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 September 30, 2005
[ ] 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 Registrant (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 Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
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:
28,793,537
October 5, 2005
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
September 30, 2005 and March 31, 2005
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
September 30, March 31,
2005 2005
----------- ----------
(Unaudited)
CURRENT ASSETS
Cash $ 130,047 $ 16,752
Accounts receivable 583,936 130,569
Inventory 87,416 8,304
Deferred costs 4,995 110,367
Prepaid expenses 6,062 14,826
Other assets 1,250 -
----------- ----------
Total Current Assets 813,706 280,818
----------- ----------
FIXED ASSETS (NET) 13,834 11,917
----------- ----------
OTHER ASSETS
Deposits 6,225 6,225
----------- ----------
Total Other Assets 6,225 6,225
----------- ----------
TOTAL ASSETS $ 833,765 $ 298,960
=========== ==========
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)
September 30, March 31,
2005 2005
--------- ----------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 422,455 $ 183,068
Accrued compensation 56,293 40,537
Payroll taxes payable 48,769 87,669
Accrued interest 60,344 75,044
Accrued expenses 69,735 59,079
Unearned revenue 347,310 269,571
Notes payable - related parties 116,690 117,054
Notes payable 114,952 205,465
---------- ---------
Total Current Liabilities 1,236,548 1,037,487
---------- ---------
Total Liabilities 1,236,548 1,037,487
---------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value, authorized
10,000,000 shares, 15,246 shares issued
and outstanding 56,372 56,372
Common stock, no par value, authorized 50,000,000
shares; 28,793,537 and 27,355,451 shares issued
and outstanding, respectively 24,199,911 23,868,669
Variable deferred consulting fees - (1,000)
Accumulated deficit (24,659,066)(24,662,568)
----------- -----------
Total Stockholders' Equity (Deficit) (402,783) (738,527)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 833,765 $ 298,960
=========== ===========
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 Six Months Ended
September 30, September 30,
-------------------------- ------------------------
2005 2004 2005 2004
---------- ---------- ---------- -----------
REVENUE
Lab Revenue $ 762,852 $ 227,983 $ 1,652,374 $ 623,712
License Revenue 47,350 41,114 91,482 87,075
Subscription Revenue 1,235 4,042 2,553 7,050
----------- ----------- ----------- -----------
Total Revenues 811,437 273,139 1,746,409 717,837
COST OF GOODS SOLD/
COST OF SALES 477,080 115,154 859,291 262,626
----------- ----------- ----------- -----------
GROSS PROFIT 334,357 157,985 887,118 455,211
----------- ----------- ----------- -----------
OPERATING EXPENSES
Salaries and wages 150,323 123,307 257,091 240,166
Depreciation expense 1,191 92 2,381 92
Common stock and stock
options issued for
consulting expense 88,133 138,042 90,115 481,733
General and administrative 222,131 152,385 513,916 373,858
----------- ----------- ----------- -----------
Total Operating Expenses 461,778 413,826 863,503 1,095,849
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (127,421) (255,841) 23,615 (640,638)
----------- ----------- ----------- -----------
OTHER INCOME AND EXPENSES
Gain on settlement of debt - - - 43,990
Interest income 18 24 23 973
Interest expense (11,089) (10,012) (34,867) (40,450)
Other income 676 5,276 17,131 12,569
Other expense (2,400) (528) (2,400) (1,995)
----------- ----------- ----------- -----------
Total Other Income and
(Expenses) (12,795) (5,240) (20,113) 15,087
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES (140,216) (261,081) 3,502 (625,551)
INCOME TAX EXPENSE - - - -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (140,216) $ (261,081) $ 3,502 $ (625,551)
=========== =========== =========== ===========
F-4
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
(Continued)
For the Three Months Ended For the Six Months Ended
September 30, September 30,
--------------------------- ------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
BASIC INCOME (LOSS)
PER SHARE $ (0.00) $ (0.01) $ 0.00 $ (0.02)
=========== =========== =========== ===========
DILUTED INCOME (LOSS)
PER SHARE $ 0.00
===========
WEIGHTED AVERAGE NUMBER OF
BASIC SHARES OUTSTANDING 26,874,521 25,688,359 26,854,923 25,386,545
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
DILUTED SHARES OUTSTANDING 30,275,536
==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
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 30,000 5,100 - -
Stock offering costs - (5,100) - -
Common stock issued for
services at $0.17 per
share 240,000 40,800 - -
Stock offering costs - (40,800) - -
Options issued to employees
below market value - 3,000 - -
Options issued to consultants
below market value - 507,877 - -
Common stock issued for
conversion of debt and
interest at $0.20 per
share 376,165 75,232 - -
Common stock issued for
cash at $0.10 per share
for option exercise 750,000 75,000 - -
Intrinsic value of
employee options issued
below market value - 5,000 - -
Common stock issued for
related party note payable
reduction at $0.07 per
share 250,000 17,500 - -
Fair value of options
issued to consultant - 696 - -
Common stock issued for
conversion of preferred
stock at $0.20 per share 338,020 67,603 (67,604) (67,603)
Options issued to directors
