United States Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File No. 333-53458
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
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:
20,072,296
December 31, 2003
Transitional Small Business Disclosure Format (Check One): Yes X No
--- ---
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and March 31, 2003
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
December 31, March 31,
2003 2003
(Unaudited)
CURRENT ASSETS
Cash $ 57,440 $ 11,449
Accounts receivable 457,003 345,333
Inventory 861 2,073
Deferred costs 60,351 103,662
Debt extension costs, net - 5,460
---------- ---------
Total Current Assets 575,655 467,977
---------- ---------
FIXED ASSETS (NET) - 25,447
---------- ---------
OTHER ASSETS
Deposits 6,175 425
---------- ---------
Total Other Assets 6,175 425
---------- ---------
TOTAL ASSETS $ 581,830 $ 493,849
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
2
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31, March 31,
2003 2003
(Unaudited)
CURRENT LIABILITIES
Bank overdraft $ - $ 8,053
Accounts payable 164,132 109,742
Wages payable 38,436 30,603
Payroll taxes payable 178,884 233,331
Accrued interest 41,192 33,397
Accrued interest-related party 12,385 21,638
Accrued expenses 157,453 170,328
Unearned revenue 382,542 382,489
Notes payable - related party 165,882 165,882
Notes payable 627,607 762,859
---------- ----------
Total Current Liabilities 1,768,513 1,918,322
---------- ----------
Total Liabilities 1,768,513 1,918,322
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value, authorized
10,000,000 shares; 10,000 and -0- issued
and outstanding, respectively. 12,917 -
Common stock, no par value, authorized
40,000,000 shares; 20,072,296 and
17,832,301 shares issued and
outstanding, respectively 22,389,211 22,105,987
Accumulated deficit (23,588,811) (23,530,460)
----------- -----------
Total Stockholders' Equity (Deficit) (1,186,683) (1,424,473)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 581,830 $ 493,849
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
2003 2002 2003 2002
REVENUE
Lab Revenue $ 151,786 $ 188,337 $ 1,260,002 $ 1,470,888
License Revenue 35,856 33,934 109,947 110,765
Subscription Revenue 3,216 3,006 11,165 10,561
----------- ----------- ----------- -----------
Total Revenues 190,857 225,277 1,381,114 1,592,214
----------- ----------- ----------- -----------
COST OF GOODS SOLD 86,589 59,514 446,092 578,038
----------- ----------- ----------- -----------
GROSS PROFIT 104,268 165,763 935,022 1,014,176
----------- ----------- ----------- -----------
OPERATING EXPENSES
Salaries and wages 119,913 144,330 352,451 412,184
Depreciation expense - 14,408 25,447 43,224
General and administrative 153,445 203,954 508,746 739,893
----------- ----------- ----------- -----------
Total Operating Expenses 273,358 362,692 886,644 1,195,301
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (169,090) (196,929) 48,378 (181,125)
----------- ----------- ----------- -----------
OTHER INCOME AND EXPENSES
Gain on extinguishment of
debt - - - 17,908
Interest expense (31,941) (32,404) (103,812) (167,738)
----------- ----------- ----------- -----------
Total Other Income and
Expenses (31,941) (32,404) (103,812) (149,830)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES (201,031) (229,333) (55,434) (330,955)
INCOME TAX EXPENSE - - - -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (201,031) $ (229,333) $ (55,434)$ (330,955)
----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
4
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations (Continued)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
2003 2002 2003 2002
NET LOSS $ (201,031) $ (229,333) $ (55,434)$ (330,955)
Accretion of preferred
stock discount - - (2,500) -
Pro-rata preferred stock
non-cash dividend (233) - (417) -
----------- ----------- ----------- -----------
NET INCOME AVAILABLE
(LOSS ATTRIBUTABLE)
TO COMMON
SHAREHOLDERS $ (201,264) $ (229,333) $ (58,351)$ (330,955)
============ =========== =========== ===========
BASIC LOSS PER SHARE $ (0.01) $ (0.02) $ (0.00)$ (0.02)
