not in the
process of installing any new Table Trac systems.




The gross
margin in 2009 was $2,466,139 or 76.6% of sales compared with $3,516,013 for
2008 or 76.1% of sales in 2008. The percentage remained constant.




Total
operating expenses increased from $1,662,479 in 2008 to $2,517,556 in 2009. The
increase of $855,077 was primarily due to a significant increase in bad debt
expense totaling $515,784 as discussed above in detail, along with $85,916 in
wages and $77,590 for contractors to handle the increasing research and
development projects and Sarbanes - Oxley (SOX) 404 compliance
consultancy.




Interest
income has increased in 2009 to a net amount of $75,083 from $73,094 in 2008,
the increase of $1,989 is consistent due to our stable cash reserve balance
earning at a lower rate offset from interest earned on accounts receivable -
financed contracts remained at similar levels or slightly higher levels compared
to 2008. During 2009, the Company accrued $101,530 of interest income recorded
on the $250,000 customer note receivable and then wrote it off due to the
customer filing for bankruptcy.




The
provision for income taxes was $749,000 in 2008, for an effective rate of 38.9%,
compared to a provision for income taxes of $8,100 for an effective rate of
34.2% in 2009. The decrease in rates is primarily due to differing state
rates.




The net
income for 2009 was $15,566 compared to net income for 2008 of $1,177,628. This
was a decrease of $1,162,062.




The basic
earnings per share in 2009 was $0.004 compared to basic earnings per share of
$0.28 in 2008.




4.
Off-balance sheet arrangements.




None.




5.
Critical Accounting Policies and Estimates.




The
Company’s discussion and analysis of financial condition and results of
operations is based upon its financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, the Company evaluates these estimates,
including those related to revenue recognition, bad debts, inventory valuation,
intangible assets, and income taxes. The Company bases these estimates on
historical experience and on various other assumptions that it believes are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The estimates and judgments
that the Company believes have the most effect on its reported financial
position and results of operations are as follows:




12




Revenue
Recognition




The
Company derives revenues from the sales of systems, licenses and maintenance
fees, services and participation-based agreements.




System
Sales




Revenue
from systems that have been demonstrated to meet customer specifications during
installation is recognized when evidence of an arrangement exists, the product
has been installed, title and risk of loss have transferred to the customer and
collection of the resulting receivable is reasonably assured.




System
sales, which are accounted for as multiple-element arrangements, include
multiple products and/or services. For multiple-element arrangements, the
Company allocates the revenue to each element based on their stand-alone fair
value (or in the absence of fair value, the residual method) and recognizes the
associated revenue when all revenue recognition criteria have been met for each
element.




The
Company does offer its customers contracts with extended payment terms. The
Company has established a history of successfully collecting on these contracts
under the original payment terms without making concessions. Based on past and
current collection history, all sales installment contracts are being recognized
in revenue following the “system sales” policy noted above.




Maintenance
revenue




Maintenance
revenue is recognized ratably over the contract period.




Service
revenue




Service
revenue is recognized after the services are performed and collection of the
resulting receivable is reasonably assured.




Participation
revenue




In 2009,
the Company began offering new customers a participation-based contract.
Revenues were originally determined and billed monthly based on a percentage of
the amount of money processed through the customer’s casino gaming system
utilizing the Table Trac software. After some discussion with the SEC, it was
determined that the Company would change its revenue recognition policy for
these contracts to record revenue at the time of cash collection.




13




Accounts
Receivable




Accounts
receivable are recorded at the invoiced amount. Any accounts receivable amount
relating to a sales installment contract greater than twelve months beyond the
calendar year end is recorded as a long term asset and is classified as
“accounts receivable, financed contracts - long term”. Management believes that
receivables, net of the allowance for doubtful accounts are fully collectible.
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.
During 2009, a couple of customers declared bankruptcy, which subsequently
resulted in bad debts for the Company. The entire allowance account at December
31, 2009 consists of one international customer’s contract balance. All other
uncollectible accounts have been written-off.




Accounts
receivable consisted of the following at December 31, 2009 and
2008:




2009
            
            
            2008Accounts
      receivable under normal 30 day terms
            
            $
            339,430
            
            
            $
            1,207,424Financed
      contracts:Short-term
            
            
            430,307
            
            
            
            591,072Current
      portion of long-term
            
            
            553,431
            
            
            
            207,979Long-term,
      net of current portion
            
            
            236,466
            
            
            
            68,045Total
      accounts receivable
            
            
            1,559,634
            
            
            
            2,074,520Less
      Allowance for doubtful accounts
            
            
            (182,054
            )
            
            
            -$
            1,377,580
            
            
            $
            2,074,520




Bad Debt
Expense




Bad debt
expense – for the year ended December 31, 2009 included in selling, general and
administrative expenses was $515,784 compared to $53,648 for the year ended
December 31, 2008. This significant change relates to our write-off of an
uncollectible $250,000 customer note, and certain trade accounts totaling
$265,784 due to customer bankruptcies and past due status of payment
terms.




On
October 26, 2009, the Circuit Court of Walker County, Alabama issued an order
concluding that electronic bingo in Walker County constituted the operation of
an illegal lottery. This court order affected one of the Company’s customers
causing that customer to discontinue its business operations. Since the
agreement between the customer and the Company was a participation-based
contract and the Company owned the casino tracking system and associated
hardware, the Company took immediate action to secure physical possession of the
equipment installed. The Company recorded an impairment charge of approximately
$29,000 against the system, which had a net book value of $69,099, during the
fourth quarter of fiscal 2009. The remaining value of the system totaling
approximately $40,000 will be utilized in another future system
installations.




14




Inventory




Inventory
comprised of finished goods and work in process is stated at the lower of cost
or market. The first-in, first-out cost method is used to value inventory.
Inventory is reviewed annually for the lower of cost or market and obsolescence.
Any material cost found to be above market value or considered obsolete is
written down accordingly. The Company had no obsolescence reserve at December
31, 2009 and 2008.




Intangible
Asset




In March
1999, the Company received patent number 5,957,776 relating to its table game
control system. Expenses incurred in obtaining this patent are carried at cost
and are being amortized over seventeen years using the straight-line
method.




Long-lived
Assets




The
Company periodically assesses the recoverability of long-lived assets and
certain identifiable intangible assets by reviewing for 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 to future un-discounted net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, 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.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.




Payroll




Effective
October 2009, the Company moved its payroll to an outside service with payments
made on 15th and last day of month; thereby eliminating the need for accrued
payroll.




Stock-based
Compensation




The
Company recognizes the cost of stock-based compensation plans and awards in
operations on a straight-line basis over the vesting period of the awards. The
Company measures and recognizes compensation expense for all stock-based payment
awards made to employees and directors. The compensation expense for the
Company’s stock-based payments is based on estimated fair values at the time of
the grant.




