U. S. 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 September 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File No. 333-53458
PCS EDVENTURES!.COM, INC.
-------------------------
(Name of Small Business Issuer in its Charter)
IDAHO 82-0475383
----- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
1655 Fairview Avenue, Suite #100
Boise, Idaho 83702
------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (208) 343-3110
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
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:
15,476,676
September 30, 2002
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
September 30, 2002 and March 31, 2002
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
September 30, March 31,
2002 2002
(Unaudited)
CURRENT ASSETS
Cash $ 30,140 $ 1,046
Accounts receivable 272,386 355,004
Inventory 794 -
Prepaid expenses 403 -
Debt offering costs, net 31,404 11,621
---------- ---------
Total Current Assets 335,127 367,671
---------- ---------
FIXED ASSETS (NET) 54,263 83,079
---------- ---------
OTHER ASSETS
Deposits 23,347 7,000
---------- ---------
Total Other Assets 23,347 7,000
---------- ---------
TOTAL ASSETS $ 412,737 $ 457,750
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
2
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, March 31,
2002 2002
(Unaudited)
CURRENT LIABILITIES
Bank overdraft $ - $ 15,272
Accounts payable 160,383 274,350
Wages payable 21,218 22,211
Payroll taxes payable 203,069 120,572
Accrued interest 65,202 43,383
Accrued directors fees 67,500 -
Accrued expenses 155,613 157,432
Unearned revenue 293,491 397,015
Notes payable - related parties 165,882 158,882
Notes payable 658,800 776,271
---------- ----------
Total Current Liabilities 1,791,158 1,965,388
---------- ----------
Total Liabilities 1,791,158 1,965,388
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value, authorized
50,000,000 shares; 15,473,866 and
13,261,522 shares issued and
outstanding, respectively 21,829,287 21,596,003
Deferred Consulting Fees (29,789) (27,344)
Accumulated deficit (23,177,919) (23,076,297)
----------- -----------
Total Stockholders' Equity (Deficit) (1,378,421) (1,507,638)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 412,737 $ 457,750
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
September 30, September 30,
2002 2001 2002 2001
REVENUE $ 304,301 $ 127,728 $ 1,366,937 $ 186,253
COST OF GOODS SOLD 157,375 56,306 518,524 84,863
----------- ----------- ----------- -----------
GROSS PROFIT 146,926 71,422 848,413 101,390
----------- ----------- ----------- -----------
OPERATING EXPENSES
Depreciation expense 8,108 23,929 28,816 42,379
General and
administrative 432,535 447,998 803,847 950,648
---------- ----------- ----------- -----------
Total Operating
Expenses 440,643 471,927 832,663 993,027
---------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (293,717) (400,505) 15,750 (891,637)
---------- ----------- ----------- -----------
OTHER INCOME AND (EXPENSE)
Interest expense (55,615) (17,918) (135,334) (33,752)
Interest income 54 15 54 30
---------- ----------- ----------- -----------
Total Other Income
and (Expense) (55,561) (17,903) (135,280) (33,722)
---------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (349,278) (418,408) (119,530) (925,359)
Gain on settlement of debt 17,908 - 17,908 -
---------- ----------- ----------- -----------
NET INCOME (LOSS) $ (331,370) $ (418,408) $ (101,622)$ (925,359)
========== =========== =========== ===========
BASIC INCOME (LOSS) PER SHARE
Income (loss) before
extraordinary item $ (0.02) $ (0.03) $ (0.01)$ (0.07)
Extraordinary item 0.00 - 0.00 -
---------- ----------- ----------- -----------
