ReposiTrak Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
TRAK$6.76-2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001437749-24-017141
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001437749-24-035376
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 109 previous paragraphs and 81 current paragraphs.
55 unchanged; 23 reworded; 2 added; 24 removed; 7 previous and 1 current paragraphs rearranged.
Tables are not compared: 23 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
On September 30, 2024, the Company announced that the Board of Directors approved a 10% increase to the quarterly dividend beginning with the dividend payable to shareholders of record on December 31, 2024.
Current report
General and administrative expense was $1,292,551 and $1,279,323 for the three months ended September 30, 2024 and 2023, respectively, a 1% increase. The increase in general and administrative expense was primarily due to higher employee benefit costs, general liability insurance, D&O insurance, and payroll taxes.
Removed paragraphs (24)
Previous report
Corporate Name Change
Previous report
In connection with the rebranding of the Company, on December 21, 2023, the Company effected a change of its corporate name from Park City Group, Inc. to ReposiTrak, Inc., pursuant to a short-form merger with its wholly owned subsidiary, ReposiTrak, Inc., a Utah corporation, with the Company remaining as the surviving entity.
Previous report
Transfer of listing from NASDAQ to NYSE
Previous report
The Company filed a Registration Statement on Form 8-A in connection with the transfer of the listing of its common stock, par value $0.01 per share (“Common Stock”), from the Nasdaq Capital Market of The Nasdaq Stock Market LLC (“Nasdaq”) to the New York Stock Exchange (the “NYSE”). The Company commenced the trading of its Common Stock on the NYSE on November 2, 2023 under the symbol “TRAK.” Trading on the Nasdaq Capital Market ceased concurrently with the NYSE listing.
Previous report
On August 29, 2023, the Board approved the redemption and retirement of its Series B Preferred and Series B-1 Preferred for their stated value, or $10.70 for each share of Preferred Stock, resulting in an aggregate purchase price of $8,964,214 (the “Preferred Redemption”). The Preferred Redemption is to occur over the next three years from August 29, 2023.
Previous report
As of March 31, 2024, a total of zero shares of Series B Preferred and 140,186 shares of Series B-1 Preferred were redeemed and retired, for aggregate consideration of $0 and $1,499,990 in the case of Series B Preferred and Series B-1 Preferred, respectively, resulting in a total of 625,375 shares of Series B Preferred and 72,216 shares of Series B-1 Preferred issued and outstanding at March 31, 2024.
Previous report
Global Pandemics, Bank Failures, and Geopolitical Conflicts
Previous report
The impact of global pandemics, including COVID 19, banking failures, geopolitical conflicts, including the war in Ukraine and tensions in the Middle East, creates much uncertainty in the global marketplace. Management continues to monitor the ongoing impact of these events on all aspects of its business, including how they impact its services, customers, employees, vendors, and business partners now and in the future. While these events did not materially adversely affect the Company’s financial results and business operations during the year ended June 30, 2023 or during the nine months ended March 31, 2024, we are unable to predict the impact that these events, including geopolitical conflicts, will have on its future financial position and operating results due to numerous uncertainties.
Previous report
In January of 2023, the United States Department of Agriculture (the “USDA”), which governs the National Organic Program, instituted new requirements under the Strengthening Organic Enforcement (“SOE”) rule. This rule will be enforced beginning in March 2024. The SOE is designed to reduce the amount of fraud in the organic products industry by increasing the requirements for facility certification and traceability of organic products. The timing and scope of the SOE traceability requirement will accelerate the adoption of traceability solutions across the entire food supply chain, much sooner than many anticipated.
Previous report
In December 2023, one of the largest grocery retail chains in the US sent their suppliers a communication detailing their new traceability program requirements for ALL food products, not just the FDA required foods, with a deadline for compliance of June 2025, significantly earlier than the FDA FSMA 204 compliance deadline. It’s estimated that this new requirement could impact up to 20,000 food companies. If history is any indicator, we expect other large chains will follow the precedent set by this industry leader, resulting in effectively every supplier of food products sold in the United States will have the ability to simply and cost effectively share traceability data with their customers.
Previous report
Cost of services and product support was $831,912 and $840,272 for the three months ended March 31, 2024 and 2023, respectively, a 1% decrease. This $8,360 decrease is primarily the result of the decrease of certain hardware and software support and maintenance costs.
