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, ~~2022~~2023

☐	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 May ~~16, 2022, 18,596,308~~15, 2023, 18,355,898 shares of the registrant’s common stock, $0.01 par value, were issued and outstanding.

	March 31, 2022			June 30, 2021			March 31, 2023			June 30, 2022
*Assets*
Current Assets:
Current Assets
Cash	$	21,269,307		$	24,070,322		$	22,941,493		$	21,460,948
Receivables, net of allowance for doubtful accounts of $192,315 and $234,693 at March 31, 2022 and June 30, 2021, respectively		3,593,383			3,891,699
Receivables, net of allowance for doubtful accounts of $168,699 and $206,093 at March 31, 2023 and June 30, 2022, respectively								2,242,187			3,165,200
Contract asset – unbilled current portion		665,322			1,248,936			285,474			649,433
Prepaid expense and other current assets		1,163,489			490,817			518,458			1,307,128
Total Current Assets		26,691,501			29,701,774			25,987,612			26,582,709

Property and equipment, net		865,931			2,589,194			1,128,022			764,517

Other Assets:
Deposits and other assets		22,414			22,414			22,414			22,414
Prepaid expense – less current portion		67,098			47,987			50,988			82,934
Contract asset – unbilled long-term portion		206,052			408,925			108,052			108,052
Operating lease – right-of-use asset		382,544			695,371			325,493			368,512
Customer relationships		427,050			525,600			295,650			394,200
Goodwill		20,883,886			20,883,886			20,883,886			20,883,886
Capitalized software costs, net		128,799			171,732			776,695			114,488
Total Other Assets		22,117,843			22,755,915			22,463,178			21,974,486

Total Assets	$	49,675,275		$	55,046,883		$	49,578,812		$	49,321,712

*Liabilities and Stockholders' Equity*
Current liabilities:
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	493,405		$	467,194		$	380,826		$	690,638
Accrued liabilities		1,065,034			988,092			1,662,400			1,206,284
Contract liability - deferred revenue		1,542,020			1,755,341
Contract liability – deferred revenue								1,562,774			1,555,143
Lines of credit		3,385,867			6,000,000			-			2,590,907
Operating lease liability - current		52,669			90,156
Operating lease liability – current								57,502			53,862
Notes payable and financing leases – current								219,262			-
Total current liabilities		6,538,995			9,300,783			3,882,764			6,096,834

Long-term liabilities:
Long-term liabilities
Operating lease liability – less current portion		335,903			605,214			278,401			321,818

Notes payable and financing leases – less current portion								200,770			-
Total liabilities		6,874,898			9,905,997			4,361,935			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 March 31, 2022 and June 30, 2021		6,254			6,254
Series B-1 Preferred, 550,000 shares authorized; 212,402 shares issued and outstanding at March 31, 2022 and June 30, 2021		2,124			2,124
Common Stock, $0.01 par value, 50,000,000 shares authorized; 18,637,929 and 19,351,935 issued and outstanding at March 31, 2022 and June 30, 2021, respectively		186,382			193,522
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, 2023 and June 30, 2022;								6,254			6,254
Series B-1 Preferred, 550,000 shares authorized; 212,402 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively								2,124			2,124
Common Stock, $0.01 par value, 50,000,000 shares authorized; 18,350,765 and 18,460,538 issued and outstanding at March 31, 2023 and June 30, 2022, respectively								183,510			184,608
Additional paid-in capital		69,498,487			74,298,924			68,022,970			68,653,361
Accumulated deficit		(26,892,870	)		(29,359,938	)		(22,997,981	)		(25,943,287	)
Total stockholders’ equity		42,800,377			45,140,886			45,216,877			42,903,060

Total liabilities and stockholders’ equity	$	49,675,275		$	55,046,883		$	49,578,812		$	49,321,712

	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022

Revenue	$	4,824,101		$	4,555,906		$	14,295,091		$	13,469,170

Operating expense:
Cost of services and product support		840,272			773,651			2,539,618			2,437,351
Sales and marketing		1,239,946			1,229,677			3,667,017			3,570,606
General and administrative		916,237			1,178,649			3,392,056			3,484,307
Depreciation and amortization		305,864			197,393			771,030			676,324
Total operating expense		3,302,319			3,379,370			10,369,721			10,168,588

Income from operations		1,521,782			1,176,536			3,925,370			3,300,582

Other income (expense):
Interest income		275,941			24,975			554,299			167,015
Interest expense		(9,771	)		(13,919	)		(52,481	)		(20,120	)
Unrealized (loss) on short term investments		35,068			(65,889	)		(3,753	)		(328,987	)
Other gain (loss)		-			(5,649	)		70,047			(88,730	)
Income before income taxes		1,823,020			1,116,054			4,493,482			3,029,760

(Provision) for income taxes:		(160,000	)		(28,038	)		(280,006	)		(122,859	)
Net income		1,663,020			1,088,016			4,213,476			2,906,901

Dividends on preferred stock		(146,611	)		(146,611	)		(439,833	)		(439,833	)

Net income applicable to common shareholders	$	1,516,409		$	941,405		$	3,773,643		$	2,467,068

Weighted average shares, basic		18,394,000			19,019,000			18,408,000			19,255,000
Weighted average shares, diluted		18,751,000			19,422,000			18,702,000			19,579,000
Basic income per share	$	0.08		$	0.05		$	0.20		$	0.13
Diluted income per share	$	0.08		$	0.05		$	0.20		$	0.13

Three Months Ended
March 31,

Nine Months Ended
March 31,

2022

2021

2022

2021

Revenue
$ 4,555,906 $ 6,022,540 $ 13,469,170 $ 16,422,146

Operating expense:

Cost of services and product support
773,651 2,634,224 2,437,351 6,706,769
Sales and marketing
1,229,677 1,155,266 3,570,606 3,643,602
General and administrative
1,178,649 1,255,410 3,484,307 3,568,474
Depreciation and amortization
197,393 259,343 676,324 769,440
Total operating expense
3,379,370 5,304,243 10,168,588 14,688,285

Income from operations
1,176,536 718,297 3,300,582 1,733,861

Other income (expense):

Interest income
24,975 60,234 167,015 176,078
Interest expense
(13,919
)
(4,248
)
(20,120
)
(76,700
)
Unrealized gain (loss) on short term investments
(65,889
)
(1,131
)
(328,987
)
54,434
Other gain (loss)
(5,649
)
10,000 (88,730
)
1,109,350
Income before income taxes
1,116,054 783,152 3,029,760 2,997,023

(Provision) for income taxes:
(28,038
)
(9,955
)
(122,859
)
(46,141
)
Net income
1,088,016 773,197 2,906,901 2,950,882

Dividends on preferred stock
(146,611
)
(146,611
)
(439,833
)
(439,833
)

Net income applicable to common shareholders
$ 941,405 $ 626,586 $ 2,467,068 $ 2,511,049

Weighted average shares, basic
19,019,000 19,555,000 19,255,000 19,511,000
Weighted average shares, diluted
19,422,000 19,942,000 19,579,000 19,744,000
Basic income per share
$ 0.05 $ 0.03 $ 0.13 $ 0.13
Diluted income per share
$ 0.05 $ 0.03 $ 0.13 $ 0.13