$ (0.02) $ (0.03) $ (0.01)$ (0.07)
========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 15,170,533 12,522,835 14,836,665 12,495,530
========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
Deferred
Common Shares Consulting Accumulated
Shares Amount Fees Deficit
Balance, March 31, 2001 12,383,959 $ 21,247,795 $(173,066)$ (21,515,949)
Common stock issued for
conversion of debt at
$0.25 per share 100,000 25,000 - -
Common stock issued for
conversion of warrants
at $0.75 per share 67,025 50,269 - -
Stock offering costs - (49,599) - -
Common stock issued for
services at $0.75 per
share 6,000 4,500 - -
Common stock issued for
cash at $0.10 per share 250,000 25,000 - -
Warrants issued in
conjunction with private
placement memorandum at
$0.73 per warrant - 191,634 - -
Common stock issued for
services at $0.28 per
share 20,000 5,600 - -
Common stock issued for
services at $0.30 per
share 15,000 4,500 - -
Common stock issued as
consideration for notes
payable at $0.28 per share 20,000 5,600 - -
Common stock issued for
conversion of payable at
$0.63 per share 75,538 47,774 - -
Common stock issued as
consideration for notes
payable at $0.30 per share 15,000 4,500 - -
Common stock issued for
cash at $0.10 per share 250,000 25,000 - -
Common stock issued as
consideration for notes
payable at $0.14 per share 59,000 8,430 - -
Amortization of expenses
prepaid with common stock - - 145,722 -
Net loss for the year ended
March 31, 2002 - - - (1,560,348)
Balance, March 31, 2002 13,261,522 $21,596,003 $ (27,344) $(23,076,297)
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)
Deferred
Common Shares Consulting Accumulated
Shares Amount Fees Deficit
Balance, March 31, 2002 13,261,522 $21,596,003 $ (27,344) $(23,076,297)
Common stock issued for
conversion of accounts
payable at $0.08 per
share (unaudited) 50,000 4,250 - -
Common stock issued for
conversion of accounts
payable at $0.30 per
share (unaudited) 15,000 4,500 - -
Common stock issued for
conversion of accounts
payable at $0.07 per
share (unaudited) 248,417 17,389 - -
Common stock issued for
prepaid services at $0.05
per share (unaudited) 515,000 27,500 (27,500) -
Common stock issued for
prepaid services at $0.07
per share (unaudited) 100,000 7,000 (7,000) -
Common stock issued for
services at $0.07 per
share (unaudited) 157,500 11,025 - -
Cancelled common stock
previously issued for
services that had not been
performed (unaudited) (20,000) - - -
Common stock issued for
conversion of debt at $0.13
per share (unaudited) 204,000 27,541 - -
Common stock issued for
conversion of warrants at
$0.01 per share (unaudited) 9,808 98 - -
Common stock issued for
services at $0.16 per share
(unaudited) 100,800 16,128 - -
Common stock issued for
conversion of warrants at
$0.01 per share (unaudited) 10,500 105 - -
Common stock issued for
extension of debt, valued
at an average of $0.17 per
share (unaudited) 233,250 41,353 - -
Common stock issued for
services at $0.16 per
share (unaudited) 78,125 12,500 - -
Common stock issued for
prepaid servies at $0.17
Per share (unaudited) 203,000 34,510 (34,510) -
Common stock issued for
services at $0.17 per share
(unaudited) 101,500 17,255 - -
Common stock issued for
conversion of accounts
payable at $0.07 per share
(unaudited) 181,289 11,888 - -
Common stock issued for
conversion of warrants at
$0.01 per share (unaudited) 24,155 242 - -
Amortization of deferred
consulting expense
(unaudited) - - 66,565 -
Net loss for the six months
ended September 30, 2002
(unaudited) (101,622)
Balance, September 30,
2002 (unaudited) 15,473,866 $21,829,287 $ (29,789) $(23,177,919)
The accompanying notes are an integral part of these consolidated financial
statements.
