UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should carefully read this Quarterly Report completely, and it should be read and considered with all other reports filed by us with the United States Securities and Exchange Commission (the “SEC”) that are contained in the SEC Edgar Archives. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
Documents Incorporated by Reference
See Part II, Other Information, Item 6, Exhibits.
PCS EDVENTURES!, Inc.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024
INDEX
| 2 |
PART I –FINANCIAL INFORMATION
PART I – FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
The Condensed Financial Statements of the Registrant required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Condensed Financial Statements fairly present the financial condition of the Registrant.
(This space intentionally left blank.)
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PCS EDVENTURES!, INC.
Condensed Balance Sheets
June 30, 2024 (Unaudited) | March 31, 2024 (Audited) | |||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Prepaid expenses | ||||||||
| Inventory, net | ||||||||
| Total Current Assets | ||||||||
| NONCURRENT ASSETS | ||||||||
| Lease Right-of-Use Asset | ||||||||
| Deposits | ||||||||
| Property and equipment, net | ||||||||
| Deferred tax asset | ||||||||
| Total Noncurrent Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Payroll liabilities and accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Lease Liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Lease Liability, net of current portion | ||||||||
| Total Noncurrent Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, | ||||||||
| Common stock, | ||||||||
| Additional Paid-in Capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| 4 |
PCS EDVENTURES!, INC.
Condensed Statements of Operations (unaudited)
| For the three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Salaries and wages | ||||||||
| General and administrative expenses | ||||||||
| Total Operating Expenses | ||||||||
| OPERATING INCOME | ||||||||
| OTHER INCOME | ||||||||
| Interest income | ||||||||
| Net Other Income | ||||||||
| NET INCOME BEFORE TAXES | ||||||||
| Provision for income taxes | ||||||||
| NET INCOME | $ | $ | ||||||
| Net Income per common share: | ||||||||
| Basic | $ | $ | ||||||
| Fully Diluted | $ | $ | ||||||
| Weighted Average number of shares outstanding | ||||||||
| Basic | ||||||||
| Fully diluted | ||||||||
The accompanying notes are an integral part of these condensed financial statements.
| 5 |
PCS EDVENTURES!, INC.
Condensed Statement of Stockholders’ Equity
(Unaudited)
# of Common Shares O/S | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||||
| Balance at 3/31/2023 | $ | ($ | ) | $ | ||||||||||||||||
| Net Income | - | $ | $ | |||||||||||||||||
| Balance at 6/30/2023 | $ | ($ | ) | $ | ||||||||||||||||
| Balance at 3/31/2024 | $ | ($ | ) | $ | ||||||||||||||||
| Net Income | - | $ | ||||||||||||||||||
| Balance at 6/30/2024 | $ | ($ | ) | $ | ||||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| 6 |
PCS EDVENTURES!, INC.
Condensed Statements of Cash Flows
(Unaudited)
| For the three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Income | $ | |||||||
| Depreciation and amortization | ||||||||
| Amortization of right of use asset | ||||||||
| Changes in operating assets and liabilities | ||||||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| (Increase) decrease in prepaid expenses | ( | ) | ( | ) | ||||
| (Increase) decrease in inventories | ( | ) | ||||||
| (Increase) decrease in other current assets | ( | ) | ||||||
| (Decrease) increase in accounts payable and accrued liabilities | ||||||||
| Increase (decrease) in lease liability | ( | ) | ( | ) | ||||
| Increase (decrease) in unearned revenue | ||||||||
| Net Cash Provided by Operating Activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash paid for purchase of fixed assets | ( | ) | ( | ) | ||||
| Net Cash Used by Investing Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | - | - | ||||||
| Net Cash Used by Financing Activities | ||||||||
| Net Increase (Decrease) in Cash | ||||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | ||||||||
| Cash paid for taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
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PCS EDVENTURES!, INC.
Notes to the Condensed Financial Statements
June 30, 2024
(Unaudited)
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The condensed financial statements presented are those of PCS Edventures!, Inc., an Idaho corporation (the “Company,” “PCS,” “PCSV,” “we,” “our,” “us” or similar words), incorporated in 1994, in the State of Idaho. PCS specializes in experiential, hands-on, K12 education and drone technology. PCS has extensive experience and intellectual property (“IP”) that includes drone hardware, product designs, and K-12 curriculum content. PCS continually develops new educational products based upon market needs that the Company identifies through its sales and customer networks.
