United States Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File No. 000-49990
PCS EDVENTURES!.COM, INC.
-------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
IDAHO 82-0475383
----- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
345 Bobwhite Court, Suite #200
Boise, Idaho 83706
------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (208) 343-3110
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
Check whether the Registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
27,355,451
December 31, 2004
Transitional Small Business Disclosure Format (Check One): Yes X No
--- ---
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004 and March 31, 2004
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
December 31, March 31,
2004 2004
----------- ----------
(Unaudited)
CURRENT ASSETS
Cash $ 63,133 $ 113,820
Accounts receivable 149,996 449,518
Inventory 40,514 -
Deferred costs 71,588 -
Note receivable - 50,000
Prepaid expenses 629 6,084
----------- ----------
Total Current Assets 325,860 619,422
----------- ----------
FIXED ASSETS (NET) 5,133 -
----------- ----------
OTHER ASSETS
Deposit on distribution rights 45,000 45,000
Deposits 6,225 6,175
----------- ----------
Total Other Assets 51,225 51,175
----------- ----------
TOTAL ASSETS $ 382,218 $ 670,597
=========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31, March 31,
2004 2004
--------- ----------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 69,749 $ 55,665
Wages payable 29,503 38,436
Payroll taxes payable 95,845 182,949
Accrued interest 79,983 56,465
Accrued interest - related parties 8,009 4,098
Accrued expenses 119,506 256,818
Unearned revenue 341,434 204,404
Notes payable - related parties 117,054 165,882
Notes payable 180,639 349,810
---------- ---------
Total Current Liabilities 1,041,722 1,314,527
---------- ---------
Total Liabilities 1,041,722 1,314,527
---------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value, authorized
10,000,000 shares, 15,246 and 82,850 shares
issued and outstanding, respectively 56,372 120,473
Common stock, no par value, authorized 40,000,000
shares; 27,355,451 and 24,230,874 shares issued
and outstanding, respectively 23,864,669 23,023,323
Expenses prepaid with common stock (33,750) (67,292)
Variable deferred consulting fees (1,333) -
Accumulated deficit (24,545,462)(23,720,434)
----------- -----------
Total Stockholders' Equity (Deficit) (659,504) (643,930)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 382,218 $ 670,597
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
-------------------------- ------------------------
2004 2003 2004 2003
---------- ---------- ---------- -----------
REVENUE
Lab Revenue $ 213,936 $ 151,785 $ 837,648 $ 1,260,002
License Revenue 36,057 35,856 123,132 109,947
Subscription Revenue 4,168 3,216 11,218 11,165
----------- ----------- ----------- -----------
Total Revenues 254,161 190,857 971,998 1,381,114
----------- ----------- ----------- -----------
COST OF GOODS SOLD/
COST OF SALES 113,888 86,589 368,521 446,092
----------- ----------- ----------- -----------
GROSS PROFIT 140,273 104,268 603,477 935,022
----------- ----------- ----------- -----------
OPERATING EXPENSES
Salaries and wages 162,241 119,913 430,108 352,451
Depreciation expense 275 - 367 25,447
Common stock and stock
options issued for
consulting expense (3,509) - 483,921 -
General and administrative 170,928 153,445 511,388 508,746
----------- ----------- ----------- -----------
Total Operating Expenses 329,935 273,358 1,425,784 886,644
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (189,662) (169,090) (822,307) 48,378
----------- ----------- ----------- -----------
OTHER INCOME AND EXPENSES
Gain on settlement of debt - - 43,990 -
Interest income 15 - 987 -
Interest expense (16,047) (31,941) (56,497) (103,812)
Other income 3,517 - 16,086 -
Other expense (1,788) - (3,783) -
----------- ----------- ----------- -----------
Total Other Income and
(Expenses) (14,303) (31,941) 783 (103,812)
----------- ----------- ----------- -----------
LOSS BEFORE
INCOME TAXES (203,965) (201,031) (821,524) (55,434)
INCOME TAX EXPENSE - - - -
----------- ----------- ----------- -----------
NET LOSS $ (203,965) $ (201,031) $ (821,524)$ (55,434)
----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
4
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations (Continued)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
--------------------------- ------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
NET LOSS $ (203,965) $ (201,031) $ (821,524)$ (55,434)
Accretion of preferred
stock discount - - - (2,500)
Pro-rata preferred stock