6
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the
Six Months Ended
September 30,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (101,622) $ (925,359)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation 28,816 42,379
Common stock issued for services 56,908 (2,350)
Expenses prepaid with common stock - 1,250
Common stock issued for debt extensions 41,353 -
Amortization of debt discount 24,654 -
Amortization of debt offering costs 32,250 -
Amortization of deferred consulting costs 66,565 80,420
Gain on extinguishment of debt (17,908) -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 82,618 (154,217)
(Increase) decrease in prepaid expenses (403) (2,803)
(Increase) decrease in inventory (794) -
(Increase) in deposits (16,347)
Increase (decrease) in accounts payable and
accrued liabilities 113,395 144,374
Increase (decrease) in interest payable 21,819 10,494
Increase (decrease) in commitments and
contingencies - (1,938)
Increase (decrease) in unearned revenue (103,524) 225,778
--------- -----------
Net Cash Provided (Used) by Operating
Activities 227,780 (581,972)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - (1,030)
---------- ----------
Net Cash (Used) by Investing Activities - (1,030)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in cash overdraft (44,722) 51,479
Proceeds from related parties 27,000 50,000
Payments to related parties (20,000) (60,000)
Payments on notes payable (215,000) (64,786)
Payments on short term financing (234,990) -
Proceeds from notes payable 105,624 603,549
Proceeds from short term financing 234,990 -
Debt extension costs (52,033) -
Proceeds from common stock 445 670
---------- ----------
Net Cash Provided (Used) by Financing
Activities (198,686) 580,912
---------- ----------
INCREASE (DECREASE) IN CASH 29,094 (2,090)
CASH AT BEGINNING OF PERIOD 1,046 4,654
---------- ----------
CASH AT END OF PERIOD $ 30,140 $ 2,564
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
7
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the
Six Months Ended
September 30,
2002 2001
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for payment on notes payable
and interest $ 27,541 $ 25,000
Common stock issued for services $ 56,908 $ 4,500
Common stock issued for payment on accounts
Payable $ 38,027 $ -
Common stock issued for debt extensions $ 41,353 $ -
Revaluation of stock options issued for prepaid
services $ - $ (6,850)
Cash Paid For:
Interest $ 52,327 $ 27,098
Income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
8
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 2002 and March 31, 2002
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 generally accepted accounting
principles 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, 2002 Annual Report on Form 10-KSB. Operating results for
the six months ended September 30, 2002 are not necessarily
indicative of the results that may be expected for the year ending
March 31, 2003.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. However, the
Company does not have significant cash or other material assets, nor
does it have an established source of revenues sufficient to cover
its operating costs. Additionally, the Company has accumulated
significant losses, has negative working capital, and a deficit in
stockholders' equity. All of these items raise substantial doubt
about its ability to continue as a going concern. The Company has
expanded its product line to include four additional educational
labs, which they believe will 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 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
The Company applied Accounting Principles Board ("APB") Option 25,
"Accounting for Stock Issued to Employees," and related
interpretations in accounting for all stock option plans. Under APB
Option 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.
9
PCS EDVENTURES!.COM, INC.
Notes to the Consolidated Financial Statements
September 30, 2002 and March 31, 2002
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
FASB Statement 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123"), requires the Company to provide pro forma information
regarding net income and net income per share as if compensation
costs for the Company's stock option plans and other stock awards
had been determined in accordance with the fair value based method
prescribed in SFAS No. 123. The Company estimates the fair value of
each stock award at the grant date by using the Black-Scholes option
pricing model with the following weighted average assumptions used
for grants, respectively; dividend yield of zero percent for all
years; expected volatility of 84% to 128% percent for all years;
risk-free interest rates of 3% to 6%, and expected lives of 3 to 10
years.
For the Three Months Ended For the Six Months Ended
September 30, September 30,
2002 2001 2002 2001
Net loss:
As reported $(331,370) $(418,408) $(101,622) $(925,359)
Pro Forma (486,352) (418,408) (256,604) (925,539)
Net loss per share:
As reported $ (0.02) $ (0.03) $ (0.01) $ (0.07)
Pro Forma (0.03) (0.03) (0.02) (0.07)
During the initial phase-in period of SFAS No. 123, the effect of pro forma
results are not likely to be representative of the effects on pro forma
results in future years since options vest over several years and additional
options could be granted each year.
