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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.04pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.05pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.12pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+1
threats+1
unrest+1
disruptions+1
shortages+1
Positive rising
No words rose this year.
Risk Factors (Item 1A)
4,059 words
Item 1A. Risk Factors.
Risk Factors Relating to Our Business
MD&A (Item 7)
2,705 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The following Management's Discussion and Analysis should be read in conjunction with our audited financial statements and related notes that appear elsewhere in this filing.
Some of the statements made in this report are “forward-looking statements,” as that term is defined under Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may,” “will,” “believe,” “anticipate,” “intend,” “estimate,” “expect” and similar expressions. The forward-looking statements in this report are primarily located in the material set forth under the headings “Description of Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are found in other parts of this report as well. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks and uncertainties and other important factors, including those described in this report under Part I, Item 1A “Risk Factors” as well as in our other SEC filings. Forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no and expressly any obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.
The Company ’ s business is subject to unpredictable order flows, which might cause its results to fluctuate significantly from period to period .
Individual system sales can have a long sales cycle, resulting in unpredictable revenue from such sales. Other revenue is derived from expansion opportunities at existing customer facilities and, although existing customers have in the past engaged us to provide expanded services and systems, there is no contractual agreement to provide us with any minimum volume or the ability to expand our services and systems. For these reasons, the Company can experience unpredictable order flows for system expansions.
Our growth and ability to access capital markets are subject to a number of economic risks.
Financial markets worldwide can experience disruption, including, among other things, diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations. Financial market conditions affect our business in a number of ways. For example, the tightening of credit in financial markets adversely affects the ability of our customers to obtain financing for purchases and operations and could result in a decrease in or cancellation of lease and sale orders for our products and services. In addition, poor financial market conditions could also affect our ability to raise funds in the capital and lending markets.
Unfavorable economic, social and political conditions, public health crises and other events beyond our control may have a negative effect on our business, results of operations and financial conditions.
If fewer players visit our customers’ facilities or, if such players have less disposable income to spend at our customers’ facilities or if our customers are unable to make timely payments to us or to devote resources to purchasing and leasing our products are/or forced to close their facilities, there could be an adverse effect on our business, results of operations and financial conditions. Such risks that may affect our customers and suppliers and consumers behavior include, but are not limited to:
adverse economic and market conditions in gaming markets, including recession, inflation, economic slowdown, high rates of unemployment, higher interest rates, new or increased tariffs, higher airfares, higher energy and gasoline prices and rising food and healthcare costs;
global geopolitical events such as terrorist attacks or threats thereof, acts of war or hostility, including the war in Ukraine, civil unrest or other economic or political uncertainties;
global health concerns, including pandemics, epidemics, or outbreaks of infectious or contagious diseases;
natural disasters such as major fires, floods, hurricanes and earthquakes; and
inability of our customers to operate due to regulatory disputes or inability to meet their debt obligations.
We have agreements with casinos in Native American and foreign jurisdictions, which may subject us to sovereign immunity risks.
We may have a difficult time enforcing our contracts with Central America, South America, the Caribbean and Native American tribes and the casinos they operate. These customers may enjoy significant immunity or impracticality from suit. For instance, in order to sue a Native American tribe (or an agency or instrumentality of a Native American tribe); the Native American tribe must have effectively waived its sovereign immunity with respect to the matter in dispute. While we always seek the waivers of immunity initially, they may not always become a part of our final contracts with Native American tribes. Without a waiver, limited or otherwise, of the tribe’s sovereign immunity, our ordinary rights and remedies (such as our right to enter Native American lands to retrieve our property in the event of a breach of contract by the tribal party to that contract, or our right to enforce any outside judgment against such tribal party) will not likely be enforceable.
Our business may suffer if our products become obsolete or demand for them decreases, including without limitation, as a result of our inability to develop innovative products or respond to technological changes.