Income
Taxes




Income
taxes are provided for using the liability method of accounting. A deferred tax
asset or liability is recorded for all temporary differences between financial
and tax reporting. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effect of changes in tax laws and rates on the date of enactment.




15




The
Company accounts for income taxes pursuant to Financial Accounting Standards
Board guidance. This guidance prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than not to be sustained
upon examination by taxing authorities. The Company believes its income tax
filing positions and deductions will be sustained upon examination and,
accordingly, no reserves, or related accruals for interest and penalties have
been recorded at December 31, 2009 and 2008. In accordance with the guidance,
the Company has adopted a policy under which, if required to be recognized in
the future, interest and penalties related to the underpayment of income taxes
will be classified in operating expenses in the statements of operations. The
Company has three open years of tax returns subject to examination.




6.
Recent Accounting Pronouncements.




On
September 15, 2009, the Company adopted new accounting guidance on codification
referencing that encourages the use of plain English to describe broad
accounting topic areas in an attempt to make financial statements more useful to
users and more clearly explain accounting concepts.




In
October 2009, the FASB issued an update to existing guidance on revenue
recognition for arrangements with multiple deliverables and deliverables that
include software elements effective for fiscal years beginning on or after June
15, 2010. This update will allow companies to allocate consideration received
for qualified separate deliverables using estimated selling prices for both
delivered and undelivered items when vendor-specific objective evidence or
third-party evidence is unavailable. Additional disclosures discussing the
nature of multiple element arrangements, the types of deliverables under the
arrangements, the general timing of their delivery, and significant factors and
estimates used to determine estimated selling prices are required. We will adopt
this update for new revenue arrangements entered into or materially modified
beginning January 1, 2011. The Company is currently assessing the impact on our
financial statements.




Item
7A. Quantitative and Qualitative Disclosures About Market Risk.




Our
financial instruments consist almost entirely of cash. Our only risk is the
fluctuations in interest rates which is not considered significant.




The
Company does not hold foreign currency since we do not transact business in
foreign currencies, and therefore have no currency exposure. We do not enter
into futures or forward commodity contracts since we have no market risk
exposure with respect to commodity prices.




16




Item 8. Financial
Statements and Supplementary Data.




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and Stockholders of  Table Trac, Inc.
  We have
audited the accompanying balance sheets of Table Trac, Inc. as of December 31,
2009 and 2008, and the related statements of income, stockholders’ equity and
cash flows for the years then ended. 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 the standards of the Public Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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,
2009 and 2008, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.
  /s/
Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
  Edina,
Minnesota
 March 31,
2010




17




TABLE TRAC, INC.




BALANCE
SHEETS




December
      31,
              2009
            
            
            December
      31,
              2008ASSETSCurrent
      assets:Cash
            
            $
            1,320,946
            
            
            $
            1,212,953Accounts
      receivable, net of allowance for doubtful accounts of $182,054 and $0 for
      the years ended December 31, 2009 and 2008, respectively
            
            
            1,141,114
            
            
            
            2,006,475Inventory
            
            
            189,482
            
            
            
            248,598Prepaid
      expenses
            
            
            34,219
            
            
            
            8,143Other
      current assets
            
            
            5,039
            
            
            
            - 0
      -Income
      taxes receivable
            
            
            172,434
            
            
            
            45,000Total
      current assets
            
            
            2,863,234
            
            
            
            3,521,169Patent,
      net
            
            
            9,826
            
            
            
            11,191Property
      and equipment, net
            
            
            34,219
            
            
            
            27,865Accounts
      receivable, financed contracts - long term
            
            
            236,466
            
            
            
            68,045Total
      assets
            
            $
            3,143,745
            
            
            $
            3,628,270LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            139,697
            
            
            $
            225,557Accrued
      payroll and related
            
            
            - 0
      -
            
            
            
            39,624Deferred
      revenue
            
            
            - 0
      -
            
            
            
            389,297Deferred
      tax liability
            
            
            574,000
            
            
            
            619,000Total
      current liabilities
            
            
            713,697
            
            
            
            1,273,478Long
      term liabilitiesDeferred
      tax liability long term
            
            
            9,000
            
            
            
            - 0 -Total
      liabilities
            
            
            722,697
            
            
            
            1,273,478Stockholders’
      equity:Common
      stock, 0.001 par value; 5,000,000 shares authorized: 4,162,234 shares
      issued and outstanding at December 31, 2009 and 2008
            
            
            4,162
            
            
            
            4,162Additional
      paid-in capital
            
            
            1,404,619
            
            
            
            1,398,254Retained
      earnings
            
            
            1,013,689
            
            
            
            998,1232,422,470
            
            
            
            2,400,539Less:
      treasury stock (1,000 shares in 2009 and 32,200 shares in 2008) at
      cost
            
            
            (1,422
            )
            
            
            (45,747
            )Total
      stockholders’ equity
            
            
            2,421,048
            
            
            
            2,354,792Total
      liabilities and stockholders’ equity
            
            $
            3,143,745
            
            
            $
            3,628,270




The
accompanying notes are an integral part of these financial
statements.




18




TABLE
TRAC, INC.




STATEMENTS
OF INCOME




Years
      EndedDecember
      31,
            
            
            December
      31,2009
            
            
            2008Net
      sales
            
            $
            3,219,263
            
            
            $
            4,621,514Cost
      of sales
            
            
            753,124
            
            
            
            1,105,501Gross
      profit
            
            
            2,466,139
            
            
            
            3,516,013Selling,
      general and administrative expenses
            
            
            2,517,556
            
            
            
            1,662,479Income
      (loss) from operations
            
            
            (51,417
            )
            
            
            1,853,534Other
      income (expense):Interest
      income
            
            
            176,613
            
            
            
            73,094Interest
      bad debt expense
            
            
            (101,530
            )
            
            
            - 0 -Total
      other income
            
            
            75,083
            
            
            
            73,094Net
      income before income taxes
            
            
            23,666
            
            
            
            1,926,628Income
      tax expense
            
            
            8,100
            
            
            
            749,000Net
      income
            
            $
            15,566
            
            
            $
            1,177,628Basic
      earnings per share
            
            $
            0.004
            
            
            $
            0.28Weighted
      average basic shares outstanding
            
            
            4,162,234
            
            
            
            4,159,234Diluted
      earnings per share
            
            $
            0.003
            
            
            $
            0.26Weighted
      average diluted shares outstanding
            
            
            4,463,049
            
            
            
            4,468,609




The
accompanying notes are an integral part of these financial
statements.




19




TABLE
TRAC, INC.