	Nine Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2023			2022
Cash flows from operating activities:
Net income	$	2,906,901		$	2,950,882		$	4,213,476		$	2,906,901
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		676,324			769,440			771,030			676,324
Amortization of operating right of use asset		312,826			63,896			43,019			312,826
Stock compensation expense		320,199			249,733			315,216			320,199
Bad debt expense		391,667			516,694			1,200,000			391,667
Gain on disposal of assets		(24,737	)		0			-			(24,737	)
Gain on debt extinguishment		0			(1,109,350	)
Loss on sale of property and equipment		107,820			0			-			107,820
(Increase) decrease in:
Accounts receivables		198,430			(1,508,097	)		86,972			198,430
Long-term receivables, prepaids and other assets		(414,998	)		293,042			655,391			(414,998	)
(Decrease) increase in:
Increase (decrease) in:
Accounts payable		26,210			1,091,304			(309,812	)		26,210
Operating lease liability		(306,798	)		(63,895	)		(39,777	)		(306,798	)
Accrued liabilities		52,441			549,537			122,744			52,441
Deferred revenue		(213,321	)		(452,633	)		7,631			(213,321	)
Net cash provided by operating activities		4,032,964			3,350,553			7,065,890			4,032,964

Cash flows from investing activities:
Sale of property and equipment		1,374,085			0			-			1,374,085
Capitalization of software costs								(769,243	)
Purchase of property and equipment		(50,823	)		(105,391	)		(133,944	)		(50,823	)
Net cash provided by (used in) investing activities		1,323,262			(105,391	)		(903,187	)		1,323,262

Cash flows from financing activities:
Net (decrease) increase in lines of credit		(2,614,133	)		1,340,000			(2,590,907	)		(2,614,133	)
Common Stock buyback/retirement		(5,212,452	)		(508,243	)		(981,194	)		(5,212,452	)
Proceeds from employee stock plan		109,177			114,430			92,728			109,177
Dividends paid		(439,833	)		(439,833	)		(993,037	)		(439,833	)
Payments on notes payable		0			(920,754	)
Payments on notes payable and capital leases								(209,748	)		-
Net cash used in financing activities		(8,157,241	)		(414,400	)		(4,682,158	)		(8,157,241	)

Net (decrease) increase in cash and cash equivalents		(2,801,015	)		2,830,762
Net increase (decrease) in cash and cash equivalents								1,480,545			(2,801,015	)

Cash and cash equivalents at beginning of period		24,070,322			20,345,330			21,460,948			24,070,322
Cash and cash equivalents at end of period	$	21,269,307		$	23,176,092		$	22,941,493		$	21,269,307

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	172,342		$	55,772		$	264,486		$	172,342
Cash paid for interest	$	21,607		$	76,700		$	52,481		$	21,607
Cash paid for operating leases	$	66,871		$	71,200		$	53,015		$	66,871

Supplemental disclosure of non-cash investing and financing activities:
Common stock to pay accrued liabilities	$	234,447		$	214,550		$	256,977		$	234,447
Dividends accrued on preferred stock	$	439,833		$	439,833		$	489,833		$	439,833

	Series B Preferred Stock				Series B-1 Preferred Stock				Common Stock						Additional Paid-In			Accumulated						Series B Preferred Stock				Series B-1 Preferred Stock				Common Stock						Additional Paid-In			Accumulated
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Total			Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Total

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
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

Stock issued for:
Accrued compensation		0		0		0		0		29,316			293			172,207			0			172,500			-		-		-		-		19,036			190			104,592			-			104,782
Employee stock plan		0		0		0		0		13,901			139			56,438			0			56,577			-		-		-		-		11,583			116			43,709			-			43,825
Stock buyback		0		0		0		0		(7,600	)		(76	)		(41,200	)		0			(41,276	)		-		-		-		-		(74,150	)		(741	)		(428,530	)		-			(429,271	)
Preferred Dividends-Declared		-		0		-		0		-			0			0			(146,611	)		(146,611	)		-		-		-		-		-			-			-			(146,611	)		(146,611	)
Common Stock Dividends-Declared																									-		-		-		-		-			-			-			(275,261	)		(275,261	)
Net income		-		0		-		0		-			0			0			946,817			946,817			-		-		-		-		-			-			-			1,663,020			1,663,020

Balance, September 30, 2021		625,375	$	6,254		212,402	$	2,124		19,387,552		$	193,878		$	74,486,369		$	(28,559,732	)	$	46,128,893

Stock issued for:
Accrued compensation		0		0		0		0		11,464			115			61,832			0			61,947
Stock buyback		0		0		0		0		(244,552	)		(2,446	)		(1,427,252	)		0			(1,429,698	)
Preferred Dividends-Declared		-		0		-		0		-			0			0			(146,611	)		(146,611	)
Net income		-		0		-		0		-			0			0			872,068			872,068

Balance, December 31, 2021		625,375	$	6,254		212,402	$	2,124		19,154,464		$	191,547		$	73,120,949		$	(27,834,275	)	$	45,486,599

Stock issued for:
Accrued compensation		0		0		0		0		10,639			106			61,144			0			61,250
Employee stock plan		0		0		0		0		11,202			112			52,488			0			52,600
Stock buyback		0		0		0		0		(538,376	)		(5,383	)		(3,736,094	)		0			(3,741,477	)
Preferred Dividends-Declared		-		0		-		0		-			0			0			(146,611	)		(146,611	)
Net income		-		0		-		0		-			0			0			1,088,016			1,088,016

Balance, March 31, 2022		625,375	$	6,254		212,402	$	2,124		18,637,929		$	186,382		$	69,498,487		$	(26,892,870	)	$	42,800,377
Balance, March 31, 2023																									625,375	$	6,254		212,402	$	2,124		18,350,765		$	183,510		$	68,022,970		$	(22,997,981	)	$	45,216,877

	Series B Preferred Stock				Series B-1 Preferred Stock				Common Stock						Additional Paid-In			Accumulated						Series B Preferred Stock				Series B-1 Preferred Stock				Common Stock						Additional Paid-In			Accumulated
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Total			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		0		0		0		0		1,302			13			5,392			0			5,405
Employee stock plan		0		0		0		0		13,980			140			50,188			0			50,328
Preferred Dividends-Declared		-		0		-		0		-			0			0			(146,611	)		(146,611	)
Net income		-		0		-		0		-			0			0			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		0		0		0		0		29,141			292			130,958			0			131,250
Employee stock plan		0		0		0		0		514			5			2,699			0			2,704
Preferred Dividends-Declared		-		0		-		0		-			0			0			(146,611	)		(146,611	)
Net income		-		0		-		0		-			0			0			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
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

Stock issued for:
Accrued compensation		0		0		0		0		15,419			154			77,741			0			77,895			-		-		-		-		29,316			293			172,207			-			172,500
Employee stock plan		0		0		0		0		17,278			173			63,928			0			64,101			-		-		-		-		13,901			139			56,438			-			56,577
Stock buyback		0		0		0		0		(84,081	)		(841	)		(507,402	)		0			(508,243	)		-		-		-		-		(7,600	)		(76	)		(41,200	)		-			(41,276	)
Preferred Dividends-Declared		-		0		-		0		-			0			0			(146,611	)		(146,611	)		-		-		-		-		-			-			-			(146,611	)		(146,611	)
Net income		-		0		-		0		-			0			0			773,197			773,197			-		-		-		-		-			-			-			946,817			946,817

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
Balance, September 30, 2021																									625,375	$	6,254		212,402	$	2,124		19,387,552		$	193,878		$	74,486,369		$	(28,559,732	)	$	46,128,893

Stock issued for:
Accrued compensation																									-		-		-		-		11,464			115			61,832			-			61,947
Stock buyback																									-		-		-		-		(244,552	)		(2,446	)		(1,427,252	)		-			(1,429,698	)
Preferred Dividends-Declared																									-		-		-		-		-			-			-			(146,611	)		(146,611	)
Net income																									-		-		-		-		-			-			-			872,068			872,068

Balance, December 31, 2021																									625,375	$	6,254		212,402	$	2,124		19,154,464		$	191,547		$	73,120,949		$	(27,834,275	)	$	45,486,599

Stock issued for:
Accrued compensation																									-		-		-		-		10,639			106			61,144			-			61,250
Employee stock plan																									-		-		-		-		11,202			112			52,488			-			52,600
Stock buyback																									-		-		-		-		(538,376	)		(5,383	)		(3,736,094	)		-			(3,741,477	)
Preferred Dividends-Declared																									-		-		-		-		-			-			-			(146,611	)		(146,611	)
Net income																									-		-		-		-		-			-			-			1,088,016			1,088,016

Balance, March 31, 2022																									625,375	$	6,254		212,402	$	2,124		18,637,929		$	186,382		$	69,498,487		$	(26,892,870	)	$	42,800,377

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,~~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,~~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 more efficiently, 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 3three 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,~~(PCG Utah, PCG Delaware, and ReposiTrak are, 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.~~(435) 645-2000. Its website address is www.parkcitygroup.com, and ReposiTrak’s website address is www.repositrak.com.