We derive substantially all of our revenues from leasing, licensing, selling and other financing arrangements of products within the gaming industry. Consistent demand for and satisfaction with our products by our customers is critical to our financial condition and future success. Problems, issues, defects or dissatisfaction with our products could cause us to lose customers or revenues from leases with minimal notices. Additionally, our success depends on our ability to keep pace with technological advances in our industry and to adapt and improve our products in response to evolving customer needs and industry trends. If demand for our products weakens due to lack of market acceptance, technological change, increased competition, regulatory changes, or other factors, it could have a material adverse effect on our business, results of operations or financial condition.
Any disruption in our manufacturing processes, any significant increase in manufacturing costs or any inability to manufacture our products to meet demand could adversely affect our business and operating results.
We create our software and many related products ourselves. Should any of these manufacturing processes be disrupted we may be unable to timely remedy such disruption. In such a case, we may be unable to produce a sufficient quantity of our products to meet the demand of our customers. In addition, manufacturing costs may increase significantly and we may not be able to successfully recover these cost increases with increased pricing to our customers. Either case could have an adverse impact on our business, results of operations or financial condition.
We operate in a very competitive business environment and if we do not adapt our approach and our products to meet this competitive environment, our business, results of operations or financial condition could be adversely impacted.
There is intense competition in the gaming management and gaming products industry which is characterized by dynamic customer demand and rapid technological advances. Today, there are many systems providers in the U.S. and abroad offering casinos and gaming operators “total solution” casino management and table games management systems. As a result, we must continually adapt our approach and our products to meet this demand and match technological advances and if we cannot do so, our business results of operations or financial condition may be adversely impacted. Conversely, the development of new competitive products or the enhancement of existing competitive products in any market in which we operate could have an adverse impact on our business, results of operations or financial condition. Several of our competitors are larger, have greater name recognition, longer operating histories, larger marketing budgets and significantly greater resources than we do, and are able to devote greater resources to the development, promotion and sale of their products and services. If we are unable to remain dynamic in the face of changes in the market, it could have a material adverse effect on our business, results of operations or financial condition.
We are dependent on the success of our customers and their decisions to upgrade or replace their current casino management systems.
Our success depends on our customers leasing or buying our products to expand their existing operations, replacing existing gaming management products or equipping a new casino. Any slowdown in the replacement cycle on the part of our customers may negatively impact our operations.
The opening of new casinos, expansion of existing casinos, and replacement of gaming management systems fluctuate based on demand, general economic conditions, regulatory approvals, and the availability of financing. These activities may also be adversely affected by factors such as inflationary pressures, rising interest rates, supply chain disruptions, labor shortages, geopolitical instability, or changes in consumer spending patterns. In addition, the expansion of gaming into new jurisdictions can be a lengthy and uncertain process, often requiring public referendums, legislative action, and extensive regulatory review. Any of these factors could delay, restrict, or prevent the expansion of our business and could negatively impact our results of operations, cash flows, and financial condition.
If our products contain defects, our reputation could be harmed and our operating results and financial results could be adversely affected.
Some of our products and our anticipated future products are complex and may contain defects that we do not detect. The occurrence of defects or malfunctions in one or more of our products could result in financial losses for our customers and in turn the termination of leases, cancellation of orders, product returns and diversion of our resources, and could additionally result in lost revenues, civil damages and regulatory penalties, as well as possible rescission of product approvals. Any of these occurrences could also result in the loss of or delay in market acceptance of our products and loss of placements.
We may not be able to attract, retain, or motivate the management or employees necessary to remain competitive in our industry.
The competition for qualified personnel in the gaming industry is intense. Our future success depends on the retention and continued contributions of our key management, finance, marketing, development, technical and staff personnel, many of whom would be difficult or impossible to replace. Our success is also tied to our ability to recruit additional key personnel in the future. We may not be able to retain our current personnel or recruit any additional key personnel required. The loss of services of any of our personnel or our inability to recruit additional necessary key personnel could have a material adverse effect on our business, financial condition, results of operations and prospects.
Any disruption in our software and related information technology systems due to a cyber incident could adversely affect our business, operating results and financial conditions.
