10-Q 1 pcyg10q_mar312019.htm QUARTERLY REPORT Blueprint
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended March 31, 2019
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the transition period from __________ to _________.
 
Commission File Number 001-34941
 
PARK CITY GROUP, INC.
(Exact name of small business issuer as specified in its charter)
 
Nevada
 
37-1454128
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
 
5282 South Commerce Drive, Suite D292, Murray, Utah 84107
(Address of principal executive offices)
 
(435) 645-2000
(Registrant’s telephone number)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes ☐ No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ☒ Yes ☐ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer
[   ]
 Accelerated filer
[X]
 Non-accelerated filer
[   ]
 Smaller reporting company
[X]
 
 
 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.  [ ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  [ ] Yes   [X] No 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
PCYG
Nasdaq Capital Market
 
Securities registered pursuant to Section 12(g) of the Act:  None
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  Common Stock, $0.01 par value, 19,871,283 shares as of May 8, 2019.
 
 


 
 
 
PARK CITY GROUP, INC.
 
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
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19
 
 
 
19
 
 
 
 
20
 
 
 
Exhibit 31
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Exhibit 32
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 

 
 
PARK CITY GROUP, INC.
Consolidated Condensed Balance Sheets (Unaudited)
 
Assets
 
March 31,
2019
 
 
June 30,
2018
 
Current assets
 
 
 
 
 
 
Cash
 $18,145,369 
 $14,892,439 
Receivables, net allowance for doubtful accounts of $418,985 and $153,220 at March 31, 2019 and June 30, 2018, respectively
  3,977,982 
  4,222,348 
Contract asset – unbilled current portion
  3,379,652 
  3,502,287 
Prepaid expense and other current assets
  1,219,878 
  1,116,387 
 
    
    
Total current assets
  26,722,881 
  23,733,461 
 
    
    
Property and equipment, net
  1,683,923 
  1,896,348 
 
    
    
Other assets:
    
    
Deposits, and other assets
  3,922 
  18,691 
Contract asset – unbilled long-term portion
  1,864,974 
  1,194,574 
Investments
  476,884 
  477,884 
Customer relationships
  821,250 
  919,800 
Goodwill
  20,883,886 
  20,883,886 
Capitalized software costs, net
  95,380 
  168,926 
 
    
    
Total other assets
  24,146,296 
  23,663,761 
 
    
    
Total assets
 $52,553,100 
 $49,293,570 
 
    
    
Liabilities and Stockholders' Equity
    
    
Current liabilities
    
    
Accounts payable
 $622,803 
 $1,490,434 
Accrued liabilities
  1,328,037 
  745,694 
Contract liability - deferred revenue
  2,063,810 
  2,335,286 
Lines of credit
  4,660,000 
  3,230,000 
Current portion of notes payable
  36,891 
  188,478 
 
    
    
Total current liabilities
  8,711,541 
  7,989,892 
 
    
    
Long-term liabilities
    
    
Notes payable, less current portion
  255,054 
  1,592,077 
Other long-term liabilities
  - 
  7,275 
 
    
    
Total liabilities
  8,966,595 
  9,589,244 
 
    
    
Commitments and contingencies
    
    
 
    
    
Stockholders’ equity:
    
    
Preferred stock; $0.01 par value, 30,000,000 shares authorized;
    
    
Series B Preferred, 700,000 shares authorized; 625,375 issued and outstanding at March 31, 2019 and June 30, 2018;
  6,254 
  6,254 
Series B-1 Preferred, 550,000 shares authorized; 212,402 shares issued and outstanding at March 31, 2019 and June 30, 2018.
  2,124 
  2,124 
Common stock, $0.01 par value, 50,000,000 shares authorized; 19,871,283 and 19,773,548 issued and outstanding at March 31, 2019 and June 30, 2018, respectively.
  198,715 
  197,738 
Additional paid-in capital
  77,312,818 
  76,711,887 
Accumulated deficit
  (33,933,406)
  (37,213,677)
 
    
    
Total stockholders’ equity
  43,586,505 
  39,704,326 
 
    
    
Total liabilities and stockholders’ equity
 $52,553,100 
 $49,293,570 
 
See accompanying notes to consolidated condensed financial statements.
 
 
 
PARK CITY GROUP, INC.
Consolidated Condensed Statements of Operations (Unaudited)
 
   
 
Three Months Ended
March 31, 
 
 
Nine Months Ended
March 31,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Revenue
 $5,006,132 
 $5,278,783 
 $16,513,363 
 $15,715,654 
 
    
    
    
    
Operating expense:
    
    
    
    
Cost of services and product support
  1,342,051 
  1,805,256 
  4,341,236 
  4,649,620 
Sales and marketing
  1,485,785 
  1,574,663 
  4,533,664 
  4,781,752 
General and administrative
  1,020,652 
  1,293,727 
  3,490,698 
  3,569,584 
Depreciation and amortization
  140,312 
  165,189 
  429,717 
  487,815 
 
    
    
    
    
Total operating expense
  3,988,800 
  4,838,835 
  12,795,315 
  13,488,771 
 
    
    
    
    
Income from operations
  1,017,332 
  439,948 
  3,718,048 
  2,226,883 
 
    
    
    
    
Other income (expense):
    
    
    
    
Interest income
  75,670 
  17,730 
  165,567 
  - 
Interest expense
  (4,706)
  - 
  (20,802)
  (12,157)
 
    
    
    
    
Income before income taxes
  1,088,296 
  457,678 
  3,862,813 
  2,214,726 
 
    
    
    
    
(Provision) for income taxes:
  (20,210)
  (349)
  (142,710)
  (76,063)
Net income
  1,068,086 
  457,329 
  3,720,103 
  2,138,663 
 
    
    
    
    
Dividends on preferred stock
  (146,610)
  (146,611)
  (439,832)
  (426,737)
 
    
    
    
    
Net income applicable to common shareholders
 $921,476 
 $310,718 
 $3,280,271 
 $1,711,926 
 
    
    
    
    
Weighted average shares, basic
  19,861,000 
  19,648,000 
  19,823,000 
  19,519,000 
Weighted average shares, diluted
  20,390,000 
  20,321,000 
  20,369,000 
  20,250,000 
Basic income per share
 $0.05 
 $0.02 
 $0.17 
 $0.09 
Diluted income per share
 $0.05 
 $0.02 
 $0.16 
 $0.08 
 
See accompanying notes to consolidated condensed financial statements.
 