The interim financial information of the Company as of March 31, ~~2022~~ 2023 and for the three and nine months ended March 31, ~~2022~~ 2023 is unaudited, and the balance sheet as of June 30, ~~2021~~ 2022 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-K10-K for the year ended June 30, ~~2021.~~ 2022. 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, ~~2022~~ 2023 are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, ~~2022.~~ 2023. 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-K10-K for the year ended June 30, ~~2021.~~ 2022.

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.

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.

~~We recognize~~The Company recognizes revenue as ~~we transfer~~it transfers control of deliverables (products, solutions and services) to ~~our~~its customers in an amount reflecting the consideration to which ~~we expect~~it expects to be entitled. To recognize revenue, ~~we apply~~the Company applies the following five step approach: (1)(1) identify the contract with a ~~customer, (~~2)customer; (2) identify the performance obligations in the ~~contract, (~~3)contract; (3) determine the transaction ~~price, (~~4)price; (4) allocate the transaction price to the performance obligations in the ~~contract,~~contract; and (5)(5) recognize revenue when a performance obligation is satisfied. ~~We account~~The Company accounts for a contract based on the terms and conditions the parties agree to, if the contract has commercial substance and if 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 The Company may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any combination of ~~our~~its deliverables. To the extent a contract includes multiple promised deliverables, ~~we apply~~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, ~~we allocate~~the Company allocates consideration among the performance obligations based on their relative standalone selling price. Standalone selling price is the price at which wethe Company would sell a promised good or service separately to the customer. When not directly observable, wethe Company typically ~~estimate~~estimates standalone selling price by using the expected cost plus a margin approach. WeThe Company typically ~~establish~~establishes a standalone selling price range for ~~our~~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 FASB ASC Topic 606,-10-55-~~18.~~Revenue from Contracts with Customers (“Topic 606”), paragraph 606-10-55-18 (“ASC 606-10-55-18”).

If ~~our~~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 ~~our~~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.~~606-10-55-18. If ~~our~~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 ~~our~~the Company’s performance obligations.

Revenue related to ~~our~~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, we~~ time to time, the Company may enter into arrangements with third party suppliers to resell products or services. In such cases, ~~we evaluate~~the Company evaluates whether ~~we are~~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, we the Company first ~~evaluate~~ evaluates whether ~~we control~~it controls the good or service before it is transferred to the customer. If ~~we control~~the Company controls the good or service before it is transferred to the customer, ~~we are~~the Company is the principal; if not, ~~we are~~ the Company is the agent. Determining whether ~~we control~~the Company controls the good or service before it is transferred to the customer may require judgment.

~~We provide~~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. ~~We include~~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. ~~Our~~The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and ~~are~~is based largely on an assessment of ~~our~~its anticipated performance and all information that is reasonably available to ~~us.~~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, ~~we do~~ 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 ~~our~~the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing ~~our~~its services, not to receive or provide financing from or to customers. ~~We do~~ The Company does not consider set up or transition fees paid upfront by ~~our~~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.

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.

normal;">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			Contract assets
Balance – December 31, 2021	$	996,609
Balance – June 30, 2022				$	757,485
Revenue recognized during the period but not billed		-			-
Amounts reclassified to accounts receivable		(149,466	)		(344,000	)
Other		24,231			(19,959	)
Balance – March 31, 2022	$	871,374	⁽¹⁾
Balance – March 31, 2023				$	393,526	⁽¹⁾

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.

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:

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.

For the three and nine months ended March 31, 2023 and 2022, warrants to purchase 23,737 shares of our common stock at an exercise price of $10.00 per share were anti-dilutive and not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average price of common stock for the quarter.

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

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.

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

Outstanding at December 31, 2021		897,731		$	5.35
Outstanding at June 30, 2022							906,155		$	5.34
Granted		30,940			5.16		60,994			5.01
Vested and issued		(940	)		5.32		(24,130	)		5.79
Forfeited		(16,873	)		5.35		(2,568	)		5.84
Outstanding at March 31, 2022		910,858		$	5.35
Outstanding at March 31, 2023							940,451		$	5.30

As of March 31, ~~2022,~~ 2023, there were ~~16,148~~25,054 restricted stock units outstanding that had vested but for which shares of Common Stock had not yet been issued pursuant to the terms of the applicable agreement.

As of March 31, ~~2022,~~ 2023, there was approximately ~~$4.9~~$5.0 million of unrecognized stock-based compensation ~~expense~~obligations under our equity compensation ~~plans,~~plans. The stock-based compensation obligation is in connection with certain employment agreements which have a deferral option at the Board’s discretion. At the end of the deferral period, the stock-based compensation expense associated with the obligation is expected to be recognized on a straight-line basis over a ~~weighted average~~ period of ~~1.98~~three years.

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 March 31, ~~2022:~~2023:

Warrants Outstanding at March 31, 2022								Warrants Exercisable at March 31, 2022
Warrants Outstanding at March 31, 2023												Warrants Outstanding at March 31, 2023							Warrants Exercisable at March 31, 2023
Range of exercise prices	Range of exercise prices	Number Outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price		Number exercisable		Weighted average exercise price		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		0.85	$	4.00		1,085,068	$	4.00	4.00		1,085,068		2.85	$	4.00		1,085,068	$	4.00
$	10.00		23,737		0.82	$	10.00		23,737	$	10.00	10.00		23,737		2.82	$	10.00		23,737	$	10.00
			1,108,805		0.85	$	4.13		1,108,805	$	4.13			1,108,805		2.85	$	4.13		1,108,805	$	4.13

During the quarter ended March 31, 2023, the Company’s Board of Directors approved the modification to extend the expiration dates of the Company’s existing January 26, 2023 and February 5, 2023 warrants by an additional three years. Accordingly, all the Company’s outstanding warrants have been extended and are anticipated to expire or be exercised on or before the quarter ending March 31, 2026.

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-1B-1 Preferred Stock (“Series B-1B-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 BB-1 Preferred, or Series B-1B-1 Preferred, as applicable.

The Company does business with some of the largest retailers, wholesalers, and ~~wholesalers~~distributors in the ~~World.~~world. Management believes the Series B-1B-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,~~ratios; (ii) possesses a below market dividend rate relative to similar ~~instruments,~~instruments; (iii) offers the flexibility of a paid-in-kind (PIK) payment ~~option,~~option; and (iv) is without covenants. After exploring alternative options for redeeming the Series B-1B-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-1B-1 Preferred Stock, as amended (the “Series B-1B-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-1B-1 Preferred for a cash payment of $10.70 per share at any time upon providing the holders of Series B-1B-1 Preferred at least ten days written notice that sets forth the date on which the redemption will occur (the “Redemption Notice”).

