[X]
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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[
]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Nevada
|
|
37-1454128
|
State or other
jurisdiction of incorporation
|
|
(IRS Employer
Identification No.)
|
|
|
|
5282 South Commerce Drive, Suite D292
Murray, Utah 84107
|
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(435)
645-2000
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(Address of
principal executive offices)
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(Registrant's
telephone number, including area code)
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Title of each Class
|
Trading Symbol
|
Name of each exchange on which
registered
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Common Stock,
$0.01 Par Value
|
PCYG
|
NASDAQ Capital
Market
|
Large
accelerated filer
|
[
]
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Accelerated
filer
|
[
]
|
Non-accelerated
filer
|
[X]
|
Smaller
reporting company
|
[X]
|
|
|
Emerging Growth
Company
|
[
]
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1
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6
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12
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12
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12
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13
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14
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14
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22
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22
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22
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22
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22
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23
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||
23
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23
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23
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23
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24
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Signatures
|
25
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|
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F-1
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F-2
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F-3
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F-4
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F-5
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F-6
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Exhibit
31
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Certifications
of the Principal Executive Officer and Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
Exhibit
32
|
Certifications
pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
ITEM I.
|
BUSINESS
|
ITEM 1A.
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RISK FACTORS
|
ITEM 2.
|
PROPERTIES
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
|
Quarterly
Common Stock Price Ranges
|
|||
|
2021
|
2020
|
||
Fiscal Quarter
Ended
|
High
|
Low
|
High
|
Low
|
September 30
|
$5.45
|
$3.72
|
$8.25
|
$4.76
|
December 31
|
$5.53
|
$3.80
|
$6.17
|
$4.27
|
March 31
|
$7.91
|
$4.75
|
$5.73
|
$3.33
|
June 30
|
$6.97
|
$4.80
|
$6.22
|
$3.40
|
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
|
Remaining Amount Available for Future Share
Repurchases Under the Plans or Programs
|
|
|
|
|
|
Year
Ended June 30, 2020:
|
|
|
|
|
July 1, 2019 –
September 30, 2019
|
79,954
|
$6.43
|
167,554
|
$3,000,235
|
October 1, 2019 –
December 31, 2019
|
174,615
|
$4.80
|
342,169
|
$2,162,557
|
January 1, 2020 –
March 31, 2020
|
157,616
|
$5.11
|
499,785
|
$1,359,123
|
April 1, 2020 – June
30, 2020
|
-
|
-
|
-
|
$1,359,123
|
Year
Ended June 30, 2021:
|
|
|
|
|
July 1, 2020 –
September 30, 2020
|
-
|
$-
|
-
|
$1,359,123
|
October 1, 2020 –
December 31, 2020
|
-
|
$-
|
-
|
$1,359,123
|
January 1, 2021 –
March 31, 2021
|
84,081
|
$6.04
|
584,586
|
$2,850,880
|
April 1, 2021 – June
30, 2021
|
126,927
|
$6.30
|
457,659
|
$2,050,885
|
(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 6.
|
SELECTED FINANCIAL
DATA
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
|
|
Year
Ended
June
30, 2021
|
$
Change
|
%
Change
|
Year
Ended
June
30, 2020
|
Revenue
|
$21,007,076
|
$969,022
|
5%
|
$20,038,054
|
|
Year
Ended
June
30, 2021
|
$
Change
|
%
Change
|
Year
Ended
June
30, 2020
|
Cost of service and product
support
|
$6,884,647
|
$(112,777)
|
-2%
|
$6,997,424
|
Percent of total
revenue
|
33%
|
|
|
35%
|
|
Year
Ended
June 30,
2021
|
$
Change
|
%
Change
|
Year
Ended
June 30,
2020
|
Sales and
marketing
|
$4,995,578
|
$(779,731)
|
-14%
|
$5,775,309
|
Percent of total
revenue
|
24%
|
|
|
29%
|
|
Year
Ended
June 30,
2021
|
$
Change
|
%
Change
|
Year
Ended
June 30,
2020
|
General and
administrative
|
$5,214,936
|
$266,493
|
5%
|
$4,948,443
|
Percent of total
revenue
|
25%
|
|
|
25%
|
|
Year
Ended
June 30,
2021
|
$
Change
|
%
Change
|
Year
Ended
June 30,
2020
|
Depreciation and
amortization
|
$1,019,515
|
$180,649
|
22%
|
$838,866
|
Percent of total
revenue
|
5%
|
|
|
4%
|
|
Year
Ended
June 30,
2021
|
$
Change
|
%
Change
|
Year
Ended
June 30,
2020
|
Other income and
(expense)
|
$1,301,892
|
$1,144,716
|
728%
|
$157,176
|
Percent of total
revenue
|
6%
|
|
|
1%
|
|
Year
Ended
June 30,
2021
|
$
Change
|
%
Change
|
Year
Ended
June 30,
2020
|
Preferred
dividends
|
$586,444
|
$-
|
-%
|
$586,444
|
Percent of total
revenue
|
3%
|
|
|
3%
|
|
Year
Ended
June 30,
2021
|
$
Change
|
%
Change
|
Year
Ended
June 30,
2020
|
Cash and Cash
Equivalents
|
$24,070,322
|
$3,724,992
|
18%
|
$20,345,330
|
|
Year
Ended
June
30, 2021
|
$
Change
|
%
Change
|
Year
Ended
June
30, 2020
|
Cash provided by operating
activities
|
$5,401,815
|
$1,205,676
|
29%
|
$4,196,139
|
|
2021
|
2020
|
Net income
|
$4,117,395
|
$1,593,269
|
Noncash expense and income,
net
|
1,388,831
|
2,084,287
|
Net changes in operating
assets and liabilities
|
(104,411)
|
518,583
|
|
$5,401,815
|
$4,196,139
|
|
Year
Ended
June
30, 2021
|
$
Change
|
%
Change
|
Year
Ended
June
30, 2020
|
Cash used in investing
activities
|
$(318,873)
|
331,549
|
-51%
|
$(650,422)
|
|
Year
Ended
June
30, 2021
|
$
Change
|
%
Change
|
Year
Ended
June
30, 2020
|
Cash used in financing
activities
|
$(1,357,950)
|
$451,860
|
-25%
|
$(1,809,810)
|
|
As of
June 30,
|
As of
June 30,
|
Variance
|
|
|
2021
|
2020
|
Dollars
|
Percent
|
Current
assets
|
$29,701,774
|
$27,148,911
|
$2,552,863
|
9%
|
|
As of
June 30,
|
As of
June 30,
|
Variance
|
|
|
2021
|
2020
|
Dollars
|
Percent
|
Current
liabilities
|
$9,300,783
|
$8,912,247
|
$388,536
|
4%
|
|
Payment Due by Year
|
||||
|
Total
|
Less than 1 Year
|
1-3 Years
|
3-5 Years
|
More than 5 Years
|
Operating
lease obligations
|
$695,370
|
$90,156
|
$194,326
|
$214,783
|
$196,105
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
(a)
|
Evaluation of disclosure controls and procedures.
|
(b)
|
Management’s Annual Report on Internal Control over Financial
Reporting.
|
(c)
|
Changes in Internal Controls over Financial
Reporting.
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
Exhibit
Number
|
|
Description
|
|
Articles of
Incorporation (Incorporated by reference from the Company’s
Definitive Proxy Statement on Schedule 14C dated June 5, 2002).
(1)
|
|
|
Certificate of
Amendment (Incorporated by reference from Exhibit 3.3 to the
Company’s Quarterly Report on Form 10-QSB for the quarter
ended Sept 30, 2005, dated November 10, 2005). (2)
|
|
|
Certificate of
Amendment (Incorporated by reference from Exhibit 3.4 to the
Company’s Annual Report on Form 10-KSB for the year ended
June 30, 2006, dated September 29, 2006). (3)
|
|
|
Certificate of
Amendment (Incorporated by reference from Exhibit 4.1 to the
Company’s Current Report on Form 8-K dated July 28, 2017).
(13)
|
|
|
Amended and
Restated Bylaws (Incorporated by reference from Exhibit 3.1 the
Company’s Current Report on Form 8-K dated October 21, 2016).
(11)
|
|
|
Certificate of
Designation of the Series B Convertible Preferred Stock
(Incorporated by reference from Exhibit 3.1 to the Company’s
Current Report on Form 8-K dated July 21, 2010). (4)
|
|
|
Fourth Amended
and Restated Certificate of Designation of the Relative Rights,
Powers and Preferences of the Series B Preferred Stock of Park City
Group, Inc. (Incorporated by reference from Exhibit 4.1 the
Company’s Current Report on Form 8-K dated January 14, 2016).
(10)
|
|
|
First Amended
and Restated Certificate of Designation of the Relative Rights,
Powers and Preferences of the Series B-1 Preferred Stock of Park
City Group, Inc. (Incorporated by reference from Exhibit 4.2 to the
Company’s Current Report on Form 8-K dated January 14, 2016).
(10)
|
|
|
Amendment to
Loan Agreement and Note, by and between U.S. Bank National
Association and the Company, dated September 15, 2009 (Incorporated
by reference from Exhibit 10.1 the Company’s Current Report
on Form 8-K dated September 30, 2009). (5)
|
|
|
Amendment to
Loan Agreement and Note, by and between U.S. Bank National
Association and the Company, dated May 5, 2010 (Incorporated
by reference from Exhibit 10.2 to the Company’s Current
Report on Form 8-K dated May 6, 2010). (6)
|
|
|
Second Amended
and Restated 2011 Stock Incentive Plan, dated April 1, 2013
(Incorporated by reference from Exhibit 10.1 to the Company’s
Registration Statement on Form S-8, dated September 4, 2013).
