# ReposiTrak, Inc. (TRAK) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ReposiTrak, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/50471/000165495421010502/pcyg10k_june302021.htm
Accession: 0001654954-21-010502
Filing date: 2021-09-28
Report date: 2021-06-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/TRAK/
All MD&A years: /company/TRAK/mda/
Next year: /company/TRAK/mda/fy2022/ (FY 2022)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The
following Management’s Discussion and Analysis is intended to
assist the reader in understanding our results of operations and
financial condition. Management’s Discussion and
Analysis is provided as a supplement to, and should be read in
conjunction with, our audited consolidated financial statements
beginning on page F-1 of this Annual Report on Form 10-K (this
"Annual Report"). This Annual Report includes certain statements
that may be deemed to be “forward-looking statements”
within the meaning of Section 27A of the Securities Act. All
statements, other than statements of historical fact, included in
this Annual Report that address activities, events or developments
that we expect, project, believe, or anticipate will or may occur
in the future, including matters having to do with expected and
future revenue, our ability to fund our operations and repay debt,
business strategies, expansion and growth of operations and other
such matters, are forward-looking statements. These statements
are based on certain assumptions and analyses made by our
management in light of its experience and its perception of
historical trends, current conditions, expected future
developments, and other factors it believes are appropriate in the
circumstances. These statements are subject to a number of
assumptions, risks and uncertainties, including general economic
and business conditions, the business opportunities (or lack
thereof) that may be presented to and pursued by us, our
performance on our current contracts and our success in obtaining
new contracts, our ability to attract and retain qualified
employees, and other factors, many of which are beyond our
control. You are cautioned that these forward-looking
statements are not guarantees of future performance and those
actual results or developments may differ materially from those
projected in such statements.

Overview

The Company is a SaaS provider, and the parent
company of ReposiTrak, a B2B e-commerce, compliance, and supply
chain management platform company that partners with retailers,
wholesalers, and product suppliers to help them source, vet, and
transact with their suppliers in order to accelerate sales, control
risks, and improve supply chain efficiencies. The
Company’s fiscal year ends on June 30. References to
fiscal 2021 refer to the fiscal year ended June 30,
2021.

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Sources of Revenue

The principal customers for the Company’s
products are multi-store retail chains, wholesalers and
distributors, and their suppliers. The Company has a Hub and Spoke
business model, whereby the Company is typically engaged by Hubs,
which in turn require Spokes to utilize the Company’s
services. The Company derives revenue from five sources: (i)
subscription fees, (ii) transaction based fees, (iii) professional
services fees, (iv) license fees, and (v) hosting and maintenance
fees

A significant portion of the Company’s
revenue is generated from its Supply Chain solutions and Compliance
and Food Safety solutions in the form of recurring subscription
payments from the suppliers. Subscription fees can be based
on a negotiated flat fee per supplier, or some volumetric metric,
such as the number of stores, or the volume of economic activity
between a retailer and its suppliers. Subscription revenue contains
arrangements with customers for use of the application, application
and data hosting, maintenance of the application, and standard
support.

Revenue
from the Company’s MarketPlace sourcing solution is
transactional, based on the volume of products sourced via the
application. MarketPlace revenue can come from several sources
depending on the customer’s specific requirements. These
include acting as an agent for a supplier, providing supply chain
technology services, and enabling a Hub to reduce its number of new
suppliers by acting as the supplier for any number of
products.

The Company
also provides professional consulting services targeting
implementation, assessments, profit optimization and support
functions for its applications and related products, for which revenue is recognized on a
percentage-of-completion or pro rata basis over the life of the
subscription, depending on the nature of the engagement.
Premier customer support includes extended availability and
additional services and is available along with additional support
services such as developer support and partner support for an
addition fee.

In some instances, the Company will sell its
software in the form of a license. License arrangements are
a time-specific and perpetual license. Software license maintenance
agreements are typically annual contracts, paid in advance or
according to terms specified in the contract. When sold as a license, the Company’s
software, is usually accompanied by a corresponding Maintenance
and/or Hosting Agreement to support the
service.

Software
maintenance agreements provide the customer with access to new
software enhancements, maintenance releases, patches, updates and
technical support personnel. Our hosting services provide
remote management and maintenance of our software and
customers’ data, which is physically located in third-party
facilities. Customers access ‘hosted’ software and
data through a secure internet connection. 