As of March 31, ~~2022,~~ 2023, a total of 625,375 shares of Series B Preferred and 212,402 shares of Series B-1B-1 Preferred were issued and outstanding.

On May 9, 2019, our Board of Directors approved the repurchase of up to $4.0 million in 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~~-1810b-18 of the Exchange Act.

On March 17, 2020, the Board, given the extreme uncertainty due to ~~COVID-~~19COVID-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~~ ~~$4.0~~ ~~million~~number of shares of Common Stock available to ~~$6.0 million. The~~repurchase under the Share Repurchase Program ~~expires 24 months following~~ ~~May 18, 2021,~~ ~~and it~~ ~~may~~ ~~be suspended for periods~~by an additional $4 million bringing the total number of ~~time or discontinued at any time, at~~Common Stock authorized to repurchase under the ~~Board’s discretion.~~Share Repurchase Program to $8.0 million.

On August 31, 2021, our Board of Directors approved a further increase to its Share Repurchase program ~~by $10~~to $12.0 million in shares of our Common ~~Stock. The total remaining authorization for future~~Stock which added an additional $4 million to the Share Repurchase Program.

On May 10, 2022, our Board of Directors approved an increase of $9.0 million in the number of shares of Common Stock ~~repurchases~~available to repurchase under the Share Repurchase Program.

Since inception of the Share Repurchase Program through March 31, 2023, a total of $21,000,000 in shares of Common Stock have been approved under the Share Repurchase Program, and 1,897,819 shares of Common Stock have been repurchased at an average purchase price of $5.88, resulting in $9,835,910 remaining available to repurchase under the current Share Repurchase Program. From time-to-time, our Board of Directors may authorize further increases to our Share Repurchase ~~Program was $6,838,434 as of~~ ~~March 31, 2022.~~ ~~Our Board~~ ~~may~~ ~~authorize further increases, suspend, reduce, or discontinue our~~Program. In addition, the Share Repurchase Program may also be suspended for periods of time or discontinued at any time, at the Board’s discretion.

The following table provides information about repurchases of our Common Stock registered pursuant to Section 12 of the Exchange Act, during the ~~nine~~three months ended March 31, ~~2022:~~2023:

During the ~~three~~nine months ended March 31, ~~2022,~~ 2023, the Company continued to be a party to a service agreement (the “ServiceAgreement”) with Fields Management, Inc. (“FMI”), pursuant to which FMI ~~provides~~provided certain executive management services to the Company, including designating ~~Randall K.~~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 0no payables to FMI at ~~March 31, 2022~~ ~~and~~ ~~June 30, 2021,~~ ~~respectively,~~ under the Service Agreement as of March 31, 2023 or March 31, 2022. During the nine months ended March 31, 2023 and 2022, the Company paid FMI $346,523 and $346,523, respectively, in connection with the Service Agreement.

The Company has reviewed newly issued accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on its consolidated financial statements as a result of future adoption.

In accordance with the Subsequent Events Topic of the FASB ASC 855, we have evaluated subsequent events through the filing date and ~~noted~~ determined that no subsequent events occurred that ~~are~~were reasonably ~~likely~~expected to impact the ~~Company’s~~consolidated condensed financial ~~statements.~~statements presented herein.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (this ~~"Report"~~“Report”) contains forward-looking statements. 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”. 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 June 30, ~~2021~~2022 Annual Report on Form 10-K, incorporated by reference herein. Statements made herein are as of the date of the filing of this Report with the Securities and Exchange Commission ~~("SEC"~~(“SEC”) 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.

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"”), a business-to-business (“B2B”) e-commerce, compliance, and supply chain management platform company 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.~~efficiencies. The Company’s fiscal year ends on June 30. References to fiscal 2022 refer to the fiscal year ended June 30, 2022.

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,~~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,~~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~~through proprietary software ~~products~~solutions designed, developed, marketed and supported by the Company. These ~~products are designed to~~software solutions provide ~~transparency~~visibility and to facilitate improved business processes among all key constituents in the supply chain, starting with the retailer and moving ~~back~~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~~solutions are household name multi-store food retail ~~store~~ chains and their suppliers, branded food manufacturers, food wholesalers and distributors, and other food service businesses.

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,~~(PCG Utah, PCG Delaware, and ReposiTrak are, 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~~suite D292, Murray, Utah ~~84107.~~84107. Its telephone number is (435) ~~645-2000.~~645-2000. Its website address is www.parkcitygroup.com, and ReposiTrak’s website address is www.repositrak.com.

ReposiTrak released a new Audit Management solution for large manufacturers who audit their own sites and supplier facilities for food safety and quality. Based on the world class audit management platform that powers the SQFI global audit system, used to conduct over 10,000 audits annually, the ReposiTrak Audit Management solution will enable manufacturers to easily deploy their own audit schemas, including custom scoring methodologies, auditor management and scheduling, and performance comparisons.

The Audit Management platform is industry and audit agnostic and can easily be configured for a wide variety of GMP and GFSI approved audits. The new solution will help improve quality and safety by making audits more efficient and accurate through better corrective actions management and documentation.

As more retailers and wholesalers continue to expand their base of vendors and suppliers to bolster supply chain resiliency and expand assortments, ReposiTrak has released new and improved vendor vetting and onboarding capabilities to automate the process. Historically, thorough vetting of prospective new vendors has been laborious and slow, and in conflict with the goal of expanding assortments and strengthening supply chains with new vendors.

ReposiTrak's new and improved vendor vetting and onboarding automation, including the ability to connect to customer ERPs through APIs, creates systemic controls to ensure vendors are properly vetted prior to the generation of the first purchase order. Using ReposiTrak vendor vetting automation accelerates the collection of critical documents and data, so that only those vendors that meet the high standards of retailers and wholesalers are onboarded, delivering better safety and brand protection.

On ~~October 6, 2021, the Company and U.S. Bank N.A. (the “~~~~Bank~~~~”) executed a Revolving Credit Agreement (the "~~~~Revolving Credit Agreement"~~~~) and accompanying addendum (the "~~~~Addendum~~~~"), and Stand-Alone Revolving Note (the "~~~~Note~~~~" and collectively with the Revolving Credit Agreement and Addendum, the "~~~~Credit Agreement~~~~"), with an effective date of September 30, 2021. The Credit Agreement replaces~~March 21, 2023, the Company’s ~~prior $6.0 million Revolving Credit Agreement and Stand-Alone Revolving Note between the Company and the Bank, as amended and revised on January 9, 2019, and provides the Company with~~Board of Directors declared a ~~$10.0 million revolving line~~quarterly cash dividend of ~~credit that matures~~$0.015 per share ($0.06 per year), payable to shareholders of record on March 31, 2023, which were paid to shareholders of record on or about May 1, 2023. Based on the closing prices on March 31, 2023, this represented an annual dividend yield of approximately 1.06%. Subsequent quarterly dividends will be paid within 45 days of each record date of June 30,2023, September 30, 2023, December 31, 2023 and March 31, 2024.