(7)
|
|
|
Second Amended
and Restated 2011 Employee Stock Purchase Plan, dated April 1, 2013
(Incorporated by reference from Exhibit 10.2 to the Company’s
Registration Statement on Form S-8, dated September 4, 2013).
(7)
|
|
|
Fields
Employment Agreement (Incorporated by reference from Exhibit 10.8
to the Company’s Annual Report on Form 10-K dated September
11, 2014). (9)
|
|
|
Services
Agreement (Incorporated by reference from the Company’s Form
10-K dated September 11, 2014).(9)
|
|
|
Amendment No. 1
to the Employment Agreement, by and between Park City Group, Inc.,
Randall K. Fields and Fields Management, Inc., dated July 1, 2016
(Incorporated by reference from Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q dated November 7, 2016). (12)
|
|
|
Amendment No. 1
to the Second Amended and Restated 2011 Stock Incentive Plan of
Park City Group, Inc., dated August 3, 2017 (Incorporated by
reference from Exhibit 10.1 to the Company’s Registration
Statement on Form S-8 dated November 9, 2017) (15)
|
|
|
Amendment No. 1
to the Second Amended and Restated 2011 Employee Stock Purchase
Plan of Park City Group, Inc., dated August 3, 2017 (Incorporated
by reference from Exhibit 10.2 to the Company’s Registration
Statement on Form S-8 dated November 9, 2017) (15)
|
|
|
Amendment to
Services Agreement (Incorporated by reference from Exhibit
10.1 to the Company’s Quarterly Report on Form 10-Q dated May
10, 2018). (16)
|
|
|
Amendment to
Note, by and between U.S. Bank National Association and the
Company, dated January 9, 2019 (Incorporated by reference from
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated January 15, 2019). (17)
|
|
|
Master Lease
Agreement, dated January 9, 2019 (Incorporated by reference from
Exhibit 10.2 to the Company’s Current Report on Form 8-K
dated January 15, 2019). (17)
|
|
|
Employment
Agreement by and between John Merrill and Park City Group, Inc.,
dated May 29, 2019 (Incorporated by reference from Exhibit
10.1 to the Company’s Current Report on Form 8-K dated May
31, 2019). (18)
|
|
|
Loan Agreement
by and between U.S. Bank National Association and the Company,
dated April 23, 2020 (Incorporated by reference from Exhibit 10.2
to the Company’s Current Report on Form 8-K dated April 27,
2020). (19)
|
|
|
Amendment No. 2 to the Second Amended and Restated 2011 Employee
Stock Purchase Plan of Park City Group, Inc., dated March 17, 2021
(Incorporated by reference from Exhibit 10.1 to the Company’s
Form S-8 dated April 12, 2021). (20)
|
|
|
Code of Ethics
and Business Conduct (Incorporated by reference from the
Company’s Annual Report Form 10-KSB for the period ended June
30, 2008, dated September 29, 2008). (8)
|
|
|
List of
Subsidiaries (Incorporated by reference from the Company’s
Annual Report on Form 10-K for the period ended June 30, 2017,
dated September 13, 2017). (14)
|
|
|
Consent of
Haynie & Company, dated September
28, 2021*
|
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of Sarbanes
Oxley Act of 2002 *
|
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of Sarbanes
Oxley Act of 2002 *
|
|
|
Certification
of Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section 1350 *
|
(1)
|
Incorporated by
reference from our Form DEF 14C dated June 5, 2002.
|
(2)
|
Incorporated by
reference from our Form 10-QSB for the year ended Sept 30,
2005.
|
(3)
|
Incorporated by
reference from our Form 10-KSB dated September 29,
2006.
|
(4)
|
Incorporated by
reference from our Form 8-K dated July 21, 2010.
|
(5)
|
Incorporated by
reference from our Form 8-K dated September 30, 2009.
|
(6)
|
Incorporated by
reference from our Form 8-K dated May 6, 2010.
|
(7)
|
Incorporated by
reference from our Registration Statement on Form S-8 dated
September 4, 2013.
|
(8)
|
Incorporated by
reference from our Form 10-KSB dated September 29,
2008.
|
(9)
|
Incorporated by
reference from our Form 10-K dated September 11, 2014.
|
(10)
|
Incorporated by
reference from our Form 8-K dated January 14, 2016.
|
(11)
|
Incorporated by
reference from our Form 8-K dated October 21, 2016.
|
(12)
|
Incorporated by
reference from our Form 10-Q dated November 7, 2016.
|
(13)
|
Incorporated by
reference from our Form 8-K dated July 28, 2017.
|
(14)
|
Incorporated by
reference from our Form 10-K dated September 13, 2017.
|
(15)
|
Incorporated by
reference from our Registration Statement on Form S-8 dated
November 9, 2017.
|
(16)
|
Incorporated by
reference from our Form 10-Q dated May 10, 2018.
|
(17)
|
Incorporated by
reference from our Form 8-K dated January 15, 2019.
|
(18)
|
Incorporated by
reference from our Form 8-K dated May 31, 2019.
|
(19)
|
Incorporated by
reference from our Form 8-K dated April 27, 2020.
|
(20)
|
Incorporated by
reference from our Form 8-K dated April 12, 2021.
|
*
|
Filed
herewith
|
|
PARK CITY GROUP, INC.
|
|
(Registrant)
|
Date:
September 28, 2021
|
By: /s/
Randall K. Fields
|
|
Principal
Executive Officer,
Chair of the
Board and Director
|
Signature
|
Title
|
Date
|
|
|
|
/s/ Randall
K. Fields
|
Chair of the
Board and Director,
|
September
28, 2021
|
Randall
K. Fields
|
Chief Executive
Officer
(Principal
Executive Officer)
|
|
/s/ John
Merrill
|
Chief Financial
Officer
|
September
28, 2021
|
John
Merrill
|
(Principal
Financial Officer &
Principal
Accounting Officer)
|
|
/s/ Robert W.
Allen
|
Director, and
Compensation
|
September
28, 2021
|
Robert W.
Allen
|
Committee
Chair
|
|
/s/ Peter J.
Larkin
|
Director
|
September
28, 2021
|
Peter J.
Larkin
|
|
|
/s/ Ronald C.
Hodge
|
Director, and
Audit Committee Chair
|
September
28, 2021
|
Ronald C.
Hodge
|
|
|
Assets
|
June
30,
2021
|
June
30,
2020
|
Current
Assets
|
|
|
Cash
|
$24,070,322
|
$20,345,330
|
Receivables, net of
allowance for doubtful accounts of $234,693 and $251,954 at June 30, 2021 and 2020,
respectively
|
3,891,699
|
4,007,316
|
Contract asset –
unbilled current portion
|
1,248,936
|
2,300,754
|
Prepaid expense and other
current assets
|
490,817
|
495,511
|
|
|
|
Total
Current Assets
|
29,701,774
|
27,148,911
|
|
|
|
Property
and equipment, net
|
2,589,194
|
3,003,402
|
|
|
|
Other
Assets:
|
|
|
Deposits, and other
assets
|
22,414
|
22,414
|
Prepaid expense –
less current portion
|
47,987
|
77,030
|
Contract asset –
unbilled long-term portion
|
408,925
|
838,726
|
Operating lease –
right-of-use asset
|
695,371
|
781,137
|
Customer
relationships
|
525,600
|
657,000
|
Goodwill
|
20,883,886
|
20,883,886
|
Capitalized software costs,
net
|
171,732
|
18,539
|
|
|
|
Total
Other Assets
|
22,755,915
|
23,278,732
|
|
|
|
Total
Assets
|
$55,046,883
|
$53,431,045
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$467,194
|
$407,497
|
Accrued
liabilities
|
988,092
|
1,123,528
|
Contract liability -
deferred revenue
|
1,755,341
|
1,845,347
|
Lines of
credit
|
6,000,000
|
4,660,000
|
Operating lease liability -
current
|
90,156
|
85,767
|
Current portion of notes
payable
|
-
|
310,242
|
Current portion of paycheck
protection program loans
|
-
|
479,866
|
|
|
|
Total
current liabilities
|
9,300,783
|
8,912,247
|
|
|
|
Long-term
liabilities
|
|
|
Operating lease liability
– less current portion
|
605,214
|
695,369
|
Notes payable, less current
portion
|
-
|
610,512
|
Paycheck protection program
loans
|
-
|
629,484
|
|
|
|
Total
liabilities
|
9,905,997
|
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 June 30, 2021 and 2020;
|
6,254
|
6,254
|
Series B-1
Preferred, 550,000 shares authorized; 212,402 shares issued and
outstanding at June 30, 2021 and 2020, respectively
|
2,124
|
2,124
|
Common Stock, $0.01 par
value, 50,000,000 shares authorized; 19,351,935 and 19,484,485 issued and outstanding at June
30, 2021 and 2020, respectively
|
193,522
|
194,847
|
Additional paid-in
capital
|
74,298,924
|
75,271,097
|
Accumulated
deficit
|
(29,359,938)
|
(32,890,889)
|
|
|
|
Total
stockholders’ equity
|
45,140,886
|
42,583,433
|
|
|