============ =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 19,771,024 15,170,533 18,640,974 14,836,665
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
Common Shares Preferred Shares
Shares Amount Shares Amount
Balance, March 31, 2002 13,261,522 $21,596,003 $ - $ -
Common stock issued for
conversion of accounts
payable at $0.08 per
share 50,000 4,250 - -
Common stock issued for
conversion of accounts
payable at $0.30 per
share 15,000 4,500 - -
Common stock issued for
conversion of accounts
payable at $0.07 per
share 248,417 17,389 - -
Common stock issued for
prepaid services at $0.05
per share 515,000 27,500 - -
Common stock issued for
prepaid services at $0.07
per share 100,000 7,000 - -
Common stock issued for
services at $0.07 per
share 157,500 11,025 - -
Cancelled common stock
previously issued for
services that had not been
performed (20,000) - - -
Common stock issued for
conversion of debt at $0.13
per share 204,000 27,541 - -
Common stock issued for
conversion of warrants at
$0.01 per share 9,808 98 - -
Common stock issued for
services at $0.16 per share 100,800 16,128 - -
---------- ------------- --------- ------------
Balance Forward 14,642,047 $ 21,711,434 $ - $ -
[CONTINUED]
Deferred
Consulting Accumulated
Fees Deficit
Balance, March 31, 2002 $ (27,344) $(23,076,297)
Common stock issued for
conversion of accounts
payable at $0.08 per
share - -
Common stock issued for
conversion of accounts
payable at $0.30 per
share - -
Common stock issued for
conversion of accounts
payable at $0.07 per
share - -
Common stock issued for
prepaid services at $0.05
per share (27,500) -
Common stock issued for
prepaid services at $0.07
per share (7,000) -
Common stock issued for
services at $0.07 per
share - -
Cancelled common stock
previously issued for
services that had not been
performed - -
Common stock issued for
conversion of debt at $0.13
per share - -
Common stock issued for
conversion of warrants at
$0.01 per share - -
Common stock issued for
services at $0.16 per share - -
--------- ------------
Balance Forward $ (61,844) $(23,076,297)
The accompanying notes are an integral part of these consolidated financial
statements.
6
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
Shares Amount Shares Amount
Balance Forward 14,642,047 $ 21,711,434 $ - $ -
Common stock issued for
conversion of warrants at
$0.01 per share 10,500 105 - -
Common stock issued for
extension of debt, valued at
an average of $0.17 per
share 233,250 41,353 - -
Common stock issued for
services at $0.16 per share 78,125 12,500 - -
Common stock issued for
conversion of warrants at
$0.01 per share 13,055 131 - -
Common stock issued for
conversion of warrants at
$0.01 per share 10,500 105 - -
Common stock issued for
prepaid services at $0.17
Per share 304,500 51,765 - -
Common stock issued for
conversion of accounts
payable at $0.07 per
share 181,289 11,888 - -
Options issued to
Directors for
accrued Director's Fees - 45,000 - -
Common stock issued for
services at $0.095 per
share 90,000 8,550 - -
Common stock issued for
services at $0.095 per
share 153,125 14,547 - -
----------- ------------- --------- ------------
Balance Forward 15,716,391 $ 21,897,378 $ - $ -
----------- ------------- --------- ------------
[CONTINUED]
Deferred
Consulting Accumulated
Fees Deficit
Balance Forward $ (61,844) $(23,076,297)
Common stock issued for
conversion of warrants at
$0.01 per share - -
Common stock issued for
extension of debt, valued at
an average of $0.17 per
share - -
Common stock issued for
services at $0.16 per share - -
Common stock issued for
conversion of warrants at
$0.01 per share - -
Common stock issued for
conversion of warrants at
$0.01 per share - -
Common stock issued for
prepaid services at $0.17
Per share (51,765) -
-
Common stock issued for
conversion of accounts
payable at $0.07 per
share - -
Options issued to
Directors for
accrued Director's Fees - -
Common stock issued for
services at $0.095 per
share - -
Common stock issued for
services at $0.095 per
share - -
--------- ------------
Balance forward $(113,609) $(23,076,297)
The accompanying notes are an integral part of these consolidated financial
statements.
