10-Q

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 December 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, (“Common Stock”)	PCYG	Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act:  None

As of February 10, 2020, 19,579,989 shares of the registrant’s Common Stock, $0.01 par value, were issued and outstanding.

PARK CITY GROUP, INC.

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets as of December 31, 2019 and June 30, 2019 (Unaudited)	1
	Consolidated Condensed Statements of Operations for the Three and Six Months Ended December 31, 2019 and 2018 (Unaudited)	2
	Consolidated Condensed Statements of Cash Flows for the SixMonths Ended December 31, 2019 and 2018 (Unaudited)	3
	Consolidated Statements of Stockholders’ Equity for December 31, 2019 and 2018 (Unaudited)	4
	Notes to Consolidated Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	21
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 5.	Other Information	23
Item 6.	Exhibits	23
Signatures		24

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PARK CITY GROUP, INC.

Consolidated Condensed Balance Sheets (Unaudited)

Assets	December 31, 2019	June 30, 2019
Current assets
Cash	$18,968,775	$18,609,423
Receivables, net of allowance for doubtful accounts of $396,895 and $145,825 at December 31, 2019 and June 30, 2019, respectively	3,974,207	3,878,658
Contract asset – unbilled current portion	2,909,583	3,023,694
Prepaid expense and other current assets	584,528	1,037,099
Total current assets	26,437,093	26,548,874
Property and equipment, net	3,252,560	2,972,257
Other assets:
Deposits, and other assets	22,414	17,146
Contract asset – unbilled long-term portion	1,440,939	1,659,110
Operating lease-right-of-use asset	822,502	-
Customer relationships	722,700	788,400
Goodwill	20,883,886	20,883,886
Capitalized software costs, net	21,834	70,864
Total other assets	23,914,275	23,419,406
Total Assets	$53,603,928	$52,940,537
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$756,264	$530,294
Accrued liabilities	1,203,854	1,399,368
Contract liability - deferred revenue	2,461,924	1,917,787
Lines of credit	4,660,000	4,660,000
Operating lease liability - current	83,562	-
Current portion of notes payable	302,611	295,168
Total current liabilities	9,468,215	8,802,617
Long-term liabilities
Operating lease liability – less current portion	738,940	-
Notes payable, less current portion	767,564	920,754
Total liabilities	10,974,719	9,723,371
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 shares issued and outstanding at December 31, 2019 and June 30, 2019;	6,254	6,254
Series B-1 Preferred, 550,000 shares authorized; 212,402 shares issued and outstanding at December 31, 2019 and June 30, 2019, respectively	2,124	2,124
Common Stock, $0.01 par value, 50,000,000 shares authorized; 19,579,989 and 19,793,372 issued and outstanding at December 31, 2019 and June 30, 2019, respectively	195,802	197,936
Additional paid-in capital	75,774,511	76,908,566
Accumulated deficit	(33,349,482)	(33,897,714)
Total stockholders’ equity	42,629,209	43,217,166
Total liabilities and stockholders’ equity	$53,603,928	$52,940,537

See accompanying notes to consolidated condensed financial statements.

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PARK CITY GROUP, INC.

Consolidated Condensed Statements of Operations (Unaudited)

	Three Months Ended December 31,		Six Months Ended December 31,
	2019	2018	2019	2018
Revenue	$4,837,332	$5,565,237	$9,637,416	$11,507,231
Operating expense:
Cost of services and product support	1,425,309	1,270,659	3,253,423	2,999,185
Sales and marketing	1,446,517	1,139,855	2,861,380	3,047,879
General and administrative	1,114,251	1,326,735	2,336,462	2,470,046
Depreciation and amortization	222,499	144,030	416,177	289,405
Total operating expense	4,208,576	3,881,279	8,867,442	8,806,515
Income from operations	628,756	1,683,958	769,974	2,700,716
Other income (expense):
Interest income	65,982	54,773	148,713	89,897
Interest expense	(16,042)	(5,623)	(36,640)	(16,096)
Income before income taxes	678,696	1,733,108	882,047	2,774,517
(Provision) for income taxes:	(15,593)	(47,500)	(40,593)	(122,500)
Net income	663,103	1,685,608	841,454	2,652,017
Dividends on preferred stock	(146,611)	(146,611)	(293,222)	(293,222)
Net income applicable to common shareholders	$516,492	$1,538,997	$548,232	$2,358,795
Weighted average shares, basic	19,741,000	19,822,000	19,775,000	19,804,000
Weighted average shares, diluted	20,052,000	20,375,000	20,033,000	20,474,000
Basic income per share	$0.03	$0.08	$0.03	$0.12
Diluted income per share	$0.03	$0.08	$0.03	$0.12

See accompanying notes to consolidated condensed financial statements.

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PARK CITY GROUP, INC.

Consolidated Condensed Statements of Cash Flows (Unaudited)

	Six Months Ended December 31,
	2019	2018
Cash flows operating activities:
Net income	$841,454	$2,652,017
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	416,177	289,405
Amortization of operating right of use asset	40,239	-
Stock compensation expense	244,505	323,273
Bad debt expense	250,000	200,000
(Increase) decrease in:
Accounts receivables	(231,438)	208,051
Long-term receivables, prepaids and other assets	665,474	(1,892,581)
(Decrease) increase in:
Accounts payable	225,970	(652,283)
Operating lease liability	(40,239)	-
Accrued liabilities	(284,418)	366,966
Deferred revenue	543,861	335,734
Net cash provided by operating activities	2,671,585	1,830,582
Cash flows investing activities:
Purchase of property and equipment	(581,750)	(3,547)
Net cash used in investing activities	(581,750)	(3,547)
Cash flows financing activities:
Net increase in lines of credit	-	1,430,000
Proceeds from exercise of warrants	-	164,977
Common Stock buyback/retirement	(1,355,037)	-
Proceeds from employee stock plan	63,523	-
Dividends paid	(293,222)	(146,611)
Payments on notes payable and capital leases	(145,747)	(1,485,578)
Net cash used in financing activities	(1,730,483)	(37,192)
Net increase in cash and cash equivalents	359,352	1,789,843
Cash and cash equivalents at beginning of period	18,609,423	14,892,439
Cash and cash equivalents at end of period	$18,968,775	$16,682,282
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$100,158	$47,500
Cash paid for interest	$16,042	$5,622
Supplemental disclosure of non-cash investing and financing activities:
Common stock to pay accrued liabilities	$155,325	$253,017
Dividends accrued on preferred stock	$293,222	$293,222
Right of use asset	$842,689	$-

See accompanying notes to consolidated condensed financial statements.

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PARK CITYGROUP, INC.

Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)

	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, 2019	625,375	$6,254	212,402	$2,124	19,793,372	$197,936	$76,908,566	$(33,897,714)	$43,217,166
Stock issued for:
Accrued compensation	-	-	-	-	14,542	145	77,742	-	77,887
Employee stock plan	-	-	-	-	13,274	133	63,390	-	63,523
Stock buyback	-	-	-	-	(79,954)	(799)	(516,560)		(517,359)
Preferred dividends declared	-	-	-	-	-	-	-	(146,611)	(146,611)
Net income	-	-	-	-	-	-	-	178,351	178,351
Balance, September 30, 2019	625,375	$6,254	212,402	$2,124	19,741,234	$197,415	$76,533,138	$(33,865,974)	$42,872,957
Stock issued for:
Accrued compensation	-	-	-	-	13,370	134	77,304	-	77,438
Stock buyback	-	-	-	-	(174,615)	(1,747)	(835,931)	-	(837,678)
Preferred dividends declared	-	-	-	-	-	-	-	(146,611)	(146,611)
Net income	-	-	-	-	-	-	-	663,103	663,103
Balance, December 31, 2019	625,375	$6,254	212,402	$2,124	19,579,989	$195,802	$75,774,511	$(33,349,482)	$42,629,209

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	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)
Preferred dividends declared	-	-	-	-	-	-	-	$(146,611)	$(146,611)
Exercise of option/warrant	-	-	-	-	25,581	$256	$164,741	-	$164,977
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

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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. (“We”, “us”, “our” or 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 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 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 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 www.parkcitygroup.com, and ReposiTrak’s website address is www.repositrak.com.

Recent Developments

In July 2019, we deployed InApp Pop Up and Online Chat. These applications provide account managers and sales staff with two additional real time means to facilitate farming of the network to cross sell with new and existing customers.

In August 2019, we released our new Out of Stock Management Solution (“OOS”). Eliminating out-of-stocks remains a critical challenge for food retailers as consumers turn to online retailers when their local store is out of a sought-after item. Previously, retailers had no viable solution to address this challenge. Our OOS is the industry’s first solution to address Direct Store Delivery out-of-stocks which enables retailers to retain customers and increase revenues.

In September 2019, we released the “Automated Buy Process”. This connection platform allows suppliers to sign up for compliance service, select the appropriate tier, and purchase the monthly Tier 2 subscription in real time. This is anticipated to expedite supplier onboarding and facilitate faster payment.

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Basis of Financial Statement Presentation

The interim financial information of the Company as of December 31, 2019 and for the three and six months ended December 31, 2019 is unaudited, and the balance sheet as of June 30, 2019 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, 2019. 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 six months ended December 31, 2019 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2020. 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, 2019. 

Effective July 1, 2019, the Company adopted the requirements of Accounting Standards Update No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), as discussed further in Note 5. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q 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.

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 718, Compensation – Stock Compensation

From time to time, the Company issues shares of common stock as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to 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.

In prior periods through September 30, 2019, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

The Company adopted the standard during the second quarter of fiscal year 2020. This standard did not have a material impact on the Company’s condensed consolidated financial statements.

Adoption of ASU 2016-02 “Leases (Topic 842)”

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

Effective July 1, 2019, the Company adopted the requirements of Accounting Standards Update No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), as discussed further in Note 5. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q 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.

The Company adopted the requirements of ASU 2016-02 utilizing the modified retrospective method of transition to identified leases as of July 1, 2019 (the “effective date”). The recognition of additional operating lease liabilities was $82,517 for the current portion and $760,172 for the long-term portion and corresponding operating ROU assets were recorded in the amount of $842,689. This represents the operating lease existing as of the effective date which has a lease term of three years with the option for two additional three-year terms.

On June 21, 2018, the Company entered into an office lease at 5258 South Commerce Drive Suite D292, Murray, Utah 84107, providing for the lease of approximately 9,800 square feet, commencing on March 1, 2019. The monthly rent is $10,200. The initial term of the lease is three years. The Company has the option of renewing for an additional two three-year terms.

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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.

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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 number 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 – September 30, 2019	$4,513,131
Revenue recognized during the period but not billed	286,862
Amounts reclassified to accounts receivable	(449,471)
Other	-
Balance – December 31, 2019	$4,350,522(1)

(1) Contract asset balances for December 31, 2019 include a current and a long-term contract asset, $2,909,583, and $1,440,939, respectively.

The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:

	Contract liability
Balance – September 30, 2019	$1,955,425
Amounts billed but not recognized as revenue	(142,600)
Revenue recognized related to the opening balance of deferred revenue	649,099
Other	-
Balance – December 31, 2019	$2,461,924

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.

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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 Six Months Ended December 31, 2019
Geography	Subscription & support	Professional services	Transaction based	Total
North America	$8,029,104	$325,607	$1,256,763	9,611,474
International	25,942	-	-	25,942
Total	$8,055,046	$325,607	$1,256,763	$9,637,416

Earnings Per Share

Basic net income per share of Common Stock (“Basic EPS”) excludes dilution and is computed by dividing net income applicable to Common Stockholders by the weighted average number of Common Stock outstanding during the period. Diluted net income per share of Common Stock (“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 share of Common Stock.

The following table presents the components of the computation of basic and diluted earnings per share for the periods indicated:

	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2019	2018	2019	2018
Numerator
Net income applicable to common shareholders	$516,492	$1,538,997	$548,232	$2,358,795
Denominator
Weighted average common shares outstanding, basic	19,741,000	19,822,000	19,775,000	19,804,000
Warrants to purchase common stock	311,000	553,000	258,000	670,000
Weighted average common shares outstanding, diluted	20,052,000	20,375,000	20,033,000	20,474,000
Net income per share
Basic	$0.03	$0.08	$0.03	$0.12
Diluted	$0.03	$0.08	$0.03	$0.12

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 September 30, 2019	852,688	$5.44
Granted	-	-
Vested and issued	(369)	9.08
Forfeited	-	-
Outstanding at December 31, 2019	852,319	$5.43

As of December 31, 2019, there were 4,156 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 December 31, 2019, there was approximately $4.6 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 4.09 years.

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Warrants

 The following table summarizes information about warrants outstanding and exercisable at December 31, 2019:

Warrants Outstanding				Warrants Exercisable
at December 31, 2019				at December 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	3.10	$4.00	1,085,068	$4.00
$10.00	23,737	3.07	$10.00	23,737	$10.00
	1,108,805	3.10	$4.13	1,108,805	$4.13

During the quarter ended December 31, 2019, the Company’s Board of Directors approved the modification to extend the expiration dates of the Company's existing January 26, 2020 and February 5, 2020 warrants by an additional three years. Accordingly, all of the Company’s outstanding warrants are now set to expire in the quarter ending March 31, 2023.

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 (the “Board”), 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 December 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.