STATEMENTS
OF STOCKHOLDERS’ EQUITY




Common
      Stock
            
            
            AdditionalNumber
      of
              Shares
            
            
            Amount
            
            
            Paid-in
              Capital
            
            
            Retained
              Earnings
            
            
            Treasury
              Stock
            
            
            TotalBALANCE,
      DECEMBER 31, 2007
            
            
            4,156,234
            
            
            $
            4,156
            
            
            $
            1,382,510
            
            
            $
            28,307
            
            
            $
            - 0
      -
            
            
            $
            1,414,973Shares
      issued for consultant services
            
            
            6,000
            
            
            
            6
            
            
            
            15,744
            
            
            
            
            
            
            
            
            
            
            
            15,750Dividend
      paid April 10, 2008 at $0.05 per share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (207,812
            )
            
            
            
            
            
            
            (207,812
            )Treasury,
      stock repurchased in November andDecember
      2008 at $1.40 per share, plus transactions costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (45,747
            )
            
            
            (45,747
            )2008
      Net income
            
            
            
            
            
            
            
            
            
            
            
            1,177,628
            
            
            
            
            
            
            1,177,628BALANCE,
      DECEMBER 31, 2008
            
            
            4,162,234
            
            
            
            4,162
            
            
            
            1,398,254
            
            
            
            998,123
            
            
            
            (45,747
            )
            
            
            2,354,792Treasury
      stock repurchased in January 2009 at $1.40 per share, plus transactions
      costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (942
            )
            
            
            (942
            )Treasury
      shares issued as employee bonuses in April 2009 at approximately $1.60 per
      share
            
            
            
            
            
            
            
            
            
            
            6,365
            
            
            
            
            
            
            
            45,267
            
            
            
            51,6322009
      Net Income
            
            
            
            
            
            
            
            
            
            
            
            15,566
            
            
            
            
            
            
            15,566BALANCE,
      DECEMBER 31, 2009
            
            
            4,162,234
            
            
            $
            4,162
            
            
            $
            1,404,619
            
            
            $
            1,013,689
            
            
            $
            (1,422
            )
            
            $
            2,421,048




The
accompanying notes are an integral part of these financial
statements.




20




TABLE TRAC, INC.




STATEMENTS
OF CASH FLOWS




Year
      Ended
              December
      31, 2009
            
            
            Year
      Ended
              December
      31, 2008Cash
      flows from operating activities:Net
      income
            
            $
            15,566
            
            
            $
            1,177,628Adjustments to
      reconcile net income to cash flows provided by operating
      activities:Depreciation
      and amortization
            
            
            12,954
            
            
            
            8,564Deferred
      income taxes
            
            
            (36,000
            )
            
            
            334,000Non-cash
      stock compensation expense
            
            
            51,632
            
            
            
            15,750Allowance
      for doubtful accounts
            
            
            182,054
            
            
            
            - 0
      -Write-off
      of uncollectible note receivable
            
            
            250,000
            
            
            
            - 0
      -Changes in operating
      assets and liabilities:Accounts
      receivable
            
            
            514,886
            
            
            
            (900,574
            )Inventory
            
            
            59,116
            
            
            
            (86,039
            )Prepaid
      expenses
            
            
            (26,076
            )
            
            
            3,900Other
      current assets
            
            
            (5,039
            )
            
            
            - 0
      -Income
      taxes receivable
            
            
            (127,434
            )
            
            
            (45,000
            )Accounts
      payable
            
            
            (85,860
            )
            
            
            160,048Accrued
      payroll and related
            
            
            (39,624
            )
            
            
            3,201Deferred
      revenue
            
            
            (389,297
            )
            
            
            219,944Net
      cash flows provided by operating activities
            
            
            376,878
            
            
            
            891,422Cash flows from
      investing activitiesPurchases
      of property and equipment
            
            
            (17,943
            )
            
            
            (35,065
            )Issuance
      of note receivable
            
            
            (250,000
            )
            
            
            - 0 -Net
      cash flows used in investing activities
            
            
            (267,943
            )
            
            
            (35,065
            )Cash flows from
      financing activities:Repurchase
      of Company stock
            
            
            (942
            )
            
            
            (45,747
            )Dividend
      paid
            
            
            - 0
      -
            
            
            
            (207,812
            )Net
      cash flows used in financing activities
            
            
            (942
            )
            
            
            (253,559
            )Net
      increase in cash
            
            
            107,993
            
            
            
            602,798Cash
      - beginning of year
            
            
            1,212,953
            
            
            
            610,155Cash
      - end of year
            
            $
            1,320,946
            
            
            $
            1,212,953




The
accompanying notes are an integral part of these financial
statements.




21




Notes
to Financial Statements




NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES




Company




Table
Trac, Inc. (the Company) was formed under the laws of the State of Nevada in
June 1995. The Company has its offices in Minnetonka, Minnesota. The Company has
developed and sells an information and management system that automates various
aspects of the operations of casino table games, Table TracTM.




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 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
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.




Concentrations of
Risk




Cash Deposits in Excess of
Federally Insured Limits




The
Company maintains its cash balances at two financial institutions. Accounts are
insured by the Federal Deposit Insurance Corporation up to $250,000. The Company
had approximately $738,000 of uninsured cash balances at December 31,
2009.




22


Major
Customers




The
following table summarizes significant customer information for the twelve
months ended December 31, 2009 and 2008:




2009
            
            
            2008Major
      Customers
            
            
            %
      Sales
            
            
            %
      AR
            
            
            %
      Sales
            
            
            %
      ARA
            
            
            
            33.7
            %
            
            
            2.3
            %
            
            
            29.3
            %
            
            
            19.6
            %B
            
            
            
            12.7
            %
            
            
            12.0
            %
            
            
            19.2
            %
            
            
            13.8
            %C
            
            
            
            2.5
            %
            
            
            7.8
            %
            
            
            12.1
            %
            
            
            13.1
            %D
            
            
            
            10.3
            %
            
            
            13.6
            %
            
            
            13.8
            %
            
            
            13.4
            %E
            
            
            
            14.7
            %
            
            
            9.1
            %F
            
            
            
            17.5
            %
            
            
            32.6
            %Totals
            
            
            
            91.4
            %
            
            
            77.4
            %
            
            
            74.4
            %
            
            
            59.9
            %




Revenue
Recognition




The
Company derives revenues from the sales of systems, licenses and maintenance
fees, services and participation-based agreements.




System Sales




Revenue
from systems that have been demonstrated to meet customer specifications during
installation is recognized when evidence of an arrangement exists, the product
has been installed, title and risk of loss have transferred to the customer and
collection of the resulting receivable is reasonably assured.




System
sales, which are accounted for as multiple-element arrangements, include
multiple products and/or services. For multiple-element arrangements, the
Company allocates the revenue to each element based on their stand-alone fair
value (or in the absence of fair value, the residual method) and recognizes the
associated revenue when all revenue recognition criteria have been met for each
element.




