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SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Jun. 30, 2015
Accounting Policies [Abstract] |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation The financial statements presented herein reflect the consolidated financial position of Park City Group, Inc. and subsidiaries, including ReposiTrak and Prescient. All inter-company transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that materially affect the amounts reported in the condensed 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 Securities and Exchange Commission 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 as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include: income taxes, goodwill and other long-lived asset valuations, revenue recognition, stock-based compensation, and capitalization of software development costs. Cash and Cash Equivalents The Company considers all short-term instruments with an original maturity of three months or less to be cash equivalents. Concentration of Credit Risk and Significant Customers The Company maintains cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of trade receivables. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses which when realized have been within the range of management's expectations. The Company does not require collateral from its customers. The Company's accounts receivable are derived from sales of products and services primarily to customers operating multi-location retail and grocery stores. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. During the years ended June 30, 2015, 2014 and 2013, the Company had one customer that accounted for greater than 10% of total revenue. Receivables Trade account and notes receivable are stated at the amount the Company expects to collect. Receivables are reviewed individually for collectability. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, allowances may be required. Interest income on current notes receivable is recognized on an accrual basis at a stated interest rate of 8%. Allowance for Doubtful Accounts Receivable The Company offers credit terms on the sale of the Company’s products to a significant majority of the Company’s customers and requires no collateral from these customers. The Company performs ongoing credit evaluations of customers’ financial condition and maintains an allowance for doubtful accounts receivable based upon the Company’s historical experience and a specific review of accounts receivable at the end of each period. As of June 30, 2015, 2014 and 2013, the allowance for doubtful accounts was $94,000, $70,000, and $190,000, respectively. Depreciation and Amortization Depreciation and amortization of property and equipment is computed using the straight line method based on the following estimated useful lives:
|  | Years |
Furniture and fixtures |  |  | 5-7 |
Computer Equipment |  |  | 3 |
Equipment under capital leases |  |  | 3 |
Leasehold improvements |  | See below |
Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life of the improvements. Amortization of intangible assets are computed using the straight line method based on the following estimated useful lives:
|  | Years |
Customer relationships |  |  | 10 |
Acquired developed software |  |  | 5 |
Developed software |  |  | 3 |
Goodwill |  | See below |
Goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Other intangible assets are amortized over their useful lives. See Note 7 regarding impairment charges for the year ended June 30, 2015. Warranties The Company offers a limited warranty against software defects. Customers who are not completely satisfied with their software purchase may attempt to be reimbursed for their purchases outside the warranty period. For the years ending June 30, 2015, 2014 and 2013, the Company did not incur any expense associated with warranty claims. Revenue Recognition We recognize revenue when all of the following conditions are satisfied: (i) there is persuasive evidence of an arrangement, (ii) the service has been provided to the customer, (iii) the collection of our fees is probable and (iv) the amount of fees to be paid by the customer is fixed or determinable. We recognize subscription and hosting revenue ratably over the length of the agreement beginning on the commencement dates of each agreement or when revenue recognition conditions are satisfied based on their relative fair values. For a fee, subscriptions provide the customer with access to the software and data over the Internet, or on demand, and provide technical support services, premium analytical services and software upgrades when and if available. Under subscriptions, customers do not have the right to take possession of the software and such arrangements are considered service contracts. Accordingly, we recognize professional services as incurred based on their relative fair values. In situations where we have contractually committed to an individual customer specific technology, we defer all of the revenue for that customer until the technology is delivered and accepted. Once delivery occurs, we then recognize the revenue ratably over the remaining contract term. When subscription service or hosting service is paid in advance, deferred revenue is recognized and revenue is recorded ratably over the term as services are consumed. Set up fees paid by customers in connection with subscription services are deferred and recognized ratably over the life of the applicable agreement. Premium support and maintenance service revenue is derived from services beyond the basic services provided in standard arrangements. We recognize premium service and maintenance revenue ratably over the contract