non-cash dividend - (233) - (417)
----------- ----------- ----------- -----------
NET LOSS ATTRIBUTABLE
TO COMMON
SHAREHOLDERS $ (203,965) $ (201,264) $ (821,524)$ (58,351)
=========== =========== =========== ===========
BASIC LOSS
PER SHARE $ (0.01) $ (0.01) $ (0.03)$ (0.00)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
BASIC SHARES OUTSTANDING 25,745,125 19,771,024 25,892,537 18,640,974
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
Common Shares Preferred Shares
-------------------------- ------------------------
Shares Amount Shares Amount
------------- ----------- ---------- ------------
Balance, March 31, 2004 24,230,874 $ 23,023,323 82,850 $120,473
Common stock issued for
services at $0.17 per
share (unaudited) 30,000 5,100 - -
Stock offering costs
(unaudited) - (5,100) - -
Common stock issued for
services at $0.17 per
share (unaudited) 240,000 40,800 - -
Stock offering costs
(unaudited) - (40,800) - -
Options issued to employees
below market value
(unaudited) - 3,000 - -
Options issued to consultants
below market value (unaudited) - 507,877 - -
Common stock issued for
conversion of debt and
interest at $0.20 per
share (unaudited) 376,165 75,232 - -
Common stock issued for
cash at $0.10 per share
for option exercise
(unaudited) 750,000 75,000 - -
Intrinsic value of
employee options issued
below market value
(unaudited) - 5,000 - -
Common stock issued for
related party note payable
reduction at $0.07 per
share (unaudited) 250,000 17,500 - -
Fair value of options
issued to consultant
(unaudited) - 696 - -
Common stock issued for
conversion of preferred
stock at $0.20 per share
(unaudited) 338,020 67,603 (67,604) (67,603)
Options issued to directors
for accrued director fees
(unaudited) - 9,241 - -
Contributed capital for
accrued director fees
(unaudited) - 50,759 - -
Pro-rata cumulative
non-cash preferred stock
dividend (unaudited) - - - 3,502
Amortization of prepaid
expense (unaudited) - - - -
Amortization and revaluation
of consulting expense
(unaudited) - (84,102) - -
Stock issued for marketing
services at $0.09 per share
(unaudited) 250,000 22,500 - -
Stock issued for legal
services at $0.09 per share
(unaudited) 500,000 45,000 - -
Stock issued for accounts
payable at $0.15 per share
(unaudited) 45,833 6,875 - -
Stock issued for note
payable to related party
at $0.06 per share
(unaudited) 344,559 20,674 - -
Amortization and revaluation
of deferred consulting
(unaudited) - (12,000) - -
Amortization of prepaid
expense (unaudited) - - - -
Fair value of options
issued to consultant
(unaudited) - 491 - -
Options issued to directors
for accrued director fees
(unaudited) - 28,416 - -
Contributed capital for
accrued director fees
(unaudited) - 1,584 - -
Net loss,
December 31, 2004
(unaudited) - - - -
---------- ----------- --------- ------------
Balance,
December 31, 2004
(unaudited) 27,355,451 $23,864,669 15,246 $ 56,372
=========== ============ ========= ============
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance, March 31, 2004
(unaudited) $(67,292) - $(23,720,436)
Common stock issued for
services at $0.17 per
share (unaudited) - - -
Stock offering costs
(unaudited) - - -
Common stock issued for
services at $0.17 per share
(unaudited) - - -
Stock offering costs
(unaudited) - - -
Options issued to employees
below market value (unaudited) - - -
Options issued to consultants
below market value (unaudited) - (507,877) -
Common stock issued for
conversion of debt and
interest at $0.20 per
share (unaudited) - - -
Common stock issued for
cash at $0.10 per share
for option exercise (unaudited) - - -
Intrinsic value of
employee options issued
below market value (unaudited) - - -
Common stock issued for
related party note payable
reduction at $0.07 per
share (unaudited) - - -
Fair value of options
issued to consultant
(unaudited) - - -
Common stock issued for
conversion of preferred
stock at $0.20 per share
(unaudited) - - -
Options issued to directors
for accrued director fees
(unaudited) - - -
Contributed capital for
accrued director fees
(unaudited) - - -
Pro-rata cumulative
non-cash preferred stock
dividend (unaudited) - - (3,502)
Amortization of prepaid
expense (unaudited) 67,292 - -
Amortization and revaluation
of consulting expense
(unaudited) - 498,544 -
Stock issued for marketing
services at $0.09 per share
(unaudited) (22,500) - -
Stock issued for legal
services at $0.09 per share
(unaudited) (45,000) - -
Stock issued for accounts
payable at $0.15 per share
(unaudited) - - -
Stock issued for note
payable to related party
at $0.06 per share
(unaudited) - - -
Amortization and revaluation
of deferred consulting
(unaudited) - 8,000 -
