pcyg20221231

pcyg20221231_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended December 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________ to _________.

Commission File Number 001-34941

PARK CITY GROUP, INC.

(Exact name of small business issuer as specified in its charter)

Nevada		37-1454128
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

5282 South Commerce Drive, Suite D292, Murray, Utah 84107

(Address of principal executive offices)

(435) 645-2000

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	PCYG	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of February 14, 2023, 18,413,734 shares of the registrant’s common stock, $0.01 par value, were issued and outstanding.

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Condensed Balance Sheets as of December 31, 2022 and June 30, 2022 (Unaudited)
	Consolidated Condensed Statements of Operations for the Three and Six Months Ended December 31, 2022 and 2021 (Unaudited)
	Consolidated Condensed Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021 (Unaudited)
	Consolidated Statements of Stockholders’ Equity for December 31, 2022 and 2021 (Unaudited)
	Notes to Consolidated Condensed Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3.	Defaults Upon Senior Securities	22

Item 5.	Other Information	22

Item 6.	Exhibits	22

Signatures		23

	December 31, 2022			June 30, 2022
*Assets*
Current Assets
Cash	$	21,400,255		$	21,460,948
Receivables, net of allowance for doubtful accounts of $184,847 and $206,093 at December 31, 2022 and June 30, 2022, respectively		2,827,039			3,165,200
Contract asset – unbilled current portion		440,087			649,433
Prepaid expense and other current assets		1,197,120			1,307,128
Total Current Assets		25,864,501			26,582,709

Property and equipment, net		1,154,534			764,517

Other Assets:
Deposits and other assets		22,414			22,414
Prepaid expense – less current portion		60,130			82,934
Contract asset – unbilled long-term portion		108,052			108,052
Operating lease – right-of-use asset		340,062			368,512
Customer relationships		328,500			394,200
Goodwill		20,883,886			20,883,886
Capitalized software costs, net		85,866			114,488
Total Other Assets		21,828,910			21,974,486

Total Assets	$	48,847,945		$	49,321,712

*Liabilities and Shareholders’ Equity*
Current liabilities
Accounts payable	$	389,708		$	690,638
Accrued liabilities		1,332,720			1,206,284
Contract liability – deferred revenue		1,566,383			1,555,143
Lines of credit		448,742			2,590,907
Operating lease liability – current		56,306			53,862
Notes payable and financing leases – current		220,915			-
Total current liabilities		4,014,774			6,096,834

Long-term liabilities
Operating lease liability – less current portion		293,202			321,818
Notes payable and financing leases – less current portion		283,576			-
Total liabilities		4,591,552			6,418,652

Commitments and contingencies

Stockholders’ equity:
Preferred Stock; $0.01 par value, 30,000,000 shares authorized;
Series B Preferred, 700,000 shares authorized; 625,375 shares issued and outstanding at December 31, 2022 and June 30, 2022;		6,254			6,254
Series B-1 Preferred, 550,000 shares authorized; 212,402 shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively		2,124			2,124
Common Stock, $0.01 par value, 50,000,000 shares authorized; 18,394,296 and 18,460,538 issued and outstanding at December 31, 2022 and June 30, 2022, respectively		183,945			184,608
Additional paid-in capital		68,303,199			68,653,361
Accumulated deficit		(24,239,129	)		(25,943,287	)
Total stockholders’ equity		44,256,393			42,903,060
Total liabilities and stockholders’ equity	$	48,847,945		$	49,321,712

	Three Months Ended December 31,						Six Months Ended December 31,
	2022			2021			2022			2021

Revenue	$	4,750,513		$	4,353,587		$	9,470,990		$	8,913,264

Operating expense:
Cost of services and product support		866,642			817,213			1,699,346			1,663,700
Sales and marketing		1,226,812			1,152,036			2,427,071			2,340,929
General and administrative		1,252,357			1,209,002			2,475,819			2,305,658
Depreciation and amortization		229,160			217,767			465,166			478,931

Total operating expense		3,574,971			3,396,018			7,067,402			6,789,218

Income from operations		1,175,542			957,569			2,403,588			2,124,046

Other income (expense):
Interest income		199,266			86,884			278,358			142,040
Interest expense		(18,058	)		(3,303	)		(42,710	)		(6,201	)
Unrealized (loss) on short term investments		(31,406	)		(113,807	)		(38,821	)		(263,098	)
Other gain (loss)		-			-			70,047			(83,081	)

Income before income taxes		1,325,344			927,343			2,670,462			1,913,706

(Provision) for income taxes:		(60,000	)		(55,275	)		(120,006	)		(94,821	)
Net income		1,265,344			872,068			2,550,456			1,818,885

Dividends on preferred stock		(146,611	)		(146,611	)		(293,222	)		(293,222	)

Net income applicable to common shareholders	$	1,118,733		$	725,457		$	2,257,234		$	1,525,663

Weighted average shares, basic		18,402,000			19,357,000			18,419,000			19,370,000
Weighted average shares, diluted		18,630,000			19,682,000			18,678,000			19,658,000
Basic income per share	$	0.06		$	0.04		$	0.12		$	0.08
Diluted income per share	$	0.06		$	0.04		$	0.12		$	0.08