Previous report
Sales and marketing expense was $1,349,838 and $1,239,946 for the three months ended March 31, 2024 and 2023, respectively, a 9% increase. The increase in sales and marketing expense was primarily the result of an increase in trade show expense, investment in FSMA 204 traceability marketing, and higher sales travel expense. As the pandemic continues to abate, customers and prospects are returning to in person meetings. The largest contributor to the increase in sales and marketing expense has been an increase in travel cost and trade shows. We believe this trend will continue as many of our trading partners and industry associations will continue to require our assistance in addressing their compliance and supply chain needs particularly in the case of the 2026 traceability deadline.
Previous report
General and administrative expense was $1,352,197 and $916,237 for the three months ended March 31, 2024 and 2023, respectively, a 48% increase. The increase in general and administrative expense was primarily due to refund of payroll taxes associated with the ERC that occurred in the prior fiscal year. The ERC was a refund of certain payroll taxes for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts. During the prior fiscal year, the Company received approximately $1.175 million in payroll tax refunds, net of fees. The ERC credit was partially offset by increases in bad debt expense and increases in cost of benefits for employees.
Previous report
Comparison of the Nine months Ended March 31, 2024 to the Nine months Ended March 31, 2023.
Previous report
Revenue
Previous report
Sales and Marketing Expense
Previous report
General and Administrative Expense
Previous report
General and administrative expense was $3,978,798 and $3,392,056 for the nine months ended March 31, 2024 and 2023, respectively, a 17% increase. The increase in general and administrative expense was primarily due to refund of payroll taxes associated with the Employee Retention Credit (“ERC”) that occurred in the prior fiscal year. The ERC was a refund of certain payroll taxes for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts. During the prior fiscal year, the Company received approximately $1.175 million in payroll tax refunds, net of fees. The ERC credit was partially offset by increases in bad debt expense and increases in cost of benefits for employees.
Previous report
Depreciation and Amortization Expense
Previous report
Depreciation and amortization expense was $897,479 and $771,030 for the nine months ended March 31, 2024 and 2023, respectively, an increase of 16%. The increase was due to additional assets acquired in the prior fiscal year. Given the rising global hacks on software companies, banks, and financial institutions, we spent approximately $420,000 on security, backup, storage, and redundancy. The upgrades were financed through a leasing agent with an effective APR rate of 4.45%.
Previous report
Other Income and Expense
Previous report
Preferred Dividends
Previous report
Dividends accrued on the Company’s Series B-1 Preferred was $427,567 and $439,833 for the nine months ended March 31, 2024 and 2023, respectively. Dividends decreased due to the redemption of Preferred Stock.
Previous report
The Preferred Redemption is to occur over the next three years from August 29, 2023. As of March 31, 2024, a total of zero shares of Series B Preferred and 140,186 shares of Series B-1 Preferred were redeemed and retired, for aggregate consideration of $0 and $1,499,990 in the case of Series B Preferred and Series B-1 Preferred, respectively. The Company believes it will have adequate cash resources to fund its operations, satisfy its debt obligations, and fund its anticipated quarterly cash dividends and Preferred Redemption for at least the next 12 months.
Reworded paragraphs (23)
Previous wording
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 condensed financial statements, which contain the operating results of the operations. The Company has no business operations separate from the operations conducted through its Subsidiaries.
Current wording
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.
Previous wording
On March 18, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.0165 per share ($0.066 per year), payable to shareholders of record on March 28, 2024, which were paid to shareholders of record on or about May 10, 2024. Based on the closing prices on March 31, 2024, this represented an annual dividend yield of approximately 0.42%. Subsequent quarterly dividends will be paid within 45 days of each record date of June 30, 2024, September 30, 2024 and December 31, 2024
Current wording
On September 19, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.0165 per share ($0.066 per year), payable to shareholders of record on November 13, 2024, which were paid to shareholders of record on or about September 30, 2024. Based on the closing prices on September 30, 2024, this represented an annual dividend yield of approximately 0.34%. Subsequent dividends will be paid within 45 days of each fiscal quarter end.