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NOTE 4.  RELATED PARTY TRANSACTIONS

During the six months ended December 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 Chair of the Board and controls FMI. The Company had payables of $0 and $316,539 to FMI at December 31, 2019 and June 30, 2019, respectively, under this Service Agreement. In addition, in July 2017, 20,000 shares of Series B-1 Preferred were paid to FMI in satisfaction of an accrued bonus payable to Mr. Fields.

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.

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 adopted the standard during the first quarter of fiscal year 2020. This standard did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04 “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which amends and simplifies the accounting standard for goodwill impairment. The new standard removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount a reporting unit’s carrying value exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. 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.

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 Quarterly Report on Form 10-Q 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.

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 that are reasonably likely to impact the Company’s financial statements.

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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, 2019 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. (“We”, “us”, “our” or 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 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 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 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 www.parkcitygroup.com, and ReposiTrak’s website address is www.repositrak.com.

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Recent Developments

In July 2019, we deployed InApp Pop Up and Online Chat. These applications provide account managers and sales staff with two additional real time means to facilitate farming of the network to cross sell with new and existing customers.

In August 2019, we released our new Out of Stock Management Solution (“OOS”). Eliminating out-of-stocks remains a critical challenge for food retailers as consumers turn to online retailers when their local store is out of a sought-after item. Previously, retailers had no viable solution to address this challenge. Our OOS is the industry’s first solution to address Direct Store Delivery out-of-stocks which enables retailers to retain customers and increase revenues.

In September 2019, we released the “Automated Buy Process”. This connection platform allows suppliers to sign up for compliance service, select the appropriate tier, and purchase the monthly Tier 2 subscription in real time. This is anticipated to expedite supplier on boarding and facilitate faster payment.

Results of Operations

Comparison of the Three Months Ended December 31, 2019 to the Three Months Ended December 31, 2018.

Revenue

	Fiscal Quarter Ended December 31,		Variance
	2019	2018	Dollars	Percent
Revenue	$4,837,332	$5,565,237	$(727,905)	-13%

Revenue was $4,837,332 and $5,565,237 for the three months ended December 31, 2019 and 2018, respectively, a 13% decrease. This decrease was primarily due to a decrease in transactional one-time revenue that occurred in 2018 that did not occur in 2019. The decrease in one-time revenue was partially offset by an increase in professional services and MarketPlace.

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 a certain percentage of customers that will require buying a particular service outright (i.e. a license). We will continue to make our best effort to reduce this non-recurring transactional revenue when unnecessary.

Cost of Services and Product Support

	Fiscal Quarter Ended December 31,		Variance
	2019	2018	Dollars	Percent
Cost of services and product support	$1,425,309	$1,270,659	$154,650	12%
Percent of total revenue	29%	23%

Cost of services and product support was $1,425,309 and $1,270,659 for the three months ended December 31, 2019 and 2018, respectively, a 12% increase. This increase is primarily the result of (i) higher expenses associated to MarketPlace; and (ii) an increase in hardware/software non-capitalized items required for updating our information systems security, maintaining equipment licensing and other database systems.

While 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 December 31,		Variance
	2019	2018	Dollars	Percent
Sales and marketing	$1,446,517	$1,139,855	$306,662	27%
Percent of total revenue	30%	20%

Sales and marketing expense was $1,446,517 and $1,139,855 for the three months ended December 31, 2019 and 2018, respectively, a 27% increase. This increase in sales and marketing expense is due to an increase in sales compensation.

While no assurances can be given, management currently expects sales and marketing expense to be relatively flat in absolute valuein subsequent periods, but to fall as a percentage of total revenue as we continue to executive our Success Team strategy.

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General and Administrative Expense

	Fiscal Quarter Ended December 31,		Variance
	2019	2018	Dollars	Percent
General and administrative	$1,114,251	$1,326,735	$(212,484)	-16%
Percent of total revenue	23%	24%

General and administrative expense was $1,114,251 and $1,326,735 for the three months ended December 31, 2019 and 2018, respectively, a 16% decrease. General and administrative expense decreased in part by lower professional service fees, lower overhead costs and overall lower travel expense.

While no assurances can be given, management currently expects general and administrative expense to remain flat in subsequent periods and therefore fall as a percentage of total revenue as we benefit from our investments in automation and process optimization.

Depreciation and Amortization Expense

	Fiscal Quarter Ended December 31,		Variance
	2019	2018	Dollars	Percent
Depreciation and amortization	$222,499	$144,030	$78,469	54%
Percent of total revenue	5%	3%

Depreciation and amortization expense was $222,499 and $144,030 for the three months ended December 31, 2019 and 2018, respectively, an increase of 54%. This increase is due to the expansion of new equipment for the Company’s information technology infrastructure, buildout of our corporate headquarters, and expansion of our data center completed in June 2019.

Other Income and Expense

	Fiscal Quarter Ended December 31,		Variance
	2019	2018	Dollars	Percent
Net other income (expense)	$49,940	$49,150	$790	2%
Percent of total revenue	1%	1%

Net other income was $49,940 for the three months ended December 31, 2019 compared to $49,150 for the three months ended December 31, 2018. Other income increased due to higher interest income resulting from an increase of total cash held in short term investments offset in part by the increase in interest expense associated with financing arrangements for equipment purchased under a lease arrangement with a bank.

Preferred Dividends

	Fiscal Quarter Ended December 31,		Variance
	2019	2018	Dollars	Percent
Preferred dividends	$146,611	$146,611	$-	-%
Percent of total revenue	3%	3%

Dividends accrued on the Company’s Series B-1 Preferred was $146,611 for the three months ended December 31, 2019, compared to dividends accrued on the Series B-1 Preferred of $146,611 for the three months ended December 31, 2018. Dividends remained flat in the comparable periods.

Comparison of the Six Months Ended December 31, 2019 to the Six Months Ended December 31, 2018.

Revenue

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Revenue	$9,637,416	$11,507,231	$(1,869,815)	-16%

Revenue was $9,637,416 and $11,507,231 for the six months ended December 31, 2019 and 2018, respectively, a 16% decrease. This was primarily due to a decrease in transactional one-time revenue that occurred in 2018 that did not occur in 2019. The decrease in one-time revenue was partially offset by an increase in professional services and MarketPlace revenue.

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Cost of Services and Product Support

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Cost of services and product support	$3,253,423	$2,999,185	$254,238	8%
Percent of total revenue	34%	26%

  Cost of services and product support was $3,253,423 and $2,999,185 for the six months ended December 31, 2019 and 2018, respectively, a 8% increase. This increase is primarily the result of (i) higher expenses associated to MarketPlace; and (ii) an increase in hardware/software non-capitalized items required for updating our information systems security, maintaining equipment licensing and other database systems. 

Sales and Marketing Expense

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Sales and marketing	$2,861,380	$3,047,879	$(186,499)	-6%
Percent of total revenue	30%	26%

Sales and marketing expense was $2,861,380 and $3,047,879 for the six months ended December 31, 2019 and 2018, respectively, a 6% decrease. This was due primarily to an decrease in variable compensation, a reduction in trade show expenses, and lower sales and marketing travel expense.

General and Administrative Expense

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
General and administrative	$2,336,462	$2,470,046	$(133,584)	-5%
Percent of total revenue	24%	21%

General and administrative expense was $2,336,462 and $2,470,046 for the six months ended December 31, 2019 and 2018, respectively, a 5% decrease.  General and administrative expense decreased year over year due to lower administrative costs, accounting and other professional service fees, and lower compliance related costs.

Depreciation and Amortization Expense

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Depreciation and amortization	$416,177	$289,405	$126,772	44%
Percent of total revenue	4%	3%

Depreciation and amortization expense were $416,177 and $289,405 for the six months ended December 31, 2019 and 2018, respectively, an increase of 44%.  This increase is due to the expansion of new equipment for the Company’s information technology infrastructure, buildout of our corporate headquarters, and expansion of our data center completed in June 2019.

Other Income and Expense

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Net other income (expense)	$112,073	$73,801	$38,272	52%
Percent of total revenue	1%	1%

  Net other income was $112,073 for the six months ended December 31, 2019 compared to net other expense of $73,801 for the six months ended December 31, 2018. Other income increased due to higher interest income resulting from an increase of total cash held in short term investments offset in part by the increase in interest expense associated with financing arrangements for equipment purchased under a lease arrangement with a bank. 

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Preferred Dividends

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Preferred dividends	$293,222	$293,222	$-	-%
Percent of total revenue	3%	3%

  Dividends accrued on the Company’s Series B-1 Preferred was $293,222 for the six months ended December 31, 2019 and 2018. Dividends remained flat in the comparable period.

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
	December 31, 2019	June 30, 2019	Dollars	Percent
Cash and cash equivalents	$18,968,775	$18,609,423	$359,352	2%

We have historically funded our operations with cash from operations, equity financings, and borrowings from the issuance of debt, including our existing line of credit with U.S. Bank N.A., which line of credit was amended during the quarter ended December 31, 2019 to, among other matters, extend the maturity date to December 31, 2020 and increase the interest rate in the event of a default to 5% per annum.

Cash was $18,968,775 and $18,609,423 at December 31, 2019 and June 30, 2019, respectively. This 2% increase is principally the result of collections.

Net Cash Flows from Operating Activities

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Cash provided by operating activities	$2,671,585	$1,830,582	$841,003	46%

Net cash provided by operating activities is summarized as follows:

	Six Months Ended December 31,
	2019	2018
Net income	$841,454	$2,652,017
Noncash expense and income, net	950,921	812,678
Net changes in operating assets and liabilities	879,210	(1,634,113)
	$2,671,585	$1,830,582

Net cash provided by operating activities increased 46% primarily as a result of collections on existing accounts, annual subscriptions paid in advance, and lower cash operating expense. Noncash expense increased by $138,243 in the six months ended December 31, 2019 compared to December 31, 2018 as a result of an decrease in stock compensation and accrued liabilities offset by an increase in depreciation, accounts payable and deferred revenue.

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Net Cash Flows Used in Investing Activities

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Cash used in investing activities	$(581,750)	$(3,547)	$578,203	16301%

Net cash used in investing activities for the six months ended December 31, 2019 was $581,750 compared to net cash used in investing activities of $3,547 for the six months ended December 31, 2018. This increase in cash used in investing activities for the six months ended December 31, 2019 was primarily due to maintenance on equipment capitalized over the remaining life of the asset.

Net Cash Flows from Financing Activities

	Six Months Ended December 31,		Variance
	2019	2018	Dollars	Percent
Cash used in financing activities	$(1,730,483)	$(37,192)	$1,693,291	4553%

Net cash used in financing activities totaled $1,730,483 for the six months ended December 31, 2019 as compared to cash used in financing activities of $37,192 for the six months ended December 31, 2018. The increase in net cash used in financing activities is primarily attributable to an increase in the amount used for the buyback of Common Stock, offset by the decrease in payments in notes payable and proceeds from employee stock plan.

Working Capital

At December 31, 2019, the Company had working capital of $16,968,878, as compared to working capital of $17,746,257 at June 30, 2019. This $777,379 decrease in working capital is primarily due to the buyback of Common Stock.

	As of December 31,	As of June 30,	Variance
	2019	2019	Dollars	Percent
Current assets	$26,437,093	$26,548,874	$(111,781)	NM%

Current assets as of December 31, 2019 totaled $26,437,093, a decrease of $111,781, as compared to $26,548,874 as of June 30, 2019. The decrease in current assets is primarily attributable to cash used to buyback Company Common Stock, a decrease in prepaid expense, and cash, offset in part by an increase in accounts receivable and short-term contract assets.

	As of December 31,	As of June 30,	Variance
	2019	2019	Dollars	Percent
Current liabilities	$9,468,215	$8,802,617	$665,598	8%

Current liabilities totaled $9,468,215 as of December 31, 2019 as compared to $8,802,617 as of June 30, 2019. The comparative increase in current liabilities is primarily attributable to a increase of $30,456 in accrued liabilities and accounts payable, an increase in operating lease liability of $83,562 due to accounting changes, and an increase in deferred revenue and current portion notes payable of $551,580.

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.

-18-

Contractual obligations

Total contractual obligations and commercial commitments as of December 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
Finance lease obligations	$1,070,175	$302,611	652,376	115,188	-
Operating lease obligation	822,502	122,400	244,800	244,800	210,502

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.

-19-

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, 2019.

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"), as discussed further in Note 5. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q 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.

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 December 31, 2019, the debt portfolio was composed of approximately 19% fixed rate debt and 81% variable rate debt.

	December 31, 2019 (Unaudited)	Percent of Total Debt
Fixed rate debt	$1,070,175	19%
Variable rate debt	4,660,000	81%
Total debt	$5,730,175	100%

-20-

The table that follows presents fair values of principal amounts and weighted average interest rates for our investment portfolio as of December 31, 2019:

Cash:	Aggregate Fair Value	Weighted Average Interest Rate
Cash	$18,968,775	2%

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 December 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.

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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, 2019.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchase Program

On May 9, 2019, our Board of Directors approved of the repurchase of up to $4 million of our Common Stock, which repurchases may be made in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices (the “Share Repurchase Program”). From time-to-time, our Board may authorize increases to our Share Repurchase Program. The total remaining authorization for future shares of Common Stock repurchases under our Share Repurchase Program was $2,162,558 as of December 31, 2019. Under the Share Repurchase Program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable laws and regulations, including Rule 12b-18 of the Exchange Act. The Share Repurchase Program expires 24 months following May 9, 2019, and it may be suspended for periods of time or discontinued at any time, at the Board’s discretion.

The following table provides information about the repurchases of our Common Stock registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), during the quarter ended December 31, 2019.

Period  (1)	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Amount Available for Future Share Repurchases Under the Plans or Programs
October 1, 2019 – December 31, 2019:	174,615	$4.80	342,170	$2,162,558

(1)

We close our books and records on the last calendar day of each month to align our financial closing with our business processes.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	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.
32.2	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

-23-

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:  February 10, 2020	By:	/s/ Randall K. Fields
		Randall K. Fields
		Chair of the Board and Chief Executive Officer (Principal Executive Officer)

	PARK CITY GROUP, INC.
Date:  February 10, 2020	By:	/s/ John R. Merrill
		John R. Merrill
		Chief Financial Officer (Principal Financial Officer & Principal Accounting Officer)

-24-

EX-31

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13A-14(A)

I, Randall K. Fields, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Park City Group, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    (a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

    (b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

    (c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    (d)  Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

    (a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

    (b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2020 By:  /s/  Randall K. Fields Randall K. Fields Chief Executive Officer and Chair of the Board
(Principal Executive Officer)

EX-31

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13A-14(A)

I, John R. Merrill, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Park City Group, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    (a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

    (b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

    (c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    (d)  Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

    (a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

    (b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2020 By: /s/ John R. Merrill John R. Merrill Chief Financial Officer (Principal Financial Officer & Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. Sec.1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Park City Group, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2019 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, Randall K. Fields, Principal Executive Officer of the Company, certifies, to my best knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 10, 2020 By:  /s/  Randall K. Fields Randall K. Fields Chief Executive Officer and Chair of the Board
(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. Sec.1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Park City Group, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2019 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, John R. Merrill, Principal Financial Officer of the Company, certifies, to my best knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 10, 2020 By: /s/John R. Merrill John R. Merrill Chief Financial Officer (Principal Financial Officer & Principal Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Dec. 31, 2019	Feb. 10, 2020
Document And Entity Information
Entity Registrant Name	PARK CITY GROUP INC
Entity Central Index Key	0000050471
Document Type	10-Q
Document Period End Date	Dec. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		19,579,989
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2020
Entity Interactive Data Current	Yes
Entity Incorporation State Country Code	NV
Entity File Number	001-34941
Title of 12b security	Common stock, par value $0.01 per share
Trading Symbol	PCYG
Security Exchange Name	NASDAQ

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash Flows from Operating Activities:
Net income	$ 841,454	$ 2,652,017
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	416,177	289,405
Amortization of operating right of use asset	40,239	0
Stock compensation expense	244,505	323,273
Bad debt expense	250,000	200,000
(Increase) decrease in:
Accounts receivables	(231,438)	208,051
Long-term receivables, prepaid and other assets	665,474	(1,892,581)
(Decrease) increase in:
Accounts payable	225,970	(652,283)
Operating Lease liability	(40,239)	0
Accrued liabilities	(284,418)	366,966
Deferred revenue	543,861	335,734
Net cash provided by operating activities	2,671,585	1,830,582
Cash Flows from Investing Activities:
Purchase of property and equipment	(581,750)	(3,547)
Net cash used in investing activities	(581,750)	(3,547)
Cash Flows from Financing Activities:
Net increase in lines of credit	0	(1,430,000)
Proceeds from exercise of warrants	0	164,977
Common Stock buyback/retirement	(1,355,037)	0
Proceeds from employee stock plan	63,523	0
Dividends paid	(293,222)	(146,611)
Payments on notes payable and capital leases	(145,747)	(1,485,578)
Net cash used in financing activities	(1,730,483)	(37,192)
Net increase in cash and cash equivalents	359,352	1,789,843
Cash and cash equivalents at beginning of period	18,609,423	14,892,439
Cash and cash equivalents at end of period	18,968,775	16,682,282
Supplemental disclosure of cash flow information:
Cash paid for income taxes	100,158	47,500
Cash paid for interest	16,042	5,622
Supplemental disclosure of non-cash investing and financing activities:
Common stock to pay accrued liabilities	155,325	253,017
Dividends accrued on preferred stock	293,222	293,222
Right of use asset	$ 842,689	$ 0

XML

EQUITY

6 Months Ended

Dec. 31, 2019

Equity [Abstract]

EQUITY

Restricted Stock Units	Restricted Stock Units			Weighted Average Grant Date Fair Value ($/share)
Outstanding at September 30, 2019		852,688		$	5.44
Granted		—
Vested and issued		(369	)		9.08
Forfeited		—
Outstanding at December 31, 2019		852,319		$	5.43

As of December 31, 2019, there were 4,156 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 December 31, 2019, there was approximately $4.6 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 4.09 years.

Warrants

 The following table summarizes information about warrants outstanding and exercisable at December 31, 2019:

Warrants Outstanding								Warrants Exercisable
at December 31, 2019								at December 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		3.10	$	4.00		1,085,068	$	4.00
$	10.00		23,737		3.07	$	10.00		23,737	$	10.00
			1,108,805		3.10	$	4.13		1,108,805	$	4.13

During the quarter ended December 31, 2019, the Company’s Board of Directors approved the modification to extend the expiration dates of the Company's existing January 26, 2020 and February 5, 2020 warrants by an additional three years. Accordingly, all of the Company’s outstanding warrants are now set to expire in the quarter ending March 31, 2023.

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 (the “Board”), 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 December 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.

XML

SUBSEQUENT EVENTS

6 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

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 that are reasonably likely to impact the Company’s financial statements.

XML

OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION (Details Narrative)	Dec. 31, 2019
PC Group Inc.
Ownership interest by parent	98.76%
Park City Group Inc.
Ownership interest by parent	100.00%
ReposiTrak
Ownership interest by parent	100.00%

XML

EQUITY (Details) - Restricted Stock	6 Months Ended
	Dec. 31, 2019 $ / shares shares
Restricted stock units
Outstanding, beginning of period | shares	852,688
Granted | shares	0
Vested and issued | shares	(369)
Forfeited | shares	0
Outstanding, end of period | shares	852,319
Outstanding, beginning of period | $ / shares	$ 5.44
Granted | $ / shares	0
Vested and issued | $ / shares	9.08
Forfeited | $ / shares	0
Outstanding, end of period | $ / shares	$ 5.43

XML

EQUITY (Details 1) - Warrant	6 Months Ended
	Dec. 31, 2019 $ / shares shares
Outstanding at end of period, shares | shares	1,108,805
Weighted average remaining contractual life (years), shares outstanding	3 years 1 month 6 days
Weighted average exercise price, shares outstanding | $ / shares	$ 4.13
Exercisable at end of period, shares | shares	1,108,805
Weighted average exercise price, shares exercisable | $ / shares	$ 4.13
$4.00
Outstanding at end of period, shares | shares	1,085,068
Weighted average remaining contractual life (years), shares outstanding	3 years 1 month 6 days
Weighted average exercise price, shares outstanding | $ / shares	$ 4.00
Exercisable at end of period, shares | shares	1,085,068
Weighted average exercise price, shares exercisable | $ / shares	$ 4.00
$10.00
Outstanding at end of period, shares | shares	23,737
Weighted average remaining contractual life (years), shares outstanding	3 years 25 days
Weighted average exercise price, shares outstanding | $ / shares	$ 10.00
Exercisable at end of period, shares | shares	23,737
Weighted average exercise price, shares exercisable | $ / shares	$ 10.00

XML

SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

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 718, Compensation – Stock Compensation

From time to time, the Company issues shares of common stock as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to 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.

In prior periods through September 30, 2019, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

The Company adopted the standard during the second quarter of fiscal year 2020. This standard did not have a material impact on the Company’s condensed consolidated financial statements.

Adoption of ASU 2016-02 “Leases (Topic 842)”

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

Effective July 1, 2019, the Company adopted the requirements of Accounting Standards Update No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), as discussed further in Note 5. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q 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.

The Company adopted the requirements of ASU 2016-02 utilizing the modified retrospective method of transition to identified leases as of July 1, 2019 (the “effective date”). The recognition of additional operating lease liabilities was $82,517 for the current portion and $760,172 for the long-term portion and corresponding operating ROU assets were recorded in the amount of $842,689. This represents the operating lease existing as of the effective date which has a lease term of three years with the option for two additional three-year terms.

On June 21, 2018, the Company entered into an office lease at 5258 South Commerce Drive Suite D292, Murray, Utah 84107, providing for the lease of approximately 9,800 square feet, commencing on March 1, 2019. The monthly rent is $10,200. The initial term of the lease is three years. The Company has the option of renewing for an additional two three-year terms.

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 number 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 – September 30, 2019	$	4,513,131
Revenue recognized during the period but not billed		286,862
Amounts reclassified to accounts receivable		(449,471	)
Other		—
Balance – December 31, 2019	$	4,350,522	(1)

(1) Contract asset balances for December 31, 2019 include a current and a long-term contract asset, $2,909,583, and $1,440,939, respectively.

The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:

	Contract liability
Balance – September 30, 2019	$	1,955,425
Amounts billed but not recognized as revenue		(142,600	)
Revenue recognized related to the opening balance of deferred revenue		649,099
Other		—
Balance – December 31, 2019	$	2,461,924

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 Six Months Ended December 31, 2019
Geography	Subscription & support		Professional services		Transaction based		Total
North America	$	8,029,104	$	325,607	$	1,256,763		9,611,474
International		25,942		—		—		25,942
Total	$	8,055,046	$	325,607	$	1,256,763	$	9,637,416

Earnings Per Share

Basic net income per share of Common Stock (“Basic EPS”) excludes dilution and is computed by dividing net income applicable to Common Stockholders by the weighted average number of Common Stock outstanding during the period. Diluted net income per share of Common Stock (“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 share of Common Stock.

The following table presents the components of the computation of basic and diluted earnings per share for the periods indicated:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2018		2019		2018
Numerator
Net income applicable to common shareholders	$	516,492	$	1,538,997	$	548,232	$	2,358,795
Denominator
Weighted average common shares outstanding, basic		19,741,000		19,822,000		19,775,000		19,804,000
Warrants to purchase common stock		311,000		553,000		258,000		670,000
Weighted average common shares outstanding, diluted		20,052,000		20,375,000		20,033,000		20,474,000
Net income per share
Basic	$	0.03	$	0.08	$	0.03	$	0.12
Diluted	$	0.03	$	0.08	$	0.03	$	0.12

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.

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Income Statement [Abstract]
Revenue	$ 4,837,332	$ 5,565,237	$ 9,637,416	$ 11,507,231
Operating expenses:
Cost of services and product support	1,425,309	1,270,659	3,253,423	2,999,185
Sales and marketing	1,446,517	1,139,855	2,861,380	3,047,879
General and administrative	1,114,251	1,326,735	2,336,462	2,470,046
Depreciation and amortization	222,499	144,030	416,177	289,405
Total operating expense	4,208,576	3,881,279	8,867,442	8,806,515
Income from operations	628,756	1,683,958	769,974	2,700,716
Other income (expense):
Interest income	65,982	54,773	148,713	89,897
Interest expense	(16,042)	(5,623)	(36,640)	(16,096)
Income before income taxes	678,696	1,733,108	882,047	2,774,517
(Provision) for income taxes	15,593	47,500	40,593	122,500
Net income	663,103	1,685,608	841,454	2,652,017
Dividends on preferred stock	146,611	146,611	293,222	293,222
Net income applicable to common shareholders	$ 516,492	$ 1,538,997	$ 548,232	$ 2,358,795
Weighted average shares, basic	19,741,000	19,822,000	19,775,000	19,804,000
Weighted average shares, diluted	20,052,000	20,375,000	20,033,000	20,474,000
Basic income per share	$ 0.03	$ 0.08	$ 0.03	$ 0.12
Diluted income per share	$ 0.03	$ 0.08	$ 0.03	$ 0.12

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

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 718, Compensation - Stock Compensation

Adoption of ASC 718, Compensation – Stock Compensation

From time to time, the Company issues shares of common stock as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to 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.

In prior periods through September 30, 2019, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

The Company adopted the standard during the second quarter of fiscal year 2020. This standard did not have a material impact on the Company’s condensed consolidated financial statements.

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

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

Effective July 1, 2019, the Company adopted the requirements of Accounting Standards Update No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), as discussed further in Note 5. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q 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.

The Company adopted the requirements of ASU 2016-02 utilizing the modified retrospective method of transition to identified leases as of July 1, 2019 (the “effective date”). The recognition of additional operating lease liabilities was $82,517 for the current portion and $760,172 for the long-term portion and corresponding operating ROU assets were recorded in the amount of $842,689. This represents the operating lease existing as of the effective date which has a lease term of three years with the option for two additional three-year terms.

On June 21, 2018, the Company entered into an office lease at 5258 South Commerce Drive Suite D292, Murray, Utah 84107, providing for the lease of approximately 9,800 square feet, commencing on March 1, 2019. The monthly rent is $10,200. The initial term of the lease is three years. The Company has the option of renewing for an additional two three-year terms.

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 number 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 – September 30, 2019	$4,513,131
Revenue recognized during the period but not billed	286,862
Amounts reclassified to accounts receivable	(449,471)
Other	-
Balance – December 31, 2019	$4,350,522(1)

(1) Contract asset balances for December 31, 2019 include a current and a long-term contract asset, $2,909,583, and $1,440,939, respectively.

