ReposiTrak, Inc.

Current report

Critical Accounting Estimates

Current report

In December 2023, the FASB issued ASU 2023-09 (ASC Topic 740),Improvements to Income Tax Disclosures, which requires incremental income tax disclosures that increase the transparency and usefulness of income tax disclosures. The updated disclosures primarily require specific categories and greater disaggregation within the rate reconciliation, disaggregation of income taxes paid, and modifications of other income tax-related disclosures. The Company adopted this guidance prospectively effective July 1, 2025. The adoption impacted the presentation and disclosure of income taxes but did not have a material impact on the Company’s financial statements.

Current report

During the fiscal year ended June 30, 2026, the Company generated revenue of $23.3 million, compared with $22.6 million for the fiscal year ended June 30, 2025, representing an increase of approximately 3%. The increase in revenue was primarily attributable to growth in recurring subscription revenue across the Company’s compliance, supply chain and traceability solutions.

Current report

Demand for the Company’s subscription-based services continues to be influenced by increased regulatory requirements, food safety and traceability initiatives, and greater demand for transparency throughout the food supply chain. These factors have increased the compliance, documentation and traceability requirements applicable to grocery retailers, wholesalers, distributors and their suppliers. As adoption of these requirements has expanded, the Company has experienced increased demand for its compliance and traceability services.

Current report

The Company continues to focus its sales and marketing efforts on recurring subscription-based software services while placing less emphasis on non-recurring transactional revenue. Certain customers may, from time to time, elect to purchase specific services or licenses on a non-recurring basis. Accordingly, the Company expects that a portion of its revenue may continue to be derived from non-recurring transactions; however, its strategy remains focused on increasing recurring subscription revenue.

Current report

Cost of services and product support was $3.3 million, or 14% of total revenue, for the fiscal year ended June 30, 2026, compared with $3.7 million, or 16% of total revenue, for the fiscal year ended June 30, 2025, representing a decrease of approximately 10%. The decrease was primarily attributable to the capitalization of certain qualifying software development costs that otherwise would have been recognized as expense during the period. This decrease was partially offset by increased cybersecurity costs and higher offshore development costs associated with the Company’s Traceability initiative.

Current report

Sales and marketing expense was $5.8 million, or 25% of total revenue, for the fiscal year ended June 30, 2026, compared with $5.8 million, or 26% of total revenue, for the fiscal year ended June 30, 2025, representing a decrease of approximately 2%. The decrease was primarily attributable to lower personnel costs resulting from a reduction in marketing staff and lower trade show expenses. The Company also continued to utilize artificial intelligence and other technology-enabled tools to enhance the efficiency and targeting of its sales and marketing activities.

Current report

General and administrative expense was $5.7 million, or 25% of total revenue, for the fiscal year ended June 30, 2026, compared with $5.6 million, or 25% of total revenue, for the fiscal year ended June 30, 2025, representing an increase of approximately 2%. The increase was primarily attributable to higher personnel-related costs, including stock-based compensation and employee benefit costs, as well as increased liability insurance premiums, bad debt expense and travel-related costs.

Current report

The Company’s depreciation and amortization expense was $647,637 and $1,251,514 for the years ended June 30, 2026 and 2025, respectively, a decrease of 48%. The decrease was primarily attributable to lower depreciation and amortization as certain existing property, software and acquired intangible assets became fully depreciated or amortized.

Current report

Net other income was $1,676,124 for the fiscal year ended June 30, 2026, compared with $1,426,834 for the fiscal year ended June 30, 2025, representing an increase of $249,290, or approximately 17%. The increase was primarily attributable to higher interest income and a favorable year-over-year change in unrealized gains on investments, partially offset by lower realized gains on investments. Interest income may fluctuate in future periods based on changes in market interest rates and the amount of cash and investments held by the Company.

