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 June 30, 2009 or




o   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
August 14, 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
              
              2Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
              
              10Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
              
              15Item
      4T. Controls and Procedures
              
              15PART
      II. OTHER INFORMATIONItem
      1. Legal Proceedings
              
              16Item
      1A. Risk Factors
              
              16Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              
              16Item
      3. Defaults Upon Senior Securities
              
              16Item
      4. Submission of Matters to a Vote of Security Holders
              
              16Item
      5. Other Information
              
              16Item
      6. Exhibits
              
              17SIGNATURES
              
              17


1


PART
I. FINANCIAL INFORMATION




Item 1. Financial
Statements





TABLE
TRAC, INC.





CONTENTS





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


2





TABLE
TRAC, INC.


CONDENSED
BALANCE SHEETS (Unaudited)





June 30, 2009
                
                
                December 31, 2008ASSETSCURRENT
      ASSETSCash
                
                $
                1,113,625
                
                
                $
                1,212,953Accounts
      receivable, net
                
                
                1,930,485
                
                
                
                2,006,475Note
      receivable – short-term
                
                
                250,000
                
                
                
                -Interest
      receivable
                
                
                58,919
                
                
                
                -Inventory
                
                
                182,401
                
                
                
                248,598Prepaid
      expenses and other
                
                
                37,241
                
                
                
                8,143Income
      taxes receivable
                
                
                160,000
                
                
                
                45,000TOTAL
      CURRENT ASSETS
                
                
                3,732,671
                
                
                
                3,521,169Property
      and equipment, net of accumulated depreciation
                
                
                22,831
                
                
                
                27,865Deferred
      system sales cost, net
                
                
                72,939
                
                
                
                -Patent,
      net of accumulated amortization
                
                
                10,508
                
                
                
                11,191Long-term
      accounts receivable – financed contracts
                
                
                -
                
                
                
                68,045TOTAL
      ASSETS
                
                $
                3,838,949
                
                
                $
                3,628,270LIABILITIES
      AND  STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts
      payable
                
                $
                166,059
                
                
                $
                225,557Accrued
      payroll and related withholding liabilities
                
                
                18,190
                
                
                
                39,624Deferred
      revenue
                
                
                -
                
                
                
                389,297Deferred
      tax liability
                
                
                801,000
                
                
                
                619,000TOTAL
      CURRENT LIABILITIES
                
                
                985,249
                
                
                
                1,273,478LONG-TERM
      LIABILITIESDeferred
      tax liability
                
                
                27,000
                
                
                
                -TOTAL
      LIABILITIES
                
                
                1,012,249
                
                
                
                1,273,478STOCKHOLDERS'
      EQUITYCommon
      stock, 0.001 par value; 5,000,000 shares authorized: 4,162,234 shares
      issued and outstanding at June 30, 2009 and December 31,
    2008
                
                
                4,162
                
                
                
                4,162Additional
      paid-in capital
                
                
                1,404,619
                
                
                
                1,398,254Retained
      earnings
                
                
                1,419,341
                
                
                
                998,123Treasury
      stock (1,000 shares and 32,200 shares at June 30, 2009 and December 31,
      2008, respectively), at cost
                
                
                (1,422
                )
                
                
                (45,747
                )TOTAL
      STOCKHOLDERS’ EQUITY
                
                
                2,826,700
                
                
                
                2,354,792TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                3,838,949
                
                
                $
                3,628,270





See
notes to condensed financial statements.


3


TABLE
TRAC, INC.


CONDENSED
STATEMENTS OF INCOME (Unaudited)





Three months ended
                    
                    
                    Six months endedJune 30, 2009
                    
                    
                    June 30, 2008
                    
                    
                    June 30, 2009
                    
                    
                    June 30, 2008Revenues
                    
                    $
                    1,045,449
                    
                    
                    $
                    456,422
                    
                    
                    $
                    2,190,295
                    
                    
                    $
                    1,958,111Cost
      of sales
                    
                    
                    378,882
                    
                    
                    
                    86,430
                    
                    
                    
                    514,479
                    
                    
                    
                    444,056Gross
      profit
                    
                    
                    666,567
                    
                    
                    
