SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C. 20549




Form
10-Q




x   Quarterly report pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934




For the
quarterly period ended September 30, 2009 or




 ̈   Transition report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934




Commission File Number:  
000-28383




Table
Trac, Inc.


(Exact
Name of Registrant as Specified in its Charter)





Nevada
            
            88-0336568(State
      or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
      Employer Identification Number)




15612 Highway 7, Suite 331,
Minnetonka, Minnesota 55345


(Address
of Principal Executive Offices) (Zip Code)




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





N/A







(Former name, former address
and former fiscal year, if changed since last report)




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 xNo  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes  ̈No  ̈





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
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈  (Do
      not check if a smaller reporting company)
            Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  ̈  No x





As of
November 10, 2009, the registrant had outstanding 4,162,234 shares of common
stock, $.001 par value per share.





Table
Trac, Inc.




Index





PagePART
      I. FINANCIAL INFORMATIONItem
      1. Financial Statements
                    
                    3Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                    
                    11Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                    
                    16Item
      4T. Controls and Procedures
                    
                    16PART
      II. OTHER INFORMATIONItem
      1. Legal Proceedings
                    
                    18Item
      1A. Risk Factors
                    
                    18Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                    
                    18Item
      3. Defaults Upon Senior Securities
                    
                    18Item
      4. Submission of Matters to a Vote of Security Holders
                    
                    18Item
      5. Other Information
                    
                    18Item
      6. Exhibits
                    
                    19SIGNATURES
                    
                    19




1


PART
I. FINANCIAL INFORMATION




Item 1. Financial
Statements





TABLE
TRAC, INC.





CONTENTS





PageCONDENSED
      FINANCIAL STATEMENTSCondensed
      Balance Sheets
                  3Condensed
      Statements of Operations
                  4Condensed
      Statements of Cash Flows
                  5Notes
      to Condensed Financial Statements
                  6




2





TABLE
TRAC, INC.


CONDENSED
BALANCE SHEETS (Unaudited)





September 30, 2009
                  
                  
                  December 31, 2008ASSETSCURRENT
      ASSETSCash
                  
                  $
                  991,295
                  
                  
                  $
                  1,212,953Accounts
      receivable, net
                  
                  
                  1,710,179
                  
                  
                  
                  2,006,475Inventory
                  
                  
                  166,659
                  
                  
                  
                  248,598Prepaid
      expenses and other
                  
                  
                  31,005
                  
                  
                  
                  8,143Income
      taxes receivable
                  
                  
                  155,434
                  
                  
                  
                  45,000TOTAL
      CURRENT ASSETS
                  
                  
                  3,054,572
                  
                  
                  
                  3,521,169Property
      and equipment, net of accumulated depreciation
                  
                  
                  23,309
                  
                  
                  
                  27,865Deferred
      system sales cost, net
                  
                  
                  69,099
                  
                  
                  
                  -Patent,
      net of accumulated amortization
                  
                  
                  10,167
                  
                  
                  
                  11,191Long-term
      accounts receivable – financed contracts
                  
                  
                  -
                  
                  
                  
                  68,045TOTAL
      ASSETS
                  
                  $
                  3,157,147
                  
                  
                  $
                  3,628,270LIABILITIES
      AND  STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts
      payable
                  
                  $
                  67,144
                  
                  
                  $
                  225,557Accrued
      payroll and related withholding liabilities
                  
                  
                  7,762
                  
                  
                  
                  39,624Deferred
      revenue
                  
                  
                  -
                  
                  
                  
                  389,297Deferred
      tax liability
                  
                  
                  584,000
                  
                  
                  
                  619,000TOTAL
      CURRENT LIABILITIES
                  
                  
                  658,906
                  
                  
                  
                  1,273,478LONG-TERM
      LIABILITIESDeferred
      tax liability
                  
                  
                  26,000
                  
                  
                  
                  -TOTAL
      LIABILITIES
                  
                  
                  684,906
                  
                  
                  
                  1,273,478STOCKHOLDERS'
      EQUITYCommon
      stock, 0.001 par value; 5,000,000 shares authorized: 4,162,234 shares
      issued and outstanding at September 30, 2009 and December 31,
      2008
                  
                  
                  4,162
                  
                  
                  
                  4,162Additional
      paid-in capital
                  
                  
                  1,404,618
                  
                  
                  
                  1,398,254Retained
      earnings
                  
                  
                  1,064,883
                  
                  
                  
                  998,1232,473,663
                  
                  
                  
                  2,400,539Treasury
      stock (1,000 shares and 32,200 shares at September 30, 2009 and December
      31, 2008, respectively), at cost
                  
                  
                  (1,422
                  )
                  
                  
                  (45,747
                  )TOTAL
      STOCKHOLDERS’ EQUITY
                  
                  
                  2,472,241
                  
                  
                  
                  2,354,792TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  3,157,147
                  
                  
                  $
                  3,628,270





See
notes to condensed financial statements.


3





TABLE
TRAC, INC.


