FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2005
Commission File Number 000-03718
PARK CITY GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 37-1454128
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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(435) 649-2221
(Registrant's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding as of November 10, 2005
Common Stock, $.01 par value 283,253,935
2,369 shareholders
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PARK CITY GROUP, INC.
Table of Contents to Quarterly Report on Form 10-QSB
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Condensed Balance Sheet as of September 30, 2005
(Un-audited) 3
Consolidated Condensed Statements of Operations for the
Quarters Ended September 30, 2005 and 2004 (Un-audited) 4
Consolidated Condensed Statements of Cash Flows for the
Quarters Ended September 30, 2005 and 2004 (Un-audited) 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis or Plan of Operation 9
Item 3 Controls and Procedures 10
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 11
Item 5 Other Information 11
Item 6 Exhibits 11
Exhibit 31 Certification of Chief Executive Officer and Chief 13
Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32 Certification pursuant to 18 U.S.C. Section 1350, as 15
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
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PARK CITY GROUP, INC.
Consolidated Condensed Balance Sheet (Unaudited)
September 30, 2005
Assets
Current assets:
Cash $ 159,442
Receivables, net of allowance for doubtful accounts of $53,000 553,860
Prepaid expenses and other current assets 124,196
----------------
Total current assets 837,498
----------------
Property and equipment, net of accumulated depreciation and amortization 100,428
----------------
Other assets:
Deposits and other assets 25,000
Capitalized software costs, net of accumulated amortization of $797,636 265,879
----------------
Total other assets 290,879
----------------
Total assets $ 1,228,805
================
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 173,914
Accrued liabilities 1,139,796
Deposits for unissued stock 36,667
Deferred revenue 1,509,513
Current portion of long-term capital lease obligations 20,493
Current portion of long-term related party debt, net of discount of $6,188 338,813
Related party lines of credit 336,187
----------------
Total current liabilities 3,555,383
----------------
Long-term liabilities
Long-term related party debt, net of discount of $110,269 3,186,137
Capital lease obligations, less current portion 3,919
----------------
Total long-term liabilities 3,190,056
----------------
Total liabilities 6,745,439
----------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.01 par value, 30,000,000 shares authorized, none issued
- Common stock , $0.01 par value, 500,000,000 shares authorized;
282,846,334 issued and outstanding 2,828,463
Additional paid-in capital 10,056,291
Accumulated deficit (18,401,388)
----------------
Total Stockholders' deficit (5,516,634)
----------------
$ 1,228,805
================
See accompanying notes to consolidated condensed financial statements.
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PARK CITY GROUP, INC.
Consolidated Condensed Statements of Operations (Unaudited)
For the Three Months Ended September 30, 2005 and 2004
September 30, September 30,
2005 2004
------------- -------------
Revenues:
Software licenses $ 2,630,453 $ 162,163
Maintenance and support 608,446 623,492
ASP 48,900 11,600
Consulting and other 411,066 192,420
------------- -------------
Total revenues 3,698,865 989,675
Cost of revenues 404,651 300,154
------------- -------------
Gross margin 3,294,214 689,521
Operating expenses:
Research and development 235,909 256,081
Sales and marketing 283,200 293,394
General and administrative 313,155 310,109
------------- -------------
Total operating expenses 832,264 859,584
------------- -------------
Income (loss) from operations 2,461,950 (170,063)
Interest expense (297,135) (274,558)
------------- -------------
Income (loss) before income taxes 2,164,815 (444,621)
Income tax (expense) benefit - -
------------- -------------
Net Income (loss) $ 2,164,815 $ (444,621)
============= =============
Weighted average shares, basic 282,850,000 269,105,000
============= =============
Weighted average shares, diluted 283,989,000 269,105,000
============= =============
Basic earnings (loss) per share $ 0.01 $ (0.00)
============= =============
Diluted Earnings (loss) per share $ 0.01 $ (0.00)
============= =============
See accompanying notes to consolidated condensed financial statements.
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PARK CITY GROUP, INC.
