ReposiTrak(TRAK) - 2023 Q4 - Annual Report

Part I Business Park City Group operates as a Software-as-a-Service (SaaS) provider through its subsidiary, ReposiTrak, offering B2B e-commerce, compliance, and supply chain solutions on a "hub and spoke" model for the U.S. consumer retail sector - The Company is a Software-as-a-Service (SaaS) provider, with its primary operations conducted through its subsidiary, ReposiTrak, Inc[15] - The business operates on a "hub and spoke" model, where retailers and wholesalers (Hubs) mandate their suppliers (Spokes) to utilize the Company's services[19] - Service offerings are categorized into three application suites: ReposiTrak MarketPlace (supplier discovery), ReposiTrak Compliance and Food Safety, and ReposiTrak Supply Chain solutions[16] - On September 19, 2023, the Board declared a quarterly cash dividend of $0.015 per share[22] - On September 12, 2023, the Company announced plans to redeem and retire its Series B and B-1 Preferred Stock over the next three years for an aggregate price of $8,964,214[23] - The company is positioning its ReposiTrak Traceability Network® to address the requirements of the FDA's Food Safety Modernization Act (FSMA) Section 204(d), which mandates enhanced food traceability[25][28] - As of June 30, 2023, the company employed 69 people, with 17 located overseas[55] Risk Factors The company identifies several key risks, including a history of past losses, significant dependence on its CEO, and potential fluctuations in quarterly results - The business is heavily dependent on the expertise and continued service of its founder and CEO, Randall K. Fields, who controls 37% of the Common Stock[62][91] - The company faces competition from larger firms with greater financial resources, which could lead to pricing pressure or render its products obsolete[65][67] - Potential delays or modifications to the implementation of FSMA Section 204(d) could slow the adoption of the company's traceability technology, adversely affecting business[84] - The company relies on a third-party data center, making it vulnerable to service interruptions from system failures, natural disasters, or security breaches[78][80] - Officers and directors control approximately 46% of the Common Stock, giving them significant influence over corporate matters[91] Properties The company's principal place of business is a leased office space of approximately 5,000 square feet located in Murray, Utah - The company leases approximately 5,000 square feet for its corporate office at 5282 South Commerce Drive, Suite D292, Murray, Utah 84107[96] Legal Proceedings The company reports that it is not involved in any pending or threatened material legal proceedings - There are no pending or threatened material legal proceedings at this time[97] Mine Safety Disclosures This section is not applicable to the company - Not applicable[98] Part II Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities PCYG common stock trades on NASDAQ, initiated quarterly dividends, and has an active $21.0 million share repurchase program with $9.5 million remaining Quarterly Common Stock Price Ranges (Fiscal 2023 vs 2022) | Fiscal Quarter Ended | 2023 High ($) | 2023 Low ($) | 2022 High ($) | 2022 Low ($) | | :--- | :--- | :--- | :--- | :--- | | September 30 | 6.60 | 4.31 | 5.77 | 4.81 | | December 31 | 5.64 | 4.57 | 6.40 | 4.90 | | March 31 | 6.60 | 4.83 | 10.68 | 5.12 | | June 30 | 10.50 | 6.24 | 6.02 | 4.06 | - During fiscal year 2023, the company paid a quarterly cash dividend of $0.015 per share of Common Stock and intends to continue this policy[102] - As of June 30, 2023, there were 628 holders of record of the company's Common Stock[103] Share Repurchase Program Summary | Metric | Value | | :--- | :--- | | Total Authorized for Repurchase | $21.0 million | | Shares Repurchased (Inception to June 30, 2023) | 1,945,666 | | Average Purchase Price | $5.91 | | Remaining Amount Available for Repurchase | $9,507,781 | Management's Discussion and Analysis of Financial Condition and Results of Operations For fiscal year 2023, revenue increased by 6% to $19.1 million, net income rose to $5.6 million, cash increased to $24.0 million, and the company maintains zero bank debt Revenue Performance (Fiscal Year Ended June 30) | Year | Revenue ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | | 2023 | 19,098,910 | +1,051,969 | +6% | | 2022 | 18,046,941 | | | - Revenue growth was primarily driven by increased demand for compliance and supply chain services, fueled by industry and consumer concerns about food safety and transparency[137] Operating Expense Analysis (Fiscal Year Ended June 30, 2023 vs 2022) | Expense Category | FY 2023 ($) | FY 2022 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Cost of services | 3,309,345 | 3,186,712 | +4% | | Sales and marketing | 4,933,405 | 4,853,926 | +2% | | General and administrative | 4,685,783 | 4,716,131 | -1% | | Depreciation and amortization | 1,079,799 | 875,551 | +23% | - General and administrative expenses