Exhibit 99.1
Park City Group, Inc.
Unaudited Pro Forma Combined Condensed Financial Statements
On August 28, 2008, Park City Group, Inc. ("Park City Group", or the "Company") entered into two Stock Purchase Agreements (the “Purchase Transaction”) relating to the acquisition by Park City Group of shares of Series E Preferred Stock of Prescient Applied Intelligence, Inc. (“Prescient”) from existing stockholders of Prescient in exchange for cash.
As a result of the Purchase Transaction, Park City Group acquired approximately 43% of Prescient’s Series E Preferred Stock. The Purchase Transaction was consummated contemporaneously with the execution of an Agreement and Plan of Merger (“Merger Transaction”), pursuant to which Prescient was merged with and into a wholly-owned subsidiary of Park City Group. The Merger Transaction closed on January 13, 2009. In connection with the Purchase Transaction, the sellers of the Series E Preferred Stock also entered into Lockup and Voting Agreements whereby they, subject to certain limited exceptions, agreed (i) not to transfer any of their shares of Prescient Common Stock or Series G Preferred Stock prior to completion or termination of the Merger and (ii) to vote their shares of Prescient Common Stock and Series G Preferred Stock in favor of the Merger.
The following unaudited pro forma combined condensed balance sheet presents Park City Group’s historical financial position combined with Prescient as if the Merger Transaction and the financing for the Merger Transaction had occurred on September 30, 2008, and includes adjustments which give effect to events that are directly attributable to the Merger Transaction and that are factually supportable, regardless of whether they have a continuing impact or are nonrecurring. The unaudited pro forma combined condensed statements of operations present the combined results of Park City Group’s operations with Prescient as if the Merger Transaction and the financing for the Merger Transaction had occurred at the beginning of each of the periods presented and include adjustments that are directly attributable to the Merger Transaction, are expected to have a continuing impact on the combined results, and are factually supportable. The pro forma financial statements are not necessarily indicative of what Park City Group’s financial position or results of operations actually would have been had Park City Group completed the Merger Transaction at the dates indicated. In addition, the unaudited pro forma combined condensed financial information does not purport to project the future financial position or operating results of the combined company.
The unaudited pro forma combined condensed financial statements should be read in conjunction with the:
• | Accompanying Adjustments to the Unaudited Pro Forma Combined Condensed Financial Statements; |
• | Separate historical financial statements of Park City Group included in its Annual Report on Form 10-K for the year ended June 30, 2008 and Form 10-Q as of and for the three months ended September 30, 2008; and |
• | Separate historical financial statements of Prescient included in Prescient’s Annual Report on Form 10-KSB for the year ended December 31, 2007 and Form 10-Q as of and for the nine months ended September 30, 2008. |
-1-
Park City Group prepared the unaudited pro forma combined condensed financial information using the purchase method of accounting. Accordingly, Park City Grop’s estimated cost to acquire Prescient of approximately $9,728,000 has been allocated to the assets acquired and liabilities assumed according to their estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair value of the net assets acquired has been recorded as goodwill.
Park City Group is currently determining the fair values of a significant portion of these net assets. The preliminary work performed in estimating the fair values is reflected in these unaudited pro forma combined condensed financial statements. The final determination of these fair values will be completed as soon as possible but no later than one year from the acquisition date.
This final valuation will be based on the actual assets acquired and liabilities assumed at the acquisition date. Although the final determination may result in asset and liability fair values that are different than the preliminary estimates of these amounts included herein, it is not expected that those differences will be material to an understanding of the impact of the Merger Transaction to Park City Group’s financial results.
-2-
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 2008
Historical | ||||||||||||||||||||
Company | Prescient | Pro Forma Adjustments | Pro Forma | |||||||||||||||||
Revenue | ||||||||||||||||||||