In 2005,
the Company began offering its customers contracts with extended payment terms.
The Company has established a history of successfully collecting on these
contracts under the original payment terms without making concessions. Based on
past and current collection history, all sales installment contracts are being
recognized in revenue following the “system sales” policy noted
above.




Maintenance
revenue




Maintenance
revenue is recognized ratably over the contract period.




23




Service revenue




Service
revenue is recognized after the services are performed and collection of the
resulting receivable is reasonably assured.




Participation
revenue




In 2009,
the Company began offering new customers a participation-based contract.
Revenues were determined and billed monthly based on a percentage of the amount
of money processed through the customer’s casino gaming system utilizing the
Table Trac software. However, due to collectability not being reasonably
assured, participation revenue is not recognized until the cash is
collected.




Fair Value of Financial
Instruments




The
Company’s financial instruments consist of cash, 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




For
purposes of the statement of cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.




Accounts Receivable /
Allowance for Doubtful Accounts




Accounts
receivable includes regular customer receivables for systems sales and on-going
monthly license and maintenance billings which is typically due within 30 days
of invoicing. The Company also, at times, depending on the customer’s credit,
has systems sales that are financed over a period of 24 to 30 months. Our
accounts receivable includes regular customer receivables and amounts from
financed contracts due within 12 months. Amounts from these contracts coming due
beyond 12 months are recorded as “Accounts receivable financed contracts –
long-term.” Our practice for systems sales is to require a down payment, with a
portion paid at the time a contract is signed and the remainder either paid 30
days after the system installation is completed or financed generally over a
period of either 24 - 30 months. Interest on the financed balance is invoiced
monthly. Payments received are applied first against unpaid interest with the
remainder applied to unpaid principal.




The
allowance for doubtful accounts is the Company’s best estimate of the amount of
probable credit losses in the Company’s existing accounts
receivable.  The Company determines the allowance based on historical
write-off experience and current knowledge of specific customer matters. The
Company reviews its allowance for doubtful accounts monthly. Individual accounts
with past due balances over 90 days are specifically reviewed for
collectability. All other balances are reviewed on a pooled
basis.  Account balances are charged off against accounts receivable,
as bad debts, after all means of collection have been exhausted and the
potential for recovery is considered remote.




24




Inventory




Inventory,
comprised of finished goods and work in process, is stated at the lower of cost
or market. The first-in, first-out cost method is used to value inventory.
Inventory is reviewed annually for the lower of cost or market and obsolescence.
Any material cost found to be above market value or considered obsolete is
written down accordingly. The Company has no obsolescence reserve at December
31, 2009 and 2008.




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.




Intangible
Asset




In March
1999, the Company received patent number 5,957,776 relating to its table game
control system. Expenses incurred in obtaining this patent are carried at cost
and are being amortized over seventeen years using the straight-line
method.




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 to future
undiscounted net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, 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. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.




Income
Taxes




Income
taxes are provided for using the liability method of accounting. A deferred tax
asset or liability is recorded for all temporary differences between financial
and tax reporting. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effect of changes in tax laws and rates on the date of enactment.




25




The
Company accounts for income taxes pursuant to Financial Accounting Standards
Board guidance. This guidance prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than not to be sustained
upon examination by taxing authorities. The Company believes its income tax
filing positions and deductions will be sustained upon examination and,
accordingly, no reserves, or related accruals for interest and penalties have
been recorded at December 31, 2009 and 2008. In accordance with the guidance,
the Company has adopted a policy under which, if required to be recognized in
the future, interest and penalties related to the underpayment of income taxes
will be classified in operating expenses in the statements of operations. The
Company has three open years of tax returns subject to examination.




Stock-based
Compensation




The
Company recognizes the cost of stock-based compensation plans and awards in
operations on a straight-line basis over the vesting period of the awards. The
Company measures and recognizes compensation expense for all stock-based payment
awards made to employees and directors. 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 stock-based payment awards on the date of
grant using an option pricing model. These option pricing models involve a
number of assumptions, including the expected lives of stock options, the
volatility of the public market price for the Company’s common stock and
interest rates. The Company is using the Black-Scholes option pricing model.
Stock-based compensation expense recognized during the period is based on the
value of the portion of stock-based payment awards that are ultimately expected
to vest.




Segment
Reporting




The
Company operates as one reporting segment.




Comprehensive Income
(Loss)




Comprehensive
income (loss) includes net income (loss) and items defined as other
comprehensive income (loss). Items defined as other comprehensive income (loss)
include such items as foreign currency translation adjustments and unrealized
gains (losses) on certain marketable securities. For the year ended December 31,
2009 and 2008, the Company had no items defined as other comprehensive income
(loss).




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 or warrants, if dilutive. The number of additional
shares is calculated by assuming that outstanding stock options or warrants 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.




26




Recent Accounting
Pronouncements




On
September 15, 2009, the Company adopted new accounting guidance on codification
referencing that encourages the use of plain English to describe broad
accounting topic areas in an attempt to make financial statements more useful to
users and more clearly explain accounting concepts.




In
October 2009, the FASB issued an update to existing guidance on revenue
recognition for arrangements with multiple deliverables and deliverables that
include software elements effective for fiscal years beginning on or after June
15, 2010. This update will allow companies to allocate consideration received
for qualified separate deliverables using estimated selling price for both
delivered and undelivered items when vendor-specific objective evidence or
third-party evidence is unavailable. Additional disclosures discussing the
nature of multiple element arrangements, the types of deliverables under the
arrangements, the general timing of their delivery, and significant factors and
estimates used to determine estimated selling prices are required. We will adopt
this update for new revenue arrangements entered into or materially modified
beginning January 1, 2011. The Company is currently assessing the impact on our
financial statements.




NOTE
2. ACCOUNTS RECEIVABLE




Accounts
receivable consisted of the following at:




December
      31, 2009
            
            
            December
      31, 2008Accounts
      receivable under normal 30 day terms
            
            $
            339,430
            
            
            $
            1,207,424Financed
      contracts:Short-term
            
            
            430,307
            
            
            
            591,072Current
      portion of long-term
            
            
            553,431
            
            
            
            207,979Long-term,
      net of current portion
            
            
            236,466
            
            
            
            68,045Total
      accounts receivable
            
            
            1,559,634
            
            
            
            2,074,520Less
      Allowance for doubtful accounts
            
            
            (182,054
            )
            
            
            -0-$
            1,377,580
            
            
            $
            2,074,520




27


A
roll-forward of the Company’s allowance for doubtful accounts for the twelve
months ended is as follows:




December
      31, 2009
            
            
            December
      31, 2008Accounts
      receivable allowance, beginning of period
            
            $
            -
            
            
            $
            -Provision
      adjustment during period
            
            
            265,528
            
            
            
            53,648Write-off
      of bad debts
            
            
            (83,474
            )
            
            
            (53,648
            )Accounts
      receivable allowance, end of period
            
            $
            182,054
            
            
            $
            0




NOTE
3. INVENTORY




Inventories
consisted of the following at:




December
      31, 2009
            
            
            December
      31, 2008Work
      in Process
            
            $
            - 0
      -
            
            
            $
            8,850Finished
      Goods
            
            
            189,482
            
            
            
            239,748Totals
            
            $
            189,482
            
            
            $
            248,598




NOTE
4. NOTE RECEIVABLE / INTEREST RECEIVABLE




Note
receivable and interest receivable activity for the year ended December 31, 2009
is as follows:




Note
      Receivable
            
            
            Interest
      ReceivableBalance
      as of December 31, 2008
            
            $
            -0-
            
            
            $
            -0-March
      2009, customer loan made
            
            
            250,000Interest
      earned for the period March to September 2009
            
            
            -
            
            
            
            101,530Balances
      written off to bad debt expense
            
            
            (250,000
            )
            
            
            (101,530
            )Balance
      as of December 31, 2009
            
            $
            -0-
            
            
            $
            -0-




In March
2009, the Company provided a $250,000 loan to a customer to help them get their
casino business started. The loan bore interest at an annual rate of 80% and was
due September 13, 2009. Beginning September 13, 2009, a $90 per day late fee was
assessed for each day the loan remained unpaid. As of September 30, 2009, the
Company had accrued interest receivable and late fees of $101,530. During the
4th
quarter of 2009, the Company wrote-off the note and interest receivable because
the casino customer had been shut down as a result of a court order reversing or
re-interpreting the constitutional amendment of 2006 providing for the legality
of bingo in the Alabama county where the customer conducted business. In
connection with this customer, the Company had also wrote-off $45,800 for past
due accounts receivable related to participation revenue earned and unreimbursed
expenses.




28




NOTE
5. PROPERTY AND EQUIPMENT




Property
and equipment consists of the following at:




December
      31, 2009
            
            
            December
      31, 2008Office
      equipment
            
            $
            19,199
            
            
            $
            22,794Vehicles
            
            
            46,474
            
            
            
            35,06565,673
            
            
            
            57,859Less:
      accumulated depreciation
            
            
            (31,454
            )
            
            
            (29,994
            )Property
      and equipment, net
            
            $
            34,219
            
            
            $
            27,865




Depreciation
expense totaled $11,589 and $7,020 for the years ended December 31, 2009 and
2008, respectively.




NOTE
6. OPERATING LEASE




The
Company leases its office facilities under a lease agreement which expires May
2011. Future minimum lease payments are as follows:






2010
            
            $
            45,3602011
            
            $
            19,400




Rent
expense was $42,019 and $33,500 in 2009 and 2008, respectively.




NOTE 7. STOCKHOLDERS’
EQUITY




In 2008,
the Company repurchased 32,200 shares of its common stock for at total purchase
cost of $45,747. In January 2009, the Company repurchased 625 additional shares
of its common stock for a total purchase cost of $942. On April 14, 2009, the
Company issued 31,825 shares of its repurchased stock to its employees through
its employee bonus program. The issuance of the 31,825 shares of treasury stock
was valued at the trading value of the Company’s common stock at the date of
issuance of $1.60 per share or $50,920 in total. The total cost of $51,632,
which includes transaction costs of $712, was recognized as stock compensation
expense in the Company’s statement of income. The difference between the initial
cost of purchase of the treasury stock and the trading value of the reissued
treasury stock of $6,365 was recorded as a credit to additional paid-in-capital
in the Company’s balance sheet. As of December 31, 2009, the Company holds 1,000
common stock shares in treasury at a total cost of $1,422 for future employee
issuances under the bonus program.




29




In May
2008, the Company issued 6,000 common restricted shares for consultant services
with a fair value of $15,750.




Stock
Options




In
October 2001, the Company implemented an Employee Stock Incentive Plan. This
plan provides for the issuance of options to employees to purchase shares of the
Company’s common stock at an exercise price at least equal to the fair value of
the Company’s common stock at the grant date. These options are exercisable for
a period of seven years from the date of grant. The Company has reserved
1,000,000 shares of its common stock for potential issuance under this plan. As
of December 31, 2009, 370,000 stock options were available for
grants.




The
Company recorded $0 of related compensation expense for the years ended December
31, 2009 and 2008 as no options were granted during these years and all
previously issued options were fully vested prior to January 1,
2007.




The
following is a summary of all activity involving options for the years ended
December 31:




Outstanding
      and Exercisable Options
            
            
            Weighted
      Average
              Exercise
      Price
            
            
            Weighted
      Average
              Remaining
      Term
            
            
            Aggregate
              Intrinsic
      ValueBalance,
      December 31, 2007
            
            
            337,500
            
            
            $
            0.13
            
            
            
            3.0Granted
            
            
            - 0
      -Exercised
            
            
            - 0
      -Cancelled
            
            
            - 0 -Balance,
      December 31, 2008
            
            
            337,500
            
            
            $
            0.13
            
            
            
            2.0Granted
            
            
            - 0
      -Exercised
            
            
            - 0
      -Cancelled
            
            
            - 0 -Balance,
      December 31, 2009
            
            
            337,500
            
            
            $
            0.13
            
            
            
            1.0
            
            $
            344,250




30




The
aggregate intrinsic value in the table represents the difference between the
closing stock price on December 31, 2009 and the exercise price, multiplied by
the number of in-the-money options that would have been received by the option
holders had all option holders exercised their options on December 31,
2009.




NOTE 8. SUPPLEMENTAL CASH FLOW
INFORMATION




Cash paid
for interest was $0 for the years ended December 31, 2009 and 2008.




Cash paid
for income taxes totaled $171,534 and $460,000 for the years ended December 31,
2009 and 2008, respectively.




NOTE 9. INCOME
TAXES




The
income tax provision consists of the following for the years ended December
31:




2009
            
            
            2008Current
      tax expense
            
            $
            44,100
            
            
            $
            415,000Deferred
      tax expense
            
            
            (36,000
            )
            
            
            334,000Total
      income tax expense
            
            $
            8,100
            
            
            $
            749,000




The
reconciliation between expected federal income tax rates and the Company’s
effective federal tax rates is as follows:




2009
            
            
            2008Amount
            
            
            Percent
            
            
            Amount
            
            
            PercentExpected
      federal tax $
            
            $
            8,000
            
            
            
            34.0
            %
            
            $
            655,000
            
            
            
            34.0
            %State
      income tax, net of federal tax benefit
            
            
            1,000
            
            
            
            4.4
            %
            
            
            85,000
            
            
            
            4.4
            %Other
            
            
            (900
            )
            
            (4.2
            %)
            
            
            9,000
            
            
            
            .5
            %Total
            
            $
            8,100
            
            
            
            34.2
            %
            
            $
            749,000
            
            
            
