FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2005
Commission File Number 000-03718
PARK CITY GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 37-1454128
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
333 Main Street, P.O. Box 5000; Park City, Utah 84060
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(Address of principal executive offices)
(435) 649-2221
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(Registrant's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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.
[X]Yes [ ]No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of
May 6, 2005
Common Stock, $.01 par value 278,420,529
Shareholders 2,359
PARK CITY GROUP, INC.
Table of Contents to Quarterly Report on Form 10-QSB
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Condensed Balance Sheet as of March 31, 2005
(Unaudited) 3
Consolidated Condensed Statements of Operations for the three
and nine months ended March 31, 2005 and 2004 (Unaudited) 4
Consolidated Condensed Statements of Cash Flows for nine months
ended March 31, 2005 and 2004 (Unaudited) 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis or Plan of Operations 9
Item 3 Controls and Procedures 10
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 11
Item 6 Exhibits and Reports on Form 8-K 12
Exhibit 31 Certification of Chief Executive Officer and
Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
Exhibit 32 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
2
PARK CITY GROUP, INC.
Consolidated Condensed Balance Sheet (Unaudited)
March 31, 2005
Assets
Current assets:
Cash $ 121,936
Receivables, net of allowance for doubtful accounts of $109,759 1,086,751
Prepaid expenses and other current assets 124,602
---------------
Total current assets 1,333,289
Property and equipment, net of accumulated depreciation and amortization of $1,574,967 122,191
Other assets:
Deposits and other assets 32,056
Capitalized software costs, net of accumulated amortization of $664,697 398,818
---------------
Total other assets 430,874
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Total assets $ 1,886,354
===============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 479,354
Accrued liabilities 914,035
Deferred revenue 1,256,444
Current portion of capital lease obligations 24,255
Related party notes payable, net of discount of $18,563 326,437
Notes payable, net of discount of $82,464 1,917,536
Related party lines of credit 544,816
---------------
Total current liabilities 5,462,877
Long-term liabilities
Related party notes payable, net of discounts of $135,715 3,160,691
Capital lease obligations, less current portion 4,424
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Total long-term liabilities 3,165,115
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Total liabilities 8,627,992
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Commitments and contingencies -
Stockholders' deficit:
Preferred stock, $0.01 par value, 30,000,000 shares authorized, none issued
- Common stock , $0.01 par value, 300,000,000 shares authorized;
278,420,529 issued and outstanding 2,784,205
Additional paid-in capital 9,910,527
Accumulated deficit (19,436,370)
---------------
Total Stockholders' deficit (6,741,638)
---------------
$ 1,886,354
===============
See accompanying notes to consolidated condensed financial statements.
3
PARK CITY GROUP, INC.
Consolidated Condensed Statements of Operations (Unaudited)
For the Three and Nine Months Ended March 31, 2005 and 2004
Three Nine
Months Ended Months Ended
March 31, March 31,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Revenues:
Software licenses $ 149,760 $ 834,000 $ 453,615 $ 2,462,276
Maintenance and support 560,631 588,532 1,854,314 1,694,287
Consulting and other 95,473 86,347 428,674 454,056
----------- ----------- ----------- -----------
805,865 1,508,879 2,736,604 4,610,619
Cost of revenues 394,192 270,282 1,046,117 1,091,739
----------- ----------- ----------- -----------
Gross Margin 411,673 1,238,598 1,690,487 3,518,880
----------- ----------- ----------- -----------
Operating expenses:
Research and development 256,309 246,607 763,159 921,839
Sales and marketing 310,081 249,486 985,804 802,101
General & administrative expenses 377,748 328,972 1,356,678 1,046,914
----------- ----------- ----------- -----------
Income (loss) from operations (532,465) 413,532 (1,415,154) 748,016
Other income (expense): - 86,934 - 86,934
Interest Income (expense) (300,517) (399,139) (863,049) (1,205,870)
----------- ----------- ----------- -----------
Income(loss) before income taxes (832,982) 101,327 (2,278,203) (370,910)
(Provision) benefit for income taxes
Current - - - -
Deferred - - - -
----------- ----------- ----------- -----------
Net income (loss) $ (832,982) $ 101,326 $(2,278,203) $ (370,910)
=========== =========== =========== ===========
Weighted average shares, basic 277,374,000 241,675,000 272,281,000 232,165,000
=========== =========== =========== ===========
Weighted average shares, diluted 277,374,000 250,715,000 272,281,000 232,165,000
=========== =========== =========== ===========
Basic income (loss) per share $ (0.00) $ 0.00 $ (0.01) $ (0.00)
=========== =========== =========== ===========
Diluted income (loss) per share $ (0.00) $ 0.00 $ (0.01) $ (0.00)
=========== =========== =========== ===========
See accompanying notes to consolidated condensed financial statements.
