Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements. The words or phrases "would be", "will allow", "intends to", "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", or similar expressions are intended to identify "forward-looking statements". Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties, including those risks factors contained in our June 30, 2025 Annual Report on Form 10-K, incorporated by reference herein. Statements made herein are as of the date of the filing of this Report with the Securities and Exchange Commission ("SEC") and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

Overview

ReposiTrak, Inc., a Nevada corporation ("ReposiTrak", "We", "us", "our" or the "Company") is a Software-as-a-Service ("SaaS") which operates a business-to-business ("B2B") e-commerce, compliance & traceability, and supply chain management platform that partners with retailers, wholesalers, distributors and their product suppliers to (a) help them manage specific programs, such as out-of-stock management and scan-based trading; (b) reduce risk in their supply chain by managing compliance documents and data; ensure compliance with new regulatory requirements supporting traceability; and (c) improve product ordering and forecasting in order to accelerate sales, control risks, and improve supply chain efficiencies.

The Company's services are grouped in three application suites:

1.

ReposiTrak Compliance Management ("Compliance") solutions, which helps the Company's customers vet suppliers and reduce a company's potential regulatory, legal, and criminal risk from its supply chain partners by providing a way for them to ensure these suppliers are compliant with food safety regulations, such as the Food Safety Modernization Act of 2011 ("FSMA");

2.

ReposiTrak Traceability Network ("Traceability" or "RTN"), which helps the Company's customers comply with federal regulatory requirements of traceability and provides the lowest cost, easiest to use way to manage the capture and sharing of key data elements ("KDEs") now required by Section 204d of FSMA 2011 as designated products move through the supply chain at each 'event' known as a 'critical tracking event' or "CTE", which includes tracking from farm to shelf; and

3.

ReposiTrak Supply Chain Solutions ("Supply Chain"), which help the Company's customers to more efficiently manage various interactions with their suppliers. In other words, it provides customers with greater flexibility in sourcing products by enabling them to choose new suppliers and integrate them into their supply chain faster and more cost effectively, and it helps them to manage these relationships more efficiently, enhancing revenue while lowering working capital, labor costs and reducing waste.

The Company's services are delivered though proprietary software products designed, developed, marketed and supported by the Company. These products provide visibility and facilitate improved business processes among all key constituents in the supply chain, starting with the retailer and moving backwards to suppliers and eventually to raw material providers.

The Company provides cloud-based applications and services that address e-commerce, supply chain, food safety, compliance and traceability activities. The principal customers for the Company's products are household name multi-store food retail chains and restaurants including their suppliers, branded food manufacturers, food wholesalers and distributors, and other food service businesses.

The Company has a hub and spoke business model. The Company is typically engaged by retailers and wholesalers ("Hubs"), which in turn require their suppliers ("Spokes") to utilize the Company's services.

On December 21, 2023, the Company effected a change of its corporate name from Park City Group, Inc. to ReposiTrak, Inc. The Company is incorporated in the State of Nevada and has two principal subsidiaries: PC Group, Inc., a Utah corporation (98.76% owned) ("PCG Utah"), and Park City Group, Inc., a Delaware corporation (100% owned) ("PCG Delaware" and together with PCG Utah, the "Subsidiaries"). All intercompany transactions and balances have been eliminated in the Company's consolidated financial statements, which contain the Company's results from operations. The Company has no business operations separate from the operations conducted through its Subsidiaries.

The Company's principal executive offices are located at 5282 South Commerce Drive, Suite D292, Murray, Utah 84107. Its telephone number is (435) 645-2000. Its website address is www.repositrak.com.

Recent Developments

Dividend Payment

On September 19, 2025, The Company's Board of Directors declared a quarterly cash dividend of $0.02 per share ($0.08 per year), payable to shareholders of record on September 30, 2025, payable to shareholders of record on or about November 14, 2025. Based on the closing prices on September 30, 2025, this represented an annual dividend yield of approximately 0.54%. Subsequent dividends will be paid within 45 days of each fiscal quarter end.

Federal Regulation & Traceability: FSMA 204(d) and USDA SOE

In 2020, the United States Food & Drug Administration ("FDA") announced the "New Era of Smarter Food Safety" blueprint. It "outlines achievable goals to enhance traceability, improve predictive analytics, respond more rapidly to outbreaks, address new business models, reduce contamination of food, and foster the development of stronger food safety cultures."

