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, 2006
[ ] 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
Not applicable.
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: August 10, 2006 -
31,361,090 shares.
Transitional Small Business Disclosure Format (Check One): Yes No X
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, 2006 and March 31, 2006
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
June 30, March 31,
2006 2006
----------- ----------
(Unaudited)
CURRENT ASSETS
Cash $ 154,938 $ 297,239
Accounts receivable 417,255 608,453
Prepaid expenses 12,899 14,137
Deferred costs 5,494 13,073
Finished goods inventory 45,830 75,606
Capitalized costs (Net) (Note 3) 44,836 89,667
--------- ----------
Total Current Assets 681,252 1,098,175
--------- ----------
FIXED ASSETS (NET) 12,722 18,164
--------- ----------
INTELLECTUAL PROPERTY (NET) (Note 4) 14,287 16,145
--------- ----------
EDUCATIONAL SOFTWARE (NET) (Note 5) 121,208 130,404
--------- ----------
GOODWILL (Notes 6) 485,238 485,238
--------- ----------
OTHER ASSETS
Deposits 6,175 6,175
Employee receivable 221 1,550
Other assets 1,151 -
--------- ----------
Total Other Assets 7,547 7,725
--------- ----------
TOTAL ASSETS $ 1,322,254 $1,755,851
=========== ==========
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,
2006 2006
--------- ----------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 235,981 $ 312,866
Accrued compensation 64,937 109,531
Payroll taxes payable 24,036 54,886
Deposits payable 4,461 4,280
Accrued interest 1,946 4,280
Accrued expenses (Note 7) 30,628 34,092
Unearned revenue 113,723 136,554
Notes payable - related parties (Note 8) 116,423 116,590
Notes payable (Net) (Note 9) 716,386 471,022
Other current liabilities 7,570 10,322
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Total Current Liabilities 1,316,091 1,253,018
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Total Liabilities 1,316,091 1,253,018
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STOCKHOLDERS' EQUITY (DEFICIT) (Note 10)
Preferred stock, no par value, authorized
10,000,000 shares, no shares issued
and outstanding - -
Common stock, no par value, authorized 40,000,000
shares; 31,361,090, shares issued
and outstanding, respectively 26,551,074 26,377,041
Accumulated comprehensive loss (3,793) (7,136)
Accumulated deficit (26,541,118)(25,867,072)
----------- -----------
Total Stockholders' Equity (Deficit) 6,163 502,833
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 1,322,254 $ 1,755,851
=========== ===========
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,
--------------------------
2006 2005
---------- ----------
REVENUE
Lab Revenue $ 510,333 $ 889,522
License Revenue 50,336 44,132
Subscription Revenue - 1,318
---------- ----------
Total Revenues 560,669 934,972
COST OF GOODS SOLD/
COST OF SALES 243,668 382,211
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GROSS PROFIT 317,001 552,761
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OPERATING EXPENSES
Salaries and wages 219,209 106,768
Depreciation and
amortization expense 397,193 1,190
Options/Warrants expense 111,927 -
General and administrative 272,837 293,767
---------- ----------
Total Operating Expenses 1,001,166 401,725
---------- ----------
OPERATING INCOME (LOSS) (684,165) 151,036
---------- ----------
OTHER INCOME AND EXPENSES
Interest income 553 5
Interest expense (5,016) (23,778)
Other income 14,582 16,455
---------- ----------
Total Other Income and
(Expenses) 10,119 (7,318)
---------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES (674,046) 143,718
INCOME TAX EXPENSE - -
---------- ----------
NET INCOME (LOSS) (674,046) 143,718
Foreign currency
translation 3,343 -
---------- ----------
COMPREHENSIVE NET
INCOME (LOSS) $ (670,703) $ 143,718
========== ==========
BASIC INCOME (LOSS)
PER SHARE $ (0.02) $ 0.01
========== ==========
WEIGHTED AVERAGE NUMBER OF
BASIC SHARES OUTSTANDING 28,087,871 26,515,013
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the
Three Months Ended
June 30,
----------------------
2006 2005
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(674,046) $143,718
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization 352,361 1,190
Amortization of capitalized costs 44,832 -
Stock/Stock options issued for consulting services 40,861 8,649
Stock options issued for board compensation 11,245 15,000
Stock options issued for employee compensation 125,856 2,825
Amortization of expenses prepaid with common stock - (7,667)
