☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2020
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to
_________.
|
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)
|
Large accelerated filer
|
[ ]
|
Accelerated filer
|
[ ]
|
Non-accelerated filer
|
[X]
|
Smaller reporting company
|
[X]
|
|
|
Emerging growth company
|
[ ]
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which
registered
|
Common
stock, par value $0.01 per share
|
PCYG
|
Nasdaq
Capital Market
|
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Page
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21
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|
|
|
Assets
|
September
30,
2020
|
June
30,
2020
|
Current
Assets
|
|
|
Cash
|
$21,158,716
|
$20,345,330
|
Receivables, net of
allowance for doubtful accounts of $376,954 and $251,954 at September 30, 2020 and June 30,
2020, respectively
|
3,895,158
|
4,007,316
|
Contract asset
– unbilled current portion
|
2,899,819
|
2,300,754
|
Prepaid expense and
other current assets
|
594,245
|
495,511
|
|
|
|
Total
Current Assets
|
28,547,938
|
27,148,911
|
|
|
|
Property
and equipment, net
|
2,872,805
|
3,003,402
|
|
|
|
Other
Assets:
|
|
|
Deposits, and other
assets
|
22,414
|
22,414
|
Prepaid expense
– less current portion
|
62,919
|
77,030
|
Contract asset
– unbilled long-term portion
|
542,170
|
838,726
|
Operating lease
– right-of-use asset
|
760,172
|
781,137
|
Customer
relationships
|
624,150
|
657,000
|
Goodwill
|
20,883,886
|
20,883,886
|
Capitalized
software costs, net
|
9,269
|
18,539
|
|
|
|
Total
Other Assets
|
22,904,980
|
23,278,732
|
|
|
|
Total
Assets
|
$54,325,723
|
$53,431,045
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$465,012
|
$407,497
|
Accrued
liabilities
|
1,712,342
|
1,123,528
|
Contract liability
–
deferred revenue
|
1,951,467
|
1,845,347
|
Lines of
credit
|
5,280,000
|
4,660,000
|
Operating lease
liability –
current
|
86,853
|
85,767
|
Current portion of
notes payable
|
-
|
310,242
|
Current portion of
paycheck protection program loans
|
668,457
|
479,866
|
|
|
|
Total
current liabilities
|
10,164,131
|
8,912,247
|
|
|
|
Long-term
liabilities
|
|
|
Operating lease
liability – less current portion
|
673,318
|
695,369
|
Notes payable
– less
current portion
|
-
|
610,512
|
Paycheck protection
program loans
|
440,893
|
629,484
|
|
|
|
Total
liabilities
|
11,278,342
|
10,847,612
|
|
|
|
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 September 30, 2020 and June 30, 2020,
respectively
|
6,254
|
6,254
|
Series
B-1 Preferred, 550,000 shares authorized; 212,402 shares issued and
outstanding at September 30, 2020 and June 30, 2020,
respectively
|
2,124
|
2,124
|
Common Stock, $0.01
par value, 50,000,000 shares authorized; 19,499,767 and
19,484,485 issued and
outstanding at September 30, 2020 and June 30, 2020,
respectively
|
195,000
|
194,847
|
Additional paid-in
capital
|
75,326,677
|
75,271,097
|
Accumulated
deficit
|
(32,482,674)
|
(32,890,889)
|
|
|
|
Total
stockholders’ equity
|
43,047,381
|
42,583,433
|
|
|
|
Total
liabilities and stockholders’ equity
|
$54,325,723
|
$53,431,045
|
|
Three Months Ended
September 30,
|
|
|
2020
|
2019
|
|
|
|
Revenue:
|
$5,225,402
|
$4,800,084
|
|
|
|
Operating
expense:
|
|
|
Cost
of services and product support
|
1,980,957
|
1,828,114
|
Sales
and marketing
|
1,283,041
|
1,414,863
|
General
and administrative
|
1,081,925
|
1,222,212
|
Depreciation
and amortization
|
248,500
|
193,677
|
Total
operating expense
|
4,594,423
|
4,658,866
|
|
|
|
Income
from operations
|
630,979
|
141,218
|
|
|
|
Other
income (expense):
|
|
|
Interest
income
|
34,341
|
82,731
|
Interest
expense
|
(70,545)
|
(20,598)
|
Unrealized gain
(loss) on short term investments