We rely on our software and related information technology systems to operate our business. We are also exposed to the risk of cyber incidents in the ordinary course of business. To date, we have not experienced a cyber breach or incident. Cyber incidents may be deliberate attacks for the theft of intellectual property or other sensitive information or may be the result of unintentional actions or events. We have information technology security initiatives and recovery plans in place to mitigate our risk to these vulnerabilities, but these measures may not be adequate, or implemented properly, or executed timely to ensure that our operations are not disrupted. Cyber-attacks are becoming increasingly more difficult to anticipate, prevent and detect due to their rapidly evolving nature and, as a result, the technology we use to protect our systems from being breached or compromised could become outdated due to advances in computer capabilities or other technological developments. Potential risks associated with a material cyber incident include loss of intellectual property, impairment of our ability to conduct our operations, disruption of our customers’ operations, damage to our reputation and our relationships with existing or potential customers, litigation, significant fines, penalties and liability, and increased cyber security protection and remediation costs. Such consequences could adversely affect our business, results of operations or financial condition.
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If we are unable to maintain and implement effective internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. We will need to maintain and enhance these processes and controls as we grow, and we may require additional management and staff resources to do so. Additionally, even if we conclude our internal controls are effective for a given period, we may in the future identify one or more material weaknesses in our internal controls, in which case our management will be unable to conclude that our internal control over financial reporting is effective.
If we are unable to conclude that our internal control over financial reporting is effective, investors could lose confidence in the accuracy and completeness of our financial disclosures, which could cause the price of our common stock to decline. Any failure of our internal control over financial reporting could have a material adverse effect on our reported operating results and harm our reputation. Internal control deficiencies could also result in a restatement of our financial results.
Risk Factors Relating to Intellectual Property
We are dependent on our intellectual property and we may be unable to protect our intellectual property from infringement, or misappropriation.
The gaming industry and the software industry are in general characterized by the use of various forms of intellectual property. We are dependent upon patented technologies, trademarked brands and proprietary information for our business. We endeavor to protect our intellectual property rights and our products through a combination of patent, trademark, trade dress, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. We cannot, however, be certain that any trademark, copyright, issued patent or other types of intellectual property will provide competitive advantages for us. Furthermore, we cannot be certain that our efforts to protect our intellectual property rights or products will be successful.
Our existing patents may be found invalid or unenforceable and any current or future patent applications may not be approved.
We have patents and we utilize patent protection in the United States relating to certain processes and products. We cannot assure you that all of our existing patents would be found valid or enforceable or will continue to be valid or enforceable, or that any pending patent applications will be approved. Our competitors may in the future challenge the validity or enforceability of certain of our patents. The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Competitors may infringe our patents and we may not have adequate resources or there may be other reasons we do not enforce our patents. Our patents may not adequately cover a competitor’s products in such a way as to provide us with a competitive advantage. Furthermore, the future interpretation by courts of United States laws regarding the validity of patents could negatively affect the validity or enforceability of our current or future patents.
Our efforts to protect our unpatented proprietary technology may not be successful.
We rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and other collaborators to enter into confidentiality agreements. We cannot assure you that these agreements are fully enforceable or will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. Furthermore, we may not have adequate resources to enforce these agreements in a meaningful way. If we are unable to maintain the proprietary nature of our technologies or enforce the agreements, we use to protect those technologies, it could have a material adverse effect on our business.
We may not be able to establish or maintain our trademarks.
We rely on our trademarks, trade names, trade dress, copyrights and brand names to distinguish our products from the products of our competitors. We have registered or applied to register many of these trademarks. Our trademarks may not remain valid or enforceable. We may not be able to build and maintain goodwill in our trademarks or other intellectual property. Third parties may oppose our trademark applications or challenge our use of the trademarks. In the event that our trademarks are successfullychallenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources towards advertising and marketing new brands. Further, our competitors may infringe our trademarks or other intellectual property and we may not have adequate resources or there may be other reasons we do not enforce our trademarks or other types of intellectual property.
We may not be able to adequately protect our foreign intellectual property rights.