 
 
PARK CITY GROUP, INC.
Consolidated Condensed Statements of Cash Flows (Unaudited)
 
 
 
Nine Months
Ended March 31,
 
 
 
2019
 
 
2018
 
Cash flows operating activities:
 
 
 
 
 
 
Net income
 $3,720,103 
 $2,138,663 
Adjustments to reconcile net income to net cash provided by operating activities:
    
    
Depreciation and amortization
  429,718 
  487,815 
Stock compensation expense
  473,556 
  489,748 
Bad debt expense
  350,000 
  295,050 
(Increase) decrease in:
    
    
Accounts receivables
  17,001 
  (2,999,613)
Long-term receivables, prepaids and other assets
  (759,122)
  764,513 
(Decrease) increase in:
    
    
Accounts payable
  (867,631)
  688,073 
Accrued liabilities
  392,089 
  (98,821)
Deferred revenue
  (271,752)
  9,548 
Net cash provided by operating activities
  3,483,962 
  1,774,976 
 
    
    
Cash flows investing activities:
    
    
Capitalization of software costs
  - 
  (111,241)
Purchase of long-term investments
  1,000 
  - 
Purchase of property and equipment
  (45,197)
  (204,004)
Net cash used in investing activities
  (44,197)
  (315,245)
 
    
    
Cash flows financing activities:
    
    
Net increase in lines of credit
  1,430,000 
  380,000 
Proceeds from issuance of note payable
  - 
  56,078 
Redemption of Series B-1 Preferred
  - 
  (999,990)
Proceeds from exercise of warrants
  164,997 
  666,903 
Proceeds from employee stock plan
  - 
  244,417 
Dividends paid
  (293,222)
  (488,897)
Payments on notes payable and capital leases
  (1,488,610)
  (544,088)
Net cash used in financing activities
  (186,835)
  (685,577)
 
    
    
Net increase in cash and cash equivalents
  3,252,930 
  774,154 
 
    
    
Cash and cash equivalents at beginning of period
  14,892,439 
  14,054,006 
Cash and cash equivalents at end of period
 $18,145,369 
 $14,828,160 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash paid for income taxes
 $143,909 
 $42,630 
Cash paid for interest
 $33,371 
 $146,889 
 
    
    
Supplemental disclosure of non-cash investing and financing activities:
    
    
Common stock to pay accrued liabilities
 $436,911 
 $971,127 
Preferred stock to pay accrued liabilities
 $- 
 $200,000 
Dividends accrued on preferred stock
 $439,832 
 $426,737 
  
See accompanying notes to consolidated condensed financial statements.
 
 
 
PARK CITY GROUP, INC. 
Consolidated Statements of Stockholders’ Equity (Deficit)
 
 
 
 Series B
Preferred Stock
 
 
 Series B-1
Preferred Stock
 
 
 Common Stock
 
 
Additional
Paid-In
 
 
Accumulated
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2018
  625,375 
 $6,254 
  212,402 
 $2,124 
  19,773,549 
 $197,738 
 $76,711,887 
 $(37,213,677)
 $39,704,326 
 
    
    
    
    
    
    
    
    
    
Stock issued for:
    
    
    
    
    
    
    
    
    
Accrued compensation
  - 
  - 
  -
 
  -
 
  6,592 
 $66 
 $51,602 
  - 
 $51,668 
Employee stock plan
  - 
  - 
  -
 
  -
 
  12,333 
 $123 
 $82,755 
  -
 
 $82,878 
Preferred Dividends-Declared
  - 
  - 
  - 
  - 
  - 
  - 
  -
 
 $(146,611)
 $(146,611)
 
    
    
    
    
    
    
    
    
    
Net income
  - 
  - 
  - 
  - 
  - 
  - 
  - 
 $966,409 
 $966,409 
Balance, September 30, 2018
  625,375 
 $6,254 
  212,402 
 $2,124 
  19,792,474 
 $197,927 
 $76,846,244 
 $(36,393,879)
 $40,658,670 
 
    
    
    
    
    
    
    
    
    
Stock issued for:
    
    
    
    
    
    
    
    
    
Accrued compensation
  -
 
  -
 
  -
 
  -
 
  21,207 
 $212 
 $211,476 
  -
 
 $211,688 
Redemption
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
 $(93,217)
  -
 
 $(93,217)
Employee stock plan
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  - 
Preferred Dividends-Declared
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
 $(146,611)
 $(146,611)
Exercise of Option/Warrant
  -
 
  -
 
  -
 
  -
 
  25,581 
 $256 
 $164,741 
  -
 
 $164,997 
 
    
    
    
    
    
    
    
    
    
Net income
  -
 
    
    
    
    
    
    
 $1,685,608 
 $1,685,608 
Balance, December 31, 2018
  625,375 
 $6,254 
  212,402 
 $2,124 
  19,839,262 
 $198,395 
 $77,129,244 
 $(34,854,882)
 $42,481,135 
 
    
    
    
    
    
    
    
    
    
Stock issued for:
    
    
    
    
    
    
    
    
    
Accrued compensation
  -
 
  -
 
  -
 
  -
 
  17,786 
 $178 
 $111,919 
  -
 
 $112,097 
Redemption
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
Employee stock plan
  -
 
  -
 
  -
 
  -
 
  14,235 
 $142 
 $71,655 
  -
 
 $71,797 
Preferred Dividends-Declared
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
 $(146,610)
 $(146,610)
Exercise of Option/Warrant
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
 
    
    
    
    
    
    
    
    
    
Net income
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
  -
 
 $1,068,086 
 $1,068,086 
Balance, March 31, 2019
  625,375 
 $6,254 
  212,402 
 $2,124 
  19,871,283 
 $198,715 
 $77,312,818 
 $(33,933,406)
 $43,586,505 
 
 
 
PARK CITY GROUP, INC. 
Consolidated Statements of Stockholders’ Equity (Deficit)
 
 
 
 Series B
Preferred Stock
 
 
 Series B-1
Preferred Stock
 
 
 Common Stock
 
 
Additional
Paid-In
 
 
Accumulated
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2017
  625,375 
 $6,254 
  285,859 
 $2,859 
  19,423,821 
 $194,241 
 $75,489,189 
 $(39,983,692)
 $35,708,851 
 
    
    
    
    
    
    
    
    
    
Stock issued for:
    
    
    
    
    
    
    
    
    
Accrued compensation
  - 
  - 
  20,000 
  200 
  - 
  - 
  $199,800 
  - 
 $200,000 
Employee stock plan
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  - 
Preferred Dividends-Declared
  - 
  - 
  - 
  - 
  - 
  - 
  - 
 $(117,160)
 $(117,160)
 
    
    
    
    
    
    
    
    
    
Net income
  - 
  - 
  - 
  - 
  - 
  - 
  - 
 $330,850 
 $330,850 
Balance, September 30, 2017
  625,375 
 $6,254 
  305,859 
 $3,059 
  19,423,821 
 $194,241 
 $75,688,989 
 $(39,770,002)
 $36,122,541 
 
    
    
    
    
    
    
    
    
    
Stock issued for:
    
    
    
    
    
    
    
    
    
Accrued compensation
  - 
    
  - 
  - 
  99,160 
 $991 
 $733,270 
  - 
 $734,261 
Redemption
  - 
    
  - 
  - 
  - 
  - 
  - 
  - 
  - 
Employee stock plan
  - 
    
  - 
  - 
  11,605 
 $116 
 $119,763 
  - 
 $119,879 
Preferred Dividends-Declared
  - 
    
  - 
  - 
  - 
  - 
  - 
 $(162,966)
 $(162,966)
Exercise of Option/Warrant
  - 
    
  - 
  - 
  - 
  - 
  - 
  - 
  - 
 
    
    
    
    
    
    
    
    