|
(16,263)
|
-
|
|
|
|
Income
before income taxes
|
578,512
|
203,351
|
|
|
|
(Provision)
for income taxes:
|
(23,686)
|
(25,000)
|
Net income
|
554,826
|
178,351
|
|
|
|
Dividends
on preferred stock
|
(146,611)
|
(146,611)
|
|
|
|
Net income applicable to Common Stockholders
|
$408,215
|
$31,740
|
|
|
|
Weighted
average shares, basic
|
19,489,000
|
19,811,000
|
Weighted
average shares, diluted
|
19,642,000
|
20,122,000
|
Basic
income per share
|
$0.02
|
$0.00
|
Diluted
income per share
|
$0.02
|
$0.00
|
|
Three Months Ended
September 30,
|
|
|
2020
|
2019
|
Cash
flows from operating activities:
|
|
|
Net
income
|
$554,826
|
$178,351
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
|
|
Depreciation
and amortization
|
248,500
|
193,677
|
Amortization
of operating right-of-use asset
|
20,965
|
-
|
Stock
compensation expense
|
93,432
|
119,567
|
Bad
debt expense
|
125,000
|
125,000
|
(Increase)
decrease in:
|
|
|
Accounts
receivables
|
(1,154,077)
|
(321,246)
|
Long-term
receivables, prepaid and other assets
|
691,245
|
730,563
|
Right-of-use
asset
|
-
|
(842,689)
|
(Decrease)
increase in:
|
|
|
Accounts
payable
|
57,515
|
(89,198)
|
Accrued
liabilities
|
501,063
|
(261,758)
|
Operating
lease liability
|
(20,965)
|
842,689
|
Deferred
revenue
|
105,844
|
37,638
|
Net cash provided by operating activities
|
1,223,348
|
712,594
|
|
|
|
Cash
flows from investing activities:
|
|
|
Purchase
of property and equipment
|
(12,925)
|
(353,706)
|
Net cash used in investing activities
|
(12,925)
|
(353,706)
|
|
|
|
Cash
flows financing activities:
|
|
|
Net
increase in lines of credit
|
620,000
|
-
|
Common
Stock buyback/retirement
|
-
|
(517,360)
|
Proceeds
from employee stock plans
|
50,328
|
63,523
|
Dividends
paid
|
(146,611)
|
(146,611)
|
Payments
on notes payable and capital leases
|
(920,754)
|
(72,420)
|
Net cash used in financing
activities
|
(397,037)
|
(672,868)
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
813,386
|
(313,980)
|
|
|
|
Cash
and cash equivalents at beginning of period
|
20,345,330
|
18,609,423
|
Cash and cash equivalents at end of period
|
$21,158,716
|
$18,295,443
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
paid for income taxes
|
$25,899
|
$79,073
|
Cash
paid for interest
|
$70,545
|
$20,598
|
Cash
paid for operating leases
|
$30,600
|
$30,600
|
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
Common
Stock to pay accrued liabilities
|
$5,405
|
$77,888
|
Dividends
accrued on preferred stock
|
$146,611
|
$146,611
|
|
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,
2020
|
625,375
|
$6,254
|
212,402
|
$2,124
|
19,484,485
|
$194,847
|
$75,271,097
|
$(32,890,889)
|
$42,583,433
|
|
|
|
|
|
|
|
|
|
|
Stock issued
for:
|
|
|
|
|
|
|
|
|
|
Accrued
compensation
|
-
|
-
|
-
|
-
|
1,302
|
13
|
5,392
|
-
|
5,405
|
Employee stock
plan
|
-
|
-
|
-
|
-
|
13,980
|
140
|
50,188
|
-
|
50,328
|
Stock
buyback
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Preferred
Dividends-Declared
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(146,611)
|
(146,611)
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
554,826
|
554,826
|
Balance, September
30, 2020
|
625,375
|
$6,254
|
212,402
|
$2,124
|
19,499,767
|
$195,000
|
$75,326,677
|
$(32,482,674)
|
$43,047,381
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Contract assets
|
Balance –
June 30, 2020
|
$3,139,480
|
Revenue recognized
during the period but not billed
|
803,660
|
Amounts
reclassified to accounts receivable
|
(501,151)
|
Other
|
-
|
Balance –
September 30, 2020
|
$3,441,989(1)
|
(1)
|
Contract asset balances for September 30, 2020 include a current
and a long-term contract asset, $2,899,819, and $542,170,
respectively.