Stock issued for legal expenses - 35,000
Gain on return of common stock - (13,750)
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable 191,198 (107,924)
(Increase) decrease in inventory 29,776 (46,291)
Decrease in deferred costs 7,578 110,367
Decrease in accounts payable and accrued
liabilities (182,366) (44,976)
Increase (decrease) in interest payable 2,904 (4,240)
Increase in unearned revenue (22,831) (110,315)
Decrease in other assets 17,490 (4,193)
--------- --------
Net Cash Provided (Used) by Operating Activities (55,142) (22,607)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash payment for notes receivable (4,270) -
Purchase of fixed assets - (2,515)
Loss on sale of fixed assets 3,758 -
--------- --------
Net Cash Provided by (Used) Investing Activities (512) (2,515)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to related parties - -
Principal payments on notes payable (89,990) (27,726)
Payments on notes payable - 60,380
Proceeds from notes payable - 41,728
--------- ---------
Net Cash Provided (Used) by Financing Activities (89,990) 74,382
--------- ---------
Foreign currency translation 3,343 -
--------- ---------
NET INCREASE (DECREASE) IN CASH (142,301) 49,260
CASH AT BEGINNING OF PERIOD 297,239 16,753
--------- ---------
CASH AT END OF PERIOD $ 154,938 $ 66,013
========= =========
Cash Paid For:
Interest $ 5,016 $ 13,199
Income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30 and March 31, 2006
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 October 1994 and November 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, 2006
Annual Report on Form 10-KSB, which is on file with the SEC.
The financial statements presented are on a consolidated basis and
include post-acquisition numbers of PCS LabMentors, LTD. The pre-acquisition
net income(loss) and balance sheet accounts are not included herein.
The operating results for the three month periods ended June 30,
2006 and 2005 are not necessarily indicative of the results that may be
expected for the year ending March 31, 2007.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using Generally
Accepted Accounting Principals 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, and has negative working capital. 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:
The Company continued discussions with several target companies for possible
merger and acquisition activities. Furthermore, the Company continued to
strengthen its strategic alliances with K'NEX, Science Demo, and Absolute
Toy Marketing for further product development and enhancement. The Company
has also strengthened its international position by 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 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
paragraphs 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 - CAPITALIZED COSTS
The capitalized costs of $44,836 are the costs associated with the Note
Payable Agreement dated December 29, 2005, which funded on January 3, 2006,
between the Company and Barron Partners, LP. The total amount of $134,500 is
being amortized over the life of the note payable, which has a conversion date
of September 30, 2006. To date, $89,664 has been amortized. The additional
amount will be amortized each month for the next quarter of fiscal year
2007, after which time the capitalized costs will be fully amortized.
NOTE 4 - INTELLECTUAL PROPERTY
Intellectual property consists of capitalized costs associated with the
development of the Internet software and delivery platform developed by PCS
LabMentors to enable access to the various educational programs and exercises
developed by the Company. In accordance with FAS 86, the initial costs
associated with researching the delivery platform and methods were expensed
until economic feasibility and acceptance were determined. Thereafter, costs
incurred to develop the Internet online delivery platform and related
environments were capitalized until ready for use and able to deliver and
access the Company's educational programs and exercises. Costs incurred
thereafter to maintain the delivery and access platform are expensed as
incurred. These capitalized costs are being amortized on a straight-line
basis over the estimated useful life of the Company's delivery and access
platform, which has been determined to be 60 months. This intellectual
property had a carrying value of $16,145 as of March 31, 2006.
Amortization recognized for the quarter ended June 30, 2006 was $1,858.