Amortization of prepaid
expense (unaudited) 33,750 - -
Fair value of options
issued to consultant
(unaudited) - - -
Options issued to directors
for accrued director fees
(unaudited) - - -
Contributed capital for
accrued director fees
(unaudited) - - -
Net loss,
December 31, 2004 (unaudited) - - (821,524)
---------- --------- ------------
Balance,
December 31, 2004 (unaudited) (33,750) $ (1,333) $(24,545,462)
========== ========= ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the
Nine Months Ended
December 31,
----------------------
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(821,524) $ (55,434)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 367 25,447
Gain on extinguishment (43,990) -
Stock options issued for consulting services 411,629 -
Stock options issued for board compensation 3,000 -
Stock options issued for compensation 5,000 31,607
Common stock issued for debt extensions - 5,760
Amortization of expenses prepaid with common stock 101,042 -
Amortization of debt offering and extension costs - 5,460
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable 299,522 (111,670)
Decrease in prepaid expenses and deferred costs - 43,311
(Increase) in inventory (112,102) 1,212
(Increase) in deposits - (5,750)
Increase (decrease) in accounts payable and accrued
liabilities (48,741) 44,616
Increase (decrease) in interest payable - (1,458)
Increase (decrease) in unearned revenue 137,030 53
Decrease in other assets 5,405 -
--------- --------
Net Cash Used by Operating Activities (63,362) (16,846)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipt on notes receivable 50,000 -
Purchase of fixed assets (5,500) -
-------- --------
Net Cash Provided by Investing Activities 44,500 -
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) in cash overdraft - (8,053)
Payments to related parties (10,654) -
Principal payments on notes payable (96,171) (564,349)
Proceeds from debt - 450,898
Proceeds from common stock 75,000 179,341
Proceeds from preferred stock - 5,000
-------- ---------
Net Cash Provided (Used) by Financing Activities (31,825) 62,837
-------- ---------
NET INCREASE (DECREASE) IN CASH (50,687) 45,991
CASH AT BEGINNING OF PERIOD 113,820 11,449
-------- ---------
CASH AT END OF PERIOD $ 63,133 $ 57,440
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the
Nine Months Ended
December 31,
---------------------
2004 2003
----------- ---------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for payment on notes payable
and interest $ 75,232 $ 38,373
Common stock issued for related party debt $ 38,174 $ -
Stock options issued for accrued director fees $ 90,000 $ -
Common stock issued for stock offering costs $ 45,900 $ -
Common stock issued for payment on accounts payable $ 6,875 $ 28,143
Common stock issued for debt extensions $ - $ 5,760
Preferred stock issued for conversion of
notes payable $ - $ 5,000
Stock options issued for consulting services $ 411,629 $ -
Stock options issued for employee and
board compensation $ 3,000 $ -
Cash Paid For:
Interest $ 19,490 $ 71,960
Income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31 and March 31, 2004
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted in accordance with such rules and regulations.
The information furnished in the interim condensed consolidated financial
statements include normal recurring adjustments and reflects all adjustments,
which, in the opinion of management, are necessary for a fair presentation of
such financial statements. Although management believes the disclosures and
information presented are adequate to make the information not misleading, it
is suggested that these interim condensed consolidated financial statements be
read in conjunction with the Company's most recent audited financial
statements and notes thereto included in its March 31, 2004 Annual Report on
Form 10-KSB. Operating results for the nine months ended December 31, 2004
are not necessarily indicative of the results that may be expected for the
year ending March 31, 2005.
Certain prior period balances have been reclassified to conform to current
period presentation.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using accounting
principles generally accepted in the United States of America applicable to a
going concern which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company does not
have significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating costs.
Additionally, the Company has accumulated significant losses, has negative
working capital, and a deficit in stockholders' equity. All of these items
raise substantial doubt about its ability to continue as a going concern.