            38.9
            %




The
following table summarizes the Company’s deferred tax assets and liabilities at
December 31, 2009 and 2008:




2009
            
            
            2008Current
      deferred tax asset (liabilities):Deferred
      revenue
            
            $
            - 0
      -
            
            
            $
            144,000Accounts
      payable and accrued expenses
            
            
            23,000
            
            
            
            98,000Accounts
      receivable
            
            
            (599,000
            )
            
            
            (766,000
            )Allowance
      for doubtful accounts
            
            
            70,000Inventory
            
            
            (54,000
            )
            
            
            (92,000
            )Prepaid
      expenses
            
            
            (14,000
            )
            
            
            (3,000
            )Net
      current deferred tax liability
            
            $
            (574,000
            )
            
            $
            (619,000
            )Long-term
      deferred tax asset:Book
      - Tax depreciation
            
            
            (9,000
            )
            
            
            - 0 -Net
      deferred tax asset (liability)
            
            $
            (583,000
            )
            
            $
            (619,000
            )




31




NOTE
10. EARNINGS PER SHARE




Earnings
per share is computed under two different methods, basic and diluted, and is
presented for all periods in which statements of operations are presented. Basic
earnings per share is computed by dividing net income by the weighted average
number of shares of common stock outstanding. Diluted earnings per share is
computed by dividing net income by the weighted average number of shares of
common stock and common stock equivalents outstanding.




The
following table provides a reconciliation of the numerators and denominators
used in calculating basic and diluted earnings per share for the three and nine
months ended December 31, 2009 and 2008:




2009
            
            
            2008Basic
      earnings per share calculation:Net
      income to common stockholders
            
            $
            15,566
            
            
            $
            1,177,628Weighted
      average number of common shares outstanding
            
            
            4,162,234
            
            
            
            4,159,234Basic
      net income per share
            
            $
            0.004
            
            
            $
            0.28Diluted
      earnings per share calculation:Net
      income to common stockholders
            
            $
            15,566
            
            
            $
            1,177,628Weighted
      average number of common shares outstanding
            
            
            4,162,234
            
            
            
            4,159,234Common
      stock equivalents:Stock
      options
            
            
            300,815
            
            
            
            309,375Weighted
      average diluted shares outstanding
            
            
            4,463,049
            
            
            
            4,468,609Diluted
      net income per share
            
            $
            0.003
            
            
            $
            0.26




32




NOTE
11. GEOGRAPHIC CONCENTRATIONS




The
Company sells its technologies and services to casinos in the United States, and
countries in both Central and South America. For 2009 and 2008, 90% and 64% of
the Company’s revenues were from the United States, 8% and 27% from Central
America, and 2% and 9% from South America, respectively.




Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.




None.




Item 9A. Controls and
Procedures.




Under the
supervision and with the participation of our management, including our chief
executive officer/chief financial officer, we conducted an evaluation of the
effectiveness, as of December 31, 2009, of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, or the Exchange Act. The purpose of this
evaluation was to determine whether as of the evaluation date our disclosure
controls and procedures were effective to provide reasonable assurance that the
information we are required to disclose in our filings with the Securities and
Exchange Commission, or SEC, under the Exchange Act (i) is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms and (ii) accumulated and communicated to our management, including our
chief executive officer/chief financial officer (CEO/CFO), as appropriate to
allow timely decisions regarding required disclosure. Based on this evaluation,
our management has concluded, as discussed below, that material weaknesses
existed in our internal control over financial reporting as of December 31, 2009
and as a result, our disclosure controls and procedures were not
effective.




Notwithstanding
the material weaknesses that existed as of December 31, 2009, our CEO/ CFO has
concluded that the financial statements included in this Annual Report on Form
10-K present fairly, in all material respects, the financial position, results
of operations and cash flows of the Company in conformity with accounting
principles generally accepted in the United States of America
(“GAAP”).




Report
of Management on Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(e) and 15d-15(f) of
the Exchange Act. We have designed our internal controls to provide reasonable,
but not absolute, assurance that our financial statements are prepared in
accordance with U.S. GAAP. We assess the effectiveness of our internal controls
based on the criteria set forth in the Internal Control - Integrated Framework
developed by the Committee of Sponsoring Organizations of the Treadway
Commission.




33




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. It should be noted that any system of internal
control, however well designed and operated, can provide only reasonable, and
not absolute, assurance that the objectives of the system will be met. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.




A
material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of annual or interim financial statements will not be prevented or
detected.




In
performing the assessment, our management identified the following material
weaknesses in internal control over financial reporting as of December 31,
2009:




The
Company was not adequately monitoring sales cut-off to ensure revenue was
recorded in the proper period.




Management’s
internal control system is dependent entirely on the founder and a few key
employees. As such it has the inherent flaws of lack of segregation of duties
and being subject to time constraints of an ever expanding set of demands that
are part of growing a business. Consequently, management did not maintain
effective control relating to individual monthly closings and monthly financial
reporting process in adequately preparing account reconciliations and properly
evidencing journal entries. The Company only closes and reports
quarterly.




The
Company did not have an audit committee with a financial expert that was
actively involved with the financial reporting process during 2009 and 2008;
therefore, the Company lacks the board oversight role within the financial
reporting process. In December 2009, the Company’s shareholder voted in board
member Scott Smith, who serves as the audit committee chairman and financial
expert. During 2009, the Company formed an audit committee consisting of three
independent directors including a financial expert. The audit committee’s first
meeting was in January 2010; however, they were only active in the 2009 10-K
reporting process.




Due to
these material weaknesses, management has concluded that our internal control
over financial reporting was not effective as of December 31, 2009.
Notwithstanding the material weaknesses that existed as of December 31, 2009,
our Chief Executive Officer/Chief Financial Officer has concluded that the
financial statements included in this Annual Report on Form 10-K present fairly,
in all material respects, the financial position, results of operations and cash
flows of the Company in conformity with accounting principles generally accepted
in the United States of America (“GAAP”).




34


Changes
in Internal Controls




Management
has made the following steps to help improve the Company’s control
structure:




In 2009,
the Company engaged the services of Internal Control and Anti-Fraud Experts
(ICAFE) to perform a formal risk assessment and design procedures and controls,
and policies along with a plan to remediate the control deficiencies that
represent material weaknesses. In addition, ICAFE provided assistance in many of
the daily accounting tasks to provide proper separation of duties. Our contract
with ICAFE ended in January 2010




In
February 2010, the Company engaged KMAS Consulting LLC. (KMAS), who is providing
a permanent part time CPA to perform the daily accounting tasks and to insure
proper separation of duties and procedures are carried out as we implement
remediation of areas that represent material weaknesses. The majority of the
preparation of the financial statements was carried out by the KMAS CPA along
with the Company’s CEO/CFO. The KMAS CPA prepared routine and non-routine
journal entries, processed certain transactions, prepared certain account
reconciliations, and prepared interim and annual financial statements (including
report combinations and footnote disclosures) in accordance with generally
accepted accounting principles with review and approval by the CEO/CFO and with
financial expertise oversight of the Company’s new audit committee chairman,
Scott Smith. The Company believes it has sufficient personnel resources and
technical accounting and reporting expertise within the Company’s financial
closing and reporting functions at the time of the preparation of this form
10-K, however the Company has not had the full benefit of this expertise for the
full year of operations ended December 31, 2009.