Current report

Dividends accrued on the Company’s Series B Preferred Stock and Series B-1 Preferred Stock were $167,804 and $360,306 for the fiscal years ended June 30, 2026 and 2025, respectively, representing a decrease of approximately 53%. The decrease was primarily attributable to the redemption and retirement of shares of Preferred Stock during fiscal 2026.

Current report

Since inception of the redemption program, the Company has redeemed and retired an aggregate of 676,912 shares of Series B Preferred Stock and Series B-1 Preferred Stock at a redemption price of $10.70 per share, for total consideration of approximately $7.2 million. As of June 30, 2026, approximately $1.7 million of Preferred Stock remained outstanding and subject to redemption. The Company currently intends to redeem the remaining outstanding Preferred Stock on or before December 31, 2026, subject to the availability of sufficient cash and other applicable considerations.

Current report

Our future capital requirements will depend on a number of factors, including general macroeconomic conditions, our rate of revenue growth, sales and marketing activities, investments in research and development, capital expenditures, strategic investments, including our investment in SPAR Group, Inc., and other uses of capital, and continued market acceptance of our products and services.

Current report

Historically, the Company has funded its operations through cash generated from operations, equity financings and borrowings under a revolving credit facility with U.S. Bank N.A. In March 2024, the Company terminated its revolving credit facility and currently has no outstanding borrowings under a credit facility.

Current report

Cash and cash equivalents were $27.3 million as of June 30, 2026, compared with $28.6 million as of June 30, 2025, representing a decrease of $1.3 million, or approximately 5%. During fiscal 2026, operating activities provided $8.2 million of cash, while investing activities used $4.1 million and financing activities used $5.4 million of cash.

Current report

Net cash provided by operating activities was $8.2 million for fiscal 2026, compared with $8.4 million for fiscal 2025, representing a decrease of approximately $0.2 million. The year-over-year change primarily reflected an approximately $3.0 million decrease in noncash adjustments to net income, partially offset by a $0.6 million increase in net income and an approximately $2.2 million favorable change in operating assets and liabilities. The decrease in noncash adjustments primarily reflected $2.3 million of common stock received in settlement of accounts receivable and lower depreciation and amortization expense, partially offset by higher bad debt expense.

Current report

Net cash used in investing activities was $4.1 million for fiscal 2026, compared with nominal net cash provided by investing activities in fiscal 2025. The increase in cash used in investing activities was primarily attributable to $3.0 million advanced under the SPAR note receivable and approximately $1.0 million of capitalized software development costs.

Current report

Net cash used in financing activities was $5.4 million for fiscal 2026, compared with $5.0 million for fiscal 2025. The increase in cash used in financing activities was primarily attributable to higher repurchases of the Company’s common stock, partially offset by lower redemptions of Preferred Stock and lower payments on notes payable and finance lease obligations.

Current report

At June 30, 2026, the Company had working capital of $24.2 million, compared with $28.2 million at June 30, 2025, representing a decrease of approximately $3.9 million. The decrease was attributable to a $0.9 million decrease in current assets and a $3.0 million increase in current liabilities. The decrease also partially reflected our investment in SPAR Group, Inc. during the quarter ended June 30, 2026, described below.

Current report

The decrease in current assets primarily reflected a $1.3 million decrease in cash and cash equivalents and a $0.1 million decrease in prepaid expenses and other current assets, partially offset by a $0.5 million increase in accounts receivable. The increase in current liabilities primarily reflected increases of approximately $1.4 million in accrued liabilities, $1.3 million in deferred revenue and $0.2 million in accounts payable.

Current report

The Company previously maintained a revolving credit facility with U.S. Bank N.A. On March 15, 2024, the Company elected not to renew the facility. No amounts were outstanding under the facility at the time of termination. As of June 30, 2026, the Company had no outstanding bank debt and no borrowing availability under the former credit facility.