In November 2022, the FDA announced the final rule on the Food Safety Modernization Act Section 204(d) ("FSMA 204") - Traceability for High-Risk Foods.

On January 20, 2023, the rule became effective and applies to any person or Company that manufactures, processes, packs or hold foods the FDA considers to be high risk for food borne illness, the so-called Food Traceability List ("FTL"). The FTL is comprised of 16 product categories of food, which represent thousands of products commonly sold in grocery and convenience stores, and all restaurants. As a result, every grocery distributor, wholesaler and retailer, and the food service supply chain, must now institute a traceability program that enables the capture, creation and sharing of specific Key Data Elements ("KDEs") prescribed by the FDA and required for traceability, at each designated Critical Tracking Event ("CTE") in the supply chain, for thousands of items.

FSMA 204 requires the traceability data records to be stored for two years, and be retrievable such that specific data records can be presented within 24 hours of a request from the FDA. FSMA 204 is ultimately about supply chain data recording record keeping, resulting is an enormous amount of data to manage, across more than one million supply chain and retail facilities.

In March 2025, the deadline for compliance with FSMA 204 was extended by 30 months to July 20, 2028. Nearly every company impacted will require some type of technical systems support to meet the requirement by this date. The food supply chain industry is moving toward traceability, driven by competitive pressures beyond regulatory deadlines. Major retailers have announced food traceability programs with more robust requirements than the FDA. While FSMA 204 requires traceability for certain foods included on the FTL, retailers have publicly communicated traceability requirements including:

●

Additional traceability data elements that need to be transmitted electronically for every shipment

●

Traceability for ALL FOODS, instead of only for foods listed on the FTL

●

Accelerated timelines, with several major retailers requiring suppliers to meet their unique requirements by June 30, 2025 - years before FDA enforcement begins.

While the FTL includes thousands of product types, the FDA has made it clear in its communications that the list is only the beginning. The FDA states that it would "encourage the voluntary adoption of these practices industry-wide," There are some strong early indications that the industry will move to complete traceability of all food products within the next few years.

Traceability is, by definition, a supply chain data management issue, which is ReposiTrak's core expertise. That is why we developed a traceability solution that is easy, inexpensive and meets FDA's requirements. The ReposiTrak Traceability Network ("RTN") is a growing traceability solution, connecting thousands of supplier locations to thousands of food wholesaler and retail locations, using low cost, easy to deploy technology, on the ReposiTrak platform. As the largest connected network of food suppliers, wholesalers and retailers in the world, the RTN is positioned to provide end-to-end traceability to provide a safe food supply chain, tighten controls on food waste, and implement a food recall response that saves lives and money.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 to the Three Months Ended September 30, 2024.

Revenue

		Fiscal Quarter Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Revenue		$	5,971,467			$	5,441,142			$	530,325				10	%

Revenue was $5,971,467 and $5,441,142 for the three months ended September 30, 2025 and 2024, respectively, a 10% increase year-over-year. The increase in revenue was due to growth in recurring subscription revenue in all lines of business. These include compliance, supply chain and traceability. Growth in traceability is the result of growing industry and consumer response to food contaminations and food safety hazards, whether biological, chemical, physical, or allergenic. The risks have elevated regulatory requirements, documentation requisites, and principally has resulted in tighter mandates from the retailers to its suppliers. As more and more retailers, wholesalers and distributors mandate their requirements to suppliers, the Company continues to see a corresponding rise in demand for its services.

Although no assurances can be given, we continue to focus our sales efforts on marketing our software services on a recurring subscription basis and placing less emphasis on transactional revenue. However, we believe there will continue to be an insignificant percentage of customers that will, from time to time, require buying a particular service outright (i.e., a license). We have and will continue to deemphasize non-recurring transactional revenue when we are able.