                    369,992
                    
                    
                    
                    1,675,816
                    
                    
                    
                    1,514,055Operating
      Expenses:Selling,
      General and Administrative
                    
                    
                    646,853
                    
                    
                    
                    347,429
                    
                    
                    
                    1,078,800
                    
                    
                    
                    687,475Income
      from operations
                    
                    
                    19,714
                    
                    
                    
                    22,563
                    
                    
                    
                    597,016
                    
                    
                    
                    826,580Interest
      income
                    
                    
                    71,702
                    
                    
                    
                    13,963
                    
                    
                    
                    85,752
                    
                    
                    
                    31,900Net
      income before taxes
                    
                    
                    91,416
                    
                    
                    
                    36,526
                    
                    
                    
                    682,768
                    
                    
                    
                    858,480Income
      tax expense
                    
                    
                    31,066
                    
                    
                    
                    11,000
                    
                    
                    
                    261,550
                    
                    
                    
                    332,000Net
      income
                    
                    $
                    60,350
                    
                    
                    $
                    25,526
                    
                    
                    $
                    421,218
                    
                    
                    $
                    526,480Basic
      earnings per common share
                    
                    $
                    0.01
                    
                    
                    $
                    0.01
                    
                    
                    $
                    0.10
                    
                    
                    $
                    0.13Weighted-average
      basic shares outstanding
                    
                    
                    4,162,234
                    
                    
                    
                    4,158,805
                    
                    
                    
                    4,162,234
                    
                    
                    
                    4,157,520Diluted
      earnings per common share
                    
                    $
                    0.01
                    
                    
                    $
                    0.01
                    
                    
                    $
                    0.09
                    
                    
                    $
                    0.12Weighted-average
      diluted shares outstanding
                    
                    
                    4,477,530
                    
                    
                    
                    4,484,422
                    
                    
                    
                    4,478,587
                    
                    
                    
                    4,483,136Cash
      dividends paid per common share
                    
                    $
                    0.00
                    
                    
                    $
                    0.05
                    
                    
                    $
                    0.00
                    
                    
                    $
                    0.05





See
notes to condensed financial statements.


4


TABLE
TRAC, INC.


CONDENSED
STATEMENTS OF CASH FLOW (Unaudited)





Six Months Ended
                  June 30, 2009
                
                
                Six Months Ended
                  June 30, 2008OPERATING
      ACTIVITIESNet
      Income
                
                $
                421,218
                
                
                $
                526,480Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                5,717
                
                
                
                2,847Deferred
      income taxes
                
                
                209,000
                
                
                
                332,000Allowance
      for accounts receivable doubtful accounts
                
                
                138,500
                
                
                
                -Non-cash
      stock compensation expense
                
                
                51,632
                
                
                
                15,750Changes
      in operating assets and liabilitiesAccounts
      receivable
                
                
                5,535
                
                
                
                (572,573
                )Interest
      receivable
                
                
                (58,919
                )
                
                
                -Inventory
                
                
                66,197
                
                
                
                (99,898
                )Prepaid
      expenses and other assets
                
                
                (29,098
                )
                
                
                (10,100
                )Income
      taxes receivable
                
                
                (115,000
                )
                
                
                -Deferred
      system sales costs
                
                
                (72,939
                )
                
                
                -Accounts
      payable
                
                
                (59,498
                )
                
                
                (26,610
                )Accrued
      payroll and related withholding liabilities
                
                
                (21,434
                )
                
                
                (35,001
                )Deferred
      revenue
                
                
                (389,297
                )
                
                
                235,971Net
      cash provided by operating activities
                
                
                151,614
                
                
                
                368,866INVESTING
      ACTIVITIESPurchase
      of equipment
                
                
                -
                
                
                
                (12,999
                )Issuance
      of note receivable
                
                
                (250,000
                )
                
                
                -Net
      cash used in investing activities
                
                
                (250,000
                )
                
                
                (12,999
                )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
                
                
                (99,328
                )
                
                
                148,055CASHBeginning
      of period
                
                
                1,212,953
                
                
                
                610,155End
      of period
                
                $
                1,113,625
                
                
                $
                758,210





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 June 30, 2009 and the statements of
income and cash flows for the three and six months ended June 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 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. In addition to table games
management, 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. These modules all use Table Trac's simple to learn browser
based interface.





