(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of FY2009 Q2: $3,369,103 as of September 30, 2008.

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.   As of June 26, 2009, the Registrant had outstanding 38,018,078 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

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 PART I

Item 1. Business.

PCS Edventures!.com, Inc. (the “Company,” “PCS,” “we,” “our,” “us” or similar words) was incorporated in 1994 in the State of Idaho. In October 1994, we acquired PCS Schools, Inc. (“PCS Schools”), which was later divested to focus our efforts on educational systems for use in classrooms instead of free standing learning centers.  In November 2005, we acquired PCS LabMentors, Ltd. (“PCS LabMentors”) based in Fredericton, New Brunswick, Canada, which is a wholly owned subsidiary of PCS Edventures!.com, Inc.

PCS LabMentors is the exclusive provider of a proprietary virtual lab technology, which is designed to provide hands-on experience to high school and college students studying a variety of technical topics. These technical topics include programming, network management, security, and operating systems. LabMentors' technology provides students with the ability to manage and configure any hardware/software platform remotely, through a proprietary client accessed remote server farm. Also embedded within the LabMentors system is a Learning Management System (LMS) that enables the delivery and tracking of curriculum and tasks to students. Using LabMentors' complete solution, any school or institution can offer advanced IT training topics in any number of areas such as Windows Server 3000®, Linux® system administration, and various other applications without the associated overhead of owning and managing various hardware platforms.

PCS is engaged in the business of developing and marketing educational learning labs bundled with related technologies and programs. Our products and technologies are targeted and marketed to public and private school classrooms for pre-kindergarten through college, the after school market that includes YMCAs, Boys and Girls Clubs,  21 ^stCentury Learning Centers, and the home school market.  Our products and technologies are delivered to each of these markets through an inventory of hardware, software, books (both developed in-house and from external sources), and Internet access. Our technologies and products are delivered to the home user through Internet access via a subscription based website.  Our products and technologies allow students ages 3 and up to explore the basic foundations of mechanical engineering, architecture, structural engineering, robotics, mechatronics, applied mathematics, art, computer science, programming, and physical science.

PCS Edventures!.com, Inc. has developed a number of  innovative technology based educational products and programs directed to the pre-kindergarten through college educational market. Our PCS Academy of Engineering™, PCS Academy of Electronics, PCS Academy of Science™, PCS Academy of Robotics™, Digital Media Labs (Audio/Video/Photography), and Discover! Lab products are site-licensed installations for classrooms and learning programs. Our PCS BrickLab® and Little Edventures products are also for classrooms and learning programs, but are not licensed. Our Edventures! Online™ product is our comprehensive Internet delivered educational experience that supports our Discover! Lab site licenses and also serves as a stand-alone program for home use on a monthly subscription basis. Our Brain is a proprietary robotic microcontroller designed to facilitate educational robotic activities and the Cortex is a proprietary, progressive programming environment developed to manage the Brain and teach programming concepts. Our online Learning Management System (LMS) supports our licensed customers with online learning activities and support and provides assessment, file sharing, and social networking services for our customers.  Separately, and in combination, these products present a platform for delivering educational services and support to classrooms, learning centers, and home users, and create a virtual community of learners and parents on the web. It is our business strategy that as this online community grows, it will become an education portal through which additional PCS programs and services can be marketed and delivered.  PCS also partners with several companies to represent their product lines including Valiant Technologies and K’NEX Education.

The results of operations discussed herein are on a consolidated basis.

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Recent Developments.

The following are the business developments during fiscal 2009:

We continued to explore potential mergers, acquisitions, and partnerships during 2009, seeking opportunities and values that would strengthen PCS Edventures and advance shareholder value through improved sales and marketing, development, or operational efficiency.  

We continued our long term relationship with Edison schools in 2009, providing additional customized learning labs for their summer adventures programs as well as supplying them with materials authored and developed in previous years.  Edison programs developed by PCS range from primary stage camps in life science and biology to high school age activities in engineering, electronics, and robotics. Warehousing, packaging, fulfillment, and support were further streamlined this year to reduce costs, improve efficiency and add to the overall customer experience.

Our LabMentors division has cultivated a strong relationship with DeVry which continues to grow and we have developed infrastructure expansion plans to support continued growth.   In addition, four new products for Cengage were developed using a combination of internal and outsourced resources to maximize our development efficiencies.  Four more additional products are in the planning stages to facilitate additional growth with this partner.  Other customers include community colleges and technical schools. Outsourcing relationships were developed off-shore to support and expand development of our school administrative software suite.

We continued to expand our sales staff to drive stronger revenues into targeted market segments both domestic and international, and established new distribution partners in Singapore and Australia while strengthening existing relationships with our partners in the Middle East and Pakistan.  In addition, our domestic sales staff expanded our relationships and market presence in the California after-school market and the national magnet school market.

We continued to develop our core line of engineering, electronics, and robotics labs and completed additional curriculum in programming and robotics.  Our middle and high school fischertechnik curriculum was expanded to better meet the needs of professional technical educators at this level.  Our Digital Media Labs product line was expanded with dedicated development staff to produce and support new titles.  We completed our third generation of proprietary robotic micro-controllers and our own programming environment. We refined our partnership with an overseas manufacturer of components for our BrickLab products that strengthens our supply chain and provides a higher quality of manipulative at more competitive prices.  Our Young Learners curriculum was expanded and pilots for testing and refinement were deployed into key corporate partner sites.

We expanded our relationship with Boise State University in developing and testing curriculum, software, and hardware, and were successfully funded through Federal appropriations to deploy a systemic STEM solution into Idaho schools.  This partnership between the BSU College of Engineering, College of Education, Meridian School District, and our newest partner, The Idaho Engineering Laboratory, and PCS Edventures will provide teacher training and materials to the Meridian District and several other local School Districts  to develop and deploy a research study and document the academic impact of PCS Learning Labs in the classroom.

Strategy.

Our strategy is to provide a broad range of educational products tied to educational standards in the U.S. and international markets delivered via the Internet, after school programs, and in classrooms to address the various needs of pre-kindergarten through college age levels. Our strategy consists of the following key areas:

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working with various customers to customize educational products to meet their growing needs and adapt current curriculum to fit specific standards;

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continued training of our recently expanded sales force to increase market awareness and penetration at all targeted market levels;

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building the PCS brand to continue to increase market awareness;

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developing new and enhancing current curriculum to increase market appeal; and

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utilizing the Internet to bring our products to other areas, persons, and markets to increase market penetration.

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Foreign Currency Exchange Rate Risk.

The Company sells many products throughout the international market, as well as having operations in Canada as a result of the acquisition of LabMentors.  As a result, our statement of cash flows and operating results could be affected by changes in foreign currency exchange rates or weak economies of foreign countries. Working capital necessary to continue operating our foreign subsidiary are held in local, Canadian currency, with additional funds utilized through the parent company being held in U.S. dollars. In accordance with SFAS 52, “Foreign Currency Translation,” all assets and liabilities are translated at the exchange rate on the balance sheet date and all revenues and expenditures are translated at the average rate for the year. Translation adjustments are reflected as a separate component of stockholders' equity, accumulated other comprehensive income (loss) and the net change for the year reflected separately in the statements of operations and other comprehensive income (loss). Our subsidiary is not a significant component of our business and as such the risk associated therewith is minimal.

Backlog.