7
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
Shares Amount Shares Amount
Balance Forward 15,716,391 $ 21,897,378 $ - $ -
Common stock issued for
services at $0.095 per
share 130,000 12,350 - -
Common stock issued for
conversion of debt at
$0.10 per share 1,290,000 129,000 - -
Common stock issued for
cash at $0.10 per share 670,000 67,000 - -
Common stock issued for
conversion of warrants
at $0.01 per share 25,910 259 - -
Amortization of deferred
consulting expense - - - -
Net loss for the year
ended March 31, 2003 - - - -
----------- ------------- --------- ------------
Balance, March 31, 2003 17,832,301 22,105,987 - -
Common stock issued for
extinguishment of debt and
interest at $0.09 per
share (unaudited) 35,000 3,150 - -
Options issued for
accrued directors fees
(unaudited) - 27,143 - -
Common stock issued for
conversion of accounts
payable at $0.09 per
share (unaudited) 11,111 1,000 - -
---------- ----------- --------- ------------
Balance Forward 17,878,412 $22,137,280 - $ -
---------- ----------- --------- ------------
[CONTINUED]
Deferred
Consulting Accumulated
Fees Deficit
Balance Forward $(113,609) $(23,076,297)
Common stock issued for
services at $0.095 per
share - -
Common stock issued for
conversion of debt at
$0.10 per share - -
Common stock issued for
cash at $0.10 per share - -
Common stock issued for
conversion of warrants
at $0.01 per share - -
Amortization of deferred
consulting expense 113,609 -
Net loss for the year
ended March 31, 2003 - (454,163)
--------- ------------
Balance, March 31, 2003 - (23,530,460)
Common stock issued for
extinquishment of debt and
interest at $0.09 per
share (unaudited) - -
Options issued for
accrued directors fees
(unaudited) - -
Common stock issued for
conversion of accounts
payable at $0.09 per
share (unaudited) - -
--------- ------------
Balance forward $ - $(23,530,460)
--------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
8
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
Shares Amount Shares Amount
Balance Forward 17,878,412 $22,137,280 - $ -
Common stock issued to
related party for
conversion of accrued
interest at $0.10 per
share (unaudited) 202,234 20,223 - -
Common stock issued for
the conversion of
warrants at $0.01 per
share (unaudited) 19,050 191 - -
Repriced options issued
below market value
(unaudited) - 13,500 - -
Options issued below
market value (unaudited) - 18,607 - -
Preferred stock issued
for conversion of debt
at $1.00 per share
(unaudited) - - 5,000 5,000
Preferred stock issued
for cash at $1.00 per
share (unaudited) - - 5,000 5,000
Discount on preferred
stock (unaudited) - - - 2,500
Common stock issued for
extension of debt at
$0.10 per share (unaudited) 57,600 5,760 - -
Common stock issued for
conversion of
debt at $0.10 per share
(unaudited) 150,000 15,000 - -
Common stock issued for
cash at $0.01 per share
(unaudited) 150,000 15,000 - -
----------- ------------- --------- -----------
Balance forward 18,457,296 $ 22,225,561 $ 10,000 $ 12,500
----------- ------------- --------- -----------
[CONTINUED]
Deferred
Consulting Accumulated
Fees Deficit
Balance forward $ - $(23,530,460)
Common stock issued to
related party for
conversion of accrued
interest at $0.10 per
share (unaudited) - -
Common stock issued for
the conversion of
warrants at $0.01 per
share (unaudited) - -
Repriced options issued
below market value
(unaudited) - -
Options issued below
market value (unaudited) - -
Preferred stock issued
for conversion of debt
at $1.00 per share
(unaudited) - -
Preferred stock issued
for cash at $1.00 per
share (unaudited) - -
Discount on preferred
stock (unaudited) - (2,500)
Common stock issued for
extension of debt at
$0.10 per share (unaudited) - -
Common stock issued for
conversion of
debt at $0.10 per share
(unaudited) - -
Common stock issued for
cash at $0.01 per share
(unaudited) - -
--------- -----------
Balance forward $ $(23,532,960)
--------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
9
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
Shares Amount Shares Amount
Balance forward 18,457,296 $ 22,225,561 $ 10,000 $ 12,500
Common stock issued for
the conversion of
warrants at $0.01 per
share (unaudited) 6,000 60 - -
Common stock issued for
cash at $0.10 per share
(unaudited) 550,000 55,000 - -
Revaluation of repriced
and outstanding options
(unaudited) - (500) - -
Common stock issued for
cash at $0.10 per share
(unaudited) 200,000 20,000 - -
Common stock issued for
the conversion of
warrants at $0.01 per
share (unaudited) 6,000 60 - -
Common stock issued for
cash at $0.10 per share
(unaudited) 250,000 25,000 - -
Common stock issued for
cash at $0.10 per share
(unaudited) 200,000 20,000 - -