During the fiscal year ending March 2004, the Company added depth to one of
its most popular product lines, the PCS Brick Lab, introducing the Brick Lab
Grade Series for Grades 1 and 2 with plans to introduce Grades 3 and 4 during
fiscal year 2005 and Grades 5 and 6 during fiscal year 2006. The Company has
also entered into an exclusive distribution agreement with a company whose
science-oriented products will complement its engineering curriculum and labs.
In addition to widening and deepening its product mix, the Company has also
entered into agreements with independent sales agency groups which the Company
believes will provide better market penetration and coverage. In addition,
the Company intends to continue offering its common stock to raise additional
capital necessary to cover operating expenses and its cost containment
strategy, not investing significant amounts of capital to research and
development.
The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish this plan and to
eventually attain profitable operations. The accompanying consolidated
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
NOTE 3 - DILUTIVE INSTRUMENTS
a. Stock Options
The Company applied Accounting Principles Board ("APB") Opinion 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for all stock option plans. Under APB Opinion 25, compensation
cost is recognized for stock options granted to employees when the option
price is less than the market price of the underlying common stock on the date
of grant.
F-16
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 2004 and March 31, 2004
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
During October 2004, the Company issued 344,559 shares of common stock to its
Chief Executive Officer for the non-cash reduction of related party debt of
$20,674.
On October 1, 2004, PCS entered into a six-month agreement with Equitilink.
The scope of said agreement includes public relations and investor
communications services. The six-month agreement will be extended for an
additional three months, unless cancelled by PCS. Compensation for
Equitilink's services is 250,000 shares of restricted stock valued at $22,500
or $0.09 per share representing fair market value. This amount will be
amortized over the six-month term of the agreement.
On October 1, 2004, PCS entered into a twelve-month agreement with Michael
Corrigan, attorney. The scope of said agreement is for legal representation
for such matters that PCS deem necessary. Compensation for Corrigan's
services for the first six months is 500,000 of free trading, non-restricted
shares of common stock valued at $45,000 or $0.09 per share representing fair
market value. This amount will be amortized over the six-month term of the
agreement. Unless PCS cancels the agreement at the end of six
months, compensation for the remainder of the twelve-month agreement will be
an additional 500,000 free trading, non-restricted shares of common stock.
During October 2004, the Company issued 45,833 shares of common stock for the
non-cash reduction of accounts payable debt of $6,875.
During the period ended September 30, 2004, the Company issued options to
purchase 6,000,000 shares of its common stock for prepaid consulting fees.
The options are exercisable immediately with 2,000,000 options exercisable at
a price of $0.10 per share for 60 days while 4,000,000 are exercisable at a
price of $0.25 per share for 120 days. During the period, 750,000 options
were exercised at $0.10 and 5,250,000 were allowed to expire unexercised. The
issuance of these options resulted in the recording of $372,988 in variable
deferred consulting fees.
In accordance with EITF 96-18, "Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services", and due to the options being issued for ongoing services,
the options are being valued as the services are completed. In order to
capture the changes in the fair value of the options over the term of service,
changes in the fair values at interim reporting dates are attributed in
accordance with FIN 28, "Accounting for Stock Appreciation Rights and Other
Variable Stock Option or Award Plans". FIN 28 states that consulting expense
should be measured at the end of each period as the amount by which the fair
value of the options covered by a grant exceeds the option price or value
specified under the plan and should be accrued as a charge to expense over the
periods the grantee performs the related services. Changes in the quoted
market value are being reflected as adjustments of deferred consulting and
consulting expense in the period and will continue until the date the services
are complete. Consulting deferred during the service period is being adjusted
in subsequent periods up to the measurement date for changes, either increases
or decreases, in the fair value of the options covered by the grant but shall
not be adjusted below zero. The offsetting adjustment is being made to
consulting expense of the period in which changes in the fair value occur.
During the quarter ended September 30, 2004, these options expired
unexercised. PCS recognized the remaining $120,000 in non-cash consulting
expense.
During the quarter ended June 30, 2004, the Company issued options to purchase
800,000 shares of its common stock for prepaid consulting fees. The options
are exercisable immediately in groups of 200,000 at prices of $0.10, $0.20,
$0.30 and $0.35 per share for one year. The issuance of these options
resulted in the recording of $134,889 in variable deferred consulting fees.