for accrued director fees - 9,241 - -
---------- ----------- --------- ------------
Balance forward 26,215,059 $23,784,472 15,246 $ 52,870
---------- ----------- --------- ------------
F-6
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Shares Preferred Shares
------------------------- ----------------------
Shares Amount Shares Amount
---------- ------------ --------- -----------
Balance forward 26,215,059 $23,784,472 15,246 $ 52,870
Contributed capital for
accrued director fee - 50,759 - -
Pro-rata cumulative
non-cash preferred stock
dividend - - - 3,502
Amortization of prepaid
expense - - - -
Amortization and revaluation
of consulting expense - (92,102) - -
Stock issued for marketing
services at $0.09 per share 250,000 22,500 - -
Stock issued for legal
services at $0.09 per share 500,000 45,000 - -
Stock issued for accounts
payable at $0.15 per share 45,833 6,875 - -
Stock issued for note
payable to related party
at $0.06 per share 344,559 20,674 - -
Amortization of prepaid
expense - - - -
Fair value of options
issued to consultant - 491 - -
Options issued to directors
for accrued director fees - 28,416 - -
Contributed capital for
accrued director fees - 1,584 - -
Net loss,
March 31, 2005 - - - -
---------- ----------- --------- ----------
Balance, March 31, 2005 27,355,451 $ 23,868,669 15,246 $ 56,372
---------- ----------- --------- ----------
F-7
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Shares Preferred Shares
----------------------- --------------------
Shares Amount Shares Amount
---------- ----------- --------- ----------
Balance, March 31, 2005 27,355,451 $ 23,868,669 15,246 $ 56,372
Options issued to directors
for accrued director fees
(unaudited) - 15,000 - -
Treasury stock issued for
legal services (unaudited) - 21,250 - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) 15,000 2,400 - -
Stock issued for cash
for $0.20 per share
(unaudited) 35,000 7,000 - -
Stock issued for public
relations services for
$0.095/share (unaudited) 90,972 8,649 - -
Stock issued for the
exercise of options for
$0.13 per share (unaudited) 205,211 26,645 - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) 654,706 112,485 - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) 12,815 2,178 - -
Stock issued for cash
for $0.17 per share
(unaudited) 33,430 5,683 - -
Amortization and revaluation
of consulting expense
(unaudited) - (7,667) - -
Options issued to employees
below market value (unaudited) - 2,825 - -
Stock issued for services at
$0.705 per share (unaudited) 20,000 14,100 - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) 60,900 10,353 - -
Stock issued for the
exercise of options for
$0.15 per share (unaudited) 5,000 750 - -
Stock issued for marketing
services @ $0.12 per share
(unaudited) 25,208 3,025 - -
Stock issued for marketing
services below market value
(unaudited) - 1,008 - -
Stock issued for the
exercise of options for
$0.10 per share (unaudited) 4,500 450 - -
Stock issued for the
exercise of options for
$0.31 per share (unaudited) 344 107 - -
Options issued to employee
below market value (unaudited) - 7,000 - -
Stock issued for services at
$0.70 per share (unaudited) 100,000 70,000 - -
Stock issued for the reduction of
interest and principal for a note
payable for a related party
(unaudited) 100,000 16,000 - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) 75,000 12,000 - -
Net income,
September 30, 2005
(unaudited) - - - -
---------- ----------- --------- ------------
Balance,
September 30, 2005
(unaudited) 28,793,537 $24,199,910 15,246 $ 56,372
=========== ============ ========= ============
F-8
[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 $(67,292) $ - $(23,720,434)
Common stock issued for
services at $0.17 per
share - - -
Stock offering costs - - -
Common stock issued for
services at $0.17 per share - - -
Stock offering costs - - -
Options issued to employees
below market value - - -
Options issued to consultants
below market value - (507,877) -
Common stock issued for
conversion of debt and
interest at $0.20 per
share - - -
Common stock issued for
cash at $0.10 per share
for option exercise - - -
Intrinsic value of
employee options issued
below market value - - -
Common stock issued for
related party note payable
reduction at $0.07 per
share - - -
Fair value of options
issued to consultant - - -
Common stock issued for
conversion of preferred
stock at $0.20 per share - - -
Options issued to directors
for accrued director fees - - -
Contributed capital for
accrued director fees - - -
----------- --------- ------------
Balance forward $ (67,292) $(507,877) $(23,720,434)
----------- --------- ------------
F-6
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance forward $ (67,292) $(507,877) $(23,720,434)
Pro-rata cumulative
non-cash preferred stock
dividend - - (3,502)
Amortization of prepaid
expense 67,292 - -
Amortization and revaluation
of consulting expense - 506,877 -
Stock issued for marketing
services at $0.09 per share (22,500) - -
Stock issued for legal
services at $0.09 per share (45,000) - -
Stock issued for accounts
payable at $0.15 per share - - -
Stock issued for note
payable to related party
at $0.06 per share - - -
Amortization of prepaid
expense 67,500 - -
Fair value of options
issued to consultant - - -
Options issued to directors
for accrued director fees - - -
Contributed capital for
accrued director fees - - -
Net loss,
March 31, 2005 - - (938,632)