CONDENSED
STATEMENTS OF OPERATIONS (Unaudited)





Three months ended
                          
                          
                          Nine months endedSeptember 30, 2009
                          
                          
                          September 30, 2008
                          
                          
                          September 30, 2009
                          
                          
                          September 30, 2008Revenues
                          
                          $
                          471,847
                          
                          
                          $
                          1,011,991
                          
                          
                          $
                          2,662,142
                          
                          
                          $
                          2,970,102Cost
      of sales
                          
                          
                          105,899
                          
                          
                          
                          147,791
                          
                          
                          
                          620,378
                          
                          
                          
                          591,847Gross
      profit
                          
                          
                          365,948
                          
                          
                          
                          864,200
                          
                          
                          
                          2,041,764
                          
                          
                          
                          2,378,255Operating
      Expenses:Selling,
      general and administrative
                          
                          
                          627,924
                          
                          
                          
                          466,126
                          
                          
                          
                          1,706,724
                          
                          
                          
                          1,153,601Bad
      debt expense – note receivable and related interest
    receivable
                          
                          
                          351,530
                          
                          
                          
                          -
                          
                          
                          
                          351,530
                          
                          
                          
                          -Income
      (loss) from operations
                          
                          
                          (613,506
                          )
                          
                          
                          398,074
                          
                          
                          
                          (16,490
                          )
                          
                          
                          1,224,654Interest
      income
                          
                          
                          51,051
                          
                          
                          
                          16,446
                          
                          
                          
                          136,803
                          
                          
                          
                          48,346Net
      income (loss) before taxes
                          
                          
                          (562,455
                          )
                          
                          
                          414,520
                          
                          
                          
                          120,313
                          
                          
                          
                          1,273,000Income
      tax expense (benefit)
                          
                          
                          (207,997
                          )
                          
                          
                          161,500
                          
                          
                          
                          53,553
                          
                          
                          
                          493,500Net
      income (loss)
                          
                          $
                          (354,458
                          )
                          
                          $
                          253,020
                          
                          
                          $
                          66,760
                          
                          
                          $
                          779,500Basic
      earnings (loss) per common share
                          
                          $
                          (0.09
                          )
                          
                          $
                          0.06
                          
                          
                          $
                          0.02
                          
                          
                          $
                          0.19Weighted-average
      basic shares outstanding
                          
                          
                          4,162,234
                          
                          
                          
                          4,162,234
                          
                          
                          
                          4,162,234
                          
                          
                          
                          4,159,091Diluted
      earnings (loss) per common share
                          
                          $
                          (0.09
                          )
                          
                          $
                          0.06
                          
                          
                          $
                          0.02
                          
                          
                          $
                          0.17Weighted-average
      diluted shares outstanding
                          
                          
                          4,162,234
                          
                          
                          
                          4,486,753
                          
                          
                          
                          4,478,939
                          
                          
                          
                          4,483,610Cash
      dividends paid per common share
                          
                          $
                          0.00
                          
                          
                          $
                          0.00
                          
                          
                          $
                          0.00
                          
                          
                          $
                          0.05





See
notes to condensed financial statements.


4


TABLE
TRAC, INC.


CONDENSED
STATEMENTS OF CASH FLOW (Unaudited)





Nine Months Ended
                    September 30, 2009
                  
                  
                  Nine Months Ended
                    September 30, 2008OPERATING
      ACTIVITIESNet
      income
                  
                  $
                  66,760
                  
                  
                  $
                  779,500Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                  
                  
                  5,580
                  
                  
                  
                  5,707Deferred
      income taxes
                  
                  
                  (9,000
                  )
                  
                  
                  332,000Allowance
      for doubtful accounts receivable
                  
                  
                  144,383
                  
                  
                  
                  40,000Allowance
      for uncollectible note and related interest receivable
                  
                  
                  351,530
                  
                  
                  
                  -Non-cash
      stock compensation expense
                  
                  
                  51,631
                  
                  
                  
                  15,750Changes
      in operating assets and liabilitiesAccounts
      receivable
                  
                  
                  219,958
                  
                  
                  
                  (506,552
                  )Interest
      receivable
                  
                  
                  (101,530
                  )
                  
                  
                  -Inventory
                  
                  
                  81,939
                  
                  
                  
                  (319,566
                  )Prepaid
      expenses and other assets
                  
                  
                  (22,862
                  )
                  
                  
                  3,900Deferred
      system sales costs
                  
                  
                  (69,099
                  )
                  
                  
                  -Accounts
      payable
                  
                  
                  (158,413
                  )
                  
                  
                  25,330Accrued
      payroll and related withholding liabilities
                  
                  
                  (31,862
                  )
                  
                  
                  (19,047
                  )Deferred
      revenue
                  
                  
                  (389,297
                  )
                  
                  
                  315,948Income
      taxes receivable / payable
                  
                  
                  (110,434
                  )
                  
                  
                  161,500Net
      cash provided by operating activities
                  
                  
                  29,284
                  
                  
                  
                  834,470INVESTING
      ACTIVITIESIssuance
      of note receivable
                  
                  
                  (250,000
                  )
                  
                  
                  -Purchase
      of equipment
                  
                  
                  -
                  
                  
                  
                  (35,066
                  )Net
      cash used in investing activities
                  
                  
                  (250,000
                  )
                  
                  
                  (35,066
                  )FINANCING
      ACTIVITIESCash
      dividend paid
                  
                  
                  -
                  
                  
                  
                  (207,812
                  )Repurchase
      of Company stock
                  
                  
                  (942
                  )
                  
                  
                  -Net
      cash used in financing activities
                  
                  
                  (942
                  )
                  
                  
                  (207,812
                  )NET
      INCREASE (DECREASE) IN CASH
                  
                  
                  (221,658
                  )
                  
                  
                  591,592CASHBeginning
      of period
                  
                  
                  1,212,953
                  
                  
                  
                  610,155End
      of period
                  
                  $
                  991,295
                  
                  
                  $
                  1,201,747





See
notes to condensed financial statements.