Our products facilitate STEM (Science, Technology, Engineering, and Math) education by providing engaging activities that demonstrate STEM concepts and inspire further STEM studies, with the goal of ultimately leading students to pursue STEM career pathways. Due to our exceptionally detailed curriculum, our products are easy to teach and do not require a teaching degree or experience to administer.
Our educational products are developed from both in-house efforts and contracted services. They are marketed through reseller channels, direct sales efforts, partner networks, and web-based channels.
PCS has developed and sells a variety of STEM education products into the K12 market, which can be categorized as follows:
| 1. | Enrichment Programs |
These camps are for the informal learning market and are designed to be highly engaging for students while easily administered by the instructor. The Company offers approximately thirty (30) different enrichment programs and typically develops at least two (2) new programs each year. Some of the more popular programs include Rockin’ Robots; Build a Better World; Summer Camp Classics; Pirate Camp; Flight and Aerodynamics; Science of the Human Body; and Claymation.
| 2. | Discover Series Products |
These products are designed for the makerspace environment and include engaging STEM activities that motivate students to pursue educational pathways toward STEM careers. The Discover Series includes Discover Engineering; Discover Robotics & Physics; Discover Robotics & Programming; and Discover STEM.
| 3. | BrickLAB Products |
These products are designed for the grade school market and use the Company’s proprietary bricks (which are Lego compatible) and curriculum to engage students to explore, imagine, and create within a STEM education framework. The Company offers a variety of grade-specific BrickLAB products.
| 4. | Discover Drones, Add-on Drone Packages and Ala Carte Drone Items |
These products are designed around using drones as a platform for STEM education and career exploration. These titles include the Discover Drones series of Products; Discover Drones Indoor Coding Bundle; Discover Drones Indoor Racing Add-On; Discover Drones Outdoor Practice Add-on; and all the spare parts and ala carte drone items offered in the Company’s comprehensive drone packages.
| 8 |
| 5. | STEAMventures BUILD Activity Book |
These series of activity books are designed for the K-3 market and ideal for a distance-learning environment. The series includes twelve (12) different issues. Instructor guides and/or family engagement guides are included. The Company also provides the necessary bricks for the builds in the activity books as a separate, but related product.
| 6. | Professional Development Training |
The Company offers professional development trainings, for a fee, to educators who are implementing the Company’s products in their classroom.
The Company intends to continue developing STEM education products that address demand from large markets.
Interim Financial Information
The accompanying unaudited condensed financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, the accompanying unaudited condensed financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments and reclassifications considered necessary in order to make the financial statements not misleading and for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the three ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending March 31, 2024, or any future periods. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 31, 2024, filed with the SEC on June, 28, 2024.
Use of Estimates
The preparation of these condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include reserves related to accounts receivable and inventory, the valuation allowance related to deferred tax assets, the valuation of equity instruments, and debt discounts.
Revenue Recognition
The Company accounts for revenue in accordance with FASB ASC 606, “Revenue from Contracts with Customers,” which we adopted on April 1, 2018. Revenue amounts presented in our condensed financial statements are recognized net of sales tax, value-added taxes, and other taxes. Amounts received as prepayment on future products or services are recorded as unearned revenues and recognized as income when the product is shipped, or service performed.
The
Company had deferred revenue of $
Most of our contracts with customers contain transaction prices with fixed consideration; however, some contracts may contain variable consideration in the form of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, and other similar items. When a contract includes variable consideration, we evaluate the estimate of variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. This can result in recognition of revenue over time as we perform services or at a point in time when the deliverable is transferred to the customer, depending on an evaluation of the criteria for over time recognition in FASB ASC 606. For certain fixed-fee per transaction contracts, such as delivering training courses or conducting workshops, revenue is recognized during the period in which services are delivered in accordance with the pricing outlined in the contracts.
| 9 |
The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share (“ASC 260”). Under ASC 260, basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock awards. Diluted net income (loss) per share (“EPS”) reflects the potential dilution that could occur assuming exercise of all dilutive unexercised stock options and warrants. The dilutive effect of these instruments was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options and restricted stock awards, the amount of compensation cost for future service not yet recognized by the Company, and the amount of tax benefits that would be recorded as income tax expense when the stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company’s common stock.