NOTE 5 - EDUCATIONAL SOFTWARE
Educational software was purchased by the Company as a part of the acquisition
of LabMentors and consists of internally developed education computer
programs and exercises to be accessed on the Internet. In accordance with FAS
86, the costs associated with research and initial feasibility of the programs
and exercises are expensed as incurred. Once economic feasibility has been
determined, the costs to develop the programs and exercises are capitalized
until they are ready for sale and access and are reported at the lower of
unamortized cost or net realizable value. Capitalized program and exercise
inventory are amortized on a straight-line basis over the estimate useful life
of the program or exercise, generally 42 to 48 months. This educational
software had a carrying value of $130,404 as of March 31, 2006. A total of
$9,196 of related depreciation was recognized during the current quarter ended
June 30, 2006.
NOTE 6 - GOODWILL
The entire goodwill balance of $485,238 at June 30, 2006, which is not
deductible for tax purposes due to the purchase being completed through the
exchange of stock, is related to the Company's acquisition of PCS LabMentors
in November 2005. Included within this amount of goodwill is $135,658 of
costs associated with the acquisition. The capitalized costs are for
accounting, consulting, and legal fees associated with the transaction. With
the acquisition of PCS LabMentors, the Company gained LabMentors' significant
interest in the technical college market and increased the products available
to educational outlets. The Company also obtained the information technology
and programming expertise of LabMentors' workforce, gained additional cost
optimization, and gained greater market flexibility in optimizing market
information and access to collegiate level sales.
The provisions of SFAS 142 require that a two-step impairment test be
performed annually or whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. The first step of
the test for impairment compares the book value of the Company to its
estimated fair value.
At the end of the June 30, 2006 quarter, we undertook an impairment review.
After reviewing current operating income and future growth potential of the
subsidiary, the Company determined that no impairment was created. The basis
for this determination included the growth of existing clients since the end
of the fiscal year, conversations with potential customers for the upcoming
year, as well as the added economies of scale the subsidiary has added to the
Company as a whole, including several technical performance enhancements
supplied by LabMentors to supplement the core capabilities of PCS, such as
creation of added Internet service bandwidth and associated signal routing
capabilities not known to the technical people at PCS; locating and managing
a demonstration server on their system for a wide variety of PCS products;
and assisting technical people from PCS in the creation and management of a
server to host the PCS STEPS(TM) product. In conclusion, the Company felt
and still feels that LabMentors brought more than a cutting edge product to
PCS, including vertical integration and technology not previously known by
PCS.
NOTE 7 - ACCRUED EXPENSES
Accrued expenses are made up of credit card debt of $30,628 at June 30, 2006.
NOTE 8 - NOTES PAYABLE - RELATED PARTY
Notes payable - related party consisted of the following at June 30, 2006:
Notes payable to the President bearing interest
at 10% per annum, all unpaid principal and
interest payments due on demand $ 116,423
---------
Total Notes Payable Related Party $ 116,423
=========
NOTE 9 - NOTES PAYABLE
Notes payable consisted of the following at June 30, 2006:
Notes payable related to an investing company
bearing no interest, with a conversion option on
September 30, 2006
$1,000,000
Debt Discount on notes payable $(333,334)
Notes payable to a Canadian governmental agency
bearing no interest, with payments due
September 1, 2006, unsecured (1) 49,720
Line of credit with a financing institution with varying
interest rates, due periodically (generally monthly),
secured by assets and specific receivables 89,990
---------
Total Notes Payable $ 716,386
=========
(1) The notes payable to a Canadian governmental agency varied from the amount
shown at fiscal year end March 31, 2006 due to a fluctuation in the currency
exchange rate. No new funds were borrowed to cause the increase.
All notes payable are considered to be current. The discount on notes payable
is being amortized monthly over the length of the agreement (conversion date
of September 30, 2006) in accordance with EITF 00-27, "Application of Issue
98-5 to Certain Convertible Instruments" and APB Opinion No. 14, "Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants."
The notes payable related to an investing company bearing no interest, with a
conversion option on September 30, 2006 is explained in further detail in our
10-KSB dated March 31, 2006 on file with the SEC.
As of August 14, 2006, the Note had not been converted and neither of the
warrants had been exercised, in whole or in part.