Revenue Recognition

Effective July
1, 2018, we adopted the Financial Accounting Standards
Board’s Accounting Standards Update 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.

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.

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Other Metrics – Non-GAAP Financial Measures

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.

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 United States of America
(“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.”

Critical Accounting Policies

This
Management’s Discussion and Analysis of Financial Condition
and Results of Operations discusses the Company’s financial
statements, which have been prepared in accordance with GAAP. The
preparation of our financial statements requires management to make
estimates and assumptions that affect reported amounts of assets
and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenue and expense during the reporting
period.

On an ongoing
basis, management evaluates its estimates and assumptions based on
historical experience of operations and on various other factors
that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Income Taxes

In determining
the carrying value of the Company’s net deferred income tax
assets, the Company must assess the likelihood of sufficient future
taxable income in certain tax jurisdictions, based on estimates and
assumptions, to realize the benefit of these assets. If these
estimates and assumptions change in the future, the Company may
record a reduction in the valuation allowance, resulting in an
income tax benefit in the Company’s statements of operations.
Management evaluates quarterly whether to realize the deferred
income tax assets and assesses the valuation
allowance.

Goodwill and Other Long-Lived Asset Valuations

Goodwill is
assigned to specific reporting units and is reviewed for possible
impairment at least annually or upon the occurrence of an event or
when circumstances indicate that a reporting unit’s carrying
amount is greater than its fair value. Management reviews the
long-lived tangible and intangible assets for impairment when
events or changes in circumstances indicate that the carrying value
of an asset may not be recoverable. Management evaluates, at each
balance sheet date, whether events and circumstances have occurred
which indicate possible impairment.

The carrying
value of a long-lived asset is considered impaired when the
anticipated cumulative undiscounted cash flows of the related asset
or group of assets is less than the carrying value. In that event,
a loss is recognized based on the amount by which the carrying
value exceeds the estimated fair market value of the long-lived
asset. Economic useful lives of long-lived assets are assessed and
adjusted as circumstances dictate. 

Stock-Based Compensation

The Company
recognizes the cost of employee services received in exchange for
awards of equity instruments based on the grant-date fair value of
those awards. The Company records compensation expense on a
straight-line basis. The fair value of any options granted are
estimated at the date of grant using a Black-Scholes option pricing
model with assumptions for the risk-free interest rate, expected
life, volatility, dividend yield and forfeiture rate.

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Capitalization of Software Development Costs

The Company
accounts for research costs of computer software to be sold, leased
or otherwise marketed as expense until technological feasibility
has been established for the product. Once technological
feasibility is established, all software costs are capitalized
until the product is available for general release to customers.
Judgment is required in determining when technological feasibility
of a product is established.

We have
determined that technological feasibility for our software products
is reached shortly after a working prototype is complete and meets
or exceeds design specifications including functions, features, and
technical performance requirements.  Costs incurred after
technological feasibility is established have been and will
continue to be capitalized until such time as when the product or
enhancement is available for general release to customers. The
Company capitalized software development costs of $171,733 in the
fiscal year ended June 30, 2021.

Off-Balance Sheet Arrangements

The Company
does not have any off-balance sheet arrangements that are
reasonably likely to have a current or future effect on our
financial condition, revenue and results of operation, liquidity or
capital expenditures.

Recent Accounting Pronouncements

In August 2018,
the FASB issued ASU 2018-15 Intangibles – Goodwill and Other
Internal-Use Software (Subtopic 350-40) – Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That is a Service Contract. The amendments in
this update apply to an entity who is a customer in a hosting
arrangement accounted for as a service contract. The update
requires a customer in a hosting arrangement to capitalize certain
implementation costs. Costs associated with the application
development stage of the implementation should be capitalized and
costs with the other stages should be expensed. For instance, costs
for training and data conversion should be expensed. The
capitalized implementation costs should be expensed over the term
of the hosting arrangement, which is the noncancelable period plus
periods covered by an option to extend if the customer is
reasonably certain to exercise the option. Impairment of the
capitalized costs should be considered similar to other
intangibles. The effective date of this update is effective for
annual reporting periods beginning after December 15, 2019 for
public entities and after December 15, 2020 for all other entities
with early adoption permitted. The Company is a customer in a
hosting arrangement and may enter into new arrangements in the
future. The Company adopted the standard during the second quarter
of fiscal year 2020. This standard did not have a material impact
on the Company’s consolidated financial
statements.

