UNITED
STATES
Securities
and Exchange Commission
Washington,
D. C. 20549
FORM
10 - A1
GENERAL
FORM FOR REGISTRATION OF SECURITIES
Pursuant
to Section 12(b) or (g) of the Securities Exchange Act of 1934
PCS
Edventures!, Inc.
(Exact
name of registrant as specified in its charter)
Idaho |
|
82-0475383 |
(State
or other jurisdiction of |
|
(I.R.S.
Employer |
incorporation
or organization) |
|
Identification
No.) |
11915
W. Executive Drive, Suite 101
Boise,
Idaho 83713
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (208) 343-3110
Securities
to be registered pursuant to Section 12(b) of the Act:
None
Securities
to be registered pursuant to Section 12(g) of the Act:
No
par value common stock
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company,
or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ☐ |
Accelerated
filer ☐ |
Non-accelerated
filer ☐ |
Smaller
reporting company ☒ |
|
Emerging
Growth company☐ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
INDEX
Forward-Looking
Statements
When
used in this Registration Statement on Form 10, the words or phrases “would be,” “will allow,” “intends
to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,”
“estimate,” “project” or similar expressions are intended to identify “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995. You should be aware that these forward-looking statements
are subject to risks and uncertainties that are beyond our control. Although management believes that the assumptions underlying the
forward-looking statements included in this Registration Statement are reasonable, they do not guarantee our future performance, and
actual results could differ from those contemplated by these forward-looking statements. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. Unless otherwise required by applicable law, we do not undertake,
and specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.
Item
1. Business.
History
and Organization
PCS
Edventures!, Inc., an Idaho corporation (“PCS,” the “Company,” “we,” “our,” “us,”
and words of similar import), was originated under the laws of the State of Idaho on August 3, 1994 as “PCS Education Systems,
Inc.” On March 27, 2000, we changed our name from “PCS Education Systems, Inc.” to “PCS Edventures!.com, Inc.”
On August 31, 2015, we changed our name from “PCS Edventures!.com, Inc.” to “PCS Edventures!, Inc.” PCS Edventures!,
Inc. is our current company name.
On
February 18, 2016, we announced the completion of an asset purchase of Thrust-UAV, a privately-held company focused on drone technology.
On
March 27, 2017, the Company filed a Form 15-12g with the Securities and Exchange Commission (the “Commission”) whereby, under
Rule 12g-4(a)(1) and Rule 12h-3 (b)(1)(i), it terminated its duty to file reports with the Commission.
Effective
December 31, 2017, the Company’s Executive Vice President, Director, and highest-ranking operations officer, resigned to pursue
other interests. Given his tenure at the Company of over 20 years and his position at the time of his departure, this effectively caused
a change in executive leadership at the Company. On January 1, 2018, Michael J. Bledsoe, then Vice President and Treasurer, and a Director,
was appointed to assume responsibility for the operational oversight of the Company. On April 23, 2018, he was promoted to President,
a position he currently holds. Todd R. Hackett was Chairman of the Board and CEO at the time of this transition and remains in those
positions with the Company.
The
Company’s Board of Directors has determined that it is in the best interests of the shareholders of the Company to register its
common stock pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and return
to its former status as a “fully-reporting” entity with the Commission given the Company’s improved financial condition
and management’s desire to improve the Company’s reporting quality to shareholders. This Registration Statement on Form 10
is filed for that purpose. Upon the automatic effectiveness this Registration Statement, which will occur 60 days after filing, our common
stock will be registered under Section 12(g) of the Exchange Act.
Overview
The
Company specializes in creating experiential, hands-on, K12 STEM (Science, Technology, Engineering, and Math) education products and
curriculum. (STEM is often abbreviated as STEAM – Science, Technology, Engineering, Arts, and Math – to include the arts.
We use the terms STEM and STEAM interchangeably throughout this document and make no significant distinction between the two terms.)
Through our acquisition of Thrust-UAV, we developed educational drones and drone curriculum. Our customers include schools and school
districts from the collegiate to kindergarten level, and providers of out-of-school programming which include after-school programs,
military education programs, home-schooling programs, summer programs, and corporate outreach programs. We sell predominately in the
United States and sell into nearly every state in the nation. We have a few international customers, but revenue from customers outside
of the United States is not material and we do not focus our sales efforts on international markets at this time.
Our
products facilitate STEM 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.
PCS’
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.