Common stock issued for
the conversion of warrants
at $0.01 per share
(unaudited) 3,000 30 - -
Common stock issued for
cash at $0.10 per share
(unaudited) 200,000 20,000 - -
Common stock issued for
cash at $0.12 per share
(unaudited) 200,000 24,000 - -
------------ ------------- ---------- ------------
Balance forward 20,072,296 $ 22,389,211 10,000 $ 12,500
============ ============= ========== ============
[CONTINUED]
Deferred
Consulting Accumulated
Fees Deficit
Balance forward $ - $(23,532,960)
Common stock issued for
cash at $0.10 per share
(unaudited) - -
Common stock issued for
the conversion of
warrants at $0.01 per
share (unaudited) - -
Common stock issued for
cash at $0.10 per share
(unaudited) - -
Common stock issued for
cash at $0.10 per share
(unaudited) - -
Common stock issued for
the conversion of warrants
at $0.01 per share
(unaudited) - -
Common stock issued for
cash at $0.10 per share
(unaudited) - -
Common stock issued for
cash at $0.12 per share
(unaudited) - -
---------- ------------
Balance forward $ - $(23,532,960)
========== ============
10
The accompanying notes are an integral part of these consolidated financial
statements.
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
Shares Amount Shares Amount
Balance forward 20,072,296 $ 22,389,211 $ 10,000 $ 12,500
Pro-rata cumulative non-cash
preferred stock dividend
(unaudited) - - - 417
Net income for the nine
months ended December 31,
2003(unaudited) - - - -
---------- ----------- --------- ------------
Balance, December 31,
2003 20,072,296 $22,389,211 10,000 $ 12,917
========== =========== ========= ============
[CONTINUED]
Deferred
Consulting Accumulated
Fees Deficit
Balance forward $ $(23,532,960)
Pro-rata cumulative non-cash
preferred stock dividend
(unaudited) - (417)
Net income for the nine
months ended December 31,
2003(unaudited) - (55,434)
--------- ------------
Balance, December 31,
2003 - $(23,588,811)
========= ============
The accompanying notes are an integral part of these consolidated financial
statements.
11
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the
Nine Months Ended
December 31,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (55,434) $ (330,955)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation 25,447 43,224
Common stock issued for services - 56,908
Common stock issued for debt extensions 5,760 41,353
Options issued below market value 31,607 -
Amortization of debt discount - 24,654
Amortization of debt offering and extension
costs 5,460 45,365
Amortization of deferred consulting fees - 91,633
Gain on extinguishment of debt - (17,908)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (111,670) 273,372
(Increase) decrease in prepaid expenses and
deferred costs 43,311 (403)
(Increase) decrease in inventory 1,212 -
(Increase) in deposits (5,750) (425)
Increase in accounts payable and
accrued liabilities 44,616 194,174
Increase (decrease) in interest payable (1,458) 10,204
(Decrease) in unearned revenue 53 (233,285)
--------- -----------
Net Cash Provided (Used) by Operating
Activities (16,846) 197,911
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES - -
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) in cash overdraft (8,053) (33,126)
Proceeds from related parties - 27,000
Payments to related parties - (20,000)
Payments on debt (564,349) (474,801)
Proceeds from debt 450,898 353,305
Debt extension costs - (52,033)
Proceeds from sales of common stock 179,341 698
Proceeds from sales of preferred stock 5,000 -
---------- ----------
Net Cash Provided (Used) by Financing
Activities 62,837 (198,957)
---------- ----------
INCREASE IN CASH 45,991 (1,046)
CASH AT BEGINNING OF PERIOD 11,449 1,046
---------- ----------
CASH AT END OF PERIOD $ 57,440 $ -
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
12
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the
Nine Months Ended
December 31,
2003 2002
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for payment on notes payable
and interest $ 38,373 $ 27,541
Common stock issued for services $ - $ 56,908
Common stock issued for payment on accounts
Payable $ 28,143 $ 38,027
Common stock issued for debt extensions $ 5,760 $ 41,353
Preferred stock issued for conversion of notes
Payable $ 5,000 $ -
Cash Paid For:
Interest $ 71,960 $ 74,231
Income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
13
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 2003 and March 31, 2003
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, 2003 Annual Report on
Form 10-KSB. Operating results for the nine months ended December 31, 2003
are not necessarily indicative of the results that may be expected for the
year ending March 31, 2004.