    
Net income
    
    
  - 
  - 
  - 
  - 
  - 
 $1,350,484 
 $1,350,484 
Balance, December 31, 2017
  625,375 
 $6,254 
  305,859 
 $3,059 
  19,534,586 
 $195,348 
 $76,542,022 
 $(38,582,484)
 $38,164,199 
 
    
    
    
    
    
    
    
    
    
Stock issued for:
    
    
    
    
    
    
    
    
    
Accrued compensation
  - 
    
  - 
    
  28,888 
 $289 
 $236,578 
  - 
 $236,867 
Redemption
  - 
    
  (93,457)
  (935)
  - 
  - 
 $(933,635)
  $(65,420)
  $(999,990)
Employee stock plan
  - 
    
  - 
    
  15,413 
 $154 
 $124,383 
  - 
 $124,537 
Preferred Dividends-Declared
  - 
    
  - 
    
  - 
  - 
  - 
 $(146,611)
 $(146,611)
Exercise of Option/Warrant
  - 
    
  - 
    
  186,550 
  1,866 
 $665,037 
    
  666,903 
 
    
    
    
    
    
    
    
    
    
Net income
  - 
    
  - 
    
  - 
  - 
  - 
 $457,329 
 $457,329 
Balance, March 31, 2018
  625,375 
 $6,254 
  212,402 
 $2,124 
  19,765,437 
 $197,657 
 $76,634,385 
 $(38,337,186)
 $38,503,234 
 
 
 
 
 
 
 
 
PARK CITY GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1.  OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION
 
Overview
 
Park City Group, Inc. (the “Company”) is a Software-as-a-Service (“SaaS”) provider, and the parent company of ReposiTrak Inc., which operates a business-to-business (“B2B”) e-commerce, compliance, and supply chain management platform 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 supply chain and MarketPlace services provide its 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 more efficiently manage these relationships, enhancing revenue while lowering working capital, labor costs and waste. The Company’s food safety and compliance solutions help 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”).
 
The Company’s services are grouped in three application suites: (i) ReposiTrak MarketPlace, encompassing the Company’s supplier discovery and B2B e-commerce solutions, which helps the Company’s customers find new suppliers, (ii) ReposiTrak Compliance and Food Safety solutions, which help the Company’s customers vet suppliers to mitigate the risk of doing business with these suppliers, and (iii) ReposiTrak’s Supply Chain solutions, which help the Company’s customers to more efficiently manage their various transactions with their suppliers.
 
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 and compliance activities. The principal customers for the Company’s products are household name multi-store food retail chains and 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.
 
The Company is incorporated in the state of Nevada and has three principal subsidiaries: PC Group, Inc., a Utah corporation (98.76% owned); Park City Group, Inc., a Delaware corporation (100% owned); and ReposiTrak, Inc., a Utah corporation (100% owned). All intercompany transactions and balances have been eliminated in the Company’s consolidated financial statements, which contain the operating results of the operations of Park City Group, Inc. (Delaware) and ReposiTrak, Inc. Park City Group, Inc. (Nevada) 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 http://www.parkcitygroup.com, and ReposiTrak’s website address is http://repositrak.com.
 
Recent Developments
 
Stand-Alone Revolving Note Amendment
 
On January 9, 2019, the Company and U.S. Bank N.A. (the “Bank”) entered into an amendment (the “Amendment”) to the outstanding Stand-Alone Revolving Note, as amended and restated by the parties on February 12, 2018 (the “Revolving Note”), and the accompanying addendum. Pursuant to the Amendment, the parties agreed to (i) extend the maturity date to December 31, 2019; (ii) increase the maximum amount the Company is able to borrow under the Revolving Note to $6,000,000; (iii) increase the interest rate to 1.75% per annum plus the greater of zero percent or one-month LIBOR, (iv) convert the Revolving Note from a secured instrument to an unsecured instrument; provided, however, that the Company must maintain liquid assets equal to the outstanding balance of the Note, and (v) to add a provision requiring the Company to maintain a Senior Funded Debt to EBITDA Ratio, as such terms are defined in the Amendment, of not more than 2:1.
 
Master Lease Agreement
 
On January 9, 2019, the Company also entered into a Master Lease Agreement (the “Lease Agreement”) with the Bank, pursuant to which the parties agreed that the Bank would finance up to an aggregate of $1.0 million, which amount was thereafter increased to approximately $1.3 million, of equipment and services related to the Company’s expansion and subsequent relocation of its data center and construction of its new corporate facility, which it will then lease back to the Company. Specific terms related to future purchases shall be set forth in various schedules, which shall be entered into by the parties from time to time, and which shall incorporate the terms of the Lease Agreement.
 
On May 1, 2019, the Company completed the expansion of new equipment for the Company’s information technology infrastructure, buildout of its corporate headquarters, and expansion of its collocation data center, and began leasing the equipment and property from the Bank. See Note 6 – Subsequent Events for additional details.
 
 
 
Basis of Financial Statement Presentation
 
The interim financial information of the Company as of March 31, 2019 and for the three and nine months ended March 31, 2019 is unaudited, and the balance sheet as of June 30, 2018 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 the Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended June 30, 2018. 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 and nine months ended March 31, 2019 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2019. 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, 2018. 
  
NOTE 2.  SIGNIFICANT ACCOUNTING POLICIES
 
Principles of Consolidation
 
The financial statements presented herein reflect the consolidated financial position of Park City Group, Inc. and our subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.  
 
Use of Estimates
 
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that materially affect the amounts reported in the consolidated financial statements. Actual results could differ from these estimates. The methods, estimates, and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results it reports in its financial statements. The Securities and Exchange Commission has defined the most critical accounting policies as those that are most important to the portrayal of the Company’s financial condition and results and require the Company to make its most difficult and subjective judgments, often because of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include: revenue recognition, goodwill, other long-lived asset valuations, income taxes, stock-based compensation, and capitalization of software development costs.
 
Adoption of ASC Topic 606, “Revenue from Contracts with Customers”
 
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASC 606”). ASC 606 clarifies the accounting for revenue arising from contracts with customers and specifies the disclosures that an entity should include in its financial statements. During 2016, the FASB issued certain amendments to the standard relating to the principal versus agent guidance, accounting for licenses of intellectual property identifying performance obligations as well as the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. We adopted ASC 606 using the modified retrospective method on July 1, 2018.
 
The effect of applying ASC 606 did not result in an opening balance adjustment to retained earnings or any other balance sheet accounts because the Company: (1) identified similar performance obligations under ASC 606 as compared with deliverables and separate units of account previously identified; (2) determined the transaction price to be consistent; and (3) concluded that revenue is recorded at the same point in time, upon performance under both ASC 605 and ASC 606. The adoption of ASC 606 did not require significant changes in our internal controls and procedures over financial reporting and disclosures. However, we made enhancements to existing internal controls and procedures to ensure compliance with the new guidance.
 
Revenue Recognition
 
We recognize revenue as we transfer control of deliverables (products, solutions and services) to our customers in an amount reflecting the consideration to which we expect to be entitled. To recognize revenue, we apply the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. We account for a contract based on the terms and conditions the parties agree to, the contract has commercial substance and collectability of consideration is probable. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience.
 