In August 2018,
the FASB issued ASU 2018-13 Fair
Value Measurement (Topic 820) Disclosure Framework - Changes to the
Disclosure Requirements for Fair Value Measurement. This ASU
eliminates, amends, and adds disclosure requirements for fair value
measurements. The new standard is effective for fiscal years
beginning after December 15, 2019, including interim periods within
those fiscal years. The Company adopted the standard during the
second quarter of fiscal year 2020. This standard did not have a
material impact on the Company’s consolidated financial
statements.

In June 2018,
the FASB issued ASU 2018-07 Compensation – Stock Compensation (Topic
718), Improvements to Nonemployee Share-Based Payment
Accounting. The amendments in this update expand the scope
of Topic 718 to include share-based payment transactions for
acquiring goods and services from nonemployees. Prior to this
update, equity-based payments to non-employees was accounted for
under Subtopic 505-50 resulting in significant differences between
the accounting for share-based payments to non-employees as
compared to employees. One of the most significant changes is that
non-employee share-based awards (classified as equity awards) may
be measured at grant-date fair value and not have to be continually
revalued until the service/goods are rendered. The update also
indicates that share-based awards related to financing and awards
granted to a customer in conjunction with selling goods or services
are not included in Topic 718. This standard is effective for
interim and annual reporting periods beginning after December 15,
2018 for public entities and December 15, 2019 for all other
entities. Early adoption is permitted, but no earlier than an
entity’s adoption date of Topic 606. The Company adopted the
standard during the first quarter of fiscal year 2020. This
standard did not have a material impact on the Company’s
consolidated financial statements.

  In
January 2017, the FASB issued ASU 2017-04 Intangibles-Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment, which amends
and simplifies the accounting standard for goodwill impairment. The
new standard removes Step 2 of the goodwill impairment test, which
requires a hypothetical purchase price allocation. A goodwill
impairment will now be the amount a reporting unit’s carrying
value exceeds its fair value, limited to the total amount of
goodwill allocated to that reporting unit. The new standard is
effective for annual and any interim impairment tests for periods
beginning after December 15, 2019. The Company adopted the standard
during the fourth quarter of fiscal year 2020. This standard did
not have a material impact on the Company’s consolidated
financial statements.

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In February
2016, the FASB issued ASU 2016-02 Leases (Topic 842). Under the new
guidance, lessees will be required to recognize for all leases
(with the exception of short-term leases) a lease liability, which
is a lessee’s obligation to make lease payments arising from
a lease, measured on a discounted basis and a right-of-use asset,
which is an asset that represents the lessee’s right to use,
or control the use of, a specified asset for the lease
term.

Effective July
1, 2019, the Company adopted the requirements of Accounting
Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). All amounts and
disclosures set forth in this Annual Report on Form 10-K have been
updated to comply with this new standard with results for reporting
periods beginning after July 1, 2019 presented under ASU 2016-02,
while prior period amounts and disclosures are not adjusted and
continue to be reported under the accounting standards in effect
for the prior period.

Results of Operations – Fiscal Years Ended June 30, 2021 and
2020

Revenue

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Revenue","$21,007,076","$969,022","5%","$20,038,054"]]
[[/GREPCENT_TABLE]]

During the
fiscal year ended June 30, 2021, the Company had revenue of
$21,007,076 compared to $20,038,054 for the year ended June 30,
2020, a 5% increase. The increase in
revenue was due to growth in both subscription revenue and
Marketplace revenue, partially offset by approximately $145,500 in
one-time license revenue that occurred in 2020 that did not reoccur
in 2021.

During fiscal
2021, as COVID-19 disrupted supply chains and generated shortages
in products, our ability to source hard to find items for our
customers resulted in increased revenue attributable to
MarketPlace. These products largely consisted of personel
protective equipment ("PPE") which includes nitrile gloves,
masks, freezers and telecommunication equipment. While the Company
has experienced a significant increase in Marketplace revenue for
PPE during the height of COVID-19, it is uncertain whether demand
for PPE will continue at the same level. As a result, we may
experience reduced demand for MarketPlace attributable to PPE as
the pandemic begins to abate.

