PARK CITY GROUP INC - Quarter Report: 2021 March (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.   For the quarterly period ended March 31, 2021

 

☐	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	[X]	Smaller reporting company	[X]
		Emerging growth company	[   ]

 

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

 

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

  

As of May 17, 2021, 19,478,037 shares of the registrant’s common stock, $0.01 par value, were issued and outstanding.

 

 

 

PARK CITY GROUP, INC.

 

TABLE OF CONTENTS

 

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets as of March 31, 2021 and June 30, 2020 (Unaudited)	1
	Consolidated Condensed Statements of Operations for the Three and Nine Months Ended March 31, 2021 and 2020 (Unaudited)	2
	Consolidated Condensed Statements of Cash Flows for the Nine Months Ended March 31, 2021 and 2020 (Unaudited)	3
	Consolidated Statements of Stockholders’ Equity for March 31, 2021 and 2020 (Unaudited)	4
	Notes to Consolidated Condensed Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	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

 

 

 

 

PARK CITY GROUP, INC.

Consolidated Condensed Balance Sheets (Unaudited)

 

Assets	March 31, 2021	June 30, 2020
Current Assets
Cash	$23,176,092	$20,345,330
Receivables, net of allowance for doubtful accounts of $253,037 and $251,954 at March 31, 2021 and June 30, 2020, respectively	4,598,701	4,007,316
Contract asset – unbilled current portion	2,390,104	2,300,754
Prepaid expense and other current assets	1,108,589	495,511
Total Current Assets	31,273,486	27,148,911
Property and equipment, net	2,673,705	3,003,402
Other Assets:
Deposits, and other assets	22,414	22,414
Prepaid expense – less current portion	59,989	77,030
Contract asset – unbilled long-term portion	43,052	838,726
Operating lease – right-of-use asset	717,241	781,137
Customer relationships	558,450	657,000
Goodwill	20,883,886	20,883,886
Capitalized software costs, net	-	18,539
Total Other Assets	22,285,032	23,278,732
Total Assets	$56,232,223	$53,431,045
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$1,498,801	$407,497
Accrued liabilities	1,705,269	1,123,528
Contract liability – deferred revenue	1,392,990	1,845,347
Lines of credit	6,000,000	4,660,000
Operating lease liability – current	89,041	85,767
Current portion of notes payable	-	310,242
Current portion of paycheck protection program loans	-	479,866
Total current liabilities	10,686,101	8,912,247
Long-term liabilities
Operating lease liability – less current portion	628,200	695,369
Notes payable – less current portion	-	610,512
Paycheck protection program loans	-	629,484
Total liabilities	11,314,301	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 March 31, 2021 and June 30, 2020, respectively	6,254	6,254
Series B-1 Preferred, 550,000 shares authorized; 212,402 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively	2,124	2,124
Common Stock, $0.01 par value, 50,000,000 shares authorized; 19,478,038 and 19,484,485 issued and outstanding at March 31, 2021 and June 30, 2020, respectively	194,783	194,847
Additional paid-in capital	75,094,601	75,271,097
Accumulated deficit	(30,379,840)	(32,890,889)
Total stockholders’ equity	44,917,922	42,583,433
Total liabilities and stockholders’ equity	$56,232,223	$53,431,045

  

See accompanying notes to consolidated condensed financial statements.

 

 

PARK CITY GROUP, INC.

Consolidated Condensed Statements of Operations (Unaudited)

 

	Three Months Ended March 31,		Nine Months Ended March 31,
	2021	2020	2021	2020
Revenue	$6,022,540	$4,633,244	$16,422,146	$14,270,660
Operating expense:
Cost of services and product support	2,634,224	1.369,421	6,706,769	4,622,844
Sales and marketing	1,155,266	1,654,189	3,643,602	4,515,569
General and administrative	1,255,410	1,179,851	3,568,474	3,516,313
Depreciation and amortization	259,343	192,860	769,440	609,037
Total operating expense	5,304,243	4,396,321	14,688,285	13,263,763
Income from operations	718,297	236,923	1,733,861	1,006,897
Other income (expense):
Interest income	60,234	53,075	176,078	201,788
Interest expense	(4,248)	(16,953)	(76,700)	(53,593)
Unrealized gain (loss) on short term investments	(1,131)	-	54,434	-
Gain on debt extinguishment	10,000	-	1,109,350	-
Income before income taxes	783,152	273,045	2,997,023	1,155,092
(Provision) for income taxes:	(9,955)	(1,058)	(46,141)	(41,651)
Net income	773,197	271,987	2,950,882	1,113,441
Dividends on preferred stock	(146,611)	(146,611)	(439,833)	(439,833)
Net income applicable to common shareholders	$626,586	$125,376	$2,511,049	$673,608
Weighted average shares, basic	19,555,000	19,588,000	19,511,000	19,714,000
Weighted average shares, diluted	19,942,000	19,776,000	19,744,000	19,942,000
Basic income per share	$0.03	$0.01	$0.13	$0.03
Diluted income per share	$0.03	$0.01	$0.13	$0.03

 

See accompanying notes to consolidated condensed financial statements.