Products
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 30 different enrichment programs and typically develops at least two new programs each year. Some
of the more popular programs include Ready, Set, Drone!; Traveling Artist; Unleash Your Wild Side, Build a Better World; Claymation;
Oceanic Exploration; Pirate; and Flight and Aerodynamics. |
|
|
|
|
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. |
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|
|
|
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. |
|
|
|
|
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.
Distribution
Methods of Products
The
Company sells its products directly to customers and through resellers. The Company kits all of its products at its Boise, Idaho facility
and ships the products directly to customers. Resellers do not inventory the Company’s products and the Company “drop ships”
its products directly to the resellers’ customers. Trainings and Professional Development sessions are conducted either at the
Company’s facilities or at the customer’s location depending on the desires of the customer. Customers can buy from the Company’s
website, from a reseller’s website, or by presenting the Company with a valid purchase order.
Competition
The
STEM education market is not well defined and is very fragmented. Our products experience competition from multiple angles. Most schoolteachers
with exposure to STEM can create their own lesson plans, using their own materials, to emulate the educational benefits of using the
Company’s products, at a fraction of the cost. The value proposition of our products is less compelling in a budget-constrained
environment, as cost becomes an overriding factor in m any such cases. Additionally, there are several sources of free and inexpensive
curriculum that teachers can use to help them deliver STEM educational concepts similar to those experienced by the users of our products.
In
addition to competition at the local level, many of our products face competition from similar products produced by multinational companies
that have significant advantages over us in terms of financial resources, human resources, brand loyalty, supply-chain costs, and global
reach. While many of these companies primarily target the toy industry, their sheer size and cost advantages allow them to easily breach
the education market with their products. In this regard, the company competes directly with Lego, DJI, Fischertechnik, K’Nex (acquired
by Basic Fun), and Vex IQ among many others.
There
are numerous companies of various sizes that develop and sell STEM educational products. While there may be several characteristics that
differentiate our Company’s products from theirs, all of us are competing for a finite market. There are several potential solutions
to STEM education demand and, oftentimes, companies can achieve a first-mover advantage by developing a relationship with a customer
or distributor, and integrating their suite of products and services into the supply chain before we can showcase our offerings.
We
also compete against non-profit organizations, such as Project Lead The Way, who have a mission to promote and implement STEM education.
The programs they provide can be free, subsidized, government-sponsored, rigorously developed, and/or heavily promoted, creating intense
competition for our products and services.
We
believe that we have a competitive advantage in curriculum development. We employ STEM teachers who, through experience, understand the
environment that educators operate within and the unique challenges they face, and we develop our curriculum with the educator in mind
for an easy, successful, and consistent implementation. Many of our competitors’ products focus on the product or the student,
with the educator left to figure out the details of implementation.
Manufacturing,
Supplies, and Quality Control
Our
Enrichment Programs contain several types of materials, kitted in a box. There is no manufacturing involved in the creation of our final
product in the Enrichment Program category. Nearly all materials used are non-proprietary and commercially available. The materials are
mostly consumer discretionary (paper, crayons, pencils, tape, yarn, etc.) and sourced from a variety of vendors, some of which are located
outside of the United States. Some of our Enrichment Programs contain proprietary products from other companies, commercially available,
and the Company maintains close relationships with these suppliers. The final creation of the product via kitting and packaging is done
at our corporate facility in Boise, Idaho. The printing and digitizing of the curriculum, as well as all curriculum development oversight,
is performed at our corporate facility.
Our
Discover series of products contains some proprietary products designed by our Company and manufactured abroad as well as non-proprietary,
commercially available products. Most of our Discover series of products are comprised of other companies’ final products, combined
with our curriculum. Our RubiQ education drone is a proprietary product of the Company and is the main component in Discover Drones.
The RubiQ education drone’s components are manufactured abroad and quality-controlled at our corporate facility. The final packaging
of all Discover products is done at our Boise, Idaho facility. The printing and digitizing of the curriculum, as well as all curriculum
development oversight, is performed at our corporate facility.
Our
BrickLAB products contain proprietary plastic building bricks (that are Lego compatible) manufactured for us by a long-time vendor with
manufacturing facilities in South Korea. The printing and digitizing of the curriculum, as well as all curriculum development oversight,
is performed at our corporate facility.
The
STEAMventures BUILD Activity Book was developed at our corporate facility. The printing of the product and final packaging are performed
at our corporate facility.
Sources
and Availability of Raw Materials and Names of Principal Suppliers
Raw
material procurement has become more challenging since the Covid-19 pandemic. Backlogs have created availability problems for a few items,
shipping congestion from time to time has significantly delayed shipment of many items, and prices of nearly all items have increased
materially. We expect continued inflation in the materials we use in our final products, although we expect transportation costs to moderate.
