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, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File No. 000-49990
PCS EDVENTURES!.COM, INC.
-------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
IDAHO 82-0475383
----- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
345 Bobwhite Court, Suite #200
Boise, Idaho 83706
------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (208) 343-3110
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
Check whether the Registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
29,389,294
January 31, 2006
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, 2005 and March 31, 2005
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
December 31, March 31,
2005 2005
----------- ----------
(Unaudited)
CURRENT ASSETS
Cash $ 63,310 $ 16,752
Restricted cash 1,155 -
Accounts receivable 539,005 130,569
Inventory 39,666 8,304
Deferred costs 382 110,367
Prepaid expenses 18,422 14,826
Other assets 10,931 -
----------- ----------
Total Current Assets 672,871 280,818
----------- ----------
FIXED ASSETS (NET) 17,713 11,917
----------- ----------
INTELLECTUAL PROPERTY (NET) 18,593 -
----------- ----------
EDUCATIONAL SOFTWARE (NET) 142,097 -
----------- ----------
GOODWILL 349,580 -
----------- ----------
OTHER ASSETS
Deposits 6,175 6,225
----------- ----------
Total Other Assets 6,175 6,225
----------- ----------
TOTAL ASSETS $ 1,207,029 $ 298,960
=========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31, March 31,
2005 2005
--------- ----------
(Unaudited)
CURRENT LIABILITIES
Bank overdraft $ 9,217 $ -
Accounts payable 414,324 183,068
Stock payable 289,001 -
Accrued compensation 44,016 40,537
Payroll taxes payable 33,999 87,669
Deposits payable 4,286 -
Accrued interest 63,035 75,044
Accrued expenses 63,867 59,079
Unearned revenue 310,184 269,571
Loan payable 47,766 -
Notes payable - related parties 116,690 117,054
Notes payable 235,263 205,465
---------- ---------
Total Current Liabilities 1,631,648 1,037,487
---------- ---------
Total Liabilities 1,631,648 1,037,487
---------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value, authorized
10,000,000 shares, 15,246 shares issued
and outstanding 56,372 56,372
Common stock, no par value, authorized 50,000,000
shares; 30,540,212 and 27,355,451 shares issued
and outstanding, respectively 24,767,129 23,868,669
Variable deferred consulting fees - (1,000)
Accumulated other comprehensive loss 210 -
Accumulated deficit (25,248,330)(24,662,568)
----------- -----------
Total Stockholders' Equity (Deficit) (424,619) (738,527)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 1,207,029 $ 298,960
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
-------------------------- ------------------------
2005 2004 2005 2004
---------- ---------- ---------- -----------
REVENUE
Lab Revenue $ 224,338 $ 213,936 $ 1,876,712 $ 837,648
License Revenue 59,209 36,057 150,691 123,132
Subscription Revenue 1,091 4,168 3,644 11,218
----------- ----------- ----------- -----------
Total Revenues 284,638 254,161 2,031,047 971,998
COST OF GOODS SOLD/
COST OF SALES 354,858 113,888 1,214,150 368,521
----------- ----------- ----------- -----------
GROSS PROFIT (70,220) 140,273 816,897 603,477
----------- ----------- ----------- -----------
OPERATING EXPENSES
Salaries and wages 205,324 162,241 510,132 430,108
Depreciation expense 6,788 275 9,169 367
Common stock and stock
options issued for
consulting expense - (3,509) - 483,921
General and administrative 299,680 170,928 855,720 511,388
Other operating expenses 333 - - -
----------- ----------- ----------- -----------
Total Operating Expenses 512,125 329,935 1,375,021 1,425,784
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (582,345) (189,662) (558,124) (822,307)
----------- ----------- ----------- -----------
OTHER INCOME AND EXPENSES
Gain on settlement of debt - - - 43,990
Interest income 11 15 - 987
Interest expense (12,220) (16,047) (47,087) (56,497)
Other income 4,957 3,517 19,449 16,086
Other expense - (1,788) - (3,783)
----------- ----------- ----------- -----------
Total Other Income and
(Expenses) (7,252) (14,303) (27,638) 783
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES (589,597) (203,965) (585,762) (821,524)
INCOME TAX EXPENSE - - - -
----------- ----------- ----------- -----------
NET INCOME (LOSS) (589,597) (203,965) (585,762) (821,524)
Foreign currency
translation 210 - 210 -
----------- ----------- ----------- -----------
COMPREHENSIVE NET
INCOME (LOSS) $ (589,387) $ (203,965) $ (585,552)$ (821,524)
=========== =========== =========== ===========
F-4
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