|
|
Contract liability
|
Balance
– June 30, 2020
|
$1,845,347
|
Amounts
billed but not recognized as revenue
|
1,230,106
|
Revenue
recognized related to the opening balance of deferred
revenue
|
(1,123,986)
|
Other
|
-
|
Balance
– September 30, 2020
|
$1,951,467
|
|
For the Three Months Ended September 30, 2020
|
|||
Geography
|
Subscription
& support
|
Professional
services
|
Transaction
based
|
Total
|
North
America
|
$4,086,790
|
$48,769
|
$1,089,843
|
$5,225,402
|
International
|
-
|
-
|
-
|
-
|
Total
|
$4,086,790
|
$48,769
|
$1,089,843
|
$5,225,402
|
|
Three Months Ended
September 30,
|
|
|
2020
|
2019
|
Numerator
|
|
|
Net
income applicable to Common Stockholders
|
$408,215
|
$31,740
|
|
|
|
Denominator
|
|
|
Weighted
average Common Stock outstanding, basic
|
19,489,000
|
19,811,000
|
Warrants
to purchase Common Stock
|
153,000
|
311,000
|
|
|
|
Weighted
average Common Stock outstanding, diluted
|
19,642,000
|
20,122,000
|
|
|
|
Net
income per share
|
|
|
Basic
|
$0.02
|
$0.00
|
Diluted
|
$0.02
|
$0.00
|
Restricted Stock Units
|
Restricted
Stock Units
|
Weighted Average Grant Date Fair Value
($/share)
|
|
|
|
Outstanding
at June 30, 2020
|
837,424
|
$5.36
|
Granted
|
-
|
-
|
Vested
and issued
|
(412)
|
12.15
|
Forfeited
|
-
|
-
|
Outstanding
at September 30, 2020
|
837,012
|
$5.35
|
Warrants
Outstanding
|
Warrants
Exercisable
|
||||
at
September 30, 2020
|
at
September 30, 2020
|
||||
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
|
2.35
|
$4.00
|
1,085,068
|
$4.00
|
$10.00
|
23,737
|
2.32
|
$10.00
|
23,737
|
$10.00
|
|
1,108,805
|
2.35
|
$4.13
|
1,108,805
|
$4.13
|
|
Fiscal Quarter Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Revenue
|
$5,225,402
|
$4,800,084
|
$425,318
|
9%
|
|
Fiscal Quarter Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Cost
of services and product support
|
$1,980,957
|
$1,828,114
|
$152,843
|
8%
|
Percent
of total revenue
|
38%
|
38%
|
|
|
|
Fiscal Quarter Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Sales
and marketing
|
$1,283,041
|
$1,414,863
|
$(131,822)
|
-9%
|
Percent
of total revenue
|
25%
|
29%
|
|
|
|
Fiscal Quarter Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
General
and administrative
|
$1,081,925
|
$1,222,212
|
$(140,287)
|
-11%
|
Percent
of total revenue
|
21%
|
25%
|
|
|
|
Fiscal Quarter Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Depreciation
and amortization
|
$248,500
|
$193,677
|
$54,823
|
28%
|
Percent
of total revenue
|
5%
|
4%
|
|
|
|
Fiscal Quarter Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Net
other income (expense)
|
$(52,467)
|
$62,133
|
$(114,600)
|
-184%
|
Percent
of total revenue
|
-1%
|
1%
|
|
|
|
Fiscal Quarter Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Preferred
dividends
|
$146,611
|
$146,611
|
$-
|
-%
|
Percent
of total revenue
|
3%
|
3%
|
|
|
|
As of
|
Variance
|
||
|
September 30,
2020
|
June 30,
2020
|
Dollars
|
Percent
|
Cash
and cash equivalents
|
$21,158,716
|
$20,345,330
|
$813,386
|
4%
|
|
Three Months Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Cash
provided by operating activities
|
$1,223,348
|
$712,594
|
$510,754
|
72%
|
|
Three Months Ended
September 30,
|
|
|
2020
|
2019
|
Net
income
|
$554,826
|
$178,351
|
Noncash
expense and income, net
|
487,897
|
438,244
|
Net
changes in operating assets and liabilities
|
180,626
|
95,999
|
|
1,223,349
|
$712,594
|
|
Three Months Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Cash
used in investing activities
|
$(12,925)
|
$(353,706)
|
$340,781
|
-96%
|
|
Three Months Ended
September 30,
|
Variance
|
||
|
2020
|
2019
|
Dollars
|
Percent
|
Cash
used in financing activities
|
$(397,037)
|
$(672,868)
|
$275,831
|
-41%
|
|
As of
September 30,
|
As of
June 30,
|
Variance
|
|
|
2020
|
2020
|
Dollars
|
Percent
|
Current
assets
|
$28,547,938
|
$27,148,911
|
$1,399,027
|
5%
|
|
As of
September 30,
|
As of
June 30,
|
Variance
|
|
|
2020
|
2020
|
Dollars
|
Percent
|
Current
liabilities
|
$10,164,131
|
$8,912,247
|
$1,251,884
|
14%
|
|
Payment Due by Year
|
||||
|
Total
|
Less than 1 Year
|
1-3 Years
|
3-5 Years
|
More than 5 Years
|
Finance
lease obligations
|
$-
|
$-
|
-
|
-
|
-
|
Operating
lease obligation
|
760,171
|
122,400
|
244,800
|
244,800
|
148,171
|
|
September 30,
2020
(Unaudited)
|
Percent of
Total Debt
|
Fixed
rate debt
|
$1,109,350