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. We began to recognize participation revenues during the
three months ended June 30, 2009.





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 six months ended June 30, 2009 was $3,840 and $0, respectively, as the
system installation was completed late in March 2009 and revenues commenced
during April 2009.





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 "Accounts receivable, financed contracts, long
term".  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 six months
ended June 30, 2009 and 2008 is as follows:





Six Months Ended
                    June 30,2009
                  
                  
                  2008Accounts
      receivable allowance, beginning of period
                  
                  $
                  -
                  
                  
                  $
                  -Provision
      adjustment during period
                  
                  
                  138,500
                  
                  
                  
                  -Write-off
      of bad debt
                  
                  
                  -
                  
                  
                  
                  -Accounts
      receivable allowance, end of period
                  
                  $
                  138,500
                  
                  
                  $
                  -





Major
Customers




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


For
      the six months endedJune 30, 2009
              
              
              For
      the six months endedJune 30, 2008%
      of Sales
              
              
              %
      of A/R
              
              
              %
      of Sales
              
              
              %
      of A/RCustomer
      A
              
              
              24.1
              %
              
              
              24.2
              %
              
              
              0.0
              %
              
              
              0.0
              %Customer
      B
              
              
              38.3
              %
              
              
              3.9
              %
              
              
              0.0
              %
              
              
              0.0
              %Customer
      C
              
              
              2.8
              %
              
              
              0.9
              %
              
              
              38.3
              %
              
              
              30.2
              %Customer
      D
              
              
              1.6
              %
              
              
              9.4
              %
              
              
              24.7
              %
              
              
              20.9
              %





Recent Accounting
Pronouncements





During
May 2009, the FASB issued Statement of Financial Standards No. 165 (“SFAS 165”),
Subsequent Events.
SFAS 165 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.  SFAS No. 165 defines two types of subsequent
events, as follows:  the first type consists of events or transactions that
provide additional evidence about conditions that existed at the date of the
balance sheet and the second type consists of events that provide evidence about
conditions that did not exist at the date of the balance sheet but arose after
that date.  SFAS 165 is effective for interim and annual periods ending
after June 15, 2009 and must be applied prospectively.  Upon adoption, this
standard did not have a material effect on the financial
statements.  Subsequent events have been evaluated through the filing
date of this Quarterly Report on Form 10-Q.


7





In June
2009, the FASB issued SFAS No. 168, The “FASB Accounting Standards
Codification” and the Hierarchy of Generally Accepted Accounting
Principles.  This standard replaces SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles, and establishes only two levels of U.S. generally
accepted accounting principles (“GAAP”), authoritative and
nonauthoritative.  The FASB Accounting Standards Codification (the
“Codification”) will become the source of authoritative, nongovernmental GAAP,
except for rules and interpretive releases of the Securities and Exchange
Commission (“SEC”), which are sources of authoritative GAAP for SEC
registrants.  All other nongrandfathered, non-SEC accounting
literature not included in the Codification will become
nonauthoritative.  This standard is effective for financial statements
for interim or annual reporting periods ending after September 15, 2009. We will
begin to use the new guidelines and numbering system prescribed by the
Codification when referring to GAAP in the third quarter of fiscal
2009.  As the Codification was not intended to change or alter
existing GAAP, it will not have any impact on our consolidated financial
statements.





2.         Inventory –





Company
inventories consisted of the following at:





June 30, 2009
                  
                  
                  December 31, 2008Raw
      Materials
                  
                  $
                  -
                  
                  
                  $
                  -Work-in-Process
                  
                  
                  -
                  
                  
                  
                  8,850Finished
      Goods
                  
                  
                  182,401
                  
                  
                  
                  239,748Total
                  
                  $
                  182,401
                  
                  
                  $
                  248,598





3.         Note Receivable –




In March
2009, the Company loaned $250,000 to one of its customers. The loan bears
interest at an annual rate of 80% and is due September 30, 2009.  As
of June 30, 2009, the Company has accrued interest receivable of
$58,919.