(Continued)
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
--------------------------- ------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
BASIC INCOME (LOSS)
PER SHARE $ (0.02) $ (0.01) $ (0.02)$ (0.03)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
BASIC SHARES OUTSTANDING 27,226,279 25,745,125 27,277,971 18,640,974
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
Common Shares Preferred Shares
----------------------- --------------------
Shares Amount Shares Amount
---------- ----------- --------- ----------
Balance, March 31, 2004 24,230,874 $ 23,023,323 82,850 $120,473
Common stock issued for
services at $0.17 per
share 30,000 5,100 - -
Stock offering costs - (5,100) - -
Common stock issued for
services at $0.17 per
share 240,000 40,800 - -
Stock offering costs - (40,800) - -
Value of options issued
to employees
below market value - 3,000 - -
Value of options issued
to consultants
below market value - 507,877 - -
Common stock issued for
conversion of debt and
interest at $0.20 per
share 376,165 75,232 - -
Common stock issued for
cash at $0.10 per share
for option exercise 750,000 75,000 - -
Intrinsic value of
employee options issued
below market value - 5,000 - -
Common stock issued for
related party note payable
reduction at $0.07 per
share 250,000 17,500 - -
Fair value of options
issued to consultant - 696 - -
Common stock issued for
conversion of preferred
stock at $0.20 per share 338,020 67,603 (67,604) (67,603)
Options issued to directors
for accrued director fees - 9,241 - -
---------- ----------- --------- ------------
Balance forward 26,215,059 $23,784,472 15,246 $ 52,870
---------- ----------- --------- ------------
F-6
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Shares Preferred Shares
------------------------- ----------------------
Shares Amount Shares Amount
---------- ------------ --------- -----------
Balance forward 26,215,059 $23,784,472 15,246 $ 52,870
Contributed capital for
accrued director fee - 50,759 - -
Pro-rata cumulative
non-cash preferred stock
dividend - - - 3,502
Amortization of prepaid
expense - - - -
Amortization and revaluation
of consulting expense - (92,102) - -
Stock issued for marketing
services at $0.09 per share 250,000 22,500 - -
Stock issued for legal
services at $0.09 per share 500,000 45,000 - -
Stock issued for accounts
payable at $0.15 per share 45,833 6,875 - -
Stock issued for note
payable to related party
at $0.06 per share 344,559 20,674 - -
Amortization of prepaid
expense - - - -
Fair value of options
issued to consultant - 491 - -
Options issued to directors
for accrued director fees - 28,416 - -
Contributed capital for
accrued director fees - 1,584 - -
Net loss,
March 31, 2005 - - - -
---------- ----------- --------- ----------
Balance, March 31, 2005 27,355,451 $ 23,868,669 15,246 $ 56,372
---------- ----------- --------- ----------
F-7
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Shares Preferred Shares
----------------------- --------------------
Shares Amount Shares Amount
---------- ----------- --------- ----------
Balance, March 31, 2005 27,355,451 $ 23,868,669 15,246 $ 56,372
Options issued to directors
for accrued director fees
(unaudited) - 15,000 - -
Treasury stock issued for
legal services (unaudited) - 21,250 - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) 15,000 2,400 - -
Stock issued for cash
for $0.20 per share
(unaudited) 35,000 7,000 - -
Stock issued for public
relations services for
$0.095/share (unaudited) 90,972 8,649 - -
Stock issued for the
exercise of options for
$0.13 per share (unaudited) 205,211 26,645 - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) 654,706 112,485 - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) 12,815 2,178 - -
Stock issued for cash
for $0.17 per share
(unaudited) 33,430 5,683 - -
Amortization and revaluation
of consulting expense
(unaudited) - (7,667) - -
Value of options issued to
employees below market value
(unaudited) - 2,825 - -
Stock issued for services at
$0.705 per share (unaudited) 20,000 14,100 - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) 60,900 10,353 - -
Stock issued for the
exercise of options for
$0.15 per share (unaudited) 5,000 750 - -
Stock issued for marketing
services @ $0.12 per share
(unaudited) 25,208 3,025 - -
Value of stock issued for
marketing services below
market value
(unaudited) - 1,008 - -
Stock issued for the
exercise of options for
$0.10 per share (unaudited) 4,500 450 - -
Stock issued for the
exercise of options for
$0.31 per share (unaudited) 344 107 - -
Value of options issued to
employee below market value
(unaudited) - 7,000 - -