We may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any combination of our deliverables. To the extent a contract includes multiple promised deliverables, we apply judgment to determine whether promised deliverables are capable of being distinct and are distinct in the context of the contract. If these criteria are not met, the promised deliverables are accounted for as a combined performance obligation. For arrangements with multiple distinct performance obligations, we allocate consideration among the performance obligations based on their relative standalone selling price. Standalone selling price is the price at which we would sell a promised good or service separately to the customer. When not directly observable, we typically estimate standalone selling price by using the expected cost plus a margin approach. We typically establish a standalone selling price range for our deliverables, which is reassessed on a periodic basis or when facts and circumstances change.
  
 
 
For performance obligations where control is transferred over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the deliverables to be provided. Revenue related to fixed-price contracts for application development and systems integration services, consulting or other technology services is recognized as the service is performed using the output method, under which the total value of revenue is recognized based on each contract’s deliverable(s) as they are completed and when value is transferred to a customer. Revenue related to fixed-price application maintenance, testing and business process services is recognized based on our right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in ASC 606-10-55-18.
 
If our invoicing is not consistent with the value delivered, revenue is recognized as the service is performed based on the method described above. The output method measures the results achieved and value transferred to a customer, which is updated as the project progresses to reflect the latest available information; such estimates and changes in estimates involve the use of judgment. The cumulative impact of any revision in estimates is reflected in the financial reporting period in which the change in estimate becomes known and any anticipated losses on contracts are recognized immediately. Revenue related to fixed-price hosting and infrastructure services is recognized based on our right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in ASC 606-10-55-18. If our invoicing is not consistent with value delivered, revenue is recognized on a straight-line basis unless revenue is earned and obligations are fulfilled in a different pattern. The revenue recognition method applied to the types of contracts described above provides the most faithful depiction of performance towards satisfaction of our performance obligations.
 
Revenue related to our software license arrangements that do not require significant modification or customization of the underlying software is recognized when the software is delivered as control is transferred at a point in time. For software license arrangements that require significant functionality enhancements or modification of the software, revenue for the software license and related services is recognized as the services are performed in accordance with the methods described above. In software hosting arrangements, the rights provided to the customer, such as ownership of a license, contract termination provisions and the feasibility of the client to operate the software, are considered in determining whether the arrangement includes a license or a service. Revenue related to software maintenance and support is generally recognized on a straight-line basis over the contract period.
 
Revenue related to transaction-based or volume-based contracts is recognized over the period the services are provided in a manner that corresponds with the value transferred to the customer to-date relative to the remaining services to be provided.
 
From time to time, we may enter into arrangements with third party suppliers to resell products or services. In such cases, we evaluate whether we are the principal (i.e. report revenue on a gross basis) or agent (i.e. report revenue on a net basis). In doing so, we first evaluate whether we control the good or service before it is transferred to the customer. If we control the good or service before it is transferred to the customer, we are the principal; if not, we are the agent. Determining whether we control the good or service before it is transferred to the customer may require judgment.
 
We provide customers with assurance that the related deliverable will function as the parties intended because it complies with agreed-upon specifications. General updates or patch fixes are not considered an additional performance obligation in the contract.
 
Variable consideration is estimated using either the sum of probability weighted amounts in a range of possible consideration amounts (expected value), or the single most likely amount in a range of possible consideration amounts (most likely amount), depending on which method better predicts the amount of consideration to which we may be entitled. We include in the transaction price variable consideration only to the extent it is probable that a significant reversal of revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and are based largely on an assessment of our anticipated performance and all information that is reasonably available to us.
 
We assess the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, we do not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our services, not to receive or provide financing from or to customers. We do not consider set up or transition fees paid upfront by our customers to represent a financing component, as such fees are required to encourage customer commitment to the project and protect us from early termination of the contract.
 
Trade Accounts Receivable and Contract Balances
 
We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset (unbilled receivable). A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For example, we recognize a receivable for revenue related to our transaction or volume-based contracts when earned regardless of whether amounts have been billed. We present such receivables in trade accounts receivable, net in our consolidated statements of financial position at their net estimated realizable value. We maintain an allowance for doubtful accounts to provide for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables, judgment, and other applicable factors.
 
 
 
A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are presented in current and other assets in our consolidated balance sheets and primarily relate to unbilled amounts on fixed-price contracts utilizing the output method of revenue recognition. The table below shows movements in contract assets:
 
 
 
Contract assets
 
Balance – December 31, 2018
 $5,903,046 
   Revenue recognized during the period but not billed
  407,966
   Amounts reclassified to accounts receivable
  (1,066,386)
       Other
    
Balance – March 31, 2019
 $   5,244,626(1)

(1)
Contract asset balances for March 31, 2019 include a current and a long-term contract asset, $3,379,652, and $1,864,974, respectively.
  
The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:
 
 
 
Contract liability
 
Balance – December 31, 2018
 $2,671,296 
  Amounts billed but not recognized as revenue
  (1,072,836)
  Revenue recognized related to the opening balance of deferred revenue
  465,350 
  Other
    
Balance – March 31, 2019
 $2,063,810 
 
Our contract assets and liabilities are reported in a net position on a contract by contract basis at the end of each reporting period. The difference between the opening and closing balances of our contract assets and deferred revenue primarily results from the timing difference between our performance obligations and the customer’s payment. We receive payments from customers based on the terms established in our contracts, which may vary generally by contract type.
 
Disaggregation of Revenue
 
The table below presents disaggregated revenue from contracts with customers by customer geography and contract-type. We believe this disaggregation best depicts the nature, amount, timing and uncertainty of our revenue and cash flows that may be affected by industry, market and other economic factors:
 
 
 
For the Nine Months Ended March 31, 2019
 
Geography
 
Subscription
& support
 
 
Professional
services
 
 
Transaction
based
 
 
Total
 
North America
 $4,018,892 
 $148,922 
 $821,063 
  4,988,877 
International
  -
  -
  17,255 
  17,255 
Total
 $4,018,892 
 $148,922 
 $838,318 
 $5,006,132 
 
Earnings Per Share
 
Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue shares of common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an antidilutive effect on net income per common share.
 
 
 
The following table presents the components of the computation of basic and diluted earnings per share for the periods indicated:
 
 
 
  Three Months Ended
 
 
  Nine Months Ended
 
 
 
  March 31,
 
 
  March 31,
 
 
 
 2019
 
 
2018
 
 
2019
 
 
2018
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common shareholders
 $921,476 
 $310,718 
 $3,280,271 
 $1,711,926 
 
    
    
    
    
Denominator
    
    
    
    
Weighted average common shares outstanding, basic
  19,861,000 
  19,648,000 
  19,823,000 
  19,519,000 
Warrants to purchase common stock
  529,000 
  673,000 
  546,000 
  731,000 
Weighted average common shares outstanding, diluted
  20,390,000 
  20,321,000 
  20,369,000 
  20,250,000 
 
    
    
    
    
Net income per share
    
    
    
    
Basic
 $0.05 
 $0.02 
 $0.17 
 $0.09 
Diluted
 $0.05 
 $0.02 
 $0.16 
 $0.08 
 
Reclassifications
 
            Certain prior year amounts have been reclassified to conform with the current year’s presentation. These reclassifications have no impact on the previously reported results.
  