Consolidated Condensed Statements of Cash Flows (Unaudited)
For the Three Months Ended September 30, 2005 and 2004
September 30, September 30,
2005 2004
------------ ------------
Cash Flows From Operating Activities:
Net income (loss) $ 2,164,815 $ (444,621)
Adjustments to reconcile net income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 83,571 84,321
Bad debt expense (3,000) -
Stock issued for services and expenses 21,499 211,516
Amortization of discounts on debt 73,887 42,355
Decrease (increase) in:
Trade receivables (194,521) (125,567)
Prepaid and other assets (87,136) (6,615)
Increase (decrease) in:
Accounts payable (454,484) 5,737
Accrued liabilities (127,345) (172,694)
Deferred revenue 626,089 (138,254)
Accrued interest, related party 138,844 115,886
------------ ------------
Net cash provided by (used in) operating activities 2,242,219 (427,936)
------------ ------------
Cash Flows From Investing Activities:
Purchase of property and equipment (3,046) (8,724)
------------ ------------
Net cash used in investing activities (3,046) (8,724)
------------ ------------
Cash Flows From Financing Activities:
Net (decrease) increase in line of credit - related party (283,556) 200,000
Payments on notes payable and capital leases (2,005,845) (13,007)
------------ ------------
Net cash (used in) provided by financing activities (2,289,401) 186,993
------------ ------------
Net decrease in cash and cash equivalents (50,228) (249,667)
Cash at beginning of period 209,670 312,817
------------ ------------
Cash at end of period $ 159,442 $ 63,150
============ ============
See accompanying notes to consolidated condensed financial statements.
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PARK CITY GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 2005
Note 1 - Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for quarterly financial statements, and include all normal, recurring adjustments which in the opinion of management are necessary in order to make the financial statements not misleading. Although the Company believes that the disclosures in these unaudited financial statements are adequate to make the information presented for the interim periods not misleading, certain information and footnote information normally included in quarterly financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and these financial statements should be read in conjunction with the Company's audited annual financial statements included in the Company's June 30, 2005 Annual Report on Form 10-KSB.
Certain 2004 amounts have been reclassified to conform to 2005 classifications.
Note 2 - Liquidity
As shown in the consolidated financial statements, the Company had a profit for the period ending September 30, 2005 and incurred a loss for the same quarter in 2004. Current liabilities are in excess of current assets at September 30, 2005. The company did generate positive cash flow during the quarter ending September 30, 2005 and was able to retire a large amount of current debt. The company did not generate a positive cash flow however for the year ending June 30, 2005.
The Company believes that cash flows from sales, as well as the ability and commitment of its majority shareholder to contribute funds necessary to continue to operate, will allow the Company to fund its currently anticipated working capital, capital spending and debt service requirements during the year ended June 30, 2006. The financial statements do not reflect any adjustments should the Company's operations not be achieved.
Note 3 - Stock-Based Compensation
At September 30, 2005 and 2004, the Company has issued stock options to certain of its employees. The Company accounts for these options under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net loss, as all options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. Had compensation cost for the Company's stock option plans been determined based on fair value consistent with the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net loss and loss per share would have been increased to the pro forma amounts indicated below for the quarter ended September 30, 2005 and 2004:
Quarters ended
September 30, 2005 September 30, 2004
------------------ ------------------
Net income (loss) available to common shareholders, as reported $ 2,154,816 $ (444,621)
Add: Stock-based employee compensation expense included in
reported net income (loss), net of related tax effects -- --
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (14,325) (14,325)
----------------- -----------------
Net income (loss) - pro forma $ 2,140,491 $ (458,946)
================= =================
Income (loss) per share:
Basic - as reported $ 0.01 $ (0.00)
================= =================
Diluted - as reported $ 0.01 $ (0.00)
================= =================
Basic - pro forma $ 0.01 $ (0.00)
================= =================
Diluted - pro forma $ 0.01 $ (0.00)
================= =================
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Park City Group has an employment agreement with its Vice President of Professional Services, dated effective April 11, 2005. One provision of this agreement provides for a stock bonus of 2,000,000 shares payable in 500,000 share increments on his next 4 anniversary dates, provided continued employment.