In accordance with EITF 96-18 and FIN 48, during the quarter ended December
31, 2004, the revaluation of these options resulted in the recording of a
decrease in deferred valuation of $8,000 and a decrease of $4,000 in
non-cash consulting expense.
SFAS No. 148, requires the Company to provide pro forma information regarding
net loss and net loss per share as if compensation costs for the Company's
stock option plans and other stock awards had been determined in accordance
with the fair value based method prescribed in SFAS No. 148. The current
period pro forma net loss includes $10,291 of prior period option expense
amortization. The Company estimates the fair value of each stock award at the
grant date by using the Black-Scholes option pricing model.
For the Nine Months Ended
December 31,
--------------------------
2004 2003
------------ ----------
Net loss:
As reported $ (821,524) $ (55,434)
Pro Forma (985,664) (169,991)
Net loss per share:
As reported $ (0.01) $ (0.00)
Pro Forma (0.04) (0.01)
The Company has the following outstanding options as of December 31,
2004:
Amount
Date of Issue Issue Amount Expired/ Amount
Description Grant Number Price Exercised Cancelled
Outstanding
---------------- -------- --------- -------- --------- --------- ----------
1) Board Members 12-10-01 1,000,000 $ 0.30 0 (250,000) 750,000
2) Board Members 06-03-02 1,000,000 $ 0.16 0 (250,000) 750,000
3) Employees 07-01-02 335,000 $ 0.16 0 (10,000) 325,000
4) Employee 08-15-02 5,000 $ 0.16 0 0 5,000
5) Board Members 10-21-02 499,998 $ 0.09 0 (166,666) 333,332
6) Board Members 05-15-03 892,855 $ 0.07 (250,000) (214,285) 428,570
7) Employee 05-20-03 100,000 $ 0.07 0 0 100,000
8) Employee 07-25-03 25,000 $ 0.10 0 0 25,000
9) Employee 09-05-03 150,000 $ 0.07 0 0 150,000
10) Employee 09-25-03 25,000 $ 0.15 0 0 25,000
11) Board Member 04-28-04 150,000 $ 0.15 0 0 150,000
12) Consultant 04-28-04 2,000,000 $ 0.10 (750,000)(1,250,000) 0
13) Consultant 04-28-04 4,000,000 $ 0.25 0 (4,000,000) 0
14) Consultant 04-28-04 200,000 $ 0.10 0 0 200,000
15) Consultant 04-28-04 200,000 $ 0.20 0 0 200,000
16) Consultant 04-28-04 200,000 $ 0.30 0 0 200,000
17) Consultant 04-28-04 200,000 $ 0.35 0 0 200,000
18) Board Members 09-14-04 80,358 $ 0.14 0 0 80,358
19) Board Members 09-14-04 93,750 $ 0.12 0 0 93,750
20) Board Members 09-14-04 112,500 $ 0.10 0 0 112,500
21) Board Members 09-14-04 48,912 $ 0.23 0 0 48,912
22) Board Members 09-14-04 57,692 $ 0.26 0 0 57,692
23) Employee 07-29-04 153,533 $ 0.15 0 0 153,533
24) Employee 08-10-04 50,000 $ 0.13 0 0 50,000
25) Employee 07-10-04 50,000 $ 0.13 0 0 50,000
26) Employee 07-01-04 25,000 $ 0.31 0 0 25,000
27) Consultant 07-29-04 5,000 $ 0.15 0 0 5,000
28) Employee 11-15-04 100,000 $ 0.10 0 0 100,000
29) Board Members 01-04-05 315,792 $ 0.10 0 0 315,792
30) Consultant 01-06-05 4,500 $ 0.10 0 0 4,500
---------- --------- ---------- ----------
12,079,890 (1,000,000) 6,140,951 4,938,939
========== ========= ========== ==========
Amount Exercisable 4,540,406
==========
F-18
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31 and March 31, 2004
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
Risk-Free
Fair Interest Expected Expected
Description Value Rate Life Volatility
---------------- --------- --------- -------- ----------
1) Board Members $ 0.20 5.69% 10.00 99.80%
2) Board Members $ 0.15 5.48% 10.00 128.91%
3) Employee $ 0.14 2.84% 3.50 157.77%
4) Employee $ 0.14 2.84% 3.30 163.77%
5) Board Members $ 0.09 3.94% 10.00 158.83%
6) Board Members $ 0.09 3.94% 10.00 151.61%
7) Employee $ 0.06 2.54% 4.00 151.61%
8) Employee $ 0.12 2.81% 4.00 156.24%
9) Employee $ 0.11 2.81% 4.00 152.03%
10) Employee $ 0.12 3.07% 5.85 152.03%
11) Board Member $ 0.17 4.43% 10.00 344.55%
12) Consultant $ 0.17 0.98% 0.17 187.13%
13) Consultant $ 0.17 0.98% 0.33 187.13%
14) Consultant $ 0.17 1.55% 1.00 537.80%
15) Consultant $ 0.17 1.55% 1.00 537.80%