Previous wording
On January 20, 2023, the rule became effective and applies to any person or Company that manufactures, processes, packs or hold foods the FDA considers to be high risk for food borne illness, the so-called Food Traceability List (“FTL”). The FTL is comprised of 16 product categories of food, which represent thousands of products commonly sold in grocery and convenience stores, and all restaurants. As a result, every grocery distributor, wholesaler and retailer, and the food service supply chain, must now institute a traceability program that enables the capture, creation and sharing of specific Key Data Elements (“KDEs”) prescribed by the FDA and required for traceability, at each designated Critical Tracking Event (“CTE”) in the supply chain, for thousands of items.
Current wording
In November 2022, the FDA announced the final rule on the Food Safety Modernization Act Section 204(d) (“FSMA 204”) - Traceability for High-Risk Foods. On January 20, 2023, the rule became effective and applies to any person or Company that manufactures, processes, packs or hold foods the FDA considers to be high risk for food borne illness, the so-called Food Traceability List (“FTL”). The FTL is comprised of 16 product categories of food, which represent thousands of products commonly sold in grocery and convenience stores, and all restaurants. As a result, every grocery distributor, wholesaler and retailer, and the food service supply chain, must now institute a traceability program that enables the capture, creation and sharing of specific Key Data Elements (“KDEs”) prescribed by the FDA and required for traceability, at each designated Critical Tracking Event (“CTE”) in the supply chain, for thousands of items.
Previous wording
FSMA 204 requires the traceability data records to be stored for two years, and be retrievable such that specific data records can be presented within 24 hours of a request from the FDA. FSMA 204 is ultimately about supply chain data recording record keeping, resulting is an enormous amount of data to manage, across more than one million supply chain and retail facilities.
Current wording
FSMA 204 requires the traceability data records to be stored for two years, and be retrievable such that specific data records can be presented within 24 hours of a request from the FDA. FSMA 204 is ultimately about supply chain data recording record keeping, resulting is an enormous amount of data to manage, across more than one million supply chain and retail facilities. The deadline for compliance with FSMA 204 is January 20, 2026, and nearly every company impacted will require some type of technical systems support to meet the requirement.
Previous wording
Traceability is, by definition, a supply chain data management issue, which is ReposiTrak’s core expertise. That’s why we’ve made it our goal to develop a traceability solution that’s easy, inexpensive and exceeds FDA’s requirements. TheReposiTrak Traceability Network (“RTN”) is now the largest and fastest growing traceability solution, connecting thousands of supplier locations to thousands of food wholesaler and retail locations, using low cost, easy to deploy technology, on the ReposiTrak platform. As the largest connected network of food suppliers, wholesalers and retailers in the world, theReposiTrak Traceability Network is well positioned to provide end-to-end traceability to provide a safer food supply chain, tighten controls on food waste, and implement a food recall response that saves lives and money.
Current wording
Traceability is, by definition, a supply chain data management issue, which is ReposiTrak’s core expertise. That is why we have made it our goal to develop a traceability solution that is easy, inexpensive and meets FDA’s requirements. The ReposiTrak Traceability Network (“RTN”) is a growing traceability solution, connecting thousands of supplier locations to thousands of food wholesaler and retail locations, using low cost, easy to deploy technology, on the ReposiTrak platform. As the largest connected network of food suppliers, wholesalers and retailers in the world, the ReposiTrak Traceability Network is positioned to provide end-to-end traceability to provide a safer food supply chain, tighten controls on food waste, and implement a food recall response that saves lives and money.
Previous wording
Revenue was $5,084,866 and $4,824,101 for the three months ended March 31, 2024 and 2023, respectively, a 5% increase year-over-year. The increase in revenue was due to growth in recurring subscription revenue, in all lines of business which includes compliance, supply chain and traceability. This is the result of growing industry and consumer response to food contaminations and food safety hazards, whether biological, chemical, physical, or allergenic. The risks have elevated regulatory requirements, documentation requisites, and principally “where does your food come from” transparency on grocery retailers and their suppliers. As more and more retailers, wholesalers and distributors adopt the increased regulatory disclosure requirements, the Company has seen a corresponding rise in demand for its services.
Current wording
Revenue was $5,441,142 and $5,060,112 for the three months ended September 30, 2024 and 2023, respectively, a 8% increase year-over-year. The increase in revenue was due to growth in recurring subscription revenue primarily in traceability but includes growth in all lines of business. These include compliance, supply chain and traceability. Growth in traceability is the result of growing industry and consumer response to food contaminations and food safety hazards, whether biological, chemical, physical, or allergenic. The risks have elevated regulatory requirements, documentation requisites, and principally has resulted in mandates from the retailers to its suppliers. As more and more retailers, wholesalers and distributors mandate their requirements to suppliers, the Company continues to see a corresponding rise in demand for its services.