Subscriptions | $ | 203,028 | $ | 5,577,695 | $ | - | $ | 5,780,723 | ||||||||||||
Maintenance and support | 1,455,344 | 1,558,663 | - | 3,014,007 | ||||||||||||||||
Professional service and other | 584,661 | 1,159,490 | - | 1,744,151 | ||||||||||||||||
Software licenses | 1,101,940 | 326,305 | - | 1,428,245 | ||||||||||||||||
Total revenue | 3,344,973 | 8,622,153 | - | 11,967,126 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
Customer operations and support | 2,419,227 | 2,368,966 | - | 4,788,193 | ||||||||||||||||
Research and development | - | 1,231,547 | - | 1,231,547 | ||||||||||||||||
Sales and marketing | 1,843,912 | 1,749,088 | - | 3,593,000 | ||||||||||||||||
General and administrative | 2,073,214 | 1,749,535 | - | 3,822,749 | ||||||||||||||||
Impairment of goodwill | - | 7,453,198 | - | 7,453,198 | ||||||||||||||||
Depreciation and amortization | 505,539 | 473,610 | 790,453 | (4 | ) | 1,769,602 | ||||||||||||||
Total operating expenses | 6,841,892 | 15,025,944 | 790,453 | 22,658,289 | ||||||||||||||||
Gain (loss) from operations | (3,496,919 | ) | (6,403,791 | ) | (790,453 | ) | (10,691,163 | ) | ||||||||||||
Other income (expense) | ||||||||||||||||||||
Loss on disposal of assets | (295 | ) | - | - | (295 | ) | ||||||||||||||
Interest income (expense) | 29,035 | (203,831 | ) | (1,167,395 | ) | (1 | ) | (1,342,191 | ) | |||||||||||
Income from patent activities | 600,000 | - | - | 600,000 | ||||||||||||||||
Loss from operations before income taxes | (2,868,179 | ) | (6,607,622 | ) | (1,957,848 | ) | (11,433,649 | ) | ||||||||||||
Provision for income taxes | - | (45,000 | ) | - | (45,000 | ) | ||||||||||||||
Net loss | (2,868,179 | ) | (6,652,622 | ) | (1,957,848 | ) | (11,478,649 | ) | ||||||||||||
Dividends on preferred stock | (330,837 | ) | - | - | (330,837 | ) | ||||||||||||||
Deemed dividend on Series E Preferred Stock | - | (707,208 | ) | 707,208 | (3 | ) | - | |||||||||||||
Undeclared dividend on Series E Preferred Stock | - | (1,329,050 | ) | 1,329,050 | (3 | ) | - | |||||||||||||
Net loss attributable to common shareholders | $ | (3,199,016 | ) | $ | (8,688,880 | ) | $ | 78,410 | $ | (11,809,486 | ) | |||||||||
Basic and diluted weighted average number of common shares outstanding: | 9,150,000 | 33,572,282 | (33,572,282 | ) | (2 | ) | 9,150,000 | |||||||||||||
Basic and diluted loss per common share: | $ | (0.35 | ) | $ | (0.26 | ) | $ | (1.29 | ) |
-3-
THREE MONTHS ENDED SEPTEMBER 30, 2008
Historical | ||||||||||||||||||||
Company | Prescient | Pro Forma Adjustments | Pro Forma | |||||||||||||||||
Revenue | ||||||||||||||||||||
Subscriptions | $ | 58,104 | $ | 1,477,287 | $ | - | $ | 1,535,391 | ||||||||||||
Maintenance and support | 288,632 | 381,348 | - | 669,980 | ||||||||||||||||
Professional service and other | 145,302 | 227,966 | - | 373,268 | ||||||||||||||||
Software licenses | 38,240 | 110,000 | - | 148,240 | ||||||||||||||||
Total revenue | 530,278 | 2,196,601 | - | 2,726,879 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
Customer operations and support | 580,544 | 560,970 | - | 1,141,514 | ||||||||||||||||
Research and development | - | 366,511 | - | 366,511 | ||||||||||||||||
Sales and marketing | 300,472 | 423,357 | - | 723,829 | ||||||||||||||||
General and administrative | 415,241 | 463,605 | - | 878,846 | ||||||||||||||||
Impairment of goodwill | - | 2,369,808 | - | 2,369,808 | ||||||||||||||||
Depreciation and amortization | 135,563 | 121,582 | 197,613 | (4 | ) | 454,758 | ||||||||||||||
Total operating expenses | 1,431,820 | 4,305,833 | 197,613 | 5,935,266 | ||||||||||||||||
Gain (loss) from operations | (901,542 | ) | (2,109,232 | ) | (197,613 | ) | (3,208,387 | ) | ||||||||||||
Other income (expense) | ||||||||||||||||||||
Interest income (expense) | (22,741 | ) | (27,821 | ) | (291,849 | ) | (1 | ) | (342,411 | ) | ||||||||||
Loss on equity method investment | (197,205 | ) | - | 197,205 | (6 | ) | - | |||||||||||||
Loss from operations before income taxes | (1,121,488 | ) | (2,137,053 | ) | (292,257 | ) | (3,550,798 | ) | ||||||||||||
Provision for income taxes | - | (7,500 | ) | - | (7,500 | ) | ||||||||||||||
Net loss | (1,121,488 | ) | (2,144,553 | ) | (292,257 | ) | (3,558,298 | ) | ||||||||||||
Dividends on preferred stock | (88,396 | ) | - | - | (88,396 | ) | ||||||||||||||
Undeclared dividend on Series E Preferred Stock | - | (334,078 | ) | 334,078 | (3 | ) | - | |||||||||||||
Net loss attributable to common shareholders | $ | (1,209,884 | ) | $ | (2,478,631 | ) | $ | 41,821 | $ | (3,646,694 | ) | |||||||||
Basic and diluted weighted average number of common shares outstanding: | 9,303,000 | 33,560,791 | (33,560,791 | ) | (2 | ) | 9,303,000 | |||||||||||||
Basic and diluted loss per common share: | $ | (0.13 | ) | $ | (0.07 | ) | $ | (0.39 | ) |
-4-
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2008