5





TABLE
TRAC, INC.




NOTES TO
CONDENSED FINANCIAL STATEMENTS





1.        Nature of Business and Summary of
Significant Accounting Policies –





Basis of
Presentation





The
accompanying unaudited condensed financial statements of Table Trac have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. The balance sheet as of September 30, 2009 and the statements of
income and cash flows for the three and nine months ended September 30, 2009 and
2008 are unaudited but include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial position at such
date and the operating results and cash flows for those periods. Certain
information normally included in financial statements and related footnotes
prepared in accordance with generally accepted accounting principles has been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. The accompanying financial statements should be read in
conjunction with the financial statements and notes included in the Table Trac
Annual Report on Form 10-K, for the year ended December 31, 2008.





Nature of
Business




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




Table
Trac 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.





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.


6


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 are 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.





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.





Deferred System Sales
Costs





Deferred
system sales costs consist of installed system costs incurred on
participation-based contracts. These costs are recognized on a straight-line
basis over the term of the contract which is generally 60 months beginning when
revenues are generated. At the end of the contract period, the customer will
receive title to the system. Amortization of deferred system sales costs for the
three and nine months ended September 30, 2009 was $3,840 and $7,680,
respectively.  See footnote 7 for subsequent event.





Accounts Receivable /
Allowance for Doubtful Accounts





Accounts
receivable includes regular customer receivables and amounts from financed
contracts coming due within 12 months. Amounts from these contracts coming due
beyond 12 months are recorded as "Long-term accounts receivable - financed
contracts ".  An allowance for doubtful accounts is recorded when the
Company believes the amounts will not be collected.





A
rollforward of the Company’s allowance for doubtful accounts for the nine months
ended September 30, 2009 and 2008 is as follows:





Nine Months Ended
                      September 30,2009
                    
                    
                    2008Accounts
      receivable allowance, beginning of period
                    
                    $
                    -
                    
                    
                    $
                    -Provision
      adjustment during period
                    
                    
                    144,383
                    
                    
                    
                    40,000Write-off
      of bad debt
                    
                    
                    -
                    
                    
                    
                    -Accounts
      receivable allowance, end of period
                    
                    $
                    144,383
                    
                    
                    $
                    40,000





Major
Customers





The
following table summarizes significant customer information for the nine months
ended September 30, 2009 and 2008:





For
      the nine months ended
                        September
      30, 2009
                      
                      
                      For
      the nine months ended
                        September
      30, 2008%
      of Sales
                      
                      
                      %
      of A/R
                      
                      
                      %
      of Sales
                      
                      
                      %
      of A/RCustomer
      A
                      
                      
                      28.9
                      %
                      
                      
                      7.0
                      %
                      
                      
                      16.2
                      %
                      
                      
                      1.0
                      %Customer
      B
                      
                      
                      23.1
                      %
                      
                      
                      26.0
                      %
                      
                      
                      0.0
                      %
                      
                      
                      0.0
                      %Customer
      C
                      
                      
                      13.9
                      %
                      
                      
                      4.0
                      %
                      
                      
                      2.9
                      %
                      
                      
                      1.0
                      %Customer
      D
                      
                      
                      9.8
                      %
                      
                      
                      4.0
                      %
                      
                      
                      24.5
                      %
                      
                      
                      23.0
                      %Customer
      E
                      
                      
                      3.3
                      %
                      
                      
                      9.0
                      %
                      
                      
                      15.3
                      %
                      
                      
                      19.0
                      %Customer
      F
                      
                      
                      9.8
                      %
                      
                      
                      16.0
                      %
                      
                      
                      12.4
                      %
                      
                      
                      17.0
                      %Customer
      G
                      
                      
                      1.6
                      %
                      
                      
                      16.0
                      %
                      
                      
                      12.1
                      %
                      
                      
                      16.0
                      %




7


Recent Accounting
Pronouncements





On June
15, 2009, the Company adopted new accounting guidance on subsequent events,
including events or transactions that provide additional evidence about
conditions that existed at the date of the balance sheet and events that provide
evidence about conditions that did not exist at the date of the balance sheet
but arose after that date.  The new guidance requires all public
entities to evaluate subsequent events through the date that the financial
statements are available to be issued and disclose in the notes the date through
which the Company has evaluated subsequent events and whether the financial
statements were issued or were available to be issued on the disclosed
date.




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.





2.        Inventory –





Company
inventories consisted of the following at:





September
      30, 2009
                      
                      
                      December
      31, 2008Raw
      Materials
                      
                      $
                      -
                      
                      
                      $
                      -Work-in-Process
                      
                      
                      -
                      
                      
                      
                      8,850Finished
      Goods
                      
                      
                      166,659
                      
                      
                      
                      239,748Obsolescence
      reserve
                      
                      
                      -
                      
                      
                      
                      -Total
                      
                      $
                      166,659
                      
                      
                      $
                      248,598





3.        Note
Receivable / Interest Receivable –





Notes
receivable and interest receivable activity for the nine months ended September
30, 2009 is as follows:





Note
      Receivable
                        
                        
                        Interest
      ReceivableBalance
      as of December 31, 2008
                        
                        $
                        -
                        
                        
                        $
                        -March
      2009, customer loan made
                        
                        
                        250,000Interest
      earned for the nine months ended September 30, 2009
                        
                        
                        -
                        
                        
                        
                        101,530Allowance
      for bad debts
                        
                        
                        (250,000
                        )
                        
                        
                        (101,530
                        )Balance
      as of September 30, 2009
                        
                        $
                        -
                        
                        
                        $
                        -




The loan
bears 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.  The Company reserved against the note and interest
receivable because of (1) a pending court action regarding the legality of
electronic bingo in the county where the customer conducted business, (2) the
past due status of the note receivable repayment, and (3) lack of payments
towards the interest receivable.  An allowance is recorded when the
Company believes collection of the receivable is doubtful.  In
connection with this customer, the Company has also recorded a reserve of
$45,800 for past due accounts receivable related to participation revenue earned
and unreimbursed expenses.  This amount is included in the Company’s
allowance for doubtful accounts receivable at September 30, 2009.