Stock issued for services at
$0.70 per share (unaudited) 100,000 70,000 - -
Stock issued for the
reduction of interest and
principal for a note
payable for a related party
(unaudited) 100,000 16,000 - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) 75,000 12,000 - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) 50,000 8,000 - -
Stock issued for the
exercise of options at
weighted average of
$0.0885 per share
(unaudited) 555,435 49,145 - -
Stock issued for
interest payments at
$0.20 per share (unaudited) 53,746 10,749 - -
Stock issued for the
exercise of options for
$0.07 per share (unaudited) 214,285 15,000 - -
Stock issued for the
exercise of options for
$0.10 per share (unaudited) 15,000 1,500 - -
Options issued to directors
for accrued director fees
(unaudited) - 22,500 - -
Stock issued for purchase of
LabMentors (unaudited) 700,000 420,000
Stock issued to Officer
for compensation at
$0.74 per share (unaudited) 6,756 5,000 - -
Stock issued for royalty
payments at $0.155 per share
(unaudited) 31,453 4,875 - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) 35,000 5,600 - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) 10,000 1,600 - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) 75,000 12,000 - -
Options issued to directors
for accrued director fees
(unaudited) - 11,250 - -
Net income,
December 31, 2005
(unaudited) - - - -
Foreign currency adjustment
(unaudited) - - - -
---------- ----------- --------- ------------
Balance,
December 31, 2005
(unaudited) 30,540,212 $24,767,129 15,246 $ 56,372
=========== ============ ========= ============
F-8
[CONTINUED]
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance, March 31, 2004 $(67,292) $ - $(23,720,434)
Common stock issued for
services at $0.17 per
share - - -
Stock offering costs - - -
Common stock issued for
services at $0.17 per share - - -
Stock offering costs - - -
Value of options issued to
employees below market value - - -
Value of options issued to
consultants below market value - (507,877) -
Common stock issued for
conversion of debt and
interest at $0.20 per
share - - -
Common stock issued for
cash at $0.10 per share
for option exercise - - -
Value of employee options
issued below market value - - -
Common stock issued for
related party note payable
reduction at $0.07 per
share - - -
Fair value of options
issued to consultant - - -
Common stock issued for
conversion of preferred
stock at $0.20 per share - - -
Options issued to directors
for accrued director fees - - -
Contributed capital for
accrued director fees - - -
----------- --------- ------------
Balance forward $ (67,292) $(507,877) $(23,720,434)
----------- --------- ------------
F-6
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance forward $ (67,292) $(507,877) $(23,720,434)
Pro-rata cumulative
non-cash preferred stock
dividend - - (3,502)
Amortization of prepaid
expense 67,292 - -
Amortization and revaluation
of consulting expense - 506,877 -
Stock issued for marketing
services at $0.09 per share (22,500) - -
Stock issued for legal
services at $0.09 per share (45,000) - -
Stock issued for accounts
payable at $0.15 per share - - -
Stock issued for note
payable to related party
at $0.06 per share - - -
Amortization of prepaid
expense 67,500 - -
Fair value of options
issued to consultant - - -
Options issued to directors
for accrued director fees - - -
Contributed capital for
accrued director fees - - -
Net loss,
March 31, 2005 - - (938,632)
---------- ---------- -----------
Balance, March 31, 2005 $ - $ (1,000) $(24,662,568)
---------- ---------- -----------
F-7
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Variable
Expenses Prepaid Deferred Accumulated
with Common Stock Consulting Deficit
----------------- ---------- -----------
Balance, March 31, 2005 $ - $ (1,000) $(24,662,568)
Options issued to directors
for accrued director fees
(unaudited) - - -
Treasury stock issued for
legal services (unaudited) - - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) - - -
Stock issued for cash
for $0.20 per share (unaudited) - - -
Stock issued for public
relations services for
$0.095/share (unaudited) - - -
Stock issued for the
exercise of options for
$0.13 per share (unaudited) - - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) - - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) - - -
Stock issued for cash
for $0.17 per share (unaudited) - - -
Amortization and revaluation
of consulting expense (unaudited) - 1,000 -
Value of options issued to
employees below market value
(unaudited) - - -
Stock issued for services at
$0.705 per share (unaudited) - - -
Stock issued for conversion
of debt and interest at