NOTE 10 - Stockholders' Equity
The Stockholders' Equity Section increased during the quarter due to the
following transactions:
During the quarter ended June 30, 2006, the Company issued 25,000 shares of
common stock in exchange for conversion of related party note payable with
interest valued at $4,000.
During the quarter ended June 30, 2006, the Company issued 18,312 shares of
common stock in exchange for consulting services valued at $9,115.
During the quarter ended June 30, 2006, the Company issued stock options to
purchase 64,287 shares of common stock in exchange for consulting services
valued at $31,745.
During the quarter ended June 30, 2006, the Company expensed options in
accordance with FAS 123(R) valued at $111,927.
During the quarter ended June 30, 2006, the Company issued stock options to
purchase 18,750 share of common stock as board compensation valued
at $11,245.
During the quarter ended June 30, 2006, the Company issued 11,321 shares of
common stock to our subsidiary president, Joseph A. Khoury, pursuant to his
employment agreement valued at $6,000.
Some of the transactions listed above were a result of the Company's adoption
of SFAS 123(R)(see next paragraph). The value of the stock options granted
during the current quarter was properly accounted for under the stockholders'
equity section because the Company's stock has no par value.
We account for stock-based employee compensation in accordance with SFAS
123(R) (revised 2004) "Share-Based Payment." SFAS No. 123(R) requires
employee stock-based compensation to be measured based on the fair value as of
the grant-date of the awards and the cost is to be recognized over the period
during which an employee is required to provide services in exchange for the
award. Historically, the Company used the intrinsic method of valuation as
specified in APB No. 25, "Accounting for Stock Issued to Employees" and
related interpretations and accordingly no compensation cost had been
recognized for stock options in prior years. This pronouncement eliminates
the alternative use of Accounting Principles Board (APB) No. 25, wherein the
intrinsic value method of accounting for awards was used. As a result of
adopting the fair value method for stock compensation, all future awards and
awards vesting in future periods will be expensed over the stock options
vesting period as defined in its contract award. The Company adopted this
provision during the first quarter of fiscal year 2007, which ends March 31,
2007.
A summary of the status of the Company's outstanding stock options for the
current fiscal year as of June 30, 2006 is presented below:
Weighted
Average
Exercise
Shares Price
---------- --------
Outstanding, March 31, 2006 9,109,090 $0.94
Granted 1,063,037 $0.55
Expired/Cancelled - n/a
Exercised (25,000) $0.11
---------- -------
Outstanding, June 30, 2006 10,147,127 $0.90
========== =======
Exercisable, June 30, 2006 8,366,127 $1.00
========== =======
NOTE 11 - SUBSEQUENT EVENTS
On July 7, 2006, the Company signed a Letter of Intent (LOI) for acquisition
of certain technological assets of a small, non-publicly traded, U.S. company.
The transaction is anticipated to close on or before August 31, 2006. The
purchase of assets will be through the issuance of 375,000 shares of Rule 144
stock as stated in the Stock Purchase Agreement.
On July 26, 2006, the Company signed an Equipment Lease (Lease) with Genesis
Financial, Inc. The Lease is effective for three years from inception. The
Lease is for servers to be located at an offsite server farm. The equipment
will be used by all facets of the Company, including its Canadian subsidiary.
On July 31, 2006, the Company entered into a non-exclusive Distribution
Agreement with Valiant Technology, Ltd. located in London, UK. Valiant is in
the business of designing, developing, marketing, selling, and maintaining
various educational products. The Agreement allows the Company to sell
certain of Valiant's product lines, namely MathAmigo Software, Roamer and
Roamer Accessories, Invento, and Tronix. The Agreement is for distribution
rights in the United States and Canada.
F-13
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------
Overview.
- ---------
PCS Edventures!.com, Inc. (the "Company," "PCS," "we," "our," "us" or
similar words) was incorporated in 1994 in the State of Idaho. In October
1994, we acquired PCS Schools, Inc. ("PCS Schools") and in November 2005 we
acquired 511092 N.B. LTD. dba LabMentors based in Fredericton, New Brunswick
Canada, which are both wholly owned subsidiaries of PCS Edventures!.com, Inc.