8


4.        Shareholders’
Equity –




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 in
total.  The total cost of $51,632, which included $712 of transaction
costs, 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 September 30, 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.




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 stock at the grant date. These options are exercisable for a period of seven
years from the date of grant. Table Trac has reserved 1,000,000 shares of its
common stock for potential issuance under this plan. As of September 30, 2009,
370,000 stock options were available for grants.




Table
Trac uses the Black-Scholes-Merton option-pricing model as a method for
determining the estimated fair market value for employee stock awards.
Compensation expense for employee stock awards is recognized on a straight-line
basis over the vesting period of the award. The Company recorded $0 of related
compensation expense for the three and nine months ended September 30, 2009 and
2008, respectively.




There
were 337,500 options outstanding and exercisable at September 30, 2009 and
December 31, 2008 with an exercise price of $0.125, which expire October 10,
2010. The options had an aggregate intrinsic value of $666,563 at September 30,
2009, which is equal to the difference in the closing stock price on that date
and the exercise price multiplied by the number of in-the-money options that
would have been received had all options been exercised on September 30,
2009.




5. Income
Tax –




The
Company accounts for income taxes by following the asset and liability approach
to accounting for income taxes. Deferred tax assets and liabilities represent
the future tax consequences of the differences between the financial statement
carrying amounts of assets and liabilities versus the tax basis of assets and
liabilities. Under this method, deferred tax assets are recognized for
deductible temporary differences, and operating loss and tax credit
carryforwards. Deferred liabilities are recognized for taxable temporary
differences. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The impact of the tax rate
changes on deferred tax assets and liabilities is recognized in the year that
the change is enacted.




The
Company files income tax returns in the U.S. federal jurisdiction and various
state jurisdictions. Based on its evaluation, it has concluded that there are no
significant unrecognized tax implications. The Company’s evaluation was
performed for the tax years ended December 31, 2004 through 2008, the tax years
that remain subject to examination by major tax jurisdictions as of September
30, 2009. The Company does not believe there will be any material changes in its
unrecognized tax positions over the next twelve months.




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




6.        Earnings (Loss) Per Share
–





Earnings
(loss) 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 (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding. Diluted earnings
(loss) per share is computed by dividing net income (loss) 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 September 30, 2009 and 2008:


9





Three Months Ended
                      September 30,
                    
                    
                    Nine Months Ended
                      September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Basic
      earnings per share calculation:Net
      income (loss) to common stockholders
                    
                    $
                    (354,458
                    )
                    
                    $
                    253,020
                    
                    
                    $
                    66,760
                    
                    
                    $
                    779,500Weighted
      average number of common shares outstanding
                    
                    
                    4,162,234
                    
                    
                    
                    4,162,234
                    
                    
                    
                    4,162,234
                    
                    
                    
                    4,159,091Basic
      net income (loss) per share
                    
                    $
                    (0.09
                    )
                    
                    $
                    0.06
                    
                    
                    $
                    0.02
                    
                    
                    $
                    0.19Diluted
      earnings per share calculation:Net
      income (loss)
                    
                    $
                    (354,458
                    )
                    
                    $
                    253,020
                    
                    
                    $
                    66,760
                    
                    
                    $
                    779,500Weighted
      average number of common shares outstanding
                    
                    
                    4,162,234
                    
                    
                    
                    4,164,234
                    
                    
                    
                    4,162,234
                    
                    
                    
                    4,159,091Common
      stock equivalents:Stock
      options
                    
                    
                    -
                    (1)
                    
                    
                    322,519
                    
                    
                    
                    316,705
                    
                    
                    
                    324,519Weighted
      average diluted shares outstanding
                    
                    
                    4,162,234
                    
                    
                    
                    4,486,753
                    
                    
                    
                    4,478,939
                    
                    
                    
                    4,483,610Diluted
      net income (loss) per share
                    
                    $
                    (0.09
                    )
                    
                    $
                    0.06
                    
                    
                    $
                    0.02
                    
                    
                    $
                    0.17





(1)  Stock
options outstanding of 337,500 were not included in the calculation as they
would have been anti-dilutive.





7.        Subsequent
Event –





On
October 26, 2009, the Circuit Court of Walker County, Alabama issued an order
concluding that electronic bingo in Walker County, Alabama constituted the
operation of an illegal lottery.  This court order affects 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 will take
an impairment charge of approximately $29,000 against the system, which has net
book value of $69,099 as of September 30, 2009, during the fourth quarter of
fiscal 2009.





The
Company did not have any additional subsequent events through November 16, 2009,
which is the date the financial statements were available to be issued,
requiring recording or disclosure in the financial statements for the three and
nine months ended September 30, 2009.