Common stock outstanding reflected in the Company’s balance sheets includes restricted stock awards outstanding. Securities that may participate in undistributed net income with common stock are considered participating securities. The computation of diluted earnings per share does not assume exercise or conversion of securities that would have an anti-dilutive effect. The following schedules presents the calculation of basic and diluted net income per share:
| For the Three Months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net Income per common Share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| Weighted average number of common shares outstanding Basic | ||||||||
| Weighted average number of common shares outstanding Fully Diluted | ||||||||
Net
income for the three (3) months ended June 30, 2024, and 2023, was $
Recently Issued Accounting Pronouncements
The Company has reviewed recent accounting pronouncements and has determined that they will not significantly impact the Company’s results of operations or financial position.
NOTE 2 – BUSINESS CONDITION
As
of June 30, 2024, the Company had $
NOTE 3 – ACCOUNTS RECEIVABLE
In
the Company’s normal course of business, the Company provides credit terms to its customers, which generally range from net fifteen
(15) to thirty (30) days. The Company performs ongoing credit evaluations of its customers. The Company established an allowance for
doubtful accounts of $
| 10 |
NOTE 4 - PREPAID EXPENSES
Prepaid expenses for the periods are as follows:
| June 30, 2024 | March 31, 2024 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid tradeshows | ||||||||
| Prepaid inventory | ||||||||
| Prepaid software | ||||||||
| Prepaid other | ||||||||
| Total Prepaid Expenses | $ | $ | ||||||
NOTE 5 - COMMON AND PREFERRED STOCK TRANSACTIONS
| a. | Common Stock |
The
Company has authorized shares of common stock,
During
the three (3) months ended June 30, 2024, the Company had
During the three (3) months ended June 30, 2024, the Company did t issue any shares of common stock.
During
the three (3) months ended June 30, 2024, the Company entered into an agreement to repurchase shares common stock at $ per
share for total consideration of $
| b. | Preferred Stock |
The Company has authorized shares of preferred stock. As of June 30, 2024, and March 31, 2024, there were preferred shares issued or outstanding.
NOTE 6 – PAYROLL LIABILITIES & ACCRUED EXPENSES
Accrued expenses for the periods are as follows:
| June 30, 2024 | March 31, 2024 | |||||||
| Payroll liabilities | $ | $ | ||||||
| Sales tax payable | ||||||||
| State income tax payable | ||||||||
| Production printer accrued expenses | ||||||||
| Total | $ | $ | ||||||
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company had no related party transactions during the fiscal year ended March 31, 2024, nor during the quarter ended June 30, 2024.
NOTE 8 - SUBSEQUENT EVENTS
On
March 17, 2023, Michelle Fisher, our Director of Curriculum, exercised performance options and purchased shares of “restricted”
Rule 144 common stock at $ per share, for total consideration of $
| 11 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Statements for Purposes of “Safe Harbor Provisions” of the Private Securities Litigation Reform Act of 1995:
Except for historical facts, all matters discussed in this Annual Report, which are forward-looking, involve a high degree of risk and uncertainty. Certain statements in this Annual Report set forth management’s intentions, plans, beliefs, expectations, or predictions of the future based on current facts and analyses. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” or similar expressions, we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Actual results may differ materially from those indicated in such statements, due to a variety of factors, risks, and uncertainties. Potential risks and uncertainties include, but are not limited to, competitive pressures from other companies within the Educational Industries, economic conditions in the Company’s primary markets, exchange rate fluctuation, reduced product demand, increased competition, inability to produce required capacity, unavailability of financing, government action, weather conditions and other uncertainties, including those detailed in our SEC filings. We assume no duty to update forward-looking statements to reflect events or circumstances after the date of such statements.
The following discussion should be read in conjunction with Item 1, Condensed Financial Statements, in Part I of this Quarterly Report.
Overview of Current and Planned Operations
PCS Edventures!, Inc. sells STEM / STEAM products to educational and recreational entities serving youth. At this time, we do not attempt to align our products to fit in the classroom setting although we are aware that some of our customers use our products to fill enrichment time blocks in the classroom during formal school time. Classroom curriculum must align with specific state standards to be considered for use. Each state has their own unique set of standards, making classroom curriculum development a state by-state endeavor.