|
17%
|
Variable
rate debt
|
5,280,000
|
83%
|
Total
debt
|
$6,389,350
|
100%
|
Cash:
|
Aggregate
Fair Value
|
Weighted Average
Interest Rate
|
Cash
|
$21,158,716
|
1.93%
|
(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
(the "Exchange
Act"), as of September 30, 2020
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
Exchange Act is recorded, processed, summarized and reported within
the time periods specified in SEC 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.
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
101.INS
|
|
XBRL
Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
PARK CITY GROUP, INC.
|
|
|
|
|
|
|
Date: November 16, 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: November 16, 2020
|
By:
|
/s/ John R. Merrill
|
|
|
|
John R. Merrill
|
|
|
|
Chief Financial Officer
(Principal Financial Officer & Principal Accounting
Officer)
|
|
(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
|
(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: November 16, 2020
|
By:
|
/s/ Randall
K. Fields
Randall K. Fields
Chief Executive Officer and Chair of the Board
(Principal Executive Officer)
|
(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
|
(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: November 16,
2020
|
By:
|
/s/
John R. Merrill
John R. Merrill
Chief Financial Officer
(Principal Financial Officer & Principal Accounting
Officer)
|
Date: November 16,
2020
|
By:
|
/s/ Randall
K. Fields
Randall K. Fields
Chief Executive Officer and Chair of the Board
(Principal Executive Officer)
|
Date: November 16,
2020
|
By:
|
/s/John
R. Merrill
John R. Merrill
Chief Financial Officer
(Principal Financial Officer & Principal Accounting
Officer)
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Nov. 16, 2020 |
|
Cover [Abstract] | ||
Entity Registrant Name | PARK CITY GROUP INC | |
Entity Central Index Key | 0000050471 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | NV | |
Entity File Number | 001-34941 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 19,528,907 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
Consolidated Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($) |
Sep. 30, 2020 |
Jun. 30, 2020 |
---|---|---|
Current assets: | ||
Receivables, net of allowance | $ 376,954 | $ 251,954 |
Stockholders' equity: | ||
Preferred stock, par value | $ .01 | $ 0.01 |
Preferred stock, authorized | 30,000,000 | 30,000,000 |
Common stock, par value | $ .01 | $ 0.01 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 19,499,767 | 19,484,485 |
Common stock, outstanding | 19,499,767 | 19,484,485 |
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 |
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, 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 |
Beginning balance, shares at Jun. 30, 2020 | 625,375 | 212,402 | 19,484,485 | |||
Beginning balance, amount at Jun. 30, 2020 | $ 6,254 | $ 2,124 | $ 194,847 | 75,271,097 | (32,890,889) | 42,583,433 |
Accrued compensation, shares | 1,302 | |||||
Accrued compensation, amount | $ 13 | 5,392 | 5,405 | |||
Employee stock plan, shares | 13,980 | |||||
Employee stock plan, amount | $ 140 | 50,188 | 50,328 | |||
Preferred dividends-declared | (146,611) | (146,611) | ||||
Net income | 554,826 | 554,826 | ||||
Ending balance, shares at Sep. 30, 2020 | 625,375 | 212,402 | 19,499,767 | |||
Ending balance, amount at Sep. 30, 2020 | $ 6,254 | $ 2,124 | $ 195,000 | $ 75,326,677 | $ (32,482,674) | $ 43,047,381 |
OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION |
3 Months Ended |
---|---|
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION | Overview
Park City Group, Inc., a Nevada corporation (“Park City Group”, “We”, “us”, “our” or the “Company”) is a Software-as-a-Service (“SaaS”) provider, and the parent company of ReposiTrak, Inc., a Utah corporation (“ReposiTrak”) 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 (“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 (“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 (“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 Compliance and Food Safety 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) (“PCG Utah”); Park City Group, Inc., a Delaware corporation (100% owned) (“PCG Delaware”); and ReposiTrak (100% owned) (collectively, the “Subsidiaries”). All intercompany transactions and balances have been eliminated in the Company’s consolidated financial statements, which contain the operating results of the operations of PCG Delaware and ReposiTrak. Park City Group 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