|
Total
liabilities and stockholders’ equity
|
$55,046,883
|
$53,431,045
|
|
For the
Years Ended June 30,
|
|
|
2021
|
2020
|
|
|
|
Revenue
|
$21,007,076
|
$20,038,054
|
|
|
|
Operating
expense:
|
|
|
Cost of revenue and product
support
|
6,884,647
|
6,997,424
|
Sales and
marketing
|
4,995,578
|
5,775,309
|
General and
administrative
|
5,214,936
|
4,948,443
|
Depreciation and
amortization
|
1,019,515
|
838,866
|
Total operating
expense
|
18,114,676
|
18,560,042
|
|
|
|
Income from
operations
|
2,892,400
|
1,478,012
|
|
|
|
Other income
(expense):
|
|
|
Interest
income
|
237,269
|
224,908
|
Interest
expense
|
(106,680)
|
(67,732)
|
Unrealized gain on short
term investments
|
61,953
|
-
|
Gain on debt
extinguishment
|
1,109,350
|
-
|
|
|
|
Income before income
taxes
|
4,194,292
|
1,635,188
|
|
|
|
(Provision) for income
taxes
|
(76,897)
|
(41,919)
|
|
|
|
Net income
|
4,117,395
|
1,593,269
|
|
|
|
Dividends on Preferred
Stock
|
(586,444)
|
(586,444)
|
|
|
|
Net income applicable to
common shareholders
|
$3,530,951
|
$1,006,825
|
|
|
|
Weighted average shares,
basic
|
19,502,000
|
19,651,000
|
Weighted average shares,
diluted
|
19,754,000
|
19,863,000
|
Basic earnings per
share
|
$0.18
|
$0.05
|
Diluted earnings per
share
|
$0.18
|
$0.05
|
|
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
|
-
|
-
|
-
|
-
|
76,575
|
766
|
396,223
|
-
|
396,989
|
Cash
|
-
|
-
|
-
|
-
|
26,723
|
267
|
120,657
|
-
|
120,924
|
Preferred
Dividends-Declared
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(586,444)
|
(586,444)
|
Stock Buyback
|
-
|
-
|
-
|
-
|
(412,185)
|
(4,122)
|
(2,154,349)
|
-
|
(2,158,471)
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,593,269
|
1,593,269
|
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
|
-
|
-
|
-
|
-
|
46,376
|
464
|
216,789
|
-
|
217,253
|
Cash
|
-
|
-
|
-
|
-
|
32,082
|
321
|
117,166
|
-
|
117,487
|
Preferred
Dividends-Declared
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(586,444)
|
(586,444)
|
Stock Buyback
|
-
|
-
|
-
|
-
|
(211,008)
|
(2,110)
|
(1,306,128)
|
-
|
(1,308,238)
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,117,395
|
4,117,395
|
Balance, June 30,
2021
|
625,375
|
$6,254
|
212,402
|
$2,124
|
19,351,935
|
$193,522
|
$74,298,924
|
$(29,359,938)
|
$45,140,886
|
|
For the
Years Ended June 30,
|
|
|
2021
|
2020
|
Cash flows from operating
activities:
|
|
|
Net income
|
$4,117,395
|
$1,593,269
|
Adjustments to reconcile
net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
1,019,515
|
803,002
|
Amortization of operating
right of use asset
|
85,766
|
81,604
|
Stock compensation
expense
|
336,695
|
399,681
|
Bad debt
expense
|
1,056,205
|
800,000
|
Gain on debt
extinguishment
|
(1,109,350)
|
-
|
Decrease (increase)
in:
|
|
|
Trade
receivables
|
(199,437)
|
(205,718)
|
Long-term receivables,
prepaids and other assets
|
465,978
|
1,279,674
|
Increase (decrease)
in:
|
|
|
Accounts
payable
|
59,697
|
(122,797)
|
Accrued
liabilities
|
(254,601)
|
(278,255)
|
Operating lease
liability
|
(85,766)
|
(81,605)
|
Deferred
revenue
|
(90,282)
|
(72,716)
|
|
|
|
Net cash provided by
operating activities
|
5,401,815
|
4,196,139
|
|
|
|
Cash flows from investing
activities:
|
|
|
Purchase
of property and equipment
|
(147,140)
|
(650,422)
|
Capitalization of
software development costs
|
(171,733)
|
-
|
|
|
|
Net
cash used in investing activities
|
(318,873)
|
(650,422)
|
|
|
|
Cash flows from financing
activities:
|
|
|
Proceeds
from employee stock purchase plans
|
117,487
|
120,923
|
Proceeds from issuance of note payable
|
-
|
1,109,350
|
Net
increase in lines of credit
|
1,340,000
|
-
|
Dividends
paid
|
(586,444)
|
(586,444)
|
Common
stock buy-back
|
(1,308,238)
|
(2,158,471)
|
Payments
on notes payable and capital leases
|
(920,755)
|
(295,168)
|
|
|
|
Net
cash used in financing activities
|
(1,357,950)
|
(1,809,810)
|
|
|
|
Net increase in cash and
cash equivalents
|
3,724,992
|
1,735,907
|
|
|
|
Cash and cash equivalents
at beginning of period
|
20,345,330
|
18,609,423
|
|
|
|
Cash and cash equivalents
at end of period
|
$24,070,322
|
$20,345,330
|
|
|
|
Supplemental Disclosure of
Cash Flow Information
|
|
|
Cash paid for income
taxes
|
$167,185
|
$100,158
|
Cash paid for
interest
|
$103,411
|
$16,042
|
|
|
|
Supplemental Disclosure of
Non-Cash Investing and Financing Activities
|
|
|
Common Stock to pay accrued
liabilities
|
$217,253
|
$396,989
|
Dividends accrued on
Preferred Stock
|
$586,444
|
$586,444
|
Right-of-use
asset
|
$-
|
$862,741
|
NOTE 1.
|
DESCRIPTION OF BUSINESS
|
NOTE 2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
Years
|
Furniture and
fixtures
|
5-7
|
Computer
equipment
|
3
|
Equipment under capital
leases
|
3
|
Long-term use
equipment
|
10
|
Leasehold
improvements
|
See below
|
|
Years
|
Customer
relationships
|
10
|
Acquired developed
software
|
5
|
Developed
software
|
3
|
Goodwill
|
See below
|
|
Contract assets
|
|
Balance – June 30,
2020
|
$3,139,480
|
|
Revenue
recognized during the period but not billed
|
-
|
|
Amounts
reclassified to accounts receivable
|
(1,391,313)
|
|
Other
|
(90,306)
|
|
Balance – June 30,
2021
|
$1,657,861
|
(1) |
|
Contract liability
|
Balance – June 30, 2020
|
$1,845,347
|
Amounts
billed but not recognized as revenue
|
1,665,648
|
Revenue
recognized related to the opening balance of deferred
revenue
|
(1,755,654)
|
Other
|
-
|
Balance – June 30, 2021
|
$1,755,341
|
|
Year Ended, June 30
|
|
|
|
|
2021
|
2020
|
Chg $
|
Chg %
|
Recurring -
Subscription, Support and Services
|
$17,733,134
|
$16,043,245
|
$1,689,889
|
11%
|
Non -
Recurring - Services
|
37,121
|
849,288
|
(812,167)
|
-96%
|
Non -
Recurring - License
|
-
|
218,250
|
(218,250)
|
-100%
|
Transaction
Based - Marketplace
|
3,236,821
|
2,927,271
|
309,550
|
11%
|
Total
|
$21,007,076
|
$20,038,054
|
$969,022
|
5%
|
|
Year ended
June 30,
|
|
|
2021
|
2020
|
Numerator
|
|
|
Net income applicable to
common shareholders
|
$3,530,951
|
$1,006,825
|
|
|
|
Denominator
|
|
|
Weighted average common
shares outstanding, basic
|
19,502,000
|
19,651,000
|
Warrants to purchase Common
Stock
|
252,000
|
212,000
|
|
|
|
Weighted average common
shares outstanding, diluted
|
19,754,000
|
19,863,000
|
|
|
|
Net income per
share
|
|
|
Basic
|
$0.18
|
$0.05
|
Diluted
|
$0.18
|
$0.05
|
NOTE 3.
|
RECEIVABLES
|
|
2021
|
2020
|
Accounts
receivable
|
$5,375,598
|
$6,560,024
|
Allowance for doubtful
accounts
|
(234,963)
|
(251,954)
|
|
$5,140,635
|
$6,308,070
|
NOTE 4.
|
PROPERTY AND EQUIPMENT
|
|
2021
|
2020
|
Computer
equipment
|
$4,069,543
|
$3,974,792
|
Furniture and
equipment
|
2,237,684
|
2,185,295
|
Leasehold
improvements
|
807,816
|
807,816
|
|
7,115,043
|
6,697,903
|
Less accumulated
depreciation and amortization
|
(4,525,849)
|
(3,964,501)
|
|
$2,589,194
|
$3,003,402
|
NOTE 5.
|
CAPITALIZED SOFTWARE COSTS
|
|
2021
|
2020
|
Capitalized software
costs
|
$2,909,044
|
$2,737,312
|
Less accumulated
amortization
|
(2,737,312)
|
(2,718,773)
|
|
$171,732
|
$18,539
|
NOTE 6.
|
ACQUISITION RELATED INTANGIBLE ASSETS, NET
|
|
2021
|
2020
|
Customer
relationships
|
$5,537,161
|
$5,537,161
|
Less accumulated
amortization
|
(5,011,561)
|
(4,880,161)
|
|
$525,600
|
$657,000
|
Years ending June
30:
|
|
2022
|
$131,400
|
2023
|
$131,400
|
2024
|
$131,400
|
2025
|
$131,400
|
NOTE 7.
|
ACCRUED LIABILITIES
|
|
2021
|
2020
|
Accrued stock-based
compensation
|
$348,265
|
$252,959
|
Accrued
compensation
|
293,130
|
383,088
|
Accrued other
liabilities
|
56,333
|
207,003
|
Accrued
taxes
|
146,004
|
136,117
|
Accrued
dividends
|
144,360
|
144,361
|
|
$988,092
|
$1,123,528
|
NOTE 8.
|
NOTES PAYABLE
|
Notes
Payable:
|
2021
|
2020
|
|
|
|
Note payable to a bank, due
in monthly installments of $29,097 bearing interest at 4.99% due
April 1, 2023 secured by related capital equipment
|
$-
|
$920,754
|
Unsecured Paycheck
Protection Program loans which carries an interest rate of 1%.