Previous wording
Cost of services and product support was $2,571,533 and $2,539,618 for the nine months ended March 31, 2024 and 2023, respectively, a 1% increase. This $31,915 increase is primarily the result of increased offshore developer headcount and support services in effort to support the acceleration and expansion of the FSMA 204 initiative. Given the demand in traceability the Company has also expended additional resources on further upgrading its security and confidentiality to increase protection of customer data.
Current wording
Cost of services and product support was $859,219 and $766,334 for the three months ended September 30, 2024 and 2023, respectively, a 12% increase. This $92,885 increase is primarily the result of development to accelerate automation of onboarding and support services in effort to support the acceleration and expansion of the FSMA 204 initiative. Given the demand in traceability the Company has also expended additional resources on further upgrading its information security services to increase protection of customer data.
Previous wording
Sales and marketing expense was $4,119,716 and $3,667,017 for the nine months ended March 31, 2024 and 2023, respectively, a 12% increase. The increase in sales and marketing expense was primarily the result of an increase in commission, trade show expense, investment in FSMA 204 traceability marketing, and higher sales travel expense. As the pandemic continues to abate, customers and prospects are returning to in person meetings. The largest contributors to the increase in sales and marketing expense has been an increase in commission and FSMA 204 traceability marketing. We believe the uptick in marketing costs will flatten over the next twelve months as awareness of the 2026 traceability regulatory deadline approaches.
Current wording
Sales and marketing expense was $1,529,100 and $1,505,501 for the three months ended September 30, 2024 and 2023, respectively, a 2% increase. The increase in sales and marketing expense was primarily the result of higher sales commissions, sales travel, and investment in marketing for our suite of services. The largest contributors to the increase in sales and marketing expense has been an increase in commission and FSMA 204 traceability awareness marketing. We believe the uptick in marketing costs will flatten over the next twelve months as awareness of the 2026 traceability regulatory deadline approaches.
Previous wording
Depreciation and amortization expense was $288,576 and $305,864 for the three months ended March 31, 2024 and 2023, respectively, a decrease of 6%. The decrease was due to certain assets becoming fully depreciated over their useful lives.
Current wording
Depreciation and amortization expense was $280,211 and $308,945 for the three months ended September 30, 2024 and 2023, respectively, a decrease of 9%. The decrease was due to certain assets that have been fully depreciated or amortized.
Previous wording
Net other income was $951,412 for the nine months ended March 31, 2024, compared to net other income of $568,112 for the nine months ended March 31, 2023. Other income increased due to an increase in interest income attributable to higher interest rates on fixed income instruments on excess cash. When the Federal Reserve begins to cut rates in the future, it is unlikely the Company will be able to maintain the same interest income on its existing cash balances without taking additional credit risk.
Current wording
Net other income was $335,094 for the three months ended September 30, 2024, compared to net other income of $279,003 for the three months ended September 30, 2023. Other income increased due to higher cash balances and an increase in interest income attributable to higher earnings on fixed income instruments. In September 2024, the Federal Reserve began cutting interest rates, which reductions make it unlikely the Company will be able to maintain the same interest income on its existing cash balances without taking additional credit risk.
Previous wording
Preferred dividends accrued on the Company’s Preferred Stock was $134,345 for the three months ended March 31, 2024 and $146,611 for the three months ended March 31, 2023. Dividends decreased due to the redemption of Preferred Stock during the period. Although no assurances can be given, the Company anticipates redeeming the remaining outstanding Preferred Stock over the next 2.5 years.
Current wording
Preferred dividends accrued on the Company’s Preferred Stock was $107,882 for the three months ended September 30, 2024 and $146,611 for the three months ended September 30, 2023. Dividends decreased due to the redemption and retirement of Preferred Stock. Although no assurances can be given, the Company announced that it intends to redeem all of the Series B and B-1 Preferred stock over three years which commenced August of 2023.
Previous wording
Cash was $24,452,680 and $23,990,879 at March 31, 2024 and June 30, 2023, respectively. This 2% increase is primarily the result of higher revenue and the corresponding cash receipts from customers.