$0.17 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.15 per share (unaudited) - - -
Stock issued for marketing
services @ $0.12 per share
(unaudited) - - -
Value of stock issued for
marketing services below
market value (unaudited) - - -
Stock issued for the
exercise of options for
$0.10 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.31 per share (unaudited) - - -
Value of options issued to
employee below market value
(unaudited) - - -
Stock issued for services at
$0.70 per share (unaudited) - - -
Stock issued for the reduction of
interest and principal for a note
payable for a related party
(unaudited) - - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) - - -
Stock issued for the
exercise of options at
weighted average of
$0.0885 per share
(unaudited) - - -
Stock issued for
interest payments at
$0.20 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.07 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.10 per share (unaudited) - - -
Options issued to directors
for accrued director fees
(unaudited) - - -
Stock issued for purchase
of LabMentors (unaudited) - - -
Stock issued to Officer
for compensation at
$0.74 per share (unaudited) - - -
Stock issued for royalty
payments at $0.155 per share
(unaudited) - - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) - - -
Stock issued for the
exercise of options for
$0.16 per share (unaudited) - - -
Options issued to directors
for accrued director fees
(unaudited) - - -
Net income,
December 31, 2005
(unaudited) - - (585,762)
Foreign currency adjustment
(unaudited) - - 210
---------- --------- ------------
Balance,
December 31, 2005
(unaudited) - $ - $(25,248,120)
========== ========= ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the
Nine Months Ended
December 31,
----------------------
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(585,762) $(821,524)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation 9,169 367
Gain on extinguishment - (43,990)
Stock/Stock options issued for consulting services 96,782 411,629
Stock options issued for board compensation 48,750 3,000
Stock options issued for compensation 19,700 5,000
Stock issued for legal services 35,000 -
Gain on return of common stock (13,750) -
Amortization of expenses prepaid with common stock (6,667) 101,042
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable (389,303) 299,522
(Increase) in inventory (26,366) (112,102)
Decrease in deferred costs 105,040 -
Increase (decrease) in accounts payable and accrued
liabilities 404,475 (48,741)
Increase in interest payable 38,393 -
Increase in unearned revenue 40,614 137,030
Decrease in other assets (16,449) 5,405
--------- --------
Net Cash Provided (Used) by Operating Activities (240,374) (63,362)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipt on notes receivable - 50,000
Purchase of fixed assets (5,465) (5,500)
-------- --------
Net Cash Provided by (Used) Investing Activities (5,465) 44,500
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to related parties - (10,654)
Principal payments on notes payable (13,807) (96,171)
Cash proceeds from notes payable 151,104 -
Proceeds from common stock 147,880 75,000
Cash from acquisition 63 -
Increase in bank overdraft 7,157 -
-------- ---------
Net Cash Provided (Used) by Financing Activities 292,397 (31,825)
-------- ---------
NET INCREASE (DECREASE) IN CASH 46,558 (50,687)
CASH AT BEGINNING OF PERIOD 16,752 113,820
-------- ---------
CASH AT END OF PERIOD $ 63,310 $ 63,133
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the
Nine Months Ended
December 31,
---------------------
2005 2004
----------- ---------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for payment on notes payable
and interest $ 141,017 $ 75,232
Common stock issued for related party debt $ - $ 38,174
Stock options issued for accrued director fees $ - $ 90,000
Common stock issued for stock offering costs $ - $ 45,900
Common stock issued for accounts payable $ 10,749 $ 6,875
Stock options issued for consulting services $ 1,000 $ 411,629
Stock options issued for employee and
board compensation $ 48,750 $ 3,000
Issuance of stock for acquisition $ 420,000 $ -
Common stock issued for marketing $ 8 $ -
Cash Paid For:
Interest $ 38,393 $ 19,490
Income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31 and March 31, 2005
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). The condensed consolidated
financial statements include the results of PCS Edventures!.com, Inc. and its
subsidiaries. The subsidiaries include PCS School, Inc. and PCS LabMentors,
LTD., which the Company acquired in 1994 and November 30, 2005, respectively.