 

 

PARK CITY GROUP, INC.

Consolidated Condensed Statements of Cash Flows (Unaudited)

 

	Nine Months Ended March 31,
	2021	2020
Cash flows operating activities:
Net income	$2,950,882	$1,113,441
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	769,440	609,037
Amortization of operating right of use asset	63,896	60,793
Bad debt expense	516,694	291,630
Stock compensation expense	249,733	375,000
Gain on debt extinguishment	(1,109,350)	-
(Increase) decrease in:
Accounts receivables	(1,508,097)	(350,908)
Long-term receivables, prepaids and other assets	293,042	884,429
(Decrease) increase in:
Accounts payable	1,091,304	(187,291)
Accrued liabilities	549,537	(247,233)
Operating lease liability	(63,895)	(60,794)
Deferred revenue	(452,633)	(213,677)
Net cash provided by operating activities	3,350,553	2,274,427
Cash flows investing activities:
Purchase of property and equipment	(105,391)	(642,922)
Net cash used in investing activities	(105,391)	(642,922)
Cash flows financing activities:
Net increase in lines of credit	1,340,000	340,000
Common stock buyback/retirement	(508,243)	(2,158,471)
Proceeds from employee stock plan	114,430	120,923
Dividends paid	(439,833)	(439,833)
Payments on notes payable	(920,754)	(219,992)
Net cash used in financing activities	(414,400)	(2,357,373)
Net increase (decrease) in cash and cash equivalents	2,830,762	(725,868)
Cash and cash equivalents at beginning of period	20,345,330	18,609,423
Cash and cash equivalents at end of period	$23,176,092	$17,883,555
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$55,772	$100,158
Cash paid for interest	$76,700	$16,042
Cash paid for operating leases	$71,200	$71,200
Supplemental disclosure of non-cash investing and financing activities:
Common stock to pay accrued liabilities	$214,550	$284,135
Dividends accrued on preferred stock	$439,833	$439,833
Right-of-use asset	$-	$862,741

  

See accompanying notes to consolidated condensed financial statements.

 

 

PARK CITY GROUP, INC.

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

 

	Series B Preferred Stock		Series B-1 Preferred Stock		Common Stock		Additional Paid-In	Accumulated
	Shares	Amount	Shares	Amount	Shares	Amount	Capital	Deficit	Total
Balance, June 30, 2020	625,375	$6,254	212,402	$2,124	19,484,485	$194,847	$75,271,097	$(32,890,889)	$42,583,433
Stock issued for:
Accrued compensation	-	-	-	-	1,302	13	5,392	-	5,405
Employee stock plan	-	-	-	-	13,980	140	50,188	-	50,328
Preferred Dividends-Declared	-	-	-	-	-	-	-	(146,611)	(146,611)
Net income	-	-	-	-	-	-	-	554,826	554,826
Balance, September 30, 2020	625,375	$6,254	212,402	$2,124	19,499,767	$195,000	$75,326,677	$(32,482,674)	$43,047,381
Stock issued for:
Accrued compensation	-	-	-	-	29,141	292	130,958	-	131,250
Employee stock plan	-	-	-	-	514	5	2,699	-	2,704
Preferred Dividends-Declared	-	-	-	-	-	-	-	(146,611)	(146,611)
Net income	-	-	-	-	-	-	-	1,622,859	1,622,859
Balance, December 31, 2020	625,375	$6,254	212,402	$2,124	19,529,422	$195,297	$75,460,334	$(31,006,426)	$44,657,583
Stock issued for:
Accrued compensation	-	-	-	-	15,419	154	77,741	-	77,895
Employee stock plan	-	-	-	-	17,278	173	63,928	-	64,101
Stock buyback	-	-	-	-	(84,081)	(841)	(507,402)	-	(508,243)
Preferred Dividends-Declared	-	-	-	-	-	-	-	(146,611)	(146,611)
Net income	-	-	-	-	-	-	-	773,197	773,197
Balance, March 31, 2021	625,375	$6,254	212,402	$2,124	19,478,038	$194,783	$75,094,601	$(30,379,840)	$44,917,922

 

 

PARK CITY GROUP, INC.