Cost of Services and Product Support

		Fiscal Quarter Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Cost of services and product support		$	854,152			$	859,219			$	(5,067	)			(1	)%
Percent of total revenue			14	%			16	%

Cost of services and product support was $854,152 and $859,219 for the three months ended September 30, 2025 and 2024, respectively, a 1% decrease. This $5,067 decrease is primarily the result of certain development costs to be capitalized as part of significant enhancements being developed to our current platform of services as well as several new software programs to be released at a future date. The demand in traceability has required additional development of software used on the ReposiTrak platform in order to accurately meet the complex requirements of FSMA 204 in addition to further accelerate the systematic onboarding of customers with little if any human intervention.

Sales and Marketing Expense

		Fiscal Quarter Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Sales and marketing		$	1,607,469			$	1,529,100			$	78,369				5	%
Percent of total revenue			27	%			28	%

Sales and marketing expense was $1,607,469 and $1,529,100 for the three months ended September 30, 2025 and 2024, respectively, a 5% increase. The increase in sales and marketing expense was primarily the result of higher sales commissions, sales travel, and investment in marketing for our suite of services. The increase in sales and marketing expense has been the result of commission due to higher sales and FSMA 204 traceability awareness marketing. We believe the uptick in marketing spending, excluding commissions and other variable costs due to higher sales, will flatten over the next twelve months as awareness of the traceability regulatory deadline approaches and the industry continues to mandate early adoption.

General and Administrative Expense

		Fiscal Quarter Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
General and administrative		$	1,372,227			$	1,292,551			$	79,676				6	%
Percent of total revenue			23	%			24	%

General and administrative expense was $1,372,227 and $1,295,551 for the three months ended September 30, 2025 and 2024, respectively, a 6% increase. The increase in general and administrative expense was primarily due to higher employee benefit costs, general liability insurance, increases in D&O insurance due to a higher market cap, and higher payroll taxes due to an increase in commissions and other benefit programs.

Depreciation and Amortization Expense

		Fiscal Quarter Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Depreciation and amortization		$	243,746			$	280,211			$	(36,465	)			(13	)%
Percent of total revenue			4	%			5	%

Depreciation and amortization expense was $243,746 and $280,211 for the three months ended September 30, 2025 and 2024, respectively, a decrease of 13%. The decrease was due to certain leased assets obtained with financing arrangements becoming fully amortized.

Other Income and Expense

		Fiscal Quarter Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Net other income (expense)		$	375,655			$	335,094			$	40,561				12	%
Percent of total revenue			6	%			6	%

Net other income was $375,355 for the three months ended September 30, 2025, compared to net other income of $335,094 for the three months ended September 30, 2024. Other income increased due to an increase in interest income attributable to earnings on fixed income instruments as a result in higher cash balances. In September 2024, the Federal Reserve began cutting interest rates, which reductions make it unlikely the Company will be able to maintain the same interest income on its existing cash balances without taking additional credit risk or increasing the total amount of cash held for investment.

Preferred Dividends

		Fiscal Quarter Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Preferred dividends		$	58,817			$	107,882			$	(49,065	)			(45	)%
Percent of total revenue			1	%			2	%

Preferred dividends accrued on the Company's Preferred Stock was $58,817 for the three months ended September 30, 2025 and $107,882 for the three months ended September 30, 2024. Dividends decreased due to the redemption and retirement of Preferred Stock since the inception of the redemption plan that commenced in fiscal 2024. Although no assurances can be given, the Company announced that it intends to redeem all of the Series B and B-1 Preferred on or before December 2026. Since inception, a total of 571,772 shares of Preferred Stock, including Series B and Series B-1 Preferred, at the redemption price of $10.70 per share, have been redeemed for a total of $6,117,960. There is a total of $2.85 million of Preferred Stock remaining to be redeemed.

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.

		As of								Variance
		September 30,				June 30,
		2025				2025				Dollars				Percent
Cash and cash equivalents		$	28,794,806			$	28,568,805			$	226,001				1	%

We have historically funded our operations with cash from operations, equity financings, and borrowings from our existing line of credit with U.S. Bank N.A. (the "Bank"), which was revised on October 6, 2021, and again in 2022. In March 2024, given our strong financial position, we terminated the credit facility with the Bank.

Cash was $28,794,806 and $28,568,805 at September 30, 2025 and June 30, 2025, respectively. This 1% increase is primarily the result of higher revenue and the corresponding cash receipts from customers who in many cases are required to pay annual subscriptions in advance generating higher cash balances in advance of higher revenue. It also includes higher earnings associated with a growing cash balance and the resulting interest income.

