trak20240930

trak20240930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to .

Commission File Number 001-34941

REPOSITRAK, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	37-1454128
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

5282 South Commerce Drive, Suite D292, Murray, Utah 84107

(Address of principal executive offices)

(435) 645-2000

(Registrant’s telephone number)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which

registered

Common stock, par value $0.01 per share

TRAK

New York Stock Exchange

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 and 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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 14, 2024, 18,260,982 shares of the registrant’s common stock, $0.01 par value, were issued and outstanding.

Table of Contents

REPOSITRAK, INC.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Consolidated Condensed Balance Sheets as of September 30, 2024 and June 30, 2024 (Unaudited)	1
	Consolidated Condensed Statements of Operations and Comprehensive Income for the Three months Ended September 30, 2024 and 2023 (Unaudited)	2
	Consolidated Condensed Statements of Cash Flows for the Three months Ended September 30, 2024 and 2023 (Unaudited)	3
	Consolidated Condensed Statements of Stockholders’ Equity for the Three months Ended September 30, 2024 and 2023 (Unaudited)	4
	Notes to Consolidated Condensed Financial Statements	5

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3.	Defaults Upon Senior Securities	22

Item 5.	Other Information	22

Item 6.	Exhibits	22

Signatures		23

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REPOSITRAK, INC.

Consolidated Condensed Balance Sheets (Unaudited)

	*September 30,*			*June 30,*
	*2024*			*2024*
*Assets*
Current Assets
Cash	$	25,790,206		$	25,153,862
Receivables, net of allowance for doubtful accounts of $215,480 and $227,573 at September 30, 2024 and June 30, 2024, respectively		3,297,932			3,678,627
Contract asset – unbilled current portion		671,763			181,680
Prepaid expense and other current assets		332,018			285,998
Total Current Assets		30,091,919			29,300,167

Property and equipment, net		675,721			513,277

Other Assets:
Deposits and other assets		22,414			22,414
Prepaid expense – less current portion		2,218			2,609
Contract asset – unbilled long-term portion		-			108,052
Operating lease – right-of-use asset		234,729			250,306
Customer relationships		98,550			131,400
Goodwill		20,883,886			20,883,886
Capitalized software costs, net		320,518			384,621
Total Other Assets		21,562,315			21,783,288

Total Assets	$	52,329,955		$	51,596,732

*Liabilities and Shareholders’ Equity*
Current liabilities
Accounts payable	$	331,755		$	265,086
Accrued liabilities		1,286,725			1,554,775
Contract liability – deferred revenue		2,585,019			2,441,234
Operating lease liability – current		65,452			64,076
Notes payable and financing leases – current		188,425			217,971
Total current liabilities		4,457,376			4,543,142

Long-term liabilities
Operating lease liability – less current portion		182,085			198,972
Notes payable and financing leases – less current portion		165,735			-
Total liabilities		4,805,196			4,742,114

Commitments and contingencies

Stockholders’ equity:
Preferred Stock; $0.01 par value, 30,000,000 shares authorized;
Series B Preferred, 700,000 shares authorized; 546,377 and 616,470 shares issued and outstanding at September 30, 2024 and June 30, 2024, respectively		5,464			6,165
Common Stock, $0.01 par value, 50,000,000 shares authorized; 18,246,090 and 18,234,893 and issued and outstanding at September 30, 2024 and June 30, 2024, respectively		182,463			182,351
Additional paid-in capital		64,085,398			64,655,902
Accumulated other comprehensive loss		6,696			(27,390	)
Accumulated deficit		(16,755,262	)		(17,962,410	)
Total stockholders’ equity		47,524,759			46,854,618
Total liabilities and stockholders’ equity	$	52,329,955		$	51,596,732

See accompanying notes to consolidated condensed financial statements.

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REPOSITRAK, INC.

Consolidated Condensed Statements of Operations and Comprehensive Income (Unaudited)

	*Three Months Ended*
	*September 30,*
	*2024*			*2023*

Revenue	$	5,441,142		$	5,060,112

Operating expense:
Cost of revenue and product support		859,219			766,334
Sales and marketing		1,529,100			1,505,501
General and administrative		1,292,551			1,279,323
Depreciation and amortization		280,211			308,945
Total operating expense		3,961,081			3,860,103

Income from operations		1,480,061			1,200,009

Other income (expense):
Interest income		349,533			258,161
Interest expense		(10,172	)		(6,344	)
Unrealized gain (loss) on short term investments		(4,267	)		27,186
Income before income taxes		1,815,155			1,479,012

(Provision) for income taxes:		(150,000	)		(100,464	)
Net income		1,665,155			1,378,548

Dividends on preferred stock		(107,882	)		(146,611	)

Net income applicable to common shareholders	$	1,557,273		$	1,231,937

Weighted average shares, basic		18,244,000			18,225,000
Weighted average shares, diluted		19,102,000			18,839,000
Basic income per share	$	0.09		$	0.07
Diluted income per share	$	0.08		$	0.07
Comprehensive income:
Net income	$	1,665,155		$	1,378,548
Other comprehensive gain:
Unrealized gain on available-for-sale securities		34,086			-
Total comprehensive income	$	1,699,241		$	1,378,548

See accompanying notes to consolidated condensed financial statements.