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

(continued)

	Series B Preferred Stock		Series B-1 Preferred Stock		Common Stock		Additional Paid-In	Accumulated
	Shares	Amount	Shares	Amount	Shares	Amount	Capital	Deficit	Total
Balance, June 30, 2019	625,375	$6,254	212,402	$2,124	19,793,372	$197,936	$76,908,566	$(33,897,714)	$43,217,166
Stock issued for:
Accrued compensation	-	-	-	-	14,542	145	77,742	-	77,887
Employee stock plan	-	-	-	-	13,274	133	63,390	-	63,523
Stock buyback	-	-	-	-	(79,954)	(799)	(516,560)		(517,359)
Preferred dividends declared	-	-	-	-	-	-	-	(146,611)	(146,611)
Net income	-	-	-	-	-	-	-	178,351	178,351
Balance, September 30, 2019	625,375	$6,254	212,402	$2,124	19,741,234	$197,415	$76,533,138	$(33,865,974)	$42,872,957
Stock issued for:
Accrued compensation	-	-	-	-	13,370	134	77,304	-	77,438
Stock buyback	-	-	-	-	(174,615)	(1,747)	(835,931)	-	(837,678)
Preferred dividends declared	-	-	-	-	-	-	-	(146,611)	(146,611)
Net income	-	-	-	-	-	-	-	663,103	663,103
Balance, December 31, 2019	625,375	$6,254	212,402	$2,124	19,579,989	$195,802	$75,774,511	$(33,349,482)	$42,629,209
Stock issued for:
Accrued compensation	-	-	-	-	35,614	356	185,854	-	186,210
Stock buyback	-	-	-	-	(157,616)	(1,576)	(801,858)	-	(803,434)
Preferred dividends declared	-	-	-	-	-	-	-	(146,611)	(146,611)
Net income	-	-	-	-	-	-	-	271,987	271,987
Balance, March 31, 2020	625,375	$6,254	212,402	$2,124	19,457,987	$194,582	$75,158,507	$(33,224,106)	$42,137,361

 

 See accompanying notes to consolidated condensed financial statements.

 

 

PARK CITY GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1.  OVERVIEW OF OPERATIONS AND BASIS FOR PRESENTATION

 

Overview

 

Park City Group, Inc., 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 and source hard to find items, (ii) ReposiTrak Compliance and Food Safety (“Compliance and Food Safety”) solutions, which help the Company’s customers vet suppliers to mitigate the risk of doing business with these suppliers, and (iii) ReposiTrak’s Supply Chain (“Supply Chain”) solutions, which help the Company’s customers to more efficiently manage their various transactions with their suppliers.

 

The Company’s Supply Chain and MarketPlace services provide its customers with greater flexibility in sourcing products by enabling them to choose new suppliers and integrate them into their supply chain faster and more cost effectively, and it helps them to more efficiently manage these relationships, enhancing revenue while lowering working capital, labor costs and waste. The Company’s Compliance and Food Safety solutions help reduce a company’s potential regulatory, legal, and criminal risk from its supply chain partners by providing a way for them to ensure these suppliers are compliant with food safety regulations, such as the Food Safety Modernization Act of 2011 (“FSMA”).

 

The Company’s services are delivered though proprietary software products designed, developed, marketed and supported by the Company. These products provide visibility and facilitate improved business processes among all key constituents in the supply chain, starting with the retailer and moving backwards to suppliers and eventually to raw material providers. The Company provides cloud-based applications and services that address e-commerce, supply chain, food safety and compliance activities. The principal customers for the Company’s products are household name multi-store food retail chains and their suppliers, branded food manufacturers, food wholesalers and distributors, and other food service businesses.

   

The Company has a hub and spoke business model. The Company is typically engaged by retailers and wholesalers (“Hubs”), which in turn require their suppliers (“Spokes”) to utilize the Company’s services.

 

The Company is incorporated in the state of Nevada and has three principal subsidiaries: PC Group, Inc., a Utah corporation (98.76% owned) (“PCG Utah”); Park City Group, Inc., a Delaware corporation (100% owned) (“PCG Delaware”); and ReposiTrak (100% owned) (collectively, the “Subsidiaries”). All intercompany transactions and balances have been eliminated in the Company’s consolidated financial statements, which contain the operating results of the operations of PCG Delaware and ReposiTrak. Park City Group has no business operations separate from the operations conducted through its Subsidiaries.