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 and
transaction costs of $712.  The total cost of $51,632 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 June 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 June 30, 2009,
370,000 stock options were available for grants.




Statement
of Financial Accounting Standard No. 123(R)"Share-Based Payment" (SFAS 123(R))
requires companies to estimate fair value of share-based awards on the date of
grant using an option-pricing model. 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 six months
ended June 30, 2009 and 2008, respectively.




There
were 337,500 options outstanding and exercisable at June 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 $641,250 at June 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 June 30, 2009.


8




5.
            Income
      Tax –




The
Company accounts for income taxes pursuant to SFAS No. 109, Accounting for
Income Taxes and FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes an interpretation of FASB Statement No.10., which provides for an
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.




We file
income tax returns in the U.S. federal jurisdiction and various state
jurisdictions. Based on our evaluation, we have concluded that there are no
significant unrecognized tax implications. Our 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 June 30, 2009. We do not
believe there will be any material changes in our unrecognized tax positions
over the next twelve months.




We 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
our financial results. In accordance with FIN 48, paragraph 19, we decided to
classify interest and penalties as a component of income tax
expense.




6.         Earnings Per Share
–





The
Company computes earnings per share in accordance with SFAS No. 128, Earnings
per Share ("SFAS 128"). SFAS 128 requires companies to compute earnings per
share under two different methods, basic and diluted, and present per share data
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 six
months ended June 30, 2009 and 2008:





Three Months Ended
                    June 30,
                  
                  
                  Six Months Ended
                    June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Basic
      earnings per share calculation:Net
      income to common stockholders
                  
                  $
                  60,350
                  
                  
                  $
                  25,526
                  
                  
                  $
                  421,218
                  
                  
                  $
                  526,480Weighted
      average number of common shares outstanding
                  
                  
                  4,162,234
                  
                  
                  
                  4,158,805
                  
                  
                  
                  4,162,234
                  
                  
                  
                  4,157,520Basic
      net income per share
                  
                  $
                  0.01
                  
                  
                  $
                  0.01
                  
                  
                  $
                  0.10
                  
                  
                  $
                  0.13Diluted
      earnings per share calculation:Net
      income
                  
                  $
                  60,350
                  
                  
                  $
                  25,526
                  
                  
                  $
                  41,218
                  
                  
                  $
                  526,480Weighted
      average number of common shares outstanding
                  
                  
                  4,162,234
                  
                  
                  
                  4,158,805
                  
                  
                  
                  4,162,234
                  
                  
                  
                  4,157,520Common
      stock equivalents:Stock
      options
                  
                  
                  315,296
                  
                  
                  
                  325,617
                  
                  
                  
                  316,353
                  
                  
                  
                  325,616Weighted
      average diluted shares outstanding
                  
                  
                  4,477,530
                  
                  
                  
                  4,484,422
                  
                  
                  
                  4,478,587
                  
                  
                  
                  4,483,136Diluted
      net income per share
                  
                  $
                  0.01
                  
                  
                  $
                  0.01
                  
                  
                  $
                  0.09
                  
                  
                  $
                  0.12





7.         Subsequent
Event –





The
Company did not have any subsequent events through August 19, 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 six months ended
June 30, 2009.


9




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. In addition to table games
management, 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. These modules all use Table Trac's simple to learn browser
based interface.




The
Company launched new products in the areas of gaming machine on-line accounting
and management, gaming machine/vault, promotions administration and management,
customer mailing for tiered pre-encoded promotional marketing, touch screen
customer service kiosks, guest service paging and wireless handheld
communications. 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 of comparable functionality 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




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 accounting policies,
estimates and judgments that the Company believes 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




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


10





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.





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 its system. We began to recognize participation
revenues during the three months ended June 30, 2009.




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 six months ended June 30, 2009 was $3,840 and $3,840,
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 "Accounts receivable, financed contracts,
long-term".  Our accounts receivable also includes an allowance for
doubtful accounts recorded during the three months ended June 30,
2009.





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





During
the three months ended June 30, 2009, income from operations was $19,714
compared to $22,563 for the three months ended June 30, 2008. The major
components of each of revenues, cost of sales and selling, general and
administrative expenses are discussed below.