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REPOSITRAK, INC.

Consolidated Condensed Statements of Cash Flows (Unaudited)

	*Three Months Ended*
	*September 30,*
	*2024*			*2023*
Cash flows from operating activities:
Net income	$	1,665,155		$	1,378,548
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		280,211			308,945
Amortization of operating right of use asset		15,577			14,829
Stock compensation expense		150,000			85,375
Bad debt expense		100,044			75,000
(Increase) decrease in:
Accounts receivables		(259,388	)		(547,809	)
Long-term receivables, prepaids and other assets		6,455			216,340
Increase (decrease) in:
Accounts payable		66,669			(116,499	)
Operating lease liability		(15,511	)		(57,164	)
Accrued liabilities		(284,097	)		(14,218	)
Deferred revenue		143,785			177,423
Net cash provided by operating activities		1,868,900			1,520,770

Cash flows from investing activities:
Sale of marketable securities		34,086			-
Net cash provided by investing activities		34,086			-

Cash flows from financing activities:
Common Stock buyback/retirement		-			(1,322,082	)
Redemption of Series B Preferred		(749,995	)		-
Proceeds from employee stock plan		59,852			57,743
Dividends paid		(422,954	)		(421,248	)
Payments on notes payable and capital leases		(153,545	)		(128,834	)
Net cash used in financing activities		(1,266,642	)		(1,814,421	)

Net increase (decrease) in cash and cash equivalents		636,344			(293,651	)

Cash and cash equivalents at beginning of period		25,153,862			23,990,879
Cash and cash equivalents at end of period	$	25,790,206		$	23,697,228

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	312,098		$	221,661
Cash paid for interest	$	2,005		$	2,329
Cash paid for operating leases	$	18,686		$	18,141

Supplemental disclosure of non-cash investing and financing activities:
Common stock to pay accrued liabilities	$	69,985		$	37,500
Dividends accrued on preferred stock	$	107,882		$	146,611
Right-of-use asset	$	289,734		$	-

See accompanying notes to consolidated condensed financial statements.

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REPOSITRAK, INC.

Consolidated Condensed Statements of Stockholders’ Equity (Deficit) (Unaudited)

Three months Ended September 30, 2024

																					*Accumulated*
	*Series B*						*Series B-1*								*Additional*						*Other*
	*Preferred Stock*						*Preferred Stock*				*Common Stock*				*Paid-In*			*Accumulated*			*Comprehensive*
	*Shares*			*Amount*			*Shares*		*Amount*		*Shares*		*Amount*		*Capital*			*Deficit*			*Gain/Loss*			*Total*

Balance, June 30, 2024		616,470		$	6,165			-	$	-		18,234,893	$	182,351	$	64,655,902		$	(17,962,410	)	$	(27,390	)	$	46,854,618
Stock issued for:
Accrued compensation		-			-			-		-		5,705		57		69,928			-			-			69,985
Employee stock plan		-			-			-		-		5,492		55		59,797			-			-			59,852
Stock buyback		-			-			-		-		-		-		-			-			-			-
Preferred Stock redemption		(70,093	)		(701	)		-		-		-		-		(700,229	)		(49,065	)		-			(749,995	)
Preferred Dividends-Declared		-			-			-		-		-		-		-			(107,882	)		-			(107,882	)
Common Stock Dividends-Declared		-			-			-		-		-		-		-			(301,060	)		-			(301,060	)
Net income		-			-			-		-		-		-		-			1,665,155			-			1,665,155
Other comprehensive gain		-			-			-		-		-		-		-			-			34,086			34,086
Balance, September 30, 2024		546,377		$	5,464			-	$	-		18,246,090	$	182,463	$	64,085,398		$	(16,755,262	)	$	6,696		$	47,524,759

Three months Ended September 30, 2023

																					*Accumulated*
	*Series B*				*Series B-1*										*Additional*						*Other*
	*Preferred Stock*				*Preferred Stock*				*Common Stock*						*Paid-In*			*Accumulated*			*Comprehensive*
	*Shares*		*Amount*		*Shares*		*Amount*		*Shares*			*Amount*			*Capital*			*Deficit*			*Gain/Loss*		*Total*