4
PARK CITY GROUP, INC.
Consolidated Condensed Statements of Cash Flows (Unaudited)
For the Nine Months Ended March 31, 2005 and 2004
March 31, March 31,
2005 2004
----------- -----------
Cash Flows From Operating Activities:
Net loss $(2,278,203) $ (370,910)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 254,268 242,684
Bad debt expense 104,417 -
Stock issued for services and expenses 508,694 466,978
Amortization of warrant and other discount on debt 131,106 387,788
Gain on settlement of payable - (86,934)
Decrease (increase) in:
Trade receivables (48,010) (26,989)
Prepaid and other assets 74,511 (3,680)
Increase (decrease) in:
Accounts payable 152,183 (256,022)
Accrued liabilities (219,456) 24,966
Deferred revenue 144,529 126,839
Advances payable - (175,000)
Accrued interest, related party 361,009 32,513
----------- -----------
Net cash provided by (used in) operating activities (814,952) 362,233
----------- -----------
Cash Flows From Investing Activities:
Purchase of property and equipment (32,137) (8,051)
Proceeds from disposal of property 3,400 -
----------- -----------
Net cash used in investing activities (28,737) (8,051)
----------- -----------
Cash Flows From Financing Activities:
Net (decrease) increase in line of credit 544,815 255,000
Payments on notes payable and capital leases (33,007) (20,002)
Payments to extend note payable (9,000) -
Proceeds from exercise of stock options - 238,667
Proceeds from issuance of stock 150,000 -
----------- -----------
Net cash provided by financing activities 652,808 473,665
----------- -----------
Net Increase (decrease) in cash (190,881) 827,847
Cash at beginning of period 312,817 69,305
----------- -----------
Cash at end of period $ 121,936 $ 897,152
=========== ===========
See accompanying notes to consolidated condensed financial statements.
(Balance of page intentionally left blank)
5
PARK CITY GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
Note 1 - Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in accordance
with U.S. generally accepted accounting principles for quarterly financial
statements, and includes all adjustments of a normal recurring nature, which in
the opinion of management are necessary in order to make the financial
statements not misleading. Although the Company believes that the disclosures in
these unaudited financial statements are adequate to make the information
presented for the interim periods not misleading, certain information and
footnote information normally included in financial statements prepared in
accordance with U.S. generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, and these financial statements should be read in
conjunction with the Company's audited annual financial statements included in
the Company's June 30, 2004 Annual Report on Form 10-KSB. Results of operations
for the three and nine months ended March 31, 2005 are not necessarily
indicative of the results that may be expected for the year ending June 30,
2005.
Certain 2003 amounts have been reclassified to conform to 2004 classifications.
Note 2 - Stock-Based Compensation
At March 31, 2005 and 2004, the Company has issued stock options to certain of
its employees. The Company accounts for these options under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation
cost is reflected in net loss, as all options granted had an exercise price
equal to or greater than the market value of the underlying common stock on the
date of grant. Had compensation cost for the Company's stock option plans been
determined based on fair value consistent with the provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's net loss and loss per
share would have been increased to the pro forma amounts indicated below:
Three Nine
Months Ended Months Ended
March 31, March 31,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net Loss available to common shareholders, as reported $ (832,982) $ 101,326 $(2,278,203) $ (370,910)
Add: Stock-based employee compensation expense included
in reported net income, net of related tax effects - - - -
Deduct: Total stock-based employee compensation expense
determined under the fair value based method for all
awards, net of related tax effects. - - (14,325) (49,500)
Net (loss) income - pro forma $ (832,982) $ 101,326 $(2,292,528) $ (420,410)
----------- ----------- ----------- -----------
Loss per share:
Basic and diluted - as reported $ (0.00) $ 0.00 $ (0.01) $ (0.00)
Basic and diluted - pro forma $ (0.00) $ 0.00 $ (0.01) $ (0.00)
Note 3 - Related Party Transactions
The Company entered into a Securities Purchase Agreement dated as of August 26,
2004 with its President, James Horton. The agreement was amended in October
2004; the amended terms called for the payment of $150,000 due December 15, 2004
for the purchase of 2,142,857 at $0.07 and a warrant to purchase 6,428,571
shares of common stock at $0.07. The Company received the cash before December
15th and issued the stock and warrants accordingly.