The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:

	Contract liability
Balance – September 30, 2019	$1,955,425
Amounts billed but not recognized as revenue	(142,600)
Revenue recognized related to the opening balance of deferred revenue	649,099
Other	-
Balance – December 31, 2019	$2,461,924

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 Six Months Ended December 31, 2019
Geography	Subscription & support	Professional services	Transaction based	Total
North America	$8,029,104	$325,607	$1,256,763	9,611,474
International	25,942	-	-	25,942
Total	$8,055,046	$325,607	$1,256,763	$9,637,416

Earnings Per Share

Basic net income per share of Common Stock (“Basic EPS”) excludes dilution and is computed by dividing net income applicable to Common Stockholders by the weighted average number of Common Stock outstanding during the period. Diluted net income per share of Common Stock (“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 share of Common Stock.

The following table presents the components of the computation of basic and diluted earnings per share for the periods indicated:

	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2019	2018	2019	2018
Numerator
Net income applicable to common shareholders	$516,492	$1,538,997	$548,232	$2,358,795
Denominator
Weighted average common shares outstanding, basic	19,741,000	19,822,000	19,775,000	19,804,000
Warrants to purchase common stock	311,000	553,000	258,000	670,000
Weighted average common shares outstanding, diluted	20,052,000	20,375,000	20,033,000	20,474,000
Net income per share
Basic	$0.03	$0.08	$0.03	$0.12
Diluted	$0.03	$0.08	$0.03	$0.12

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.

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SIGNIFICANT ACCOUNTING POLICIES (Details)	6 Months Ended
	Dec. 31, 2019 USD ($)
Accounting Policies [Abstract]
Contract assets, beginning	$ 4,513,131
Revenue recognized during the period but not billed	286,862
Amounts reclassified to accounts receivable	(449,471)
Other	0
Contract assets, ending	4,350,522	[1]
Contract liability, beginning	1,955,425
Amounts billed but not recognized as revenue	(142,600)
Revenues recognized related to the opening balance of deferred revenue	649,099
Contract liability, ending	$ 2,461,924

[1] Contract asset balances for December 31, 2019 include a current and a long-term contract asset, $2,909,583, and $1,440,939, respectively.

XML

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
FMI [Member]
Due to related parties	$ 0	$ 316,539

XML

Consolidated Condensed Balance Sheets (Unaudited) - USD ($)	Dec. 31, 2019	Jun. 30, 2019
Current assets:
Cash	$ 18,968,775	$ 18,609,423
Receivables, net allowance for doubtful accounts of $396,895 and $145,825 at December 31, 2019 and June 30, 2018, respectively	3,974,207	3,878,658
Contract asset - unbilled current portion	2,909,583	3,023,694
Prepaid expense and other current assets	584,528	1,037,099
Total current assets	26,437,093	26,548,874
Property and equipment, net	3,252,560	2,972,257
Other assets:
Deposits, and other assets	22,414	17,146
Contract asset - unbilled long-term portion	1,440,939	1,659,110
Operating lease-right-of-use asset	822,502	0
Customer relationships	722,700	788,400
Goodwill	20,883,886	20,883,886
Capitalized software costs, net	21,834	70,864
Total other assets	23,914,275	23,419,406
Total assets	53,603,928	52,940,537
Current liabilities:
Accounts payable	756,264	530,294
Accrued liabilities	1,203,854	1,399,368
Contract liability - deferred revenue	2,461,924	1,917,787
Lines of credit	4,660,000	4,660,000
Operating lease liability - current	83,562	0
Current portion of notes payable	302,611	295,168
Total current liabilities	9,468,215	8,802,617
Long-term liabilities:
Operating lease liability - less current portion	738,940	0
Notes payable, less current portion	767,564	920,754
Total liabilities	10,974,719	9,723,371
Stockholders' equity:
Common stock, $0.01 par value, 50,000,000 shares authorized; 19,579,989 and 19,793,372 issued and outstanding at December 31, 2019 and June 30, 2018, respectively.	195,802	197,936
Additional paid-in capital	75,774,511	76,908,566
Accumulated deficit	(33,349,482)	(33,897,714)
Total stockholders' equity	42,629,209	43,217,166
Total liabilities and stockholders' equity	53,603,928	52,940,537
Series B Preferred Stock
Stockholders' equity:
Preferred Stock	6,254	6,254
Series B1 Preferred Stock
Stockholders' equity:
Preferred Stock	$ 2,124	$ 2,124

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Condensed Statement of Stockholders Equity - USD ($)	Series B Preferred Stock	Series B1 Preferred Stock	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning balance, shares at Jun. 30, 2018	625,375	212,402	19,773,549
Beginning balance, amount at Jun. 30, 2018	$ 6,254	$ 2,124	$ 197,738	$ 76,711,887	$ (37,213,677)	$ 39,704,326
Accrued compensation, shares			6,592
Accrued compensation, amount			$ 66	51,602		51,668
Employee stock plan, shares			12,333
Employee stock plan, amount			$ 123	82,755		82,878
Preferred dividends declared					(146,611)	(146,611)
Net income					966,409	966,409
Ending balance, shares at Sep. 30, 2018	625,375	212,402	19,792,474
Ending balance, amount at Sep. 30, 2018	$ 6,254	$ 2,124	$ 197,927	76,846,244	(36,393,879)	40,658,670
Accrued compensation, shares			21,207
Accrued compensation, amount			$ 212	211,476		211,688
Redemption				(93,217)		(93,217)
Preferred dividends declared					(146,611)	(146,611)
Exercise of Option/Warrant,shares			25,581
Exercise of Option/Warrant, amount			$ 256	164,471		(164,977)
Net income					1,685,608	1,685,608
Ending balance, shares at Dec. 31, 2018	625,375	212,402	19,839,262
Ending balance, amount at Dec. 31, 2018	$ 6,254	$ 2,124	$ 198,395	77,129,244	(34,854,882)	42,481,135
Beginning balance, shares at Jun. 30, 2019	625,375	212,402	19,793,372
Beginning balance, amount at Jun. 30, 2019	$ 6,254	$ 2,124	$ 197,936	76,908,566	(33,897,714)	43,217,166
Accrued compensation, shares			14,542
Accrued compensation, amount			$ 145	77,742		77,887
Employee stock plan, shares			13,274
Employee stock plan, amount			$ 133	63,390		63,523
Stock buyback, shares			(79,954)
Stock buyback, amount			$ (799)	(516,560)		(517,359)
Preferred dividends declared					(146,611)	(146,611)
Net income					178,351	178,351
Ending balance, shares at Sep. 30, 2019	625,375	212,402	19,741,234
Ending balance, amount at Sep. 30, 2019	$ 6,254	$ 2,124	$ 197,415	76,533,138	(33,865,974)	42,872,957
Accrued compensation, shares			13,370
Accrued compensation, amount			$ 134	77,304		77,438
Stock buyback, shares			(174,615)
Stock buyback, amount			$ (1,747)	(835,931)		(837,678)
Preferred dividends declared					(146,611)	(146,611)
Net income					663,103	663,103
Ending balance, shares at Dec. 31, 2019	625,375	212,402	19,579,989
Ending balance, amount at Dec. 31, 2019	$ 6,254	$ 2,124	$ 195,802	$ 75,774,511	$ (33,349,482)	$ 42,629,209

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SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Net income applicable to common shareholders	$ 516,492	$ 1,538,997	$ 548,232	$ 2,358,795
Weighted average common shares outstanding, basic	19,741,000	19,822,000	19,775,000	19,804,000
Weighted average common shares outstanding, diluted	20,052,000	20,375,000	20,033,000	20,474,000
Net income per share, basic	$ 0.03	$ 0.08	$ 0.03	$ 0.12
Net income per share, diluted	$ 0.03	$ 0.08	$ 0.03	$ 0.12

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RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

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.