Because of the differences in foreign patent, trademark, trade dress, copyright and other laws concerning proprietary rights, our intellectual property frequently does not receive the same degree of protection in foreign countries as it would in the United States. Our failure to possess, obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition.
The intellectual property rights of others may limit our ability to make and sell our products.
The gaming industry is characterized by the rapid development of new technology which requires us to continuously introduce new products using these technologies and innovations, as well as to expand into new markets that may be created. Therefore, our success depends in part on our ability to continually adapt our products and systems to incorporate new technologies and to expand into markets that may be created by new technologies. However, to the extent technologies are protected by the intellectual property rights of others, including our competitors, we may be prevented from introducing products based on these technologies or expanding into markets created by these technologies. If the intellectual property rights of others prevent us from taking advantage of innovative technologies, our financial condition, operating results or prospects may be harmed.
We have many competitors in both the United States and foreign countries, some of which have substantially greater resources and have made substantial investments in competing technologies. Some competitors have applied for and obtained and may in the future apply for and obtain, patents that may prevent, limit or otherwise interfere with our ability to make and sell our products. Any royalty, licensing or settlement agreements, if required, may not be available to us on acceptable terms or at all.
Significant litigation regarding intellectual property rights exists in our industry.
There is a significant amount of litigation that occurs in the gaming and technology industry. A successfulchallenge to or invalidation of one of our patents or trademarks, a successful claim of infringement by a third party against us, our products, or one of our licensees in connection with the use of our technology, or an unsuccessful claim of infringement made by us against a third party or its products, could adversely affect our business or cause us financial harm. Any such litigation – whether with or without merit – could:
be expensive and time consuming to defend;
cause one or more of our patents to be ruled or rendered unenforceable or invalid;
cause us to cease making, licensing or using products that incorporate the challenged intellectual property;
require us to redesign, reengineer or rebrand our products;
divert management’s attention and resources;
require us to pay significant amounts in damages;
require us to enter into royalty, licensing or settlement agreements in order to obtain the right to use a necessary product, process or component;
limit our ability to bring new products to the market in the future; or
cause us, by way of injunction to remove products on lease and/or stop selling or leasing new products.
Risks Factors Relating to Regulation
The gaming industry is highly regulated and we must adhere to various regulations and maintain applicable licenses to continue our operations. Failure to abide by regulations or maintain applicable licenses could be disruptive to our business and could adversely affect our operations.
We and our products are subject to extensive regulation under federal, state, local and foreign laws, rules and regulations of the jurisdictions in which we do business and our products are used. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. Licenses, approvals or findings of suitability may be revoked, suspended or conditioned. In sum, we may not be able to obtain or maintain all necessary registrations, licenses, permits or approvals. The licensing process may result in delays or adversely affect our operations and our ability to maintain key personnel, and our efforts to comply with any new licensing regulations will increase our costs.
We may be unable to obtain licenses in new jurisdictions where our customers operate.
We will become subject to regulation in any jurisdiction where our customers operate in the future. To expand into any such jurisdiction, we may need to be licensed or obtain approvals of our products or services. If we do not receive, or receive a license, or our license is revoked in a particular jurisdiction for our products, we would not be able to sell or place our products in that jurisdiction. Any such outcome could materially and adversely affect our results of operations and any growth plans for our business.
Legislative and regulatory changes could negatively affect our business and the business of our customers.
Legislative and regulatory changes may affect demand for or place limitations on the placement of our products. Such changes could affect us in a variety of ways. Legislation or regulation may introduce limitations on our products or opportunities for the use of our products and could foster competitive products or solutions at our or our customers’ expense. Our business will likely also suffer if our products became obsolete due to changes in laws or the regulatory framework.
