Business context and reporting period
The supplied filing is Park City Group, Inc.’s Form 10-Q for the quarter and nine months ended March 31, 2013, not a standalone ReposiTrak, Inc. filing. Park City Group describes ReposiTrak as a supply-chain food and drug safety solution powered by Park City Group technology; the filing does not provide separate ReposiTrak financial statements. The quarter ended March 31, 2013 was the company’s fiscal third quarter.
Key financial metrics
| Metric | Three months ended March 31, 2013 | Nine months ended March 31, 2013 |
|---|---|---|
| Revenue | $3.047 million, up 21% year over year | $8.419 million, up 10% |
| Subscription revenue | $2.008 million, up 19% | $5.918 million, up 16% |
| Other revenue | $1.039 million, up 26% | $2.501 million, down 2% |
| Operating income (loss) | $243,075, versus loss of $361,751 | $461,476, versus loss of $696,460 |
| Net income (loss) | $209,294, versus loss of $352,637 | $349,827, versus loss of $808,230 |
| Net loss applicable to common shareholders | $79,427, versus loss of $561,052 | $438,175, versus loss of $1.434 million |
| Operating cash flow | Not separately presented for the quarter | $417,221, versus $643,507 |
For the nine months, investing activities used $345,375 and financing activities provided $3.218 million. Cash rose to $4.396 million at March 31, 2013 from $1.106 million at June 30, 2012. Current assets were $7.855 million and current liabilities $5.100 million, yielding working capital of $2.755 million, compared with a $2.346 million deficit at June 30, 2012. Total debt was approximately $2.285 million, comprising $1.2 million of lines of credit and notes payable; the filing identifies 52% of debt as variable-rate and 48% as fixed-rate. No income tax provision was recorded.
Material changes versus the prior comparable periods
- Quarterly and nine-month revenue and operating results improved, with subscription growth the principal driver. Nine-month subscription gains were partly offset by customer non-renewals, including a significant retail customer and related connections.
- Cost of services and product support declined, while sales and marketing expense increased 8% for the nine-month period. General and administrative expense declined 19%, partly due to lower employee costs, professional fees, and bad debt expense.
- Nine-month operating cash flow fell 35% year over year, principally as operating assets and liabilities used more cash, including from higher receivables and lower deferred revenue.
- Cash and working capital increased substantially following March equity financing. The company reported approximately $4.34 million of proceeds from a private offering and director investment.
Outlook, commentary, and risks
Management expected subscription revenue to continue increasing year over year and anticipated that contracts connecting suppliers to existing retail customers, the CVS service agreement, and licensing technology to ReposiTrak could support growth. These are expectations, not quantified guidance. Management said it believed existing cash and projected operating cash flow would support operations, capital spending, and debt service for at least the next 12 months, while noting capital needs depend on growth, spending, market acceptance, and the ability to restructure debt.
On April 15, 2013, the company completed the Series A preferred redemption process: 2,172 shares were redeemed for $21,720 and 684,038 shares converted into 2,280,149 common shares. The March private offering issued 756,858 common shares and warrants; directors separately purchased 470,281 shares and warrants. These transactions and the preferred conversion may materially affect dilution and capital structure. Management cautioned that subscription renewals and expansion are not assured, and that license, maintenance, and consulting revenue may fluctuate. The filing reports no ongoing legal proceedings, no defaults upon senior securities, and no off-balance-sheet arrangements reasonably likely to affect financial condition or liquidity.
Important facts for investors to verify
- Confirm the intended issuer: this filing is for Park City Group, not ReposiTrak, and contains no standalone ReposiTrak results.
- Reconcile the financing proceeds, preferred redemption, conversions, and warrant terms with subsequent filings; verify resulting fully diluted share count. Park City Group reported 16,119,342 common shares outstanding as of May 8, 2013.
- Track subscription customer retention and growth, including the effects of non-renewals and the CVS and ReposiTrak relationships.
- Assess cash conversion and receivables collection: operating cash flow declined despite improved reported earnings.
- Review debt maturities, variable-rate exposure, and whether management’s liquidity and debt-service expectations were achieved.
- Consider preferred dividends, which totaled $788,002 for the nine months and exceeded reported net income, when evaluating earnings attributable to common shareholders.