With
few exceptions, we can generally source materials from multiple vendors, although the pricing from different vendors varies considerably.
Thus, supply problems that we experience generally do not impair our business from functioning. However, supply problems that cause us
to procure from higher-priced sources negatively affect our gross margin as we cannot adjust our prices as quickly as the prices of our
raw materials increase.
In
response this challenging environment, we raised 2022 prices for many products to maintain our margin goals, and we were compelled to
do so again in 2023. Additionally, we buy in bulk to achieve better pricing, and have increased general inventory levels. While we purchase
from numerous vendors, below are our most used vendors by dollar volume:
Mida’s
Global
Fischertechnik
Amazon
ASI
Flash
Hobby Technology
FPVElite
Dependence
on One or a Few Major Customers
We
have two major customers who accounted for 45% of sales in our Fiscal Year 2023. One of these customers was a new contract from the Air
Force JROTC program and represented 38% of our revenue in Fiscal Year 2023. We had three major customers who accounted for 46% of sales
in our Fiscal Year 2022. The details of sales from our major customer are below:
| |
2023 | | |
2022 | | |
Relationship Duration |
Customer Description | |
| | | |
| | | |
|
Customer A | |
| 4 | % | |
| 12 | % | |
9 years |
Customer B | |
| 7 | % | |
| 22 | % | |
18 years |
Customer C | |
| 38 | % | |
| 0 | % | |
1 year |
Customer D | |
| 4 | % | |
| 12 | % | |
12 years |
Customers
A and D are resellers. The sales from reseller customers represent the aggregation of many purchase orders each of these customers place
with us throughout the year. Our reseller customers place an order with us when their customer orders our product from them. This cycle
recurs numerous times throughout any given year.
We
work closely and frequently with our larger customers to ensure that they are receiving the value proposition and service from us they
require to continue doing business with us. We would categorize our relationship with these customers as excellent and do not believe
that there is a risk to any of these relationships over the next year. Customer C, being a contract with a specified ending date with
no minimum order requirement in any given year, is not likely to experience the duration with us as our other major customers have.
We
believe that the risk of losing any one of these customers is small, and we are actively, and successfully, soliciting larger customers
to diversify our current customer concentration. While we believe the risk of losing any one of these major customers over the next year
is small, the loss of any two of these customers would pose a significant risk to the financial health of the Company.
Seasonality
of Business
Our
business is subjected to strong seasonal patterns during any given year, with our busiest period coinciding with summer learning and
the planning leading up to providing summer programs (January through July). The period between Thanksgiving and the New Year is our
slowest time, coinciding with the holiday season, as most schools observe the holidays with significant time off during this period.
Patents,
Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration
We
do not have any designs or equipment which are patented, registered trademarked, or licensed.
Research
and Development Costs During the Last Two Fiscal Years
We
currently expense our costs under a general operating expense category instead of capitalizing any research and development expenses.
Employees
As
of September 30, 2023, we had 21 full-time employees.
Impact
of the Covid-19 Pandemic
The
pandemic affected our end markets considerably for a period of time when lockdown orders were enacted at schools and after-school programs.
We sell to educational program providers, and our products are designed to be used in-person with group collaboration encouraged. School
closures and a movement to remote learning during much of calendar year 2020 significantly and negatively impacted our revenue. Our revenue
for fiscal year 2021 (ending March 31, 2021) declined 57.7% from our revenue for fiscal year 2020. For fiscal year 2022, the impact from
the pandemic was negligible, as most K-12 learning institutions and after-school programs resumed in-person learning and services. We
reported record revenue for fiscal year 2023 indicating that the any lingering effects of the pandemic are insignificant.
Our
supply chain has experienced and continues to experience moderate delays due to the pandemic’s various effects on our vendors.
Our vendors are located in China, Europe, South Korea, and the U.S., with each region experiencing the cycles of the pandemic at different
times and reacting differently to it. These conditions have caused some delays in us receiving our raw materials from vendors. Port congestion
arises from time to time, elevating transportation costs due to increased storage fees at the port, and further adding to delays in us
receiving materials. In situations when these delays in receiving our materials risk interrupting our customers’ programs, we have
often accommodated these customers, at the Company’s expense, with compensation in the form of free shipping to the customer, express
shipping to the customer, express shipping of materials from our vendor to us, product substitutions with the customer, or additional
materials given to the customer. We believe that these supply chain issues are manageable and temporary, but they will continue to negatively
impact our profit margin until fully resolved.