The Company has granted the following options as of September 30, 2002:
Date of Exercise Exercise Amount Amount
Description Grant Number Price Exercised Vested
----------- ------- -------- -------- --------- ------
1) Employee 2-05-00 50,000 $ 0.75 0 50,000
2) Officers/directors 4-20-00 600,000 $ 0.75 0 600,000
3) Employee 6-01-00 45,000 $ 0.75 0 45,000
4) Consultant 9-20-00 200,000 $ 0.50 0 200,000
5) Employees 9-01-00 200,000 $ 0.75 0 200,000
6) Director 10-01-00 200,000 $ 0.75 0 200,000
7) Employee 1-05-01 25,000 $ 0.75 0 25,000
8) Employee 6-15-01 25,000 $ 0.75 0 25,000
9) Employee 10-24-01 50,000 $ 0.30 0 50,000
10) Employee 12-1-01 24,230 $ 0.15 0 24,230
11) Board Members 12-10-01 1,000,000 $ 0.30 0 1,000,000
12) Board Members 6-03-02 1,000,000 $ 0.16 0 1,000,000
13) Employees 7-01-02 335,000 $ 0.16 0 0
14) Employees 7-15-02 15,000 $ 0.16 0 0
15) Employees 8-15-02 5,000 $ 0.16 0 0
3,774,230 3,419,230
10
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 2002 and March 31, 2002
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
Risk-Free
Fair Interest Expected Expected
Description Value Rate Life Volatility
----------- ----- --------- -------- ----------
1) Employee $ 0.46 6.05% 3 92.82%
2) Officers/directors $ 0.46 6.15% 3 91.32%
3) Employee $ 0.46 6.15% 3 92.82%
4) Consultant $ 0.42 6.15% 3 89.37%
5) Employees $ 0.52 6.21% 3 85.69%
6) Director $ 0.52 6.21% 3 84.39%
7) Employee $ 0.52 6.21% 3 84.39%
8) Employee $ 0.39 3.76% 3 76.69%
9) Employee $ 0.19 3.76% 3 100.52%
10) Employee $ 0.14 3.76% 3 99.80%
11) Board Members $ 0.20 5.69% 10 99.80%
12) Board Members $ 0.15 5.48% 10 128.91%
13) Employees $ 0.12 2.84% 2 157.77%
14) Employees $ 0.12 2.84% 2 152.96%
15) Employees $ 0.13 2.84% 2 163.78%
On April 20, 2000, the Company granted 600,000 options with a 3-year life to
officers and directors out of the 800,000 authorized on January 19, 2000. On
October 1, 2000, the Company granted the remaining 150,000 3-year life options
authorized to a director. All of the option exercise prices are $0.75 per
share with a fair value determined by Black Scholes of $0.46 and $0.52,
respectively.
On April 20, 2000, the Company authorized the granting of 400,000 options to
employees and directors. On June 1, 2000, the Company granted 45,000 options
to an employee. On September 1, 2000, the Company granted 200,000 options to
four employees. On October 1, 2000, the Company granted 50,000 options to a
director. On January 5, 2001, the Company granted 25,000 options to an
employee. On March 31, 2001, the Company had not granted 80,000 options.
Each option granted has an exercise price of $0.75 per option and a 3-year
life with a fair value determined by Black Scholes of $0.46, $0.52, $0.52 and
$0.52, respectively.
On September 22, 2000, the Company authorized the granting of 250,000 options
to employees and directors of the Company with exercise prices of $0.75 and a
3-year life. None of these options have been granted.
On June 15, 2001, the Company granted 25,000 options to an employee. These
options had an exercise price of $ 0.75 per option and a 3-year life with
a fair value determined by Black Scholes of $0.39.
On December 1, 2001, the Company granted employees 24,230 3-year life options.