COVID-19
There are many uncertainties regarding COVID-19, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it will impact its services, customers, employees, vendors, and business partners. While the pandemic did not materially adversely affect the Company’s financial results and business operations during the quarter ended September 30, 2020 or during the fiscal year ended June 30, 2020, we are unable to predict the impact that COVID-19 will have on its future financial position and operating results due to numerous uncertainties. The Company expects to continue to assess the evolving impact of COVID-19 and intends to make adjustments to its responses accordingly.
Basis of Financial Statement Presentation
The interim financial information of the Company as of September 30, 2020 and for the three months ended September 30, 2020 is unaudited, and the balance sheet as of June 30, 2020 is derived from audited financial statements. The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") 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. GAAP. 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, 2020. In the opinion of management, all adjustments necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for the three months ended September 30, 2020 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2021. 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, 2020.
|
SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. GAAP 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 U.S. Securities and Exchange Commission (“SEC”) 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.
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:
The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:
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:
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:
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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EQUITY |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY |
As of September 30, 2020, there were 12,132 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 September 30, 2020, there was approximately $4.5 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted average period of 3.22 years.
Warrants
The following table summarizes information about warrants outstanding and exercisable at September 30, 2020:
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 6, 2020 warrants by an additional three years. Accordingly, all 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, par value $0.01 per share ("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 September 30, 2020, 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 in cash, or 9% if paid in additional shares of Series B Preferred (“PIK Shares”), with the form of dividend payment to be determined by the Company.
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) offers the flexibility of a paid-in-kind (“PIK”) payment option, and (iii) 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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RELATED PARTY TRANSACTIONS |
3 Months Ended |
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Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | During the three months ended September 30, 2020, 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, FMI’s designated executive, who also serves as the Company’s Chair of the Board of Directors, controls FMI. The Company had no payables to FMI at September 30, 2020 and June 30, 2020, respectively, under the Service Agreement.
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RECENT ACCOUNTING PRONOUNCEMENTS |
3 Months Ended |
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Sep. 30, 2020 | |
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 required 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 Company is a customer in a hosting arrangement and may enter into new arrangements in the future. 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.