The LOC with Riverview Financial was extended in December 2004 with the payment
of $9,000 cash and 225,000 shares of common stock.
Note 4 - Supplemental Cash Flow Information
In connection with the note payable funding from Whale Investment, Ltd., in
December 2002 the Company, issued warrants and shares of common stock as a
finder's fee. The value of the warrants was recorded as a discount on the note
payable, of which $22,464 and $67,392 was amortized into interest expense during
the nine months ended March 31, 2005 and 2004, respectively. The value of the
shares issued for the finder's fee was recorded as a prepaid expense, of which
$19,048 and $57,144 was amortized into expense during the nine months ended
March 31, 2005 and 2004, respectively. In June 2004 the note payable to Whale
Investments, LTD was extended to December 31, 2005 and ownership of the note
payable was transferred to Whale Investment's sister Company Triplenet
Investments. As consideration for the extension the Company paid $40,000 Cash
and issued 1,000,000 shares of common stock valued at $80,000. The fair value of
the cash and shares issued in connection with the extension was recorded as a
discount to the note payable, of which $60,000 was amortized to interest expense
during the nine months ended March 31, 2005. Due to the extension the remainder
of original warrant and finders fee will be amortized over the extended life of
the note payable.
6
The fair value of 857,143 shares issued in connection with the $345,000 note
payable funding from Riverview obtained as a condition of the Whale Investment,
Ltd. funding was recorded as a discount on the note payable, of which $4,285 and
$6,429 was amortized into interest expense during the nine months ended March
31, 2005 and 2004, respectively. In December 2004 the note payable to Riverview
was extended for a period of 12 months for $9,000 and 225,000 shares of common
stock valued at $15,750. The fair value of the cash and stock paid as
consideration in the amount of $24,750 for the extension was recorded as a
discount to the note payable, of which $6,188 was amortized to interest expense
during the nine months ended March 31, 2005.
For the nine months ended March 31, 2005 and 2004 the Company paid interest in
cash of $350,600 and $379,208, respectively. No cash was paid for income taxes.
Note 5 - Net Loss Per Common Share
Basic net loss per common share ("Basic EPS") excludes dilution and is computed
by dividing net loss by the weighted average number of common shares outstanding
during the period. Diluted net loss per common share ("Diluted EPS") reflects
the potential dilution that could occur if stock options or other contracts to
issue 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 anti-dilutive effect on net loss per common share. Options
and warrants to purchase 52,109,500 and 74,884,203 shares of common stock as of
March 31, 2005 and 2004, respectively, were not included in the computation of
Diluted EPS. The inclusion of the options would have been anti-dilutive, thereby
decreasing net loss per common share.
Note 6 - Accrued Liabilities
Accrued liabilities consist of the following at March 31, 2005
Accrued vacation $101,465
Other payroll liabilities 13,903
Accrued Stock Compensation 65,958
Accrued interest 711,950
Other accrued liabilities 20,760
--------
$914,036
========
Note 7 - Recent Accounting Pronouncements
In December 2003, the FASB issued Interpretation No. 46 ("FIN 46R") (revised
December 2003), Consolidation of Variable Interest Entities, an Interpretation
of Accounting Research Bulletin No. 51 ("ARB 51"), which addresses how a
business enterprise should evaluate whether it has a controlling interest in an
entity through means other than voting rights and accordingly should consolidate
the entity. FIN 46R replaces FASB Interpretation No. 46 (FIN 46), which was
issued in January 2003. Before concluding that it is appropriate to apply ARB 51
voting interest consolidation model to an entity, an enterprise must first
determine that the entity is not a variable interest entity ("VIE"). As of the
effective date of FIN 46R, an enterprise must evaluate its involvement with all
entities or legal structures created before February 1, 2003 to determine
whether consolidation requirements of FIN 46R apply to those entities. There is
no grandfathering of existing entities. Public companies must apply either FIN
46 or FIN 46R immediately to entities created after January 31, 2003 and no
later than the end of the first reporting period that ends after March 15, 2004.