10




Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations





Our
Management’s Discussion and Analysis of Financial Condition and Results of
Operations set forth below should be read in conjunction with our
audited  financial statements, and notes thereto, contained in our
Form 10-K filed with the SEC on March 20, 2009 relating to our year ended
December 31, 2008.




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 actions or 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 report.





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.





General
Overview




Table
Trac is a Nevada corporation, formed on June 27, 1995, with principal offices in
Minnetonka, Minnesota. It developed and patented (U. S. patent number 5,957,776)
a proprietary information and management system (Table Trac) that automates and
monitors the operations of casino table games. Since 2000, Table Trac has added
functionality, developed related casino system modules for guest rewards and
loyalty club, marketing analysis, guest service, promotion
administration/management, vault/cage management and audit/accounting to its
existing table games management program. These modules all use Table Trac's
simple to learn browser-based interface.




Recently,
we expanded our product offerings in the areas of gaming machine on-line
accounting and management, customer mailing for tiered pre-encoded promotional
marketing, touch screen customer service kiosks, guest service paging and
wireless handheld communication devices. The addition of these modalities has
transformed Table Trac from a "niche" supplier of peripheral products to one of
a full line single source supplier.




We are
able to offer our customers systems with functionality comparable to our larger
competitors at a significantly lower price point by utilizing innovative
technology and programming resources. We have over twelve years of on-table
experience, more than eight years of customer reward and loyalty programs and
tens of millions of continuous gaming machine operation monitoring hours. We are
favorably positioned to compete for a broader cross section of casinos seeking
to reduce their systems cost while improving the reliability and accountability
of their operations.




Discussion of Critical
Accounting Policies




Our
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 us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We evaluate these
estimates on an on-going basis, including those related to revenue recognition,
bad debts, inventory valuation, intangible assets, and income taxes. We base
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
accounting policies, estimates and judgments that we believe have the most
effect on its reported financial position and results of operations are as
listed below. This section should also be read in conjunction with Note 1 in our
financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2008.




Revenue
Recognition




We derive
revenues from the sales of systems, licenses and maintenance fees, services and
participation-based agreements.


11


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,
we allocate the revenue to each element based on their stand-alone fair value
(or in the absence of fair value, the residual method) and recognize the
associated revenue when all revenue recognition criteria have been met for each
element.





In 2005,
we began offering our customers contracts with extended payment terms and have
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,
we began offering new customers a participation-based contract. Revenues are
determined and billed monthly based on a percentage of the amount of money
processed through our system.




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.




Deferred
System Sales Costs




Deferred
system sales costs consist of installed system costs incurred on
participation-based contracts. These costs will be recognized on a straight-line
basis over the term of the contract which is generally 60 months beginning when
revenues are generated. At the end of the contract period, the customer will
receive title to the system.  Amortization of deferred system sales
costs for the three and nine months ended September 30, 2009 was $3,840 and
$7,680, respectively.




Accounts
Receivable




Accounts
receivable includes regular customer receivables and amounts from financed
contracts coming due within 12 months. Amounts from these contracts coming due
beyond 12 months are recorded as "Long-term accounts receivable - financed
contracts ".  Our accounts receivable also includes an allowance for
doubtful accounts.





Results
of Operations - Three Months Ended September 30, 2009 Compared to Three Months
Ended September 30, 2008





During
the three months ended September 30, 2009, loss from operations was ($613,506)
compared to income from operations of $398,074 for the three months ended
September 30, 2008. The major components of revenues, cost of sales and selling,
general and administrative expenses are discussed below.





Revenues





Revenues
totaled $471,847 for the three months ended September 30, 2009 compared to
$1,011,991 for the three months ended September 30, 2008.  The
following table summarizes our revenues for the three months ended September 30,
2009 and 2008, respectively:


12




Three Months Ended
                      September 30,
                    
                    Three Months Ended
                      September 30,2009
                    
                    2008
                    
                    2009
                    
                    2008(percentage of revenues)System
      sales
                    
                    $
                    137,648
                    
                    
                    $
                    831,929
                    
                    
                    
                    29.2
                    %
                    
                    
                    82.2
                    %License
      and maintenance fees
                    
                    
                    257,253
                    
                    
                    
                    172,171
                    
                    
                    
                    54.5
                    %
                    
                    
                    17.0
                    %Other
      sales
                    
                    
                    76,946
                    
                    
                    
                    7,891
                    
                    
                    
                    16.3
                    %
                    
                    
                    0.8
                    %Total
                    
                    $
                    471,847
                    
                    
                    $
                    1,011,991
                    
                    
                    
                    100
                    %
                    
                    
                    100
                    %





During
the three months ended September 30, 2009, we generated $137,648 in system sales
compared to $831,929 for the three months ended September 30,
2008.  The decrease resulted from less system installation work in
general (which was work conducted to finalize installations begun earlier in the
year), and the absence of any new installation work, in the current
period.  In comparison, the corresponding period from the prior year
involved a significant amount of system installation work from a single large
project.  Conversely, revenues from license and maintenance fees
increased from $172,171 for the three months ended September 30, 2008 to
$257,253 for the three months ended September 30, 2009 due to more of our
systems being in service, and the charge of a one-time license fee to customers
who activate the ticketing technology after system installation is
completed.  Lastly, other sales, which include sales of printers,
kiosk software, mailing services, and consulting services generated $76,946 in
revenues during the three months ended September 30, 2009 compared to $7,891 for
the three months ended September 30, 2008.