Our unearned revenue was $97,603 at the fiscal year ended March 31, 2009. The unearned revenue was $288,703 for the same period ending March 31, 2008. At the end of fiscal year 2009, the entire amount of unearned revenue is expected to be earned during fiscal years 2010 and 2011. All amounts listed in unearned revenue are for license fees paid but that have yet to be fully utilized by our customers. Each month, the license fees are amortized according to the length of the subscription/license.

Seasonality.

Our quarterly operating results fluctuate as a result of a number of factors, including, but not limited to, the funding of customers, timing of product development and release, availability and timeliness of items required for assembly of the products, budget cycles,  period ending dates, and the general health of the local and national economy.

Business of Smaller Reporting Company.

We are engaged in the business of developing and marketing educational learning labs, virtual labs, and related technologies and programs directed to the kindergarten through college levels, as well as the after-school market. Our products and technologies are targeted to the public and private schools classroom, after school market, and home school market. Our products and technologies are delivered to the classroom through an inventory of hardware, software, books, and Internet access. Our technologies and products are delivered to the home user through Internet access to our subscription based website. Our products and technologies allow students of all ages to explore the basic foundations of mechanical engineering, structures in architecture, art, electrical engineering, mathematics, science, and computer programming.

We have only commenced marketing efforts for our current products and technologies during the last four years, and more recently the PCS LabMentors' products in 2006. We continue to expand distribution and marketing channels. To date, we have sold over 5,000 Labs to the US and international markets. In addition, the LabMentors subsidiary has two major customers in the US that it continues to service with its multi-platform virtual labs.

Principal Products or Services and Their Markets.

 We have now developed and are currently marketing a number of innovative technology based educational programs for the kindergarten through university (“K-16”) classroom market, the K-12 after-school market, the private learning center market, and the home school market.  In addition, the virtual lab programs from our LabMentors division are currently marketed to the collegiate level. Separately, and in combination, these lab products present a platform for delivering educational services and support, and create a virtual community of learners and parents on the web. It is our intent that as this community grows, it becomes an education portal through which additional PCS programs and services can be deployed.

Customers currently use our products to:

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uniquely motivate students by engaging them in their own learning;

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provide opportunities for students to pursue their own interests and questions and make decisions about how they will find answers and solve problems;

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·

make learning relevant and useful to students by establishing connections to life outside the classroom, addressing real world concerns, and developing real world skills which are desired by today’s employers, including the ability to work well with others, make thoughtful decisions, take initiative, and solve complex problems;

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provide opportunities for teachers to build relationships with each other and with those in the larger community through sharing with other teachers, parents, mentors, and the business community who all have a stake in the student's education;

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provide exciting, hands-on, inquiry based instruction, which is aligned by standards produced by The National Science Teachers Association,  the American Association for the Advancement of Science, Project 2061, the National Curriculum of the UK, the Core, Knowledge, Sequence, the National Association for the Education of Young Children (NAEYC), and many more;

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help increase test scores and understanding in Science, Technology, Engineering and Math (STEM) standards;

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infuse engaging, technology-based methods and practices into the traditional classroom;

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teach concepts from mechanical, electrical, structural, and software engineering as well as mechatronics and robotics.

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challenge students through promoting critical thinking, creativity, and problem solving techniques;

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enable teachers to teach science lab activities without a science lab;

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enable IT training professionals at the high school and college level to offer sophisticated hands-on training labs through virtualization, effectively eliminating their need to own and manage expensive server networks.

The products that we are currently marketing are applicable and useful to a variety of education market segments.  These product lines have been designed to stand alone as well as integrate with one another to create contiguous, systemic solutions:

Little Edventures/Little Ed

These NAEYC aligned packages deliver a complete solution for implementing fun and engaging math and literacy themed activities for preschool and kindergarten classrooms. Each lab comes filled with everything needed to provide the best early childhood education for young students.

BrickLab

BrickLab is a remarkably effective system of plastic building blocks combined with PCS curriculum resources that address technology, math, and science principles at the early primary grade stages.  Simple to use, manage, and teach, it is an engaging and effective tool for hands-on STEM education.  PCS currently has six volumes of curriculum that support the BrickLab manipulative package addressing needs for students in grades K, 1, 2, 3, 4, and 5.  The BrickLab Survey curriculum provides a variety of activities that are ideal for afterschool and unstructured learning environments.  A special homeschool compilation of activities is packaged with a smaller lab pack for families and small groups.  The price for the BrickLab modules is $99.95 for a three-student package and $595 for a 30-student classroom pack.

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Edventures Enrichment

The Edventures curriculum strand was the original PCS afterschool program designed for students ages 7-13, that provides a broad set of subject areas including art, programming, web page design, mechanical engineering, CAD, chess, physics, electricity, and others.  The wide variety of topics was designed to engage a variety of types of students in hands-on learning within a dynamic, open ended learning environment.  The Edventures curriculum is sold through an online license for homes and classrooms, or bundled within a lab package, the Discover Lab, that includes a storage cabinet, LEGO® manipulatives, and other supporting items.  Edventures program licenses include online assessment and support tools as well as access to the Academy of Robotics Challenge (AORC), an online competition framework that allows all Edventures lab students to share information and compete. The price for Edventures products ranges from $69.95 for a home access account to $3,495 for a 10-student Discover Lab module.

Academy of Engineering

Our Academy of Engineering™ Lab is a site license program designed for use within various K-12 programs and is scalable for various environments using 10 student modules that include hardware, software, lab furniture, and curriculum. Using the Academy of Engineering™, students develop, design, and produce exciting hands-on projects ranging from catapults to robots in response to engaging challenges in a variety of topics. The current Academy of Engineering™ product includes three primary volumes of mechanical engineering activities and seven extension books addressing applied mathematics, science, structural engineering, and historical engineering activities.  There are several configurations of the Academy of Engineering that utilize LEGO or fischertechnik constructs for hands-on activities.  Fischertechnik solutions are typically used in more rigorous applications at the high school or university level while the LEGO solution is more often used in afterschool or primary solutions.  The Academy of Engineering license includes online assessment and support tools as well as access to the Academy of Robotics Challenge (AORC), an online competition framework that allows all Edventures lab students to share information and compete.  The price for Academy of Engineering implementations begins at $10,995.

Academy of Robotics

Our Academy of Robotics™ Lab is a site license program designed for use within various K-12 programs and is scalable for various environments using 10 student modules that include hardware, software, lab furniture, and curriculum. Using the Academy of Robotics™, students develop, design, and produce exciting hands-on projects ranging from simple robotic automatons to advanced manufacturing simulations. The current Academy of Robotics™ product includes three primary volumes of robotics curriculum covering the basics of mobility, structural integrity, motorization, end effectors, working envelopes, programming, sensor integration, and more.  There are several configurations of the Academy of Robotics that utilize LEGO or fischertechnik constructs for hands-on activities.  Fischertechnik solutions are typically used in more rigorous applications at the high school or university level while the LEGO solution is more often used in afterschool or primary solutions.  The Academy of Robotics license includes online assessment and support tools as well as access to the Academy of  Robotics Challenge (AORC), an online competition framework that allows all Edventures lab students to share information and compete.  A robotics starter package bundles the Academy of Robotics Challenge with a starter inventory of manipulatives from fischertechnik, LEGO, or KNEX for $495; the price for Academy of Robotics implementations begins at $6,995.