decreased primarily due to a net refund of approximately $1.175 million in payroll taxes from the Employee Retention Credit (ERC)[143] Key Financial Position Metrics (as of June 30) | Metric | 2023 ($) | 2022 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 23,990,879 | 21,460,948 | +12% | | Working Capital | 23,042,199 | 20,485,875 | +12.5% | | Current Ratio | 6.44 | 4.36 | +48% | Cash Flow Summary (Fiscal Year Ended June 30) | Cash Flow Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net cash from Operating Activities | 8,860,019 | 6,101,617 | | Net cash (used in) from Investing Activities | (903,187) | 1,323,262 | | Net cash used in Financing Activities | (5,426,901) | (10,034,253) | - The company has a $10.0 million revolving line of credit, which was undrawn with a zero balance as of June 30, 2023[160] Quantitative and Qualitative Disclosures About Market Risk The company states that its financial results are not materially affected by market risks such as changes in foreign currency exchange rates, as all contracts require payment in U.S. dollars - The company does not engage in hedging as all contracts require payment in U.S. dollars, minimizing exposure to foreign currency exchange rate risk[165] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2023, with no material changes reported - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[168] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2023[171] Part III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Related Transactions The information required for Items 10 through 14 is incorporated by reference from the company's definitive proxy statement, to be filed by October 28, 2023 - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's forthcoming Proxy Statement[176][177][178] Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the 10-K report, including articles of incorporation, bylaws, material contracts, and certifications required by the Sarbanes-Oxley Act - Lists key corporate documents, material contracts, and required certifications filed as exhibits[182][183][184] Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm Haynie & Company, the independent auditor, issued an unqualified opinion on the consolidated financial statements, identifying Revenue Recognition for multiple-element arrangements as a critical audit matter - The auditor, Haynie & Company, provided an unqualified opinion on the financial statements[191] - A critical audit matter was identified as Revenue Recognition for multiple-element arrangements, due to the complexity and judgment involved in allocating revenue[195][196] Consolidated Financial Statements The consolidated financial statements present the company's financial position, results of operations, changes in stockholders' equity, and cash flows for fiscal years 2023 and 2022 Consolidated Balance Sheet Summary (as of June 30) | Account | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Total Current Assets | 27,274,620 | 26,582,709 | | Total Assets | 50,583,431 | 49,321,712 | | Total Current Liabilities | 4,232,421 | 6,096,834 | | Total Liabilities | 4,701,500 | 6,418,652 | | Total Stockholders' Equity | 45,881,931 | 42,903,060 | Consolidated Statement of Operations Summary (for Year Ended June 30) | Account | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Revenue | 19,098,910 | 18,046,941 | | Income from Operations | 5,090,578 | 4,414,621 | | Net Income | 5,590,289 | 4,003,095 | | Net Income Applicable to Common Shareholders | 5,003,845 | 3,416,651 | | Diluted Earnings Per Share | 0.27 | 0.18 | Consolidated Statement of Cash Flows Summary (for Year Ended June 30) | Account | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 8,860,019 | 6,101,617 | | Net Cash (Used in)/from Investing Activities | (903,187) | 1,323,262 | | Net Cash from Financing Activities | (5,426,901) | (10,034,253) | | Net Increase/(Decrease) in Cash | 2,529,931 | (2,609,374) | Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial statement line items, including revenue recognition, software costs, and subsequent events - Revenue is disaggregated into Recurring (Subscription, Support, Services) and Non-Recurring, with recurring revenue in FY2023 at $19.03 million, a 7% increase from $17.86 million in FY2022[253] - The company has a $10 million revolving line of credit that matures March 31, 2023 (subsequently amended), with a zero balance as of June 30, 2023[273][274] - As of June 30, 2023, the company had net operating loss carryforwards of approximately $36.7 million, subject to annual limitations due to past changes in ownership[280][281] - The Share Repurchase Program has a total authorization of $21.0 million, with $9.5 million remaining available for repurchase as of June 30, 2023[305][306] - Subsequent to the fiscal year-end, the company announced a plan to redeem its Series B and B-1 Preferred Stock for an aggregate price of $8,964,214 over three years[311] - On September 19, 2023, a quarterly cash dividend of $0.015 per share was declared[312]