Cost of
Sales




Cost of
sales decreased from $147,791 for the three months ended September 30, 2008 to
$105,899 for the three months ended September 30, 2008.  This is
consistent with completion of a larger system installation during the three
months ended September 30, 2008 compared to completion of a smaller system
installation in the current period. The Company's gross profit was 77.6% and
85.4% for the three months ended September 30, 2009 and 2008, respectively. This
decrease is primarily due to the smaller size of the system installation
completed during the current period compared to the larger system installation
completed a year ago.




Selling, General and
Administrative Expenses





Selling,
general and administrative expenses for the three months ended September 30,
2009 were $627,924 compared to $466,126 for the three months ended September 30,
2008.  Our most significant changes in operating expenses related to
salaries and benefits, sales and marketing, research and development,
professional fees, and bad debt expenses. A discussion of the various components
of our operating expenses for the three months ended September 30, 2009 appears
below.





Salaries
and Benefits. Payroll and related costs were $321,276 compared to $242,092 for
the three months ended September 30, 2009 and 2008, respectively. Increased
salaries and benefits expense resulted primarily from the addition of sales and
marketing employees. We expect that, with anticipated growth in our service
offerings as well as an increase in the number of customers, these salaries and
benefits will continue to increase.





Sales and
Marketing. Our expenses related to sales and marketing efforts increased
significantly from $25,510 for the three months ended September 30, 2008 to
$94,637 for the three months ended September 30, 2009 due to increased marketing
efforts related to the sale of our systems and expansion of our service
offerings to existing customers.





Research
and Development.  Our research and development costs for the three
months ended September 30, 2009 increased to $47,967 compared to $44,925 for the
same period in 2008.





Professional
Fees.  Professional fees for accounting services, legal services and
product support aggregated to $35,410 for the three months ended September 30,
2009 versus $35,094 for the three months ended September 30, 2008. Although our
professional fees in total have remained steady for the three months ended
September 30, 2009 compared to the three months ended September, 30, 2008, we
have realized an increase in professional fees for accounting and legal services
related to our status as a public reporting company and our efforts to prepare
for the internal control attestation requirement just recently postponed by the
Securities and Exchange Commission.  We recognized a reduction in
professional fees related to product support due to the completion of projects
related to enhancing our system documentation.  We expect professional
fees to increase throughout the remainder of 2009 as we concentrate our
Sarbanes-Oxley compliance efforts on remediating previously disclosed
deficiencies.


13





Bad
Debt.  Bad debt expense for the three months ended September 30, 2009
was $43,817 compared to $40,000 for the three months ended September 30,
2008.  This change relates to an increase in our allowance for
doubtful accounts due to the discontinued operations of one
customer.





Bad Debt Expense – Note
Receivable and Related Interest Receivable





Bad debt
expense – note receivable and related interest receivable for the three months
ended September 30, 2009 was $351,530 compared to $0 for the three months ended
September 30, 2008.  This change relates to our recording of an
allowance for uncollectible note and related interest receivable due to the past
due status of repayments on the loan and lack of payments on the interest
receivable.




Interest
Income




Interest
income for the three months ended September 30, 2009 was $51,051 compared to
$16,446 for the three months ended September 30, 2008.  This increase
is due somewhat to a higher and more consistent cash balance, but primarily is
related to the $41,081 of interest income and late fees accrued on our $250,000
note receivable.




Income Tax Expense /
Benefit




The
income tax benefit for the third quarter of 2009 of $207,997 which was
calculated at a 34% effective rate compared to the third quarter of 2008 income
tax expense of $161,500 which was also calculated at a 34% effective
rate.




Net Income
(Loss)




Net loss
before taxes was ($562,455) for the three months ended September 30, 2009,
compared to net income before taxes of $414,520 for the three months ended
September 30, 2008. The net loss was ($354,458) for the three months ended
September 30, 2009 down from net income of $253,020 for the three months ended
September 30, 2008. The decrease is due to a reduction in revenue, an increase
in the allowance for doubtful accounts, and recording of an allowance against
the note receivable and the associated interest receivable, which combined
resulted in a net loss for the period.  The basic loss per share was
($0.09) compared to basic earnings per share of $0.06 for the three months ended
September 30, 2009 and 2008, respectively.





Results
of Operations - Nine Months Ended September 30, 2009 Compared to Nine Months
Ended September 30, 2008





During
the nine months ended September 30, 2009, loss from operations was ($16,490)
compared to income from operations $1,224,654 for the nine months ended
September 30, 2008. The major components of revenues, cost of sales and selling,
general and administrative expenses are discussed below.





Revenues





Revenues
totaled $2,662,142 for the nine months ended September 30, 2009 compared to
$2,970,102 for the nine months ended September 30, 2008.  The
following table summarizes our revenues for the nine months ended September 30,
2009 and 2008, respectively:




Nine Months Ended
                      September 30,
                    
                    Nine Months Ended
                      September 30,2009
                    
                    2008
                    
                    2009
                    
                    2008(percentage of revenues)System
      sales
                    
                    $
                    1,825,082
                    
                    
                    $
                    2,460,684
                    
                    
                    
                    68.6
                    %
                    
                    
                    82.8
                    %License
      and maintenance fees
                    
                    
                    723,524
                    
                    
                    
                    496,018
                    
                    
                    
                    27.1
                    %
                    
                    
                    16.7
                    %Other
      sales
                    
                    
                    113,536
                    
                    
                    
                    13,400
                    
                    
                    
                    4.3
                    %
                    
                    
                    0.5
                    %Total
                    
                    $
                    2,662,142
                    
                    
                    $
                    2,970,102
                    
                    
                    