The impact of ~~the COVID-19 pandemic and~~global pandemics, including COVID 19, banking failures, geopolitical conflicts, including the recent war in Ukraine, has created much uncertainty in the global marketplace. There are many uncertainties regarding these events, and the Company is closely monitoring the ongoing impact of the ~~pandemic and the~~ recent events ~~in Ukraine~~ on all aspects of its business, including how itthey will impact its services, customers, employees, vendors, and business partners now and in the future. While ~~the pandemic and recent geopolitical conflicts~~these events did not materially adversely affect the Company’s financial results and business operations in the ~~Company’s~~ nine months ended March 31, ~~2022,~~2023 or in the fiscal years ended June 30, ~~2020~~2022 or 2021, we are unable to predict the impact that ~~COVID-19 and~~ recent events, including geopolitical conflicts, ~~will~~may have on its future financial position and operating results due to numerous uncertainties.

In 2020, the United States Food & Drug Administration (“FDA”) announced the “New Era of Smarter Food Safety” blueprint. It “outlines achievable goals to enhance traceability, improve predictive analytics, respond more rapidly to outbreaks, address new business models, reduce contamination of food, and ~~Economic Security~~foster the development of stronger food safety cultures.” But one particular section of the Food Safety Modernization Act ("(“~~CARES Act~~FSMA"”), Section 204(d) which has to deal with traceability, was left incomplete when the regulation was enacted in 2011. FDA has been working for the last few years to define exactly what traceability means and what is required to comply with that section of the law.

As part of the 2020 “New Era” announcement, FDA published the Food Traceability List or (“FTL”). FDA used a “risk assessment model” to identify 16 of the highest-risk categories to start with. There is not a single grocery retailer who does not sell these items. These 16 categories represent thousands of individual items and FDA has made it clear in its communications the categories on ~~March 27, 2020~~the FTL are only the beginning. FDA states that they would “encourage the voluntary adoption of these practices industry-wide,” which means more categories are expected to be added over time.

On November 7, 2022, FDA announced the final rule on FSMA Section 204(d) and proposes it would become effective 60 days after publication in the ~~United States. On April 23, 2020,~~Federal Register. The proposed compliance date for all persons subject to the ~~Company received proceeds from a loan in~~recordkeeping requirements would be 2 years after the ~~amount~~effective date of ~~approximately $1.1 million from its lender, U.S. Bank National Association (the “~~the final regulation.

For traceability, FDA requires the capture, creation and sharing of specific key data elements (“~~Lender~~KDE”)~~, pursuant to approval by the U.S. Small Business Administration (the “~~ at each designated Critical Tracking Event (“~~SBA~~CTE”) for every item and every shipment. FDA also requires the ~~Lender~~data be stored for two years and be retrievable and presented to ~~fund~~them within 24 hours upon request. FSMA 204 is ultimately about recording all movement of inventories through the ~~Company’s request for~~supply chain. The result is an enormous amount of data to manage. At the root, it is a ~~loan under the SBA’s Paycheck Protection Program (“~~~~PPP Loan~~~~”) created as part of the CARES Act administered by the SBA. In accordance~~supply chain data management issue, which is ReposiTrak’s core expertise. That’s why we’ve made it our goal to develop a traceability solution that’s easy, inexpensive and exceeds FDA’s requirements with the ~~requirements~~guidance of industry thought leaders gathered in the ~~CARES Act,~~Food Traceability Leadership Consortium. As the ~~Company used~~largest connected network of food suppliers, wholesalers and retailers in the ~~proceeds from~~world, the ~~PPP Loan primarily for payroll costs, covered rent payments,~~ReposiTrak Traceability Network® is well positioned to provide end-to-end traceability to provide a safer food supply chain, tighten control on food waste and ~~covered utilities during the eight-week period commencing on the date of loan approval. The PPP Loan was scheduled to mature on April 23, 2022, with~~implement a ~~1.00% interest rate,~~food recall response that saves lives and was subject to the terms and conditions applicable to all loans made pursuant to the Paycheck Protection Program as administered by the SBA under the CARES Act. The PPP Loan was forgiven on December 19, 2020.money.

Comparison of the Three Months Ended March 31, ~~2022~~2023 to the Three Months Ended March 31, ~~2021.~~2022.

Revenue was ~~$4,555,906~~$4,824,101 and ~~$6,022,540~~$4,555,906 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, a ~~24% decrease.~~6% increase year-over-year. The ~~decrease~~increase in revenue was due to significant MarketPlace revenue during the height of COVID-19 that occurred in 2021 that has not reoccurred in 2022. This includes $1.5MM, in non- recurring Marketplace revenue and $200k in recurring revenue for products and services the Company as part of its strategy chose to sunset that had little upside and very low margin. This was partially offset by revenue growth in ~~other higher margin compliance~~ subscription, ~~supply chain~~ services and other recurring revenue.

~~During fiscal 2021, as COVID-19 disrupted supply chains~~ This is the result of growing industry and ~~generated shortages in products, our ability to source hard to find items for our customers resulted in increased revenue attributable to MarketPlace. These products largely consisted~~consumer concern of ~~personal protective equipment ("~~~~PPE~~~~") which includes nitrile gloves, masks, freezers~~food contaminations and ~~telecommunication equipment. While~~food safety hazards whether biological, chemical, physical, or allergenic. The risks have elevated regulatory requirements, documentation requisites, and principally “where does your food come from” transparency on grocery retailers and their suppliers. As more and more retailers, wholesalers and distributors adopt the risk concerns and disclosure requirements, the Company ~~experienced~~has seen a significant increase in MarketPlace revenue for PPE during the height of COVID-19, that demand has decreased in 2022, and future demand is uncertain. As a result, we may experience significant swings in MarketPlace revenue as the pandemic continues to abate depending on the impact of future variants of COVID-19. The uncertainty regarding futurerising demand for MarketPlace is heightened due to recent geopolitical conflicts, including the current war in Ukraine. While we don’t currently anticipate that such uncertainties will materially affect our future results from operations, no assurances can be given.its services.

Although no assurances can be given, we continue to focus our sales efforts on marketing our software services on a recurring subscription basis and placing less emphasis on transactional revenue. However, we believe there will continue to be a ~~certain~~small percentage of customers that will require buying a particular service outright (i.e., a license). We will continue to make our best effort to reduce this non-recurring transactional revenue when we are able.

Cost of services and product support was ~~$773,651~~$840,272 and ~~$2,634,224~~$773,651 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, a ~~71% decrease.~~9% increase. This ~~decrease~~$66,621 increase is primarily the result of ~~planned elimination of low margin products,~~increased salary and support services in preparation for the Company’s continued demand for its compliance and ~~cost control. (1) We eliminated high cost, low margin MarketPlace transactional revenue which significantly resulted~~supply chain solutions. In addition, we have invested heavily in reduced procurement costs. With lower MarketPlace transactions, we realized significantly less Cost of Services. (2) We sunsetted two vendor managed pricing products and headcount which also contributed to lower Cost of Services. (3) We eliminated certain 3^rd ~~party vendor software services which contributed~~automation in response to the ~~reduction.~~

While we experienced a significant increase in MarketPlace costs and corresponding revenue during fiscal 2021 due to demand in PPE, those costs and corresponding revenue was not continued in fiscal 2022. It is uncertain what if any Marketplace revenue we can expect going forward since the Company has chosen to eliminate all non-core non-recurring revenue.FSMA 204 initiative.

Sales and marketing expense ~~was~~were $1,239,946 and $1,229,677 ~~and $1,115,266~~ for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, a 6%1% increase. This increase in sales and marketing expense is primarily ~~due to~~ an increase in ~~tradeshows, conference fees,~~trade show expense, investment in FSMA 204 traceability marketing, and higher sales travel ~~costs~~expense. As the pandemic continues to abate, many customers and prospects are returning to the “new normal” requiring in person meetings. The largest contributor to the increase in sales and marketing expense has been an increase in travel cost and trade shows. We believe this trend will continue as ~~the Company has discontinued temporary travel holds caused by the COVID-19 pandemic. Additionally, the Company has contracted with various marketing consultants~~many of our trading partners, industry associations will continue to require our assistance in ~~preparation of launching the Repositrak Traceablity Network.~~addressing their compliance and supply chain needs.