----------------- ---------- -----------
Balance, March 31, 2005 $ - $ (1,000) $(24,662,568)
----------------- ---------- -----------
F-7
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, 2005 $ - $ (1,000) $(24,662,568)
Options issued to directors
for accrued director fees
(unaudited) - - -
Treasury stock issued for
legal services (unaudited) - - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) - - -
Stock issued for cash
for $0.20 per share (unaudited) - - -
Stock issued for public
relations services for
$0.095/share (unaudited) - - -
Stock issued for the
exercise of options for
$0.13 per share (unaudited) - - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) - - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) - - -
Stock issued for cash
for $0.17 per share (unaudited) - - -
Amortization and revaluation
of consulting expense (unaudited) - 1,000 -
Options issued to employees
below market value (unaudited) - - -
Stock issued for services at
$0.705 per share (unaudited) - - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.15 per share (unaudited) - - -
Stock issued for marketing
services @ $0.12 per share
(unaudited) - - -
Stock issued for marketing
services below market value
(unaudited) - - -
Stock issued for the
exercise of options for
$0.10 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.31 per share (unaudited) - - -
Options issued to employee
below market value (unaudited) - - -
Stock issued for services at
$0.70 per share (unaudited) - - -
Stock issued for the reduction of
interest and principal for a note
payable for a related party
(unaudited) - - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) - - -
Net income,
September 30, 2005
(unaudited) - - 3,502
---------- --------- ------------
Balance,
September 30, 2005
(unaudited) - $ - $(24,659,066)
========== ========= ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the
Six Months Ended
September 30,
----------------------
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,502 $(625,551)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation 2,381 92
Gain on extinguishment - (43,990)
Stock/Stock options issued for consulting services 96,782 415,138
Stock options issued for board compensation 15,000 3,000
Stock options issued for compensation 9,825 5,000
Stock issued for legal services 35,000 -
Gain on return of common stock (13,750) -
Amortization of expenses prepaid with common stock (6,667) 67,292
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable (453,367) 244,606
(Increase) in inventory (79,112) (33,967)
Decrease in deferred costs 105,372 -
Increase (decrease) in accounts payable and accrued
liabilities 226,899 (88,357)
Increase in interest payable 24,954 -
Increase in unearned revenue 77,739 48,198
Decrease in other assets 7,513 5,185
--------- --------
Net Cash Provided (Used) by Operating Activities 52,071 (3,354)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipt on notes receivable - 50,000
Purchase of fixed assets (4,298) (5,500)
-------- --------
Net Cash Provided by (Used) Investing Activities (4,298) 44,500
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to related parties - (10,654)
Principal payments on notes payable (43,605) (79,335)
Cash proceeds from notes payable 54,092 -
Proceeds from common stock 55,035 75,000
-------- ---------
Net Cash Provided (Used) by Financing Activities 65,522 (14,989)
-------- ---------
NET INCREASE IN CASH 113,295 26,157
CASH AT BEGINNING OF PERIOD 16,752 113,820
-------- ---------
CASH AT END OF PERIOD $130,047 $ 139,977
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the
Six Months Ended
September 30,
---------------------
2005 2004
----------- ---------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for payment on notes payable
and interest $ 140,653 $ 75,232
Common stock issued for related party debt $ 364 $ 17,500
Stock options issued for accrued director fees $ 15,000 $ 60,000
Common stock issued for stock offering costs $ - $ 45,900
Stock options issued for consulting services $ 96,782 $ 415,138
Stock options issued for employee and
board compensation $ - $ 8,000
Cash Paid For:
Interest $ 21,386 $ 24,949
Income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30 and March 31, 2005
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, 2005 Annual Report on
Form 10-KSB. Operating results for the six months ended September 30, 2005
are
not necessarily indicative of the results that may be expected for the year
ending March 31, 2006.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using generally
accepted accounting principles 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. Management's plans with
respect to alleviating the adverse financial conditions that caused you to
express substantial doubt about the Company's ability to continue as a going
concern are as follows:
During the fiscal year ending March 2005, the Company opened discussions with
several target companies for possible merger and acquisition activities. In
addition, the Company also continued to investigate the feasibility of
utilizing parts of our Learning Labs to create a line of specialty retail
learning toys. The Company has also entered into several strategic alliances
with K'NEX, Science Demo, and GibsonTechEd for further product development and
enhancement. The Company has also strengthened its international position by
naming agents and installing Learning Labs in Egypt, Dubai, and Saudi Arabia.