Legislative or regulatory changes negatively impacting the gaming industry as a whole or our customers in particular could also decrease the demand for our products. Opposition to gaming could result in restrictions or even prohibitions of gaming operations in any jurisdiction or could result in increased taxes on gaming revenues. Tax matters, including changes in state, federal or other tax legislation or assessments by tax authorities could have a negative impact on our business. A reduction in growth of the gaming industry or in the number of gaming jurisdictions or delays in the opening of new or expanded casinos could reduce demand for our products. Changes in current or future laws or regulations or future judicial intervention in any particular jurisdiction may have a material adverse effect on our existing and proposed foreign and domestic operations. Any such adverse change in the legislative or regulatory environment could have a material adverse effect on our business, results of operations or financial condition.
Risk Factors Related to Our Common Stock
The limited liquidity for our common stock could affect your ability to sell your shares at a satisfactory price.
Trading of our common stock is conducted on the over-the-counter markets—specifically on the OTCQX, the top-tier quotation marketplace administered by OTC Markets. Our common stock is relatively illiquid. A more active public market for our common stock may not develop, which could adversely affect the trading price and liquidity of our common stock. Moreover, a thin trading market for our stock could cause the market price for our common stock to fluctuate significantly more than the stock market as a whole. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.
The payment and amount of future dividends is subject to Board of Director discretion and to various risks and uncertainties.
The payment and amount of future quarterly dividends is within the discretion of the Board of Directors and will depend on factors the Board deems relevant at each time it considers declaring a dividend. These factors include, but are not limited to: available cash; management’s expectations regarding future performance and free cash flow; alternative uses of cash to fund capital expenditures; and the effect of various risks and uncertainties described in this “Risk Factors” section.
There is currently little trading volume in our common stock, which may make it difficult to sell shares of our common stock.
In general, there has been very little trading activity in our common stock. The relatively low trading volume will likely make it difficult for our stockholders to sell their shares as and when they choose. Furthermore, low trading volumes generally depress market prices. As a result, you may not always be able to resell shares of our common stock publicly at or near their original purchase price or at any price.
disclaim
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Industry data and other statistical information used in this report are based on independent publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, derived from our review of internal surveys and the independent sources listed above. Although we believe these sources are reliable, we have not independently verified the information.
BACKLOG
The Company’s backlog generally consists of incomplete system installations and expansion of offerings for currently installed and supported systems.
The Company had three projects in its backlog as of December 31, 2025 . The Company had five projects in its backlog at December 31, 2024 . As of the filing date of this report, the Company has signed four new contracts with cust omers in 2026.
The Company is currently serving gaming establishmen ts in seventeen states in the U.S., as well as countries in Central and South America, the Caribbean and Australia. The Company aims to pursue further opportunities and strategic partnerships.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that the Company has adequate cash to meet its obligations and continue operations for both existing customer contracts and ongoing product development for at least the next twelve months from the date of this filing. The Company’s primary sources of liquidity are cash, cash equivalents, short term investments, receivables, and future cash generated from operations.
In addition, the Company has a $500,000 line of credit with a lender. No amount was outstanding or drawn from this line of credit during the year ended December 31, 2025 . The line of credit expires on February 1, 2027.
The Company’s cash and cash equivalents position at December 31, 2025 was $8,235,788 , an increase of $5,978,092 from $ 2,257,696 at December 31, 2024 . This increase was primarily the result of the Company investment in certificates of deposit maturing during the 2025. The Company’s short-term investments were $0 as of December 31, 2025, as compared to $4,627,744 as of December 31, 2024.
Net cash flows provided by operating activities during the year ended December 31, 2025 was $1,806,481 a decrease of $211,572 from $ 2,018,053 for the year ended December 31, 2024 . This decrease was primarily due to a decrease in customer deposits offset by a decrease in inventory.
Net cash provided by investing activities was $4,534,991 during the year ended December 31, 2025 , compared to cash used in investing activities of $3,111,075 for the year ended December 31, 2024 . This increase relative to 2024 was primarily due to proceeds from maturing certificates of deposit of $4,725,286. We used no cash to purchase certificates of deposit in 2025, as compared to $6,561,614 in 2024.
Net cash used in financing activities was $363,380 for the year ending December 31, 2025, compared to net cash used in financing activities of $139,053. This increase relative to 2024 was primarily due to higher total dividend payments of $371,240.