Academy of Electronics

Our Academy of Electronics™ Lab is designed for use within various K-12 programs and is scalable using 10 student modules that include hardware, software, lab furniture, and curriculum. Using the Academy of Electronics™, students develop, design, and produce exciting hands-on projects ranging from simple analog circuits demonstrating resistance to advanced digital logic projects using a variety of industry standard integrated circuits. The current Academy of Electronics™ product includes two primary volumes of electronics curriculum covering the basics of analog and digital electronics.  Academy of Electronics modules utilize standard electronic components and breadboards as constructs for hands-on activities.  The price for Academy of Electronics implementations begins at $1,995.

Academy of Science

The PCS Academy of Science™ is a physical science solution designed for use within various K-12 programs and is scalable using 10 student modules that include hardware, software, and curriculum. The unique, hands-on science packages within the Academy of Science combine curriculum and simple, effective apparatus that enable teachers to quickly and easily demonstrate complex science concepts.  Various configurations of the products enable it to be effective as an afterschool or classroom solution and the curriculum is aligned with National and State science standards. The products can be purchased in a lab format or individually based on the specific needs of the customer. The labs currently sell for between $2,395 and $47,995, while individual products vary in price.

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Digital Media Labs

Our Digital Media Labs are designed for use within various K-12 programs and are scalable using 10 student modules that include hardware, software, storage solution, and curriculum. The PCS Digital Media Labs combine digital photography, video, and audio equipment with a comprehensive curriculum that helps teachers apply engaging, exciting tools to core curriculum areas such as history, science, language arts, and mathematics.  The curriculum is aligned with technology standards from the International Society for Technology Education (ISTE) and the International Technology Education Association (ITEA). 10 student lab packs for photography, video, or audio start at $6,495.

LabMentors

The technologies and products for PCS LabMentors, LTD. that we are currently marketing are as follows:

On-call mentoring. This is a 24 hour 7 days per week call in and/or email service for students to contact the company for technical assistance. The current price is $25 per student per month for unlimited assistance.

Windows® Based Applications. Currently LabMentors has virtual labs on its proprietary platform for Windows XP® and Windows Server 2003®. These labs currently sell for between $60 and $75 per student. The pricing is for individual students, while large clients are billed based on virtual machine lab hours at a negotiated rate.

Linux® Based Applications. Currently LabMentors has virtual labs on its proprietary platform for Linux+®. These labs currently sell for $75 per student. The pricing is for individual students, while large clients are billed based on virtual machine lab hours at a negotiated rate.

Custom Labs. In addition, LabMentors also provides custom lab development. This pricing is based on the complexity and resources involved in developing such curriculum/virtual labs.

We believe that education programs of our type are not currently available from any other source and present a unique opportunity for sales and marketing to specific segments of the education industry. We believe that PCS' education programs deliver a unique, proven learning experience that:

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provides students with exciting and relevant activities that brings curriculum to life;

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develops essential critical thinking and problem-solving skills;

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prepares students for real-world career demands; and

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builds a strong foundation in technical literacy.

Markets.

The educational market represents significant business opportunities in the US.  There are several segments within the educational market that can benefit from the products and services that PCS provides.  PCS has developed sales and marketing strategies to position the Company and its products to meet the needs of specific segments in the education market.

There is increasing focus and importance being placed on the role of technology in both public and private education.   Educators and parents are not only striving to integrate technology into the educational experiences of students, but also needing to increase student’s performance in technology based subjects such as Engineering, Mathematics and Science.  Public schools are trying to increase their ability to deliver technology education effectively to students.  The increased value being placed on technology in the classroom has also led to an increase in growth for private and charter school alternatives that can offer better programs for Science, Technology, Engineering and Math (STEM) education.  Growth of extended learning programs continues as well.  Federally funded programs that include before, after and summer school programs have also remained an important educational focus and are also expected to meet demands for technology.

PCS’ understanding of the complexities of STEM subjects and our progressive methodologies give us a unique ability to deliver solutions for educators to meet the growing demands of teaching STEM and integrating technology into classrooms.

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PCS Designated Markets.

We have identified public and private schools and the after-school programs, which are growing quickly across the United States, as our primary market for our labs. Widespread financial support for implementing school-based after-school programs is driving the growth of public school programs in this segment. The growth of programs such as those offered by the Boys & Girls Clubs of America are further proof of the market need for this product. As a niche market, after school programs, on and off the campus of public schools (the Extended Learning Market), represent a potential market for PCS products.

Boys & Girls Clubs. We are currently continuing our efforts to distribute our labs into the Boys & Girls Clubs. To date, clubs have evidenced a strong interest in our program due to an organization-wide mandate to implement educational programs like the Academy of Engineering™.  PCS has assisted multiple Boys & Girls Clubs in grant writing to obtain the available funds to purchase our products.  We currently have labs in over 100 of the 4,000 Boys & Girls Clubs nationwide.

YMCA. We are currently continuing our efforts to distribute our labs into the YMCA. To date, clubs have evidenced a strong interest in our program due to an organization-wide mandate to implement educational programs like the Academy of Engineering™. The funding cycle access to funds for these programs is a significant factor in our ability to market the Academy of Engineering™ to YMCAs. We currently have labs in several YMCAs nationwide.

Extended Learning Market. In addition to the Boys & Girls Clubs of America and YMCA, additional non-school-based programs are increasing through such institutions as Community Learning Centers and other sites such as Science Museums. PCS is currently working to establish reference sites in each of these markets and will follow a strategy similar to the one it is pursuing with the Boys & Girls Clubs of America. Progress to date in these market segments includes implementation of labs within over 10 science museums nationwide.

Public Schools. The Company is currently targeting the school day market with an extensive marketing campaign focused on conferences, publication adverts, email, and telemarketing efforts focused on our new Science, Technology, Engineering, and Math (STEM) lab approach. Our STEM approach combines all of our unique PBL disciplines into one unique program that focuses student efforts on STEM.

International Market.  Efforts in the international market are focused on the Ministries of Education and Private Schools to obtain the largest implementation footprint  possible.  We are actively grooming sales representatives in Australia, Singapore, India, the Middle East, and the United Kingdom.  We are closely evaluating several potential sales reps for the various countries within the E.U.

Higher Education Markets. Through the parent company, various universities, colleges, and other private institutions utilize a variety of federal grants (GEAR UP, UPWARD BOUND, and TRIO) to purchase the various learning labs available to best fit their teaching needs.  Students utilize these products to obtain scholarships in the engineering and technology fields for entrance into post-secondary education.  PCS currently has installations in over 50 colleges within the United States.

Through the LabMentors subsidiary, we currently have installations of the virtual labs utilizing our proprietary software in several outlets serviced by DeVry University and Thompson Learning/Course Technologies. We are continuing to expand the agreements with each of these customers to expand market presence and gain brand recognition.

Marketing and Other Agreements.

Our sales and marketing efforts are designed to expand market share in the markets discussed above. We currently utilize a direct sales force and are creating a catalog for distribution to increase our market coverage.

Direct Sales Force. Currently, we have a direct sales force consisting of six employees (in-house) and several independent agency groups (Representatives). This in-house direct sales force markets our products and programs in a variety of methods to various users, providers, and others. The Representatives use their own networks to drive increased sales in various states and countries to increase market awareness for PCS products and services. The in-house salespeople utilize trade show conferences, referrals, and telephone communications to sell and market the PCS products.

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Distribution Methods of the Products or Services.