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. The Company has expanded
its product line to include three additional educational labs, which they
believe will significantly boost future revenues. The Company also intends to
continue offerings of its common stock to raise the capital necessary to cover
operating costs not provided for by current revenues. The ability of the
Company to continue as a going concern is dependent upon its ability to
successfully accomplish this plan and to eventually attain profitable
operations. The accompanying consolidated financial statements do not include
any adjustments that might be necessary if the Company is unable to continue
as a going concern.
NOTE 3 - DILUTIVE INSTRUMENTS
a. Stock Options
The Company applied Accounting Principles Board ("APB") Opinion 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for all stock option plans. Under APB Opinion 25, compensation
cost is recognized for stock options granted to employees when the option
price is less than the market price of the underlying common stock on the date
of grant.
14
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 2003 and March 31, 2003
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
FASB Statement 123, "Accounting for Stock-Based Compensation" (SFAS No. 123"),
requires the Company to provide proforma information regarding net income and
net income 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. 123. 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 84% to 163% percent for all years; risk-free interest rates of
2% to 6%, and expected lives of 3 to 10 years.
For the Nine Months Ended
December 31,
2003 2002
Net income (loss):
As reported $ (55,434) $ (303,955)
Pro Forma (169,991) (485,078)
Net income (loss) per share:
As reported $ (0.00) $ (0.02)
Pro Forma $ (0.01) $ (0.03)
The Company has granted the following options as of December 31, 2003:
Date of Exercise Exercise Amount
Description Grant Number Price Exercised
- ----------- ------- -------- -------- ---------
1) Consultant 9-20-00 200,000 $ 0.50 0
2) Employees 9-01-00 25,000 $ 0.75 0
3) Director 1-05-01 25,000 $ 0.75 0
4) Employee 10-24-01 50,000 $ 0.30 0
5) Employee 12-1-01 24,230 $ 0.15 0
6) Board Members 12-10-01 1,000,000 $ 0.30 0
7) Board Members 6-03-02 1,000,000 $ 0.16 0
8) Employees 7-01-02 335,000 $ 0.16 0
9) Employee 7-15-02 15,000 $ 0.16 0
10) Employee 8-15-02 5,000 $ 0.16 0
11) Board Members 10-21-02 499,998 $ 0.09 0
12) Board Members 5-15-03 892,855 $ 0.07 0
13) Employee 5-20-03 100,000 $ 0.07 0
14) Director 7-25-03 25,000 $ 0.10 0
15) Employee 9-05-03 150,000 $ 0.07 0
---------
4,347,083
=========
15
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 2003 and March 31, 2003
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
Risk-Free
Fair Interest Expected Expected
Description Value Rate Life Volatility
- ----------- ----- --------- -------- ----------
1) Consultant $ 0.42 6.15% 3 89.37%
2) Employees $ 0.52 6.21% 3 85.69%
3) Employees $ 0.52 6.21% 3 84.39%
4) Employees $ 0.19 3.76% 3 100.52%
5) Employee $ 0.14 3.76% 3 99.80%
6) Board Members $ 0.20 3.76% 10 99.80%
7) Board Members $ 0.15 5.69% 10 128.90%
8) Employee $ 0.14 5.48% 3.5 157.77%
9) Employee $ 0.14 2.84% 3.5 152.96%
10) Employee $ 0.14 2.84% 3.3 163.77%
11) Board Members $ 0.09 2.84% 10 158.83%
12) Board Members $ 0.09 3.94% 10 151.61%
13) Employee $ 0.06 3.94% 4 151.61%
14) Employee $ 0.12 2.81% 4 156.24%
15) Employee $ 0.11 2.81% 4 152.03%
On May 14, 2002, the Company authorized the issuance of 1,000,000 options to
members of the board of directors. These options vested immediately and have
an exercise price of $0.16 per share and are exercisable for ten years. All
1,000,000 of the options were granted on September 3, 2002. The options were
determined to have a fair value of $0.15 per share using the Black-Scholes
valuation model.