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 and
presented on an unaudited basis. Although management believes the disclosures
and information presented are adequate to make the information not misleading,
it is suggested that these interim condensed consolidated financial statements
be read in conjunction with the Company's most recent audited financial
statements and notes thereto included in its March 31, 2005 Annual Report on
Form 10-KSB, which is on file with the SEC, and the Company's current 8-K on
file relating to the acquisition of PCS LabMentors dated December 9, 2005.
The financial statements previously presented are on a consolidated basis and
include post-acquisition numbers of PCS LabMentors, LTD., which includes
December 1, 2005 through December 31, 2005. The pre-acquisition net
income(loss) and balance sheet accounts are not included herein.
The operating results for the three and nine month periods ended December 31,
2005 and 2004 are not necessarily indicative of the results that may be
expected for the year ending March 31, 2006.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern that
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company does not have significant
cash or other material assets, nor does it have an established source of
revenues sufficient to cover its operating costs. Additionally, the Company
has accumulated significant losses, has negative working capital, and a
deficit in stockholders' equity. All of these items raise substantial doubt
about its ability to continue as a going concern. Management's plans with
respect to alleviating the adverse financial conditions that caused
shareholders to express substantial doubt about the Company's ability to
continue as a going concern are as follows:
During the fiscal year ending March 2005, the Company opened discussions with
several target companies for possible merger and acquisition activities. The
Company has also entered into several strategic alliances with K'NEX, Science
Demo, and GibsonTechEd for further product development and enhancement. The
Company has also strengthened its international position by naming agents and
installing Learning Labs in Egypt, Dubai, and Saudi Arabia. To date, the
Company has continued to develop marketplace strategy for the US market, as
well as the international market. Further, the Company is still pursuing
merger and acquisition candidates and looking at different marketing
strategies to realign products.
The ability of the Company to continue as a going concern is dependent upon
its ability to successfully accomplish the plan described in the preceding
paragraph and eventually attain profitable operations. The accompanying
consolidated financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
NOTE 3 - DILUTIVE INSTRUMENTS
a. Stock Options
We account for stock-based employee compensation in accordance with Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees," and SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure an amendment of Financial Accounting Standards Board
Statement No. 123." All of which requires the Company to provide pro forma
information regarding net income (loss) and net income (loss) per share as if
compensation costs for the Company's stock option plans and other stock awards
had been determined in accordance with the fair value based method prescribed
in SFAS No. 148. Had this method been in place for the Company, it would have
resulted in additional expense of $9,825 and $10,291 for the nine months ended
December 31, 2005 and 2004, respectively.
The Company would also like to note that the SEC issued SFAS 123(R),
"Share-Based Payment." This new SFAS establishes how companies should account
for transactions wherein the company issues equity instruments in exchange for
services and/or goods. This is not a reporting requirement for the Company
due to its small business filing status.
The Company estimates the fair value of each stock award at the grant date by
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants, respectively: dividend yield of zero
percent for all years; expected volatility of 100% to 538% percent for all
years; risk-free interest rates of 1% to 6%, and expected lives of 1 to 10
years.
For the Nine Months Ended
December 31,
2005 2004
Net income(loss):
As reported $ (585,195) $ (625,551)
Pro Forma (863,467) (747,918)
Net income(loss) per share:
As reported $ (0.02) $ (0.02)
Pro Forma (0.03) (0.03)
The pro forma amounts presented above may not be indicative of the expected
results for the fiscal year ending March 31, 2006.
F-11
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31 and March 31, 2005
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
A summary of the status of the Company's outstanding stock options as
of December 31, 2005 is presented below:
Weighted
Average
Exercise
Shares Price
---------- --------
Outstanding, March 31, 2005 12,704,890 $0.19
Granted 515,789 $0.49
Expired/Cancelled (7,010,951) $0.21
Exercised (2,145,490) $0.11
---------- -------
Outstanding, December 31, 2005 4,064,238 $0.23
========== =======
Exercisable, December 31, 2005 2,938,238 $0.19
========== =======
F-12
PCS EDVENTURES!.COM, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
December 31 and March 31, 2005
NOTE 4 - SUBSEQUENT EVENTS
On November 18 2005, the Company signed a Letter of Intent (LOI) for a stock
purchase by the investment company known as Barron Partners, LP. Barron
conducted due diligence and after a thorough analysis, continued with its
investment in the Company. The investment is structured as stated in the
Company's recent 8-K filed with the SEC on January 1, 2006. All details are
outlined therein and any potential investee is encouraged to review such
document.