NOTE 3.  EQUITY
Restricted Stock Units
 
Restricted
Stock Units
 
 
Weighted Average Grant Date Fair Value
($/share)
 
 
 
 
 
 
 
 
Outstanding at December 31, 2018
  814,156 
 $5.55 
   Granted
  29,436 
  7.85 
   Vested and issued
  (5,085)
  10.75 
   Forfeited
  - 
 -
Outstanding at March 31, 2019
  838,507 
 $5.57 
 
As of March 31, 2019, there were no restricted stock units outstanding that had vested but for which shares of common stock had not yet been issued pursuant to the terms of the agreement.
 
As of March 31, 2019, there was approximately $4.68 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted average period of 3.55 years.
 
Warrants
 
 The following table summarizes information about warrants outstanding and exercisable at March 31, 2019:
 

 
 

 
 
Warrants Outstanding
 
 
Warrants Exercisable
 
 
at March 31, 2019
 
 
at March 31, 2019
 
 
 
 
Range of
exercise prices
Warrants
 
 
Number
outstanding
 
 
Weighted  average
remaining contractual
life (years)
 
 
Weighted average
exercise price
 
 
Number
exercisable
 
 
Weighted average
exercise price
 
 $4.00 
  1,085,068 
  0.85 
 $4.00 
  1,085,068 
 $4.00 
 $10.00 
  23,737 
  0.82 
 $10.00 
  23,737 
 $10.00 
    
  1,108,805 
    
 $4.13 
  1,108,805 
 $4.13 
 
 
 
Preferred Stock
 
The Company’s articles of incorporation, as amended, currently authorize the issuance of up to 30,000,000 shares of “blank check” preferred stock with designations, rights, and preferences as may be determined from time to time by the Company’s Board of Directors, of which 700,000 shares are currently designated as Series B Preferred Stock (“Series B Preferred”) and 550,000 shares are designated as Series B-1 Preferred Stock (“Series B-1 Preferred”). As of March 31, 2019, a total of 625,375 shares of Series B Preferred and 212,402 shares of Series B-1 Preferred were issued and outstanding, respectively. Both classes of Series B Preferred Stock pay dividends at a rate of 7% per annum if paid by the Company in cash, or 9% if paid by the Company in additional shares of Series B Preferred (“PIK Shares”), the Company may elect to pay accrued dividends on outstanding shares of Series B Preferred in either cash or by the issuance of PIK Shares.
 
The Company does business with some of the largest retailers and wholesalers in the world. Management believes the Series B-1 Preferred favorably impacts the Company’s overall cost of capital in that it is: (i) perpetual and, therefore, an equity instrument that positively impacts the Company’s coverage ratios, (ii) possesses a below market dividend rate relative to similar instruments, (iii) offers the flexibility of a paid-in-kind (“PIK”) payment option, and (iv) is without covenants. After exploring alternative options for redeeming the Series B-1 Preferred, management determined that alternative financing options were significantly more expensive or would negatively impact the Company’s net cash position, which management believes could cause customer concerns and weaken the Company’s ability to attract new business.
 
Section 4 of the Company’s First Amended and Restated Certificate of Designation of the Relative Rights, Powers and Preferences of the Series B-1 Preferred Stock, as amended (the “Series B-1 COD”), provides the Company’s Board of Directors with the right to redeem any or all of the outstanding shares of the Company’s Series B-1 Preferred for a cash payment of $10.70 per share at any time upon providing the holders of Series B-1 Preferred at least ten days written notice that sets forth the date on which the redemption will occur (the “Redemption Notice”).
 
In July 2017, the Company issued 20,000 shares of Series B-1 Preferred in satisfaction of an accrued bonus payable to the Company’s Chief Executive Officer.
 
On February 6, 2018, the Company delivered a Redemption Notice to certain holders of the Series B-1 Preferred notifying the holders of the Company’s intent to redeem certain shares of Series B-1 Preferred on February 7, 2018 (the “Redemption Date”) (the “Series B-1 Redemption”). On the Redemption Date, the Company paid an aggregate total of $999,990 to the holders of shares of Series B-1 Preferred, resulting in the redemption of 93,457 shares of Series B-1 Preferred. Following the Series B-1 Redemption, a total of 212,402 shares of Series B-1 Preferred remain issued and outstanding.
 
NOTE 4.  RELATED PARTY TRANSACTIONS
 
During the nine months ended March 31, 2019, the Company continued to be a party to a Service Agreement with Fields Management, Inc. (“FMI”), pursuant to which FMI provides certain executive management services to the Company, including designating Randall K. Fields to perform the functions of President and Chief Executive Officer for the Company. Mr. Fields also serves as the Company’s Chairman of the Board of Directors and controls FMI. The Company had payables of $45,200 and $316,539 to FMI at March 31, 2019 and June 30, 2018, respectively, under this Service Agreement. In addition, in the first quarter, July, of fiscal 2017, 20,000 shares of Series B-1 Preferred were paid to FMI in satisfaction of an accrued bonus payable to Mr. Fields.
 
Randall K. Fields and Robert W. Allen each beneficially own Series B-1 Preferred. As a result of the Series B-1 Redemption, the Company paid an aggregate of $889,159 and $110,831 to Messrs. Fields and Allen, respectively, in consideration for the redemption of 83,099 and 10,358 shares of Series B-1 Preferred. See Note 3.
 
NOTE 5.  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 will apply the guidance for implementation costs of new hosting arrangements once adopted.
 
 
 
-10-
 
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. Although we are still evaluating the impact of this new standard, we do not believe that the adoption will materially impact our Condensed Consolidated Financial Statements and related disclosures.
 
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 anticipates this update will impact its financials for any non-employee grants and will implement the guidance for non-employee grants accordingly’.
 
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. We are currently assessing the implication of our adoption as well as the potential impact that the standard will have on our consolidated financial statements.
  
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. We will be adopting the provisions on July 1, 2019 and determined that the amount of Lease Obligations retrospectively did not have a material effect on the financial statements. We expect that future lease obligations and right-of-use assets may increase the total assets and total liabilities we report and that amount may be material.
 
NOTE 6.  SUBSEQUENT EVENTS
 
In accordance with the Subsequent Events Topic of the FASB ASC 855, we have evaluated subsequent events through the filing date and noted no subsequent events, other than those disclosed below, that are reasonably likely to impact the financial statements.
 
On May 1, 2019, the Company completed the expansion of new equipment for the Company’s information technology infrastructure, buildout of its corporate headquarters, and expansion of its collocation data center, which it completed using approximately $1,269,000 (the “Lease Amount”) of funds provided by the Bank N.A. to finance equipment and services related to the Company’s expansion and relocation pursuant to the Lease Agreement, originally entered into by and between the Company and the Bank on January 9, 2019. Pursuant to the Lease Agreement, as of May 1, 2019, the Bank is now leasing back the property and equipment purchased by the Company. Pursuant to the Lease Agreement, commencing May 1, 2019, the initial term of the lease shall be 48 months, the Lease Amount shall accrue interest at a rate of 5.0% per annum, and the Company shall be required to make monthly rental payments in the amount of approximately $29,097 per month.