All products except the virtual labs produced by LabMentors and our Edventures! Online subscriptions are drop shipped from the manufacturer or shipped through a preferred provider from our warehouse to the specified customer. The virtual labs produced by LabMentors and our Edventures! Online are delivered through the Internet through server farms located off-site.

Status of any Publicly Announced New Product or Service.

PCS announced on September 12, 2006 the acquisition of technological assets known as PCS STEPS® during fiscal year 2007.  This software is for implementation into schools to keep students, teachers, and parents connected and informed regarding grades, attendance, homework, etc.  The anticipated release date was summer 2007.  However, after complete review of the technology, and current competitive products, our development team has asked for and been granted additional time and resources to complete the program to best fit the market needs.  The PCS STEPS® product has been transferred to our subsidiary, PCS LabMentors, for development.  It is anticipated that the software will be sold to the public during fiscal year 2009.

PCS announced in January 2007 the launch of a new Edventures Robotic Challenge (ERC) product utilizing fischertechnik® manipulatives.  This new version of our ERC utilizes fischertechnik® manipulatives that provide for various hands-on activities to teach students robotics, engineering, technology, and more.  In addition, students have the ability to compete with students all over of the world by entering our quarterly online Robotics Challenge.  During initial launch of this product, we sold over seventy packages.  The promotional launch included referral prizes, product giveaways, shipping discounts, and product discounts.

PCS announced on March 28, 2007 that it had obtained a contract with Global Techniques, a Licensee dba PCS Middle East.  The contract information was listed in a press release as well as in Form 8-K on file with the SEC.  Amendment One to the 8-K was filed on May 17, 2007 wherein the Company stated that the funds had yet to be received from PCS Middle East due to delays.  As of the date of this 10-K, the funds have yet to be received by the Company.  Additional inquiries have been placed with PCS Middle East regarding the delays that have been experienced.  Additional amendments to the 8-K will be filed as needed.

PCS announced in February 2009 that it had entered into a Letter of Intent to purchase substantially all of the assets and assume certain liabilities of Trudy Corporation. The Letter of Intent was listed in a press release as well as in Form 8K on file with the SEC. In June 2009 PCS and Trudy Corporation announced the termination of the acquisition negotiations. The Termination was listed in a press release as well as in Form 8-K on file with the SEC.

Competitive Business Conditions and the Small Business Issuer's Competitive Position in the Industry and Methods of Competition.

Both the education marketplace and the Internet are highly competitive and rapidly evolving fields and are expected to continue to undergo significant and rapid technological change. Other companies may develop products and services and technologies superior to our products that may result in our products and services becoming less competitive. Many of the companies that are established or are entering the market have substantially greater financial, manufacturing, marketing, and technical resources than we have and represent significant long-term competition. To the extent that these companies offer comparable products and services at lower prices or higher quality and more cost effective, our business could be adversely affected.

Potential Competitive Advantages.

We believe that we have certain competitive advantages which we will attempt to maximize in developing and effecting our business strategy.

High barriers exist to entry. PCS' educational programs are innovative, unique and based on over 20 years of experience and product development. Barriers to entry for competitive products that are time tested are extremely high. Early and significant market penetration will guarantee “first and best” name recognition for the types of educational services that PCS will deliver.

Flexibility and customization. Although competitors may have more resources than PCS, larger organizations tend to be more rigid and limited in product offerings and pricing.  Our ability to customize solutions to meet institutional needs on a case by case basis gives PCS an advantage in providing a product that meets directly the needs of the customer in opposition of a one size fits all approach to the market.

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Complete solutions. PCS is able to provide complete solutions for educators who want to introduce technology into the classroom.   Our solutions include training, on line content, classroom management, curriculum and building elements.   We believe this approach and our ability to provide a complete, customizable product, gives us a distinct advantage.

Utilize the Internet as a delivery and support mechanism for the programs. By leveraging our extensive expertise in Internet technology, PCS achieves the following significant advantages: (1) a high level of program control; (2) the building of a significant data model regarding program usage; and (3) a direct channel to enrolled students who access the program at home. Each of these advantages provides tangible long-term benefits to the Company.

Expand program offerings and distribute them via established program licensees. After implementing and proving a successful program model, PCS will utilize its established network of licensees to distribute additional programs designed to integrate seamlessly into the already deployed sites. This creates a long-term growth strategy that includes new and residual sales to an ever-growing list of existing licensees on an annual basis.

Proliferate licensing of PCS programs by continuing to expand other educational market segments. PCS recognizes that the public schools and community organizations offering educational programs are the best choice for rapid expansion and capturing market share and visibility. Additional market segments will be attacked individually as PCS demonstrates program viability, market by market. By taking a long term strategic approach to market penetration and maintaining a policy of solid strategic alliances for distribution, each PCS educational program will be an asset that will continue to generate growth and sales.

Sources and Availability of Raw Materials and the Names of Principal Suppliers.

None, not applicable.

Dependence on One or a Few Major Customers.

In general, PCS does not rely on one or a few major customers. However, PCS LabMentors has two major customers that make up the majority of its revenue stream, namely Cengage Learning, previously known as Thomson Course Technology, and DeVry University.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration.

We seek to protect our technology, documentation, and other written materials under trade secret and copyright laws, which afford only limited protection. Generally, we enter into confidentiality and non-disclosure agreements with our employees, key vendors, and suppliers. Currently we use the following trade names: PCS & Design®, Academy of Learning™, Edventures!™,  PCS BrickLab®, PCS Academy of Science™, PCS Edventures!.com, Inc.®, Web Lab™, PCS STEPS & Design®, Young Learning™, PCS STEPS®, New Learning for a New World™, Imagination in Education™, and PCS Academy of Engineering™. We intend to evaluate continually the appropriateness of seeking registration of additional product names and trademarks as they evolve.

At the present time, we have not applied for any patents, nor do we have any patents pending. We anticipate that our products will not be the type for which patent protection will be sought. However, we may file for patent protection on certain aspects of our proprietary technology in the future.

Our PCS & Design® mark (Registration No. 2,213,678) has been in service since at least as early as 1992 and trademarked since December 29,1998. PCS Edventures!.COM® has been in service since at least as early as 1999 and trademarked since November 27, 2001.

We applied for a trademark (application #78/329127) for PCS BrickLab® on November 13, 2003.  PCS BrickLab® was registered on January 16, 2007 with Registration Number 3,198,009.  PCS BrickLab® has been in service since at least as early as 2002.

We applied for a trademark (application #78/841,293) for PCS STEPS® on March 20, 2006.  PCS STEPS® was registered on May 22, 2007 with Registration Number 3,244,304.  PCS STEPS® has been in service since at least as early as 2006.

We applied for a trademark (application #78/472600) for PCS ACADEMY OF SCIENCE™ on August 24, 2004.  We applied for a trademark (application #77/184,052) for Imagination in Education™ on May 17, 2007.  We applied for a trademark (application #77/184,043) for New Learning for a New World on May 17, 2007.

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We anticipate that the pending trademark applications will be granted in the near future. Protection for all trademarks is for a 10-year period, with renewals available indefinitely so long as we continue to show proof of use of the mark in commerce.

Although we believe that our products have been independently developed and that we do not infringe on any third party rights, third parties may, in the future, assert infringement claims against us. We may be required to modify our products, trademarks, and/or technology or to obtain licenses to permit our continued use of those rights. We may not be able to do so in a timely manner or upon reasonable terms and conditions and as such failure to do so could irreparably harm the Company and/or our operating results.