Current wording
Cash was $25,790,206 and $25,153,862 at September 30, 2024 and June 30, 2024, respectively. This 3% increase is primarily the result of higher revenue and the corresponding cash receipts from customers. It also includes higher earnings associated with a growing cash balance.
Previous wording
Net cash provided by operating activities for the nine months ended March 31, 2024 was $4,910,741 as compared to net cash provided by operating activities of $7,065,890 for the nine months ended March 31, 2023. Net cash provided by operating activities decreased 31% due principally to an increase in accounts receivable and a decrease in accounts payable. Noncash expense decreased by $900,863 in the nine months ended March 31, 2024, compared to nine months ended March 31, 2023 as a result of a decrease in bad debt expense and stock compensation expense offset by an increase in depreciation and amortization.
Current wording
Net cash provided by operating activities for the three months ended September 30, 2024 was $1,868,900 compared to net cash provided by operating activities of $1,520,770 for the three months ended September 30, 2023. Net cash provided by operating activities increased 23% due principally to an increase in collections due to higher revenues, offset by lower accounts payable. Noncash expense in the quarter increased by $61,683 in the three months ended September 30, 2024, compared to three months ended September 30, 2023 as a result of a decrease in bad debt expense and stock compensation expense offset by an increase in depreciation and amortization.
Previous wording
Net cash used in investing activities for the nine months ended March 31, 2024 was $48,538 compared to net cash used in investing activities of $903,187 for the nine months ended March 31, 2023. This decrease in cash used in investing activities for the nine months ended March 31, 2024 was due to capitalization of certain software costs and purchases of property and equipment in the prior fiscal year that did not occur in the nine months ended March 31, 2024.
Current wording
Net cash provided by investing activities for the three months ended September 30, 2024 was $34,086 compared to net cash used in investing activities of $0 for the three months ended September 30, 2023. This increase in cash provided by investing activities for the three months ended September 30, 2024 was due to the sale of marketable securities.
Previous wording
Net cash used in financing activities totaled $4,400,402 for the nine months ended March 31, 2024, as compared to cash used in financing activities of $4,682,158 for the nine months ended March 31, 2023. The decrease in cash used in financing activities is due to the payoff of our line of credit arrangement with the Bank in the prior fiscal year offset by net cash used in financing activities for the payment of Common Stock dividends, the purchase of Common Stock under the Share Repurchase Program, and the redemption and retirement of shares of Preferred Stock.
Current wording
Net cash used in financing activities totaled $1,266,642 for the three months ended September 30, 2024, compared to cash used in financing activities of $1,814,421 for the three months ended September 30, 2023. The decrease in net cash used in financing activities is due to no buyback of Common stock during the quarter.
Previous wording
At March 31, 2024, the Company had positive working capital of $24,182,808, as compared with positive working capital of $23,042,199 at June 30, 2023. This $1,140,609 increase in working capital is primarily due to an increase in accounts receivable and decrease in prepaid and other assets offset by a decrease in contract liabilities and an increase in deferred revenue. Cash and cash equivalents also increased due to cash receipts from customers who have signed up for, among other offerings, the ReposiTrak Traceability Network.
Current wording
At September 30, 2024, the Company had positive working capital of $25,634,543, as compared with positive working capital of $24,757,025 at June 30, 2024. This $877,518 increase in working capital is primarily due to an increase in accounts receivable and decrease in prepaid and other assets offset by a decrease in contract liabilities and an increase in deferred revenue due to an increase in annual subscriptions. Cash and cash equivalents also increased due to cash receipts from customers who have signed up for, among other offerings, the ReposiTrak Traceability Network.
Previous wording
Current assets totaled $28,827,713 as of March 31, 2024, as compared to $27,274,620 as of June 30, 2023. The increase in current assets is primarily attributable to the increase in cash and accounts receivables offset by a decrease of prepaid expense and other current assets.
Current wording
Current assets totaled $30,091,919 as of September 30, 2024, as compared to $29,300,167 as of June 30, 2024. The increase in current assets is primarily attributable to the increase in cash and prepaid expense and other current assets offset by a decrease of accounts receivables.
Previous wording
Current liabilities totaled $4,644,905 as of March 31, 2024 as compared to $4,232,421 as of June 30, 2023. The increase in current liabilities is primarily attributable to the increase in deferred revenue offset by a decrease in accrued liabilities and financing lease liabilities. As of March 31, 2024, the Company had zero bank debt.