	Six Months Ended December 31,
	2022			2021
Cash flows from operating activities:
Net income	$	2,550,456		$	1,818,885
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		465,166			478,931
Amortization of operating right of use asset		28,450			44,382
Stock compensation expense		209,869			234,396
Bad debt expense		300,000			250,000
Gain on disposal of assets		-			(24,737	)
Loss on sale of property and equipment		-			107,820
(Increase) decrease in:
Accounts receivables		247,507			285,141
Long-term receivables, prepaids and other assets		21,431			(97,532	)
(Decrease) increase in:
Accounts payable		(300,930	)		15,721
Operating lease liability		(26,172	)		(44,382	)
Accrued liabilities		(207,025	)		87,811
Deferred revenue		11,240			(97,482	)
Net cash provided by operating activities		3,299,992			3,058,954

Cash flows from investing activities:
Sale of property and equipment		-			1,374,085
Purchase of property and equipment		(270,854	)		(17,049	)
Net cash provided by (used in) investing activities		(270,854	)		1,357,036

Cash flows from financing activities:
Net (decrease) increase in lines of credit		(2,142,165	)		(5,070,000	)
Common Stock buyback/retirement		(551,923	)		(1,470,974	)
Proceeds from employee stock plan		48,903			56,577
Dividends paid		(570,511	)		(293,222	)
Payments on notes payable and capital leases		125,865			-
Net cash used in financing activities		(3,089,831	)		(6,777,619	)

Net decrease in cash and cash equivalents		(60,693	)		(2,361,629	)

Cash and cash equivalents at beginning of period		21,460,948			24,070,322
Cash and cash equivalents at end of period	$	21,400,255		$	21,708,693

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	264,486		$	172,342
Cash paid for interest	$	40,446		$	7,688
Cash paid for operating leases	$	35,226		$	71,200

Supplemental disclosure of non-cash investing and financing activities:
Common stock to pay accrued liabilities	$	152,195		$	234,447
Dividends accrued on preferred stock	$	293,222		$	293,222

	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, 2022		625,375	$	6,254		212,402	$	2,124		18,460,538		$	184,608		$	68,653,361		$	(25,943,287	)	$	42,903,060
Stock issued for:
Accrued compensation		-		-		-		-		15,603			156			76,717			-			76,873
Employee stock plan		-		-		-		-		13,064			131			48,772			-			48,903
Stock buyback		-		-		-		-		(20,859	)		(209	)		(103,448	)		-			(103,657	)
Preferred Dividends-Declared		-		-		-		-		-			-			-			(146,611	)		(146,611	)
Common Stock Dividends-Declared		-		-		-		-		-			-			-			(277,162	)		(277,162	)
Net income		-		-		-		-		-			-			-			1,285,112			1,285,112
Balance, September 30, 2022		625,375	$	6,254		212,402	$	2,124		18,468,346		$	184,686		$	68,675,402		$	(25,081,948	)	$	43,786,518

Stock issued for:
Accrued compensation		-		-		-		-		14,691			147			75,175			-			75,322
Stock buyback		-		-		-		-		(88,741	)		(888	)		(447,378	)		-			(448,266	)
Preferred Dividends-Declared		-		-		-		-		-			-			-			(146,611	)		(146,611	)
Common Stock Dividends-Declared		-		-		-		-		-			-			-			(275,914	)		(275,914	)
Net income		-		-		-		-		-			-			-			1,265,344			1,265,344
Balance, December 31, 2022		625,375		6,254		212,402		2,124		18,394,296			183,945			68,303,199			(24,239,129	)		44,256,393

	Contract assets
Balance – June 30, 2022	$	757,485
Revenue recognized during the period but not billed		-
Amounts reclassified to accounts receivable		(196,000	)
Other		(13,346	)
Balance – December 31, 2022	$	548,139	⁽¹⁾

	Contract liability
Balance – June 30, 2022	$	1,555,143
Amounts billed but not recognized as revenue		1,524,016
Revenue recognized related to the opening balance of deferred revenue		(1,512,776	)
Balance – December 31, 2022	$	1,566,383

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021

Recurring – Subscription, Support and Services	$	4,743,216	$	4,300,168	$	9,421,193	$	8,705,612
Non-Recurring – Services		7,297		30,718		49,797		81,618
Transaction Based – MarketPlace		-		22,701		-		126,034
	$	4,750,513	$	4,353,587	$	9,470,990	$	8,913,264

Restricted Stock Units	Restricted Stock Units			Weighted Average Grant Date Fair Value ($/share)

Outstanding at June 30, 2022		906,155		$	5.34
Granted		50,994			4.82
Vested and issued		(12,950	)		5.71
Forfeited		(2,568	)		5.84
Outstanding at December 31, 2022		941,631		$	5.30

Warrants Outstanding at December 31, 2022								Warrants Exercisable at December 31, 2022
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		0.10	$	4.00		1,085,068	$	4.00
$	10.00		23,737		0.07	$	10.00		23,737	$	10.00
			1,108,805		0.10	$	4.13		1,108,805	$	4.13

Period ⁽¹⁾	Total Number of Shares Purchased		Average Price Paid Per Share		Dollars Expended by Period Under the Plans or Programs		Remaining Amount Available for Future Share Repurchases Under the Plans or Programs
July 1, 2022 – September 30, 2022:		20,859	$	4.97	$	103,657	$	10,713,447
October 1, 2022 – December 31, 2022:		88,741	$	5.05	$	448,266	$	10,265,181

	Fiscal Quarter Ended December 31,						Variance
	2022			2021			Dollars		Percent
Net other income (expense)	$	149,802		$	(30,226	)	$	180,028		596	%
Percent of total revenue		3	%		-1	%

	Fiscal Quarter Ended December 31,						Variance
	2022			2021			Dollars		Percent
Preferred dividends	$	146,611		$	146,611		$	-		-	%
Percent of total revenue		3	%		3	%

SEC Form 10-Q filed by Park City Group Inc.