We currently have curriculum royalty agreements with GibsonTech and Jackie DeLuna aka Infusing Technology.  The agreement with Gibson Tech which was renewed this past year, is for cash royalty payments based on sales of our PCS Academy of Engineering™ product.  The agreement with Jackie DeLuna is for cash royalty payments based on sales of our Digital Photography lab product.

Need for any Government Approval of Principal Products or Services.

None, not applicable.

Effect of Existing or Probable Governmental Regulations on the Business.

Smaller Reporting Company.

The integrated disclosure system for small business issuers adopted by the Securities and Exchange Commission in Release No. 34-30968 and effective as of August 13, 1992, substantially modified the information and financial requirements of a “Small Business Issuer,” defined to be an issuer that has revenues of less than $25 million; is a U.S. or Canadian issuer; is not an investment company; and if a majority owned subsidiary, the parent is also a small business issuer. Provided however, an entity is not a small business issuer if it has a public float (the aggregate market value of the issuer’s outstanding voting and non-voting common equity held by non-affiliates) of $25 million or more.

The Securities and Exchange Commission, state securities commissions and the North American Securities Administrators Association, Inc. (“NASAA”) have expressed an interest in adopting policies that will streamline the registration process and make it easier for a small business issuer to have access to the public capital markets. We are deemed to be a “small business issuer,” and we have selected to comply with the “small business issuer” disclosure requirements of Regulation S-B of the Securities and Exchange Commission.

The Securities and Exchange Commission has adopted a new system for disclosure rules for smaller companies that file with the SEC. The new rules take effect February 4, 2008. They replace the disclosure requirements formerly in the SEC’s Regulation S-B. The new rules expand the “smaller reporting company” category, and require the use of forms 10-K and SB-1 to replace the use of forms 10-KSB and SB-2. Small business issuers have the option to continue filing on form 10-KSB through their annual report for fiscal years ending after December 15, 2007. Effective with the fiscal year ending March 31, 2009, periodic and annual reports will be under Regulation S-K and filed on forms 10-Q and 10-K.

Sarbanes-Oxley Act.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 10-K for the fiscal year ending March 31, 2009, we are required to furnish a report by our management on our internal control over financial reporting. Despite the delay in implementation by the SEC for smaller reporting companies, the Chief Compliance Officer undertook a review of the Company’s internal controls during the fiscal year 2007 and furnished a copy for review by all directors and management.  This action will allow us to obtain feedback from the auditors, board of directors, and other management to assist in the implementation of additional controls, where needed.

Management acknowledges its responsibility for internal controls over financial reporting and seeks to continually improve those controls, in order to achieve compliance with Section 404. Beginning on our next fiscal year, our controller along with management is engaged in the process of documenting and evaluating our internal control over financial reporting. In this regard, management will need to adopt a detailed work plan to (i) assess and document the adequacy of internal control over financial reporting, (ii) take steps to improve control processes where appropriate, (iii) validate through testing that controls are functioning as documented, and (iv) implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, we can provide no assurance as to our conclusions as of March 31, 2009 with respect to the effectiveness of our internal control over financial reporting under Section 404. There is a risk that neither our independent auditors nor we will be able to conclude at or around March 31, 2009 that our internal controls over financial reporting are effective as required by Section 404. This

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could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. The Controller and management intend to take every step necessary to ensure compliance with Section 404.

“Penny Stock” Designation.

Our common stock is “penny stock” as defined in Rule 3a51-1 of the Securities and Exchange Commission. Penny stocks are stocks:

·

with a price of less than five dollars per share;

·

that are not traded on a “recognized” national exchange;

·

whose prices are not quoted on the NASDAQ automated quotation system; or

·

within issuers with net tangible assets less than $2,000,000, if the issuer has been in continuous operation for at least three years, or $5,000,000, if in continuous operation for less than three years, or with average revenues of less than $6,000,000 for the last three years.

Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities and Exchange Commission require broker/dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before making any transaction in a penny stock for the investor's account. You are urged to obtain and read this disclosure carefully before purchasing any of our shares. Rule 15g-9 of the Securities and Exchange Commission requires broker/dealers in penny stocks to approve the account of any investor for transactions in these stocks before selling any penny stock to that investor. This procedure requires the broker/dealer to:

·

get information about the investor's financial situation, investment experience, and investment goals;

·

reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor can evaluate the risks of penny stock transactions;

·

provide the investor with a written statement setting forth the basis on which the broker/dealer made his or her determination; and

·

receive a signed and dated copy of the statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience, and investment goals.

Compliance with these requirements may make it harder for our stockholders to resell their shares.

Reporting Obligations.

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the Securities and Exchange Commission regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders of our Company at a special or annual meeting thereof or pursuant to a written consent will require our Company to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the Securities and Exchange Commission at least 10 days prior to the date that definitive copies of this information are forwarded to our stockholders.

Prior to 2008 we were required to file annual reports on Form 10-KSB and quarterly reports on Form 10-QSB. Effective with our 2009 annual report we will report on Form 10-K and quarterly reports on Form 10-Q, with the Securities and Exchange Commission on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a current report on Form 8-K.

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Research and Development Expenses.

PCS LabMentors, Ltd. utilizes the Scientific Research & Experimental Development (“SR&ED”) credits, which can allow for tax credits to Canadian companies. SR&ED is a refundable tax credit program offered by the Canada Revenue Agency (“CRA”) to provide incentive for companies to undertake development activities in Canada. There are stringent reporting criteria to complete the filings to be reimbursed and to apply for these credits.  The Company receives a percentage of the total approved qualifying expenses submitted to Revenue Canada.  The percentage for the period ending March 31 2009 was approximately 18%.  The Company  recognized $17,327 as Other Income for the SR&ED payment received.

Cost and Effects of Compliance with Environmental Laws.

None, not applicable.

Number of Total Employees and Number of Full Time Employees.

We employ approximately twenty-five full-time employees, while our LabMentors subsidiary has four full-time employees. We will hire part-time and additional full-time employees on an “as-needed” basis. None of our employees are represented by a labor union. We believe that our relationship with our employees is good.

Item 1A-Risk Factors.

None, not applicable.

Item 1B-Unresolved Staff Comments.

None, not applicable.

Item 2. Property.

Location.

The Company leases its Principal executive offices in Boise, Idaho. These offices consist of approximately 7,300 square feet of office space. Rent obligations are currently $9,619/month under a non-cancelable operating lease that expires May 31, 2012. The lease obligations for the remainder of the lease are as follows:

The Company leases additional warehouse space in Boise, Idaho. This warehouse space consists of approximately 2,880 square feet. Rent obligations are approximately $1,510/month through  February 28, 2010.

The Company leases space for the LabMentors subsidiary located in Fredericton, New Brunswick, Canada. This space consists of approximately 1,200 square feet.  Rent obligations are $932/month through July 31, 2009. There is a one year renewal option effective August 1, 2009, at $565/month plus utilities.

Investment Policies.

None, not applicable.

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Description of Real Estate and Operating Data.

None, not applicable.

Item 3. Legal Proceedings.