                    100
                    %
                    
                    
                    100
                    %





During
the nine months ended September 30, 2009, we generated $1,825,082 in system
sales compared to $2,460,684 for the nine months ended September 30,
2008.  The decrease resulted from less system installation work in
general (which was work conducted to finalize installations begun earlier in the
year), and the absence of any new installation work, in the current
period.  In comparison, the corresponding period from the prior year
involved a significant amount of system installation work from a variety of
projects.  Revenues from license fees increased from $496,018 for the
nine months ended September 30, 2008 to $723,524 for the nine months ended
September 30, 2009 due to more of our systems being in service, and the charge
of a one-time license fee to customers who activate  the ticketing
technology after system installation is completed.  Lastly, other
sales, which include sales of printers, kiosk software, mailing services, and
consulting services generated $113,536 in revenues during the nine months ended
September 30, 2009 compared to $13,400 for the nine months ended September 30,
2008.  Again, this is primarily due to more systems in operation in
2009 over the same period in 2008.


14


Cost of
Sales




Cost of
sales for the nine months ended September 30, 2009 increased to $620,378 from
$591,847 for the nine months ended September 30, 2008.  The Company's
gross profit was 76.7% for the nine months ended September 30, 2009 down from
80.0% for the three months ended September 30, 2008.  This decrease in
gross profit is consistent with the overall decrease in revenues related to
systems sales, which generally result in lower gross profit.




Selling, General and
Administrative Expenses




Selling,
general and administrative expenses for the nine months ended September 30, 2009
were $1,706,724 compared to $1,153,601 for the nine months ended September 30,
2008.  Our most significant changes in operating expenses from the two
interim periods related to salaries and benefits, sales and marketing,
professional fees, stock compensation and bad debts. A discussion of the various
components of our operating expenses for the nine months ended September 30,
2009 appears below.





Salaries
and Benefits. Payroll and related costs were $914,957 compared to $653,736 for
the nine months ended September 30, 2009 and 2008, respectively. Increased
salaries and benefits expense resulted primarily from the addition of employees.
We expect that, with anticipated growth in our service offerings as well as
increases in the number of customers, these salaries and benefits will continue
to increase.





Sales and
Marketing. Our expenses related to sales and marketing efforts increased
significantly from $54,645 for the nine months ended September 30, 2008 to
$156,343 for the nine months ended September 30, 2009 due to marketing efforts
related to the sale of our systems and expansion of our service offerings to
existing customers.





Professional
Fees.  Professional fees for accounting services, legal services and
product support aggregated to $102,768 for the nine months ended September 30,
2009 versus $123,934 for the nine months ended September 30, 2008. Although our
professional fees in total decreased slightly for the nine months ended
September 30, 2009 compared to the nine months ended September, 30, 2008, we
have realized an increase in professional fees for accounting and legal services
related to our status as a public reporting company and our efforts to prepare
for the internal control attestation requirement just recently postponed by the
Securities and Exchange Commission.  We recognized a reduction in
professional fees related to consulting fees and product support due to the
completion of technical and documentation projects.  We expect
professional fees to increase throughout the remainder of 2009 as we concentrate
our Sarbanes-Oxley compliance efforts on remediating previously disclosed
deficiencies.





Stock
Compensation.  Expense related to stock compensation for the nine
months ended September 30, 2009 compared to the nine months ended September 30,
2008 was $51,632 and $0 respectively.  The increase in stock
compensation expense was due to the repurchase of our Company shares and the
corresponding issuance of these shares as employee incentives.





Bad
Debt.  Bad debt expense for the nine months ended September 30, 2009
was $182,317 compared to $40,000 for the nine months ended September 30,
2008.  This change relates to both an increase in our allowance for
doubtful accounts due to the discontinued operations of one customer and the
continuing economic slowdown with the resulting negative impacts to the gaming
industry, which is the only industry served by the Company’s products and
services.





Bad Debt Expense – Note
Receivable and Related Interest Receivable





Bad debt
expense – note receivable and related interest receivable for the nine months
ended September 30, 2009 was $351,530 compared to $0 for the nine months ended
September 30, 2008.  This change relates to our recording of an
allowance for uncollectible note and related interest receivable due to the past
due status of repayments on the loan and lack of payments on the interest
receivable.





Interest
Income




Interest
income for the nine months ended September 30, 2009 was $136,803 compared to
$48,346 for the nine months ended September 30, 2008.  This increase
is primarily related to the $101,530 of interest income and late fees accrued on
our $250,000 note receivable.




Income Tax
Expense




Income
tax expense for the nine-month period ended September 30, 2009 was $53,553
compared to income tax expense of $493,500 for the nine-month period ended
September 30, 2008, which resulted because our income before taxes for the 2009
period was $120,313 compared to income before taxes for the 2008 period of
$1,273,000.  The overall effective rate for both 2009 and 2008 was
34%.





Net
Income




Net
income was $66,760 for the nine months ended September 30, 2009 down from
$779,500 for the nine months ended September 30, 2008. The decrease in net
income is due to a reduction in revenue, an increase in the allowance for
doubtful accounts, and recording of an allowance against the note receivable and
the associated interest receivable.  The basic earnings per share was
$0.02 compared to basic earnings per share of $0.19 for the nine months ended
September 30, 2009 and 2008, respectively.


15




Backlog




The
Company’s backlog generally consists of future system installations and
expansion of offerings for currently installed and supported
systems.  These expanded offerings can include kiosks, in-casino
broadcast advertising, and electronic marketing to casino patrons.