Principle payments begin on November 23, 2020 in the amount of
$61,429.
|
-
|
1,109,350
|
|
$-
|
$2,030,104
|
Less current portion notes
payable
|
-
|
(790,108)
|
|
$-
|
$1,239,996
|
NOTE 9.
|
LINES OF CREDIT
|
NOTE 10.
|
DEFERRED REVENUE
|
|
2021
|
2020
|
Subscription
|
$1,513,729
|
$1,596,228
|
Other
|
241,612
|
249,119
|
|
$1,755,341
|
$1,845,347
|
NOTE 11.
|
INCOME TAXES
|
|
2021
|
2020
|
Deferred tax
assets:
|
|
|
NOL
carryover
|
$17,044,800
|
$27,788,000
|
Allowance
for bad debts
|
61,000
|
65,500
|
Accrued
expenses
|
77,200
|
52,000
|
Depreciation
|
(630,200)
|
(700,400)
|
Amortization
|
(687,500)
|
(565,100)
|
|
|
|
Valuation
allowance
|
(15,865,300)
|
(26,640,000)
|
Net deferred tax
asset
|
$-
|
$-
|
|
2021
|
2020
|
|
|
|
Book
income
|
$1,062,891
|
$414,250
|
Stock for
services
|
(25,679)
|
4.625
|
Change in
accrual
|
25,286
|
(3,726)
|
Life
insurance
|
17,626
|
17,626
|
Meals and
entertainment
|
3,505
|
8,874
|
Change in
allowance
|
(4,488)
|
27,594
|
Change in
depreciation
|
(52,113)
|
(168,095)
|
PPP &
EIDL loan forgiveness
|
(288,431)
|
-
|
NOL
utilization
|
(738,597)
|
(301,148)
|
Valuation
allowance
|
-
|
-
|
|
$-
|
$-
|
NOTE 12.
|
COMMITMENTS AND CONTINGENCIES
|
Year ending June
30:
|
|
2022
|
$81,600
|
NOTE 13.
|
EMPLOYEE BENEFIT PLAN
|
NOTE 14.
|
STOCKHOLDERS EQUITY
|
|
Restricted
Stock Units
|
Weighted
Average Grant Date Fair Value ($/share)
|
|
|
|
Outstanding at July 1,
2019
|
866,274
|
$5.47
|
Granted
|
1,008
|
4.96
|
Vested and
issued
|
(16,059)
|
9.33
|
Forfeited
|
(13,799)
|
7.74
|
Outstanding at June 30,
2020
|
837,424
|
5.36
|
Granted
|
13,249
|
6.35
|
Vested and
issued
|
(9,357)
|
8.74
|
Forfeited
|
-
|
-
|
Outstanding at June 30,
2021
|
841,316
|
5.34
|
Warrants
Outstanding
at June 30,
2021
|
Warrants
Exercisable
at June 30,
2021
|
||||
Range
of
exercise prices
|
Number
Outstanding
|
Weighted
average
remaining
contractual life (years)
|
Weighted
average exercise price
|
Number
exercisable
|
Weighted
average
exercise
price
|
$4.00
|
1,085,068
|
1.60
|
$4.00
|
1,085,068
|
$4.00
|
$10.00
|
23,737
|
1.57
|
$10.00
|
23,737
|
$10.00
|
|
1,108,805
|
1.60
|
$4.13
|
1,108,805
|
$4.13
|
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
|
Remaining Amount Available for Future Share
Repurchases Under the Plans or Programs
|
|
|
|
|
|
Year
Ended June 30, 2020
|
|
|
|
|
July 1, 2019 –
September 30, 2019:
|
79,954
|
$6.43
|
167,554
|
$3,000,235
|
October 1, 2019 –
December 31, 2019:
|
174,615
|
$4.80
|
342,169
|
$2,162,557
|
January 1, 2020 –
March 31, 2020:
|
157,616
|
$5.11
|
499,785
|
$1,359,123
|
April 1, 2020 – June
30, 2020:
|
-
|
$-
|
-
|
$1,359,123
|
|
|
|
|
|
Year
Ended June 30, 2021
|
|
|
|
|
July 1, 2020 –
September 30, 2020:
|
-
|
$-
|
-
|
$1,359,123
|
October 1, 2020 –
December 31, 2020:
|
-
|
$-
|
-
|
$1,359,123
|
January 1, 2021 –
March 31, 2021:
|
84,081
|
$6.04
|
584,586
|
$2,850,880
|
April 1, 2021 – June
30, 2021:
|
126,927
|
$6.30
|
457,659
|
$2,050,885
|
(1)
|
We close our
books and records on the last calendar day of each month to align
our financial closing with our business processes.
|
NOTE
15.
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
NOTE 16.
|
RELATED PARTY TRANSACTIONS
|
NOTE 17.
|
SUBSEQUENT EVENTS
|
(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:
September 28, 2021
|
By:
|
/s/
Randall K. Fields
Randall K.
Fields
Chief
Executive Officer, Chairman and Director
(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: September 28, 2021
|
By:
|
/s/
John Merrill
John
Merrill
Chief
Financial Officer
(Principal
Financial Officer & Principal Accounting Officer)
|
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: September 28, 2021
|
By:
|
/s/ Randall
K. Fields
Randall K.
Fields
Chief
Executive Officer, Chairman and Director
(Principal
Executive Officer)
|
Date: September 28, 2021
|
By:
|
/s/ John Merrill
John Merrill
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2021 |
Sep. 28, 2021 |
Dec. 31, 2020 |
|
Cover [Abstract] | |||
Entity Registrant Name | PARK CITY GROUP INC | ||
Entity Central Index Key | 0000050471 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2021 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation State Country Code | NV | ||
Entity File Number | 001-34941 | ||
Entity Common Stock, Shares Outstanding | 19,395,152 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
Entity Public Float | $ 55,192,000 |
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Allowance for doubtful accounts | $ 234,693 | $ 251,954 |
Stockholders' equity: | ||
Common stock, par value | $ .01 | $ .01 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 19,351,935 | 19,484,485 |
Common stock, outstanding | 19,351,935 | 19,484,485 |
Series B Preferred | ||
Stockholders' equity: | ||
Preferred stock, par value | $ .01 | $ 0.01 |
Preferred stock, authorized | 700,000 | 700,000 |
Preferred stock, issued | 625,375 | 625,375 |
Preferred stock, outstanding | 625,375 | 625,375 |
Series B-1 Preferred | ||
Stockholders' equity: | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, authorized | 550,000 | 550,000 |
Preferred stock, issued | 212,402 | 212,402 |
Preferred stock, outstanding | 212,402 | 212,402 |
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) |
Series B Preferred |
Series B-1 Preferred |
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 |
Stock issued for: | ||||||
Accrued compensation, shares | 76,575 | |||||
Accrued compensation, amount | $ 766 | 396,223 | 396,989 | |||
Cash, shares | 26,723 | |||||
Cash, amount | $ 267 | 120,657 | 120,924 | |||
Preferred dividends-declared | (586,444) | (586,444) | ||||
Stock buyback, shares | (412,185) | |||||
Stock buyback, amount | $ (4,122) | (2,154,349) | (2,158,471) | |||
Net Income | 1,593,269 | |||||
Ending balance, shares at Jun. 30, 2020 | 625,375 | 212,402 | 19,484,485 | |||
Ending balance, amount at Jun. 30, 2020 | $ 6,254 | $ 2,124 | $ 194,847 | 75,271,097 | (32,890,889) | 42,583,433 |
Stock issued for: | ||||||
Accrued compensation, shares | 46,376 | |||||
Accrued compensation, amount | $ 464 | 216,789 | 217,253 | |||
Cash, shares | 32,082 | |||||
Cash, amount | $ 321 | 117,166 | 117,487 | |||
Preferred dividends-declared | (586,444) | (586,444) | ||||
Stock buyback, shares | (211,008) | |||||
Stock buyback, amount | $ (2,110) | (1,306,128) | (1,308,128) | |||
Net Income | 4,117,395 | 4,117,395 | ||||
Ending balance, shares at Jun. 30, 2021 | 625,375 | 212,402 | 19,351,935 | |||
Ending balance, amount at Jun. 30, 2021 | $ 6,254 | $ 2,124 | $ 193,522 | $ 74,298,924 | $ (29,359,938) | $ 45,140,886 |
DESCRIPTION OF BUSINESS |
12 Months Ended |
---|---|
Jun. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | Summary of Business
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, and source hard-to-get-things.
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.
Recent Developments
During the second half of fiscal year 2021, ReposiTrak launched two new products designed to expand market share in the manufacturing segment: Certificate of Analysis Automation and Active-QMS for Quality Management. Both solutions were developed at the request of existing Compliance Management Solution customers and improve competitiveness in the manufacturing/food supply chain with synergistic solutions for growth in existing customers and increasing competitiveness for new business focused on quality management.
The quality management solution also has application in the retail sector, in central commissaries, distribution centers, and even task management in stores.
Another major new product initiative commenced in February 2021, as ReposiTrak joined with a group of major retailers and wholesalers to form the Food Traceability Leadership Consortium (FTLC), in response to the FDA’s announcement regarding the increase of food traceability requirements under the Food Safety Modernization Act. The expanded traceability requirements proposed by the FDA have far reaching consequences for the US food supply chain, from farms to fisheries down to retail stores, due to new, detailed documentation requirements designed to support more effective recalls.
These new proposed requirements create substantial data and records management challenges for all supply chain trading partners, many of whom do not have this capability today. The risk is that the supply chain will become fractious array of inoperable systems that could lead to massive operational complexity and expense escalation. The FTLC founding members worked collaboratively with ReposiTrak to develop a complete food traceability solution that meets all the FDA FSMA proposed reporting requirements at a very large manageable cost, based on the ReposiTrak supply chain platform which tracks product/shipment data in a similar manner today for cost and inventory control purposes.