The 511092 N.B. LTD. company was renamed PCS LabMentors, LTD. ("LabMentors" or
"PCS LabMentors").
PCS Schools had created an educational enrichment program that was
delivered in owner-operated, free standing Learning Centers. This program
offered a unique atmosphere highly conducive to individual styles of learning
and a system that utilized computer technology to increase areas of inquiry
and application. Subsequently, we changed our business plan and business
strategy and in connection with this change, we divested the Learning Centers
developed by PCS Schools and focused our efforts on creating web based
educational systems utilizing and improving PCS Schools legacy curriculum.
PCS LabMentors is the exclusive provider of a proprietary virtual lab
technology designed to provide hands-on experience to high school through
college students studying a variety of technical topics. These technical
topics include programming, network management, security and operating
systems. LabMentors' technology provides students with the ability to manage
and configure any hardware/software platform remotely, through a proprietary
client accessed remote server farm. Also embedded within the LabMentors
system is a Learning Management System (LMS) that enables the delivery and
tracking of curriculum and tasks to students. Using LabMentors' complete
solution, any school or institution can offer advanced IT training topics in
any number of areas such as Windows Server 3000(Registered), Linux(Registered)
system administration and various other applications without the associated
overhead of owning and managing various hardware platforms.
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
school classrooms for pre-kindergarten through college, after school market
and home school market. Our products and technologies are delivered to each
of these markets through an inventory of hardware, software, books (both
developed in-house and from external sources) and Internet access. Our
technologies and products are delivered to the home user through Internet
access via a subscription based website. Our products and technologies allow
students ages three and up to explore the basic foundations of mechanical
engineering, structures in architecture, robotics, mathematics, art, computer
science, programming and physical science.
PCS Edventures!.com, Inc. has developed several innovative technology based
educational programs directed to the pre-kindergarten through high school age
groups. Our Academy of Engineering(Trademarked); Academy of Electric
Engineering(Trademarked); Academy of Science(Trademarked); Academy of
Robotics(Trademarked); Edventures! Lab(Trademarked); and Discover! Lab
products are site-license installations for classrooms and learning programs.
Our PCS BrickLab(Trademarked) and Young Learner Building Box(Trademarked)
products are also for classrooms and learning programs, but are not licensed.
Our Edventures! Online(Trademarked) 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 program for home
use 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.
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.
- ----------------------
Results of Operations - Overview.
- ---------------------------------
The quarter ended June 30, 2006, resulted in a net loss of ($674,046).
This net loss is an increased loss of ($817,764) or approximately 569% from
the net income for the quarter ended June 30, 2005, of $143,718. The Basic
Loss per Share for the quarter ended June 30, 2006, was ($0.02), as compared
to the income per share of $0.01 for the quarter ended June 30, 2005. Details
of changes in revenues and expenses can be found below.
During the quarter ended June 30, 2006, the Company experienced
significant, non-recurring, non-cash losses. These losses are described in
more detail below. Excluding these non-cash, non-recurring losses, namely the
amortization of capitalized costs ($44,833), expense related to stock issued
below or above market value ($1,615), amortization of stock options in
accordance with FAS 123(R) ($154,917) and amortization of the debt discount
($333,333), which total $534,698, the Company had a net loss of ($139,348),
excluding non-cash, non-recurring losses (expenditures), as compared to the
net income of $143,718 for the quarter ended June 30, 2005.
Three months ended June 30, 2006, compared to three months ended June 30,
2005.
- -----
Revenues for the three-month period ended June 30, 2006, decreased to
$560,669 or by $374,303 (40%) as compared to $934,972 for the three-month
period ended June 30, 2005. This decrease is due to the unusually large sales
during the June 30, 2005, quarter to Edison Schools that were not replicated
in this quarter. This amount was partially offset by increased license
renewals and new customer sales.