On December 31, 2025 , total stockholders’ equity was $12,844,464 compared to $ 11,462,081 on December 31, 2024 , an increase of $1,382,383 or 12.1% , which was primarily due to 2025 net income.
The Company did not have any off-balance sheet arrangements as of December 31, 2025 .
RESULTS OF OPERATIONS, FOR THE YEAR ENDED December 31, 2025 COMPARED TO YEAR ENDED December 31, 2024
The most significant events that affected the 2025 results of operations were the Company’s installation of eight casino management systems and expanding five existing customers systems.
Revenue
See Note 1: Revenue, disaggregated revenues by major product line table
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Total revenues decreased $115,789 , a 1.0% decrease, during the year ended December 31, 2025, compared to the year ended December 31, 2024, as a result of increases in maintenance and other revenue. System sales decreased $1,166,909 , a 28.5% decrease, due to a decrease in the number and size of site installations in 2025 compared to 2024 . Maintenance revenue increased $773,918 , an 14.4% increase, due to the increase in our customer base and rates from 2024 to 2025. Service and other revenue, which includes DataTrac, KioskTrac, KioskTrac Mobile, SlotSUITE, RePrintEnroll kiosks and licensing agreements increased $223,522 , or approximately 13%, as a result of an increase in DataTrac services, SlotSUITE and promotional kiosk products sold in 2025 compared to 2024.
During 2025, the Company delivered a total of eight systems, expanded five existing customers. During 2024 , the Company delivered eight systems.
Cost of Sales and Gross Profit
Cost of sales decreased 11.6% to $2,890,020 in 2025 from $3,270,733 in 2024 . The decrease of $380,713 was primarily due to a decrease in volume, type and size of installations. The following table summarizes our cost of sales:
Year Ended December 31,
(percent of revenues)
(percent of revenues)
System
Maintenance
Lease
Service and other
Total cost of sales
Gross profit
The gross profit in 2025 totaled $8,158,217, or 73.7% of sales, compared with $7,893,293, or 70.8% of sales, in 2024. The increase in gross margin in 2025 was primarily attributable to a higher proportion of system upgrade projects performed for existing customers. These upgrade projects generally produced higher margins than traditional installations due to reduced labor requirements and the use of standardized components, which lowered overall project costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 6% to $ 6,554,624 in 2025 from $ 6,175,668 in 2024 . This increase of $378,956 was primarily due to an increase in the Company's research and development efforts.
Other Income
Other income totaled $7,076 in 2025 compared to $2,587 in 2024 .
Interest Income
Interest income increased to $477,951 in 2025, compared to $388,716 in 2024, primarily due to the increase of interest income from cash being invested into multiple certificates of deposit as well as a high yield savings account.
Income Tax Expense
The income tax expense was $ 462,000 in 2025 , for an effective rate of 22.2% , compared to income tax expense of $532,500 for an effective rate of 25.3% in 2024 . The change in the effective rate is primarily due to changes in generation/utilization of tax credits.
Net Income
The net income for 2025 was $1,626,620 compared to net income of $1,576,428 for 2024, which is a increase of $50,192 .
The basic and diluted earnings per share in 2025 were $ 0.35 , compared to basic and diluted earnings per share of $ 0.34 in 2024 .
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company’s discussion and analysis of financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates these estimates, including those related to revenue recognition. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that the Company believes have the most effect on its reported financial position and results of operations are as follows:
Revenue Recognition
The Company derives revenues from the sales of systems, licenses and maintenance fees, hardware leasing and services.
