8-K
Track Group, Inc. (TRCK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 13, 2020
Commission File Number: 0-23153
Track Group, Inc.
(Exact name of registrant as specified in its charter.)
| Delaware<br><br>(State or other<br>jurisdiction of incorporation or organization) | 87-0543981<br><br>(IRS Employer<br>Identification No.) |
|---|
200 E 5th Ave, Suite 100, Naperville, Illinois 60563
(Address of principal executive offices)
(877) 260-2010
(Registrant's Telephone number)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2)
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered |
|---|---|---|
| Common<br>Stock, par value $0.0001 per share | TRCK | OTCQX<br>Marketplace |
Item 2.02 Results of Operations and Financial Condition.
Track Group, Inc. (the "Company") issued a press release today announcing its financial results for the first quarter ended December 31, 2019. A copy of the press release is attached hereto as Exhibit 99.1.
In accordance with General Instruction B.2 for Form 8-K, the information in this Form 8-K, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 8.01 Other Events.
See Item 2.02.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release,<br>dated February 13, 2020. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TRACK<br>GROUP, INC. | |||
|---|---|---|---|
| Date: February 13, 2020 | By: | /s/ Peter K.<br>Poli | |
| Peter K. Poli | |||
| Chief Financial Officer |
Blueprint
Exhibit 99.1
FOR IMMEDIATE RELEASE
February 13, 2020
Peter Poli
Chief Financial Officer 877-260-2010
peter.poli@trackgrp.com
Track Group Reports 1st Quarter Fiscal 2020 Financial Results
Revenue up 3%, Operating Income improves dramatically, Adjusted EBITDA up 3% and Net Loss shrinks 87%
NAPERVILLE, ILLINOIS – Track Group, Inc. (OTCQX: TRCK), a global leader in offender tracking and monitoring services, today announced financial results for its first quarter ended December 31, 2019 (the “First Quarter FY20”). The Company posted (i) revenue of $8.4M, an increase of 3% over the same period last year, (ii) operating income of $0.3M compared to an operating loss of $0.1M in First Quarter FY19, (iii) Adjusted EBITDA of $1.8M, up 3% compared to First Quarter FY19, and (iv) a cash balance at December 31, 2019 of $8.5M, representing an increase of 23% over September 30, 2019.
“We are please to kick off our new fiscal year with a strong first quarter that ended December 31, 2019 with revenue growth of nearly 3%, which is commendable given the impact of the strengthening of the US dollar and the subsequent reduction in revenue caused by the translation of our significant Chilean peso revenue into US dollars”, said Derek Cassell, Track Group’s CEO.
FINANCIAL HIGHLIGHTS
●
Strong quarterly revenue of $8.4M in First Quarter FY20, up 3% over First Quarter FY19 of $8.2M.
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Favorable quarterly gross profit of $4.7M in First Quarter FY20, up 1% over First Quarter FY19 of $4.6M.
●
Total operating expense for the First Quarter FY20 of $4.4M is down 7 % versus First Quarter FY19’s $4.7M of operating expense. The decline in quarterly operating expense when combined with a favorable quarterly gross profit led to Operating Income of $301K, which is a dramatic improvement of over 600% compared to a quarterly loss of $57K in the First Quarter FY19.
●
Adjusted EBITDA in the First Quarter FY20 finished at $1.8M, up 3% compared to $1.7M for First Quarter FY2019.
●
Cash balance of $8.5M for First Quarter FY20, up 23% compared to $6.9M at September 30, 2019.
●
Net loss attributable to shareholders for First Quarter FY20 of ($0.2M) compared to a net loss attributable to shareholders in the First Quarter FY2019 of ($1.7M), representing an improvement of 87%.
| 5th Avenue<br>Station<br><br><br>200 E. 5thAvenue, Suite<br>100<br><br><br>Naperville, IL<br>60563 | 877.260.2010<br><br><br>trackgrp.com |
|---|
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BUSINESS OUTLOOK
| Actual | Outlook | ||
|---|---|---|---|
| FY<br>2018 | FY<br>2019 | FY<br>2020 | |
| Revenue: | $30.6M | $34.0M | $36-40M |
| Adjusted<br>EBITDA Margin: | 19.2% | 21.9% | 21-26% |
About Track Group, Inc.