In addition, one of PCS' Board Members has exercised stock options after the
quarter close. The total number of shares purchased through exercising stock
options is 25,000 with an exercise price of $0.16 cents per share.
The total amount received by PCS for these transactions was $4,000, which was
applied to a note payable principle and interest due to the Board Member.
NOTE 5 - BUSINESS COMBINATIONS
On November 30, 2005, the Company entered into a Stock Purchase Agreement with
511092 N.B. LTD. dba LabMentors, a Canadian Company, wherein the Company
acquired all of the issued and outstanding shares of common stock of
LabMentors. Since the acquisition the name has been legally changed to PCS
LabMentors, LTD. (LabMentors). The effective date was November 30, 2005 and
as such the results of LabMentors operations are included in our consolidated
financial information from December 1, 2005 forward. LabMentors virtual
on-line labs are utilized by all sectors of education and business
communities, particularly at the university level for educational curriculum.
LabMentors will continue to operate as a Canadian company and based in
Fredericton, New Brunswick. We will be renaming the LabMentors brand as "PCS
LabMentors", since the company will be a wholly owned subsidiary of PCS.
The acquisition provides opportunities for expansion into the college market,
as well as synergies to complement the educational whole learning lab
solutions currently undertaken by the Company. We expect the acquisition to
continue the growth of PCS into the educational markets. The products
provided by LabMentors compliment the current Edventures! lab provided by PCS
as well as incorporates new products into the product mix.
The aggregate purchase price was $420,000, which consisted of 700,000 shares
of PCS stock. There was no cash exchange for the acquisition. The purchase
price was allocated to the assets and liabilities, as well as future earning
potential with the Company's marketing staff, acquired by the Company. The
fair value of the assets and liabilities of LabMentors as of the close of the
acquisition is as follows:
ASSETS
CURRENT ASSETS
Accounts receivable $ 18,947
Other receivable 4,449
Restricted cash 1,152
---------
Total Current Assets 24,548
FIXED ASSETS (NET) 4,308
EDUCATIONAL SOFTWARE (NET) 146,835
INTELLECTUAL PROPERTY (NET) 19,347
---------
TOTAL ASSETS $ 195,038
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank overdraft $ 1,996
Accounts payable 44,451
Deposits payable 4,273
Payroll payable 13,803
Other current liabilities 12,460
Notes payable 47,632
---------
Total Current Liabilities 124,615
---------
Total Liabilities 124,615
---------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value,
authorized unlimited shares;
32,073,961 shares issued
and outstanding 495,781
Accumulated other comprehensive loss (36,648)
Accumulated deficit (388,713)
---------
Total Stockholders' Equity (Deficit) 70,420
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 195,035
=========
Pro forma financials of PCS as if LabMentors was acquired March 31, 2005 and
September 30, 2005, as well as the financial statements for LabMentors as of
September 30, 2005, are available in the Form 8K/A filed on February 15, 2006.
Periods Ended
Sept. 30, May 31,
2005 2005
------- -------
Revenues $1,801,655 $ 1,593,519
Net loss $ (107,660)$(1,098,093)
Net loss per share* $ (0.00)$ (0.04)
Note that the pro forma results of operations are not necessarily indicative
of what the actual results of operations of the Company would have been had
the acquisition occurred at the beginning of fiscal year 2006, nor are they
indicative of future results of operations of the Company.
The purchase of goodwill is normally deductible for tax purposes. However,
since the acquisition was completed through the exchange of stock, goodwill is
not deductible for such purposes.
F-13
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------
Overview.
- ---------
The Company 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 the public and private schools
classroom for grades pre-kindergarten through twelfth grade, after school
market, and home market. Our products and technologies are delivered to the
each of these markets through an inventory of hardware, software, books (both
developed in-house and outside), 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
3-18 to explore the basic foundations of mechanical engineering, structures in
architecture, robotics, math, and science.
We have developed several innovative technology based educational programs.