Current report

The Company expects that cash generated from operations, together with its existing cash and short-term investments, will be used to fund its operating requirements and other anticipated uses of capital. Significant anticipated uses of cash include the following:

Current report

Quarterly Cash Dividends. The Company has paid quarterly cash dividends since fiscal 2023. In June 2025, the Board of Directors approved an increase in the quarterly cash dividend to $0.02 per share, or $0.08 per share on an annualized basis, beginning with the dividend payable with respect to the quarter ended September 30, 2025. The declaration and payment of future dividends are subject to the discretion of the Board of Directors and will depend on, among other factors, the Company’s financial condition, results of operations, cash requirements and other factors deemed relevant by the Board.

Current report

Preferred Stock Redemptions. Since inception of the Company’s preferred stock redemption program, the Company has redeemed an aggregate of 676,912 shares of Series B Preferred Stock and Series B-1 Preferred Stock at a redemption price of $10.70 per share, for total consideration of approximately $7.2 million. The Series B-1 Preferred Stock was fully redeemed during fiscal 2024. As of June 30, 2026, approximately $1.7 million of Series B Preferred Stock remained outstanding and subject to redemption.

Current report

SPAR Group Transactions

Current report

On March 17, 2026, the Company, through its subsidiary PC Group Inc., entered into a financing arrangement with SPAR Marketing Force, Inc. providing up to $4.0 million of funding, of which $3.0 million has been advanced. The arrangement provides for interest income at 8.0% and includes additional return components in the form of equity consideration and contingent price protection provisions. These features may increase the effective yield on the loan but also introduce variability in expected returns and earnings due to potential fair value adjustments and contingent cash flows. As a result, the Company's future results of operations may be impacted by changes in the market price of SPAR Group, Inc. common stock and the timing and issuance of equity consideration.

Current report

On March 29, 2026, the Company entered into an amendment (the “Amendment”) to that certain Services Agreement dated March 13, 2026 (the “Agreement”) by and between the Company and SPAR Group, Inc. (the “Client”), which Agreement was entered into in the ordinary course of business. Under the terms of the Agreement, the Company agreed to provide certain services the (“Services”) to the Client for a one-year term beginning March 13, 2026. In accordance with the terms of the Agreement, the Client was to pay the Company in cash for the Services provided thereunder.

Current report

Under the terms of the Amendment, the Company can elect to receive payment for the Services in cash, shares of common stock, par value $0.01 per share, of the Client (“Client Stock”), or a combination thereof. Any issuance of Client Stock pursuant to the Amendment shall be valued based upon the volume weighted average price (“VWAP”) of Client Stock for the five (5) trading days immediately preceding the applicable issuance date.

Current report

On May 29, 2026, the Company elected to receive payment of an outstanding balance owed to the Company under an amendment (the “Amendment”) to that certain Services Agreement dated March 13, 2026 (the “Agreement”) by and between the Company and SPAR Group, Inc. (the “Client”) in shares of common stock, par value $0.01 per share, of the Client (“Client Stock”), resulting in the issuance by Client to the Company of 3,190,569 shares of Client Stock at a deemed value of $0.728710119 per share, in consideration of the payment of $2,325,000 otherwise payable to the Company under the terms of the Agreement.

Current report

On July 1, 2026 (the “Closing Date”), the Company entered into Stock Purchase Agreements with William Bartels (“Bartels”) and WHB Services, Inc. Incentive Savings Plan and Trust (“WHB”) (together, the “Agreements”). Under the terms of the Agreements, on the Closing Date, the Company is to be issued an aggregate of 4,709,837 shares of common stock (the “SPAR Shares”) of Client. Aggregate contingent consideration due under the Agreements on the Closing Date by the Company for the SPAR Shares is approximately $3.3 million consisting of (i) a previously paid non-refundable deposit of $100,000 (the “Deposit”); (ii) $139,883 to be paid upon delivery to the Company of the SPAR Shares held by William Bartels; (iii), $485,118 to be paid upon delivery to the Company of the SPAR shares held by WHB; and (iv) the issuance of an unsecured promissory note in the principal amount of $2,571,885 (the “Note”). The Note bears interest at 6.0% per annum and matures on the fourth anniversary of its issuance. Principal is payable in annual cash installments of $725,000, together with all accrued and unpaid interest, on each of the first three anniversaries of the Note, with the remaining outstanding principal and accrued interest due at maturity on July 1, 2030. The Note may be prepaid at any time without premium or penalty and contains customary events of default, including payment defaults and bankruptcy events. Upon an event of default, the holder may accelerate all outstanding amounts due under the Note. The Note also provides for automatic acceleration upon certain change-of-control transactions involving the Company or upon the sale of substantially all of the Company’s assets. In addition, amounts remaining outstanding become payable to the seller’s designated heirs or beneficiaries within sixty (60) days following the seller’s death.