 
-11-
 
ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
Forward-Looking Statements
 
This Quarterly Report on Form 10-Q 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, 2018 Annual Report on Form 10-K, incorporated by reference herein. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the Securities and Exchange Commission 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
 
Park City Group, Inc. (the “Company”) is a Software-as-a-Service (“SaaS”) provider, and the parent company of ReposiTrak Inc., a business-to-business (“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 supply chain and MarketPlace services provide its 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 more efficiently manage these relationships, enhancing revenue while lowering working capital, labor costs and waste. The Company’s food safety and compliance solutions help 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”).
 
The Company’s services are grouped in three application suites: (i) ReposiTrak MarketPlace, encompassing the Company’s supplier discovery and B2B e-commerce solutions, which helps the Company’s customers find new suppliers, (ii) ReposiTrak Compliance and Food Safety solutions, which help the Company’s customers vet suppliers to mitigate the risk of doing business with these suppliers, and (iii) ReposiTrak’s Supply Chain solutions, which help the Company’s customers to more efficiently manage their various transactions with their suppliers.
 
The Company’s services are delivered though proprietary software products designed, developed, marketed and supported by the Company. These products are designed to provide transparency and to facilitate improved business processes among all key constituents in the supply chain, starting with the retailer and moving back to suppliers and eventually to raw material providers. The Company provides cloud-based applications and services that address e-commerce, supply chain, food safety and compliance activities. The principal customers for the Company’s products are multi-store food retail store chains and 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.
 
The Company is incorporated in the state of Nevada and has three principal subsidiaries: PC Group, Inc., a Utah corporation (98.76% owned); Park City Group, Inc., a Delaware corporation (100% owned); and ReposiTrak, Inc., a Utah corporation (100% owned). All intercompany transactions and balances have been eliminated in the Company’s consolidated financial statements, which contain the operating results of the operations of Park City Group, Inc. (Delaware) and ReposiTrak, Inc. Park City Group, Inc. (Nevada) 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 http://www.parkcitygroup.com, and ReposiTrak’s website address is http://repositrak.com.
 
Recent Developments
 
Stand-Alone Revolving Note Amendment
 
On January 9, 2019, the Company and U.S. Bank N.A. (the “Bank”) entered into an amendment (the “Amendment”) to the outstanding Stand-Alone Revolving Note, as amended and restated by the parties on February 12, 2018 (the “Revolving Note”), and the accompanying addendum. Pursuant to the Amendment, the parties agreed to (i) extend the maturity date to December 31, 2019; (ii) increase the maximum amount the Company is able to borrow under the Revolving Note to $6,000,000; (iii) increase the interest rate to 1.75% per annum plus the greater of zero percent or one-month LIBOR, (iv) convert the Revolving Note from a secured instrument to an unsecured instrument; provided, however, that the Company must maintain liquid assets equal to the outstanding balance of the Note, and (v) to add a provision requiring the Company to maintain a Senior Funded Debt to EBITDA Ratio, as such terms are defined in the Amendment, of not more than 2:1.
 
Master Lease Agreement
 
On January 9, 2019, the Company also entered into a Master Lease Agreement (the “Lease Agreement”) with the Bank, pursuant to which the parties agreed that the Bank would finance up to an aggregate of $1.0 million, which amount was thereafter increased to approximately $1.3 million, of equipment and services related to the Company’s expansion and subsequent relocation of its data center and construction of its new corporate facility, which it will then lease back to the Company. Specific terms related to future purchases shall be set forth in various schedules, which shall be entered into by the parties from time to time, and which shall incorporate the terms of the Lease Agreement.

 
 
-12-
 
On May 1, 2019, the Company completed the expansion of new equipment for the Company’s information technology infrastructure, buildout of its corporate headquarters, and expansion of its collocation data center, which it completed using approximately $1,269,000 (the “Lease Amount”) of funds provided by the Bank to finance equipment and services related to the Company’s expansion and relocation pursuant to the Lease Agreement. Pursuant to the Lease Agreement, as of May 1, 2019, the Bank is now leasing back the property and equipment purchased by the Company. Pursuant to the Lease Agreement, commencing May 1, 2019, the initial term of the lease shall be 48 months, the Lease Amount shall accrue interest at a rate of 5.0% per annum, and the Company shall be required to make monthly rental payments in the amount of approximately $29,097 per month.
 
Results of Operations
 
Comparison of the Three Months Ended March 31, 2019 to the Three Months Ended March 31, 2018.
 
Revenue
 
 
Fiscal Quarter Ended
March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Revenue
 $5,006,132 
 $5,278,783 
 $(272,651)
  -5% 
 
Revenue was $5,006,132 and $5,278,783 for the three months ended March 31, 2019 and 2018, respectively, a 5% decrease. This decrease was primary due to a decrease in transaction revenue associated with the Company’s MarketPlace B2B e-commerce services and Professional Services fees.
 
Cost of Services and Product Support
 
 
Fiscal Quarter Ended
March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Cost of services and product support
 $1,342,051 
 $1,805,256 
 $(463,205)
  -26%
Percent of total revenue
  27%
  34%
    
    
 
Cost of services and product support was $1,342,051 and $1,805,256 for the three months ended March 31, 2019 and 2018, respectively, a 26% decrease. This decrease is the result of lower transaction revenue and its corresponding transaction costs with MarketPlace.
 
While no assurance can be given, management currently expects cost of services to grow in both absolute terms, and as a percentage of revenue, as the Company continues to invest in MarketPlace.
 
Sales and Marketing Expense
 
 
Fiscal Quarter Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Sales and marketing
 $1,485,785 
 $1,574,663 
 $(88,878)
  -6% 
Percent of total revenue
  30%
  30%
    
    
 
Sales and marketing expense was $1,485,785 and $1,574,663 for the three months ended March 31, 2019 and 2018, respectively, a 6% decrease. This decrease in sales and marketing expense is due to a decrease in fixed salary and travel expense, offset in part by higher variable compensation and professional service fees, associated with the company’s Success Team personnel costs.
 
While no assurances can be given, management currently expects sales and marketing expense to be relatively flat in absolute value in subsequent periods, but to fall as a percentage of total revenue as it continues to utilize its Success Team strategy.
  
General and Administrative Expense
 
 
Fiscal Quarter Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
General and administrative
 $1,020,652 
 $1,293,727 
 $(273,075)
  -21%
Percent of total revenue
  20%
  25%
    
    
 
General and administrative expense was $1,020,652 and $1,293,727 for the three months ended March 31, 2019 and 2018, respectively, a 21% decrease. General and administrative expense was lower year over year due to a decrease in variable compensation, Professional Service fees and travel expenses, offset in part by higher directors’ fees and bad debt expense.
 
While no assurances can be given, management currently expects general and administrative expense to remain flat in subsequent periods and hence fall as a percentage of total revenue as it benefits from investments in automation and process optimization.
 