General and administrative expense was ~~$1,178,649~~$916,237 and ~~$1,255,410~~$1,178,649 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, a ~~decrease of 6%.~~22% decrease. The decrease in general and administrative expense is primarily due to ~~(1)~~a refund of payroll taxes associated with the ~~termination~~Employee Retention Credit (ERC). The ERC is a refund or certain payroll taxes for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts. During the period, the Company received approximately $1.175 million in payroll tax refunds, net of ~~hosted software applications including its CRM provider, employee~~fees. The ERC refund was offset by increases in bad debt expense, ~~management software,~~increase costs of benefits for employees, and a ~~decrease in maintenance costs associated with certain fixed assets.~~tight labor market.

Depreciation and amortization expense was ~~$197,393~~$305,864 and ~~$259,343~~$197,393 for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively, ~~a decrease~~an increase of ~~24%~~55%. This ~~decrease~~increase is due to ~~the disposal of certain~~additional assets acquired in the current fiscal year. Given the rising global hacks on software companies, banks, and financial institutions, we spent approximately $420,000 on security, backup, storage and redundancy during the quarter. The upgrades were financed through a leasing agent with an effective APR rate of 4.45%.

Net other income was $301,238 for the three months ended March 31, 2023 compared to net other expense ~~was~~of $60,482 for the three months ended March 31, ~~2022 compared to net other~~2022. Other income ~~of $64,855 for the three months ended March 31, 2021. Other expense~~ increased due to ~~unrealized losses of certain short-term investments held~~an increase in ~~U.S. treasuries and other securities. Given~~interest income due to rising interest rates ~~the Company recognized a decline in its bond portfolio and other~~on fixed income instruments on excess cash.

Dividends accrued on the Company’s Series B-1 Preferred was $146,611 for the three months ended March 31, ~~2022~~2023 and for the three months ended March 31, ~~2021.~~2022. Dividends remained flat in the comparable periods.

Comparison of the Nine Months Ended March 31, ~~2022~~2023 to the Nine Months Ended March 31, ~~2021.~~2022.

Revenue was ~~$13,469,170~~$14,295,091 and ~~$16,422,146~~$13,469,170 for the nine months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, a ~~decrease of 18%.~~6% increase. The ~~decrease~~increase in revenue during the period was due to significant MarketPlace revenue contribution during the height of COVID-19 that occurred in fiscal 2021 that did not reoccur in 2022. Given its volatility and non-recurring nature, the Company’s strategic plan is to eliminate all non-core non-recurring revenue. Year to date, this includes $3.6MM, in non- recurring Marketplace revenue and $600k in recurring revenue for products and services that had little upside and very low margin. This was partially offset by revenue growth in ~~compliance~~ subscription, ~~supply chain~~ services and other recurring revenue. This is the result of growing industry and consumer concern of food contaminations and food safety hazards whether biological, chemical, physical, or allergenic. The risks have elevated regulatory requirements, documentation requisites, and principally “where does your food come from” transparency on grocery retailers and their suppliers. As more and more retailers, wholesalers and distributors adopt the risk concerns and disclosure requirements, the Company has seen a rising demand for its services.

During fiscal ~~2021,~~2022, as COVID-19 disrupted supply chains and generated shortages in products, our ability to source hard to find items for our customers resulted in increased revenue attributable to MarketPlace. These products largely consisted of ~~PPE.~~personal protective equipment (“PPE”) which includes nitrile gloves, masks, freezers and telecommunication equipment. While the Company experienced a significant increase in MarketPlace revenue for PPE during the height of COVID-19, ~~that~~it is uncertain what or if demand ~~has decreased in 2022, and future demand is uncertain.~~for PPE will continue during fiscal 2023. As a result, we may experience significant swings in MarketPlace revenue as the pandemic continues to abate depending on the impact of future variants of COVID-19. The uncertainty regarding future demand for MarketPlace is heightened due to recent geopolitical conflicts, including the current war in Ukraine. While we don’t currently anticipate that such uncertainties will materially affect our future results from operations, no assurances can be given.abate.

Cost of services and product support was ~~$2,437,351~~$2,539,618 and ~~$6,706,769~~$2,437,351 for the nine months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, a ~~decrease of 64%.~~4% increase. This ~~decrease~~increase is primarily the result of ~~planned elimination of low margin products, services~~increased salary and ~~cost control. (1) We eliminated high cost, low margin MarketPlace transactional revenue which significantly reduced procurement~~an increase in support and maintenance costs. With lower MarketPlace transactions, we realized significantly less Cost of Services. (2) We sunsetted two vendor managed pricing products and headcount which also contributed to lower Cost of Services. (3) We eliminated certain 3rd party vendor software services which contributed to the reduction.

Sales and marketing expense ~~was~~were $3,667,017 and $3,570,606 ~~and $3,643,602~~ for the nine months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, a ~~decrease of 2%.~~3% increase. This ~~decrease was due~~increase in sales and marketing expense is primarily ~~to a decrease in variable compensation, a reduction~~an increase in trade show expense, investment in FSMA 204 traceability marketing, and ~~lower~~higher sales travel expense. As the pandemic continues to abate, many customers and prospects are returning to the “new normal” requiring in person meetings. The largest contributor to the increase in sales and marketing expense has been an increase in travel ~~expense.~~cost and trade shows. We believe this trend will continue as many of our trading partners, industry associations will continue to require our assistance in addressing their compliance and supply chain needs.

General and administrative expense was ~~$3,484,307~~$3,392,056 and ~~$3,568,474~~$3,484,307 for the nine months ended March 31, 2023 and 2022, ~~and 2021, respectively.~~respectively, a 3% decrease. The ~~2% decline~~decrease in general and administrative ~~expenses were largely~~expense is primarily due to ~~(1)~~a refund of payroll taxes associated with the ~~termination~~Employee Retention Credit (ERC). The ERC is a refund or certain payroll taxes for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts. During the period, the Company received approximately $1.175 million in payroll tax refunds, net of ~~hosted software applications including its CRM provider, employee~~fees. The ERC refund was offset by increases in bad debt expense, ~~management software,~~increase costs of benefits for employees, and a ~~decrease in maintenance costs associated with certain fixed assets.~~tight labor market.

Depreciation and amortization expense was ~~$676,324~~$771,030 and ~~$769,440~~$676,324 for the nine months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively, ~~a decrease~~an increase of ~~12%~~14%. This ~~decrease~~increase is due to ~~the disposal of certain~~additional assets acquired in the current fiscal year.

Net other income was $568,112 for the nine months ended March 31, 2023 compared to net other expense ~~was~~of $270,822 for the nine months ended March 31, ~~2022 compared to net other~~2022. Other income ~~of $1,263,162 for the nine months ended March 31, 2021. The change in other income (expense) was~~increased due to (1) ~~recognition of a gain on debt extinguishment for the Company’s PPP loan in fiscal 2021 that did not occur in fiscal 2022; (2) and~~ an increase in interest ~~expense associated with financing arrangements with a bank for the Company’s stock repurchase plan; (3) unrealized~~income due to rising interest rates on fixed income instruments on excess cash; and (2) realized losses of certain short-term investments held in U.S. treasuries and other ~~securities.~~securities that occurred in prior fiscal year. Given rising interest rates, the Company recognized a decline in its bond portfolio and other fixed income instruments on excess cash.