Revenues





Revenues
totaled $1,045,449 for the three months ended June 30, 2009 compared to $456,422
for the three months ended June 30, 2008.  The following table
summarizes our revenues for the three months ended June 30, 2009 and 2008,
respectively:


11





Three Months Ended
                                    June 30,
                                  
                                  Three Months Ended
                                    June 30,2009
                                  
                                  2008
                                  
                                  2009
                                  
                                  2008(percentage of revenues)System
      sales
                                  
                                  $
                                  683,978
                                  
                                  
                                  $
                                  276,486
                                  
                                  
                                  
                                  65.4
                                  %
                                  
                                  
                                  60.6
                                  %License
      and maintenance fees
                                  
                                  
                                  307,368
                                  
                                  
                                  
                                  171,062
                                  
                                  
                                  
                                  29.4
                                  %
                                  
                                  
                                  37.5
                                  %Other
      sales
                                  
                                  
                                  54,103
                                  
                                  
                                  
                                  8,874
                                  
                                  
                                  
                                  5.2
                                  %
                                  
                                  
                                  1.9
                                  %Total
                                  
                                  $
                                  1,045,449
                                  
                                  
                                  $
                                  456,422
                                  
                                  
                                  
                                  100
                                  %
                                  
                                  
                                  100
                                  %





During
the three months ended June 30, 2009, we generated $683,978 in system sales
compared to $276,486 for the three months ended June 30, 2008.  This
increase resulted from a new system installation completed during the three
months ended June 30, 2009 that was significantly larger than the system sale a
year ago.  Similarly, revenues from license and maintenance fees
increased from $171,062 for the three months ended June 30, 2008 to $307,368 for
the three months ended June 30, 2009 due to more systems in service and one-time
ticket license fees of $61,000.  Lastly, other sales, which include
sales of printers, kiosk software, mailing services, and consulting services
generated $54,103 in revenues during the three months ended June 30, 2009
compared to $8,874 for the three months ended June 30, 2008.





Cost of
Sales




Cost of
sales for the three months ended June 30, 2009 increased to $378,882 from
$86,430 for the three months ended June 30, 2008.  This is consistent
with a larger installation completed in the current period compared to the same
period in the prior year. The Company's gross profit was 64% and 81% for the
three months ended June 30, 2009 and 2008, respectively. This decrease is
primarily due to a larger percentage of the Company’s sales for the three months
ended June 30, 2009 being a lower margin system installation compared to a year
ago.




Selling, General and
Administrative Expenses





Selling,
general and administrative expenses for the three months ended June 30, 2009
were $646,853 compared to $347,429 for the three months ended June 30,
2008.  Our most significant changes in operating expenses from the two
three-month interim periods related to salaries and benefits, sales and
marketing, research and development, professional fees, stock compensation and
bad debt expenses. A discussion of the various components of our operating
expenses for the three months ended June 30, 2009 appears below.





Salaries
and Benefits. Payroll and related costs were $342,986 compared to $200,609 for
the three months ended June 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 $11,786 for the three months ended June 30, 2008 to $40,577
for the three months ended June 30, 2009 due to increased marketing efforts
related to the sale of our systems.





Research
and Development.  Our research and development costs for the three
months ended June 30, 2009 decreased to $20,849 compared to $37,062 for the same
period in 2008.





Professional
Fees. Professional fees for accounting services, legal services and product
support aggregated to $18,800 for the three months ended June 30, 2009 versus
$42,029 for the three months ended June 30, 2008. The reduction in professional
fees related to a decrease in professional fees for accounting
services.  We expect professional fees to increase throughout the
remainder of 2009 as we concentrate on our Sarbanes-Oxley compliance
efforts.





Stock
Compensation.  Expense related to stock compensation for the three
months ended June 30, 2009 compared to the three months ended June 30, 2008 was
$51,632 and $0 respectively.  The increase in stock compensation
expense was due to the issuance of Company shares through the employee bonus
program.