 
 
-13-
 
Depreciation and Amortization Expense
 
 
Fiscal Quarter Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Depreciation and amortization
 $140,312 
 $165,189 
 $(24,877)
  -15%
Percent of total revenue
  3%
  3%
    
    
 
Depreciation and amortization expense was $140,312 and $165,189 for the three months ended March 31, 2019 and 2018, respectively, a decrease of 15%. This decrease is primarily due to the full depreciation of computer hardware and software. As a result of the expansion of new equipment for the Company’s information technology infrastructure, buildout of its corporate headquarters, and expansion of its collocation data center completed in May 2019, it is expected that depreciation as a percentage of revenue in subsequent periods will increase, and that amount may be material.
 
Other Income and Expense
 
 
Fiscal Quarter Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Net other income (expense)
 $70,964 
 $17,730 
 $53,234 
 300%
Percent of total revenue
  1%
 NM
    
    
 
Net other income was $70,964 for the three months ended March 31, 2019 compared to $17,730 for the three months ended March 31, 2018. Other income increased due to higher interest income from a result of an increase of cash held in short term investments and the lower expense as a result of decline in notes payable.
 
Preferred Dividends
 
 
Fiscal Quarter Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Preferred dividends
 $146,610 
 $146,611 
 $(1)
  NM%
Percent of total revenue
  3%
  3%
    
    
 
Dividends accrued on the Company’s Series B-1 Preferred was $146,610 for the three months ended March 31, 2019, compared to dividends accrued on the Series B-1 Preferred of $146,611 for the three months ended March 31, 2018. Dividends remained flat.
 
Comparison of the Nine Months Ended March 31, 2019 to the Nine Months Ended March 31, 2018.
 
Revenue
 
 
Nine Months Ended
March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Revenue
 $16,513,363 
 $15,715,654 
 $797,709 
  5%
 
Revenue was $16,513,363 and $15,715,654 for the nine months ended March 31, 2019 and 2018, respectively, a 5% increase. This increase was driven mainly by growth in Professional Service fees and recurring revenue, offset in part by a decrease in revenue from the sale of licenses and transaction costs associated with the Company’s MarketPlace B2B e-commerce services.
 
Cost of Services and Product Support
 
 
Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Cost of services and product support
 $4,341,236 
 $4,649,620 
 $(308,384)
  -7%
Percent of total revenue
  26%
  30%
    
    
 
 Cost of services and product support was $4,341,236 and $4,649,620 for the nine months ended March 31, 2019 and 2018, respectively, a 7% decrease. This decrease is primarily attributable to lower cost of goods sold associated with Marketplace.
 
 
 
-14-
 
Sales and Marketing Expense
 
 
Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Sales and marketing
 $4,533,664 
 $4,781,752 
 $(248,088)
  -5%
Percent of total revenue
  27%
  30%
    
    
 
Sales and marketing expense was $4,533,664 and $4,781,752 for the nine months ended March 31, 2019 and 2018, respectively, a 5% decrease. This decrease in sales and marketing expense is due to a decrease in fixed salary and travel expense, offset in part by higher variable compensation and professional services fees associated with the company’s Success Team personnel costs.
 
General and Administrative Expense
 
 
Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
General and administrative
 $3,490,698 
 $3,569,584 
 $(78,886)
  -2%
Percent of total revenue
  21%
  23%
    
    
 
General and administrative expense was $3,490,698 and $3,569,584 for the nine months ended March 31, 2019 and 2018, respectively, a 2% decrease.  General and administrative expense were lower year over year due to a decrease in variable compensation, outside consultant fees and travel expense, offset in part by higher directors’ fees and bad debt expense.
 
Depreciation and Amortization Expense
 
 
Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Depreciation and amortization
 $429,717 
 $487,815 
 $(58,098)
  -12%
Percent of total revenue
  3%
  3%
    
    
 
Depreciation and amortization expense was $429,717 and $487,815 for the nine months ended March 31, 2019 and 2018, respectively, a decrease of 12%.  This decrease is primarily due to the full depreciation of computer hardware and software as well as a lower depreciation associated with business equipment. As a result of the expansion of new equipment for the Company’s information technology infrastructure, buildout of its corporate headquarters, and expansion of its collocation data center completed in May 2019, it is expected that depreciation as a percentage of revenue in subsequent periods will increase, and that amount may be material.
 
Other Income and Expense
 
 
Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Net other income (expense)
 $144,765 
 $(12,157)
 $156,922 
  1291% 
Percent of total revenue
  1%
  0
%
    
    
 
  Net other income was $144,765 for the nine months ended March 31, 2019 compared to net other expense of $12,157 for the nine months ended March 31, 2018.  Other income increased due to higher interest income from a result of an increase in cash held in short term investments and lower interest expense as a result of a decline in notes payable.
 
Preferred Dividends
 
 
Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Preferred dividends
 $439,832 
 $426,737 
 $13,095 
  3%
Percent of total revenue
  3%
  3%
    
    
 
  Dividends accrued on the Company’s Series B-1 Preferred was $439,832 for the nine months ended March 31, 2019, compared to dividends accrued on the Series B-1 Preferred of $426,737 for the nine months ended March 31, 2018. This increase was due to a timing difference of dividends earned but not paid for the nine months ended March 31, 2018
 
Inflation
 
We do not believe that inflation or changing prices have had a material impact on our historical operations or profitability.
 
 
-15-
 
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 our rate of revenue growth and expansion of our sales and marketing activities, the timing and extent of spending required for research and development efforts and the continuing market acceptance of our products.
 
 
 
As of
 
 
Variance
 
 
 
March 31,
2019
 
 
June 30,
2018
 
 
Dollars
 
 
Percent
 
Cash and cash equivalents
 $18,145,369 
 $14,892,439 
 $3,252,930 
  22%
  
We have historically funded our operations with cash from operations, equity financings, and borrowings from the issuance of debt. Cash was $18,145,369 and $14,892,439 at March 31, 2019 and June 30, 2018, respectively. This 22% increase is principally the result of increased cash flows from operations due to higher net income and accelerated collections.
 
Net Cash Flows from Operating Activities
 
 
 
  Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Cash provided by operating activities
 $3,483,962 
 $1,774,976 
 $1,708,986 
  96%
 
Net cash provided by operating activities is summarized as follows:
 
 
 
Nine Months Ended
 March 31,
 
 
 
2019
 
 
2018
 
Net Income
 $3,720,103 
 $2,138,663 
Noncash expense and income, net
  1,253,274 
  1,272,613 
Net changes in operating assets and liabilities
  (1,489,415)
  (1,636,300)
 
 $3,483,962 
 $1,774,976 
 
Net cash provided by operating activities increased 96% primarily as a result of higher net income, offset in part by lower non-cash expense. Noncash expense decreased by $19,339 in the nine months ended March 31, 2019 compared to March 31, 2018 as a result of a decrease in stock compensation and depreciation and amortization, offset in part by an increase in bad debt. The reduction in operating assets and liabilities versus the comparable period was primarily due to an increase in cash and lower accounts payables, offset in part by lower accounts receivables and an increase in short term borrowing.
 