On May 14, 2002, the Company authorized the issuance of 500,000 options to
employees. These options vest over three and one-half years and have an
exercise price of $0.16 per share. The Company granted 355,000 of the options
to employees during July and August of 2002. The options were determined to
have a fair value of $0.14 per share using the Black-Scholes valuation model.
On October 21, 2002, the Company authorized and issued 499,998 options to
Board Members as payment for accrued directors fees. These options vested
immediately and have an exercise price of $0.09 per share. The options were
determined to have a fair value of $0.09 per share using the Black-Scholes
valuation model.
16
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 2003 and March 31, 2002
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
On May 15, 2003, the Company authorized and issued 892,855 options to Board
Members as payment for accrued directors fees. These options vested
immediately and have an exercise price of $0.07 per share. The options were
determined to have a fair value of $0.09 per share using the Black-Scholes
valuation model. The intrinsic value of the shares, of $0.02 per share or
$17,857, was recorded as an offset to the accrued liability with the net
balance being applied to equity. The granting of these options had a $61,545
impact on the pro forma net income of for the Company.
On May 20, 2003, the Company authorized and issued 100,000 options to an
employee. These options vest over three years and have an exercise price of
$0.07 per share. The options were determined to have a fair value of $0.06
per share using the Black-Scholes valuation model. The granting of these
options had a $5,725 impact on the pro forma net income of for the Company.
On July 15, 2003, the Company authorized and issued 200,000 and 50,000 options
to a director and an employee, respectively, as repriced options replacing
previously issued options cancelled immediately prior to the new issuance.
These options vest over three years and have an exercise price of $0.10 per
share. The options were initially determined to have an intrinsic value of
$0.02 per share and a fair value of $0.11 per share using the Black-Scholes
valuation model. As such, the Company recognized $5,000 of current period
expense and recorded a $26,949 decrease in pro-forma net income. Based on the
provisions of FIN 44: Accounting for Certain Transactions Involving Stock
Compensation, and APB Opinion 25: Accounting for Stock Issued to Employees,
these options are to be accounted for as variable options and as such, were
revalued as of September 30, 2003. As the intrinsic value of the options
remained unchanged as of the date of revaluation, there was no change to the
recorded expense related to the options. The Black-Scholes value of the
shares decreased by $264, and as such, the pro-forma effect of the options was
reduced to $26,685. These options were cancelled by the Company during
December 2003.
On July 25, 2003, the Company authorized and issued 25,000 options to an
employee as repriced options replacing previously issued options cancelled
immediately prior to the new issuance. These options vest over three years
and have an exercise price of $0.10 per share. The options were initially
determined to have an intrinsic value of $0.03 per share and a fair value of
$0.12 per share using the Black-Scholes valuation model. As such, the Company
recognized $750 of current period expense and recorded a $2,933 decrease in
pro-forma net income. Based on the provisions of FIN 44: Accounting for
Certain Transactions Involving Stock Compensation, and APB Opinion 25:
Accounting for Stock Issued to Employees, these options are to be accounted
for as variable options and as such, were revalued as of September 30, 2003.
As a result of the revaluation, there was a $250 decrease in the intrinsic
value of the options and a corresponding decrease in the recorded expense.
The Black-Scholes value of the shares decreased by $264, and as such, the pro-
forma effect of the options was reduced to $2,669. These options were
cancelled by the Company during December 2003.