To date, the Company has continued to develop marketplace strategy for the US
market as well as the international market and is still pursuing merger and
acquisition candidates.
The ability of the Company to continue as a going concern is dependent upon
its ability to successfully accomplish the plan described in the preceding
paragraph and 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
SFAS No. 148, requires the Company to provide pro forma information regarding
net income (loss) and net income (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, which
would have resulted in additional expense of $28,720 and $122,367 for the six
months ended September 30, 2005 and 2004, respectively.
The Company estimates the fair value of each stock award at the grant date by
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants, respectively; dividend yield of zero
percent for all years; expected volatility of 100% to 538% percent for all
years; risk-free interest rates of 1% to 6%, and expected lives of 1 to 10
years.
For the Six Months Ended
September 30,
2005 2004
Net income(loss):
As reported $ 3,502 $ (625,551)
Pro Forma (25,218) (747,918)
Net income(loss) per share:
As reported $ 0.00 $ (0.02)
Pro Forma 0.01 (0.03)
F-11
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30 and March 31, 2005
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
A summary of the status of the Company's outstanding stock options as
of September 30, 2005 is presented below:
Weighted
Average
Exercise
Shares Price
---------- --------
Outstanding, March 31, 2005 12,679,890 $0.19
Granted 463,547 $0.47
Expired/Cancelled (6,940,951) $0.21
Exercised (1,405,055) $0.11
-----------
Outstanding, September 30, 2005 4,797,431 $0.21
=========== =======
Exercisable, September 30, 2005 3,651,431 $0.17
=========== =======
F-12
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30 and March 31, 2005
NOTE 4 - SUBSEQUENT EVENTS
During July 2005, the Company signed a letter of intent (LOI) to acquire
LabMentors, a Canadian based developer of hands-on virtual computer,
networking, and server labs. PCS will acquire all LabMentor's stock in
exchange for PCS' restricted stock; the final structure of the exchange has
not been determined. The purchase price is $450,000, payable in PCS
restricted common stock. In addition to the purchase price, LabMentor's
shareholders can earn additional PCS shares based on LabMentor's EBITDA
(earnings before income taxes, depreciation/amortization) for three years
after the initial purchase of LabMentors. The LOI will terminate on November
30, 2005, unless a definitive agreement is reached following PCS' due
diligence. The Company is currently working on due diligence and anticipates
completion and close of the transaction on or before November 30, 2005.
In addition, two of PCS Board Members have exercised stock options after the
quarter close. The total number of shares purchased through exercising stock
options is 769,720 with an average exercise price of $0.099 cents per share.
The total amount received by PCS for these transactions was $64,144.55.
F-13
Item 2. Management's Discussion and Analysis or Plan of Operation.
--------------------------------------------------------------------
Results of Operations.
----------------------
Three months ended September 30, 2005, compared to Three months ended
September 30, 2004.
-------------------
Revenues for the three-month period ended September 30, 2005,
increased by $538,298, or 197% to $811,437 as compared to $273,139 for the
three-month period ended September 30, 2004. This increase is due to
increased sales and marketing efforts throughout the country, as well as
increased international sales.
Cost of goods sold for the three-month period ended September 30,
2005, increased by $361,926, or 314% to $477,080 as compared to $115,154 for
the three-month period ended September 30, 2004. This increase is due to an
increase in sales as well as an increase in shipping costs. Included in the
Cost of goods sold figure is Sales Commissions, which have also increased due
to the increase in sales.