The options have an exercise price of $0.15 per share. As the exercise price
of the shares was less than the trading price of the Company's common shares
on the date of issuance, the Company has recognized $1,696 of expense related
to these options.
11
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 2002 and March 31, 2002
NOTE 3 - DILUTIVE INSTRUMENTS (Continued)
a. Stock Options (Continued)
On December 5, 2001, the Company's Board of Directors approved the
granting of 1,050,000 options to employees and board members. On
October 24, 2001, the Company granted 50,000 3-year life options to an
employee. On December 10, 2001, the Company granted 1,000,000 10-year
life options to board members. Each option granted has an exercise
price of $0.30 and a fair value determined by Black Scholes of $0.14
and $0.20, respectively.
On June 3, 2002, the Company's Board of Directors granted options to
purchase 1,000,000 shares of common stock to members of the Board of
Directors. Each option granted has an exercise price of $0.16,
a 3-year life and a Black Scholes fair value of $0.15.
On July 1, 2002, the Company granted employees 335,000 options. The
options have an exercise price of $0.16 per share and 93,000 vest on
June 15, 2003, 120,500 on June 15, 2004 and 121, 500 on June 15,
2005. These options expire on December 31, 2005. The Black Scholes
fair value of these options is $0.12 per share.
On July 15, 2002, the Company granted an employee 15,000 options.
The options have an exercise price of $0.16 per share and 5,000 vest
in July 15, 2003, 5,000 on July 15, 2004 and 5,000 on July 15, 2005.
These options expire on December 31, 2005. The Black Scholes fair
value of these options is $0.12 per share.
On August 15, 2002, the Company granted an employee 5,000 options.
The options have an exercise price of $0.16 per share and 1,000 vest
on August 15, 2003, 2,000 on August 15, 2004 and 2,000 on August 15,
2005. These options expire on December 31, 2005. The Black Scholes
fair value of these options is $0.13 per share.
b. Warrants
On April 27, 2000, three individuals were granted a total of 56,750
warrants which were converted into 31,750 shares of common stock.
The conversion rate was $0.675 per share and as such, no
compensation expense was recorded because the grant price exceeded
the market value.
On September 15, 2000, the Company granted warrants allowing the
holders to purchase 342,831 shares of the Company's common stock.
The warrants are exercisable at a price of $0.01 per share for two
years. On September 15, 2000, 203,161 warrants were converted into
shares of common stock. The fair value of the warrants was $150,339
and was recorded as a stock offering cost, because the warrants were
issued to individuals who raised funds for the Company.
During the year ended March 31, 2002, the Company issued warrants
allowing the holders to purchase 263,607 shares of the Company's
common stock. The warrants were issued in conjunction with the
private placement memorandum and are exercisable at a price of $0.01
per share for two years. The fair value of the warrants, as
determined by Black Scholes, was $191,634, and was recorded as debt
discount. At September 30, 2002, 44,463 warrants were exercised for
$445.
12
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 2002 and March 31, 2002
NOTE 4 - MATERIAL EVENTS
Sales
On May 31, 2002, the Company completed the sale of twenty Academy of
Engineering Labs to a Michigan school district. The revenues
recognized related to this single transaction were $395,980, or 37%
of the Company's reported revenues for the six months ended
September 30, 2002.
On June 17, 2002, the Company completed the sale of seven Academy of
Engineering Labs to a Georgia school district. The revenues
recognized related to this single transaction were $137,145, or 13%
of the Company's reported revenues for the six months ended
September 30, 2002.
Extension of Debts
During the six months ended September 30, 2002, the Company entered
into one year debt extension agreements with nearly all of the
individual owners of the 2001 debt offering units. The Company
successfully extended $527,500 of the total $602,500 outstanding
related to the debt offering. The terms of the agreements require
the Company to issue 500 shares of common stock and pay a 2% cash
extension fee for each $1,000 of debt extended. During the six
months ended September 30, 2002, the Company capitalized $52,033 of
costs related to the extension and is amortizing those costs over
the life of the extension, or one year.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Commitments
On July 24, 2002, the Company entered into a consulting agreement
with a marketing firm to increase the profile of the Company and its
stock. Compensation for the services will be based upon the amount
of capital raised through sales of common stock.