 

The Company’s principal executive offices are located at 5282 South Commerce Drive, Suite D292, Murray, Utah 84107. Its telephone number is (435) 645-2000. Its website address is www.parkcitygroup.com, and ReposiTrak’s website address is www.repositrak.com.

 

 

 Basis of Financial Statement Presentation

 

The interim financial information of the Company as of March 31, 2021 and for the three and nine months ended March 31, 2021 is unaudited, and the balance sheet as of June 30, 2020 is derived from audited financial statements. The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial statements. Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. GAAP. The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in the Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended June 30, 2020. In the opinion of management, all adjustments necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended March 31, 2021 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2021. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2020. 

 

NOTE 2.  SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The financial statements presented herein reflect the consolidated financial position of Park City Group, Inc. and our subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.  

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that materially affect the amounts reported in the consolidated financial statements. Actual results could differ from these estimates. The methods, estimates, and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results it reports in its financial statements. The U.S. Securities and Exchange Commission (“SEC”) has defined the most critical accounting policies as those that are most important to the portrayal of the Company’s financial condition and results and require the Company to make its most difficult and subjective judgments, often because of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include revenue recognition, goodwill, other long-lived asset valuations, income taxes, stock-based compensation, and capitalization of software development costs.

 

Revenue Recognition

 

We recognize revenue as we transfer control of deliverables (products, solutions and services) to our customers in an amount reflecting the consideration to which we expect to be entitled. To recognize revenue, we apply the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. We account for a contract based on the terms and conditions the parties agree to, the contract has commercial substance and collectability of consideration is probable. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience.

 

We may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any combination of our deliverables. To the extent a contract includes multiple promised deliverables, we apply judgment to determine whether promised deliverables are capable of being distinct and are distinct in the context of the contract. If these criteria are not met, the promised deliverables are accounted for as a combined performance obligation. For arrangements with multiple distinct performance obligations, we allocate consideration among the performance obligations based on their relative standalone selling price. Standalone selling price is the price at which we would sell a promised good or service separately to the customer. When not directly observable, we typically estimate standalone selling price by using the expected cost plus a margin approach. We typically establish a standalone selling price range for our deliverables, which is reassessed on a periodic basis or when facts and circumstances change.

 

 

 

For performance obligations where control is transferred over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the deliverables to be provided. Revenue related to fixed-price contracts for application development and systems integration services, consulting or other technology services is recognized as the service is performed using the output method, under which the total value of revenue is recognized based on each contract’s deliverable(s) as they are completed and when value is transferred to a customer. Revenue related to fixed-price application maintenance, testing and business process services is recognized based on our right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in ASC 606-10-55-18.

 

If our invoicing is not consistent with the value delivered, revenue is recognized as the service is performed based on the method described above. The output method measures the results achieved and value transferred to a customer, which is updated as the project progresses to reflect the latest available information; such estimates and changes in estimates involve the use of judgment. The cumulative impact of any revision in estimates is reflected in the financial reporting period in which the change in estimate becomes known and any anticipated losses on contracts are recognized immediately. Revenue related to fixed-price hosting and infrastructure services is recognized based on our right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in ASC 606-10-55-18. If our invoicing is not consistent with value delivered, revenue is recognized on a straight-line basis unless revenue is earned and obligations are fulfilled in a different pattern. The revenue recognition method applied to the types of contracts described above provides the most faithful depiction of performance towards satisfaction of our performance obligations.

 

Revenue related to our software license arrangements that do not require significant modification or customization of the underlying software is recognized when the software is delivered as control is transferred at a point in time. For software license arrangements that require significant functionality enhancements or modification of the software, revenue for the software license and related services is recognized as the services are performed in accordance with the methods described above. In software hosting arrangements, the rights provided to the customer, such as ownership of a license, contract termination provisions and the feasibility of the client to operate the software, are considered in determining whether the arrangement includes a license or a service. Revenue related to software maintenance and support is generally recognized on a straight-line basis over the contract period.

 

Revenue related to transaction-based or volume-based contracts is recognized over the period the services are provided in a manner that corresponds with the value transferred to the customer to-date relative to the remaining services to be provided.

 

From time-to-time, we may enter into arrangements with third party suppliers to resell products or services. In such cases, we evaluate whether we are the principal (i.e. report revenue on a gross basis) or agent (i.e. report revenue on a net basis). In doing so, we first evaluate whether we control the good or service before it is transferred to the customer. If we control the good or service before it is transferred to the customer, we are the principal; if not, we are the agent. Determining whether we control the good or service before it is transferred to the customer may require judgment.

