Filing identity and reporting period
Important mismatch: Although the request identifies ReposiTrak, Inc. and 2013 Q3, the supplied filing is Park City Group, Inc.’s Form 10-Q for the quarter ended March 31, 2014—its fiscal third quarter. ReposiTrak appears as a business relationship and source of revenue, not as the filing issuer. The summary below reflects the filing provided.
Park City Group provides subscription software and consulting focused on supply-chain visibility and business operations. Its strategy emphasizes recurring subscriptions, including connecting suppliers (“spokes”) to retailer customers (“hubs”).
Financial performance
Amounts are in U.S. dollars. Quarterly and nine-month comparisons are for periods ended March 31.
| Metric | Three months 2014 | Three months 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | $3.088 million | $3.047 million | $8.884 million | $8.419 million |
| Operating income (loss) | ($438,407) | $243,075 | ($2.064 million) | $461,476 |
| Net income (loss) | ($406,420) | $209,294 | ($2.004 million) | $349,827 |
| Net income (loss) attributable to common shareholders | ($560,893) | ($79,427) | ($2.467 million) | ($438,175) |
- Quarterly subscription revenue grew 24% to $2.490 million; other revenue fell 42% to $599,000. Total revenue increased 1%.
- For nine months, subscription revenue rose 18% to $6.969 million, while other revenue declined 23% to $1.915 million; total revenue increased 6%.
- Operating expenses rose faster than revenue: 26% for the quarter and 38% for nine months. Sales and marketing and general and administrative costs were major drivers. Cost of services and support equaled 43% of revenue in both 2014 periods, versus 37% for the quarter and 39% for nine months in 2013. Operating margin was approximately negative 14% for the quarter and negative 23% for nine months in 2014.
- Preferred dividends were $154,473 for the quarter and $463,419 for nine months, reducing the amounts attributable to common shareholders. Series B Preferred carries a 15% annual dividend.
Cash, liquidity and debt
- Cash was $3.411 million at March 31, 2014, down $205,000 from June 30, 2013 and $985,000 from March 31, 2013.
- Nine-month operating cash flow was negative $712,026, compared with positive $260,479 in 2013. Investing cash flow was negative $1.233 million, including an $800,000 advance on a note receivable and $439,339 of property and equipment purchases. Financing provided $1.739 million.
- Working capital was positive $1.574 million, up $449,174 from June 30, 2013. Current assets were $6.702 million and current liabilities $5.129 million.
- Total debt was reported as $1.959 million: $1.478 million variable-rate and $481,000 fixed-rate. Balance-sheet debt includes a $1.2 million line of credit and current and long-term notes payable.
- Management said cash and projected operating cash flow should fund operations and debt service for at least 12 months, while noting it may pay down or refinance debt. This depends on projected cash flow and is not assured.
Material changes, outlook and risks
- Growth in subscriptions—driven primarily by existing retailer and supplier customers—was substantially offset by declines in maintenance, legacy license sales and professional services. Management expected subscription revenue to continue growing year over year, but gave no quantified revenue or earnings guidance.
- Management expected sales and marketing spending to remain at current levels to support subscription growth. Nine-month sales and marketing expense increased 65%; general and administrative expense increased 63%, including higher stock compensation, bonuses and salaries.
- ReposiTrak-related subscription revenue was $1.204 million for the nine months, of which $800,000 was paid through promissory notes and $403,597 was reported as accounts receivable. The company also reported $522,008 in ReposiTrak management fees for the period. Notes receivable totaled $2.543 million at March 31; management disclosed default risk if ReposiTrak fails to pay.
- Notable noncash items included $1.324 million in stock compensation, $96,900 of stock issued for a charitable contribution, and $1.004 million of common stock issued to settle accrued liabilities.
- Principal risks include continued losses and operating cash use; subscription renewal and customer adoption; execution, implementation and profitability of ReposiTrak and other new products; collection of ReposiTrak notes and receivables; competition and technology or service interruptions; and the availability of financing or refinancing. Management warned that actual results may differ and that quarterly results can fluctuate.
- The company reported effective disclosure controls, no material changes in internal controls, no ongoing legal proceedings, and no material off-balance-sheet arrangements.
Investor verification priorities
- Confirm issuer and period: the supplied filing is Park City Group’s quarter ended March 31, 2014, not a ReposiTrak, Inc. 2013 Q3 filing.
- Assess collectability and terms of the $2.543 million notes receivable and related ReposiTrak balances; distinguish revenue recognized from cash collected.
- Track subscription growth and renewal rates against the decline in legacy revenue, and whether expense growth moderates enough to restore operating profitability.
- Review operating cash burn, debt maturities and variable-rate exposure, and whether the stated 12-month liquidity expectation is supported by cash generation.
- Consider the 15% Series B dividend burden, potential dilution and the effects of stock-based compensation and stock-settled obligations.