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 June 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File No. 000-49990
PCS EDVENTURES!.COM, INC.
-------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
IDAHO 82-0475383
----- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
345 Bobwhite Court, Suite #200
Boise, Idaho 83706
------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (208) 343-3110
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
Check whether the Registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
25,627,039
June 30, 2004
Transitional Small Business Disclosure Format (Check One): Yes X No
--- ---
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and March 31, 2004
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
June 30, March 31,
2004 2004
----------- ----------
(Unaudited)
CURRENT ASSETS
Cash $ 149,516 $ 113,820
Accounts receivable 359,123 449,518
Inventory 12,507 -
Note receivable - 50,000
Prepaid expenses - 6,084
----------- ----------
Total Current Assets 521,146 619,422
----------- ----------
FIXED ASSETS (NET) - -
----------- ----------
OTHER ASSETS
Deposit on distribution rights 45,000 45,000
Deposits 6,175 6,175
----------- ----------
Total Other Assets 51,175 51,175
----------- ----------
TOTAL ASSETS $ 572,321 $ 670,597
=========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, March 31,
2004 2004
--------- ----------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 95,816 $ 55,665
Wages payable 38,436 38,436
Payroll taxes payable 123,337 182,949
Accrued interest 70,842 60,563
Accrued expenses 225,702 256,818
Unearned revenue 170,712 204,404
Notes payable - related parties 155,228 165,882
Notes payable 203,724 349,810
---------- ---------
Total Current Liabilities 1,083,797 1,314,527
---------- ---------
Total Liabilities 1,083,797 1,314,527
---------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value, authorized
10,000,000 shares, 82,850 and 82,850 shares
issued and outstanding, respectively 120,473 120,473
Common stock, no par value, authorized 50,000,000
shares; 25,627,039 and 24,230,874 shares issued
and outstanding, respectively 23,796,850 23,023,323
Expenses prepaid with common stock (46,042) (67,292)
Variable deferred consulting fees (293,333) -
Accumulated deficit (24,089,424)(23,720,434)
----------- -----------
Total Stockholders' Equity (Deficit) (511,476) (643,930)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 572,321 $ 670,597
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
June 30,
--------------------------
2004 2003
------------- ----------
REVENUES
Lab Revenue $ 395,729 $ 449,126
License Revenue 45,961 38,478
Subscription Revenue 3,008 3,750
---------- ---------
Total Revenues 444,698 491,354
---------- ---------
COST OF GOODS SOLD 147,472 185,266
---------- ---------
GROSS PROFIT 297,226 306,088
---------- ---------
OPERATING EXPENSES
Salaries and wages 116,859 127,641
Depreciation expense - 14,408
Stock options issued for consulting services 322,442 -
General and administrative 242,722 148,979
---------- ---------
Total Operating Expenses 682,023 291,028
---------- ---------
OPERATING INCOME (LOSS) (384,797) 15,060
---------- ---------
OTHER INCOME AND (EXPENSES)
Gain on settlement of debt (Note 4) 43,990 -
Interest income 949 -
Interest expense (30,438) (25,280)
Other income 7,293 -
Other expense (1,467) -
---------- ---------
Total Other Income and (Expenses) 20,327 (25,280)
---------- ---------
LOSS BEFORE INCOME TAXES (364,470) (10,220)
INCOME TAX EXPENSE (BENEFIT) - -
---------- ---------
NET LOSS $ (364,470) $ (10,220)
========== =========
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.00)
========== =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING, BASIC AND
DILUTIVE 24,692,361 17,909,075
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
-------------------------- ------------------------
Shares Amount Shares Amount
------------- ----------- ---------- ------------
Balance, March 31, 2003 17,832,301 $ 22,105,987 - $ -
Common stock issued for
extinguishment of debt and
interest at $0.09 per
share 35,000 3,150 - -
Options issued to directors
for accrued directors fees
(Note 11) - 17,857 - -
Contribution to capital
(Note 11) - 27,143 - -
Common stock issued for
conversion of accounts
payable at $0.09 per
share 11,111 1,000 - -
Common stock issued to
related party for
conversion of accrued
interest at $0.10 per
share 202,234 20,223 - -
Common stock issued for
the conversion of
warrants at $0.01 per
share 19,050 191 - -
Repriced options granted
below market value - 6,000 - -
Options granted below
market value - 8,250 - -
---------- ----------- --------- ------------
Balance Forward 18,099,696 $22,189,801 - $ -
---------- ----------- --------- ------------
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance, March 31, 2003 $ - $ - $(23,530,460)
Common stock issued for
extinguishment of debt and
interest at $0.09 per share - - -
Options issued to directors for
accrued director's fees - - -
Contribution of capital - - -
Common Stock issued for
conversion of accounts payable
at $0.09 per share - - -
Common stock issued to
related party for
conversion of accrued
interest at $0.10 per - - -
Common stock issued for
the conversion of
warrants at $0.01 per
share - - -
Repriced options granted
below market value - - -
Options granted below
market value - - -
----------- --------- ------------
Balance Forward $ - $ - $(23,530,460)
----------- --------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Shares Preferred Shares
------------------------- ----------------------
Shares Amount Shares Amount
---------- ------------ --------- -----------
Balance Forward 18,099,696 $22,189,801 - $ -
Preferred stock issued
for conversion of debt
at $1.00 per share - - 5,000 5,000
Preferred stock issued
for cash at $1.00 per
share - - 5,000 5,000
Discount on preferred
stock - - - 2,500
Common stock issued for
extension of debt at
$0.10 per share 57,600 5,760 - -
Common stock issued for
conversion of
debt at $0.10 per share 150,000 15,000 - -
Common stock issued for
cash at $0.01 per share 150,000 15,000 - -
Common stock issued for
the conversion of
warrants at $0.01 per
share 6,000 60 - -
Common stock issued for
cash at $0.10 per share 550,000 55,000 - -
Revaluation of repriced
and outstanding options - (500) - -
----------- ------------- --------- -----------
Balance forward 19,013,296 $ 22,280,121 10,000 $ 12,500
----------- ------------- --------- -----------
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance forward $ - $ - $(23,530,460)
Preferred stock issued
for conversion of debt
at $1.00 per share - - -
Preferred stock issued
for cash at $1.00 per
share - - -
Discount on preferred
stock - - (2,500)
Common stock issued for
extension of debt at
$0.10 per share - - -
Common stock issued for
conversion of
debt at $0.10 per share - - -
Common stock issued for
cash at $0.01 per share - - -
Common stock issued for the
conversion of warrants at
$0.01 per share - - -
Common stock issued for cash
at $0.10 per share - - -
Revaluation of repriced and
outstanding options - - -
----------- --------- -----------
Balance forward $ - $ $(23,532,960)
----------- --------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
-------------------------- ----------------------
Shares Amount Shares Amount
---------- ------------- -------- -----------
Balance forward 19,013,296 $ 22,280,121 10,000 $ 12,500
Common stock issued for
cash at $0.10 per share 200,000 20,000 - -
Common stock issued for
the conversion of
warrants at $0.01 per
share 6,000 60 - -
Common stock issued for
cash at $0.10 per share 250,000 25,000 - -
Common stock issued for
cash at $0.10 per share 200,000 20,000 - -
Common stock issued for
the conversion of warrants
at $0.01 per share 3,000 30 - -
Common stock issued for
cash at $0.10 per share 200,000 20,000 - -
Common stock issued for
cash at $0.12 per share 200,000 24,000 - -
Common stock issued for
cash at $.012 per share 200,000 24,000 - -
Common stock issued for
services and prepaid
services at $0.12 680,000 85,000 - -
------------ ------------- ---------- ------------
Balance forward 20,952,296 $ 22,498,211 10,000 $ 12,500
============ ============= ========== ============
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ------------ ------------
Balance forward $ - $ - $(23,532,960)
Common stock issued for
cash at $0.10 per share - - -
Common stock issued for
the conversion of
warrants at $0.01 per
share - - -
Common stock issued for
cash at $0.10 per share - - -
Common stock issued for
cash at $0.10 per share - - -
Common stock issued for
the conversion of warrants
at $0.01 per share - - -
Common stock issued for
cash at $0.10 per share - - -
Common stock issued for
cash at $0.12 per share - - -
Common stock issued for
cash at $.012 per share - - -
Common stock issued for
services and prepaid
services at $0.12 (67,292) - -
---------- ---------- ------------
Balance forward $ (67,292) $ - $(23,532,960)
========== ========== ============
F-7
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 20,952,296 $ 22,498,211 10,000 $ 12,500
Common stock issued for
accrued interest at $0.12 103,207 12,385 - -
Common stock issued for
accrued legal fees at $.012 106,384 12,766 - -
Common stock issued for cash
at $0.12 per share 100,000 12,000 - -
Common stock issued for cash
at $0.12 per share 75,000 15,000 - -
Preferred stock issued for
cash at $1.00 per share - - 12,000 12,000
Discount on preferred stock - - - 3,000
Common stock issued for cash
at $0.20 per share 50,000 10,000 - -
Common stock issued for cash
at $0.20 per share 50,000 10,000 - -
Preferred stock issued
for conversion of debt
at $1.00 per share - - 11,614 11,613
Discount on preferred stock - - - 2,903
---------- ----------- --------- ------------
Balance forward 21,436,887 $22,570,362 33,614 $ 42,016
---------- ----------- --------- ------------
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- ------------
Balance forward $ (67,292) $ - $(23,532,960)
Common stock issued for
accrued interest at $0.12 - - -
Common stock issued for
accrued legal fees at $.012 - - -
Common stock issued for cash
at $0.12 per share - - -
Common stock issued for cash
at $0.12 per share - - -
Preferred stock issued for
cash at $1.00 per share - - -
Discount on preferred stock - - (3,000)
Common stock issued for cash
at $0.20 per share - - -
Common stock issued for cash
at $0.20 per share - - -
Preferred stock issued
for conversion of debt
at $1.00 per share - - -
Discount on preferred stock - - (2,903)
----------- --------- ------------
Balance forward $ (67,292) $ - $(23,538,863)
----------- --------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
-------------------------- ----------------------
Shares Amount Shares Amount
----------- ----------- -------- ------------
Balance forward 21,436,887 $22,570,362 33,614 $ 42,016
Common stock issued for
conversion of preferred at
$0.20 per share 58,070 11,613 (11,614) (11,613)
Preferred stock issued for
conversion of debt at $1.00
per share - - 15,165 15,165
Discount on preferred stock - - - 3,791
Preferred stock issued
for conversion of debt
at $1.00 per share - - 25,275 25,274
Discount on preferred stock - - - (2,527)
Common stock issued for
conversion of preferred at
$0.20 per share 126,375 25,274 (25,275) (25,274)
Common stock issued for cash
at $0.12 per share 166,667 20,000 - -
Preferred stock issued for
conversion of debt at $1.00
per share - - 15,181 15,181
Discount on preferred stock - - - 3,795
Common stock issued for cash
at $.125 per share 400,000 50,000 - -
---------- ----------- --------- ------------
Balance forward 22,187,999 $22,677,249 52,346 $ 70,862
---------- ----------- --------- ------------
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ----------- ------------
Balance forward $ (67,292) $ - $(23,538,863)
Common stock issued for
conversion of preferred at
$0.20 per share - - -
Preferred stock issued for
conversion of debt at $1.00
per share - - -
Discount on preferred stock - - (3,791)
Preferred stock issued
for conversion of debt
at $1.00 per share - - -
Discount on preferred stock - - (2,527)
Common stock issued for
conversion of preferred at
$0.20 per share - - -
Common stock issued for cash
at $0.12 per share - - -
Preferred stock issued for
conversion of debt at $1.00
per share - - -
Discount on preferred stock - - (3,795)
Common stock issued for cash
at $0.125 per share - - -
----------- --------- ------------
Balance forward $ (67,292) $ - $(23,548,976)
----------- --------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
-------------------------- ----------------------
Shares Amount Shares Amount
----------- ----------- -------- ------------
Balance forward 22,187,999 $22,677,249 52,346 $ 70,862
Preferred stock issued
for conversion of debt
at $1.00 per share - - 10,134 10,134
Common stock issued for
conversion of preferred at
$0.20 per share 50,670 10,134 (10,134) (10,134)
Preferred stock issued for
conversion of debt at $1.00
per share - - 5,069 5,069
Discount on preferred stock - - - 1,267
Common stock issued for
cash at $0.20 per share 125,000 25,000 - -
Common stock issued for
cash at $.016 per share 1,562,500 250,000 - -
Preferred stock issued for
conversion of debt at $1.00
per share - - 10,154 10,154
Discount on preferred stock - - - 2,538
Preferred stock issued for
conversion of debt at $1.00
per share - - 5,092 5,092
Discount on preferred stock - - - 1,273
---------- ----------- --------- ------------
Balance forward 23,926,169 $22,962,383 72,661 $ 96,255
---------- ----------- --------- ------------
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- ------------
Balance forward $ (67,292) $ - $(23,548,976)
Preferred stock issued
for conversion of debt
at $1.00 per share - - -
Common stock issued for
conversion of preferred at
$0.20 per share - - -
Preferred stock issued for
conversion of debt at $1.00
per share - - -
Discount on preferred stock - - (1,267)
Common stock issued for
cash at $0.20 per share - - -
Common stock issued for
cash at $.016 per share - - -
Preferred stock issued for
conversion of debt at $1.00
per share - - -
Discount on preferred stock - - (2,538)
Preferred stock issued for
conversion of debt at $1.00
per share - - -
Discount on preferred stock - - (1,273)
----------- --------- ------------
Balance forward $ (67,292) $ - $(23,554,054)
----------- --------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
-------------------------- ---------------------
Shares Amount Shares Amount
---------- ----------- ------- ------------
Balance forward 23,926,169 $22,962,383 72,661 $ 96,255
Common stock issued for cash
at $0.20 per share 50,000 10,000 - -
Preferred stock issued for
conversion of debt at $1.00
per share - - 40,746 40,745
Discount on preferred stock - - - 8,149
Common stock issued for
conversion of preferred at
$0.25 per share 203,730 40,745 (40,746) (40,745)
Preferred stock issued for
conversion of debt at $1.00
per share - - 10,189 10,189
Discount on preferred stock - - - 2,547
Preferred stock issued for
conversion of debt at $1.00
per share - - 10,195 10,195
Discount on preferred stock - - - 2,039
Common stock issued for
conversion of debt at $0.25
per share 50,975 10,195 (10,195) (10,195)
Pro-rata cumulative non-cash
preferred stock dividend - - - 1,294
Net loss for the year
ended March 31, 2004 - - - -
---------- ----------- --------- ------------
Balance, March 31, 2004 24,230,874 $23,023,323 82,850 $ 120,473
---------- ----------- --------- ------------
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance forward $ (67,292) $ - $(23,554,054)
Common stock issued for cash
at $0.20 per share - - -
Preferred stock issued for
conversion of debt at $1.00
per share - - -
Discount on preferred stock - - (8,149)
Common stock issued for
conversion of preferred at
$0.25 per share - - -
Preferred stock issued for
conversion of debt at $1.00
per share - - -
Discount on preferred stock - - (2,547)
Preferred stock issued for
conversion of debt at $1.00
per share - - -
Discount on preferred stock - - (2,039)
Common stock issued for
conversion of debt at $0.25
per share - - -
Pro-rata cumulative non-cash
preferred stock dividend - - (1,294)
Net loss for the year
ended March 31, 2004 - - (152,351)
------------ --------- ------------
Balance, March 31, 2004 $ (67,292) $ - $(23,720,434)
------------ --------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
-------------------------- ---------------------
Shares Amount Shares Amount
---------- ----------- ------- ------------
Balance, March 31, 2004 24,230,874 $23,023,323 82,850 $ 120,473
Stock options issued to
consultants for variable
deferred consulting fees
(unaudited) - 507,877 - -
Intrinsic value of stock
options issued to Board
Member below market for
services (unaudited) - 3,000 - -
Common stock issued for
services at $0.17 per share
(unaudited) 30,000 5,100 - -
Stock offering costs
(unaudited) - (5,100) - -
Common stock issued for
services at $0.17 per share
(unaudited) 240,000 40,800 - -
Stock offering costs
(unaudited) - (40,800) - -
Common stock issued for
conversion of debt at
$0.20 per share
(unaudited) 376,165 75,232 - -
Common stock issued for
cash at $0.10 per share
(unaudited) 750,000 75,000 - -
Amortization of expenses
prepaid with common stock
(unaudited) - - - -
Amortization and
revaluation of variable
deferred consulting fees
(unaudited) - 107,898 - -
---------- ----------- --------- ------------
Balance Forward 25,627,039 $23,792,330 82,850 $ 120,473
---------- ----------- --------- ------------
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance, March 31, 2004 $ (67,292) $ - $(23,720,434)
Stock options issued to
consultants for variable
deferred consulting fees
(unaudited) - (507,877) -
Intrinsic value of stock
options issued to Board
Member below market for
services (unaudited) - - -
Common stock issued for
services at $0.17 per share
(unaudited) - - -
Stock offering costs
(unaudited) - - -
Common stock issued for
services at $0.17 per share
(unaudited) - - -
Stock offering costs
(unaudited) - - -
Common stock issued for
conversion of debt at
$0.20 per share
(unaudited) - - -
Common stock issued for
cash at $0.10 per share
(unaudited) - - -
Amortization of expenses
prepaid with common stock
(unaudited) 21,250 - -
Amortization and
revaluation of variable
deferred consulting fees
(unaudited) - 214,544 -
------------ --------- ------------
Balance Forward $ (46,042) $(293,333) $(23,720,434)
------------ --------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)(Continued)
Common Shares Preferred Shares
-------------------------- ---------------------
Shares Amount Shares Amount
---------- ----------- ------- ------------
Balance Forward 25,627,039 $23,792,330 82,850 $ 120,473
Pro-rata cumulative
non-cash preferred Stock
dividend (unaudited) - 4,520 - -
Net loss for the three
months ended June 30,
2004 (unaudited) - - - -
---------- ----------- --------- ------------
Balance, June 30, 2004
(Unaudited) 25,627,039 $23,796,850 82,850 $ 120,473
========== =========== ========= ============
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance Forward $ (46,042) $(293,333) $(23,720,434)
Pro-rata cumulative
non-cash preferred Stock
dividend (unaudited) - - (4,520)
Net loss for the three
months ended June 30,
2004 (unaudited) - - (364,470)
------------ --------- ------------
Balance, June 30, 2004
(Unaudited) $ (46,042) $(293,333) $(24,089,424)
============ ========= ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the
Three Months Ended
June 30,
----------------------
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(364,470) $ (10,220)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation - 14,408
Gain on extinguishment (43,990) -
Stock options issued for consulting services 322,442 -
Stock options issued for board compensation 3,000 -
Amortization of expenses prepaid with common stock 21,250 -
Amortization of debt offering and extension costs - 5,299
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable 90,395 (35,167)
Decrease in prepaid expenses 6,084 99,900
(Increase) in inventory (12,507) (762)
Increase (decrease) in accounts payable and accrued
liabilities (6,587) 78,544
Increase (decrease) in interest payable 12,511 (19,825)
(Decrease) in unearned revenue (33,692) (8,100)
--------- --------
Net Cash Provided (Used) by Operating Activities (5,564) 124,077
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipt on notes receivable 50,000 -
--------- --------
Net Cash Provided by Investing Activities 50,000 -
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) in cash overdraft - (8,053)
Payments to related parties (10,654) -
Payments on long-term debt (73,086) (164,811)
Proceeds from long-term debt - 67,379
Proceeds from common stock 75,000 -
-------- ---------
Net Cash Used by Financing Activities (8,740) (105,485)
-------- ---------
NET INCREASE IN CASH 35,696 18,592
CASH AT BEGINNING OF PERIOD 113,820 11,449
-------- ---------
CASH AT END OF PERIOD $149,516 $ 30,041
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the
Three Months Ended
June 30,
---------------------
2004 2003
----------- ---------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for payment on notes payable
and interest $ 75,232 $ 23,373
Common stock issued for stock offering costs $ 45,900 $ -
Common stock issued for payment on accounts payable $ - $ 28,143
Stock options issued for consulting services $ 322,442 $ -
Stock options issued for board compensation $ 3,000 $ -
Cash Paid For:
Interest $ - $ 16,367
Income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2004 and March 31, 2004
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted in accordance with such rules and regulations.
The information furnished in the interim condensed consolidated financial
statements include normal recurring adjustments and reflects all adjustments,
which, in the opinion of management, are necessary for a fair presentation of
such financial statements. Although management believes the disclosures and
information presented are adequate to make the information not misleading, it
is suggested that these interim condensed consolidated financial statements be
read in conjunction with the Company's most recent audited financial
statements and notes thereto included in its March 31, 2004 Annual Report on
Form 10-KSB. Operating results for the three months ended June 30, 2004 are
not necessarily indicative of the results that may be expected for the year
ending March 31, 2005.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using accounting
principles generally accepted in the United States of America applicable to a
going concern which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company does not
have significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating costs.
Additionally, the Company has accumulated significant losses, has negative
working capital, and a deficit in stockholders' equity. All of these items
raise substantial doubt about its ability to continue as a going concern. 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.
F-16
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2004 and March 31, 2004
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
During the quarter ended June 30, 2004, the Company issued options to purchase
150,000 shares of common stock to a newly appointed member of the Board of
Directors for services rendered. The options are exercisable at $0.15 per
share for 10 years. The issuance of these options resulted in $3,000 in non-
cash director expenses included in general and administrative expense.
Due to the death of a member of the Company's Board of Directors and in
accordance with the terms of the related option agreements, options to
purchase up to 880,951 shares of the Company's common stock were allowed to
expire unexercised.
During the quarter ended June 30, 2004, the Company issued options to purchase
6,000,000 shares of its common stock for prepaid consulting fees. The options
are exercisable immediately with 2,000,000 options exercisable at a price of
$0.10 per share for 60 days while 4,000,000 are exercisable at a price of
$0.25 per share for 120 days. During the quarter, 750,000 options were
exercised at $0.10 and 1,250,000 were allowed to expire unexercised. The
issuance of these options resulted in the recording of $372,988 in variable
deferred consulting fees.
In accordance with EITF 96-18, "Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services", and due to the options being issued for ongoing services,
the options are being valued as the services are completed. In order to
capture the changes in the fair value of the options over the term of service,
changes in the fair values at interim reporting dates are attributed in
accordance with FIN 28, "Accounting for Stock Appreciation Rights and Other
Variable Stock Option or Award Plans". FIN 28 states that consulting expense
should be measured at the end of each period as the amount by which the fair
value of the options covered by a grant exceeds the option price or value
specified under the plan and should be accrued as a charge to expense over the
periods the grantee performs the related services. Changes in the quoted
market value are being reflected as adjustments of deferred consulting and
consulting expense in the period and will continue until the date the services
are complete. Consulting deferred during the service period is being adjusted
in subsequent periods up to the measurement date for changes, either increases
or decreases, in the fair value of the options covered by the grant but shall
not be adjusted below zero. The offsetting adjustment is being made to
consulting expense of the period in which changes in the fair value occur.
The issuance of these options resulted in the recording of an increase in
deferred valuation of $34,787 and $287,775 in non-cash consulting expense
during the quarter ended June 30, 2004.
During the quarter ended June 30, 2004, the Company issued options to purchase
800,000 shares of its common stock for prepaid consulting fees. The options
are exercisable immediately in groups of 200,000 at prices of $0.10, $0.20,
$0.30 and $0.35 per share for one year. The issuance of these options
resulted in the recording of $134,889 in variable deferred consulting fees.
In accordance with EITF 96-18 and FIN 48, the issuance of these options
resulted in the recording of an increase in deferred valuation of $73,111 and
$34,667 in non-cash consulting expense during the quarter ended June 30, 2004.
SFAS No. 148, requires the Company to provide pro forma information regarding
net loss and net loss per share as if compensation costs for the Company's
stock option plans and other stock awards had been determined in accordance
with the fair value based method prescribed in SFAS No. 148. The current year
pro forma net loss includes $13,722 of prior
F-17
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2004 and March 31, 2004
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
year option expense amortization. The Company estimates the fair value of
each stock award at the grant date by using the Black-Scholes option pricing
model.
For the Three Months Ended
June 30,
--------------------------
2004 2003
------------ ----------
Net loss:
As reported $ (364,470) $ (10,220)
Pro Forma (390,401) (80,921)
Net loss per share:
As reported $ (0.01) $ (0.00)
Pro Forma (0.02) (0.02)
The Company has the following outstanding options as of June 30, 2004:
Date of Exercise Exercise Amount Amount Amount
Description Grant Number Price Exercised Exp/Cnld Vested
- ---------------- -------- --------- -------- --------- --------- ----------
1) Employee 10-24-01 50,000 $ 0.30 0 0 50,000
2) Employee 12-01-01 24,230 $ 0.15 0 0 24,230
3) Board Members 12-10-01 1,000,000 $ 0.30 0 (250,000) 750,000
4) Board Members 06-03-02 1,000,000 $ 0.16 0 (250,000) 750,000
5) Employees 07-01-02 335,000 $ 0.16 0 0 335,000
6) Employee 07-15-02 15,000 $ 0.16 0 0 15,000
7) Employee 08-15-02 5,000 $ 0.16 0 0 5,000
8) Board Members 10-21-02 499,998 $ 0.09 0 (166,666) 333,332
9) Board Members 05-15-03 892,855 $ 0.07 0 (214,285) 678,570
10) Employee 05-20-03 100,000 $ 0.07 0 0 100,000
11) Employee 07-25-03 25,000 $ 0.10 0 0 25,000
12) Employee 09-05-03 150,000 $ 0.07 0 0 150,000
13) Employee 09-25-03 25,000 $ 0.15 0 0 0
14) Employee 04-28-04 150,000 $ 0.15 0 0 150,000
15) Consultant 04-28-04 2,000,000 $ 0.10 (750,000)(1,250,000) 0
16) Consultant 04-28-04 4,000,000 $ 0.25 0 0 4,000,000
17) Consultant 04-28-04 200,000 $ 0.10 0 0 200,000
18) Consultant 04-28-04 200,000 $ 0.20 0 0 200,000
19) Consultant 04-28-04 200,000 $ 0.30 0 0 200,000
20) Consultant 04-28-04 200,000 $ 0.35 0 0 200,000
---------- --------- ---------- ----------
11,072,083 (750,000)(2,130,951) 8,166,132
========== ========= ========== ==========
F-18
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2004 and March 31, 2004
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
Risk-Free
Fair Interest Expected Expected
Description Value Rate Life Volatility
---------------- --------- --------- -------- ----------
1) Employees $ 0.19 3.76% 3.00 100.52%
2) Employee $ 0.14 3.76% 3.00 99.80%
3) Board Members $ 0.20 3.76% 10.00 99.80%
4) Board Members $ 0.15 5.69% 10.00 128.9%
5) Employee $ 0.14 5.48% 3.50 157.77%
6) Employee $ 0.14 2.84% 3.50 152.96%
7) Employee $ 0.14 2.84% 3.30 163.77%
8) Board Members $ 0.09 2.84% 10.00 158.83%
9) Board Members $ 0.09 3.94% 10.00 151.61%
10) Employee $ 0.06 3.94% 4.00 151.61%
11) Employee $ 0.12 2.81% 4.00 156.24%
12) Employee $ 0.11 2.81% 4.00 152.03%
13) Employee $ 0.11 3.07% 5.85 152.03%
14) Employee $ 0.17 4.43% 10.00 344.55%
15) Consultant $ 0.08 0.98% 0.17 187.13%
16) Consultant $ 0.05 0.98% 0.33 187.13%
17) Consultant $ 0.17 1.55% 1.00 537.80%
18) Consultant $ 0.17 1.55% 1.00 537.80%
19) Consultant $ 0.17 1.55% 1.00 537.80%
20) Consultant $ 0.17 1.55% 1.00 537.80%
b. Warrants
During the quarter ended June 30, 2004, warrants representing rights to
purchase 159,784 shares of common stock were allowed to expire unexercised and
there are no warrants remaining at June 30, 2004.
NOTE 4 - MATERIAL EVENTS
During July 2004, the Company agreed to a Release of All Claims and Settlement
Agreement (the Settlement) with Xerox Capital Services, LLC in regard to a
past due notes payable and copier lease payments. The Settlement calls for
the payment of $44,252 in installments as follows: $7,500 upon execution;
$10,000 on or before August 5, 2004; $10,000 on or before August 19, 2004;
$12,500 on or before September 15, 2004; and $4,252 on or before October 15,
2004. In addition, the Company agreed to return the copier. The Company has
recognized a gain on extinguishment of debt of $43,990 as a result of this
Settlement.
F-19
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2004 and March 31, 2004
NOTE 5 - SUBSEQUENT EVENTS
During July 2004, the Company issued 250,000 shares of common stock to its
Chief Executive Officer for the non-cash exercise of options, reducing related
party debt by $17,500.
During July 2004, the Company issued options to purchase 5,000 shares of its
common stock for consulting services rendered. The options are exercisable
immediately at a price of $0.15 per share for five years.
During July 2004, the Company issued options to purchase 153,533 shares of its
common stock to an employee. The options are exercisable at $0.15 per share
as follows: 50,000 on or after July 29, 2005; 50,000 on or after July 29,
2006; and, 53,533 on or after July 29, 2007. The options expire on July 29,
2009.
During July 2004, the Company issued options to purchase 50,000 shares of its
common stock to an employee. The options are exercisable at $0.13 per share
as follows: 10,000 on or after July 10, 2005; 20,000 on or after July 10,
2006; and, 20,000 on or after July 10, 2007. The options expire on July 10,
2009.
During August 2004, the Company issued options to purchase 50,000 shares of
its common stock to an employee. The options are exercisable at $0.13 per
share as follows: 10,000 on or after July 10, 2005; 20,000 on or after July
10, 2006; and, 20,000 on or after July 10, 2007. The options expire on July
10, 2009.
F-20
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------
Results of Operations.
- ----------------------
Three months ended June 30, 2004, compared to three months ended
June 30, 2003.
- --------------
Revenues for the three-month period ended June 30, 2004,
decreased by $46,656, or (9.5%) to $444,698 as compared to $491,354 for the
three-month period ended June 30, 2003. Revenues decreased due to a policy
change in the fourth quarter of fiscal year 2004. PCS changed its policy to
give our customers more choice in their lab materials. Under the new policy,
our customers can choose where to purchase their lab materials (e.g. LEGO
(Registered) manipulatives) and they simply purchase the PCS curriculum,
customized furniture unit and site license materials from PCS. There is no
effect on our gross profit as our revenues are reduced by same amount as our
cost of goods sold. PCS sold 279 labs during the three-month period ended
June 30, 2004, which is an increase of 84.8%, or 128 labs, as compared to 151
labs for the three-month period ended June 30, 2003.
General and administrative costs have increased by $93,743, or 62.9%
to $242,722 for the three-month period ended June 30, 2004, as compared to
$148,979 for the three-month period ended June 30, 2003. This increase is
primarily due to increased commission expense, due to a restructuring of our
employee sales department commission agreements; an increase in outside
consulting services; and an increase in marketing expenses, including travel,
trade shows and marketing brochures.
Operating expenses for the three-month period ended June 30, 2004,
included a non-cash expenditure for $322,442 associated with stock options
which were granted to a consultant. The scope of said consulting agreement
includes advisement and consultation regarding distribution strategies,
evaluation of potential acquisition targets and the structuring of any such
transactions, and business development strategies, including geographic and
service expansion plans. The approximate total non-cash cost of this
consulting agreement at June 30, 2004, is $615,775, with the remainder,
$293,333, ($615,775-$322,442), to be amortized over the remaining life of the
agreement.
Interest expense for the three-month period ended June 30, 2004,
increased to $30,438 as compared to $25,280 for the three month period ended
June 30, 2003.
We had a net loss of ($364,470), or ($0.01) per share, for the three
months ended June 30, 2004, as compared to a net loss of ($10,220), or ($0.00)
per share, for the quarterly period ended June 30, 2003. The net loss for the
three months ended June 30, 2004, after removing the costs of stock for
services of $322,442, is ($42,028), or ($0.00) per share.
Liquidity and Capital Resources.
- --------------------------------
We had a cash balance of $149,516 at June 30, 2004. Management
believes that the cash received from delivered sales orders, as well as
continued limited offerings of our common stock, will be sufficient to meet
our operating expenses.
Item 3. Controls and Procedures.
- ----------------------------------
As of the end of the period covered by this Quarterly Report, we carried
out an evaluation, under the supervision and with the participation of our
President and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures. Based on this evaluation, our President and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information required to be
included in our periodic Securities and Exchange Commission reports. It
should be noted that the design of any system of controls is based in part
upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions, regardless of how remote. In addition,
we reviewed our internal controls over financial reporting, and there have
been no changes in our internal controls or in other factors in the last
fiscal quarter that has materially affected or is reasonably likely to
materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ----------------------------
None; not applicable.
Item 2. 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
- ----------- ------ ------ ------ ------
Hazen & Josephine Sandwick 10,110 (1)
David Levosky 11,614 (1)
John Ariko, Jr. 15,165 (1)
Dave & Sue Kimball 10,134 (1)
Sina Leatha 20,373 (1)
Charles Bradley 20,373 (1)
Steve Womack 10,195 (1)
Frank Klescewski 30,000 (2)
Ralph & Vera Long 51,380 (3)
Mark Boland 36,015 (3)
Diane Stump 5,145 (3)
Trevor Brown 51,460 (3)
Paul Kuen 25,730 (3)
Barbara Harris 77,300 (3)
Kenneth Flint 25,730 (3)
Ronald Scheeler 25,805 (3)
Tammy Reuben 25,855 (3)
Fred & Debbie Harper 51,745 (3)
Javan Khazali 750,000 $75,000(4)
(1) These shares were issued to correct the number of shares issued for a
previous conversion of indentured trust debt into common stock. The original
conversion shares were issued at $0.25/share, but should have been issued at
$0.20/share. These are the additional shares due said investors.
(2) Issued for services.
(3) These shares were issued for conversion of indentured trust debt at
$0.20/share.
(4) These shares were issued in conjunction with PCS' Form S-8 Filing in
April, 2004, for consulting services.
Item 3. Defaults Upon Senior Securities.
- ------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- --------------------------------------------------------------
None; not applicable.
Item 5. Other Information.
- ----------------------------
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
- -------------------------------------------
(a) Exhibits.
31.1 302 Certification of Anthony A. Maher
31.2 302 Certification of Christina M. Vaughn
32 906 Certifications
SB-2 Registration Statement Filed with an Effective Date
of May 11, 2001*
* Incorporated by Reference.
(b) Reports on Form 8-K.
8-K Current Report Dated July 1, 2004, and filed with the
Securities and Exchange Commission on July 2, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCS EDVENTURES.COM, INC.
Date: 8/23/2004 By:/s/Anthony A. Maher
---------- -------------------------------------
Anthony A. Maher
Chief Executive Officer, President and
Chairman of the Board of Directors
Date: 8/23/2004 By:/s/Christina M. Vaughn
---------- -------------------------------------
Christina M. Vaughn
Chief Financial Officer
Date: 8/23/2004 By:/s/Donald J. Farley
---------- -------------------------------------
Donald J. Farley
Secretary and Director
Date: 8/23/2004 By:/s/Michael McMurray
---------- -------------------------------------
Michael McMurray
Director