On the other hand, out of school programs are not subject to a state governmental standard alignments, although these programs often require that educational programs align with various sets of state or national educational standards. This difference makes it easier to penetrate out-of-school programs, as more freedoms exist for curriculum development. We focus our efforts on these out-of-school programs, which include summer school, summer camps, YMCA programs, Boys and Girls club programs, and various other programs offered outside of the classroom, at all times of the year, that are too numerous to list. Oftentimes, these programs are sponsored, administered, and/or supported by local school districts, and we employ considerable efforts to build relationships with these types of school districts to provide desired programing for their out-of-school programs. The majority of the time, the out-of-school programs offered are funded with grants; however, some programs are run on a for-profit basis. The Company sells to all of these types of entities.
We offer professional development training for instructors using our products; and typically charge a fee for this service, with the fee primarily covering our expenses. Management does not view this service as a profit center, but rather as a customer service component of our products that adds to its uniqueness and value in the marketplace, and as a market development endeavor to build out the Company’s addressable market.
The nature of our target market produces considerable seasonality for the Company’s revenue. The quarters ended June 30 and September 30 tend to be the peak of this seasonality (with the quarter ended March 31 being close to these quarters), while the quarter ended December 31 tends to be the low point of our seasonality. The Table below reflects this seasonality.
| Quarterly Revenue $ | ||||||||||||||||
| Quarter Ended | 2021 | 2022 | 2023 | 2024 | ||||||||||||
| March 31 | 648,743 | 1,445,594 | 2,521,470 | 2,262,772 | ||||||||||||
| June 30 | 1,062,127 | 1,391,785 | 2,605,281 | 3,159,923 | ||||||||||||
| September 30 | 993,458 | 1,243,662 | 3,767,326 | |||||||||||||
| December 31 | 566,473 | 1,847,659 | 459,087 | |||||||||||||
| 12 |
The Company, through winning a competitive “Request For Proposal,” added the Air Force Junior Reserve Officers’ Training Corp (“AFJROTC”) as a customer in the second half of calendar year 2022. The Company experienced elevated sales due to the fulfillment of the AFJROTC orders for the quarters ended December 31, 2022, March 31, 2023, and September 30, 2023. One of the AFJROTC revenue quarters was December 31, 2022, which corresponds with the lowest seasonal revenue quarter, so the effects of seasonality in 2022 was not as readily apparent as in other calendar years. The table below removes the AFJROTC revenue to highlight the seasonality that the Company experiences.
| Quarterly Revenue Less Air Force JROTC Revenue | ||||||||||||||||
| Quarter Ended | 2021 | 2022 | 2023 | 2024 | ||||||||||||
| March 31 | 648,743 | 1,445,594 | 1,247,835 | 2,262,772 | ||||||||||||
| June 30 | 1,062,127 | 1,391,785 | 2,605,281 | 3,159,923 | ||||||||||||
| September 30 | 993,458 | 1,243,662 | 2,501,410 | |||||||||||||
| December 31 | 566,473 | 458,239 | 459,087 | |||||||||||||
During the quarter ended December 31, the Company focuses on product development, restocking inventory, and general planning for the next year. Sales and marketing activities remain fairly constant throughout the year.
Results of Operations
Revenue
For the quarter ended June 30, 2024, our revenue was $3,159,923. For the quarter ended June 30, 2023, our revenue was $2,605,281. The increase in revenue was due to our strategy of soliciting larger customers. The table below shows customer transactions by size for the periods indicated.
Number of Customer Transactions by size
>$1 million | >$500,000 | > $100,000 | > $50,000 | > $25,000 | > $10,000 | |||||||||||||||||||
| Three months ended June 30, 2022 | 0 | 0 | 3 | 7 | 12 | 24 | ||||||||||||||||||
| Three months ended June 30, 2023 | 0 | 0 | 6 | 12 | 19 | 42 | ||||||||||||||||||
| Three months ended June 30, 2024 | 0 | 0 | 8 | 13 | 26 | 50 | ||||||||||||||||||
We believe that we can continue to experience success in soliciting larger customers, but we can offer no assurances that success will be certain, nor can we offer any numerical framework in describing the success that may occur. Risk factors include anything that would negatively affect educational funding in the United States; finding and retaining employees that meet our high standards; and anything that would negatively affect our supply chain of critical components.