terms beginning on the commencement dates of each contract or when revenue recognition conditions are satisfied. Instances where these services are paid in advance, deferred revenue is recognized and revenue is recorded ratably over the term as services are consumed. Professional services revenue consists primarily of fees associated with application and data integration, data cleansing, business process re-engineering, change management and education and training services. Fees charged for professional services are recognized when delivered. We believe the fees for professional services qualify for separate accounting because: (i) the services have value to the customer on a stand-alone basis, (ii) objective and reliable evidence of fair value exists for these services and (iii) performance of the services is considered probable and does not involve unique customer acceptance criteria. The Company's revenue, to a lesser extent, is earned under license arrangements. Licenses generally include multiple elements that are delivered up front or over time. Vendor specific objective evidence of fair value of the hosting and support elements is based on the price charged at renewal when sold separately, and the license element is recognized into revenue upon delivery. The hosting and support elements are recognized ratably over the contractual term. Software Development Costs The Company accounts for research costs of computer software to be sold, leased or otherwise marketed as expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. We have determined that technological feasibility for our software products is reached shortly after a working prototype is complete and meets or exceeds design specifications including functions, features, and technical performance requirements. Costs incurred after technological feasibility is established have been and will continue to be capitalized until such time as when the product or enhancement is available for general release to customers. During 2015, 2014 and 2013 capitalized development costs of $0, $73,082, and $146,166 respectively, were amortized into expense. The Company amortizes its developed and purchased software on a straight-line basis over three and five years, respectively. Research and Development Costs Research and development costs include personnel costs, engineering, consulting, and contract labor and are expensed as incurred for software that has not achieved technological feasibility. Advertising Costs Advertising is expensed as incurred. Advertising costs were approximately $21,000, $14,000, and $20,000 for the years ended June 30, 2015, 2014 and 2013, respectively. Income Taxes The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities. Earnings Per Share Basic net income or loss per common share (“Basic EPS”) excludes dilution and is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted net income or loss per common share (“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 anti-dilutive effect on net income (loss) per common share. For the year ended June 30, 2015, 2014 and 2013 warrants to purchase 1,426,178, 317,373 and 436,110 shares of common stock, respectively, were not included in the computation of diluted EPS due to the anti-dilutive effect. Warrants to purchase shares of common stock were outstanding at prices ranging from $3.50 to $10.00 per share at June 30, 2015. 1,029,818 and 1,029,818 shares of common stock issuable upon conversion of the Company’s Series B Preferred were not included in the diluted EPS calculation for the years ended June 30, 2014 and 2013, respectively, as the effect would have been anti-dilutive. Series B Preferred was no longer convertible to common stock for the year ended June 30, 2015.
|  | Year ended June 30, 2015 |  |  | Year ended June 30, 2014 |  |  |  | Year ended June 30, 2013 |
Dilutive effect of options and warrants |  |  | - |  |  |  | - |  |  |  | - |
Weighted average shares outstanding assuming dilution |  |  | 17,375,000 |  |  |  | 16,710,000 |  |  |  | 13,246,000 |
Stock-Based Compensation The Company recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. The Company records compensation expense on a straight-line basis. The fair value of options granted are estimated at the date of grant using a Black-Scholes option pricing model with assumptions for the risk-free interest rate, expected life, volatility, dividend yield and forfeiture rate. The following table summarizes information about fixed stock warrants outstanding at June 30, 2015:
|  |  | Warrants Outstanding at June 30, 2015 |  |  | Warrants Exercisable at June 30, 2015 |
Range of exercise prices |  |  | Number Outstanding |  |  | Weighted average remaining contractual life (years) |  |  | Weighted average exercise price |  |  | Number exercisable |  |  | Weighted average exercise price |
$ | 3.50 – 4.00 |  |  |  | 1,325,697 |  |  |  | 4.25 |  |  | $ | 3.92 |  |  |  | 1,325,697 |  |  | $ | 3.92 |
$ | 6.45 – 10.00 |  |  |  | 100,481 |  |  |  | 3.49 |  |  | $ | 7.29 |  |  |  | 100,481 |  |  | $ | 7.29 |
|  |  |  |  | 1,426,178 |  |  |  | 4.20 |  |  | $ | 4.16 |  |  |  | 1,426,178 |  |  | $ | 4.16 |
Fair Value of Financial Instruments The Company's financial instruments consist of cash, cash equivalents, receivables, payables, accruals and notes payable. The carrying amount of cash, cash equivalents, receivables, payables and accruals approximates fair value due to the short-term nature of these items. The notes payable also approximate fair value based on evaluations of market interest rates. Reclassifications Certain prior-year amounts have been reclassified to conform with the current year's presentation.

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