16) Consultant $ 0.17 1.55% 1.00 537.80%
17) Consultant $ 0.17 1.55% 1.00 537.80%
18) Board Members $ 0.15 4.14% 10.00 247.04%
19) Board Members $ 0.15 4.14% 10.00 247.04%
20) Board Members $ 0.15 4.14% 10.00 247.04%
21) Board Members $ 0.15 4.14% 10.00 247.04%
22) Board Members $ 0.15 4.14% 10.00 247.04%
23) Employee $ 0.14 3.78% 5.00 250.60%
24) Employee $ 0.13 3.47% 5.00 247.04%
25) Employee $ 0.23 3.64% 5.00 250.60%
26) Employee $ 0.27 3.81% 5.00 240.27%
27) Consultant $ 0.14 3.78% 5.00 250.60%
28) Employee $ 0.10 3.53% 5.00 236.98%
29) Board Members $ 0.09 4.29% 10.00 234.54%
30) Consultant $ 0.11 3.65% 5.00 236.98%
NOTE 4 - MATERIAL EVENTS
During July 2004, the Company agreed to a Release of All Claims and Settlement
Agreement (the Settlement) with Xerox Capital Services, LLC in regard to a
past due notes payable and copier lease payments. The Settlement calls for
the payment of $44,252 in installments as follows: $7,500 upon execution;
$10,000 on or before August 5, 2004; $10,000 on or before August 19, 2004;
$12,500 on or before September 15, 2004; and $4,252 on or before October 15,
2004. In addition, the Company agreed to return the copier. The Company has
recognized a gain on extinguishment of debt of $43,990 as a result of this
Settlement. As of December 31, 2004, all scheduled payments have been made;
the obligation is paid in full.
F-19
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 2004 and March 31, 2004
NOTE 5 - SUBSEQUENT EVENTS
During the months of December 2004 and January 2005, PCS received two
substantial orders from two customers totaling $379,000. $132,000 of this
unearned revenue is reflected in the above balance sheet. The $379,000 total
will be recognized in the quarter ending March 31, 2005. This represents a
significant 39% increase in the current revenue figures of $971,998.
During the month of January 2005, the Company issued options to purchase
78,948 shares of common stock to each of its four Board Members, for a total
issuance of 315,792 at an exercise price of $0.10 per share. The options were
issued as compensation for Board services for the quarters ending September
30, 2004 and December 31, 2004. These figures are included in the above
financial statements.
During the month of January 2005, the Company issued options to purchase 4,500
shares of common stock to a consultant for purchasing services at an exercise
price of $0.10 per share. These figures are included in the above financial
statements.
F-20
Item 2. Management's Discussion and Analysis or Plan of Operation.
--------------------------------------------------------------------
Results of Operations.
----------------------
Nine months ended December 31, 2004, compared to nine months ended
December 31, 2003.
------------------
Revenues for the nine-month period ended December 31, 2004,
decreased by $409,116 (30.0%) to $971,998 as compared to $1,381,114 for the
nine-month period ended December 31, 2003. Revenues decreased due to a
combination of a policy change in the fourth quarter of fiscal year 2004 as
well as a slight decrease in sales. We changed our policy to give our
customers more choice in their lab materials. Under the new policy, our
customers can choose where to purchase their lab materials (e.g. LEGO
[Registered] manipulatives) and they simply purchase the PCS curriculum,
customized furniture unit and site license materials from us. There is no
effect on our gross profit as a result of our policy change as our revenues
are reduced by same amount as our cost of goods sold.
General and administrative costs have increased slightly by $2,637,
or 1.0% to $511,383 for the nine-month period ended December 31, 2004, as
compared to $508,746 for the nine-month period ended December 31, 2003. This
increase is primarily due to an increase in outside consulting services and an
increase in marketing expenses, including travel, trade shows and marketing
brochures.