Dividends accrued on the Company’s Series B-1 Preferred was $439,833 for the nine months ended March 31, ~~2022~~2023 and ~~2021.~~for the nine months ended March 31, 2022. Dividends remained flat in the comparable ~~period.~~periods.

We believe that our existing cash and short-term investments, together with funds generated from operations, are sufficient to fund operating and investment requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including macroeconomic conditions, our rate of revenue growth, sales and marketing activities, the timing and extent of spending required for research and development efforts and the continuing market acceptance of our products and services.

We have historically funded our operations with cash from operations, equity financings, and borrowings from the issuance of debt, including our existing line of credit with U.S. Bank N.A., which was revised on October 6, 2021.

Cash was ~~$21,269,307~~$22,941,493 and ~~$24,070,322~~$21,460,948 at March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively. This ~~12% decrease~~7% increase is principally the result of ~~a $6.0~~(1) paying down over $2.1 million ~~payoff~~ of ~~financing arrangements with a bank, partially~~our existing line of credit, and (2) the purchase of common stock under our existing buyback plan. This was significantly offset by lower overall cash operating expense, ~~and~~receiving cash in advance on subscriptions, collections on existing accounts ~~receivable.~~and the previously disclosed $1.1 million received in conjunction with the ERC.

	Nine Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2023		2022
Net income	$	2,906,901		$	2,950,882		$	4,213,476	$	2,906,901
Noncash expense and income, net		1,784,099			490,413			2,329,265		1,784,099
Net changes in operating assets and liabilities		(658,036	)		(90,742	)		523,149		(658,036	)
	$	4,032,964		$	3,350,553		$	7,065,890	$	4,032,964

Net cash provided by operating activities for the nine months ended March 31, ~~2022~~2023 was ~~$4,032,964,~~$7,065,890 as compared to net cash provided by operating activities of ~~$3,350,553~~$4,032,964 for the nine months ended March 31, ~~2021.~~2022. Net cash provided by operating activities increased ~~20%~~75% due largely to ~~elimination~~(1) higher revenue and collection of ~~low margin products, services,~~monthly subscription fees paid annually in advance, (2) collection of outstanding receivables, (3) an increase in prepaids and ~~overall cost control.~~other assets and (3) an increase in deferred revenue offset by a decrease in accounts payable. Noncash expense increased by ~~$1,293,686~~$545,166 in the nine months ended March 31, ~~2022~~2023 compared to ~~the~~ nine months ended March 31, ~~2021~~2022 as a result of loss on sale of property and equipment ~~a modification of an operating lease resulting~~ in ~~a decrease of a right-of-use asset, and~~prior fiscal year offset with an increase in ~~stock compensation~~bad debt expense. ~~Additionally, a gain on debt extinguishment occurred in the prior fiscal year.~~

Net cash ~~provided by~~used in investing activities for the nine months ended March 31, ~~2022~~2023 was ~~$1,323,262~~$903,187 compared to net cash ~~used in~~provided by investing activities of ~~$105,391~~$1,323,262 for the nine months ended March 31, ~~2021.~~2022. This increase in cash ~~provided by~~used in investing activities for the nine months ended March 31, ~~2022~~2023 was due to the sale of property and ~~equipment.~~equipment in prior fiscal year.

Net cash used in financing activities totaled ~~$8,157,241~~$4,682,158 for the nine months ended March 31, ~~2022~~2023 as compared to cash used in financing activities of ~~$414,400~~$8,157,241 for the nine months ended March 31, ~~2021.~~2022. The ~~increase~~decrease in net cash used in financing activities is primarily attributable to the payoff of our line of credit arrangement with a bank in prior fiscal year and purchase of stock under the Share Repurchase Program.

At March 31, ~~2022,~~2023, the Company had positive working capital of ~~$20,152,506,~~$22,104,848, as compared with positive working capital of ~~$20,400,991~~$20,485,875 at June 30, ~~2021.~~2022. This ~~$248,485 decrease~~$1,618,973 increase in working capital is primarily due to a decrease in ~~cash~~liability as a result of the ~~$6.0 million~~ payoff of a financing arrangement with a ~~bank and purchase of stock under the Share Repurchase Program.~~bank.

Current assets as of March 31, ~~2022~~2023 totaled ~~$26,691,501,~~$25,987,612, a decrease of ~~$3,010,273,~~$595,097, as compared to ~~$29,701,774~~$26,582,709 as of June 30, ~~2021.~~2022. The decrease in current assets is primarily attributable to a net decrease in ~~cash of $2,801,015 paying off a credit arrangement, an increase in~~ contract assets and prepaid expense of ~~$89,058 and~~$1,152,629, a decrease in accounts receivable of ~~$298,316.~~$923,013, and an offsetting increase in cash of $1,480,545.

Current liabilities totaled ~~$6,538,995~~$3,882,764 as of March 31, ~~2022~~2023 as compared to ~~$9,300,783~~$6,096,834 as of June 30, ~~2021.~~2022. The ~~comparative~~ decrease in current liabilities is primarily attributable to the corresponding payoff of ~~$6.0~~$2.1 million in our line of ~~credit, as discussed below.~~credit. As of March 31, 2023, the Company has zero bank debt.

On October 6, 2021, the Company and ~~U.S.~~the Bank ~~N.A.~~ executed the Credit Agreement, with an effective date of September 30, 2021.

The Credit Agreement replaces the Company’s prior $6.0 million Revolving Credit Agreement and Stand-Alone Revolving Note between the Company and the Bank, as amended and revised on January 9, 2019, and provides the Company with a $10.0 million revolving line of credit that matures on March 31, 2023. ~~Any amounts drawn down by~~

On April 28, 2023, the Company ~~under~~and the Bank executed an Amendment to the existing $10.0 million Credit Agreement, with an effective date of March 31, 2023. The new amendment provisions to the existing $10 million facility are (1) the Company will increase its liquidity requirement from $10 million to $12 million. Currently the Company maintains over $22 million in cash and a current ration of over 6:1. (2) Draws on the facility accrue interest at anthe annual rate equal to 1.75% plus the one-month SOFR rate instead of the previous LIBOR rate. ~~In addition,~~As of March 31, 2023, the balance of the facility was zero. The Company has zero bank debt.

Furthermore, the Credit Agreement contains customary affirmative and negative covenants and conditions to borrowing, as well as customary events of default. Among other things, the Company must maintain liquid assets equal to ~~the outstanding balance of the Note,~~$12 million and maintain a Senior Funded Debt (as defined in the Credit Agreement) to EBITDA Ratio (as defined in the Credit Agreement) of not more than 3:1.

While no assurances can be given, management currently believes that the Company will continue to increase its cash flow from operations and working capital position in subsequent ~~periods,~~periods. The Company’s increase in anticipated cash flow from operations and ~~that~~working capital position is expected to be offset by the use of cash required to fund the Company’s quarterly cash dividends announced on September 28, 2022, of $0.015 per share, and on December 30, 2022, of $0.015 per share and on February 10, 2023 of $0.015 per share. The Company believes it will have adequate cash resources to fund its operations, ~~and~~ satisfy its debt obligations, and fund its anticipated quarterly cash dividend for at least the next 12 months.

The Company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenue, and results of operation, liquidity or capital expenditures.

Total contractual obligations and commercial commitments as of March 31, ~~2022~~2023 are summarized in the following table:

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.

We commenced operations in the software development and professional services business during 1990. The preparation of our financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expense during the reporting period. On an ongoing basis, management evaluates its estimates and assumptions. Management bases its estimates and judgments on historical experience of operations and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies, among others, will affect its more significant judgments and estimates used in the preparation of our consolidated financial statements.