On July 24, 2002, the Company signed a letter of intent with an
investment banking firm, whereby the investment banking firm would
use its best efforts to obtain commitments for various financing of
up to $10,000,000. Total compensation for these services will be
based on the amount of financing obtained. The Company will be
required to pay a $25,000 retainer upon execution of the final
agreement in the form of $12,500 and 78,125 shares of common stock
valued at $0.16 per share, or $12,500.
Contingencies
On July 11, 2002, the Company settled its dispute with Key Bank for
$20,000. The Company had previously recorded a liability for
$25,208 plus interest of $3,809. The difference, of $9,017, was
recognized as a gain on extinguishment of debt.
13
PCS EDVENTURES!.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 2002 and March 31, 2002
NOTE 6- SUBSEQUENT EVENTS
Stock Issuances
Subsequent to September 30, 2002, warrant holders have exercised
warrants to purchase 2,810 shares of the Company's common stock in
exchange for $28.
Commitments
During November 2002, the Company entered into a 5 year operating lease
for office space in Boise, Idaho. The Lease commences December 1, 2002
and calls for a security deposit in the amount of $5,750 and monthly
rent payments of $5,750, subject to yearly increases based on operating
costs.
14
Item 2. Management's Discussion and Analysis or Plan of Operation.
--------------------------------------------------------------------
Plan of Operation.
------------------
For the near-term, we have two objectives, which center around
corporate awareness and marketing our product lines. First, we are working
with several public relations firms to increase corporate, brand and product
awareness on a more national level. Our second objective involves the
continued marketing of our product lines. In addition to the launch of our
Brick Lab, Discover!Lab and our Academy of Engineering Jr. Lab last year, we
have also introduced our Academy of Robotics and our Young Learner Lab. All
have been met with favorable results in the marketplace. As it is our desire
to remain on the leading edge of project-based learning within the education
marketplace, we will continue to commit resources to product development and
improvement over the next year.
The notes to our financial statements for the quarterly period ended
September 30, 2002, indicate that there is substantial doubt about our ability
to continue as a "going concern," due to our lack of significant cash or
other material assets, our lack of an established source of revenue sufficient
to cover our operating costs and our accumulated losses, negative working
capital and deficit in stockholders' equity. Accordingly, the future outlook
of our Company, under present circumstances, is not assured.
Results of Operations.
----------------------
Three months ended September 30, 2002, compared to three months ended
September 30, 2001.
-------------------
Revenues for the three month period ended September 30, 2002,
increased to $304,301 as compared to $127,728 for the three month period ended
September 30, 2001. Revenues increased due to increased lab sales over the
same period last year.
General and administrative costs have decreased to $432,535 for the
three month period ended September 30, 2002, as compared to $447,998 for the
three month period ended September 30, 2001. The decrease is primarily due to
certain cost cutting measures including the elimination of ineffective
advertising and marketing and a reduction in personnel.
Interest expense for the three month period ended September 30, 2002,
increased to $55,615 as compared to $17,918 for the three month period ended
September 30, 2001.
We had a net loss of $(331,370) for the three months ended September
30, 2002, as compared to a net loss of $(418,408) for the quarterly period
ended September 30, 2001.
Six months ended September 30, 2002, compared to six months ended September
30, 2001.
---------
Revenues for the six month period ended September 30, 2002, increased
to $1,366,937 as compared to $186,253 for the six month period ended September
30, 2001. Revenues increased due to increased lab sales over the same period
last year.