Our "Academy of Engineering," "Academy of Science," "Academy of Robotics,"
"Edventures! Lab," and "Discover! Lab" products are site-license installations
for classrooms and learning programs. Our "PCS BrickLab!" and "Young Learner
Building Box" 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 Edventures! Labs and our
Discover! Labs site licenses and also serves as a stand-alone home usage
program. Our "Edventures! Online" program is delivered to the home user over
the Internet on a monthly subscription basis. 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.
The results of operations discussed herein are on a consolidated basis and
include post-acquisition numbers of PCS LabMentors, LTD., which includes
December 1, 2005 through December 31, 2005.
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. Any gains or
losses from the foreign currency translation are presented in our statements
of operations. The recently acquired subsidiary is not a significant
component of our business and as such the risk associated therewith is
minimal.
Results of Operations.
- ----------------------
Three months ended December 31, 2005, compared to three months ended
December 31, 2004.
- ------------------
Revenues for the three-month period ended December 31, 2005,
increased to $284,638 or by $30,477 (12.0%) as compared to $254,161 for the
three-month period ended December 31, 2004. This increase is due to
increased sales and marketing efforts throughout the country, as well as
increased international sales. In addition, the new subsidiary has
contributed to the slight increase.
Cost of goods sold for the three-month period ended December 31,
2005, increased by $240,970 (211.6%) to $354,858 as compared to $113,888 for
the three-month period ended December 31, 2004. This increase is due to an
increase in sales, as well as an increase in shipping costs. Included in the
cost of goods sold figure is Sales Commissions, which have also increased due
to the increase in sales and accrual of royalty payments for our distribution
rights on the Academy of Science product line.
Operating expenses for the three-month period ended December 31,
2005, increased by $182,190 (55.2%) to $512,125 as compared to $329,935 for
the three-month period ended December 31, 2004. This increase is primarily
due the Company experiencing an increase in legal and accounting expenses due
to the due diligence associated with acquisition activity. In addition, the
Company hired additional development personnel and had other increases from
the acquisition of LabMentors.
Interest expenses for the three-month period ended December 31, 2005,
decreased by $3,838 (-23.9%) to $12,209 as compared to $16,047 for the
three-month, period ended December 31, 2004. This decrease was due to partial
repayment of short term borrowing, and partially offset by the increase in
interest rates.
Nine months ended December 31, 2005, compared to nine months ended
December 31, 2004.
- ------------------
Revenues for the nine-month period ended December 31, 2005,
increased to $2,031,047 or by $1,059,049 (109.0%) as compared to $971,998 for
the nine-month period ended December 31, 2004. This increase is due to
increased sales and marketing efforts throughout the country, as well as
increased international sales. The largest increase in sales occurred in our
second quarter when several large lab orders were delivered.
Cost of goods sold for the nine-month period ended December 31, 2005,
increased by $827,629 (214.1%) to $1,214,150 as compared to $386,521 for the
nine-month period ended December 31, 2004. This increase is due to an
increase in sales, as well as an increase in shipping costs. Included in the
Cost of goods sold figure is Sales Commissions, which have also increased due
to the increase in sales and accrual of royalty payments for our distribution
rights on the Academy of Science product line.
Operating expenses for the nine-month period ended December 31, 2005,
decreased by $50,762 (-3.6%) to $1,375,022 as compared to $1,425,784 for the
nine-month period ended December 31, 2004. This decrease is primarily due the
non-recurring expense we booked during last year's period for non-cash
consulting expense of $322,442. The decrease in consulting expenses booked
were offset by increased legal and accounting expenses due to the due
diligence associated with acquisition activity, as well as the hiring of
additional personnel.
Interest expenses for the nine-month period ended December 31, 2005,
decreased $9,410 (-16.7%) to $47,087 as compared to $56,497 for the
nine-month period ended December 31, 2004. This decrease is due to our
efforts during the first quarter to convert debt to equity.
Liquidity and Capital Resources.
- --------------------------------
We had a consolidated cash balance of $54,093 at December 31, 2005.
Management believes that the cash received from delivered sales orders,
continued limited offerings of our common stock, and the subsequent events
noted in NOTE 4 above will be sufficient to meet our operating expenses for
the foreseeable future.
Item 3. Controls and Procedures.