During
the fiscal year covered by this report, we developed and began implementing our
remediation plans to address the material weaknesses in internal control over
financial reporting described in 2008 and 2009. To date, we have made progress
towards remediation, including taking steps to:




·
              add
      a financial expert to our board of
directors;




·
              establish
      committees of our board of directors, including an audit
      committee,  responsible for oversight of our internal controls
      and accounting transactions;




·
              increase
      the frequency of our board of directors meetings and actively engage our
      directors in the provision of oversight of our internal controls and the
      review of complex or unusual accounting transactions until an audit
      committee has been
established;




·
              provide
      a mechanism for the submission of anonymous reports, relating to
      accounting or audit irregularities, directly to our independent director
      and legal counsel;




·
              provide
      our internal audit consultant with direct access to our independent
      directors and legal counsel;




35




·
              included
      our internal audit consultant in quarterly meetings of our board of
      directors to provide a status update on our remediation plan development
      and implementation as well as the effectiveness of our internal
      controls;




·
              execute
      timely preparation of balance sheet account reconciliations accompanied by
      sufficient supporting documentation and review and approval for validity,
      completeness and accuracy performed by a competent accounting
      professional;




·
              formalize
      journal entry preparation and review process to include sufficient
      supporting documentation and proper review and approval prior to
      recording; and




·
              implement
      a formal financial reporting process that includes review of the financial
      statements by the full board of directors prior to filing with the
      SEC.




We were
unable to conclude that the material weaknesses described in our Annual Report
on Form 10-K for the year ended December 31, 2008 and 2009 were effectively
remediated as of December 31, 2009 due to the fact that (i) less than the entire
remediation plan has been developed and implemented and (ii) an insufficient
period of time has passed for management to test and document the effectiveness
of those controls which have been newly created as part of the remediation plan
(as summarized above).




Attestation
Report




This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s
independent registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only management’s
report in this annual report.




Item 9B. Other
Information.




None.




36




PART
III




Item 10.
Directors, Executive Officers and Corporate Governance.




The
executive officers and directors of the Company, with a brief description, are
as follows:




Name
            
            Age
            
            Position
            
            
            
            Independent
      DirectorChad
      B. Hoehne
            
            48
            
            Chairman,
      CEO, CFO, Director
            
            Mr.
      Hoehne is the Chairman, President and founder of the Company. He has a
      B.S. degree in Business Administration, Finance and computer minor from
      Minnesota State University. Mr. Hoehne founded Table Trac, Inc. in 1994
      after working nine years for a successful Minneapolis electronics
      manufacturer and software company.
            
            NORobert
      R Siqveland
            
            66
            
            Secretary,
      Director
            
            Mr.
      Siqveland is employed by Table Trac, Inc. as Director of Marketing. Mr.
      Siqveland has served as Corporate Secretary on the Company’s Board of
      Directors since 1999. Prior to joining Table Trac, Mr. Siqveland was an
      investment advisor and venture capitalist for 25 years, providing “seed
      capital” and management to over 30 companies. Mr. Siqveland graduated from
      the University of Minnesota in 1967 with a Bachelor of Arts degree in
      history and participated in the ROTC program. Upon graduation, Mr.
      Siqveland was awarded his commission in the United States Army, achieved
      the rank of Captain, and commanded an Artillery Battery.
            
            NOThomas
      J.Oliveri
            
            51
            
            Director
            
            Thomas
      J. Oliveri is President and Chief Operating Officer of Clear Skies Solar,
      Inc. and has served in that capacity since April 14, 2008. Mr. Oliveri has
      25 years of experience as a global executive directing and managing all
      aspects of business operations, strategic planning, engineering,
      marketing, sales, operations, accounting, HR, and IT functions with
      working experience in the United States, Europe, Asia, Russia, Australia,
      South America, and South Africa. Since 2006, Mr. Oliveri has led a
      corporate turnaround effort as the Head of the Equipment Flow division of
      Sulzer Metco, Inc., a worldwide leader in the thermal spray industry. From
      1999 to 2006, Mr. Oliveri served in a variety of executive roles,
      eventually rising to CEO, at Global Payment Technologies, Inc., a currency
      validation manufacturer. From 1986 through 2000, Mr. Oliveri served in a
      variety of executive management positions at manufacturing companies
      around the world. Mr. Oliveri has a Bachelor of Science from SUNY Oswego
      and a Master of Science from SUNY Stony Brook. Mr. Oliveri has been a
      director at Table Trac since 2006.
            
            YESGlenn
      Goulet
            
            51
            
            Director
            
            Mr.
      Goulet is a seasoned market researcher with more than 20 years strategic
      research experience, including early research stints at ABC News, the
      Republican National Committee and Market Strategies, Inc., the 19th
      largest market research firm in the United States. He has served on the
      polling teams of two U.S. Presidents. In 1992, Mr. Goulet conducted his
      first market research study for the gaming industry—a comprehensive
      pre-opening market study for the MGM Grand in Las Vegas. For three years
      he was a member of the market research team at GTECH Corporation, the
      world’s leading online lottery technology provider. Over the years he has
      conducted hundreds of gaming research studies, including the annual
      Americans Respond to Gaming Survey and The World Player, a psychographic
      look at gaming across several continents. From 2000 until 2005, he served
      at Multimedia Games as Senior Vice President of Market Research, where he
      was responsible for the market research efforts of new Class II and Class
      III games, gaming systems and technologies. In June 2005, Mr. Goulet
      founded Gaming Strategies + Insights, LLC, a market research firm focused
      on providing commercial and Native American casinos, gaming manufacturers
      and gaming technology providers with research-driven blueprints for
      developing revenue-generating marketing and operational strategies and
      continues to operate that company today. In November 2008, Mr. Goulet
      joined INTRALOT, a $1.5 billion gaming technology provider with operations
      on five continents, where he remains today. At INTRALOT, he serves as
      Corporate Director of Market Research leading the company’s research
      efforts in the United States and is primarily focused on the lottery and
      video lottery gaming markets. He is a member of the editorial board of
      Casino Journal magazine, has written numerous articles on gaming and is a
      frequent speaker at gaming-related trade shows and conferences. Mr. Goulet
      has been a director at Table Trac since December 2009.
            