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 adopted the standard during the first quarter of fiscal year 2020. This standard did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04 “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which amends and simplifies the accounting standard for goodwill impairment. The new standard removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount a reporting unit’s carrying value exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. 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.

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 Quarterly Report on Form 10-Q 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.

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EQUITY (Tables)

6 Months Ended

Dec. 31, 2019

Equity [Abstract]

Restricted stock

Restricted Stock Units	Restricted Stock Units	Weighted Average Grant Date Fair Value ($/share)
Outstanding at September 30, 2019	852,688	$5.44
Granted	-
Vested and issued	(369)	9.08
Forfeited	-
Outstanding at December 31, 2019	852,319	$5.43

Warrants

Warrants Outstanding								Warrants Exercisable
at December 31, 2019								at December 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		3.10	$	4.00		1,085,068	$	4.00
$	10.00		23,737		3.07	$	10.00		23,737	$	10.00
			1,108,805		3.10	$	4.13		1,108,805	$	4.13

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Consolidated Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Dec. 31, 2019	Jun. 30, 2019
Stockholders' equity:
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, authorized	30,000,000	30,000,000
Common stock, par value	$ .01	$ .01
Common stock, authorized	50,000,000	50,000,000
Common stock, issued	19,579,989	19,793,372
Common stock, outstanding	19,579,989	19,793,372
Series B Preferred Stock
Stockholders' equity:
Preferred stock, authorized	700,000	700,000
Preferred stock, issued	625,375	625,375
Preferred stock, outstanding	625,375	625,375
Series B1 Preferred Stock
Stockholders' equity:
Preferred stock, authorized	550,000	550,000
Preferred stock, issued	212,402	212,402
Preferred stock, outstanding	212,402	212,402

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OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION

6 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION

Overview

Park City Group, Inc. (“We”, “us”, “our” or 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 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 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 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 www.parkcitygroup.com, and ReposiTrak’s website address is www.repositrak.com.

Recent Developments

In July 2019, we deployed InApp Pop Up and Online Chat. These applications provide account managers and sales staff with two additional real time means to facilitate farming of the network to cross sell with new and existing customers.

In August 2019, we released our new Out of Stock Management Solution (“OOS”). Eliminating out-of-stocks remains a critical challenge for food retailers as consumers turn to online retailers when their local store is out of a sought-after item. Previously, retailers had no viable solution to address this challenge. Our OOS is the industry’s first solution to address Direct Store Delivery out-of-stocks which enables retailers to retain customers and increase revenues.

In September 2019, we released the “Automated Buy Process”. This connection platform allows suppliers to sign up for compliance service, select the appropriate tier, and purchase the monthly Tier 2 subscription in real time. This is anticipated to expedite supplier onboarding and facilitate faster payment.

Basis of Financial Statement Presentation

The interim financial information of the Company as of December 31, 2019 and for the three and six months ended December 31, 2019 is unaudited, and the balance sheet as of June 30, 2019 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, 2019. 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 six months ended December 31, 2019 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2020. 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, 2019. 

Effective July 1, 2019, the Company adopted the requirements of Accounting Standards Update No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), as discussed further in Note 5. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q 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.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

During the six months ended December 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 Chair of the Board and controls FMI. The Company had payables of $0 and $316,539 to FMI at December 31, 2019 and June 30, 2019, respectively, under this Service Agreement. In addition, in July 2017, 20,000 shares of Series B-1 Preferred were paid to FMI in satisfaction of an accrued bonus payable to Mr. Fields.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Contract assets and liabilities

	Contract assets
Balance – September 30, 2019	$	4,513,131
Revenue recognized during the period but not billed		286,862
Amounts reclassified to accounts receivable		(449,471	)
Other		—
Balance – December 31, 2019	$	4,350,522	(1)

(1) Contract asset balances for December 31, 2019 include a current and a long-term contract asset, $2,909,583, and $1,440,939, respectively.

The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:

	Contract liability
Balance – September 30, 2019	$	1,955,425
Amounts billed but not recognized as revenue		(142,600	)
Revenue recognized related to the opening balance of deferred revenue		649,099
Other		—
Balance – December 31, 2019	$	2,461,924

Disaggregation of revenues

	For the Six Months Ended December 31, 2019
Geography	Subscription & support		Professional services		Transaction based		Total
North America	$	8,029,104	$	325,607	$	1,256,763		9,611,474
International		25,942		—		—		25,942
Total	$	8,055,046	$	325,607	$	1,256,763	$	9,637,416

Earnings per share

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2018		019		2018
Numerator
Net income applicable to common shareholders	$	516,492	$	1,538,997	$	548,232	$	2,358,795
Denominator
Weighted average common shares outstanding, basic		19,741,000		19,822,000		19,775,000		19,804,000
Warrants to purchase common stock		311,000		553,000		258,000		670,000
Weighted average common shares outstanding, diluted		20,052,000		20,375,000		20,033,000		20,474,000
Net income per share
Basic	$	0.03	$	0.08	$	0.03	$	0.12
Diluted	$	0.03	$	0.08	$	0.03	$	0.12

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SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenue	$ 4,837,332	$ 5,565,237	$ 9,637,416	$ 11,507,231
Subscription & support
Revenue			8,055,046
Professional services
Revenue			325,607
Transaction based
Revenue			1,256,763
North America
Revenue			9,611,474
North America | Subscription & support
Revenue			8,029,104
North America | Professional services
Revenue			325,607
North America | Transaction based
Revenue			1,256,763
International
Revenue			25,942
International | Subscription & support
Revenue			25,942
International | Professional services
Revenue			0
International | Transaction based
Revenue			$ 0

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EQUITY (Details Narrative)	6 Months Ended
	Dec. 31, 2019 USD ($)
Equity [Abstract]
Unrecognized stock-based compensation expense	$ 4,600,000
Unrecognized stock-based compensation expense, recognition period	4 years 1 month 2 days