Note 4 - Outstanding Stock Options
The following tables summarize information about fixed stock options and warrants outstanding and exercisable at September 30, 2005:
Number of
Options Warrants Price per Share
--------- -------- ---------------
Outstanding and exercisable at June 30, 2005 5,446,512 47,191,500 $0.03-0.14
Granted - - -
Exercised - - -
Called - - -
Cancelled - - -
Expired (215,000) - $0.03-0.05
--------- ---------- ----------
Outstanding and exercisable at September 30, 2005 5,231,512 47,191,500 $0.03-0.14
========= ========== ==========
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Options and Warrants Outstanding and Exercisable
at September 30, 2005
Weighted
average Weighted
Number remaining average
Range of Outstanding at contractual exercise
exercise prices September 30, 2005 life(years) price
--------------- ------------- ----------- -----
$0.03 - $0.05 36,780,572 2.34 $ 0.04
$0.07 - $0.08 15,142,440 2.42 0.07
$0.14 500,000 1.11 0.14
---------- ---- ------
52,423,012 2.35 $ 0.05
========== ==== ======
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Note 5 - Supplemental Cash Flow Information
In connection with the note payable funding from Whale Investment, Ltd. the Company issued warrants and issued shares of common stock, which were recorded as a debt discount. In June 2004 the note payable to Whale Investments, LTD was extended and ownership of the note payable was transferred to Whale Investment's sister company Triplenet Investments. As consideration for the extension the Company issued cash and shares. The fair value of the cash and shares issued in connection with the extension was recorded as a discount to the note payable and added to the previous discount to be amortized over the remaining life of the note as extended. Of the debt discount amounts $54,976 and $27,488 was amortized to interest expense during the quarters ended September 30, 2005 and 2004, respectively.
The Triplenet Investments loan was paid off in August 2005 with cash generated from operations. The company did pay a pre-payment penalty fee of $30,000 or one month interest on the loan.
The fair value of shares issued in connection with the $345,000 note payable funding from Riverview obtained as a condition of the Whale Investment, Ltd. funding was recorded as a discount on the note payable, of which $6,188 and $2,143 was amortized into interest expense during the quarters ended September 30, 2005 and 2004, respectively. This increase is due to the fee charged for the extension of the Riverview portion of this transaction in August 2004.
For the quarters ended September 30, 2005 and 2004 the Company paid cash for interest expense of $88,141 and $109,027, respectively. No cash was paid for income taxes.
Note 6 - Accrued liabilities
Accrued liabilities consist of the following as of September 30, 2005:
Accrued interest $ 980,839
Accrued vacation 107,976
Other accrued liabilities 50,981
----------
$1,139,796
==========
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Note 7 - Net Income (Loss) Per Common Share
Basic net income (loss) per common share ("Basic EPS") excludes dilution and is
computed by dividing net income (loss) by the weighted average number of common
shares outstanding during the period. Diluted net income (loss) per common share
("Diluted EPS") reflects the potential dilution that could occur if stock
options or other contracts to issue common stock were exercised or converted
into common stock. The computation of Diluted EPS does not assume exercise or
conversion of securities that would have an anti-dilutive effect on net income
(loss) per common share.
Options and warrants to purchase 16,052,940 and 82,850,870 shares of common stock as of September 30, 2005 and 2004 , respectively, were not included in the computation of Diluted EPS due either to the dilutive effect from a net loss or a strike price in excess of market price. Using the treasury stock method 1,138,246 shares were assumed repurchased and added to shares outstanding for the computation of Diluted EPS for the 3 months ended September 30, 2005.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
Form 10-KSB for the year ended June 30, 2005 incorporated herein by reference.
Forward-Looking Statements
This quarterly report on Form 10-QSB contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words or phrases "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward looking statements as a result of a number of risks and uncertainties, including those risks factors contained in our Form 10-KSB annual report at June 30, 2004, incorporated herein by reference. Statements made herein are as of the date of the filing of this Form 10-QSB with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.
Three Months Ended September 30, 2005 and 2004
Total revenues were $3,698,865 and $989,675 for the quarters ended September 30, 2005 and 2004, respectively, a 274% increase. Software license revenues were $2,630,453 and $162,163 for the quarters ended September 30, 2005 and 2004, respectively, a 1522% increase. This increase is primarily attributable to software license sales to one customer, Cannon Equipment, during the quarter ended September 30, 2005. Details of this software license sales transaction are incorporated herein by reference to form 8K filed on August 11, 2005. License sales in 2004 were attributed to two new and one existing customer. Maintenance and support revenues were $608,446 and $623,494 for the quarters ended September 30, 2005 and 2004, respectively, a 2% decrease. This decrease is primarily attributable to a two existing Action Manager customers reducing their maintenance fees due to store closures. Software Maintenance and support for Fresh Market Manager software increased by $51,083 during the quarter ending September 30, 2005 over the same period in 2004. This was primarily due to the Cannon Solutions Contract. The company has decided to report their ASP, (their hosted solution), sales separately starting in Fiscal Year ending June 30, 2006 instead of previously including these amounts in maintenance and support revenues. ASP revenues were $48,900 and $11,600 respectively for the quarters ending September 30, 2005 and 2004, respectively, an increase of 322%. This increase was the result of our success in the Perishable Manufacturing Channel where we have signed 4 new contracts in the last 6 months. Consulting and other revenue was $411,066 and $192,420 for the quarters ended September 30, 2005 and 2004, respectively, a 114% increase. This increase is spread evenly between increased Action Manager and FMM implementation services and income from the Cannon Equipment agreements.
Cost of revenues, as a percent of total revenues was 11% and 30% for the quarters ended September 30, 2005 and 2004, respectively. This decrease in cost of revenues as a percent of total revenues is primarily attributable to the increased software license revenues during the quarter ended September 30, 2005 as compared to the same period in the prior year.
Research and development expenses were $235,909 and $256,081 for the quarters ended September 30, 2005 and 2004 respectively, an 8% decrease. This decreased expense reflects the fact that both Action Manager and FMM software suites have had major releases completed in addition to the streamlining of our development process.
Sales and marketing expenses were $283,200 and $293,394 for the quarters ended September 30, 2005 and 2004, respectively, a 3% decrease. This decrease is primarily due to one trade show being cancelled during September 2005 due to weather problems. The company expects a slight increase in sales costs during the second quarter due to the rescheduling of this trade show.
General and administrative expenses were $313,155 and $310,109 for the quarters ended September 30, 2005 and 2004, respectively a 1% increase.
Liquidity and Capital Resources
The Company had a working capital deficit at September 30, 2005.
The company had net income of $2,154,815 versus a net loss of $444,621 for the quarters ending September 30, 2005 and 2004 respectively. The company was able to pay off the Triplenet Incorporated debt of $2,030,000 and reduce its accounts payables from $628,398 as of June 30, 2005 to $173,914 during the quarter ended September 30, 2005. The Company had interest expense of $297,135 and $274,558 for the quarters ending September 30, 2005 and 2004 respectively, an increase of 8%. This increase occurred because the prepayment of the Triplenet Incorporated debt during the quarter ended September 30, 2005. To date, the Company has financed its operations through operating revenues, loans from directors, officers and stockholders, loans from the CEO and majority shareholder, and private placements of equity securities. The Company may be unable to raise additional equity capital until it achieves profitable operations and refinances its debt. The Company anticipates that it will meet its working capital requirements primarily through increased revenue, while controlling and reducing costs and expenses. However, no assurances can be given that the Company will be able to meet its working capital requirements.
Item 3 - Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Randall K. Fields who serves as Park City Group's chief executive officer and William D. Dunlavy who serves as Park City Group's chief financial officer, after evaluating the effectiveness of Park City Group's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) as of September 30, 2005 (the "Evaluation Date") concluded that as of the Evaluation Date, Park City Group's disclosure controls and procedures were adequate and effective to ensure that material information relating to Park City Group and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared. While the Company feels that the disclosure controls currently in place are adequate to prevent material misstatements, the Company has found significant internal control deficiencies in its accounting for property, plant and equipment that they will work to rectify in the coming year in preparation for section 404 of the Sarbanes Oxley Act of 2002. The Company is continually evaluating and improving their internal control procedures.
(b) Changes in internal controls.
There were no significant changes in the Company's internal controls over financial reporting or in other factors that could significantly affect these internal controls subsequent to the date of their most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
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Part II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
o In July 2005 155,750 shares were issued per anti-dilution
agreement with the CEO.
o In August 2005 134,411 shares were issued to an employee in
lieu of cash compensation.
Item 5 - Other Information
None
Item 6 - Exhibits (for the period 7/1/05 through 9/30/05)
Exhibit 3.1 Articles of incorporation (1)
Exhibit 3.2 By-laws (1)
Exhibit 3.3 Certificate of amendment
Exhibit 10.1 License Agreement, First Right of Offer Agreement and
Exclusivity Agreement with Cannon solution (2)
Exhibit 10.2 Employment agreement with Aaron Prevo (3)
Exhibit 14.1 Code of Ethics
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbannes-Oxley Act of 2002.
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbannes-Oxley Act of 2002.
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbannes-Oxley Act of 2002.
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbannes-Oxley Act of 2002.
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(1) Incorporated by reference to Form DEF 14C filed on June 5, 2002
(2) Incorporated by reference to Form 8K filed on August 11, 2005
(3) Incorporated by reference to Form 10KSB/A filed on October 14, 2005 for the
year ended June 30, 2005
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 10, 2005 PARK CITY GROUP, INC
By /s/ Randall K. Fields
-----------------------------------
Randall K. Fields, Chairman and
Chief Executive Officer
Date: November 10, 2005 By /s/ William Dunlavy
-----------------------------------
William Dunlavy
Chief Financial Officer
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DEAN HELLER
Secretary of State
204 North Carson Street, Suite 1
Carson City, Nevada 89701-4299
(775) 684-5708 Website: secretaryofstate.biz
Certificate of Amendment
(PURSUANT TO NRS 78.385 AND 78.390)
Important: Read attached instructions
before completing form. ABOVE SPACE IS FOR OFFICE USE ONLY
Certificate of Amendment to Articles of Incorporation For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
1. Name of corporation: PARK CITY GROUP, INC.
2. The articles have been amended as follows (provide article numbers, if available):
Article V is amended as follows:
The total number of shares of all classes of capital stock that the Corporation has the authority to issue is 530,000,000 shares that are divided into two classes as follows: (1) 30,000,000 shares of Preferred Stock (Preferred Stock) $.01 par value per share, and (2) 500,000,000 shares of Common Stock (Common Stock) $.01 par value per share. This Corporation is authorized to issue two classes of shares. Except as may be otherwise required by law or this Certificate of Incorporation, each holder of Common Stock has one vote in respect of each share of stock held by him of record on the books of the corporation on all matters voted upon by the Stockholders.
The Board of Directors may determine the preferences, limitations and relative rights, to the extent permitted by the Nevada Revised Statutes, of any class of shared of Preferred Stock before the issuance of any share of that class, or of one or more series within a class before the issuance of any shares of that series. Each class or series shall be appropriately designated by a distinguishing designation prior to the issuance of any shares thereof. The Preferred Stock of all series shall have preferences, limitations and relative rights identical with those of other shares of the same series, and except to the extent otherwise provided in the description of the series, with those shares of the series of the same class.
3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, of such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the Articles of Incorporation have voted in favor of the amendment is: 225,331,389
4. Effective date of filing (optional): (must not be later than 90 days after the certificate is filed)
5. Officer Signature (required): /s/ Peter Jensen, CFO |
CODE OF BUSINESS CONDUCT AND ETHICS
(Adopted by the Board of Directors on October , 2005)
Introduction
This Code of Business Conduct and Ethics covers a wide range of business practices and procedures. It does not cover every issue that may arise but it sets out basic principles to guide all employees of the Company. All of our employees must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. The code should also be provided to and followed by the Company's agents and representatives, including consultants.
If a law conflicts with a policy in this Code, you must comply with the law. If you have any questions about these conflicts, you should ask your supervisor how to handle the situation.
Those who violate standards in this Code will be subject to disciplinary action, up to and including termination of employment. If you are in a situation that you believe may violate or lead to a violation of this Code, follow the guidelines described in Section 14 of this Code.
1. Compliance with Laws, Rules and Regulations
Obey the law, both in letter and in spirit, is the foundation on which our ethical standards are built. All employees must respect and obey the laws of the cities, states and countries in which we operate. Although not all employees are expected to know the details of these laws, it is important to know enough about them to determine when to seek advice from supervisors, managers or other appropriate personnel.
2. Conflicts of Interest
A "conflict of interest" exists when a person's private interests interferes in any way with the interests of the Company. A conflict situation can arise when an employee, officer or director takes actions or has interests that may make it difficult to perform his or her Company work objectively and efficiently. Conflicts of interest may also arise when an employee, officer or director, or members of his or her family, receives improper personal benefits as a result of his or her position in the Company. Loans to, or guarantees of obligations of, employees and their family members may create conflicts of interest.
It is almost always a conflict of interest for a Company employee to work simultaneously for a competitor, customer or supplier. You are not allowed to work for a competitor as a consultant or board member. The best policy is to avoid any direct or indirect business connection with our customers, suppliers or competitors, except on our behalf. Conflicts of interest are prohibited as a matter of Company policy, except under guidelines approved by our Board of Directors. Conflicts of interest may not always be clear-cut, so if you have a question, you should consult with higher levels of management. Any employee, officer or director who becomes aware of a conflict or potential conflict should bring it to the attention of a supervisor, manager or other appropriate personnel or consult with the procedures described in Section 14 of this Code.
3. Insider Trading
Employees who have access to confidential information are not permitted to use or share that information for stock trading purposes or for any other purpose except the conduct of our business. All non-public information about the Company should be considered confidential information. To use non-public information for personal financial benefit or to "tip" others who might make an investment decision on the basis of this information is not only unethical but also illegal.
4. Corporate Opportunities
Employees, officer and directors are prohibited from taking for themselves personally opportunities that are discovered through the use of corporate property, information or position without the consent of the Board of Directors. No employee may use corporate property, information or position for improper personal gain, and no employee may compete with the Company, directly or indirectly.
5. Competition and Fair Dealing
We seek to outperform our competition fairly and honestly. Stealing proprietary information, possessing trade secret information that was obtained without the owner's consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each employee should endeavor to respect the rights of and deal fairly with the Company's customers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair-dealing practice.
The purpose of business entertainment and gifts in a commercial setting is to create good will and sound working relationships, not to gain unfair advantage with customers. No gift, or entertainment should ever be offered, given, provided or accepted by any Company employee, family member of an employee or agent, unless it (a) is not in cash, (b) is consistent with customary business practices, (c) is not excessive in value, (d) cannot be construed as a bribe or payoff and (e) does not violate any laws or regulations. Please discuss with your supervisor any gifts or proposed gifts that you are not certain are appropriate.
6. Discrimination and Harassment
The diversity of the Company's employees is a tremendous asset. We are firmly committed to providing equal opportunity in all aspects of employment and will not tolerate illegal discrimination or harassment of any kind. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances.
7. Health and Safety
The Company strives to provide each employee with a safe and healthy work environment. Each employee has responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.
Violence and threatening behavior are not permitted. Employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol. The use of illegal drugs in the workplace will not be tolerated.
8. Record-Keeping
The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. For example, only the true and actual number of hours worked should be reported.
Many employees regularly use business expense accounts, which must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask your supervisor or the Company's controller or chief financial officer.
All of the Company's books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company's transactions and must conform to both applicable legal requirements and to the Company's systems of accounting and internal controls. Unrecorded or "off the books" funds or assets should not be maintained unless permitted by applicable laws or regulations.
Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork or inappropriate characterizations of people and companies that can be misunderstood. This applies equally to e-mail, internal memos and formal reports. Records should always be retained or destroyed according to the Company's record retention policies. In accordance with these policies, in the event of litigation or governmental investigation please consultant your supervisor. All e-mail communications are the property of the Company and employees, officers and directors should not expect that Company or personal e-mail communications are private. All e-mails are the property of the Company. No employee, officer or director shall use Company computers, including accessing the internet, for personal or non-Company business.
9. Confidentiality
Employees must maintain the confidentiality of confidential information entrusted to them by the Company or its customers, except when disclosure is required by laws or regulations. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed. It also includes information that suppliers and customers have entrusted to us. The obligation to preserve confidential information continues even after employment ends. In connection with this obligation, employees, officers and directors may be required to execute confidentiality agreements confirming their agreement to be bound not to disclose confidential information. If you are uncertain whether particular information is confidential or non-public, please consult your supervisor.
10. Protection and Proper Use of Company Assets
All employees should endeavor to protect the Company's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company's profitability. Any suspected incident of fraud or theft should be immediately reported for investigation. Company equipment should not be used for non-Company business.
The obligation of employees to protect the Company's assets includes its proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks and copyrights, as well as business, marketing and service plans, engineering and manufacturing ideas, designs, databases, records, salary information and any unpublished financial data and reports. Unauthorized use or distribution of this information would violate Company policy. It could also be illegal and result in civil or even criminal penalties.
11. Payments to Government Personnel
The Unites States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.
In addition, the U. S. government has a number of laws and regulations regarding business gratuities that may be accepted by U. S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gist, favor or other gratuity in violation of these rules would not only violate Company policy, but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules.
12. Waivers of the Code of Business Conduct and Ethics
Any waiver of the provisions of this Code may be made only by the Board of Directors or a Board committee and will be promptly disclosed as required by law or stock exchange rule or regulation.
13. Reporting any Illegal or Unethical Behavior
Employees are encouraged to talk with supervisors, managers or Company officials about observed illegal or unethical behavior, and when in doubt about the best course of action in a particular situation. It is the Company's policy not to allow retaliation for reports of misconduct by others made in good faith by employees. Employees are expected to cooperate in internal investigations of misconduct, and the failure to do so could serve as grounds for termination. Any employee may submit a good faith concern regarding questionable accounting or auditing matters without fear of dismissal or retaliation of any kind.
14. Compliance Procedures
We must all work to ensure prompt and consistent action against violations of this Code. However, in some situations, it is difficult to know if a violation has occurred. Since we cannot anticipate every situation that may arise, it is important that we have a way to approach a new question or problem.
These are steps to keep in mind:
o Make sure you have all the facts. In order to reach the right solutions, we must be as fully informed as possible.
o Ask yourself, what specifically am I being asked to do - does it seem unethical or improper? This will enable you to focus on the specific question you are faced with, and the alternatives you have. Use your judgment and common sense; if something seems unethical or improper, it probably is.
o Clarify your responsibility and role. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and discuss the problem.
o Discuss the problem with your supervisor. This is the basic guidance for all situations. In many cases, your supervisor will be more knowledgeable about the question, and will appreciate being brought into the decision-making process. Keep in mind that it is your supervisor's responsibility to help solve problems. If your supervisor does not or cannot remedy the situation, or you are uncomfortable bringing the problem to the attention of your supervisor, bring the issue to the attention of the human resources supervisor, or to an officer of the Company.
o You may report ethical violations in confidence and without fear of retaliation. If your situation requires that your identity be kept secret, your anonymity will be protected. The Company does not permit retaliation of any kind for good faith reports of ethical violations.
o Always ask first - act later. If you are unsure of what to do in any situation, seek guidance before your act. If an employee believes that a supervisor to whom a suspected violation has been reported has not taken appropriate action, the employee should report their concerns or complaints in writing directly to:
Human Resources Department
Park City Group, Inc.
PO Box 5000
333 Main Street Suite 300
Park City, UT 84060
The complaint should be in writing and provide a clear understanding of the violation. The complaint should be factual rather than speculative or conclusory, and should contain as much specific information as possible to allow for proper assessment. The complaint describing an alleged violation of the Code shall be candid and set forth all of the information that you know regarding the allegation or concern.
CODE OF ETHICS FOR THE CHIEF EXECUTIVE OFFICER AND SENIOR FINANCIAL OFFICERS
The Company has a Code of Business Conduct and Ethics applicable to all employees, officers and directors of the Company. The Chief Executive Officer (CEO) and senior financial officers of the Company, including its chief financial officer and principal accounting officer, are bound by the provisions set forth therein relating to ethical conduct, conflicts of interest and compliance with law. In addition to the Code of Business Conduct and Ethics, the CEO and senior financial officers of the Company are also subject to the following specific policies:
1. The CEO and senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports and other filings required to be made by the Company with the Securities and Exchange Commission. Accordingly, it is the responsibility of the CEO and each senior financial officer promptly to bring to the attention of the Board of Directors any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise impairs the ability of the Company to make full, fair, accurate, timely and understandable public disclosures.
2. The CEO and each senior financial officer shall promptly bring to the attention of the Company's Audit Committee any information he or she may have concerning (a) significant efficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls.
3. The CEO and each senior financial officer shall promptly bring to the attention of the Board of Directors and the Audit Committee any information he or she may have concerning any violation of the Company's Code of Business Conduct and Ethics, including any actual or apparent conflicts of interest between personal and processional relationships, involving management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls.
4. The CEO and each senior financial officer shall promptly bring to the attention of the Board of Directors and Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of the Code of Business Conduct and Ethics or of these additional procedures.
5. The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of the Code of Business Conduct and Ethics of these additional procedures by the CEO and the Company's senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code of Business Conduct and Ethics and to these additional procedures, and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or reassignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and termination of the individual's employment. In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past.
6. The CEO and each senior financial officer shall carefully review a draft of each periodic report for accuracy and completeness before it is filed with the SEC.
Exhibit 31.1
Park City Group, Inc. & Subsidiaries
Certification Of Chief Executive And Chief Financial Officer Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002
I, Randall K. Fields, certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the period ended September 30, 2005 of Park City Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b. Paragraph omitted pursuant to SEC release Nos. 33-8293 and 34-47986
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 10, 2005 /s/ Randall K. Fields ------------------------------------- Chairman and Chief Executive Officer |
Exhibit 31.2
Park City Group, Inc. & Subsidiaries
Certification Of Chief Executive And Chief Financial Officer Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002
I, William Dunlavy, certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the period ended September 30, 2005 of Park City Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b. Paragraph omitted pursuant to SEC release Nos. 33-8293 and 34-47986
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 10, 2005 /s/ William Dunlavy ----------------------------- Chief Financial Officer |
Exhibit 32.1
Park City Group, Inc. & Subsidiaries
Certification Pursuant To
18 U.S.C. Section 1350, As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002
In connection with the quarterly report of Park City Group, Inc. (the "Company") on form 10-QSB for the quarter ending September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Randall K. Fields, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: November 10, 2005 /s/ Randall K. Fields ------------------------------------ Chairman and Chief Executive Officer |
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Exhibit 32.2
Park City Group, Inc. & Subsidiaries
Certification Pursuant To
18 U.S.C. Section 1350, As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002
In connection with the quarterly Report of Park City Group, Inc. (the "Company")
on form 10-QSB for the quarter ending September 30, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, William
Dunlavy, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: November 10, 2005 /s/ William Dunlavy ------------------------- Chief Financial Officer |
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