The new solution, called the ReposiTrak Traceability Network, is launching in September 2021 with phased roll outs at suppliers and retailers, and is expected to scale rapidly through out fiscal year 2022, based on the existing Compliance Management user network.
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 fiscal years ended June 30, 2021 or 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.
Paycheck Protection Loan. On April 23, 2020, the Company received proceeds from a loan in the amount of approximately $1.1 million from its lender, U.S. Bank National Association (the “Lender”), pursuant to approval by the U.S. Small Business Administration (the “SBA”) for the Lender to fund the Company’s request for a loan under the SBA’s Paycheck Protection Program (“PPP Loan”) created as part of the CARES Act administered by the SBA. On December 19, 2020, the SBA authorized full forgiveness in the amount of approximately $1.1 million under the PPP Loan, and the Company will not need to make any payments on the PPP Loan that U.S. Bank National Association facilitates as an SBA lender. U.S. Bank National Association has applied the forgiveness amount the SBA authorized, plus all accrued interest, to the Company’s PPP Loan. The requirements under this program are established by the SBA. All requests for PPP Loan forgiveness are subject to SBA eligibility.
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SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation
The financial statements presented herein reflect the consolidated financial position of Park City Group 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 (“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 Securities and Exchange Commission (the “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.
Concentration of Credit Risk and Significant Customers
The Company maintains cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of trade receivables. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing evaluations of its customers and maintains allowances for possible losses. The provision is based on the overall composition of our accounts receivable aging, our prior history of accounts receivable write-offs, and our experience with specific customers.
Other factors indicating significant risk include customers that have filed for bankruptcy or customers for which we have less payment history to rely upon. We rely on historical trends of bad debt as a percentage of total revenue and apply these percentages to the accounts receivable which when realized have been within the range of management’s expectations. The Company does not require collateral from its customers.
The Company’s accounts receivable are derived from sales of products and services primarily to customers operating multilocation retail and grocery stores. The Company writes off accounts receivable when they are determined to be uncollectible. Changes in the allowances for doubtful accounts are recorded as bad debt expense and are included in general and administrative expense in our consolidated financial statements. Amounts that have been invoiced are recorded in accounts receivable (current and long-term), and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.
The Company had two customers that accounted for greater than 10% of accounts receivable at June 30, 2021. Customer A had a balance of $967,300 and $0 and customer B had a balance of $404,155 and $122,000, for June 30, 2021 and June 30, 2020, respectively.
Prepaid Expense and Other Current Assets
Prepaid expense and other current assets include amounts for which payment has been made but the services have not yet been consumed. The Company’s prepaid expense is made up primarily of prepayments for hosted software applications used in the Company’s operations, maintenance agreements on hardware and software, and other miscellaneous amounts for insurance, membership fees and professional fees. Prepaid expense is amortized on a pro-rata basis to expense accounts as the services are consumed typically by the passage of time or as the service is used.
Depreciation and Amortization
Depreciation and amortization of property and equipment is computed using the straight-line method based on the following estimated useful lives:
Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life of the improvements.
Amortization of intangible assets are computed using the straight-line method based on the following estimated useful lives:
Goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Other intangible assets are amortized over their useful lives.
Warranties
The Company offers a limited warranty against software defects. Customers who are not completely satisfied with their software purchase may attempt to be reimbursed for their purchases outside the warranty period. For the years ending June 30, 2021 and 2020, the Company did not incur any expense associated with warranty claims.
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 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"). All amounts and disclosures set forth in this Annual Report on Form 10-K 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 right-of-use 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
The Company recognizes revenue as it transfers control of deliverables (products, solutions and services) to its customers in an amount reflecting the consideration to which it expects to be entitled. To recognize revenue, the Company applies 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. The Company accounts 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.
The Company may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any combination of its deliverables. To the extent a contract includes multiple promised deliverables, the Company applies 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, the Company allocates consideration among the performance obligations based on their relative standalone selling price. Standalone selling price is the price at which the Company would sell a promised good or service separately to the customer. When not directly observable, the Company typically estimates standalone selling price by using the expected cost plus a margin approach. The Company typically establishes a standalone selling price range for its 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 the Company’s 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 the Company’s 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 the Company’s 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 the Company’s performance obligations.
Revenue related to the Company’s 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.
Management expects that incremental commission fees paid as a result of obtaining a contract are recoverable and therefore the Company capitalized them as contract costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.
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, the Company may enter into arrangements with third party suppliers to resell products or services. In such cases, the Company evaluates whether the Company is the principal (i.e. report revenue on a gross basis) or agent (i.e. report revenue on a net basis). In doing so, the Company first evaluates whether it controls the good or service before it is transferred to the customer. If the Company controls the good or service before it is transferred to the customer, the Company is the principal; if not, the Company is the agent. Determining whether the Company controls the good or service before it is transferred to the customer may require judgment.
The Company provides 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. The Company includes 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. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and is based largely on an assessment of its anticipated performance and all information that is reasonably available to the Company.
The Company assesses 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, the Company does 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 the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its services, not to receive or provide financing from or to customers. The Company does not consider set up or transition fees paid upfront by its customers to represent a financing component, as such fees are required to encourage customer commitment to the project and protect us from early termination of the contract.
Trade Accounts Receivable and Contract Balances
We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset (unbilled receivable). A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For example, we recognize a receivable for revenue related to our transaction or volume-based contracts when earned regardless of whether amounts have been billed. We present such receivables in trade accounts receivable, net in our consolidated statements of financial position at their net estimated realizable value. We maintain an allowance for doubtful accounts to provide for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables, judgment, and other applicable factors.
A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are presented in current and other assets in our consolidated balance sheets and primarily relate to unbilled amounts on fixed-price contracts utilizing the output method of revenue recognition. The table below shows movements in contract assets:
Our contract assets and liabilities are reported in a net position 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.
The table below shows movements in the deferred revenue balances (current and noncurrent) for the period:
Our contract assets and liabilities are reported 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 contract-type. All revenues for the years ending June 30, 2020 and 2021 were generated from sales in North America. 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:
Software Development Costs
The Company accounts for research costs of computer software to be sold, leased or otherwise marketed as expense until technological feasibility has been established for the product. Once technological feasibility is established, the company will occasionally capitalize software costs until the product is available for general release to customers. In these instances, the Company determines technological feasibility for its software products to have been reached when a working prototype is complete and meets or exceeds design specifications including functions, features, and technical performance requirements. The Company capitalized software development costs of $171,733 in the fiscal year ended June 30, 2021.
Research and Development Costs
Research and development costs include personnel costs, engineering, consulting, and contract labor and are expensed as incurred for software that has not achieved technological feasibility.
Advertising Costs
Advertising is expensed as incurred. Advertising costs were approximately $5,000 and $54,048 for the years ended June 30, 2021 and 2020, respectively.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities.
Earnings Per Share
Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income applicable to common shareholders by the weighted average number of shares of the Company’s common stock, par value $0.01 (“Common Stock”) outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue shares of Common Stock were exercised or converted into Common Stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an antidilutive effect on net income per share of Common Stock.
For the years ended June 30, 2021 and 2020 warrants to purchase 1,085,068 shares of Common Stock were included in the computation of diluted EPS and warrants to purchase 23,737 shares were excluded due to the anti-dilutive effect. Warrants to purchase shares of Common Stock were outstanding at prices ranging $4.00 from to $10.00 per share at June 30, 2021.
The following table presents the components of the computation of basic and diluted earnings per share for the periods indicated:
Stock-Based Compensation
The Company recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. The Company records compensation expense on a straight-line basis. The fair value of options granted are estimated at the date of grant using a Black-Scholes option pricing model with assumptions for the risk-free interest rate, expected life, volatility, dividend yield and forfeiture rate.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of twelve months or less to be cash equivalents. Cash and cash equivalents are stated at fair value.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, cash equivalents, receivables, payables, accruals and notes payable. The carrying amount of cash, cash equivalents, receivables, payables and accruals approximates fair value due to the short-term nature of these items. The notes payable also approximate fair value based on evaluations of market interest rates.
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RECEIVABLES |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||
RECEIVABLES | Accounts receivable consist of the following at June 30:
Accounts receivable consist of trade accounts receivable and unbilled amounts recognized as revenue during the year for which invoicing occurs subsequent to year-end. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.
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PROPERTY AND EQUIPMENT |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT | Property and equipment are stated at cost and consist of the following at June 30:
Depreciation expense for the years ended June 30, 2021 and 2020 was $561,348 and $619,277, respectively.
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CAPITALIZED SOFTWARE COSTS |
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Capitalized Computer Software, Net [Abstract] | |||||||||||||||||||||||||||||||||||||
CAPITALIZED SOFTWARE COSTS | Capitalized software costs consist of the following at June 30:
Amortization expense for the years ended June 30, 2021 and 2020 was $18,539 and $52,326, respectively.
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ACQUISITION RELATED INTANGIBLE ASSETS, NET |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITION RELATED INTANGIBLE ASSETS, NET | Customer relationships consist of the following at June 30:
Amortization expense for the years ended June 30, 2021 and 2020 was $131,400 and $131,400, respectively.
Estimated aggregate amortization expense per year are as follows:
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ACCRUED LIABILITIES |
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Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED LIABILITIES | Accrued liabilities consist of the following at June 30:
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NOTES PAYABLE |
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Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE | The Company had the following notes payable obligations at June 30:
Paycheck Protection Loan. On December 19, 2020, the SBA authorized full forgiveness in the amount of approximately $1.1 million under the PPP Loan, whereby the Company will not need to make any payments on the PPP Loan that U.S. Bank National Association facilitates as an SBA lender. U.S. Bank National Association has applied the forgiveness amount the SBA authorized, plus all accrued interest, to the Company’s PPP Loan. The requirements under this program are established by the SBA. All requests for PPP Loan forgiveness are subject to SBA eligibility.