(i). PCS Edventures!.com Inc., v. Jackie DeLuna and Infusing Technology K12, LLC (United States District Court for the district of Idaho, Case NO. CV-08-00379-BLW).  The Company initiated this trademark infringement suit against defendants. Defendants have asserted counterclaims for trademark and copyright infringement, misappropriation of trade secrets, and breach of contract claims based on alleged underpayment of royalties under two license agreements with the Company. Defendants seek an accounting, but have not stated the amount of alleged underpayment of royalties.  The Company believes that it has fully paid all royalties owed to defendants and that it has meritorious defenses to defendants’ intellectual property counterclaims. The Company intends to file a motion to dismiss the counterclaims.

(ii). Solly Tamari v. PCS Edventures!.com, Inc.(United States District court for the District of Idaho, Case NO. CV 08-00089). Solly Tamari filed a lawsuit against the Company asserting a breach of contract and breach of implied covenant of good faith and fair dealing with respect to an agreement entered into by the parties on or about April 1, 2004. Tamari asserted entitlement to a stock bonus according to a formula set forth in that agreement.  The lawsuit was recently settled and dismissed with prejudice, after the Company’s fiscal year end, by issuance of 75,000 shares of the Company’s unrestricted common stock issued pursuant to its Form S-8 registration statement. The liability is accrued as a stock payable in the amount of $63,750 as of March 31, 2009.

(iii)   Pending non-public SEC investigation: There is a pending non-public investigation by the SEC under an order dated July 24, 2008, to determine whether there have been any violations by the Company or members of its management or staff of certain provisions of the Securities Act and the Exchange Act, respecting disclosures made by the Company in its 8-K Current Report dated March 27, 2007, of material facts related to its March 28, 2007, Press Release that announced a License Agreement with Global Techniques dba PCS Middle East (“PCS ME”), including a number of rules of the SEC promulgated under the Exchange Act respecting book and record keeping procedures, transactions, internal controls and certain matters related to its relationships with its prior auditors, all apparently related to the PCS ME disclosures and agreements and the accounting treatment of these matters and sales of shares of common stock by members of management during this period of time.  The amount due under the License Agreement was not paid when due as disclosed in the Company’s 8-K/A Current Report dated March 27, 2007, and filed with the SEC on May 17, 2007.  The Company had a prior five year relationship with PCS ME at the time of the announcement of the License Agreement. Except for a loan made by the Company of $250,000 to PCS ME and Mohamed Yasser Refai, its principal and principal owner, jointly, on or about October 1, 2007, and disclosed in the Company’s 8-K Current Report of that date, the Company had and currently has no interest in PCS ME.  The loan was due on the earlier of the payment of the License Agreement or January 31, 2008, and secured by an Assignment of Equity amounting to a 25% interest in PCS ME; the loan was written off on December 31, 2007, when not paid.  However, the Company has continued the licensing of its educational products in the Middle East with PCS ME, having sold additional PCS products for approximately $160,000 since 2007.  The Company and PCS ME also continue to work on completing the entire License Agreement disclosed on March 27, 2007, and the over-all project that is tied to that agreement.  The disclosed License Agreement was never booked in the Company’s “public” financial statements as it was not paid by the time its audit at March 31, 2007, was completed; nor was the Press Release approved by the Company’s auditors prior to its dissemination on March 28, 2007; and because the $250,000 loan to PCS ME was not paid when due, it was written off.  Management believes that it acted reasonably in making the disclosures relative to these matters; however, no assurance can be given that the SEC will not determine that the Company and members of management have violated applicable securities laws, rules and regulations in connection with the foregoing, and that an enforcement proceeding will not be instituted against the Company or members of its management in the future that could have an adverse effect on its business and financial condition or otherwise.  Depositions of certain directors and executive officers were taken by the SEC in late June, 2009, and focused on what the SEC believes to be apparent discrepancies in the factors upon which the Company relied upon in forming its reasonable basis for announcing the License Agreement, including that payment under the License Agreement was contingent upon PCS ME obtaining payment from the subject Middle Eastern country that would become the ultimate licensee of the product, which the Company believed was imminent, along with auditor and internal control concerns about whether the License Agreement was collectible or bookable and the sales of certain shares of  the Company’s common stock by three members of management during this period as outlined below. Based upon this line of examination, there is a reasonable likelihood that the SEC may recommend some form of legal action against the Company and/or certain members of its management.

Members of management sold an aggregate of 161,500 shares of the Company’s common stock between April 2, 2007, and May 9, 2007, for total proceeds of $330,460.  May 15, 2007, was the date of the filing of the 8-K/A that indicated that payment under the License Agreement had been delayed.

To date, the Company continues to attempt to complete the License Agreement and believes the project surrounding this license issue remains viable and will commence at some point.  There have been many delays, and each one has been determined to be reasonable such as the replacement of various personnel within the Ministry of Education of the subject Middle Eastern governmental

PAGE 15

agency, the creation of a separate holding company by the eventual licensee to manage the project in a more efficient manner and the introduction of small scale pilot programs in which PCS has participated.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted to the shareholders during the fourth quarter of the fiscal year covered by this report through the solicitation of proxies or otherwise.

PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.

Market Information.

 Our common stock is presently quoted on the OTC Bulletin Board of the NASD under the symbol “PCSV” as discussed below. No assurance can be given that the market for our common stock will continue in the future or will be maintained. The possible sale of “restricted securities” (common stock) pursuant to Rule 144 of the Securities and Exchange Commission held by members of management or others could have a substantial adverse impact on this market. The range of high and low bid quotations for our common stock during each quarter of our past two fiscal years are shown below. Prices are inter-dealer quotations as reported by the NQB, LLC, and do not necessarily reflect transactions, retail markups, markdowns or commissions.

Stock Quotations.

Holders.

As of March 31, 2009, we had approximately 2,000 stockholders of record. This figure does not include an indeterminate number of stockholders who may hold their shares in a street name.

Dividends.

We have not paid any cash dividends since our inception and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intent of management to utilize all available funds for the development of our business.

Securities Authorized for Issuance Under Equity Compensation Plans.

None, not applicable.

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Recent Sales of Unregistered Securities.

During the last two years, we sold the securities listed below in unregistered transactions. Each of the sales was sold in reliance on the exemption provided for in Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). No underwriting fee or other compensation was paid in connection with the issuance of shares.

PAGE 17

(1) These shares were issued for the conversion of Warrant A at $1.20 per share.

(2) These shares were issued to employees for accounts payable payments.  These shares were issued at $1.28 and $0.54 per share respectively.

(3) These shares were issued for the conversion of Warrant B at $1.80 per share.

(4) These shares were issued to a Board Member who exercised various options at a price per share of $0.09, $0.10, $0.12, $0.14, $0.23, and $0.26, respectively.

(5) These shares were issued to a Board Member who exercised various options at a price per share of $0.10 $0.15, and  $0.185, respectively.

(6) These shares were issued to an employee who exercised options.  These options were exercisable at $0.10 per share.

(7) These shares were issued to a Officer/Board Member who exercised various options at a price per share of $0.16 $0.185, $0.30, and $0.65, respectively.

(8) These shares were issued for the conversion of Warrant C on a cashless option.

(9) These shares were issued for the conversion of Warrant A at $0.68 per share.

(10) These shares were issued to employees for a bonus at $1.32 per share.

(11) These shares were issued to an employee who exercised options. These options were exercisable at $0.31 per share.

(12) These shares were issued to an employee who exercised  options. These options were exercisable at $0.13 per share.

(13) These shares were issued for bonus payment to an Officer at $0.83 per share.

 (14) These shares were issued to an employee as compensation. These options were exercisable at $0.82 per share.