Operating expenses for the nine-month period ended December 31, 2004,
included a non-cash expenditure for $483,921 associated with stock and options
which were granted to consultants. The scope of said consulting agreement
includes advisement and consultation regarding distribution strategies,
evaluation of potential acquisition targets and the structuring of any such
transactions, and business development strategies, including geographic and
service expansion plans.
Interest expense for the nine-month period ended December 31, 2004,
decreased to $56,497 as compared to $103,812 for the nine-month period ended
December 31, 2003. This decrease is due to less interest expense associated
with the conversion of indentured trust debt to common stock as well as a
reduction in finance charges associated with the financing of our cost of
goods sold. Said reduction corresponds to our change in our revenue policy
(see revenue section).
We had a net loss of ($821,524), or ($0.03) per share, for the nine
months ended December 31, 2004, as compared to a net loss of ($55,434) or
($0.00) per share, for the nine-month period ended December 31, 2003. The net
loss for the nine months ended December 31, 2004, after removing the costs of
stock and options issued for services of $483,921, is ($337,603), or ($0.01)
per share.
Liquidity and Capital Resources.
--------------------------------
We had a cash balance of $63,133 at December 31, 2004. Management
believes that the cash received from delivered sales orders, as well as
continued limited offerings of our common stock, will be sufficient to meet
our operating expenses.
Item 3. Controls and Procedures.
----------------------------------
As of the end of the period covered by this Quarterly Report, we
carried out an evaluation, under the supervision and with the participation of
our President and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures. Based on this evaluation, our President
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
required to be included in our periodic Securities and Exchange Commission
reports. It should be noted that the design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how remote.
In addition, we reviewed our internal controls over financial reporting, and
there have been no changes in our internal controls or in other factors in the
last fiscal quarter that has materially affected or is reasonably likely to
materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
----------------------------
None; not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
----------------------------------------------------------------------
Sales of Unregistered Securities During the Last Quarter.
---------------------------------------------------------
Common Preferred
Description Shares Amount Shares Amount
----------- ------ ------ ------ ------
Equitilink 250,000 (1)
Michael Corrigan 500,000 (2)
Richard Schmidt 45,833 (3)
Anthony Maher 344,559 (4)
(1) On October 1, 2004, PCS entered into a six-month agreement with
Equitilink. The scope of said agreement includes public relations and investor
communications services. The six-month agreement will be extended for an
additional three months, unless cancelled by PCS. Compensation for
Equitilink's services is 250,000 shares of restricted stock at $0.09 per
share.
(2) On October 1, 2004, PCS entered into a twelve-month agreement with Michael
Corrigan, attorney. The scope of said agreement is for legal representation
for such matters that PCS deem necessary. Compensation for Corrigan's
services for the first six months is 500,000 of free trading, non-restricted
shares of common stock at $0.09 per share. Unless PCS cancels the agreement
at the end of six months, compensation for the remainder of the twelve-month
agreement will be an additional 500,000 free trading, non-restricted shares of
common stock.
(3) During October 2004, the Company issued 45,833 shares of common stock at
$0.15 per share for the non-cash reduction of accounts payable debt of $6,875.
(4) During October 2004, the Company issued 344,559 shares of common stock at
$0.06 per share to its Chief Executive Officer for the non-cash reduction of
related party debt of $20,674.
Item 3. Defaults Upon Senior Securities.
------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
--------------------------------------------------------------
None; not applicable.
Item 5. Other Information.
----------------------------
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
-------------------------------------------
(a) Exhibits.
31.1 302 Certification of Anthony A. Maher
31.2 302 Certification of Christina M. Vaughn
32 906 Certifications
SB-2 Registration Statement Filed with an Effective Date
of May 11, 2001*
* Incorporated by Reference.
(b) Reports on Form 8-K.
8-K Current Report Dated July 1, 2004, and filed with the
Securities and Exchange Commission on July 2, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCS EDVENTURES.COM, INC.
Date: 2/9/2005 /s/Anthony A. Maher
---------- -------------------------------------
Anthony A. Maher
Chief Executive Officer, President and
Chairman of the Board of Directors
Date: 2/9/2005 /s/Christina M. Vaughn
---------- -------------------------------------
Christina M. Vaughn
Chief Financial Officer