   

We provide customers with assurance that the related deliverable will function as the parties intended because it complies with agreed-upon specifications. General updates or patch fixes are not considered an additional performance obligation in the contract.

 

Variable consideration is estimated using either the sum of probability weighted amounts in a range of possible consideration amounts (expected value), or the single most likely amount in a range of possible consideration amounts (most likely amount), depending on which method better predicts the amount of consideration to which we may be entitled. We include in the transaction price variable consideration only to the extent it is probable that a significant reversal of revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and are based largely on an assessment of our anticipated performance and all information that is reasonably available to us.

  

We assess the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, we do not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our services, not to receive or provide financing from or to customers. We do not consider set up or transition fees paid upfront by our customers to represent a financing component, as such fees are required to encourage customer commitment to the project and protect us from early termination of the contract.

 

 

 

Trade Accounts Receivable and Contract Balances

 

We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset (unbilled receivable). A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For example, we recognize a receivable for revenue related to our transaction or volume-based contracts when earned regardless of whether amounts have been billed. We present such receivables in trade accounts receivable, net in our consolidated statements of financial position at their net estimated realizable value. We maintain an allowance for doubtful accounts to provide for the estimated number of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables, judgment, and other applicable factors.

  

A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are presented in current and other assets in our consolidated balance sheets and primarily relate to unbilled amounts on fixed-price contracts utilizing the output method of revenue recognition. The table below shows movements in contract assets:

 

	Contract assets
Balance – December 31, 2020	$2,433,614
Revenue recognized during the period but not billed	-
Amounts reclassified to accounts receivable	(458)
Other	-
Balance – March 31, 2021	$2,433,156  (1)

 

(1)	Contract asset balances for March 31, 2021 include a current and a long-term contract asset, $2,390,104, and $43,052, respectively.

 

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

 

	Contract liability
Balance – December 31, 2020	$1,608,480
Amounts billed but not recognized as revenue	940,764
Revenue recognized related to the opening balance of deferred revenue	(1,156,254)
Other	-
Balance – March 31, 2021	$1,392,990

 

Our contract assets and liabilities are reported in a net position on a contract by contract basis at the end of each reporting period. The difference between the opening and closing balances of our contract assets and deferred revenue primarily results from the timing difference between our performance obligations and the customer’s payment. We receive payments from customers based on the terms established in our contracts, which may vary generally by contract type.

 

Disaggregation of Revenue

 

The table below presents disaggregated revenue from contracts with customers by contract-type. We believe this disaggregation best depicts the nature, amount, timing and uncertainty of our revenue and cash flows that may be affected by industry, market, and other economic factors:

 

	Three Months Ended		Nine Months Ended
	March 31,		March 31,
	2021	2020	2021	2020
Subscription & Support	$4,480,528	$4,066,497	$12,622,485	$12,121,543
Professional Services	91,254	83,234	207,917	408,841
Transaction Based	1,450,758	483,513	3,591,744	1,740,276
Total	$6,022,540	$4,633,244	$16,422,146	$14,270,660

 

 

Earnings Per Share

 

Basic net income per share of Common Stock (“Basic EPS”) excludes dilution and is computed by dividing net income applicable to Common Stockholders by the weighted average number of Common Stock outstanding during the period. Diluted net income per share of Common Stock (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue shares of Common Stock were exercised or converted into Common Stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an antidilutive effect on net income per share of Common Stock.

 

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

 

	Three Months Ended		Nine Months Ended
	March 31,		March 31,
	2021	2020	2021	2020
Numerator
Net income applicable to common shareholders	$626,586	$125,376	$2,511,049	$673,608
Denominator
Weighted average common shares outstanding, basic	19,555,000	19,588,000	19,511,000	19,714,000
Warrants to purchase common stock	387,000	188,000	233,000	228,000
Weighted average common shares outstanding, diluted	19,942,000	19,776,000	19,744,000	19,942,000
Net income per share
Basic	$0.03	$0.01	$0.13	$0.03
Diluted	$0.03	$0.01	$0.13	$0.03

 

Reclassifications

 

            Certain prior year amounts have been reclassified to conform with the current year’s presentation. These reclassifications have no impact on the previously reported results.

  

NOTE 3.  EQUITY

 

Restricted Stock Units	Restricted Stock Units	Weighted Average Grant Date Fair Value ($/share)
Outstanding at December 31, 2020	833,610	$5.35
Granted	5,824	7.43
Vested and issued	(5,543)	9.34
Forfeited	-	-
Outstanding at March 31, 2021	833,891	$5.33