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LINES OF CREDIT |
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Line of Credit Facility [Abstract] | |
LINES OF CREDIT | On January 10, 2021, the Company and U.S. Bank entered into an amendment (the “Amendment”) to the outstanding Stand-Alone Revolving Note (the “Revolving Note”), preferred accompanying addendum. Pursuant to the Amendment, the parties agreed to (i) extend the maturity date to December 31, 2021 and (ii) increase the interest rate in the event of a default to 5% per annum.
The line of credit, as amended, is scheduled to mature on December 31, 2021. The balance on the line of credit at June 30, 2021 and June 30, 2020 was $6,000,000 and $4,660,000, respectively.
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DEFERRED REVENUE |
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Deferred Revenue Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
DEFERRED REVENUE | Deferred revenue consisted of the following at June 30:
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INCOME TAXES |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES |
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Due to the tax rates being changed in 2018 we have used a federal and state blended rate of 26%.
Net deferred tax liabilities consist of the following components at June 30:
The income tax provision differs from the amounts of income tax determined by applying the US federal income tax rate to pretax income from continuing operations for the years ended June 30, 2021 and 2020 due to the following:
At June 30, 2021, the Company had net operating loss carry-forwards of approximately $65,557,000 that may be offset against past and future taxable income from the year 2020 through 2037. A significant portion of the net operating loss carryforwards began to expire in 2019. No tax benefit has been reported in the June 30, 2021 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. In January of 2009 the Company acquired Prescient Applied Intelligence, Inc. which had significant net operating loss carry-forwards. Due to the change in ownership, Prescient's net operating loss carryforwards may be limited as to use in future years. The limitation will be determined on a year-to-year basis. In June of 2015 the Company acquired Repositrak, Inc. which had significant net operating loss carryforwards. Due to the change in ownership, Repositrak's net operating loss carryforwards may be limited as to use in future years. The limitation will be determined on a year-to-year basis.
The Company determines whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, the Company measures the tax position to determine the amount to recognize in the financial statements. The Company performed a review of its material tax positions in accordance with these recognition and measurement standards.
The Company has concluded that there are no significant uncertain tax positions requiring disclosure, and there are not material amounts of unrecognized tax benefits.
The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of June 30, 2021, the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before June 30, 2018. |
COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES | Leases
On May 1, 2019, the Company completed the expansion of new equipment for the Company’s information technology infrastructure, buildout of its corporate headquarters, and expansion of its collocation data center, which it completed using approximately $1,269,000 (the “Lease Amount”) of funds provided by U.S. Bank to finance equipment and services related to the Company’s expansion and relocation pursuant to that certain lease agreement, originally entered into by and between the Company and U.S. Bank on January 9, 2019 (the “Lease Agreement”). Pursuant to the Lease Agreement, as of May 1, 2019, U.S. Bank is now leasing back the property and equipment purchased by the Company. Pursuant to the Lease Agreement, commencing May 1, 2019, the initial term of the lease shall be 48 months, the Lease Amount shall accrue interest at a rate of 5.0% per annum, and the Company shall be required to make monthly rental payments in the amount of approximately $29,097 per month. On July 30, 2020 the Company made an early repayment of the entire outstanding balance on the note payable due to U.S. Bank in the amount of $960,208. The repayment amount included $64,721 of accrued interest. No repayment penalties were incurred as a result of the transaction.
On June 21, 2018 the Company entered into an office lease at 5252 South Commerce Drive Suite D292, Murray, Utah 84107, providing for the lease of approximately 9,800 square feet for a period of three years, commencing on March 1, 2019. The monthly rent is $10,200.
Minimum future payments, including principal and interest, under the non-cancelable capital leases are as follows:
From time to time the Company may enter into or exit from diminutive operating lease agreements for equipment such as copiers, temporary back up servers, etc. These leases are not of a material amount and thus will not in the aggregate have a material adverse effect on our business, financial condition, results of operation or liquidity.
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EMPLOYEEE BENEFIT PLAN |
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Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
EMPLOYEEE BENEFIT PLAN | The Company offers an employee benefit plan under Benefit Plan Section 401(k) of the Internal Revenue Code. Employees who have attained the age of 18 are eligible to participate. The Company, at its discretion, may match employee’s contributions at a percentage determined annually by the Board of Directors. The Company does not currently match contributions. There were no expenses for the years ended June 30, 2021 and 2020.
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STOCKHOLDERS EQUITY |
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STOCKHOLDERS EQUITY | Officers and Directors Stock Compensation
Effective October 2018, the Board of Directors approved the following compensation for directors who are not employed by the Company:
Officers, Key Employees, Consultants and Directors Stock Compensation.
In January 2013, the Board of Directors approved the Second Amended and Restated 2011 Stock Plan (the “Amended 2011 Plan”), which Amended 2011 Plan was approved by shareholders on March 29, 2013. Under the terms of the Amended 2011 Plan, all employees, consultants and directors of the Company are eligible to participate. The maximum aggregate number of shares of Common Stock that may be granted under the Amended 2011 Plan is 675,000 shares.
A Committee of independent members of the Company’s Board of Directors administers the Amended 2011 Plan. The exercise price for each share of Common Stock purchasable under any incentive stock option granted under the Amended 2011 Plan shall be not less than 100% of the fair market value of the Common Stock, as determined by the stock exchange on which the Common Stock trades on the date of grant. If the incentive stock option is granted to a shareholder who possesses more than 10% of the Company’s voting power, then the exercise price shall be not less than 110% of the fair market value on the date of grant. Each option shall be exercisable in whole or in installments as determined by the Committee at the time of the grant of such options. All incentive stock options expire after 10 years. If the incentive stock option is held by a shareholder who possesses more than 10% of the Company's voting power, then the incentive stock option expires after five years. If the option holder is terminated, then the incentive stock options granted to such holder expire no later than three months after the date of termination. For option holders granted incentive stock options exercisable for the first time during any fiscal year and in excess of $100,000 (determined by the fair market value of the shares of Common Stock as of the grant date), the excess shares of Common Stock shall not be deemed to be purchased pursuant to incentive stock options.
During the years ended June 30, 2021 and 2020 the Company issued 40,883 and 61,551 shares to its directors and 37,575 and 41,747 shares to employees and consultants, respectively, under the Amended 2011 Plan. The Company, under its Share Repurchase Program, repurchased 211,008 and 412,185 shares of its Common Stock during the years ended June 30, 2021 and 2020, respectively. Those shares were cancelled and returned to authorized but unissued shares. The Company holds no Treasury Stock. Vested and issued shares under the Amended 2011 plan for the fiscal year ending June 30, 2021 and June 30, 2020, totaling 9,357 and 16,059, respectively are included in the rollforward of Restricted Stock units below.
Restricted Stock Units
The number of restricted stock units outstanding at June 30, 2021 included 9,288 units that have vested but for which shares of Common Stock had not yet been issued pursuant to the terms of the agreement.
As of June 30, 2021, 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 2.51 years.
Warrants
Outstanding warrants were issued in connection with private placements of the Company’s Common Stock and with the restructuring of the Series B Preferred that occurred in March of 2018. The following table summarizes information about fixed stock warrants outstanding at June 30, 2021:
Preferred Stock
The Company’s articles of incorporation currently authorizes the issuance of up to 30,000,000 shares of ‘blank check’ preferred stock, par value $0.01 (“Preferred Stock”) with designations, rights, and preferences as may be determined from time to time by the Company’s Board of Directors, of which 700,000 shares are currently designated as Series B Preferred Stock (“Series B Preferred”) and 550,000 shares are designated as Series B-1 Preferred Stock (“Series B-1 Preferred”). 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 by the issuance of additional shares of Series B Preferred, or Series B-1 Preferred, as applicable.
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 materially more expensive, or would impair the Company’s net cash position, which management believes could cause customer concerns and negatively impact the Company’s ability to attract new business.
Section 4 of the Company’s First Amended and Restated Certificate of Designation of the Relative Rights, Powers and Preferences of the Series B-1 Preferred Stock, as amended (the “Series B-1 COD”) provides the Company’s Board of Directors with the right to redeem any or all of the outstanding shares of the Company’s Series B-1 Preferred for a cash payment of $10.70 per share at any time upon providing the holders of Series B-1 Preferred at least ten days written notice that sets forth the date on which the redemption will occur (the “Redemption Notice”).
As of June 30, 2021, a total of 625,375 shares of Series B Preferred and 212,402 shares of Series B-1 Preferred were issued and outstanding.
Share Repurchase Program
On May 9, 2019, our Board of Directors approved of the repurchase of up to $4.0 million shares 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”). 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. On March 17, 2020, given the extreme uncertainty due to COVID-19 at the time, the Board suspended the Share Repurchase Program.
On May 18, 2021, our Board of Directors resumed its Share Repurchase Program, and increased the buyback from $4 million to $6 million. The Share Repurchase Program expires 24 months following May 18, 2021, and it may be suspended for periods of time or discontinued at any time, at the Board’s discretion. The total remaining authorization for future shares of Common Stock repurchases under our Share Repurchase Program was $2,050,885 as of June 30, 2021. From time-to-time, our Board may authorize further increases to our Share Repurchase Program.