Track Group designs, manufactures, and markets location tracking devices; as well as develops and sells a variety of related software, services, accessories, networking solutions, and monitoring applications. The Company's products and services are designed to empower professionals in security, law enforcement, corrections and rehabilitation organizations worldwide with single-sourced offender management solutions that integrate reliable intervention technologies to support re-socialization and monitoring initiatives.
The company currently trades under the ticker symbol "TRCK" on the OTCQX exchange. For more information, visit www.trackgrp.com.
Forward-Looking Statements
Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "if", "should" and "will" and similar expressions as they relate to Track Group, Inc. and subsidiaries ("Track Group") are intended to identify such forward-looking statements. These statements are only predictions and reflect Track Group's current beliefs and expectations with respect to future events and are based on assumptions and subject to risks and uncertainties and subject to change at any time. Track Group may from time to time update these publicly announced projections, but it is not obligated to do so. Any projections of future results of operations should not be construed in any manner as a guarantee that such results will in fact occur. These projections are subject to change and could differ materially from final reported results. For a discussion of such risks and uncertainties, see "Risk Factors" in Track Group's annual report on Form 10-K, its quarterly report on Form 10-Q, and its other reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. New risks emerge from time to time. Readers are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the dates on which they are made.
Non-GAAP Financial Measures
This release includes financial measures defined as “non-GAAP financial measures” by the Securities and Exchange Commission including non-GAAP EBITDA. These measures may be different from non- GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. Reconciliations of these non-GAAP financial measures are based on the financial figures for the respective period.
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TRACK GROUP, INC. AND SUBSIDIARIES
Non-GAAP Adjusted EBITDA excludes items included but not limited to interest, taxes, depreciation, amortization, impairment charges, gains and losses, currency effects, one time charges or benefits that are not indicative of operations, charges to consolidate, integrate or consider recently acquired businesses, costs of closing facilities, stock based or other non-cash compensation or other stated cash and non-cash charges (the “Adjustments”).
The Company believes the non-GAAP measures provide useful information to both management and investors when factoring in the Adjustments. Specific disclosure regarding the Company’s financial results, including management’s analysis of results from operations and financial condition, are contained in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2019, and other reports filed with the Securities and Exchange Commission. Investors are encouraged to carefully read and consider such disclosure and analysis contained in the Company’s Form 10-K and other reports, including the risk factors contained in such Form 10-K.
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TRACK GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
| (Unaudited)<br><br><br>December<br>31, | September<br>30, | |
|---|---|---|
| Assets | 2019 | 2019 |
| Current assets: | ||
| Cash | $8,493,550 | $6,896,711 |
| Accounts<br>receivable, net of allowance for doubtful accounts of $2,556,393<br>and $2,454,281, respectively | 5,321,396 | 6,763,236 |
| Prepaid expense,<br>deposits and right of use assets | 1,692,887 | 1,339,465 |
| Inventory, net of<br>reserves of $62,147 and $26,934, respectively | 442,570 | 274,501 |
| Total current<br>assets | 15,950,403 | 15,273,913 |
| Property and<br>equipment, net of accumulated depreciation of $2,316,172 and<br>$2,248,913, respectively | 636,619 | 675,037 |
| Monitoring<br>equipment, net of accumulated amortization of $6,325,027 and<br>$6,322,768, respectively | 2,568,379 | 2,624,900 |