Cost of goods sold for the three-month period ended June 30, 2006,
decreased by $138,543 (36%) to $243,668 as compared to $382,211 for the
three-month period ended June 30, 2005. This decrease was due to the decrease
in sales, which was partially offset by the increase in shipping costs.
Operating expenses for the three-month period ended June 30, 2006,
increased by $599,441 (149%) to $1,001,166 as compared to $401,725 for the
three-month period ended June 30, 2005. Part of the increase during this
quarter as compared to the June 30, 2005, quarter was due to the increase in
the number of employees, as well as the acquisition of LabMentors. The
remainder of the increase during the first quarter of fiscal year 2007 was
due to the non-cash items. We had non-cash depreciation expense of $44,833
related to the amortization of capitalized costs for the Barron Partners
transaction. We expect to continue to book this non-cash expense over the
next quarter of fiscal year 2007, after which time the capitalized costs will
be fully amortized. In addition, we booked a non-cash expense during the
quarter in the amount of $111,927 relating to the expense of options issued
in accordance with FAS 123(R).
Interest expenses for the three-month period ended June 30, 2006,
decreased to $5,016 as compared to $23,778 for the three-month, period ended
June 30, 2005. This decrease was due to repayment of short term borrowing.
Liquidity.
- ----------
As of the quarter ended June 30, 2006, we had $154,938 in Cash, with
total current assets of $681,252 and total current liabilities of
$1,316,091. We have an accumulated deficit of ($26,541,118) and shareholders'
equity of $6,163.
The Company has a current ratio of 51.8%. The current ratio for the
Quarter ended June 30, 2005 was 47.6%. The ratio indicates that we are
currently utilizing all available resources to help grow the Company through
internal and external means. We have utilized the current ratio over a quick
ratio due to the fact that most items in inventory are easily saleable should
the need to liquidate arise.
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
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures. Based on
this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that information required to be disclosed is recorded, processed,
summarized and reported within the specified periods and is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow for timely decisions regarding required disclosure
of material information required to be included in our periodic Securities and
Exchange Commission reports. Our disclosure controls and procedures are
designed to provide reasonable assurance of achieving their objectives and our
Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are effective to a reasonable assurance
level of achieving such objectives. However, 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 our internal controls 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
- ----------- ------ ------ ------ ------
Joseph Khoury 11,321 6,000
Anthony A. Maher 25,000 4,000
Cyndel & Co., Inc. 6,378 3,380(1)
Cyndel & Co., Inc. 6,104 3,235(2)
Cyndel & Co., Inc. 5,830 2,500(3)
(1) These shares were issued for consulting expenses at a weighted
average of $0.392 per share, which was below the fair market value and thus
additional expenses of $880.16 were booked.
(2) These shares were issued for consulting expenses at a weighted
average of $0.4096 per share, which was below the fair market value and thus
additional expenses of $734.92 were booked.
(3) These shares were issued for consulting expenses at a weighted
average of $0.4288 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 other federal and similar state exemptions from
registration.
Item 3. Defaults Upon Senior Securities.
- ------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- --------------------------------------------------------------
None at this time, but please refer to the Company's Preliminary Proxy
Statement on file with the Securities and Exchange Commission that is planned
to be mailed to stockholders as soon as is reasonably practicable.
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*
SB-2 Registration Statement Filed with an Effective Date
of March 15, 2006*
Preliminary Information Statement filed with the
Securities and Exchange Commission on June 14, 2006*
* 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: 8/14/2006 By:/s/Anthony A. Maher
----------- -------------------------------------
Anthony A. Maher
Chief Executive Officer, President and
Chairman of the Board of Directors
Date: 8/14/2006 By:/s/Christina M. Vaughn
----------- -------------------------------------
Christina M. Vaughn
Chief Financial Officer
Date: 8/14/2006 By:/s/Donald J. Farley
---------- -------------------------------------
Donald J. Farley
Secretary and Director
Date: 8/14/2006 By:/s/Cecil D. Andrus
----------- -------------------------------------
Cecil D. Andrus
Director
Date: 8/14/2006 By:/s/Michael K. McMurray
----------- -------------------------------------
Michael K. McMurray
Director