The following table provides information about repurchases of our Common Stock registered pursuant to Section 12 of the Exchange Act, during the years ended June 30, 2021 and 2020:
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RECENT ACCOUNTING PRONOUNCEMENTS |
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Accounting Standards Update and Change in Accounting Principle [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 adopted the standard during the second quarter of fiscal year 2020. This standard did not have a material impact on the Company’s 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 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. 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 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 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 Annual Report on Form 10-K 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. |
RELATED PARTY TRANSACTIONS |
12 Months Ended |
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Jun. 30, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Service Agreement. During the year ended June 30, 2021, the Company continued to be a party to a Service Agreement with Fields Management, Inc. (“FMI”), pursuant to which FMI provided certain executive management services to the Company, including designating Mr. 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 June 30, 2021 and 2020 respectively, under the Service Agreement.
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SUBSEQUENT EVENTS |
12 Months Ended |
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Jun. 30, 2021 | |
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 further 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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Principles of Consolidation | The financial statements presented herein reflect the consolidated financial position of Park City Group 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. generally accepted accounting principles (“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 Securities and Exchange Commission (the “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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Concentration of Credit Risk and Significant Customers | The Company maintains cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of trade receivables. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing evaluations of its customers and maintains allowances for possible losses. The provision is based on the overall composition of our accounts receivable aging, our prior history of accounts receivable write-offs, and our experience with specific customers.
Other factors indicating significant risk include customers that have filed for bankruptcy or customers for which we have less payment history to rely upon. We rely on historical trends of bad debt as a percentage of total revenue and apply these percentages to the accounts receivable which when realized have been within the range of management’s expectations. The Company does not require collateral from its customers.
The Company’s accounts receivable are derived from sales of products and services primarily to customers operating multilocation retail and grocery stores. The Company writes off accounts receivable when they are determined to be uncollectible. Changes in the allowances for doubtful accounts are recorded as bad debt expense and are included in general and administrative expense in our consolidated financial statements. Amounts that have been invoiced are recorded in accounts receivable (current and long-term), and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.
The Company had two customers that accounted for greater than 10% of accounts receivable at June 30, 2021. Customer A had a balance of $967,300 and $0 and customer B had a balance of $404,155 and $122,000, for June 30, 2021 and June 30, 2020, respectively. |
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Prepaid Expense and Other Current Assets | Prepaid expense and other current assets include amounts for which payment has been made but the services have not yet been consumed. The Company’s prepaid expense is made up primarily of prepayments for hosted software applications used in the Company’s operations, maintenance agreements on hardware and software, and other miscellaneous amounts for insurance, membership fees and professional fees. Prepaid expense is amortized on a pro-rata basis to expense accounts as the services are consumed typically by the passage of time or as the service is used.
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Depreciation and Amortization | Depreciation and amortization of property and equipment is computed using the straight-line method based on the following estimated useful lives:
Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life of the improvements.
Amortization of intangible assets are computed using the straight-line method based on the following estimated useful lives:
Goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Other intangible assets are amortized over their useful lives.
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Warranties | The Company offers a limited warranty against software defects. Customers who are not completely satisfied with their software purchase may attempt to be reimbursed for their purchases outside the warranty period. For the years ending June 30, 2021 and 2020, the Company did not incur any expense associated with warranty claims.
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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 consolidated financial statements.
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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"). All amounts and disclosures set forth in this Annual Report on Form 10-K 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 right-of-use 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 | The Company recognizes revenue as it transfers control of deliverables (products, solutions and services) to its customers in an amount reflecting the consideration to which it expects to be entitled. To recognize revenue, the Company applies 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. The Company accounts 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.
The Company may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any combination of its deliverables. To the extent a contract includes multiple promised deliverables, the Company applies 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, the Company allocates consideration among the performance obligations based on their relative standalone selling price. Standalone selling price is the price at which the Company would sell a promised good or service separately to the customer. When not directly observable, the Company typically estimates standalone selling price by using the expected cost plus a margin approach. The Company typically establishes a standalone selling price range for its 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 the Company’s 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 the Company’s 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 the Company’s 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 the Company’s performance obligations.
Revenue related to the Company’s 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.
Management expects that incremental commission fees paid as a result of obtaining a contract are recoverable and therefore the Company capitalized them as contract costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.
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, the Company may enter into arrangements with third party suppliers to resell products or services. In such cases, the Company evaluates whether the Company is the principal (i.e. report revenue on a gross basis) or agent (i.e. report revenue on a net basis). In doing so, the Company first evaluates whether it controls the good or service before it is transferred to the customer. If the Company controls the good or service before it is transferred to the customer, the Company is the principal; if not, the Company is the agent. Determining whether the Company controls the good or service before it is transferred to the customer may require judgment.
The Company provides 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. The Company includes 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. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and is based largely on an assessment of its anticipated performance and all information that is reasonably available to the Company.
The Company assesses 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, the Company does 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 the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its services, not to receive or provide financing from or to customers. The Company does not consider set up or transition fees paid upfront by its 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 amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables, judgment, and other applicable factors.
A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are presented in current and other assets in our consolidated balance sheets and primarily relate to unbilled amounts on fixed-price contracts utilizing the output method of revenue recognition. The table below shows movements in contract assets:
Our contract assets and liabilities are reported 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.
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 contract-type. All revenues for the years ending June 30, 2020 and 2021 were generated from sales in North America. 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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Software Development Costs | The Company accounts for research costs of computer software to be sold, leased or otherwise marketed as expense until technological feasibility has been established for the product. Once technological feasibility is established, the company will occasionally capitalize software costs until the product is available for general release to customers. In these instances, the Company determines technological feasibility for its software products to have been reached when a working prototype is complete and meets or exceeds design specifications including functions, features, and technical performance requirements. The Company capitalized software development costs of $171,733 in the fiscal year ended June 30, 2021. |
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Research and Development Costs | Research and development costs include personnel costs, engineering, consulting, and contract labor and are expensed as incurred for software that has not achieved technological feasibility.
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Advertising Costs | Advertising is expensed as incurred. Advertising costs were approximately $5,000 and $54,048 for the years ended June 30, 2021 and 2020, respectively.
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Income Taxes | The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities.
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Earnings Per Share | Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income applicable to common shareholders by the weighted average number of shares of the Company’s common stock, par value $0.01 (“Common Stock”) outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue shares of Common Stock were exercised or converted into Common Stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an antidilutive effect on net income per share of Common Stock.
For the years ended June 30, 2021 and 2020 warrants to purchase 1,085,068 shares of Common Stock were included in the computation of diluted EPS and warrants to purchase 23,737 shares were excluded due to the anti-dilutive effect. Warrants to purchase shares of Common Stock were outstanding at prices ranging $4.00 from to $10.00 per share at June 30, 2021.
The following table presents the components of the computation of basic and diluted earnings per share for the periods indicated:
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Stock-Based Compensation | The Company recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. The Company records compensation expense on a straight-line basis. The fair value of options granted are estimated at the date of grant using a Black-Scholes option pricing model with assumptions for the risk-free interest rate, expected life, volatility, dividend yield and forfeiture rate. |
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Cash and Cash Equivalents | The Company considers all highly liquid investments purchased with an original maturity of twelve months or less to be cash equivalents. Cash and cash equivalents are stated at fair value.
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Fair Value of Financial Instruments | The Company’s financial instruments consist of cash, cash equivalents, receivables, payables, accruals and notes payable. The carrying amount of cash, cash equivalents, receivables, payables and accruals approximates fair value due to the short-term nature of these items. The notes payable also approximate fair value based on evaluations of market interest rates.