General and administrative costs have decreased to $803,847 for the
six month period ended September 30, 2002, as compared to $950,648 for the
six month period ended September 30, 2001. The decrease is primarily due to
certain cost cutting measures including the elimination of ineffective
advertising and marketing and a reduction in personnel.
Interest expense for the six month period ended September 30, 2002,
increased to $135,334 as compared to $33,752 for the six month period ended
September 30, 2001.
We had a net loss of $(101,622) for the six months ended
September 30, 2002, as compared to a net loss of $(925,359) for the six months
ended September 30, 2001.
Liquidity and Capital Resources.
--------------------------------
We had cash of $30,140, at September 30, 2002. Management believes
that our current cash on hand at September 30, 2002, combined with the cash
received from delivered sales orders, will be sufficient to meet our operating
expenses.
Item 3. Controls and Procedures.
----------------------------------
(a) Evaluation of Disclosure Controls and Procedures
PCS's Chief Executive Officer and Chief Financial Officer have evaluated
our Company's disclosure controls and procedures as of November 11, 2002, and
they have concluded that these controls and procedures are effective.
(b) Changes in Internal Controls
There are no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to November 11,
2002.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
----------------------------
On July 11, 2002, we settled our dispute with Key Bank for $20,000
and recognized the additional principal and accrued interest in the amount of
$9,017 as gain on extinguishment of debt.
Item 2. Changes in Securities and Use of Proceeds.
----------------------------------------------------
Sales of Unregistered Securities During the Last Quarter.
---------------------------------------------------------
Date Description Shares Amount
---- ----------- ------ ------
7/24 Common stock issued for services at $0.16
per share 78,125 $12,500.00
7/29 Common stock issued for conversion of
warrants at $0.01 per share 13,055 130.55
8/05 Common stock issued for conversion of
warrants at $0.01 per share 6,000 60.00
8/12 Common stock issued for conversion of
warrants at $0.01 per share 3,000 30.00
8/13 Common stock issued for prepaid services
at $0.17 per share 203,000 34,510.00
8/13 Common stock issued for services at
$0.17 per share 101,500 17,255.00
8/26 Common stock issued for conversion of
warrants at $0.01 per share 1,500 15.00
9/03 Common stock issued for conversion of
accounts payable at $0.07 181,289 11,888.30
9/06 Common stock issued for conversion of
warrants at $0.01 per share 600 6.00
--------
Total shares issued 588,069
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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.
SB-2 Registration Statement Filed with an Effective Date of May 11, 2001*
* Incorporated by Reference.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCS EDVENTURES.COM, INC.
Date: 11/11/02 By:/s/Anthony A. Maher
--------- -------------------------------------
Anthony A. Maher
Chief Executive Officer, President and
Chairman of the Board of Directors
Date: 11/11/02 By:/s/Christina M. Vaughn
--------- -------------------------------------
Christina M. Vaughn
Chief Financial Officer
Date: 11/11/02 By:/s/Roy M. Svee
--------- -------------------------------------
Roy M. Svee
Treasurer and Director
Date: 11/11/02 By:/s/Donald J. Farley
--------- -------------------------------------
Donald J. Farley
Secretary and Director
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Anthony A. Maher, Chief Executive Officer of PCS Edventures!.com,
Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of PCS
Edventures!.com, Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
3. Based on my knowledge, the financial statements, and other
financial information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
Quarterly Report;
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Quarterly Report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's Board of Directors (or persons performing the
equivalent function);
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in
this Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: November 11, 2002 Signature:/s/Anthony A. Maher
Anthony A. Maher
Chief Executive Officer
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christina M. Vaughn, Chief Financial Officer of PCS Edventures!.com,
Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of PCS
Edventures!.com, Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
3. Based on my knowledge, the financial statements, and other
financial information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
Quarterly Report;
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Quarterly Report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's Board of Directors (or persons performing the
equivalent function);
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in
this Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: November 11, 2002 Signature:/s/Christina M. Vaughn
Christina M. Vaughn
Chief Financial Officer