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. 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.
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. 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. The Company adopted the standard during the fourth quarter of fiscal year 2020. This standard did not have a material impact on the Company’s condensed 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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SUBSEQUENT EVENTS |
3 Months Ended |
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Sep. 30, 2020 | |
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.
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SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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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.
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Use of Estimates | The preparation of consolidated financial statements in conformity with U.S. GAAP 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 U.S. Securities and Exchange Commission (“SEC”) 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.
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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.
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.
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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:
The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:
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:
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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:
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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 (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract assets and liabilities |
The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:
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Disaggregation of revenues |
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Earnings per share |
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EQUITY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock |
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Warrants |
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OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION (Details Narrative) |
3 Months Ended |
---|---|
Sep. 30, 2020 | |
Incorporated state | NV |
PC Group Inc. | |
Incorporated state | UT |
Ownership interest by parent | 98.76% |
Park City Group Inc. | |
Incorporated state | DE |
Ownership interest by parent | 10.00% |
ReposiTrak | |
Ownership interest by parent | 10.00% |
SIGNIFICANT ACCOUNTING POLICIES (Details) |
3 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2020
USD ($)
| ||||
Accounting Policies [Abstract] | ||||
Contract assets, beginning | $ 3,139,480 | |||
Revenue recognized during the period but not billed | 803,600 | |||
Amounts reclassified to accounts receivable | (501,151) | |||
Other | 0 | |||
Contract assets, ending | 3,441,989 | [1] | ||
Contract liability, beginning | 1,845,347 | |||
Amounts billed but not recognized as revenue | 1,230,106 | |||
Revenues recognized related to the opening balance of deferred revenue | (1,123,986) | |||
Other | 0 | |||
Contract liability, ending | $ 1,951,467 | |||
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SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) |
3 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenue | $ 5,225,402 | $ 4,800,084 |
Subscription & support | ||
Revenue | 4,086,790 | |
Professional services | ||
Revenue | 48,769 | |
Transaction based | ||
Revenue | 1,089,843 | |
North America | ||
Revenue | 5,225,402 | |
North America | Subscription & support | ||
Revenue | 4,086,790 | |
North America | Professional services | ||
Revenue | 48,769 | |
North America | Transaction based | ||
Revenue | 1,089,843 | |
International | ||
Revenue | 0 | |
International | Subscription & support | ||
Revenue | 0 | |
International | Professional services | ||
Revenue | 0 | |
International | Transaction based | ||
Revenue | $ 0 |
SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) |
3 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
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Accounting Policies [Abstract] | ||
Net income applicable to common shareholders | $ 408,215 | $ 31,740 |
Weighted average common shares outstanding, basic | 19,489,000 | 19,811,000 |
Warrants to purchase common stock | 153,000 | 311,000 |
Weighted average common shares outstanding, diluted | 19,642,000 | 20,122,000 |
Net income per share, basic | $ 0.02 | $ 0 |
Net income per share, diluted | $ 0.02 | $ 0 |
EQUITY (Details) - Restricted Stock |
3 Months Ended |
---|---|
Sep. 30, 2020
$ / shares
shares
| |
Restricted stock units | |
Outstanding, beginning of period | shares | 837,424 |
Granted | shares | 0 |
Vested and issued | shares | (412) |
Forfeited | shares | 0 |
Outstanding, end of period | shares | 837,012 |
Outstanding, beginning of period | $ / shares | $ 5.36 |
Granted | $ / shares | .00 |
Vested and issued | $ / shares | 12.15 |
Forfeited | $ / shares | .00 |
Outstanding, end of period | $ / shares | $ 5.35 |
EQUITY (Details Narrative) |
3 Months Ended |
---|---|
Sep. 30, 2020
USD ($)
| |
Equity [Abstract] | |
Unrecognized stock-based compensation expense | $ 4,500,000 |
Unrecognized stock-based compensation expense, recognition period | 3 years 3 months 25 days |
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
Sep. 30, 2020 |
Jun. 30, 2020 |
---|---|---|
FMI [Member] | ||
Due to related parties | $ 0 | $ 0 |
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