 (15) These shares were issued for the conversion of accounts payable at $1.21 per share.

(16) These shares were issued to an employee who exercised some options. These options were exercisable at $0.71 per share.

(17) These shares were issued to an employee who exercised options. These options were exercisable at $0.525 per share.

 (18) These shares were issued to an employee who exercised cashless options. These options were exercisable at $0.54 and $0.61 per share, respectively.

(19) These shares were issued for the conversion of Warrant C at $0.60 per share.

(20) These shares were issued for consulting services at $1.17 per share.

(21) These shares were issued to an employee who exercised some options. These options were exercisable at $0.54 and $0.50 per share respectively.

(22) These shares were issued for the conversion of Warrant at $0.60 per share.

(23) These shares were issued for consulting services at $1.20 per share.

(24) These shares were issued for an employee compensation payment at $0.95 per share.

(25) These shares were issued for consulting services at $0.95, $0.70 and $0.45 per share, respectively.

(26) These shares were issued for bonus payment to an Officer at $0.75 per share.

(27) These shares were issued for consulting services at $0.97,and $1.01 per share, respectively.

(28) These shares were issued for consulting services at $2.00, $1.55, $0.94, and $0.90 per shares, respectively.

(29) These shares were issued to an employee who exercised cashless options. These options were exercisable at $0.48 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.

Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers.

None, not applicable.

Item 6. Selected Financial Data.

None, not applicable.

Item 7. Management's Discussion and Analysis or Plan of Operation.

PAGE 18

Plan of Operation.

PCS intends to continue to operate in the same manner as prior years, including continuing to look for viable acquisition candidates to further enhance the product lines and enhance marketing efforts to more effectively penetrate the world market. At the same time, we are experiencing a drop in revenues from the over-all general economy, along with other companies in the education space and are instituting essential cost saving programs, which will stay in place until revenues return to pre-recession levels.  PCS LabMentors will continue to expand into the collegiate market, as well as undertake new projects with existing customers for an increased revenue base. There are not expected to be any significant changes in the number of employees.

Management's Discussion and Analysis of Financial Condition and Results of Operation.

Operating Results - Overview.

Fiscal year ended March 31, 2009 resulted in a net loss of ($1,957,753) as compared to the net loss during the fiscal year ended March 31, 2008 of ($723,224). This net loss is an increased loss of ($1,234,529) or approximately one hundred seventy percent (170%) from the net loss for fiscal year ended March 31, 2008. The Basic Loss per Share for fiscal year 2009 is ($0.05), as compared to a loss per share of ($0.02) for fiscal year 2008.  Details of changes in revenues and expenses can be found below.

During fiscal year ended March 31, 2009, the Company experienced depreciation of ($127,508) and interest income (net) of $23,701 which resulted in the non-GAAP financial measure of Earnings Before Interest Depreciation and Amortization (EBITDA) of ($1,853,946), as compared to the EBITDA of ($569,641) for the fiscal year ended March 31, 2008.  

During the fiscal year ended March 31, 2009, the Company had a warrant/option expense related to FAS 123R of $509,686 employee stock compensation of $33,700, and an impairment on goodwill of $282,550. These items combined with the non-GAAP EBIDTA would have resulted in a net loss of ($1,028,010), or a Basic Loss per Share of ($0.03) for the fiscal year ended March 31, 2009 as compared to the same non-GAAP earnings of $144,401 for the year ended March 31, 2008.

Operating Results Revenues.

Revenues for the twelve-month period ended March 31, 2009, decreased to $2,861,339 or by ($966,350) (25%) as compared to $3,827,689 for the twelve-month period ended March 31, 2008. The decrease is attributable to the hesitation surrounding the general economy, a change in federal and state funding schedules, as well as a decrease in the expenditure of grant monies by some school districts. We do not believe these circumstances are recurring.

Operating Results Cost of Goods Sold/Cost of Sales.

Cost of goods sold for the twelve-month period ended March 31, 2009, decreased by $382,832 (22%) to $1,374,834 as compared to $1,757,666 for the twelve-month period ended March 31, 2008. Included in the cost of goods sold figure are variable costs including sales commissions, shipping expenses, product royalty payments, and server fees, which have all declined due to the decrease in sales.

Operating Results Operating Expenses.

Operating expenses for the twelve-month period ended March 31, 2009, increased by $647,146 (25%) to $3,201,591 as compared to $2,554,445 for the twelve-month period ended March 31, 2008. The increase is largely attributable to an increase in staff, specifically sales and marketing, as compared to the same period in the previous year.

Operating Results Loss on Goodwill.

As of March 31, 2009 there was an impairment to Goodwill in the amount of $282,550. Upon annual impairment testing as required by SFAS 142, management determined that an impairment was necessary.

Operating Results Interest Expense.

PAGE 19

There was no interest expense for the twelve-month period ended March 31, 2009, as compared to $1,463 for the twelve-month period ended March 31, 2008. This decrease was due to the conversion of debt into equity during the fiscal year 2008. For the twelve-month period ending March 31, 2009, PCS carried no debt.

Liquidity.

As of the fiscal year ended March 31, 2009, we had $548,443 in cash, with total current assets of $1,177,282 and total current liabilities of $483,510. We have an accumulated deficit of ($30,472,398) and shareholder’s equity of $1,244,737.

The Company has a current ratio of 2.43. The current ratio for the fiscal year ended March 31, 2008 was 3.27. The ratio indicates that despite the difficult economic environment, we have effectively managed working capital and debt. We have utilized the current ratio over a quick ratio due to the fact that most items in inventory are easily saleable should the need to liquidate arise.

The Company has working capital of $693,772 at March 31, 2009. The working capital indicates that our ability to pay current debt obligations through our current assets is favorable. The working capital for the fiscal year ended March 31, 2008 was $1,477,307. This decrease was due primarily to the fiscal year 2009 decrease in sales.

Critical Accounting Policies.

Estimates.

Our discussion herein and analysis thereof is based upon our financial statements in Item 7 below, which have been prepared in accordance with Generally Accepted Accounting Principals of the United States (GAAP). The preparation of these statements requires management to make estimates and best judgments that affect the reported amounts. See Note 2 contained in Item 7 for additional discussions of these and other accounting policies and disclosures required by GAAP.

Concentration of Credit Risks and Significant Customers.

The Company maintains cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of trade receivables. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses which when realized have been within the range of management's expectations. The Company does not require collateral from its customers.

During the period ended March 31, 2009, the LabMentors subsidiary had sales to two major customers that accounted for a significant portion of their total revenues. See note 2 to the financial statements for additional information.

Fair Value of Financial Instruments.

The Company includes fair value information in the notes to financial statements when the fair value of its financial instruments is different from the book value.  When the book value approximates fair value, no additional disclosure is made.

Foreign Currency Translation.

The functional currency of the Company is the U.S. dollar. The Company’s financial statements include translations for the LabMentors subsidiary, which are maintained in Canadian dollars. All assets and liabilities are translated at the exchange rate on the balance sheet date and all revenues and expenditures are translated at the average rate for the period. Translation adjustments are reflected as a separate component of stockholders' equity, accumulated other comprehensive income (loss), and the net change for the year reflected separately in the statements of operations and other comprehensive income (loss).

In accordance with SFAS No. 95, “Statement of Cash Flows,” the cash flows of the Company are translated using the weighted average exchange rates during the respective period. As a result, amounts in the statement of cash flows related to changes in assets and liabilities will not necessarily agree with the changes in the corresponding balances on the balance sheet that were translated at the exchange rate at the end of the period.