Balance, June 30, 2023		625,375	$	6,254		212,402	$	2,124		18,309,051		$	183,093		$	67,732,887		$	(22,042,427	)	$	-	$	45,881,931
Stock issued for:
Accrued compensation		-		-		-		-		3,716			37			37,463			-			-		37,500
Employee stock plan		-		-		-		-		13,326			133			57,610			-			-		57,743
Stock buyback		-		-		-		-		(155,025	)		(1,550	)		(1,320,532	)		-			-		(1,322,082	)
Preferred Dividends-Declared		-		-		-		-		-			-			-			(146,611	)		-		(146,611	)
Common Stock Dividends-Declared		-		-		-		-		-			-			-			(272,566	)		-		(272,566	)
Net income		-		-		-		-		-			-			-			1,378,548			-		1,378,548
Balance, September 30, 2023		625,375	$	6,254		212,402	$	2,124		18,171,068		$	181,713		$	66,507,428		$	(21,083,056	)	$	-	$	45,614,463

See accompanying notes to consolidated condensed financial statements.

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REPOSITRAK, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.

OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION

Overview

ReposiTrak, Inc., a Nevada corporation (“ReposiTrak”, “We”, “us”, “our” or the “Company”) is a Software-as-a-Service (“SaaS”) which operates a business-to-business (“B2B”) e-commerce, compliance & traceability, and supply chain management platform that partners with retailers, wholesalers, distributors and their product suppliers to (a) help them manage specific programs, such as out-of-stock management and scan-based trading; (b) reduce risk in their supply chain by managing compliance documents and data; ensure compliance with new regulatory requirements supporting traceability; and (c) improve product ordering and forecasting in order to accelerate sales, control risks, and improve supply chain efficiencies.

The Company’s services are grouped in three application suites:

ReposiTrak Compliance Management (“Compliance”) solutions, which helps the Company’s customers vet suppliers and reduce a company’s potential regulatory, legal, and criminal risk from its supply chain partners by providing a way for them to ensure these suppliers are compliant with food safety regulations, such as the Food Safety Modernization Act of 2011 (“FSMA”);

ReposiTrak Traceability Network (“Traceability” or “RTN”), which helps the Company’s customers comply with federal regulatory requirements of traceability and provides the lowest cost, easiest to use way to manage the capture and sharing of key data elements (“KDEs”) now required by Section 204d of FSMA 2011 as designated products move through the supply chain at each ‘event’ known as a ‘critical tracking event’ or “CTE”, which includes tracking from farm to shelf; and

ReposiTrak Supply Chain Solutions (“Supply Chain”), which help the Company’s customers to more efficiently manage various interactions with their suppliers. In other words, it provides customers with greater flexibility in sourcing products by enabling them to choose new suppliers and integrate them into their supply chain faster and more cost effectively, and it helps them to manage these relationships more efficiently, enhancing revenue while lowering working capital, labor costs and reducing waste.

The Company’s services are delivered though proprietary software products designed, developed, marketed and supported by the Company. These products provide visibility and facilitate improved business processes among all key constituents in the supply chain, starting with the retailer and moving backwards to suppliers and eventually to raw material providers.

The Company provides cloud-based applications and services that address e-commerce, supply chain, food safety, compliance and traceability activities. The principal customers for the Company’s products are household name multi-store food retail chains and restaurants including their suppliers, branded food manufacturers, food wholesalers and distributors, and other food service businesses.

The Company has a hub and spoke business model. The Company is typically engaged by retailers and wholesalers (“Hubs”), which in turn require their suppliers (“Spokes”) to utilize the Company’s services.

On December 21, 2023, the Company effected a change of its corporate name from Park City Group, Inc. to ReposiTrak, Inc. The Company is incorporated in the State of Nevada and has two principal subsidiaries: PC Group, Inc., a Utah corporation (98.76% owned) (“PCG Utah”), and Park City Group, Inc., a Delaware corporation (100% owned) (“PCG Delaware” and together with PCG Utah, the “Subsidiaries”). All intercompany transactions and balances have been eliminated in the Company’s consolidated financial statements, which contain the Company’s results from operations. The Company has no business operations separate from the operations conducted through its Subsidiaries.

The Company’s principal executive offices are located at 5282 South Commerce Drive, Suite D292, Murray, Utah 84107. Its telephone number is (435) 645-2000. Its website address is www.repositrak.com.

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Basis of Financial Statement Presentation

The interim financial information of the Company as of September 30, 2024 and for the three months ended September 30, 2024 is unaudited, and the balance sheet as of June 30, 2024 is derived from audited financial statements. The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial statements. Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. GAAP. The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in the Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended June 30, 2024. In the opinion of management, all adjustments necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for the three months ended September 30, 2024 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2024. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2024.

NOTE 2.

SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The financial statements presented herein reflect the consolidated financial position of ReposiTrak, Inc. and our subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that materially affect the amounts reported in the consolidated financial statements. Actual results could differ from these estimates. The methods, estimates, and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results it reports in its financial statements. The U.S. Securities and Exchange Commission (“SEC”) has defined the most critical accounting policies as those that are most important to the portrayal of the Company’s financial condition and results and require the Company to make its most difficult and subjective judgments, often because of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include revenue recognition, goodwill, other long-lived asset valuations, income taxes, stock-based compensation, and capitalization of software development costs.

Revenue Recognition

The Company recognizes revenue as it transfers control of deliverables (products, solutions and services) to its customers in an amount reflecting the consideration to which it expects to be entitled. To recognize revenue, the Company applies the following five step approach: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when a performance obligation is satisfied. The Company accounts for a contract based on the terms and conditions the parties agree to, if the contract has commercial substance and if collectability of consideration is probable. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience.

The Company may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any combination of its deliverables. To the extent a contract includes multiple promised deliverables, the Company applies judgment to determine whether promised deliverables are capable of being distinct and are distinct in the context of the contract. If these criteria are not met, the promised deliverables are accounted for as a combined performance obligation. For arrangements with multiple distinct performance obligations, the Company allocates consideration among the performance obligations based on their relative standalone selling price. Standalone selling price is the price at which the Company would sell a promised good or service separately to the customer. When not directly observable, the Company typically estimates standalone selling price by using the expected cost plus a margin approach. The Company typically establishes a standalone selling price range for its deliverables, which is reassessed on a periodic basis or when facts and circumstances change.

For performance obligations where control is transferred over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the deliverables to be provided. Revenue related to fixed-price contracts for application development and systems integration services, consulting or other technology services is recognized as the service is performed using the output method, under which the total value of revenue is recognized based on each contract’s deliverable(s) as they are completed and when value is transferred to a customer. Revenue related to fixed-price application maintenance, testing and business process services is recognized based on our right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in FASB ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), paragraph 606-10-55-18 (“ASC 606-10-55-18”).

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If the Company’s invoicing is not consistent with the value delivered, revenue is recognized as the service is performed based on the method described above. The output method measures the results achieved and value transferred to a customer, which is updated as the project progresses to reflect the latest available information; such estimates and changes in estimates involve the use of judgment. The cumulative impact of any revision in estimates is reflected in the financial reporting period in which the change in estimate becomes known and any anticipated losses on contracts are recognized immediately. Revenue related to fixed-price hosting and infrastructure services is recognized based on the Company’s right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in ASC 606-10-55-18. If the Company’s invoicing is not consistent with value delivered, revenue is recognized on a straight-line basis unless revenue is earned and obligations are fulfilled in a different pattern. The revenue recognition method applied to the types of contracts described above provides the most faithful depiction of performance towards satisfaction of the Company’s performance obligations.

Revenue related to the Company’s software license arrangements that do not require significant modification or customization of the underlying software is recognized when the software is delivered as control is transferred at a point in time. For software license arrangements that require significant functionality enhancements or modification of the software, revenue for the software license and related services is recognized as the services are performed in accordance with the methods described above. In software hosting arrangements, the rights provided to the customer, such as ownership of a license, contract termination provisions and the feasibility of the client to operate the software, are considered in determining whether the arrangement includes a license or a service. Revenue related to software maintenance and support is generally recognized on a straight-line basis over the contract period.

Management expects that incremental commission fees paid as a result of obtaining a contract are recoverable and therefore the Company capitalized them as contract costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.

Revenue related to transaction-based or volume-based contracts is recognized over the period the services are provided in a manner that corresponds with the value transferred to the customer to-date relative to the remaining services to be provided.

From time to time, the Company may enter into arrangements with third party suppliers to resell products or services. In such cases, the Company evaluates whether the Company is the principal (i.e., report revenue on a gross basis) or agent (i.e., report revenue on a net basis). In doing so, the Company first evaluates whether it controls the good or service before it is transferred to the customer. If the Company controls the good or service before it is transferred to the customer, the Company is the principal; if not, the Company is the agent. Determining whether the Company controls the good or service before it is transferred to the customer may require judgment.

The Company provides customers with assurance that the related deliverable will function as the parties intended because it complies with agreed-upon specifications. General updates or patch fixes are not considered an additional performance obligation in the contract.

Variable consideration is estimated using either the sum of probability weighted amounts in a range of possible consideration amounts (expected value), or the single most likely amount in a range of possible consideration amounts (most likely amount), depending on which method better predicts the amount of consideration to which we may be entitled. The Company includes in the transaction price variable consideration only to the extent it is probable that a significant reversal of revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and is based largely on an assessment of its anticipated performance and all information that is reasonably available to the Company.

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The Company assesses the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient