Dear Valued Shareholders,
We welcome you to our year-end update of Fiscal 2006! We would like to take this opportunity to do a look back at a very successful year and set the stage for our upcoming launch into fiscal 2007 – another year which we anticipate will be a breakthrough year for the Company.
Looking back, weâ€™ve had a tremendous year highlighted by many laudable achievements that will be outlined later. Our hard work and dedication to our shareholders, coupled with our customers who have continued to achieve improved results through our products, have allowed us to achieve record breaking revenues and profits in 2006. We believe the most important factor to consider is that our products are rapidly gaining traction in the industry. There is a buzz in the retail industry about our Company, products, services and most importantly, the success our customers are experiencing. This is reflected in their willingness to spread the word about our products and services in industry meetings and publications.
Year End Results for Fiscal 2006
Park City Group experienced a tremendous record-setting year in fiscal 2006 with a very healthy finish to help us launch into â€˜07. Our annual revenues were up 95% to $7,085,125 compared to $3,631,812 in 2005. While net income for the 2006 fiscal year was $1,393,596 versus a loss of ($3,408,037) for the 2005 fiscal year. Other highlights of the year include:
- Software license sales increased 656% from $479,615 in 2005 to $3,626,821 in 2006.
- ASP revenues increased 74% from $104,367 to $182,083.
- Consulting revenues increased 37%, from $735,522 to $1,004,224.
- Total liabilities during the year were reduced from $8,772,879 to $3,344,825.
- Interest expense declined from $1,178,454 to $884,404.
- Stockholder equity increased from a deficit of ($7,702,949) to a surplus of $1,481,638.
- Cash and Cash Equivalents increased from $209,670 to $3,517,060.
Improvements to Our Balance Sheet
More than two years ago we made a pledge to you – our shareholders, that we would make every effort possible to improve our balance sheet. The results have been dramatic. We closed an equity round of $5 million in June 2006 that allowed us to restructure our debt and equity composition, while realizing an $800,000 interest savings
This added working capital will give us much more financial flexibility and will let us devote more of our budget to developing our next-generation offerings, increasing our marketing efforts, and improving market awareness of the company, its products and its services.
In July 2006 we announced and executed a 50 to 1 reverse stock split in an effort to garner heightened attention from analyst and increase institutional awareness. This represents an important step toward the key goal of listing Park City Group share on one of the major American stock exchanges.
The actions we have recently taken; a restructuring of the companyâ€™s debt; a $5 million capital raise and reverse stock split, indicate our continued efforts to put in place the foundation from which we hope to add further value to our stockholders.
Preview of Fiscal Year 2007
On an annual basis we continue to expect to see positive momentum in both revenue growth and net income. Our retailer/supplier strategy continues to take root and we are seeing early signs of success which bodes very well for the future. As opportunities arise we will make licensing agreements which may have a sharp impact on quarterly revenues, though naturally we cannot predict the timing of these licensing agreements with any accuracy. We expect to see a steady smoothing of revenue and earnings growth over time as we implement this strategy.
All of the assumptions that are the basis for our business strategy continue to be in place, and in fact are intensifying. The rapid growth of the value retailer has created an urgent need for retailers and their suppliers to focus on profitability more than ever before. This new focus requires that retailers and their suppliers make significant changes to their business models, a key element of which is technologically sophisticated inventory and labor management systems, which historically has not been retailâ€™s strong point. Park City Groupâ€™s technology includes a suite of applications that help retailers and suppliers address the cost issues associated with inventory and labor in such a way as to improve their overall economic performance.
Our differentiating quality and our competitive advantage is that we are ourselves retailers. We understand the industry in a way that most enterprise software producers do not. Over the last two years, our focus has been on improving the technological sophistication of our products, and equally important has been our efforts to deepen our customer service capabilities. Our strategy with respect to each customer is that we want to not only install the technology, we also want to help them use it. This is where our retail background provides our strongest competitive advantage.
Strategically, Park City Group has been focused on increasing awareness of the Company and its successes within the commercial markets through increased marketing efforts, expanded public relations, and trade shows. Tactically, we are focused on securing high-visibility engagements from both suppliers and retailers. From these initial engagements, we expect to be able to further penetrate the accounts with additional products and services, and in turn be referred to even more suppliers and retailers as our viral marketing strategy grows more successful.
Park City Group is moving forward on a number of other fronts that we believe will exhibit the progress that we are making as a company. We expect a number of new products to come out of our newly expanded development organization. These products will address retailer concerns such as operations and analytic support, as well as improvements in our Supply Chain Profit Link offering. These products will offer ongoing evidence of our commitment to stay ahead of the technological curve in product development.
Additionally, we anticipate adding to our already very strong patent portfolio, and expect that our continued successful defense of existing patents will lead to other licensing opportunities, as it has in the past. We expect to be relocating to a new 10,000 square foot facility in November. This new facility will offer better accessibility for our employees and the worker pool in Salt Lake City. It will also allow the company to lower overhead costs. At the same time, we are expanding our operations in India and expect to open a branch office in Bangalore in the near future. This office will increase our development capabilities and go-to-market time, while providing a larger presence and proximity in the Pacific Rim.
In conclusion, we believe we have in place the platform we need to support rapid growth and we look forward to a very successful 2007. We are keenly focused on our opportunities and challenges. We are committed to making our customers successful and improving the operation of their businesses. We are dedicated to the responsibilities we have to each employee and shareholder and we appreciate your confidence in us.
We want to thank each and every shareholder for your support and interest in Park City Group. We have heard from many of you, with excellent insights, recommendations, ideas and even offers to help promote our products to associates. As always you can contact me directly – firstname.lastname@example.org or give me a call 435-645-2100 and I will be happy to discuss your questions or concerns.
CEO and Chairman
Park City Group, Inc.