Cost of Sales
We strive to have a cost of sales that is less than 40% of revenue. We price our products once per year, at the beginning of the calendar year, and maintain that pricing level throughout the year. During inflationary environments, when the price level of the Company’s raw materials is increasing, the Company must absorb that negative impact to gross margins until it can reprice its products at the beginning of the next calendar year. This repricing analysis considers the current pricing level of materials, as well as the likely increase in those levels in the year ahead. We attempt to incorporate shipping costs into the cost of raw materials, but oftentimes during the course of the year, we are compelled to ship in a more expedient manner, which is more expensive than our baseline assumptions.
For the quarter ended June 30, 2024, our cost of sales was $1,198,435, or 37.9% of revenue. For the quarter ended June 30, 2023, our cost of sales was $1,004,070, or 38.5% of revenue. For any given quarter, and especially in low revenue quarters, the cost of sales can vary significantly from our desired 40% or less of revenue. However, for any given year, the calculation is relevant and desired to be 40% or less of revenue.
| 13 |
Factors affecting cost of sales include:
| Helps sub 40% cost of sales | Impedes sub 40% cost of sales |
| Higher revenue | Higher inflation |
| Larger order size | Expedited shipping |
| Ability to take advantage of volume discounts | Quality issues with raw materials |
Operating Expenses
Operating expenses are divided into two (2) categories – salary + wages, and general + administrative. Salary and wages tend to increase over time as the Company has been increasing its number of employees, and we expect to continue to do so in the future. Also, the Company desires to retain employees over the long term, which requires periodic increases in compensation as their value to the Company increases.
The Company also has a discretionary quarterly bonus program based on qualified revenue. Qualified revenue is defined as revenue where there are no reseller fees or other price adjustments associated with that revenue. Thus, all reseller sales are disqualified from the discretionary quarterly bonus calculation, as are other miscellaneous transactions where the Company did not receive a full margin. During quarters with higher revenue, salaries and wages will increase all other things equal.
Salary and wages were $518,287 for the quarter ended June 30, 2024. For the quarter ended June 30, 2023, salaries and wages were $446,276. Salaries and wages increased during the quarter ended June 30, 2024, as compared to the quarter ended June 30, 2023, due to the facts that i) the Company had two (2) more employees as of June 30, 2024, versus June 30, 2023; ii) inflation has been elevated; and iii) the Company’s overall performance has been improving, thus increasing employee bonus amounts.
General and administrative expenses include all operating expenses outside of salaries and wages. These include the following categories:
| 1. | Advertising and marketing expenses | |
| 2. | Trade show and travel expenses | |
| 3. | Product development expenses | |
| 4. | Finance charges | |
| 5. | Contract labor expenses | |
| 6. | Lease expenses | |
| 7. | Insurance premiums | |
| 8. | Workers’ compensation expenses | |
| 9. | Office supplies and repairs | |
| 10. | Professional expenses | |
| 11. | Licenses | |
| 12. | State sales tax expenses | |
| 13. | Office and warehouse infrastructure expenses |
Most of these expenses are not correlated with changes in revenue, but they tend to increase over time. General and administrative expenses were $320,019 for the quarter ended June 30, 2024. For the quarter ended June 30, 2023, general and administrative expenses were $294,834.
The Company currently leases a 10,000 square foot facility which ends in October of 2024. We are currently looking for new space, with the expectation that we need approximately double the amount of space we currently occupy to accommodate our needs in achieving our growth expectations. This will cause general and administrative expenses to increase noticeably, as will the additional expenses associated with being an SEC “reporting company” under the Exchange Act.
| 14 |
Other Income
Interest income was the sole source of other income for the quarters ending June 30, 2024, and 2023. For the quarter ended June 30, 2024, other income was $21,509. For the quarter ended June 30, 2023, other income was $277. The Company’s surplus cash is invested in a “Vanguard” money market fund that invests exclusively in repurchase agreements and short-term U.S. government securities. The ticker symbol of this fund is “VMFXX.”