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SIGNIFICANT ACCOUNTING POLICIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization of property and equipment |
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Amortization of intangible assets |
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Contract assets and liabilities |
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Disaggregation of revenue |
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Diluted EPS |
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RECEIVABLES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||
Accounts receivable |
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PROPERTY AND EQUIPMENT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment |
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CAPITALIZED SOFTWARE COSTS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||
Capitalized Computer Software, Net [Abstract] | |||||||||||||||||||||||||||||||||||||
Capitalized software costs |
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ACQUISITION RELATED INTANGIBLE ASSETS, NET (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||
Customer relationships |
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Estimated aggregate amortization expense |
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ACCRUED LIABILITIES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued liabilities |
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NOTES PAYABLE (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes payable |
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DEFERRED REVENUE (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||
Deferred Revenue Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Deferred revenue |
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INCOME TAXES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax assets and liabilities |
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Summary of income tax |
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COMMITMENTS AND CONTINGENCIES (Tables) |
12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||
Minimum future rental payments |
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STOCKHOLDERS EQUITY (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock units |
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Fixed stock options and warrants outstanding |
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Share repurchase program |
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SIGNIFICANT ACCOUNTING POLICIES (Details) |
12 Months Ended |
---|---|
Jun. 30, 2021 | |
Furniture and fixtures | Minimum | |
Property plant and equipment useful life | 5 years |
Furniture and fixtures | Maximum | |
Property plant and equipment useful life | 7 years |
Computer Equipment | |
Property plant and equipment useful life | 3 years |
Equipment Under Capital Leases | |
Property plant and equipment useful life | 3 years |
Long-term Use Equipment | |
Property plant and equipment useful life | 10 years |
Leasehold Improvements | |
Useful life | Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life of the improvements. |
SIGNIFICANT ACCOUNTING POLICIES (Details 1) |
12 Months Ended |
---|---|
Jun. 30, 2021 | |
Customer Relationships | |
Amortization of intangible asset useful life | 10 years |
Acquired Developed Software | |
Amortization of intangible asset useful life | 5 years |
Developed Software | |
Amortization of intangible asset useful life | 3 years |
Goodwill | |
Goodwill useful life | Goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Other intangible assets are amortized over their useful lives. |
SIGNIFICANT ACCOUNTING POLICIES (Details 2) |
12 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2021
USD ($)
| ||||
Accounting Policies [Abstract] | ||||
Contract assets, beginning | $ 3,139,480 | |||
Revenue recognized during the period but not billed | 0 | |||
Amounts reclassified to accounts receivable | (1,391,313) | |||
Other | (90,306) | |||
Contract assets, ending | 1,657,861 | [1] | ||
Contract liability, beginning | 1,845,347 | |||
Amounts billed but not recognized as revenue | 1,665,648 | |||
Revenues recognized related to the opening balance of deferred revenue | (1,755,654) | |||
Other | 0 | |||
Contract liability, ending | $ 1,755,341 | |||
|
SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Revenue | $ 21,007,076 | $ 20,038,054 |
Subscription, Support & Services [Member] | ||
Revenue | 17,733,134 | 16,043,245 |
Non-Recurring - Services [Member] | ||
Revenue | 37,121 | 218,250 |
Recurring - License [Member] | ||
Revenue | 0 | 2,927,271 |
Transaction based | ||
Revenue | $ 3,236,821 | $ 849,288 |
SIGNIFICANT ACCOUNTING POLICIES (Details 4) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Numerator | ||
Net income applicable to common shareholders | $ 3,530,951 | $ 1,006,825 |
Denominator | ||
Weighted average common shares outstanding, basic | 19,502,000 | 19,651,000 |
Warrants to purchase common stock | 252,000 | 212,000 |
Weighted average common shares outstanding, diluted | 19,754,000 | 19,863,000 |
Net Income per Share | ||
Basic | $ 0.18 | $ 0.05 |
Diluted | $ 0.18 | $ 0.05 |
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Contract assets, current | $ 1,248,936 | $ 2,300,754 |
Contract assets, noncurrent | 408,925 | 838,726 |
Advertising expense | $ 5,000 | $ 54,048 |
Computation of diluted EPS due to the anti-dilutive effect | 1,108,805 | |
Customer A | ||
Accounts receivable | $ 404,155 | $ 122,000 |
RECEIVABLES (Details) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Receivables [Abstract] | ||
Accounts receivable | $ 5,375,598 | $ 6,560,024 |
Allowance for doubtful accounts | (234,963) | (251,954) |
Accounts receivable, net | $ 5,140,635 | $ 6,308,070 |
PROPERTY AND EQUIPMENT (Details) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Computer equipment | $ 4,069,543 | $ 3,974,792 |
Furniture and fixtures | 2,237,684 | 2,185,295 |
Leasehold improvements | 807,816 | 807,816 |
Property and equipment, gross | 7,115,043 | 6,697,903 |
Less accumulated depreciation and amortization | (4,525,849) | (3,964,501) |
Property and equipment, net | $ 2,589,194 | $ 3,003,402 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 561,348 | $ 619,277 |
CAPITALIZED SOFTWARE COSTS (Details) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Capitalized Computer Software, Net [Abstract] | ||
Capitalized software costs, gross | $ 2,909,044 | $ 2,737,312 |
Less accumulated amortization | (2,737,312) | (2,718,773) |
Capitalized software costs, net | $ 171,732 | $ 18,539 |
CAPITALIZED SOFTWARE COSTS (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Capitalized Computer Software, Net [Abstract] | ||
Amortization expense | $ 18,539 | $ 52,326 |
ACQUISITION RELATED INTANGIBLE ASSETS, NET (Details) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Business Combinations [Abstract] | ||
Customer relationships | $ 5,537,161 | $ 5,537,161 |
Less accumulated amortization | (5,011,561) | (4,880,161) |
Total | $ 525,600 | $ 657,000 |
ACQUISITION RELATED INTANGIBLE ASSETS, NET (Details 1) |
Jun. 30, 2021
USD ($)
|
---|---|
Business Combinations [Abstract] | |
2022 | $ 131,400 |
2023 | 131,400 |
2024 | 131,400 |
2025 | $ 131,400 |
ACQUISITION RELATED INTANGIBLE ASSETS, NET (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Business Combinations [Abstract] | ||
Amortization expense | $ 131,400 | $ 131,400 |
ACCRUED LIABILITIES (Details) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued stock-based compensation | $ 348,265 | $ 252,959 |
Accrued compensation | 293,130 | 383,088 |
Accrued other liabilities | 56,333 | 207,003 |
Accrued taxes | 146,004 | 136,117 |
Accrued dividends | 144,360 | 144,361 |
Accrued liabilities | $ 988,092 | $ 1,123,528 |
NOTES PAYABLE (Details) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Notes payable | $ 0 | $ 2,030,104 |
Less current portion of notes payable | 0 | (790,108) |
Non current capital lease obligations and notes payable | 0 | 1,239,996 |
Bank 1 | ||
Notes payable | 0 | 920,754 |
Monthly debt payment installment | $ 29,097 | |
Annual interest rate | 4.99% | |
Bank 2 | ||
Notes payable | $ 0 | $ 1,109,350 |
Annual interest rate | 1.00% |
LINES OF CREDIT (Details Narrative) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Line of Credit Facility [Abstract] | ||
Line of credit outstanding | $ 6,000,000 | $ 4,660,000 |
DEFERRED REVENUE (Details) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Deferred revenue | $ 1,755,341 | $ 1,845,347 |
Subscription | ||
Deferred revenue | 1,513,729 | 1,596,228 |
Other | ||
Deferred revenue | $ 241,612 | $ 249,119 |
INCOME TAXES (Details) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Deferred Tax Assets: | ||
NOL carryover | $ 17,044,800 | $ 27,788,000 |
Allowance for bad debts | 61,000 | 65,500 |
Accrued expenses | 77,200 | 52,000 |
Deferred Tax Liabilities: | ||
Depreciation | (630,200) | (700,400) |
Amortization | (687,500) | (565,100) |
Valuation allowance | (15,865,300) | (26,640,000) |
Net deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Income Tax Disclosure [Abstract] | ||
Book income | $ 1,062,891 | $ 414,250 |
Stock for services | (25,679) | 4,625 |
Change in accrual | 25,286 | (3,726) |
Life insurance | 17,626 | 17,626 |
Meals & entertainment | 3,505 | 8,874 |
Change in allowance | (4,488) | 27,594 |
Change in depreciation | (52,113) | (168,095) |
PPP & EIDL loan forgiveness | (288,431) | 0 |
NOL utilization | (738,597) | (301,148) |
Valuation allowance | 0 | 0 |
Total | $ 0 | $ 0 |
INCOME TAXES (Details Narrative) |
12 Months Ended |
---|---|
Jun. 30, 2021
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Net operating loss carryforwards | $ 65,557,000 |
Carryforward expiration date | Jan. 01, 2037 |
COMMITMENTS AND CONTINGENCIES (Details) |
Jun. 30, 2021
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2022 | $ 81,600 |
STOCKHOLDERS EQUITY (Details) - Restricted Stock - $ / shares |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Restricted Stock Units | ||
Outstanding, beginning of period | 837,424 | 866,274 |
Granted | 13,249 | 1,008 |
Vested and issued | (9,357) | (16,059) |
Forfeited | 0 | (13,799) |
Outstanding, end of period | 841,316 | 837,424 |
Weighted Average Grant Date Fair Value | ||
Outstanding, beginning of period | $ 5.36 | $ 5.47 |
Granted | 6.35 | 4.96 |
Vested and issued | 8.74 | 9.33 |
Forfeited | .00 | 7.74 |
Outstanding, end of period | $ 5.34 | $ 5.36 |
STOCKHOLDERS EQUITY (Details 1) - Warrants |
12 Months Ended |
---|---|
Jun. 30, 2021
$ / shares
shares
| |
Weighted average remaining contractual life (years), outstanding | 1 year 7 months 6 days |
Weighted average exercise price | $ 4.13 |
Number exercisable | shares | 1,108,805 |
Weighted average exercise price, exercisable | $ 4.13 |
$4.00 | |
Number outstanding | shares | 1,085,068 |
Weighted average remaining contractual life (years), outstanding | 1 year 7 months 6 days |
Weighted average exercise price | $ 4.00 |
Number exercisable | shares | 1,108,805 |
Weighted average exercise price, exercisable | $ 4.00 |
$10.00 | |
Weighted average remaining contractual life (years), outstanding | 1 year 6 months 25 days |
Weighted average exercise price | $ 10.00 |
Number exercisable | shares | 23,737 |
Weighted average exercise price, exercisable | $ 10.00 |
STOCKHOLDERS EQUITY (Details 2) - $ / shares |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Mar. 31, 2021 |
Dec. 31, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
|
Stockholders' equity: | ||||||||
Total number of shares purchased | 126,927 | 84,081 | 0 | 0 | 0 | 157,616 | 174,615 | 79,954 |
Average price paid per share | $ 6.3 | $ 6.04 | $ .00 | $ .00 | $ .00 | $ 5.11 | $ 4.8 | $ 6.43 |
Total number of shares purchased as part of publicly announced plans or programs | 457,659 | 584,586 | 0 | 0 | 0 | 499,785 | 342,169 | 167,554 |
Amount available for future share repurchases under the plans or programs | 2,050,885 | 2,850,880 | 1,359,123 | 1,359,123 | 1,359,123 | 1,359,123 | 2,162,557 | 3,000,235 |
STOCKHOLDERS EQUITY (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Unrecognized stock-based compensation expense | $ 4,500,000 | |
Unrecognized stock-based compensation expense, recognition period | 2 years 6 months 4 days | |
Series B Preferred | ||
Preferred stock authorized | 700,000 | 700,000 |
Preferred stock, issued | 625,375 | 625,375 |
Preferred stock, outstanding | 625,375 | 625,375 |
Series B-1 Preferred | ||
Preferred stock authorized | 550,000 | 550,000 |
Preferred stock, issued | 212,402 | 212,402 |
Preferred stock, outstanding | 212,402 | 212,402 |
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
Jun. 30, 2021 |
Jun. 30, 2020 |
---|---|---|
Related Party Transactions [Abstract] | ||
Related party payables | $ 0 | $ 0 |
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