Current wording
Current liabilities totaled $4,457,376 as of September 30, 2024 as compared to $4,543,142 as of June 30, 2024. The decrease in current liabilities is primarily attributable to the increase in deferred revenue offset by a decrease in accrued liabilities and paydown of certain financing lease liabilities. As of September 30, 2024, the Company had zero bank debt.
Previous wording
On October 6, 2021, the Company and U.S. Bank N.A. (the “Bank”) executed a Revolving Credit Agreement (the "Revolving Credit Agreement”) and accompanying addendum (the "Addendum"), and Stand-Alone Revolving Note (the "Note" and collectively with the Revolving Credit Agreement and Addendum, the "Credit Agreement"), with an effective date of September 30, 2021. The Credit Agreement replaced the Company’s prior $6.0 million Revolving Credit Agreement and Stand-Alone Revolving Note between the Company and the Bank, as amended and revised on January 9, 2019, and provided the Company with a $10.0 million revolving line of credit that matured on March 31, 2023. The Credit Agreement contained customary affirmative and negative covenants and conditions to borrowing, as well as customary events of default. Among other things, the Company must maintain liquid assets equal to $12 million and maintain a Senior Funded Debt (as defined in the Credit Agreement) to EBITDA Ratio (as defined in the Credit Agreement) of not more than 3:1.
Current wording
On October 6, 2021, the Company and the Bank executed a Revolving Credit Agreement (the "Revolving Credit Agreement”) and accompanying addendum (the "Addendum"), and Stand-Alone Revolving Note (the "Note" and collectively with the Revolving Credit Agreement and Addendum, the "Credit Agreement"), with an effective date of September 30, 2021. The Credit Agreement replaced the Company’s prior $6.0 million Revolving Credit Agreement and Stand-Alone Revolving Note between the Company and the Bank, as amended and revised on January 9, 2019, and provided the Company with a $10.0 million revolving line of credit that matured on March 31, 2023. The Credit Agreement contained customary affirmative and negative covenants and conditions to borrowing, as well as customary events of default. Among other things, the Company must maintain liquid assets equal to $12 million and maintain a Senior Funded Debt (as defined in the Credit Agreement) to EBITDA Ratio (as defined in the Credit Agreement) of not more than 3:1.
Previous wording
On April 28, 2023, the Company and the Bank executed an amendment to the Credit Agreement (the “Amendment”), with an effective date of March 31, 2023. The Amendment to the Credit Agreement sets forth that (1) the Company will increase its liquidity requirement from $10 million to $12 million, which the Company currently maintains over $22 million in cash and a current ratio of over 6:1, and (2) draws on the facility accrue interest at the annual rate, equal to 1.75% plus the one-month SOFR rate, instead of the previous LIBOR rate. As of March 31, 2024, the balance of the facility was zero. The Company had zero bank debt at March 31, 2024.
Current wording
On April 28, 2023, the Company and the Bank executed an amendment to the Credit Agreement (the “Amendment”), with an effective date of March 31, 2023. The Amendment sets forth that (1) the Company will increase its liquidity requirement from $10 million to $12 million, which the Company currently maintains over $22 million in cash and a current ratio of over 6:1, and (2) draws on the facility accrue interest at the annual rate, equal to 1.75% plus the one-month SOFR rate, instead of the previous LIBOR rate. As of March 31, 2024, the balance of the facility was zero. The Company had zero bank debt at September 30, 2024.
Previous wording
While no assurances can be given, management currently believes that the Company will continue to increase its cash flow from operations and working capital position in subsequent periods. The Company’s increase in anticipated cash flow from operations and working capital position is expected to be offset by the use of cash required to fund the Company’s quarterly cash dividends of $0.015 per share, announced on September 28, 2022, December 30, 2022, February 10, 2023, March 21, 2023, June 20, 2023, September 19, 2023, and of $0.0165 per share, announced on December 12, 2023 and March 18, 2024, as well as the redemption and retirement of the Company’s Series B Convertible Preferred Stock and Series B-1 Preferred Stock (together, the “Preferred Stock”) for their stated value, or $10.70 for each share of Preferred Stock, resulting in an aggregate purchase price of $8,964,214 (the “Preferred Redemption”).