Bad
Debt.  Bad debt expense for the three months ended June 30, 2009 was
$138,500 compared to $0 for the three months ended June 30,
2008.  This increase is due to the continuing economic slowdown and
the resulting negative impacts to the gaming industry, which is the only
industry served by the Company’s products and services.


12




Interest
Income




Interest
income for the three months ended June 30, 2009 was $71,702 compared to $13,963
for the three months ended June 30, 2008.  This increase is due
somewhat to a higher and more consistent cash balance, but primarily is related
to the $58,919 of interest income accrued on our $250,000 note
receivable.




Tax
Provision




The
provision for income taxes for the second quarter of 2009 of $31,066 which was
calculated at a 34% effective rate compared to the second quarter of 2008 tax
provision of $11,000 which was calculated at a 30% effective rate.




Net
Income




Net
income before taxes was $91,416 for the three months ended June 30, 2009,
compared to $36,526 for the three months ended June 30, 2008. Net income was
$60,350 for the three months ended June 30, 2009 up from $25,526 for the three
months ended June 30, 2008. The increase in is due to an increase in system
installation revenue.  This increase in revenue was partially offset
due to the recording of an allowance for doubtful accounts of $138,500 and a
stock bonus expense of $51,632, which directly reduced the net income for the
period.  The basic earnings per share were $0.01 compared to $0.006
for the three months ended June 30, 2009 and 2008, respectively.





Results
of Operations - Six Months Ended June 30, 2009 Compared to Six Months Ended June
30, 2008





During
the six months ended June 30, 2009, income from operations was $597,016 compared
to $826,580 for the six months ended June 30, 2008. The major components of each
of revenues, cost of sales and selling, general and administrative expenses are
discussed below.





Revenues





Revenues
totaled $2,190,295 for the six months ended June 30, 2009 compared to $1,958,111
for the six months ended June 30, 2008.  The following table
summarizes our revenues for the six months ended June 30, 2009 and 2008,
respectively:




Six Months Ended
                                  June 30,
                                
                                Six Months Ended
                                  June 30,2009
                                
                                2008
                                
                                2009
                                
                                2008(percentage of revenues)System
      sales
                                
                                $
                                1,600,665
                                
                                
                                $
                                1,619,788
                                
                                
                                
                                73.1
                                %
                                
                                
                                82.7
                                %License
      and maintenance fees
                                
                                
                                521,398
                                
                                
                                
                                323,847
                                
                                
                                
                                23.8
                                %
                                
                                
                                16.5
                                %Other
      sales
                                
                                
                                68,232
                                
                                
                                
                                14,476
                                
                                
                                
                                3.1
                                %
                                
                                
                                0.8
                                %Total
                                
                                $
                                2,190,295
                                
                                
                                $
                                1,958,111
                                
                                
                                
                                100
                                %
                                
                                
                                100
                                %





During
the six months ended June 30, 2009, we generated $1,600,665 in system sales
compared to $1,619,788 for the six months ended June 30, 2008.  The
consistency in our system sales between the interim periods is due to completion
of similar-sized systems in both years.  Similarly, revenues from
license fees increased from $323,847 for the six months ended June 30, 2008 to
$521,398 for the six months ended June 30, 2009 due to more systems in service
and one-time ticket license fees of $61,000.  Lastly, other sales,
which include sales of printers, kiosk software, mailing services, and
consulting services generated $68,232 in revenues during the six months ended
June 30, 2009 compared to $14,476 for the six months ended June 30,
2008.  Again, this is primarily due to more systems in operation in
2009 over the same period in 2008.





Cost of
Sales




Cost of
sales for the six months ended June 30, 2009 increased to $514,479 from $444,056
for the six months ended June 30, 2008.  The Company's gross profit
remained consistent at 77% for both the six months ended June 30, 2009 and 2008,
respectively.  This slight increase in gross profit is primarily due
to increased license and maintenance revenue which has a higher
margin.





Selling, General and
Administrative Expenses





Selling,
general and administrative expenses for the six months ended June 30, 2009 were
$1,078,800 compared to $687,475 for the six months ended June 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 debt. A discussion of the various
components of our operating expenses for the six months ended June 30, 2009
appears below.


