DESCRIPTION OF BUSINESS

3 Months Ended

Sep. 30, 2015

Notes to Financial Statements

DESCRIPTION OF BUSINESS

NOTE 1.  DESCRIPTION OF BUSINESS

 The Company is incorporated in the state of Nevada.  The Company has three subsidiaries, PC Group, Inc. (formerly, Park City Group, Inc., a Delaware corporation), a Utah Corporation (98.76% owned), Park City Group, Inc., (formerly, Prescient Applied Intelligence, Inc.), a wholly owned Delaware Corporation, and ReposiTrak, Inc., a wholly owned Utah corporation (“ReposiTrak”).  All intercompany transactions and balances have been eliminated in consolidation.

The Company designs, develops, markets and supports proprietary software products. These products are designed for businesses having multiple locations to assist in the management of business operations on a daily basis and communicate results of operations in a timely manner.   As a result of the acquisition of ReposiTrak in June 2015, the Company also provides food retailers and suppliers with a robust solution to help them protect their brands and remain in compliance with the rapidly evolving regulations in the Food Safety Modernization Act (“FSMA”). Additionally, ReposiTrak enables traceability of products and their ingredients as they move between trading partners. 

The Company has also built a consulting practice for business improvement that centers on the Company’s proprietary software products. The principal markets for the Company's products are multi-store retail and convenience store chains, branded food manufacturers, suppliers and distributors, and manufacturing companies, which have operations in North America, Europe, Asia and the Pacific Rim.

Recent Developments

 During the year ended June 30, 2015, the Company entered into agreements with each of the stockholders of ReposiTrak, including Leavitt Partners, LP and LP Special Asset 4, LLC, to acquire all of the outstanding capital stock of ReposiTrak (the “ReposiTrak Shares”) in exchange for shares of the Company’s common stock, par value $0.01 per share (the “ReposiTrak Acquisition”).   On June 30, 2015, the Company consummated the ReposiTrak Acquisition.  As a result, ReposiTrak became a 100% owned subsidiary of the Company.   The ReposiTrak Acquisition creates an opportunity for the Company to add customers by expanding the services we offer to our existing customer base, to ReposiTrak customers.

 We have accounted for the acquisition as the purchase of a business.  The assets acquired and the liabilities assumed of ReposiTrak have been recorded at their respective fair values.  The excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill.  Goodwill is attributed to buyer-specific value resulting from expected synergies, including long-term cost savings, as well as industry relationships which are not included in the fair values of assets.  Goodwill will not be amortized.

 The purchase price consisted of 873,438 shares of our common stock.  The fair value of the shares issued was $10,821,897 and was determined using the closing price of our common stock on June 30, 2015.  The price paid to acquire ReposiTrak was $10,830,897, approximately $9,000 of which was for direct transaction costs associated with the issuance of equity.    The net acquisition cost of $10,799,778, which excludes $31,119 of cash acquired from ReposiTrak, was allocated based on their estimated fair value of the assets acquired and liabilities assumed, as follows:

	Originally Filed			Adjustments*			Finalized Values
Receivables	$	152,340		$	-		$	152,340
Prepaid expenses		17,500			-			17,500
Customer relationships		2,006,951			(692,951	)		1,314,000
Goodwill		15,385,002			692,951			16,077,953
Accounts payable		(128,126	)		-			(128,126	)
Deferred revenue		(598,232	)		-			(598,232	)
Net assets acquired		16,835,435			-			16,835,435
Common stock issued		10,821,897			-			10,821,897
Receivables eliminated in consolidation		6,035,657			-			6,035,657
Cash received in acquisition	$	22,119		$	-		$	22,119

*Adjustments due to finalization of valuation. The adjusted values are reflected retrospectively in the balance sheet for the period ended June 30, 2015.

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Table of Contents

The accompanying audited consolidated financial statements of the Company as of and for the year ended June 30, 2015 contain the results of operations of ReposiTrak from June 30, 2015. 

Unaudited pro-forma results of operations for the twelve months ended June 30, 2015 and 2014, as though ReposiTrak had been acquired as of July 1, 2013, are as follows:

	Three Months Ended
	Sep 30, 2014			Dec 31, 2014			Mar 31, 2015			Jun 30, 2015			Year Ended 2015			Year Ended 2014
Revenue	$	2,826,813		$	2,932,825		$	2,870,646		$	2,941,511		$	11,571,795		$	9,777,431
Loss from Operations	$	(1,046,986	)	$	(1,290,524	)	$	(1,302,437	)	$	(3,222,538	)	$	(6,862,485	)	$	(5,232,552	)
Net Loss	$	(1,049,834	)	$	(1,317,510	)	$	(1,317,858	)	$	(3,241,545	)	$	(6,926,747	)	$	(5,303,773	)
Net Loss Applicable to Common Shareholders	$	(1,204,307	)	$	(1,471,983	)	$	(3,595,537	)	$	(3,365,721	)	$	(9,637,548	)	$	(5,921,664	)
Basic and Diluted EPS	$	(0.07	)	$	(0.08	)	$	(0.20	)	$	(0.18	)	$	(0.53	)	$	(0.34	)

Basis of Financial Statement Presentation

The interim financial information of the Company as of September 30, 2015 and for the three months ended September 30, 2015 and 2014 is unaudited, and the balance sheet as of June 30, 2015 is derived from audited financial statements. The accompanying condensed consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial statements. Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles. The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in Note 2 to the Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended June 30, 2015. In the opinion of management, all adjustments necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for the three months ended September 30, 2015 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2016. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2015.