Historical | ||||||||||||||||||||
Company | Prescient | Pro Forma Adjustments | Pro Forma | |||||||||||||||||
Assets | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash | $ | 321,873 | $ | 3,181,843 | $ | - | $ | 3,503,716 | ||||||||||||
Receivables, net | 795,803 | 994,503 | - | 1,790,306 | ||||||||||||||||
Unbilled receivables | 77,052 | - | - | 77,052 | ||||||||||||||||
Prepaid expenses and other current assets | 68,416 | 217,034 | - | 285,450 | ||||||||||||||||
Total current assets | 1,263,144 | 4,393,380 | - | 5,656,524 | ||||||||||||||||
Property and equipment, net | 452,405 | 170,207 | 5,083 | (5 | ) | 627,695 | ||||||||||||||
Other assets | ||||||||||||||||||||
Deposits and other assets | 122,391 | 46,835 | - | 169,226 | ||||||||||||||||
Capitalized software costs, net | 567,870 | - | - | 567,870 | ||||||||||||||||
Equity method investment | 2,569,981 | - | (2,569,981 | ) | (6 | ) | - | |||||||||||||
Software | - | - | 1,735,278 | (5 | ) | 1,735,278 | ||||||||||||||
Customer relationships | - | - | 4,433,970 | (5 | ) | 4,433,970 | ||||||||||||||
Goodwill | - | 7,434,476 | (7,434,476 | ) | (5 | ) | 2,444,832 | |||||||||||||
2,444,832 | (5 | ) | ||||||||||||||||||
Intangible assets, net | - | 1,000,000 | (1,000,000 | ) | (5 | ) | - | |||||||||||||
$ | 4,975,791 | $ | 13,044,898 | $ | (2,385,294 | ) | $ | 15,635,395 | ||||||||||||
-5-
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 2008
Historical | |||||||||||||||
Company | Prescient | Pro Forma Adjustments | Pro Forma |
Liabilities and Stockholders' Equity | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Accounts payable | $ | 468,191 | $ | 207,240 | $ | - | $ | 675,431 | ||||||||||||
Accrued liabilities | 421,160 | 724,125 | - | 1,145,285 | ||||||||||||||||
Deferred revenue | 256,933 | 961,706 | (661,448 | ) | (5 | ) | 557,191 | |||||||||||||
Current portion of capital lease obligations | 141,731 | - | - | 141,731 | ||||||||||||||||
Line of credit | 700,000 | - | (370,981 | ) | (6 | ) | 329,019 | |||||||||||||
Notes payable, related party | 2,199,000 | - | (2,199,000 | ) | (6 | ) | - | |||||||||||||
Notes payable, current portion | - | 2,269,670 | - | 2,269,670 | ||||||||||||||||
Total current liabilities | 4,187,015 | 4,162,741 | (3,231,429 | ) | 5,118,327 | |||||||||||||||
Deferred maintenance – long term portion | - | 18,700 | (18,700 | ) | (5 | ) | - | |||||||||||||
Notes payable, less current portion | - | - | 9,728,292 | (5 | ) | 9,728,292 | ||||||||||||||
Capital lease obligations, less current portion | 166,553 | - | - | 166,553 | ||||||||||||||||
Total liabilities | 4,353,568 | 4,181,441 | 6,478,163 | 15,013,172 | ||||||||||||||||
Commitments and contingencies | �� | |||||||||||||||||||
Stockholders' Equity | ||||||||||||||||||||
Preferred stock | 6,125 | - | - | 6,125 | ||||||||||||||||
Series E preferred stock | - | 16,567,747 | (16,567,747 | ) | (5 | ) | - | |||||||||||||
Series G preferred stock | - | 4,798,838 | (4,798,838 | ) | (5 | ) | - | |||||||||||||
Common stock | 94,324 | 33,561 | (33,561 | ) | (5 | ) | 94,324 | |||||||||||||
Additional paid-in capital | 27,066,569 | 104,821,360 | (104,821,360 | ) | (5 | ) | 27,066,569 | |||||||||||||
Subscription receivable | (352,500 | ) | - | - | (352,500 | ) | ||||||||||||||
Accumulated deficit | (26,192,295 | ) | (117,358,049 | ) | 117,358,049 | (5 | ) | (26,192,295 | ) | |||||||||||
Total stockholders' equity | 622,223 | 8,863,457 | (8,863,457 | ) | 622,223 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 4,975,791 | $ | 13,044,898 | $ | (2,385,294 | ) | $ | 15,635,395 | |||||||||||
-6-
ADJUSTMENTS TO THE UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) | To record estimated interest expense at 12% for the period on $9,728,292 notes payable and a credit facility entered into in connection with the acquisition by Park City Group Inc. of Prescient. |
(2) | To eliminate Prescient’s common stock. |
(3) | To eliminate dividends to Prescient's preferred stockholders. |
(4) | To record estimated amortization of acquired intangible assets. |
(5) | To record the purchase price of $9,728,292 (assumed to be entirely paid by long-term notes payable and a credit facility with a bank), allocate the purchase price to the assets acquired and liabilities assumed, and eliminate the equity and retained earnings of Prescient. The amounts for the assets acquired and liabilities assumed are based on estimates, and the Park City Group is in process of obtaining a third-party business valuation report. Upon completion of the valuation, these amounts will change and Park City Group will allocate the purchase price based on the valuation report. |
(6) | To eliminate Park City Group’s equity method investment in Prescient and the associated loss on equity method investment. |