System Sales
Revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected, when applicable from customers, which are subsequently remitted to governmental authorities.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is a unit of account in ASC 606. A majority of the Company’s systems sales have multiple performance obligations including an obligation to deliver a casino management system and another to provide maintenance services. For system sales with multiple performance obligations, the Company allocates revenue to each performance obligation based on its Standalone Selling Price ("SSP"). See discussion within the significant judgement paragraph regarding our determination of SSP. At contract inception, management assesses whether it is probable that the company will collect substantially all of the consideration to determine whether the contract meets the criterion for collectability. The revenue allocated to the casino management system is recognized upon installation. The Company occasionally enters into contracts that include multiple sites; management has determined that each site installation is a separate performance obligation. In these instances, the Company recognizes revenue upon completion of each performance obligation. In addition, the Company has a contract with a reseller who purchases and resells the Company’s products; monthly the reseller notifies the Company of their successful installations and submits an invoice to the Company for those installations. The Company also analyzes its standard business practice of using long-term contracts and the history of collecting on extended payment term contracts which include a significant financing component which is usually a market interest rate. The associated interest income is reflected accordingly on the statement of operations.
Management’s assessment of collectability at both contract incepti on and on an ongoing basis resulted in the determination that some of our contracts did not meet the criterion for collectability. The balance of these contracts are not included as part of accounts receivable on the balance sheet. Accordingly, for these contracts whereby the collectability criterion has not been met, revenue will be recognized as payments are received. During the years ended December 31, 2025 and 2024, the Company has determined that approximately $887,500 and $1,229,290 for these systems did not meet the revenue recognition collectability criterion. Management considered the following facts and circumstances in its determination: these installations are subject to different regulators than our current customer base; Payments have not been received for items invoiced; one customer has a large debtor in a senior position to Table Trac. Both contracts will continue to be recognized on a cash basis subject to ongoing collectability assessment. A change in the collectability assessment in a future period may allow the Company to recognize revenue prior to collecting cash. The company has received substantially all of the site's inventory installed.
Maintenance Revenue
Maintenance revenue is recognized ratably over the contract period. The SSP for maintenance is based upon the renewal rate for contracted services.
Lease Revenue
The Company derives a portion of its revenue from a sales type leasing arrangement in accordance with ASC 842 . The Company leases hardware to a customer and receives monthly payments.
Service Revenue and Other Revenue
Service revenue is recognized upon completion of the services and are billed in arrears. The SSP for service revenue is established based upon actual selling prices for the services or prior similar arrangements.
Other revenue includes DataTrac, kiosks and related promotional programs and miscellaneous sales of equipment. Revenue is recognized upon completion of services or delivery of equipment and is billed in arrears. During 2024 , the Company recognized variable consideration of $275,000 which resulted in a reduction of revenue in those periods related to the Company paying the one time cash consideration to a customer as a result of certain promotional software not performing in accordance with agreed upon specifications.
The Company offers qualified customers a licensing agreement. Licensing revenue is recognized after the intellectual property (CMS system), the performance obligation, is delivered and in its operational and functional state. The stand-alone selling price for licensing revenue is established based upon actual selling prices for the license.
See also Note 1.
Accounts Receivable / Allowance for Credit Losses
Accounts receivable are initially recorded at the invoiced amount and carried on the balance sheet at net realizable value as of each balance sheet date. The company offers customers extended payment terms for periods of 6 to 72 months and as amounts under these long-term accounts receivable become due within one year, they are reclassified to the current portion of accounts receivable. For receivables related to contracts that contain an interest rate, interest is recorded upon receipt to interest income on the statements of operations. An allowance for credit losses is recorded when the Company believes the amounts may not be collected. Management believes that receivables, net of the allowance for credit losses, are fully collectible. Accounts receivable are written off when management determines collection is no longer likely. While the ultimate result may differ, management believes that any write-off not allowed for will not have a material impact on the Company’s financial position.
Inventory
Inventory, consisting of finished goods, is stated at the lower of cost or net realizable value. The average cost method is used to value inventory. Inventory is reviewed quarterly for the lower of cost or net realizable value and obsolescence. Any material cost found to be above market value or considered obsolete is written down accordingly. The Compa ny had $8,597 and $ 7,697 of obsolescence reserves at December 31, 2025 and 2024, respectively.
Income Taxes
Income taxes are provided for using the asset and liability method of accounting. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued and adopted accounting pronouncements, if any, is contained in Note 1 of the Notes to Consolidated Financial Statements.