Cost of Services and Product Support

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Cost of service and product support","$6,884,647","$(112,777)","-2%","$6,997,424"],["Percent of total revenue","33%","","","35%"]]
[[/GREPCENT_TABLE]]

Cost of
services and product support was $6,884,647 or 33% of total
revenue, and $6,997,424 or 35%
of total revenue for the years ended June 30, 2021 and 2020,
respectively, a 2% decrease.
This decrease is primarily the result
of (i) higher expense associated to MarketPlace and the sales of
PPE; and (ii) an increase in hardware/software non-capitalized
items required for updating our information systems security,
maintaining equipment licensing and other database
systems.

While we have
experienced a significant increase in Marketplace costs and
corresponding revenue during the pandemic due to demand in PPE, it
is unclear what level of ongoing Marketplace costs we may
experience as the pandemic begins to abate.

Sales and Marketing Expense

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Sales and marketing","$4,995,578","$(779,731)","-14%","$5,775,309"],["Percent of total revenue","24%","","","29%"]]
[[/GREPCENT_TABLE]]

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The
Company’s sales and marketing expense was $4,995,578, or
24% of total revenue, and
$5,775,309, or 29% of total revenue, for the fiscal years ended
June 30, 2021 and 2020, respectively, a 14% decrease. This decrease in sales and marketing expense is
due primarily to a decrease in variable compensation, a reduction
in trade show expense, and lower sales and marketing travel
expense.

General and Administrative Expense

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["General and administrative","$5,214,936","$266,493","5%","$4,948,443"],["Percent of total revenue","25%","","","25%"]]
[[/GREPCENT_TABLE]]

The
Company’s general and administrative expense was
$5,214,936, or 25% of total
revenue, and $4,948,443 or 25%
of total revenue for the years ended June 30, 2021 and 2020,
respectively, a 5%
increase. General and
administrative expense increased year over year due to an increase
in bad debt expense and higher insurance
costs. These increases
were partially offset by lower general overhead due to cost cutting
measures and natural reductions due to our “work from
home” status since April of 2020.

Depreciation and Amortization Expense

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Depreciation and amortization","$1,019,515","$180,649","22%","$838,866"],["Percent of total revenue","5%","","","4%"]]
[[/GREPCENT_TABLE]]

The
Company’s depreciation and amortization expense was
$1,019,515 and $838,866 for the years ended June 30, 2021 and 2020,
respectively, a 22%
increase. This increase is due to
the expansion of new equipment for the Company’s information
technology infrastructure, buildout of our corporate headquarters,
and expansion of our data center completed in June
2020.

Other Income and Expense

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Other income and (expense)","$1,301,892","$1,144,716","728%","$157,176"],["Percent of total revenue","6%","","","1%"]]
[[/GREPCENT_TABLE]]

Other income
was $1,301,892 compared to $157,176 for the years ended June 30,
2021, and 2020, respectively, a 728% increase. Other income increased due to recognition of a
gain on debt extinguishment and higher interest income resulting
from an increase of total cash held in short term investments
offset in part by the increase in interest expense associated with
financing arrangements for equipment purchased under a lease
arrangement with a bank.  The financing arrangement was paid
off in August 2020.

Preferred Dividends

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Preferred dividends","$586,444","$-","-%","$586,444"],["Percent of total revenue","3%","","","3%"]]
[[/GREPCENT_TABLE]]

Dividends
accrued on the Company’s Series B Preferred and Series B-1
Preferred was $568,444 for the years ended June 30, 2021 and 2020,
respectively. Dividends remained flat
in the comparable periods. 

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Financial Position, Liquidity and Capital Resources

We believe
that our existing cash and short-term investments, together with
funds generated from operations, are sufficient to fund operating
and investment requirements for at least the next twelve months.
Our future capital requirements will depend on many factors,
including macroeconomic conditions, our rate of revenue growth,
sales and marketing activities, the timing and extent of spending
required for research and development efforts and the continuing
market acceptance of our products and services.

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Cash and Cash Equivalents","$24,070,322","$3,724,992","18%","$20,345,330"]]
[[/GREPCENT_TABLE]]

We have
historically funded our operations with cash from operations,
equity financings, and borrowings from the issuance of debt,
including our existing line of credit with U.S. Bank
N.A.

Cash was $24,070,322 and $20,345,330 at June 30,
2021 and 2020, respectively. This 18% increase
is
principally the result of growth in both software and MarketPlace
revenue, collection of accounts receivable, and extinguished
debt.