17
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 2003 and March 31, 2002
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
On July 25, 2003, the Company authorized and issued 25,000 options to an
employee. These options vest over three years and have an exercise price of
$0.10 per share. The options were initially determined to have an intrinsic
value of $0.03 per share and a fair value of $0.12 per share using the Black-
Scholes valuation model. As such, the Company recognized $750 of current
period expense and recorded a $2,933 decrease in pro-forma net income.
On September 1, 2003, the Company authorized and issued 50,000 options to an
employee as repriced options replacing previously issued options cancelled
immediately prior to the new issuance. These options vest over three years
and have an exercise price of $0.12 per share. The options were initially
determined to have an intrinsic value of $0.005 per share and a fair value of
$0.11 per share using the Black-Scholes valuation model. As such, the Company
recognized $250 of current period expense and recorded a $5,269 decrease in
pro-forma net income. Based on the provisions of FIN 44: Accounting for
Certain Transactions Involving Stock Compensation, and APB Opinion 25:
Accounting for Stock Issued to Employees, these options are to be accounted
for as variable options and as such, were revalued as of September 30, 2003.
As the intrinsic value of the options remained unchanged as of the date of
revaluation, there was no change to the recorded expense related to the
options. The Black-Scholes value of the shares increased by $3, and as such,
the pro-forma effect of the options was increased to $5,272. These options
were cancelled by the Company during December 2003.
On September 5, 2003, the Company authorized and issued 150,000 options to an
employee. These options vest over three years and have an exercise price of
$0.07 per share. The options were determined to have an intrinsic value of
$0.05 per share and a fair value of $0.11 per share using the Black-Scholes
valuation model. As such, the Company recognized $7,500 of current period
expense and recorded a $16,356 decrease in pro-forma net income.
b. Warrants
During the year ended March 31, 2002, the Company issued warrants allowing the
holders to purchase 263,607 shares of the Company's common stock. The
warrants were issued in conjunction with the private placement memorandum and
are exercisable at a price of $0.01 per share for two years. The fair value
of the warrants, as determined by Black Scholes, was $191,634, and was
recorded as debt discount. This discount has been fully amortized as of March
31, 2003.
18
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31, 2003 and March 31, 2002
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
b. Warrants (Continued)
During the year ended March 31, 2003, 69,773 of these warrants were exercised
and converted into an equivalent number of common shares in exchange for $698
in cash.
During the nine months ended September 30, 2003, an additional 34,050 of the
private placement warrants were exercised in exchange for $340 in cash.
NOTE 4 - SIGNIFICANT EVENTS
Common Stock
On September 4, 2003, the Company amended its articles of incorporation to
decrease the authorized number of common shares for 50,000,000 to 40,000,000.
Preferred Stock
On September 4, 2003, the Company amended its articles of incorporation to
establish a preferred class of stock. Under the amendment, 10,000,000 shares
of the preferred stock have been authorized. The preferred shares are
convertible into shares of common stock at a 20% discount and have a $0.25 cap
on the conversion price. The Company has reserved the option to convert the
shares into common stock at any point that the average trading price of the
Company's common stock for the previous 30 days exceeds to $0.50. The Company
recognized a beneficial conversion feature of $2,500.
The convertible preferred shares also include a cumulative 10% per annum non-
cash dividend.
NOTE 5 - SUBSEQUENT EVENTS
On January 19, 2004, the Company issued 200,000 shares of common stock to a
private investor in exchange for $24,000 in cash.
On January 20, 2004, the Company issued 680,000 shares of common stock, valued
at current trading price of the Company's stock as of the date of
authorization, of $0.12 per share, in exchange for marketing services to be
provided over a twelve-month period.
On January 20, 3004, the Company issued 103,207 shares of common stock to the
Company's president and CEO as payment of accrued interest totaling $12,385.
The shares were valued at current trading price of the Company's stock as of
the date of authorization, or $0.12 per share.
On January 20, 3004, the Company issued 106,384 shares of common stock to the
Company's legal counsel as payment on accrued legal fees of $12,766. The
shares were valued at current trading price of the Company's stock as of the
date of authorization, or $0.12 per share.
19
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------
Results of Operations.
- ----------------------
Three months ended December 31, 2003, compared to three months ended
December 31, 2002.