            YESScott
      E. Smith
            
            53
            
            Director,
      Audit Committee Chairman
            
            Mr.
      Smith serves as a senior advisor to Noble Ventures Group, working with
      best-in-class companies to help them grow rapidly and profitably. He was
      previously employed from 2002 until 2009 by F-2 Intelligence Group
      (“F-2”), a company engaged in providing critical insights to multinational
      corporations and private equity clients on a broad range of strategic
      issues. From 2002 to 2004, Mr. Smith served as F-2’s Director of Corporate
      Accounts, where he was responsible for selling strategic consulting
      services primarily to Fortune 500 companies and from 2004 to 2009, he
      served as F-2’s Regional Director of Sales for Private Equity, where he
      sold market and competitive intelligence consulting services to private
      equity firms. Prior to joining F-2, Mr. Smith was employed by the
      accounting firm Arthur Andersen for 23 years and served the last ten years
      as an audit partner. Mr. Smith is a Certified Public Accountant and a
      Certified Management Accountant. Since 2006, Mr. Smith has been a director
      for ProUroCare Medical, Inc. (PUMD.OB), a development-stage medical
      technology company engaged in developing innovative products for the
      detection and characterization of male urological prostate disease, where
      he also serves as Chairman of the Audit Committee. Mr. Smith has been a
      director at Table Trac since December 2009.
            
            YES




The
directors of the Company are elected annually by the stockholders for a term of
one year or until their successors are elected and qualified.




37




Item
11. - EXECUTIVE COMPENSATION.




During
the years ended December 31, 2009 and 2008, certain officers were compensated
for their role as executive officers.




In 2009,
and since 2002, Mr. Hoehne has fulfilled the duties of chief executive officer,
chief financial officer, corporate administrator, performing the corporate
accounting and finance activities, chairman and president in addition to
programming and technology development. For fulfilling these responsibilities
the total executive compensation was $376,144 which includes board member
compensation, along with 5,000 shares of common stock valued at $8,000 for the
year ended December 31, 2009 and $330,000 for the year ended December 31,
2008.




In 2008,
and since 2002, Mr. Siqveland has fulfilled the duties of corporate secretary,
customer services, installation training and corporate development, as well as
National Sales Manager. For fulfilling these responsibilities, the total
executive compensation for the year ended December 31, 2009 was $98,014 which
includes health plan coverage along with 5,825 shares of common stock valued at
$9,320 and $86,820 of salary for the year ended December 31, 2008.




38




As of the
date of this Annual Report, Table Trac Inc. does not offer its executive
employees any pension, annuity, insurance, profit sharing or similar benefit
plans other than our Stock Incentive Plan. Executive compensation is subject to
change concurrent with our requirements. We do not have employment agreements
with any of our officers but we may enter into such agreements with our senior
executive officers in the future. We do not currently have a compensation
committee. Decisions as to compensation are made from time-to-time by our Board
of Directors with no established policies or formulas. At our most recent 2010
board meeting, we created a compensation committee with the responsibility for
making such decisions.




We have
no long-term incentive plans in place; therefore, there were no awards made
under any long-term incentive plan to any of the above executive officers during
fiscal years ended December 31, 2009 and 2008.




Stock
Options and Grants in 2009




The
Company did not grant any stock options in 2009 or 2008.




Outstanding
Options Table




Name
            
            Employee
      Stock
              Options
      Exercisable
            
            
            Employee
      Stock
              Options
              Unexercisable
            
            
            Option
              Exercise
      Price
            
            Option
              Expiration
      DateChad
      and Sally Hoehne
            
            
            157,500
            
            
            
            - 0
      -
            
            
            $
            0.125
            
            12/31/2010Robert
      Siqveland, Director
            
            
            80,000
            
            
            
            - 0
      -
            
            
            $
            0.125
            
            12/31/2010Directors
      and Officers as a group
            
            
            237,500




Item 12. Security Ownership of Certain
Beneficial Owners and Management.




As of
December 31, 2009, there are 4,162,234 shares of the Company’s common shares
outstanding. The following table sets forth the information as of December 31,
2009 as to the ownership of each person who, as of this date, owns of record, or
is known by the Company to own beneficially, more than five percent of the
Company’s common stock, and in addition, by each director and executive officer
of the Company, and by all directors and executive officers as a
group.




Name
            
            Shares
      of Common Stock
            
            
            Percent
      of OwnershipChad
      Hoehne, CEO and Director
            
            
            1,138,600
            
            
            
            27.39
            %Robert
      Siqveland, Director
            
            
            170,500
            
            
            
            4.10
            %Thomas
      Oliveri, Director
            
            
            20,000
            
            
            
            0.48
            %Scott
      E. Smith, Director
            
            
            19,500
            
            
            
            0.47
            %Directors
      and Officers as a group
            
            
            1,348,600
            
            
            
            32.44
            %Unrelated
      PartiesDoucet
      capital, LLC
            
            
            368,177
            
            
            
            8.8
            %




39




Item 13. - CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.




None.




BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE




Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and
directors, and persons who own more than ten percent of any registered class of
the Company’s equity securities (in our case, our common stock), to file reports
of ownership and changes in ownership with the SEC. Officers, directors and
greater-than-ten-percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.




Based
solely on review of the copies of the Forms 3, 4 and 5 (and amendments thereto)
that we received or are aware of with respect to transactions during fiscal
2008, we believe that the Company’s officers, directors and
greater-than-ten-percent beneficial owners complied with all applicable Section
16(a) filing requirements.




ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




Our
independent auditor, Moquist Thorvilson Kaufmann Kennedy and Pieper, LLC (MTK)
formerly Carver Moquist & O’Connor, LLC (CMO), billed for the following
services:




2009
            
            
            2008Audit
      fees, including quarterly review of Form 10-Q
            
            $
            48,603
            
            
            $
            51,387Tax
      fees
            
            
            8,222
            
            
            
            3,652Audit-related
      fees
            
            
            1,779
            
            
            
            -$
            58,604
            
            
            $
            55,039




40




During
2008, the Company did not have an audit committee. During 2009, the shareholders
voted 2 additional board members and the Company now has an audit committee
composed of 3 independent directors. Our board of directors evaluates the scope
and cost of the engagement of an auditor before the auditor renders audit and
non-audit services. As a result, we do not rely on established pre-approval
policies and procedures.




PART
IV




Item 15. - EXHIBITS, FINANCIAL
STATEMENT SCHEDULES AND REPORTS ONFORM 8-K.




(a)
Included herein at part II, Item 8 are the Financial Statements and the Report
of the Independent Registered Public Accounting Firm.




(b) The
Company had no events to report on Form 8-K in 2009.




(c) There
are no exhibits.




41




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.




Dated:
March 31, 2010




TABLE
TRAC, INC.






Table
Trac, Inc.




/s/ Chad B.
Hoehne





Chad B.
Hoehne, Chief Executive Officer /Chief Financial Officer




42