Current report

The Company is currently evaluating the accounting treatment of these features, including potential derivative accounting. The ultimate impact on earnings may vary based on future equity pricing and market conditions. The loan is unsecured, and the Company is exposed to credit risk associated with the Borrower's financial condition.

Previous report

Revenue Recognition

Previous report

Effective July 1, 2018, we adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) 2014-09:Revenue from Contracts with Customers (Topic 606), and its related amendments (“ASU 2014-09”). ASU 2014-09 provides a unified model to determine when and how revenue is recognized and enhances certain disclosure around the nature, timing, amount and uncertainty of revenue and cash flows arising from customers.

Previous report

ASU 2014-09 represents a change in the accounting model utilized for the recognition of revenue and certain expense arising from contracts with customers. We adopted ASU 2014-09 using a “modified retrospective” approach and, accordingly, revenue and expense totals for all periods before July 1, 2018 reflect those previously reported under the prior accounting model and have not been restated.

Previous report

To supplement our financial statements, historically we have provided investors with adjusted EBITDA and non-GAAP income per share, both of which are non-GAAP financial measures. We believe that these non-GAAP measures may provide useful information regarding certain financial and business trends relating to our financial condition and operations. Our management uses these non-GAAP measures to compare the Company’s performance to that of prior periods for trend analyses and planning purposes. These measures are also presented to our Board of Directors.

Previous report

These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”). These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements and are subject to inherent limitations. Investors should review the reconciliations of non-GAAP financial measures to the comparable GAAP financial measures that are included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Previous report

Critical Accounting Policies

Previous report

During the fiscal year ended June 30, 2025, the Company had revenue of $22,606,066 as compared to $20,453,320 for the year ended June 30, 2024, an increase of 11%. 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

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

Cost of services and product support was $3,681,330, or 16% of total revenue, and $3,416,450 or 17% of total revenue for the years ended June 30, 2025 and 2024, respectively, an increase of 8%. This increase is primarily the result of cybersecurity spending and increased offshore developer 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 and confidentiality protocols to increase protection of customer data.

Previous report

The Company’s sales and marketing expense was $5,843,272, or 26% of total revenue, as compared to $5,492,719, or 27% of total revenue, for the fiscal years ended June 30, 2025 and 2024, respectively, an increase of 6%. The increase in sales and marketing expense was primarily the result of an increase in salary expense, commission, trade show expense, investment in FSMA 204 traceability marketing and advertising, and cost of employee benefits. Post pandemic, customers and prospects are returning to in person meetings and participation in large tradeshows. 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 traceability regulatory deadline approaches.

Previous report

The Company’s general and administrative expense was $5,602,807, or 25% of total revenue, and $5,330,437 or 26% of total revenue for the years ended June 30, 2025 and 2024, respectively, an increase of 5%. The increase in general and administrative expense was primarily due to an increase in salary expense, stock compensation expense, increased cost of employee benefits, increased insurance costs, an increase in bad debt expense, and an increase in travel related costs.