| Intangible assets,<br>net of accumulated amortization of $14,729,536 and $14,157,090,<br>respectively | 21,829,868 | 21,955,679 |
| Goodwill | 8,227,025 | 8,187,911 |
| Deferred tax<br>asset | 526,833 | 540,563 |
| Other<br>assets | 451,696 | 124,187 |
| Total<br>assets | $50,190,823 | $49,382,190 |
| Liabilities<br>and Stockholders’ Equity (Deficit) | ||
| Current liabilities: | ||
| Accounts<br>payable | 2,616,049 | 2,628,003 |
| Accrued<br>liabilities | 14,607,777 | 13,828,696 |
| Current portion of<br>long-term debt | 33,818,587 | 33,827,689 |
| Total current<br>liabilities | 51,042,413 | 50,284,388 |
| Long-term<br>liabilities | 327,644 | - |
| Total<br>liabilities | 51,370,057 | 50,284,388 |
| Commitments and<br>contingencies | - | - |
| Stockholders’<br>equity (deficit): | ||
| Common stock,<br>$0.0001 par value: 30,000,000 shares authorized; 11,414,150 and<br>11,401,650 shares outstanding, respectively | 1,141 | 1,140 |
| Series A<br>Convertible Preferred stock, $0.0001 par value: 1,200,000 shares<br>authorized; 0 shares outstanding | - | - |
| Paid in<br>capital | 302,270,242 | 302,250,556 |
| Accumulated<br>deficit | (302,384,917) | (302,152,292) |
| Accumulated other<br>comprehensive loss | (1,065,700) | (1,001,602) |
| Total equity<br>(deficit) | (1,179,234) | (902,198) |
| Total liabilities<br>and stockholders’ equity (deficit) | $50,190,823 | $49,382,190 |
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TRACK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| Three<br>Months Ended December 31, | ||
|---|---|---|
| 2019 | 2018 | |
| Revenue: | ||
| Monitoring and<br>other related services | $8,268,423 | $8,060,328 |
| Product sales and<br>other | 152,408 | 151,207 |
| Total<br>revenue | 8,420,831 | 8,211,535 |
| Cost<br>of revenue: | ||
| Monitoring,<br>products and other related services | 3,266,909 | 3,100,193 |
| Depreciation &<br>amortization included in cost of revenue | 487,442 | 478,289 |
| Total cost of<br>revenue | 3,754,351 | 3,578,482 |
| Gross<br>profit | 4,666,480 | 4,633,053 |
| Operating<br>expense: | ||
| General &<br>administrative | 3,011,854 | 3,422,272 |
| Selling &<br>marketing | 541,549 | 503,930 |
| Research &<br>development | 296,155 | 248,865 |
| Depreciation &<br>amortization | 515,939 | 514,981 |
| Total operating<br>expense | 4,365,497 | 4,690,048 |
| Operating<br>income (loss) | 300,983 | (56,995) |
| Other<br>income (expense): | ||
| Interest expense,<br>net | (602,533) | (601,239) |
| Currency exchange<br>gain (loss) | 143,308 | (932,677) |
| Total<br>other expense | (459,225) | (1,533,916) |
| Loss<br>before income taxes | (158,242) | (1,590,911) |
| Income<br>tax expense | 74,383 | 144,007 |
| Net<br>loss attributable to common stockholders | (232,625) | (1,734,918) |
| Foreign currency<br>translation adjustments | (64,098) | 96,673 |
| Comprehensive<br>loss | $(296,723) | $(1,638,245) |
| Net loss per common<br>share, basic and diluted | $(0.02) | $(0.16) |
| Weighted average<br>common shares outstanding, basic and diluted | 11,411,704 | 11,101,650 |
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| Three<br>Months Ended December<br>31, | ||
|---|---|---|
| 2019 | 2018 | |
| Non-GAAP<br>Adjusted EBITDA | ||
| Net<br>loss attributable to common shareholders | $(233) | $(1,735) |
| Interest expense,<br>net | 603 | 601 |
| Depreciation and<br>amortization | 1,003 | 993 |
| Income taxes<br>(1) | 74 | 144 |
| Board compensation<br>and stock-based compensation | 95 | 158 |
| Foreign exchange<br>expense | (143) | 933 |
| Other charges, net<br>(2) | 374 | 624 |
| Non<br>GAAP Adjusted EBITDA | $1,773 | $1,718 |
| Non<br>GAAP Adjusted EBITDA, percent of revenue | 21.1% | 20.9% |
| Weighted average<br>common shares outstanding | 11,411,704 | 11,101,650 |
| Non-GAAP<br>earnings per share | $0.16 | $0.15 |
(1)
Currently, the Company has significant U.S. tax loss carryforwards that may be used to offset future taxable income, subject to IRS limitations. However, the Company is still subject to certain state, commonwealth, and other foreign based taxes.
(2)
Other charges may include gains or losses and non-recurring accrual adjustments.
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