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Educational Software.

The Company's inventory consists partially of internally developed education computer programs and exercises to be accessed on the Internet. In accordance with FAS 86, the costs associated with research and initial feasibility of the programs and exercises are expensed as incurred. Once economic feasibility has been determined, the costs to develop the programs and exercises are capitalized until they are ready for sale and access and are reported at the lower of unamortized cost or net realizable value. Capitalized program and exercise inventory are amortized on a straight-line basis over the estimated useful life of the program or exercise, generally 24 to 48 months.

Intellectual Property.

The Company's intellectual property consists of capitalized costs associated with the development of the Internet software and delivery platform developed by the Company to enable access to the various educational programs and exercises developed by the Company. In accordance with FAS 86 as discussed previously regarding inventory, the initial costs associated with researching the delivery platform and methods were expensed until economic feasibility and acceptance were determined. Thereafter, costs incurred to develop the Internet online delivery platform and related environments were capitalized until ready for use and able to deliver and access the Company's educational programs and exercises. Costs incurred thereafter to maintain the delivery and access platform are expensed as incurred. These capitalized costs are being amortized on a straight-line basis over the estimated useful life of the Company’s delivery and access platform that has been determined to be 60 months.

Property and Equipment.

Property and equipment are recorded at cost and are being depreciated for financial accounting purposes on the straight-line method over their respective estimated useful lives ranging from three to seven years. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are reflected in the results of operations.

Expenditures for maintenance and repairs are charged to operations. Renewals and betterments are capitalized.

Goodwill and Intangible Assets.

We recorded our acquisition of LabMentors in accordance with SFAS 141, “Business Combinations.” We allocate the cost of acquired companies to the tangible and identified intangible assets and liabilities acquired with the remaining amount being recorded as goodwill. Certain intangible assets, such as acquired technology, are amortized (see Intellectual Property above).

The most recent acquisition did not have significant tangible assets, and, as a result, the majority of the purchase price was allocated to goodwill, which increases the potential for impairment charges that we may incur in the future.

We account for goodwill and other intangible assets in accordance with SFAS 142,  “Goodwill and Other Intangible Assets.” Under SFAS 142, goodwill and intangible assets with indefinite lives are not amortized to expense and must be reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that impairment might have occurred. The first step used to identify potential impairment is the comparison of the fair value of the item with its carrying amount, including goodwill and intangible assets with indefinite lives. We operate as one company, and, therefore, compare our book value to market value, which management must determine upon review based on similar transactions. If our fair value exceeds our book value, our goodwill is considered not impaired. If the book value exceeds the fair value, the goodwill is considered impaired and management must measure the amount of impairment loss, if any. For the measurement step, if the carrying amount of the goodwill exceeds the estimated fair value of the goodwill, an impairment loss would be recognized in an amount equal to that excess. The fair value estimate requires that future cash flows relating to the acquisition, in this case, be forecasted. These forecasts require management to make assumptions on the future sale of current and future products and services, future market conditions, technological advances, future growth rates, and discount rates utilized. Any loss recognized cannot exceed the carrying amount of the goodwill. After an impairment loss is recognized, the adjusted carrying amount of goodwill is its new accounting basis.

We undertook an impairment review at the end of the current fiscal year. After reviewing current operating losses and future growth potential of the subsidiary, the Company determined that an impairment of $282,550 was necessary.

PAGE 21

Options/Warrants and Shares Issued for Services.

On January 1, 2006, the Company adopted SFAS 123(R) “Accounting for Stock Based Compensation ,” which establishes accounting for stock-based payment transactions for employee services and goods and services received from non-employees. SFAS 123(R) is a revision of SFAS 123, “Accounting for Stock-Based Compensation ”and supersedes APB 25, “Accounting for Stock Issued to Employees.” The Company is required to recognize expense of options or similar equity instruments issued to employees using the fair-value-based method of accounting for stock-based payments in compliance with SFAS 123(R), “Share-Based Payment”. SFAS 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Application of this pronouncement requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior. Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking over the expected term of the award.

The Company accounts for shares issued to employees and others based upon the closing price of our common stock as of the grant date.

Acquisitions.

Our acquisition strategy is to acquire companies and/or assets that continue to increase our product depth, market penetration, and synergies within the Company.

The Company has made one asset purchase acquisition over the last three years, namely the PCS STEPS® product line from Education Enterprise Solutions on October 9, 2006 for 375,000 shares of common stock valued at $225,000.  This product  was transferred from the parent company to our subsidiary for development and implementation into the sales cycle.

Off-Balance Sheet Arrangements.

We do not have any off-balance sheet arrangements as of March 31, 2009.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

None, not applicable.

PAGE 22

Item 8. Financial Statements.

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of March 31, 2009 and March 31, 2008

Consolidated Statements of Operations for the years ended March 31, 2009 and 2008

Consolidated Statements of Stockholders' Equity for the years ended March 31, 2009 and 2008

Consolidated Statements of Cash Flows for the years ended March 31, 2009 and 2008

Notes to Consolidated Financial Statements

PAGE 23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNITNG FIRM

To the Board of Directors

 PCS Edventures!.com, Inc. and Subsidiary

Boise, Idaho

 We have audited the accompanying consolidated balance sheet of PCS Edventures!.com, Inc. and Subsidiary, as of March 31, 2009, and the related statements of operations, changes in stockholders' equity, and cash flows for the year then ended. The financial statements for the year ended March 31, 2008, were audited by other auditors whose reports expressed unqualified opinions on those statements. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PCS Edventures!.com, Inc. and Subsidiary, as of March 31, 2009, and the results of its operations, changes in stockholders' equity, and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.

 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 15 to the financial statements, the Company has suffered reoccurring losses and negative cash flow from operations, both of which raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 15. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 /s/ M&K CPAS, PLLC

 www.mkacpas.com

 Houston, Texas

June 28, 2009

PAGE 24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

PCS Edventures!.com, Inc. and Subsidiary

Boise, Idaho

We have audited the accompanying consolidated balance sheet of PCS Edventures!.com, Inc. and Subsidiary, as of March 31, 2008, and the related statements of operations, stockholders’ equity and cash flows for the year ended March 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PCS Edventures!.com, Inc. and Subsidiary as of March 31, 2008, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

We were not engaged to examine management's assertion about the effectiveness of PCS Edventures!.com, Inc. and Subsidiary’s internal control over financial reporting as of March 31, 2008 and accordingly, we do not express an opinion thereon.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 16 on March 31, 2008 to the consolidated financial statements, the Company has suffered recurring losses and has experienced negative cash flows from operations, which raises substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to those matters are also described in Note 16 on March 31, 2008 to the consolidated financial statements.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/HJ & Associates, LLC

HJ & Associates, LLC

Salt Lake City, Utah

June 27, 2008

PAGE 25

PCS EDVENTURES!.COM, INC. AND SUBSIDIARY

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements.

PAGE 26

PCS EDVENTURES!.COM, INC. AND SUBSIDIARY

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements.

PAGE 27

PCS EDVENTURES!.COM, INC. AND SUBSIDIARY

Consolidated Statements of Operations

The accompanying notes are an integral part of these consolidated financial statements

PAGE 28

PCS EDVENTURES!.COM, INC. AND SUBSIDIARY

Consolidated Statements of Stockholders' Equity