Net Income Before Tax
For the three (3) months ended June 30, 2024, net income before tax was $1,144,691 versus $860,378 for the three (3) months ended June 30, 2023. Higher revenue and higher gross margin during the quarter ended June 30, 2024, versus those for the quarter ended June 30, 2023, were responsible for the variance in net income before taxes.
Taxes
The Company has a significant tax-loss carry-forward asset, which arose due to past losses. At March 31, 2024, the Company had net operating losses of approximately $9.2 million that may be offset against future taxable income. The federal and state net operating losses and tax credits expire in years beginning in 2026.
Prior to fiscal year 2023, the Company offset its potential tax benefit from the operating loss carry-forwards with a valuation allowance in the same amount. As it became clear that the Company will more likely than not use its tax loss carry-forward amounts, the valuation allowance was partially removed for the fiscal year ended March 31, 2023, such that the tax benefit recognized by us in fiscal year 2023 was $1,011,466. The valuation allowance was fully removed as of March 31, 2024, resulting in a tax benefit of $1,529,793 for fiscal year 2024.
Net Income
With the large net operating losses that can be used to offset taxable income, net income is the same as net income before tax for the reporting periods shown.
Liquidity and Capital Resources
Cash Flow from Operations
For the three (3) months ended June 30, 2024, cash provided by operations was $1,352,840 compared to cash provided by operations of $609,211 for the three (3) months ended June 30, 2023.
As of June 30, 2024, total current assets were $6,782,462 and total current liabilities were $648,076, resulting in working capital of 6,134,386. As of March 31, 2024, total current assets were $5,425,141 and total current liabilities were $416,154, resulting in working capital of $5,008,987. The Company had a current ratio as of June 30, 2024, of 10.5 compared to a current ratio of 13.0 as of March 31, 2024.
As of June 30, 2024, we had $2,652,716 in cash and cash equivalents compared to $1,329,708 in cash as of March 31, 2024. The improvements in working capital and cash on hand are due to a significant increase in net income during the quarter ending June 30, 2024.
Cash Flow from Investing Activities
For the three (3) months ended June 30, 2024, cash used by investing activities was $29,832 compared to cash used by investing activities of $7,687 for the three (3) months ended June 30, 2023. We purchased a forklift for the warehouse for $26,829 during the quarter ended June 30, 2024, which accounts for the majority of the difference between the two (2) periods.
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Cash Flow from Financing Activities
For the three (3) months ended June 30, 2024, and 2023, we did not have any cash flows from financing activities.
Off-Balance Sheet Arrangements
We had no Off-Balance Sheet Arrangements during the three (3) month periods ended June 30, 2024, and 2023.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and is not required to provide the information required under this item.
Item 4. Controls and Procedures.
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that material information relating to us is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Management, with the participation of our Chief Executive Officer and our President who acts as our Principal Financial Officer, have evaluated the effectiveness, as of June 30, 2024, of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2024, because of inadequate control and expertise over preparation of the preliminary financial statements and schedules for our auditor’s review, resulting in some minor errors in applying “Accounting Standards Codifications” used in the United States to organize and present accounting standards and principles. Management has concluded that we will take appropriate action to add additional expertise to assist us in the preparation of our future interim financial statements for our auditor’s review to ameliorate this weakness. Management acknowledges that as a smaller reporting entity, it is difficult to have adequate accounting staff to perform appropriate additional reviews of the financial statements.
Changes in Internal Control over Financial Reporting
Management has contracted with additional expertise to assist us in the preparation of our future interim financial statements to ameliorate any internal control weakness and to assist us in designing and implementing a system of adequate controls over the preparation of our financial statements and schedules. There have been no other actions or changes in our internal control over financial reporting during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and is not required to provide the information required under this Item.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None; not applicable.
Item 5. Other Information.
No
director or Section 16 officer
Item 6. Exhibits.
(a) Index of Exhibits
Form 10A-1 Registration Statement filed with the SEC on November 15, 2023.
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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!, INC.
| Dated: August 14, 2024 | By: | /s/ Todd R. Hackett |
| Todd R. Hackett | ||
| Chief Executive Officer and | ||
| Chairman of the Board of Directors | ||
| Dated: August 14, 2024 | By: | /s/ Michael J. Bledsoe |
| Michael J. Bledsoe | ||
| President, Principal Financial Officer and Director |
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