The
Company is currently working with gaming establishments in Alabama and Oklahoma
to purchase new systems and expand service offerings for existing customers as
well as exploring opportunities in the western and eastern coastal areas of the
United States.  The Company has also recently expanded its sales and
marketing campaigns in the upper Midwest region.  Currently, we do not
have any system installations in our backlog.




Liquidity
and Capital Resources





Summary
cash flow data is as follows:




Nine Months Ended September
      30,2009
                    
                    2008Cash
      flows provided (used) by :Operating
      activities
                    
                    $
                    29,284
                    
                    
                    $
                    834,470Investing
      activities
                    
                    
                    (250,000
                    )
                    
                    
                    (35,066
                    )Financing
      activities
                    
                    
                    (942
                    )
                    
                    
                    (207,812
                    )Net
      increase (decrease) in cash
                    
                    
                    (221,658
                    )
                    
                    
                    591,592Cash,
      beginning of period
                    
                    
                    1,212,953
                    
                    
                    
                    610,155Cash,
      end of period
                    
                    $
                    991,295
                    
                    
                    $
                    1,201,747




At
September 30, 2009, we had cash of $991,295 compared to cash of $1,201,747 on
September 30, 2008. The decrease results mainly from a decrease in revenues for
the nine months ended September 30, 2009 compared to the nine months ended
September 30, 2008.  Changes in cash flows provided by operating
activities related primarily to deferred income taxes, stock compensation
expense, and changes in operating assets and liabilities, including accounts
receivable, interest receivable, inventory, income taxes receivable, deferred
system sales costs, accrued payroll and related withholding liabilities and
deferred revenue.  Changes in cash flows in investing activities
relate to a $250,000 loan to one of our customers during the nine months ended
September 30, 2008 compared to $0 for the nine months ended September 30,
2009.  Changes in financing activities relate to our repurchase of
Company stock in 2009.  Cash dividends of $207,812 and $0 were paid in
2008 and 2009, respectively.





There are
no known trends, events or uncertainties that are likely to have a material
impact on our short or long term liquidity. The primary source of liquidity in
both the short and long term will be system sales, the resulting license and
maintenance fees from existing systems, sales of printers, kiosk software,
mailing services, and consulting services. We anticipate the ability to manage
expenses and cash flow so monthly obligations will be satisfied by cash flow
from operations. We believe the Company has adequate cash to meet its
obligations and continue operations for both existing and future customers as
well as ongoing sales efforts and product development.





Off-Balance
Sheet Arrangements




The
Company had no off-balance sheet arrangements as of September 30,
2009.





Item 3. Quantitative and
Qualitative Disclosures About Market Risk





Not
applicable.




Item 4T. Controls and
Procedures




Material Weaknesses
Previously Disclosed




As
discussed in Item 9A of our 2008 Annual Report on Form 10-K, as of December 31,
2008, we identified certain material weaknesses relating to our accounting
policies and procedures, board of director financial oversight, lack of
segregation of duties, financial close and reporting and internal financial
expertise.


16




Evaluation of Disclosure
Controls and Procedures




Our Chief
Executive Officer/Chief Financial Officer evaluated the effectiveness of the
Company's disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered in this report. In
light of the material weaknesses previously disclosed, which have not been
remediated as of the end of the period covered by this Quarterly Report, our
Chief Executive Officer/Chief Financial Officer concluded that our disclosure
controls and procedures were not effective in providing reasonable assurance
that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act was recorded, processed, summarized and
reported within the time periods specified by the Securities and Exchange
Commission's rules and forms and did not ensure that information required to be
disclosed in the reports that we file or submit under the Exchange Act was
accumulated and communicated to our management, including our Chief Executive
Officer/Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.




As a
result of this conclusion, the financial statements for the period covered by
this report were prepared with particular attention to the material weaknesses
previously disclosed. Notwithstanding the material weaknesses in internal
controls which continue to exist as of September 30, 2009, our Chief Executive
Officer/Chief Financial Officer concluded that the financial statements included
in this Form 10-Q present fairly, the financial position, results of operations
and cash flows of the Company as required for interim financial
statements.





Changes in Internal Control
over Financial Reporting




There
were no changes in our internal controls over financial reporting that occurred
during the fiscal quarter covered by this report that materially affected, or
were reasonably likely to materially affect such controls, except as described
below.





During
the fiscal quarter 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 our Annual Report on Form 10-K for the
year ended December 31, 2008.  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
      director and legal counsel;


·
            include
      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.





Nevertheless,
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 were effectively
remediated as of September 30, 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).  For further information,
please see our Annual Report on Form 10-K for fiscal year ended December 31,
2008.


17


PART
II. OTHER INFORMATION




Item 1.
Legal Proceedings





None.




Item 1A. Risk
Factors





None.




Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds




None.




Item 3. Defaults upon
Senior Securities





None.




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





None.





Item 5.
Other Information





None.




18




Item 6.
Exhibits




Exhibit
                  
                  Description31.1
                  
                  Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ( filed herewith
      ).31.2
                  
                  Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ( filed herewith
      ).32
                  
                  Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002(
      filed herewith).




SIGNATURES




Pursuant
to the requirements of the Securities and Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





Dated:
      November 16, 2009
                  Table
      Trac, Inc.(Registrant)By:
                  /s/
      Chad HoehneChad
      HoehnePresident,
      Chief Executive Officer and Chief Financial
  Officer


19