- ------------------
Revenues for the three month period ended December 31, 2003,
decreased to $190,857 as compared to $225,277 for the three month period ended
December 31, 2002. Revenues decreased due to a decrease in our lab sales
which was offset by a slight increase in license revenues as well as
subscription revenues.
General and administrative costs have decreased to $153,445 for the
three month period ended December 31, 2003, as compared to $203,954 for the
three month period ended December 31, 2002. The decrease is primarily due to
a decrease in spending for public relations and marketing.
Interest expense for the three month period ended December 31, 2003,
decreased to $31,941 as compared to $32,404 for the three month period ended
December 31, 2002.
We had a net loss of ($201,031) for the three months ended December
31, 2003, as compared to a net loss of $(229,333) for the quarterly period
ended December 31, 2002.
Nine months ended December 31, 2003, compared to nine months ended December
31, 2002.
- ---------
Revenues for the nine month period ended December 31, 2003, decreased
to $1,381,114 as compared to $1,592,214 for the nine month period ended
December 31, 2002. This decrease in revenues is primarily due to an overall
decrease in lab sales as compared to last fiscal year.
General and administrative costs have decreased to $508,746 for the
nine month period ended December 31, 2003, as compared to $739,893 for the
nine month period ended December 31, 2002. The decrease is due to a decrease
in spending for public relations and marketing.
Interest expense for the nine month period ended December 31, 2003,
decreased to $103,812 as compared to $167,738 for the nine month period ended
December 31, 2002.
We had a net loss of ($55,434) for the nine months ended December
31, 2003, as compared to a net loss of $(330,955) for the nine months ended
December 31, 2002.
Liquidity and Capital Resources.
- --------------------------------
We had a cash balance of $57,440 at December 31, 2003. Management
believes that the cash received from delivered sales orders as well as
continued limited offerings of our common stock, will be sufficient to meet
our operating expenses.
Item 3. Controls and Procedures.
- ----------------------------------
(a) Evaluation of Disclosure Controls and Procedures
PCS' Chief Executive Officer and Chief Financial Officer have evaluated
our Company's disclosure controls and procedures as of December 31, 2004,
the end of the reporting period covered by this report, and they have
concluded that these controls and procedures are effective.
(b) Changes in Internal Controls
There are no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to February 4, 2004.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ----------------------------
Warren Black v. PCS.
- --------------------
On January 18, 2002, Warren Black, a former independent contractor for
our Company, filed a complaint against us alleging breach of contract. Mr.
Black seeks the return of certain software products that he claimed to have
provided us during his employment, or their monetary equivalent, which he
claims to be $15,000. We settled this action in February 2003. Per the terms
of the settlement agreement, we agreed to issue Mr. Black a $6,000 note in
full satisfaction of his claim. The note is payable in quarterly installments
of $1,500 and accrues interest at 8.0% per annum. We have paid this note in
full as of February 3, 2004.
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities.
- -----------
Sales of Unregistered Securities During the Last Quarter.
---------------------------------------------------------
Common Preferred
Description Shares Amount Shares Amount
- ----------- ------ ------ ------ ------
Samuel R. Trozzo 200,000 $20,000 - -
Richard E. Bean 250,000 $25,000 - -
Frank W. Klescewski 400,000 $40,000 - -
These shares were issued for cash at $0.10 per share.
Item 3. Defaults Upon Senior Securities.
- ------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- --------------------------------------------------------------
None; not applicable.
Item 5. Other Information.
- ----------------------------
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
- -------------------------------------------
(a) Exhibits.
31.1 302 Certification of Anthony A. Maher
31.2 302 Certification of Christina M. Vaughn
32 906 Certifications
SB-2 Registration Statement Filed with an Effective Date
of May 11, 2001*
* Incorporated by Reference.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCS EDVENTURES.COM, INC.
Date: 2/4/04 By:/s/Anthony A. Maher
--------- -------------------------------------
Anthony A. Maher
Chief Executive Officer, President and
Chairman of the Board of Directors
Date: 2/4/04 By:/s/Christina M. Vaughn
--------- -------------------------------------
Christina M. Vaughn
Chief Financial Officer
Date: 2/4/04 By:/s/Roy M. Svee
--------- -------------------------------------
Roy M. Svee
Treasurer and Director