Net Cash Flows from Operating Activities

		Three Months Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Cash provided by operating activities		$	1,538,447			$	1,868,900			$	(330,453	)			(18	)%

Net cash provided by operating activities is summarized as follows:

		Three Months Ended
		September 30,
		2025				2024
Net income		$	1,819,529			$	1,665,155
Noncash expense and income, net			569,769				545,832
Net changes in operating assets and liabilities			(850,851	)			(342,087	)
		$	1,538,447			$	1,868,900

Net cash provided by operating activities for the three months ended September 30, 2025 was $1,538,447 compared to net cash provided by operating activities of $1,868,900 for the three months ended September 30, 2024. Net cash provided by operating activities decreased 18% due principally to an increase in accounts receivable due to longer term contracts and an increase in prepaid expense and other assets. Noncash expense in the quarter increased by $23,937 in the three months ended September 30, 2025, compared to three months ended September 30, 2024 as a result of additional bad debt expense.

Net Cash Flows from Investing Activities

		Three Months Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Cash provided by (used in) investing activities		$	(20,359	)		$	34,086			$	(54,445	)			160	%

Net cash used in investing activities for the three months ended September 30, 2025 was $20,359 compared to net cash provided by investing activities of $34,086 for the three months ended September 30, 2024. This decrease in cash provided by investing activities for the three months ended September 30, 2025 was due the purchase of fixed assets and realized loss on certain marketable securities.

Net Cash Flows from Financing Activities

		Three Months Ended
		September 30,								Variance
		2025				2024				Dollars				Percent
Cash used in financing activities		$	(1,292,087	)		$	(1,266,642	)		$	25,445				2	%

Net cash used in financing activities totaled $1,292,087 for the three months ended September 30, 2025, compared to cash used in financing activities of $1,266,642 for the three months ended September 30, 2024. The increase in net cash used in financing activities is due to an increase in our buyback of Common Stock and by the continued redemption of Preferred Stock during the period.

Liquidity and Working Capital

At September 30, 2025, the Company had positive working capital of $28,899,777 as compared with positive working capital of $28,154,682 at June 30, 2025. This $745,095 increase in working capital is primarily due to an increase in prepaid expense, other current assets and accounts receivables offset by a decrease in contract assets and an increase in accrued liabilities offset by a decrease in deferred revenue. Cash and cash equivalents also increased due to cash receipts from customers in all lines of business which include compliance, supply chain and traceability who in most cases pay annually in advance for their subscription.

		As of				As of				Variance
		September 30,				June 30,
		2025				2025				Dollars				Percent
Current assets		$	34,114,277			$	33,685,800			$	428,477				1	%

Current assets totaled $34,114,277 as of September 30, 2025, as compared to $33,685,800 as of June 30, 2025. The increase in current assets is primarily attributable to the increase in cash and contract assets offset by an increase of accounts receivables.

		As of				As of				Variance
		September 30,				June 30,
		2025				2025				Change				Percent
Current liabilities		$	5,214,500			$	5,531,118			$	(316,618	)			(6	)%
Current ratio			6.45				6.09

Current liabilities totaled $5,214,500 as of September 30, 2025 as compared to $5,531,118 as of June 30, 2025. The decrease in current liabilities is primarily attributable to the decrease in deferred revenue offset partially by the increase in accounts payable and accrued liabilities. As of September 30, 2025, the Company had zero bank debt.

On October 6, 2021, the Company and the Bank executed a Revolving Credit Agreement (the "Revolving Credit Agreement") and accompanying addendum (the "Addendum"), and Stand-Alone Revolving Note (the "Note" and collectively with the Revolving Credit Agreement and Addendum, the "Credit Agreement"), with an effective date of September 30, 2021. The Credit Agreement replaced the Company's prior $6.0 million Revolving Credit Agreement and Stand-Alone Revolving Note between the Company and the Bank, as amended and revised on January 9, 2019, and provided the Company with a $10.0 million revolving line of credit that matured on March 31, 2023. The Credit Agreement contained customary affirmative and negative covenants and conditions to borrowing, as well as customary events of default. Among other things, the Company must maintain liquid assets equal to $12 million and maintain a Senior Funded Debt (as defined in the Credit Agreement) to EBITDA Ratio (as defined in the Credit Agreement) of not more than 3:1.