Net Cash Flows used in Investing Activities
 
 
 
  Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Cash used in investing activities
 $(44,197)
 $(315,245)
 $271,048 
  -86%
 
Net cash used in investing activities for the nine months ended March 31, 2019 was $44,197 compared to net cash used in investing activities of $315,245 for the nine months ended March 31, 2018. This decrease in cash used in investing activities for the nine months ended March 31, 2019 was due to a decrease in fixed asset purchases and the absence of capitalized software costs versus the comparable period.
 
 
 
-16-
 
Net Cash Flows from Financing Activities
 
 
 
  Nine Months Ended
 March 31,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
Dollars
 
 
Percent
 
Cash used in financing activities
 $(186,835)
 $(685,577)
 $498,742 
  -73%
 
Net cash used in financing activities totaled $186,835 for the nine months ended March 31, 2019 as compared to cash used in financing activities of $685,577 for the nine months ended March 31, 2018. The decrease in net cash used in financing activities is primarily attributable to an increase in the amount drawn on the Company’s line of credit, offset in part by a decrease in proceeds received for the exercise of warrants and the issue of employee stock, a decrease in the payment of dividends, and an increase in the payment of notes payable.
  
Working Capital
 
At March 31, 2019, the Company had working capital of $18,011,340, as compared to working capital of $15,743,569 at June 30, 2018. This $2,267,771 increase in working capital is primarily due to an increase in cash and lower accounts payables, offset in part by lower accounts receivables and an increase in short term borrowing.
 
 
 
As of
March 31,
 
 
As of
June 30,
 
 
Variance
 
 
 
2019
 
 
2018
 
 
 Dollars
 
 
 Percent
 
Current assets
 $26,722,881 
 $23,733,461 
 $2,989,420 
  13%
 
Current assets as of March 31, 2019 totaled $26,722,881, an increase of $2,989,420, as compared to $23,733,461 as of June 30, 2018. The increase in current assets is primarily attributable to an increase in cash of $3,252,930 offset in part by a decrease of $367,001 in accounts receivable and short-term contract assets, and an increase of $103,491 in prepaid expense and other current assets.
  
 
 
As of
March 31,
 
 
  As of
June 30,
 
 
Variance
 
 
 
2019
 
 
 2018
 
 
 Dollars
 
 
 Percent  
 
Current liabilities
 $8,711,541 
 $7,989,892 
 $721,649 
  9%
 
Current liabilities totaled $8,711,541 as of March 31, 2019 as compared to $7,989,892 as of June 30, 2018. The comparative increase in current liabilities is primarily attributable to an increase of $1,430,000 in amounts drawn on the Company’s line of credit, an increase of $582,343 in accrued liabilities, offset in part by a reduction of $867,631 in accounts payable, a decrease of $271,476 in deferred revenue, and a reduction of $151,587 in the current portion of notes payable.
 
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 March 31, 2019 are summarized in the following table:
 
 
 
Payment Due by Year
 
 
 
Total
 
 
Less than 1 Year
 
 
1-3 Years
 
 
3-5 Years
 
 
More than 5 Years
 
Lease obligations
 $357,000 
 $122,400 
  122,400 
  112,200 
  - 
 

 
 
 
-17-
 
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 whether or not to realize the deferred income tax assets and assesses the valuation allowance quarterly.
 
Goodwill and Other Long-Lived Asset Valuations
 
Goodwill and other long-lived assets assigned to specific reporting units are reviewed for possible impairment at least annually or more frequently 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, 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.
 
See Note 2 to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q 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, 2018.
 
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 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.
  

  
 
 
-18-
 
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Our business is conducted principally in the United States. As a result, our financial results are not affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We do not engage in hedging transactions to reduce our exposure to changes in currency exchange rates, although if the geographical scope of our business broadens, we may do so in the future.
 
Our exposure to risk for changes in interest rates relates primarily to our investments in short-term financial instruments. Investments in both fixed rate and floating rate interest earning instruments carry some interest rate risk. The fair value of fixed rate securities may fall due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Partly as a result of this, our future interest income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that have fallen in estimated fair value due to changes in interest rates. However, as substantially all of our cash consist of bank deposits and short-term money market instruments, we do not expect any material change with respect to our net income as a result of an interest rate change. 
  
Our exposure to interest rate changes related to borrowing has been limited, and we believe the effect, if any, of near-term changes in interest rates on our financial position, results of operations and cash flows should not be material. At March 31, 2019, the debt portfolio was composed of approximately 6% fixed rate debt and 94% variable rate debt.
 
 
 
March 31,
2019
(Unaudited)
 
 
Percent of
 Total Debt
 
Fixed rate debt
 $291,945 
  6%
Variable rate debt
  4,660,000 
  94%
Total debt
 $4,951,945 
  100%
 
The table that follows presents fair values of principal amounts and weighted average interest rates for our investment portfolio as of March 31, 2019:
 
Cash:
 
Aggregate 
Fair Value
 
 
Weighted Average
Interest Rate
 
    Cash
 $18,145,369 
  2.5%
    
ITEM 4.  CONTROLS AND PROCEDURES
 
(a)
Evaluation of disclosure controls and procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of March 31, 2019 was completed. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer believe that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, including to ensure that information required to be disclosed by the Company is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
(b)
Changes in internal controls over financial reporting. The Company’s Chief Executive Officer and Chief Financial Officer have determined that there have been no changes in the Company’s internal control over financial reporting during the period covered by this report identified in connection with the evaluation described in the above paragraph that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
 
 
 
-19-
 
PART II
 
OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
              We are, from time to time, involved in various legal proceedings incidental to the conduct of our business. Historically, the outcome of all such legal proceedings has not, in the aggregate, had a material adverse effect on our business, financial condition, results of operations or liquidity. There is currently no pending or threatened material legal proceeding that, in the opinion of management, could have a material adverse effect on our business or financial condition.
 
ITEM 1A.  RISK FACTORS
 
There are no risk factors identified by the Company in addition to the risk factors previously disclosed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 5.  OTHER INFORMATION
 
None.
 
ITEM 6.  EXHIBITS
 
 
Amendment to Note, dated January 9, 2019 (incorporated by reference from Exhibit 10.1 of our Current Report on Form 8-K, dated January 15, 2019).
 
Master Lease Agreement, dated January 9, 2019 (incorporated by reference from Exhibit 10.2 of our Current Report on Form 8-K, dated January 15, 2019).
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Taxonomy Extension Schema
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase
 
 
-20-
 
SIGNATURES
 
 In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
PARK CITY GROUP, INC. 
 
 
 
 
 
Date:  May 9, 2019
By:  
/s/  Randall K. Fields
 
 
 
Randall K. Fields 
 
 
 
Chief Executive Officer, Chairman and Director
(Principal Executive Officer)
 
 
 
 
PARK CITY GROUP, INC. 
 
 
 
 
 
Date:  May 9, 2019
By:  
/s/  Todd Mitchell
 
 
 
Todd Mitchell
 
 
 
Chief Financial Officer
(Principal Financial Officer & Principal Accounting Officer)
 
 
 
 
-21-