Current wording
While no assurances can be given, management currently believes that the Company will continue to increase its cash flow from operations and working capital position in subsequent periods. The Company’s increase in anticipated cash flow from operations and working capital position is expected to be offset by the use of cash required to fund the Company’s quarterly cash dividends of $0.015 per share, announced on September 28, 2022, December 30, 2022, February 10, 2023, March 21, 2023, June 20, 2023, September 19, 2023, and of $0.0165 per share, announced on December 12, 2023, March 18, 2024, June 18, 2024 and September 19, 2024, as well as the redemption and retirement of the Company’s Series B Convertible Preferred Stock (the “Preferred Stock”) for their stated value, or $10.70 for each share of Preferred Stock, resulting in an aggregate purchase price of $8,964,214.
Previous wording
In determining the carrying value of the Company’s net deferred income tax assets, the Company must assess the likelihood of sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions, to realize the benefit of these assets. If these estimates and assumptions change in the future, the Company may record a reduction in the valuation allowance, resulting in an income tax benefit in the Company’s statements of operations. Management evaluates whether to realize the deferred income tax assets and assesses the valuation allowance quarterly.
Current wording
In determining the carrying value of the Company’s net deferred income tax assets, the Company must assess the likelihood of sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions, to realize the benefit of these assets. If these estimates and assumptions change in the future, the Company may record a reduction in the valuation allowance, resulting in an income tax benefit in the Company’s statements of operations. Management evaluates quarterly whether to realize the deferred income tax assets and assesses the valuation allowance.
Previous wording
Goodwill and other long-lived assets assigned to specific reporting units are reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. Management reviews the long-lived tangible and intangible assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Management evaluates, at each balance sheet date, whether events and circumstances have occurred which indicate possible impairment. The carrying value of a long-lived asset is considered impaired when the anticipated cumulative undiscounted cash flows of the related asset or group of assets is less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the estimated fair market value of the long-lived asset. Economic useful lives of long-lived assets are assessed and adjusted as circumstances dictate.
Current wording
Goodwill is assigned to specific reporting units and is reviewed for possible impairment at least annually or upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. Management reviews the long-lived tangible and intangible assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Management evaluates, at each balance sheet date, whether events and circumstances have occurred which indicate possible impairment.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The carrying value of a long-lived asset is considered impaired when the anticipated cumulative undiscounted cash flows of the related asset or group of assets is less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the estimated fair market value of the long-lived asset. Economic useful lives of long-lived assets are assessed and adjusted as circumstances dictate.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
Redemption and Retirement of Preferred Stock
Previous report — wording carried elsewhere
In November 2022, the FDA announced the final rule on the Food Safety Modernization Act Section 204(d) (“FSMA 204”) - Traceability for High-Risk Foods.
Previous report — wording carried elsewhere
The deadline for compliance with FSMA 204 is January 20, 2026, and nearly every company impacted will require some type of technical systems support to meet the requirement.
Previous report — wording carried elsewhere
Net other income was $348,084 for the three months ended March 31, 2024, compared to net other income of $301,238 for the three months ended March 31, 2023. Other income increased due to an increase in interest income attributable to higher interest rates on fixed income instruments on our excess cash.
Previous report — wording carried elsewhere
Revenue was $15,270,729 and $14,295,091 for the nine months ended March 31, 2024 and 2023, respectively, a 7% increase year-over-year. The increase in revenue was due to growth in recurring subscription revenue, in all lines of business which includes compliance, supply chain and traceability. This is the result of growing industry and consumer response to food contaminations and food safety hazards, whether biological, chemical, physical, or allergenic. The risks have elevated regulatory requirements, documentation requisites, and principally “where does your food come from” transparency on grocery retailers and their suppliers. As more and more retailers, wholesalers and distributors adopt the increased regulatory disclosure requirements, the Company has seen a corresponding rise in demand for its services.
Previous report — wording carried elsewhere
Although no assurances can be given, we continue to focus our sales efforts on marketing our software services on a recurring subscription basis and placing less emphasis on transactional revenue. However, we believe there will continue to be a small percentage of customers that will, from time to time, require buying a particular service outright (i.e., a license). Nonetheless, we will continue to deemphasize non-recurring transactional revenue when we are able.
Previous report — wording carried elsewhere
Cost of Services and Product Support