Operating expenses for the three-month period ended September 30,
2005, increased by $47,952, or 12% to $461,778 as compared to $413,826 for the
three-month period ended September 30, 2004. This increase is primarily due
the Company experiencing an increase in legal and accounting expenses due to
the due diligence associated with acquisition activity.
Interest expenses for the three-month period ended September 30, 2005,
increased 11%, or $1,077 to $11,089 as compared to $10,012 for the
three-month, period ended September 30, 2004. This increase was due to an
increase in interest rates, as well as fully utilizing short term borrowing
abilities.
Six months ended September 30, 2005, compared to six months ended
September 30, 2004.
-------------------
Revenues for the six-month period ended September 30, 2005,
increased by $1,028,572, or 143% to $1,746,409 as compared to $717,837 for the
six-month period ended September 30, 2004. This increase is due to increased
sales and marketing efforts throughout the country as well as increased
international sales.
Cost of goods sold for the six-month period ended September 30, 2005,
increased by $537,617, or 167% to $859,291 as compared to $262,626 for the
six-month period ended September 30, 2004. This increase is due to an
increase in sales as well as an increase in shipping costs. Included in the
Cost of goods sold figure is Sales Commissions which have also increased due
to the increase in sales.
Operating expenses for the six-month period ended September 30, 2005,
decreased by $232,346, or 21% to $863,503 as compared to $1,095,849 for the
six-month period ended September 30, 2004. This decrease is primarily due the
non-recurring expense we booked during last year's period for non-cash
consulting expense of $322,442. In addition to the non-recurring expense, we
also experienced an increase in legal and accounting expenses due to the due
diligence associated with acquisition activity.
Interest expenses for the six-month period ended September 30, 2005,
decreased 14%, or $5,583 to $34,867 as compared to $40,450 for the
six-month, period ended September 30, 2004. This decrease is due to our
efforts during the first quarter to convert debt to equity.
Liquidity and Capital Resources.
--------------------------------
We had a cash balance of $130,047 at September 30, 2005. 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 for the foreseeable future.
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 effectively designed to ensure that information required to be
disclosed or filed by us is recorded, processed or summarized, within the time
periods specified in the rules and regulations of the Securities and Exchange
Commission. 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
----------- ------ ------ ------ ------
James Boston 800 (1)
Loretta Cook 800 (1)
Jerry Sexton 800 (1)
Thomas Tice 800 (1)
Mark Stutzman 1,200 (1)
Douglas Miller 7,800 (1)
Matamo Development LLC 7,800 (1)
Baker-Louderback Living Trust 60,900 (2)
Joe D. and Gina L. Egusquiza 5,000 750
Scott Peyron & Associates 25,208 (3)
Joe D. and Gina L. Egusquiza 4,500 450
Richard Mussler-Wright 344 107
Harbor View Fund Inc. 100,000 (4)
Anthony A. Maher 100,000 (5)
Bill Albert 75,000 12,000
(1) These shares were issued for consulting services at $0.705 per share.
(2) These shares were issued for the conversion of debt and interest at $0.20
per share.
(3) These shares were issued for public relations services at $0.12 per share.
(4) These shares were issued for consulting services at $0.70 per share.
(5) These shares were issued to an Officer/Board Member who exercised some
options in consideration for a reduction of notes payable and interest. These
options were exercisable at $0.16 per share.
We issued these securities to persons who were either "accredited investors,"
or "sophisticated investors" who, by reason of education, business acumen,
experience or other factors, were fully capable of evaluating the risks and
merits of an investment in our Company; and each had prior access to all
material information about us. We believe that the offer and sale of these
securities was exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to Sections 4(2) and 4(6)
thereof, and Rule 506 of Regulation D of the Securities and Exchange
Commission and from various similar state exemptions, and with respect to the
foreign investors, pursuant to Regulation S of the Securities and Exchange
Commission.
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.
-------------------
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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report to be signed on its
behalf by the undersigned thereunto duly authorized.
PCS EDVENTURES.COM, INC.
Date: 11/14/2005 By:/s/Anthony A. Maher
----------- -------------------------------------
Anthony A. Maher
Chief Executive Officer, President and
Chairman of the Board of Directors
Date: 11/14/2005 By:/s/Christina M. Vaughn
----------- -------------------------------------
Christina M. Vaughn
Chief Financial Officer
Date: 11/9/2005 By:/s/Donald j. Farley
---------- -------------------------------------
Donald J. Farley
Secretary and Director
Date: 11/14/2005 By:/s/Cecil D. Andrus
----------- -------------------------------------
Cecil D. Andrus
Director
Date: 11/11/2005 By:/s/Michael K. McMurray
----------- -------------------------------------
Michael K. McMurray
Director