The adoption of FIN 46 had no effect on the Company's consolidated financial
position, result of operations or cash flows.
On December 18, 2003, the SEC issued Staff Accounting Bulletin No. 104, Revenue
Recognition ("SAB 104"), which supersedes SAB 101, Revenue Recognition in
Financial Statements. SAB 104's primary purpose is to rescind accounting
guidance contained in SAB 101 related to multiple element revenue arrangements,
which was superseded as a result of the issuance of EITF 00-21, Accounting for
Revenue Arrangements with Multiple Deliverables. SAB 104 does not have a
material impact on our financial position or results of operations.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
which amends Accounting Principles Board (APB) Opinion No. 29, Accounting for
Nonmonetary Transactions. The guidance in APB Opinion 29 is based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged. The guidance in APB Opinion 29, however,
included certain exceptions to that principle. SFAS 153 amends APB Opinion 29 to
eliminate the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for fiscal
periods beginning after June 15, 2005. We do not expect that the adoption of
SFAS 153 will have a material impact on our financial position or results of
operations.
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No.123 (Revised 2004),
Share Based Payment ("SFAS 123R"). SFAS 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
7
statements. Share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of SFAS
123R are effective as of the first interim period that begins after December 15,
2005. Accordingly, the Company will implement the revised standard in the first
quarter of fiscal year 2006. Currently, the Company accounts for its share-based
payment transactions under the provisions of APB 25, which does not necessarily
require the recognition of compensation cost in the financial statements.
Management is assessing the implications of this revised standard and the effect
of the adoption of SFAS 123R will have on our financial position, results of
operations, or cash flow.
(Balance of page intentionally left blank)
8
Item 2. Management's Discussion and Analysis or Plan of Operation.
Form 10-KSB for the year ended June 30, 2004 incorporated herein by reference.
Forward-Looking Statements
This quarterly report on Form 10-QSB contains forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The words or phrases "would be," "will allow,"
"intends to," "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from those projected in the forward looking statements as a result of a number
of risks and uncertainties, including those risks factors contained in our Form
10-KSB annual report at June 30, 2004, incorporated herein by reference.
Statements made herein are as of the date of the filing of this Form 10-QSB with
the Securities and Exchange Commission and should not be relied upon as of any
subsequent date. Unless otherwise required by applicable law, we do not
undertake, and specifically disclaim any obligation, to update any
forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.
Three Months Ended March 31, 2005 and 2004
Total revenues were $805,865 and $1,508,879 for the quarters ended March 31,
2005 and 2004, respectively, a decrease of 47% in 2005 over the comparable
period for 2004. Software license revenues were $149,760 and $834,000 for the
quarters ended March 31, 2005 and 2004, respectively, an 82% decrease. Sales in
2004 included two large sales to existing accounts last year. The decision to
move the business to more of an ASP model has also lowered software license
sales revenue. Maintenance and support revenues were $560,631 and $588,532 for
the quarters ended March 31, 2005 and 2004, respectively, a 5% decrease. During
this 3 month period we lost maintenance from 2 long term maintenance accounts
and extended the warranty period of a new client until next quarter, for a total
decrease of $93,000. These decreases were offset by the addition of $30,000 in
ASP revenue and $40,000 in additional new maintenance from license sales to
existing accounts for additional FMM departments. Consulting and other revenue
was $95,473 and $86,347 for the quarters ended March 31, 2005 and 2004,
respectively, an 11% increase. This increase comes from the signing of
additional consulting contracts with three existing customers.
Research and development expenses were $256,309 and $246,607 for the quarters
ended March 31, 2005 and 2004 respectively, a 4% increase. This increase
represents the raises and some staffing changes.
Sales and marketing expenses were $310,081 and $249,486 for the quarters ended
March 31, 2005 and 2004, respectively, a 24% increase. This increase is from the
hiring of management to focus on building a commissioned sales staff and
increased travel for sales activities.
General and administrative expenses were $377,748 and $328,972 for the quarters
ended December 31, 2004 and 2003, respectively, a 15% increase. This increase is
due to bad debt expense recognized during the quarter ended March 31, 2005 due
to a change in estimate of the allowance for doubtful accounts.