- ----------------------------------
As of the end of the period covered by this Quarterly Report, we
carried out an evaluation, under the supervision and with the participation of
our President and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures. Based on this evaluation, our President
and Chief Financial Officer concluded that our disclosure controls and
procedures are effectively designed to ensure that information required to be
disclosed or filed by us is recorded, processed or summarized, within the time
periods specified in the rules and regulations of the Securities and Exchange
Commission. It should be noted that the design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how remote.
In addition, we reviewed our internal controls over financial reporting, and
there have been no changes in our internal controls or in other factors in the
last fiscal quarter that has materially affected or is reasonably likely to
materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ----------------------------
None; not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
- ----------------------------------------------------------------------
Sales of Unregistered Securities During the Last Quarter.
---------------------------------------------------------
Common Preferred
Description Shares Amount Shares Amount
- ----------- ------ ------ ------ ------
Suzanne Haislip 50,000 8,000
Cecil Andrus 555,435 49,145
Robert Fyfe 928 (1)
Leonard & Sonia Coote 2,640 (1)
Steve Womack 2,229 (1)
Hazen & Josephine Sandwick 1,724 (1)
John Ariko, Jr. 2,568 (1)
Ronald Scheeler 1,468 (1)
Sina Leatha 2,218 (1)
Brown Living Trust 2,768 (1)
Mary Kalcic 2,091 (1)
Armand LaSorsa 3,249 (1)
Nelson Wooster 1,967 (1)
Kathleen Cullinan 1,091 (1)
Kenneth Klauer 2,182 (1)
Harris Family Living Trust 4,224 (1)
Diane Stump 299 (1)
Mark Boland 1,969 (1)
Flint Family Trust 1,366 (1)
Paul Kuehn 808 (1)
Ralph Long 2,684 (1)
Allen Reuben 1,468 (1)
Charles Bradley 4,364 (1)
Dave & Sue Kimball 1,724 (1)
David Levosky 1,899 (1)
Fred & Debbie Harper 3,249 (1)
Verl A. Jensen 2,569 (1)
Donald J. Farley 214,285 15,000
Joe & Sarah Egusquiza 15,000 1,500
Zvi Ludmer 6,915 (2)
Roy A. Ludmer 6,246 (2)
Mid-Atlantic Training, Inc. 7,584 (2)
Gregory Shiffner 6,692 (2)
Martin and Helen Tarlow 1,785 (2)
Nimrod Arad 2,231 (2)
David and Sarah Chase 35,000 5,600
William & Laura Baran 10,000 1,600
Robert Grover 75,000 12,000
(1) These shares were issued for interest at a weighted average of $0.0885 per
share.
(2) These shares were issued for royalties at $0.155 per share.
We issued these securities to persons who were either "accredited investors,"
or "sophisticated investors" who, by reason of education, business acumen,
experience or other factors, were fully capable of evaluating the risks and
merits of an investment in our Company; and each had prior access to all
material information about us. We believe that the offer and sale of these
securities was exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to Sections 4(2) and 4(6)
thereof, and Rule 506 of Regulation D of the Securities and Exchange
Commission and from various similar state exemptions, and with respect to the
foreign investors, pursuant to Regulation S of the Securities and Exchange
Commission.
Item 3. Defaults Upon Senior Securities.
- ------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- --------------------------------------------------------------
None; not applicable.
Item 5. Other Information.
- ----------------------------
None; not applicable.
Item 6. Exhibits.
- -------------------
Exhibits.
31.1 302 Certification of Anthony A. Maher
31.2 302 Certification of Christina M. Vaughn
32 906 Certifications
SB-2 Registration Statement Filed with an Effective Date
of May 11, 2001*
* Incorporated by Reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCS EDVENTURES.COM, INC.
Date: 2/13/2006 By: /s/Anthony A. Maher
---------- -------------------------------------
Anthony A. Maher
Chief Executive Officer, President and
Chairman of the Board of Directors
Date: 2/14/2006 By: /s/Christina M. Vaughn
---------- -------------------------------------
Christina M. Vaughn
Chief Financial Officer
Date: 2/17/2006 By: /s/Donald J. Farley
---------- -------------------------------------
Donald J. Farley
Secretary and Director
Date: 2/17/2006 By: /s/Cecil D. Andrus
---------- -------------------------------------
Cecil D. Andrus
Director
Date: 2/16/2006 By: /s/Michael K. McMurray
---------- -------------------------------------
Michael K. McMurray
Director