Net Cash Flows from Operating Activities

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Cash provided by operating activities","$5,401,815","$1,205,676","29%","$4,196,139"]]
[[/GREPCENT_TABLE]]

Net cash
provided by operating activities is summarized as
follows:

[[GREPCENT_TABLE]]
[["","2021","2020"],["Net income","$4,117,395","$1,593,269"],["Noncash expense and income, net","1,388,831","2,084,287"],["Net changes in operating assets and liabilities","(104,411)","518,583"],["","$5,401,815","$4,196,139"]]
[[/GREPCENT_TABLE]]

Net cash provided by operating activities for
the year ended June 30, 2021 was $5,401,815 compared to net cash provided by in
operating activities of $4,916,139 for the year ended June 30,
2020. Net cash provided by operating
activities increased 29% due largely to higher revenues and lower
operating costs. Noncash expense decreased by $695,456 in
the year ended June 30, 2021 compared to June 30, 2020
as a result of gain on debt
extinguishment and an increase in depreciation and amortization
offset by a decrease in stock compensation
expense.

Net Cash Flows Used in Investing Activities

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Cash used in investing activities","$(318,873)","331,549","-51%","$(650,422)"]]
[[/GREPCENT_TABLE]]

Net cash used in investing activities for
the year ended June 30, 2021 was $318,873 compared to net cash used in
investing activities of $650,422 for the year ended June 30,
2020. This decrease in cash used in
investing activities for the year ended June 30, 2021 was primarily
due to the buildout of new Murray, UT headquarters and expansion of
our data center that was completed in 2020 that did not occur in
the same period in 2021.

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Net Cash Flows from Financing Activities

[[GREPCENT_TABLE]]
[["","Year Ended June 30, 2021","$ Change","% Change","Year Ended June 30, 2020"],["Cash used in financing activities","$(1,357,950)","$451,860","-25%","$(1,809,810)"]]
[[/GREPCENT_TABLE]]

Net cash used
in financing activities totaled $1,357,950 for the year ended June
30, 2021 compared to net cash used in financing activities of
$1,809,810 for the year ended
June 30, 2020. The decrease in net
cash used in financing activities is primarily attributable to the
August 2020 payoff of a financing arrangement with a bank partially
offset by a decrease in our stock buyback
program.

Liquidity and Working Capital

At June 30,
2021, the Company had positive working capital of $20,400,991, as compared with positive
working capital of $18,236,664
at June 30, 2020.  This $2,164,327 increase in working capital is
primarily due to an increase in cash
resulting from higher revenue. 

[[GREPCENT_TABLE]]
[["","As of June 30,","As of June 30,","Variance"],["","2021","2020","Dollars","Percent"],["Current assets","$29,701,774","$27,148,911","$2,552,863","9%"]]
[[/GREPCENT_TABLE]]

Current assets as of June 30, 2021 totaled
$29,701,774, an increase of
$2,552,863, as compared to
$27,148,911 as of June 30, 2020. The increase in current
assets is primarily attributable to an increase in cash of
$3,724,992, a decrease in contract assets and prepaid expense of
$1,056,512 and a decrease in accounts receivable of
$115,617.

[[GREPCENT_TABLE]]
[["","As of June 30,","As of June 30,","Variance"],["","2021","2020","Dollars","Percent"],["Current liabilities","$9,300,783","$8,912,247","$388,536","4%"]]
[[/GREPCENT_TABLE]]

Current liabilities totaled $9,300,783 as of June
30, 2021 as compared to $8,912,247 as of June 30, 2020. The
comparative increase in current liabilities is primarily
attributable to an increase of $1,340,000 in our line of
credit, $161,356 decrease comprised of accrued liabilities and accounts payable, offset
by a decrease of $790,108 of current portion of the notes payable
and extinguished
debt.

 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, and that it will
have adequate cash resources to fund its operations and satisfy its
debt obligations for at least the next 12 months.

Contractual Obligations

Total
contractual obligations and commercial commitments as of June 30,
2021 are summarized in the following table:

[[GREPCENT_TABLE]]
[["","Payment Due by Year"],["","Total","Less than 1 Year","1-3 Years","3-5 Years","More than 5 Years"],["Operating lease obligations","$695,370","$90,156","$194,326","$214,783","$196,105"]]
[[/GREPCENT_TABLE]]

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Inflation

The impact of
inflation has historically not had a material effect on the
Company’s financial condition or results from operations;
however, higher rates of inflation may cause retailers to slow
their spending in the technology area, which could have an impact
on the Company’s sales.