Nine Months Ended March 31, 2005 and 2004
Total revenues were $2,736,604 and $4,610,619 for the nine months ended March
31, 2005 and 2004, respectively, a 41% decrease in 2005 over the comparable
period for 2004. Software license revenues were $453,615 and $2,462,276 for the
nine months ended March 31, 2005 and 2004, respectively, an 82% decrease. For
comparability in 2004 there were three events that contributed to this decrease
in comparing 2005 with 2004. During the first 9 months of 2004 we recognized
$350,000 of deferred revenues, and we had one alliance license sale for $918,887
and a site license sale to an existing customer for $675,000. The Company has
had difficulty in closing sales during the 2005 Fiscal Year due to the overall
slow down in the economy and the cautious nature of the Grocery, C-Store and
Specialty retail markets which has contributed to the decrease in sales.
Maintenance and support revenues were $1,854,314 and $1,694,287 for the nine
months ended March 31, 2005 and 2004, respectively, a 9% increase. ASP revenue
and the combination of both new customers and existing customer additional
products sales have offset the decrease of customers that normally discontinue
maintenance. Consulting and other revenue was $428,674 and $454,056 for the nine
months ended March 31, 2005 and 2004, respectively, a 6% decrease. Project
delays during the six month period ending December 31, 2004 account for this
decrease.
Research and development expenses were $763,159 and $921,839 for the nine months
ended March 31, 2005 and 2004 respectively, a 17% decrease. This decrease
represents the general stabilization of both the Fresh Market Manager and Action
Manager 4X software. Research and development resources have been switched to
the Sales and Marketing of these suites.
Sales and marketing expenses were $985,804 and $802,101 for the nine months
ended March 31, 2005 and 2004, respectively, a 23% increase. This increase is
from the hiring of management to focus on building a commissioned sales staff
and increased travel for sales activities.
9
General and administrative expenses were $1,356,678 and $1,046,914 for the nine
months ended March 31, 2005 and 2004, respectively, a 30% increase. This
increase includes a $165,200 expense for the settlement of a legal case.
Liquidity and Capital Resources
The Company had a working capital deficit at March 30, 2005 and incurred a net
loss for the nine months then ended.
During the quarter ending December 31, 2004, the Company made significant
strategic decisions that affected strategic alliances sales. The Company
determined that it would not extend the exclusive rights to sell the
ActionManager Scheduler in the Specialty Retail Market to its partner, CRS
Retail Systems. Our alliance partner requested an extension in payment terms for
6 months for the exclusive rights, however, upon review of their sales
opportunities and pipeline, it was management's decision that we would receive
an amount equal to or greater than the exclusivity purchase from other
applications that the alliance partner had identified in their anticipated
sales. After discussions with the alliance partner, it was agreed that this was
the best course of action. We are currently working on several accounts with
this alliance partner and they continue to add new prospects to their pipeline.
As an additional effort to manage expenses and increase employee participation
in the ownership of the Company, beginning October 1, 2003, 10% of the staff
employee compensation had been paid in shares of common stock. For the quarter
ended December 31, 2003, 1,000,130 shares of common stock were issued in lieu of
$30,004 of cash compensation. The Company concluded the stock for the staff
employee compensation program in September 2004. A separate program for
management compensation was initiated on July 1, 2002 and that program continues
to be in place. From December 31, 2003 until December 31, 2004 the Company
issued 2,059,346 shares in lieu of $80,899 of cash compensation.
On March 1, 2005, the Company decided to reinstate the employee participation in
ownership program for all employees. The program requires a minimum 10%
participation level and allows the employee to use up to 25% of their pay to
purchase stock in the Company. The Company is offering a 2 for 1 stock issuance
as an incentive to the employees. Currently the total deferral per month is at
$27,843. The Company plans to make their first stock issuance in May 2005.
The marketing focus of the Company has changed under the direction of Jim
Horton, the Company's new President. The Company has concentrated on
establishing a network of commissioned sales representatives and alliance
partners for the FMM suite. In addition the Company has started pursuing the
convenience store market with its Action Manager and Fresh Market Manager
products, in both license sales and ASP offering. In addition the company has
also started pursuing the Convience Store and Perishable Manufactures markets
with some encouraging responses.
To date, the Company has financed its operations through operating revenues,
loans from directors, officers and stockholders, loans from the CEO and majority
shareholder, and private placements of equity securities. The company is working
on new long term financing options as well as the possible sale of some market
segments for their Action Manager Suite of Products. There can be no assurance
that the Company will be successful in achieving additional sales or in
obtaining of additional financing.
The company is prepared to make management and staffing cuts to lower overhead
if sales do not occur or if we are unable to complete a new long term finance
package.