On April 28, 2023, the Company and the Bank executed an amendment to the Credit Agreement (the "Amendment"), with an effective date of March 31, 2023. The Amendment sets forth that (1) the Company will increase its liquidity requirement from $10 million to $12 million, which the Company currently maintains over $22 million in cash and a current ratio of over 6:1, and (2) draws on the facility accrue interest at the annual rate, equal to 1.75% plus the one-month SOFR rate, instead of the previous LIBOR rate. As of March 31, 2024, the balance of the facility was zero. The Company had zero bank debt at September 30, 2025.

On March 15, 2024, given its strong financial position, the Company chose not to renew the Revolving Credit Agreement. There were no amounts due at the time of renewal.

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. The Company's increase in anticipated cash flow from operations and working capital position is expected to be offset by the use of cash required to fund:

1.

Quarterly Cash Dividend: In September 2022, the Company's Board of Directors first declared a quarterly cash dividend of $0.015 per share ($0.06 per year). In November 2023, the Board approved a 10% increase in the quarterly cash dividend, to $0.066 cents per share annually, or $0.0165 cents per share quarterly, commencing with the December 2023 dividend. In September 2024, the Board again declared a 10% increase in the quarterly dividend of $0.01815 per quarter ($0.0726 per share annually) to shareholders of record on December 31, 2024 payable on or about February 14, 2025. In June 2025, the Board declared a 10% increase in the quarterly dividend to shareholders of record as of September 30, 2025, or a dividend of $0.01 per quarter ($0.08 annually), payable on or about November 14, 2025. This represents the third 10% increase in the Company's dividend since the dividend was established in September 2022. Subsequent dividends will be paid within 45 days of each fiscal quarter end.

2.

Preferred Stock Redemption: Since inception, a total of 571,772 shares of Preferred Stock, including Series B and Series B-1 Preferred, have been redeemed at the redemption price of $10.70 per share for a total of $6,117,960. There is a total of $2.85 million of Preferred Stock remaining to be redeemed.

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.

Contractual Obligations

Total contractual obligations and commercial commitments as of September 30, 2025 are summarized in the following table:

		Financing
		Leases
Less than 1 Year		$	252,780
1-3 Years			232,318
Total lease payments			485,098
Less imputed interest			(27,794	)
Total		$	457,304

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 U.S. generally accepted accounting principles.

We commenced operations in the software development and professional services business during 1990. 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. Management bases its estimates and judgments 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.

Management believes the following critical accounting policies, among others, will affect its more significant judgments and estimates used in the preparation of our consolidated financial statements.

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.

Revenue Recognition

Effective July 1, 2018, the Company 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. The Company 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.

See Note 2 to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Report for a full description of the impact of the adoption of new accounting standards on our financial statements. Following the adoption of this guidance, the revenue recognition for our sales arrangements remained materially consistent with our historical practice and there have been no material changes to our critical accounting policies and estimates as compared to our critical accounting policies and estimates included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

Share-Based Compensation

The Company accounts for its share-based compensation to employees and non-employees in accordance with FASB ASC 718, Compensation - Stock Compensation. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service or vesting period.

Leases

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 Report 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.

Available-for-Sale Debt Investments

We classify our investments in fixed income securities as available-for-sale debt investments. Our available-for-sale debt investments primarily consist of U.S. government, U.S. government agency, non-U.S. government and agency, corporate debt, U.S. agency mortgage-backed securities, commercial paper and certificates of deposit. These available-for-sale debt investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of available-for-sale debt investments sold. These investments are recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on these investments are included as a separate component of accumulated other comprehensive income ("AOCI"). We classify our investments as current based on the nature of the investments and their availability for use in current operations.

Impairment Consideration of Investments

For our available-for-sale debt securities in an unrealized loss position, we determine whether a temporary or permanent credit loss exists. In this assessment, which requires judgment, among other factors, we consider the extent to which the fair value is less than the amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security. If factors indicate a permanent credit loss exists, an allowance for credit loss is recorded to other income (loss), net, limited by the amount that the fair value is less than the amortized cost basis. The amount of fair value change relating to all other factors will be recognized in other comprehensive income ("OCI").