13





Salaries
and Benefits. Payroll and related costs were $625,091 compared to $433,539 for
the six months ended June 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 $28,723 for the six months ended June 30, 2008 to $60,950 for
the six months ended June 30, 2009 due to marketing efforts related to the sale
of our systems.





Professional
Fees. Professional fees for accounting services, legal services and product
support aggregated to $67,358 for the six months ended June 30, 2009 versus
$88,840 for the six months ended June 30, 2008. The reduction in professional
fees related to a decrease in professional fees for accounting
services.  We expect professional fees to increase throughout the
remainder of 2009 as we concentrate on our Sarbanes-Oxley compliance
efforts.





Stock
Compensation.  Expense related to stock compensation for the six
months ended June 30, 2009 compared to the six months ended June 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 six months ended June 30, 2009 was
$138,500 compared to $0 for the six months ended June 30, 2008.  This
increase is due to the continuing economic slowdown and the resulting negative
impacts to the gaming industry, which is the only industry served by the
Company’s products and services.




Interest
Income




Interest
income for the six months ended June 30, 2009 was $85,752 compared to $31,900
for the six months ended June 30, 2008.  This increase is somewhat due
to a higher and more consistent cash balance, but primarily is related to the
$58,919 of interest income accrued on our $250,000 note receivable.




Income Tax
Expense




Income
tax expense for the six-month period ended June 30, 2009 was $261,550 compared
to income tax expense of $332,000 for the six-month period ended June 30, 2008,
which resulted because our income before taxes for the 2009 period was $682,768
compared to income before taxes for the 2008 period of $858,480.  The
overall effective rate for 2009 was 38.3% compared to 38.7% for
2008.




Net
Income




Net
income before taxes was $682,768 for the six months ended June 30, 2009,
compared to $858,480 for the six months ended June 30, 2008. Net income was
$421,218 for the six months ended June 30, 2009 down from $526,480 for the six
months ended June 30, 2008. The decrease in net income is due to increased
salaries and benefits, stock compensation expense and the recording of an
allowance for doubtful accounts of $138,500, which directly reduced the net
income for the period.  The basic earnings per share were $0.10
compared to $0.13 for the six months ended June 30, 2009 and 2008,
respectively.




Liquidity
and Capital Resources





Summary
cash flow data is as follows:




Six Months Ended June 30,2009
                                    
                                    2008Cash
      flows provided (used) by :Operating
      activities
                                    
                                    $
                                    151,614
                                    
                                    
                                    $
                                    368,866Investing
      activities
                                    
                                    
                                    (250,000
                                    )
                                    
                                    
                                    (12,999
                                    )Financing
      activities
                                    
                                    
                                    (942
                                    )
                                    
                                    
                                    (207,812
                                    )Net
      increase (decrease) in cash
                                    
                                    
                                    (99,328
                                    )
                                    
                                    
                                    148,055Cash,
      beginning of period
                                    
                                    
                                    1,212,953
                                    
                                    
                                    
                                    610,155Cash,
      end of period
                                    
                                    $
                                    1,113,625
                                    
                                    
                                    $
                                    758,210


14





At June
30, 2009, we had cash of $1,113,625 compared to cash of $758,210 on June 30,
2008. The increase results mainly from an increase in accounts receivable
collections.  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 and changes in financing activities are
due to our repurchase of Company stock.  Cash dividends of $207,812
were paid in 2008 but no dividends have been paid in 2009.





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 and the resulting license and
maintenance fees from existing systems. 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 June 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.




Evaluation of Disclosure
Controls and Procedures




Our Chief
Executive Officer/Principal 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/Principal 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/Principal 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 June 30, 2009, our Chief Executive
Officer/Principal 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




Based on
the Company's size and the management oversight in place, the downward pressure
on the costs for the company and its shareholders remediate the disclosure
controls and procedures as they have been identified, the company continued to
operate without changes to its controls and procedures for the period covered by
this report while continuing to seek the expertise it needs to remediate the
material weaknesses.


15


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.


16





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:
      August 19, 2009
                          Table
      Trac, Inc.(Registrant)By:
                          /s/ Chad HoehneChad
      HoehnePresident,
      Chief Executive Officer and Principal Financial
  Officer


17