Previous report

The Company’s depreciation and amortization expense was $1,251,514 and $1,189,483 for the years ended June 30, 2025 and 2024, respectively, an increase of 5%. The increase was due to additional assets acquired in the fiscal year. Given the rising cybersecurity threats, we spent approximately $744,000 on security, backup, storage, and redundancy for our new data center in Reno, Nevada. The upgrades were financed through a leasing agent with an effective APR rate of 5.95%.

Previous report

Net other income was $1,426,834 compared to net other income of $1,308,550 for the years ended June 30, 2025 and 2024, respectively. Other income increased due to higher cash balances and an increase in interest income attributable to fixed income investments. As 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.

Previous report

Dividends accrued on the Company’s Series B Preferred and Series B-1 Preferred was $360,306 and $549,645 for the years ended June 30, 2025 and 2024, respectively, a decrease of 34%. Dividends decreased due to the redemption and retirement of Preferred Stock. Although no assurances can be given, the Company intends to redeem all of the outstanding remaining Preferred stock on or before December 2026. Since inception, a total of 501,679 shares of Preferred Stock, Including Series B and Series B-1 Preferred, at the redemption price of $10.70 per share, have been redeemed for a total of $5,367,965. There is a total of $3.2 million of Preferred Stock remaining to be redeemed.

Previous report

We have historically funded our operations with cash from operations, equity financings, and borrowings from our existing line of credit with U.S. Bank N.A. (the “Bank”), which was revised on October 6, 2021, and again in 2022. In March 2024, given our strong financial position, we terminated the credit facility with our bank.

Previous report

Cash was $28,568,805 and $25,153,862 at June 30, 2025 and 2024, respectively. This 14% increase is primarily the result of higher revenue and the corresponding cash receipts from customers. It also includes higher interest income earnings associated with growing cash balances.

Previous report

Net cash provided by operating activities for the year ended June 30, 2025 was $8,842,132 compared to net cash provided by operating activities of $6,964,401 for the year ended June 30, 2024. Net cash provided by operating activities increased 21% due principally to increase in net income, an increase in accounts receivable due to an increase in subscription sales, and a decrease in operating lease liability, and other obligations that had become due. Noncash expense increased by $314,512 for the year ended June 30, 2025 compared to the year ended June 30, 2024 as a result of an increase in depreciation and amortization, an increase in bad debt expense and an increase in stock compensation expense.

Previous report

Net cash provided by investing activities for the year ended June 30, 2025 was $169 compared to net cash used in investing activities of $100,707 for the year ended June 30, 2024. The change was the result of a decrease in the purchase of equipment offset by a sale of certain marketable securities due to timing.

Previous report

Net cash used in financing activities totaled $5,005,358 for the year ended June 30, 2025 compared to net cash used in financing activities of $5,700,711 for the year ended June 30, 2024. The decrease in net cash used in financing activities is due to an decrease in purchases of common stock offset by an increase in payments made on financed capital assets and an increase in the redemption and retirement of shares of Preferred Stock.

Previous report

At June 30, 2025, the Company had positive working capital of $28,154,682, as compared with positive working capital of $24,757,025 at June 30, 2024. This $3,397,657 increase in working capital is primarily due to an increase in accounts receivable and an increase 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.

Previous report

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 report

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 June 30, 2025.

Previous report

On March 15, 2024, given its strong financial position, the Company chose not to renew the Revolving Credit Agreement. There were no amounts due at the time of renewal.

Previous report

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, including the quarterly dividends of $0.02 per share announced on September 28, 2025, 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 report — wording carried elsewhere

In December 2023, the FASB issued ASU 2023-09 (ASC Topic 740),Improvements to Income Tax Disclosures. This ASU requires disaggregated income tax disclosures on the rate reconciliation and income taxes paid. The Company is required to adopt this guidance for its annual reporting in fiscal year 2026 on a prospective basis but has the option to apply it retrospectively. Early adoption is permitted. This standard is expected to impact the Company's disclosures and will not have an impact on its Consolidated Financial Statements.