Filing summary
Entity and period: The supplied filing is Park City Group, Inc.’s unaudited Form 10-Q for the quarter and six months ended December 31, 2012 (the company’s fiscal second quarter), not a filing identified as ReposiTrak, Inc. ReposiTrak is described as a business relationship powered by Park City Group’s technology. The filing reports consolidated results.
Financial performance
| Metric | Three months ended Dec. 31, 2012 | Three months ended Dec. 31, 2011 | Six months ended Dec. 31, 2012 | Six months ended Dec. 31, 2011 |
|---|---|---|---|---|
| Revenue | $2.659 million | $2.567 million | $5.372 million | $5.146 million |
| Operating income (loss) | ($29,426) | ($128,478) | $218,399 | ($334,709) |
| Net income (loss) | ($63,861) | ($175,872) | $140,531 | ($455,593) |
| Net income (loss) applicable to common shareholders | ($353,161) | ($384,739) | ($358,749) | ($872,813) |
| Operating cash flow | Not presented for quarter | Not presented for quarter | $879,435 | $391,860 |
| Cash at period end | Not presented for quarter | Not presented for quarter | $1.111 million | $942,327 |
- Quarterly revenue rose 3.6%; subscription revenue increased 16.3% to $1.956 million, while other revenue fell 20.6% to $703,340.
- For the six months, revenue rose 4.4%. Subscription revenue grew 14.2% to $3.910 million; other revenue declined 15.2% to $1.462 million.
- Cost of services and product support was 41.3% of quarterly revenue versus 43.4% a year earlier, implying service gross margin of about 58.7% versus 56.6%. For the six-month periods, the corresponding margin was about 59.4% versus 56.2%.
- Quarterly operating loss narrowed as general and administrative expense decreased, partly offset by higher sales and marketing costs. Six-month operating results moved to income from a loss.
- Interest expense declined to $34,435 for the quarter and $77,868 for six months, primarily due to lower debt balances. Preferred dividends increased to $289,300 for the quarter and $499,280 for six months.
- Six-month operating cash flow improved to $879,435 from $391,860. Investing used $297,426, mainly for property and equipment, while financing used $576,781, largely for debt and lease payments. Cash increased by $5,228 from June 30, 2012.
Financial position and liquidity
- At December 31, 2012, cash was $1.111 million; current assets were $3.850 million and current liabilities $5.719 million. Working capital remained negative at $1.870 million, improved from negative $2.346 million at June 30, 2012.
- Total liabilities were $6.338 million. The filing’s market-risk disclosure reports total debt of $2.411 million: $1.866 million variable-rate and $545,064 fixed-rate. Current liabilities included a $1.2 million line of credit and $695,697 of current notes payable; long-term notes payable were $515,750.
- Total assets were $12.069 million, including $4.806 million of goodwill and $2.551 million of customer relationships. Stockholders’ equity was $5.731 million.
Changes, outlook and risks
- Management attributed subscription growth to new supplier connections and increased subscriptions among existing customers. Growth was partly offset by customer non-renewals, including a significant retail customer whose departure reduced revenue.
- Other revenue weakened because of lower license, maintenance and professional-services revenue. Management expects the subscription share of revenue to increase, while license and maintenance revenue may decline or fluctuate.
- Management cited the CVS Pharmacy service agreement and anticipated subscription payments from ReposiTrak as potential sources of future revenue growth. These are expectations, not guaranteed results; the filing gives no quantified revenue or earnings guidance.
- Management said existing cash and projected operating cash flow should support operations, capital spending and debt service for at least 12 months, while acknowledging no assurance. It may refinance or restructure debt; if funds or refinancing are unavailable, additional financing may be needed and may not be available on favorable terms or at all.
- A Series A preferred holder disputed the company’s calculation of dividend adjustments. Management disagreed with the holder’s method. The filing estimates that applying the disputed adjustment for the six-month period would increase Series A dividends by $90,693 and increase loss applicable to common shareholders to $449,442, or $0.04 per share rather than $0.03.
- The board authorized a common-stock repurchase program of up to $2.0 million over two years, contingent on redemption of Series A preferred stock. The program does not obligate purchases and may be changed or discontinued.
- The company reported no ongoing legal proceedings, no defaults upon senior securities, and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer and filing identity: the supplied metadata names ReposiTrak, while the report itself is for Park City Group, Inc.
- Review the Series A dividend-rate calculation and the dispute’s potential effect on preferred dividends and common-shareholder losses.
- Assess liquidity and debt maturities, including the variable-rate exposure, negative working capital and management’s refinancing assumptions.
- Track subscription customer additions and renewals, including whether new supplier connections and the CVS relationship translate into sustained revenue growth.
- Confirm the filing date: the signature page states February 14, 2012, which appears inconsistent with a report for the quarter ended December 31, 2012; the filing text does not resolve this discrepancy.