In determining the carrying value of the Company’s net deferred income tax assets, the Company must assess the likelihood of sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions, to realize the benefit of these assets. If these estimates and assumptions change in the future, the Company may record a reduction in the valuation allowance, resulting in an income tax benefit in the Company’s statements of operations. Management evaluates whether or not to realize the deferred income tax assets and assesses the valuation allowance quarterly.

Goodwill and other long-lived assets assigned to specific reporting units are reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. Management reviews the long-lived tangible and intangible assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Management evaluates, at each balance sheet date, whether events and circumstances have occurred which indicate possible impairment. The carrying value of a long-lived asset is considered impaired when the anticipated cumulative undiscounted cash flows of the related asset or group of assets is less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the estimated fair market value of the long-lived asset. Economic useful lives of long-lived assets are assessed and adjusted as circumstances dictate.

Effective July 1, 2018, wethe Company adopted the Financial Accounting Standards Board’s Accounting Standards Update 2014-09: Revenue from Contracts with Customers (Topic 606), and its related amendments (“ASU 2014-09”). ASU 2014-09 provides a unified model to determine when and how revenue is recognized and enhances certain disclosure around the nature, timing, amount and uncertainty of revenue and cash flows arising from customers.

ASU 2014-09 represents a change in the accounting model utilized for the recognition of revenue and certain expense arising from contracts with customers. WeThe Company adopted ASU 2014-09 using a “modified retrospective” approach and, accordingly, revenue and expense totals for all periods before July 1, 2018 reflect those previously reported under the prior accounting model and have not been restated.

See Note 2 to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Report for a full description of the impact of the adoption of new accounting standards on our financial statements. Following the adoption of this guidance, the revenue recognition for our sales arrangements remained materially consistent with our historical practice and there have been no material changes to our critical accounting policies and estimates as compared to our critical accounting policies and estimates included in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.

The Company accounts for its share-based compensation to employees and non-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.

Effective July 1, 2019, the Company adopted the requirements of Accounting Standards Update No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02")~~, as discussed further in Note 5.~~. All amounts and disclosures set forth in this Report 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.

Our business is conducted principally in the United States. As a result, our financial results are not affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We do not engage in hedging transactions to reduce our exposure to changes in currency exchange rates, although if the geographical scope of our business broadens, we may do so in the future.

Our exposure to risk for changes in interest rates relates primarily to our investments in short-term financial instruments. Investments in both fixed rate and floating rate interest earning instruments carry some interest rate risk. The fair value of fixed rate securities may fall due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Partly as a result of this, our future interest income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that have fallen in estimated fair value due to changes in interest rates. However, as substantially all of our cash ~~consists~~consist of bank deposits and short-term money market instruments, we do not expect any material change with respect to our net income as a result of an interest rate change.

Our exposure to interest rate changes related to borrowing has been limited, and we believe the effect, if any, of near-term changes in interest rates on our financial position, results of operations and cash flows should not be material. At March 31, ~~2022, the~~2023, our debt portfolio was composed of ~~approximately 0% fixed rate debt and 100% variable rate debt.~~(1) Bank Line of Credit – SOFR + 1.75%. The balance is zero. (2) Leases – Effective APR Fixed is 4.55%. Total lease obligations are on a three year straight-line basis. The total cost is less than $400,000.

The table that follows presents fair values of principal amounts and weighted average interest rates for our investment portfolio as of March 31, ~~2022:~~2023:

Cash:

Aggregate

Fair Value

Weighted Average

Interest Rate

Aggregate

Fair Value

Weighted

Average

Interest Rate

Cash

21,269,307

1.12

22,941,493

5.04

We are, from time-to-time, involved in various legal proceedings incidental to the conduct of our business. Historically, the outcome of all such legal proceedings has not, in the aggregate, had a material adverse effect on our business, financial condition, results of operations or liquidity. There is currently no pending or threatened material legal proceeding that, in the opinion of management, could have a material adverse effect on our business or financial condition.

There are no risk factors identified by the Company in addition to the risk factors previously disclosed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.

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.

		Page
			PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

~~Item 1.~~	~~Financial Statements~~	1

	Consolidated Condensed Balance Sheets as of March 31, ~~2022~~2023 and June 30, ~~2021~~2022 (Unaudited)	1
	Consolidated Condensed Statements of Operations for the ~~three~~Three and ~~nine months ended~~Nine Months Ended March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	2
	Consolidated Condensed Statements of Cash Flows for the ~~nine months ended~~Nine Months Ended March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	3
	Consolidated Statements of Stockholders’ Equity for March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	4
	Notes to Consolidated Condensed Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1214

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2022

Item 4.	Controls and Procedures	2023

			PART II OTHER INFORMATION

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 5.	Other Information	24

Item 6.	Exhibits	24


~~Item 1.~~Signatures		~~Legal Proceedings~~	21

~~Item 1A.~~	~~Risk Factors~~	21

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	21

~~Item 3.~~	~~Defaults Upon Senior Securities~~	21

~~Item 5.~~	~~Other Information~~	21

~~Item 6.~~	~~Exhibits~~	21

~~Signatures~~		22
		25

	Contract liability
Balance – December 31, 2021	$	1,657,859
Amounts billed but not recognized as revenue		991,099
Revenue recognized related to the opening balance of deferred revenue		(1,106,938	)
Other		0
Balance – March 31, 2022	$	1,542,020

	Contract liability
Balance – June 30, 2022	$	1,555,143
Amounts billed but not recognized as revenue		1,559,549
Revenue recognized related to the opening balance of deferred revenue		(1,551,918	)
Balance – March 31, 2023	$	1,562,774

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021

Recurring – Subscription, Support and Services	$	4,553,844	$	4,245,247	$	13,259,456	$	12,263,945
Non-Recurring – Services		0		326,535		81,618		584,394
Transaction Based – MarketPlace		2,062		1,450,758		128,096		3,573,807
	$	4,555,906	$	6,022,540	$	13,469,170	$	16,422,146

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

July 1, 2021 – September 30, 2021:		7,600	$	5.43		718,394	$	12,009,609
October 1, 2021 – December 31, 2021:		244,552	$	5.85		962,946	$	10,579,912
January 1, 2022 – March 31, 2022:		538,376	$	6.95		1,501,322	$	6,838,434

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
January 1, 2023 – March 31, 2023:		74,150	$	5.79	$	429,271	$	9,835,910

	Fiscal Quarter Ended March 31,						Variance
	2022			2021			Dollars			Percent
Cost of services and product support	$	773,651		$	2,634,224		$	(1,860,573	)		-71	%
Percent of total revenue		17	%		44	%

	Operating Leases			Financing Leases
Less than 1Year	$	72,747		$	234,769
1-3 Years		152,107			205,764
3-5 Years		154,359			-
Total lease payments		379,213			440,533
Less imputed interest		(43,310	)		(20,501	)
Total	$	335,903		$	420,032

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document ~~- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document~~
101.SCH		Inline XBRL Taxonomy Extension Schema ~~Document~~
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~
104		Cover Page Interactive Data File ~~(embedded within the~~- formatted in Inline XBRL ~~Document and include in~~(included as Exhibit 101)

	PARK CITY GROUP, INC.

Date: May ~~16, 2022~~15, 2023	By:	/s/ Randall K. Fields
		Randall K. Fields
		Chair of the Board and Chief Executive Officer (Principal Executive Officer)

	PARK CITY GROUP, INC.

Date: May ~~16, 2022~~15, 2023	By:	/s/ John R. Merrill
		John R. Merrill
		Chief Financial Officer (Principal Financial Officer & Principal Accounting Officer)