Item 3 - Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Randall K. Fields who serves as Park City Group's chief executive officer and
William Dunlavy, who serves as Park City Group's chief financial officer, after
evaluating the effectiveness of Park City Group's disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and in
preparation for section 404 of the Sarbanes Oxley Act of 2002 as of March 31,
2005 (the "Evaluation Date") concluded that as of the Evaluation Date, Park City
Group's disclosure controls and procedures were adequate and effective to ensure
that material information relating to Park City Group and its consolidated
subsidiaries would be made known to them by others within those entities,
particularly during the period in which this quarterly report was being
prepared. Although we feel that these controls are adequate to prevent material
misstatements, we have found significant deficiencies that the Company will work
to rectify in the coming year as it continues its review as required by Sarbanes
Oxley.
10
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings
In August 2002, the Company filed legal action against The Yankee Companies,
Inc. et al. The defendants were entities and individuals involved in the
reorganization of Amerinet and its acquisition of control of Park City Group
(Delaware). These causes of actions include: violation of Florida's Securities
and investor Protection Act, Fraud, negligent misrepresentation, violation of
Federal Securities Acts 1933 and 1934 and breach of promissory note. This action
has been filed in the State of Utah.
In December 2004 the Company settled with the Calvo family interests, which
involved the issuance of 2,065,000 shares of the Company's restricted common
stock at a fair value of $165,200. The actual settlement agreement was signed
January 3, 2005 and the shares were issued accordingly. The case has now been
settled as between all parties with the exception of the claims of the Company
against The Yankee Companies (Yankee). The Company has a default judgement
against Yankee but it is unlikely that there is any possibility of collecting on
the judgement.
Item 2 - Changes in Securities
o In August 2004 536,267 shares of common stock were issued to
employees in lieu of cash compensation.
o In September 2004 2,405,650 shares of common stock were issued
to board members in lieu of cash compensation.
o In November 2004 396,000 shares of common stock were issued
for consulting services
o In December 2004 225,000 shares of common stock were issued as
consideration of extension of payment on the Note Payable to
Riverview Financial
o In December 2004 2,142,857 shares of common stock were issued
to an officer as part of a private purchase agreement.
o In December 2004 166,666 shares of common stock were issued to
board members in lieu of cash compensation.
o In January 2005 2,065,000 share of common stock were issued to
settle lawsuit with Calvo family interests.
o In February 2005 1,446,680 shares of common stock were issued
to management in lieu of cash compensation.
o In February 2005 320,000 shares of common stock were issued
for consulting services.
Item 3 - Defaults Open Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
11
Item 6 - Exhibits and Reports on Form 8K (for the period 7/1/04 through 3/31/05)
On July 15, 2004 the Company filed a Current Report on Form 8K dated July 15,
2004 under Item 9 announcing its preliminary financial results for the year
ending June 30, 2004.
On August 26, 2004 the Company filled a Current Report on Form 8K dated August
24, 2004 under Item 7.01 announcing the sudden death of the current Chief
Financial Officer, Peter Jensen and the interim appointment of Will Dunlavy as
Interim Chief Financial Officer.
On September 27, 2004 the Company filed a Current Report on Form 8K dated
September 1, 2004 under Item 7.01 announcing the appointment of William Dunlavy
as the new Chief Financial Officer and James Horton as the President and Chief
Operating Officer.
On October 14, 2004 the Company filed a Current Report on Form 8K dated October
14, 2005 under Item 7.01 announcing substantial year-over-year improvement in
its FY 20004 year end filing.
On November 18, 2004 the Company filed a Current Report on Form 8K dated
November 18, 2004 under Item 7.01 announcing first quarter results showing a 20%
increase in recurring revenues.
On April 21, 2005 the Company filed a Current Report on Form 8K dated April 21,
2005 under Item 7.01 announcing third quarter progress and new strategic
alliances for increasing market penetration.
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbannes-Oxley Act of 2002.
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbannes-Oxley Act of 2002.
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbannes-Oxley Act of 2002.
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbannes-Oxley Act of 2002.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PARK CITY GROUP, INC.
Date: May 16, 2005 By /s/ Randall K. Fields
----------------------------------
Randall K. Fields,
Chief Executive Officer & Chairman
Date: May 16, 2005 By /s/ William Dunlavy
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William Dunlavy,
Chief Financial Officer
13