General
supply shortages of semiconductors, attributed to the pandemic, have elevated the cost of the flight controller component of our proprietary
drone from $14.50 per unit to $50.00 per unit. Given the global nature of this shortage, we will procure only what is needed and wait
to buy in bulk when supply returns to normal. We have solicited additional vendors who supply drone materials to diversify our supply
chain. Recently, prices have begun to moderate.
During
the pandemic when our markets were significantly impaired by mandated lockdowns, we developed a STEM activity book, titled STEAMventures,
which could be used in a distance-learning environment. We also modified two of our enrichment programs to be used at the individual
level instead of at the group level, to accommodate areas where in-person learning was not possible. Through these developments, we believe
that we have a better suite of offerings for distance-learning environments, should that environment arise again.
On
April 14, 2020, the Company received its first Paycheck Protection Program (PPP) loan in the amount of $193,375. This amount was subsequently
forgiven in December of 2020. On February 2, 2021, the Company received its second PPP loan in the amount of $221,050. This amount was
subsequently forgiven in September of 2021.
The
Company qualified for the Employee Retention Tax Credit (ERTC) for 2020 and the first three calendar quarters of 2021. The Company has
filed an amended IRS Form 941 quarterly federal tax return for the April through June 2020 period to claim this credit as it was made
retroactive at the end of 2020. We have also filed our quarterly Forms 941 claiming this credit. The amounts of the credits are summarized
below:
| |
ERTC | |
For period | |
Amount Claimed | |
Apr 1, 2021 – March 31, 2022 | |
$ | 198,995 | |
Apr 1, 2022 - March 31, 2023 | |
$ | 94,860 | |
Growth
Plan
Our
primary focus is to continue penetrating the U.S. market with our current product line as we feel the market is large relative to our
current market share and receptive to our value proposition of high-quality, easily implemented, hands-on STEM programs. We are actively
pursuing larger customers who can implement our programs at multiple sites, recognizing that some unique product development may be required
for these sales. We intend to develop new products and to enhance our current product line based on market feedback we receive, both
solicited and unsolicited, and based on developments within our market. We intend to further develop and enhance our educational drone
product line, and we are prepared to compete intensely in this product category, as we believe that 1) our curriculum offers us a competitive
advantage in this space and 2) the educational drone market is nascent and expected to continue to grow significantly.
The
Company reported record revenue and net income for fiscal year 2023, after a profitable fiscal year 2022, and its outlook is for continued
profitability in its fiscal year 2024. The Company’s recent success, coupled with the Company’s established history of significant
aggregate profitability for the past 5 years, accomplished under the supervision of different Management than the team that oversaw the
period prior to fiscal year 2019, compelled Management, in consultation with Company tax advisors and auditors, to recognize a portion
of the tax- loss carry-froward asset on the Company’s fiscal year 2023 financial statements. The value of this recognition was $1,011,466
which represents the portion of the total tax-loss carry-forward amount that Management feels confident in realizing. For the fiscal
year ended March 31, 2023, the Company reported net income of $2,776,176 which includes the recognition of the tax-deferred asset.
Regulation
and Environmental Compliance
Presently,
none of our products are in highly regulated industries.
Need
for any Governmental Approval of Principal Products or Services
No
products presently being manufactured or sold by us are subject to prior governmental approvals. Notwithstanding the forgoing, the educational
drone market is relatively new and undergoing significant regulatory evolution. We stay current on these regulatory developments and
help our customers understand and comply with new regulations.
Effect
of Existing or Probable Governmental Regulations on the Business
Our
Registration Statement on Form 10 will become effective 60 days after filing with the Commission, at which point our securities will
be registered pursuant to Section 12(g) of the Exchange Act. Issuers with securities registered under Section 12(g) are subject to numerous
regulatory requirements under the Exchange Act. For example, we will be subject to the Sarbanes-Oxley Act of 2002. This Act creates a
strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence.
It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality
of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible
conflicts of interest affecting securities analysts; creates guidelines for audit committee members appointment, compensation and oversight
of the work of public companies’ auditors; prohibits certain insider trading during pension fund blackout periods; and establishes
a federal crime of securities fraud, among other provisions.
Section
14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with
the rules and regulations of the Commission regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders
of our Company at a special or annual meeting thereof or pursuant to a written consent will require that we provide our stockholders
with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the
Commission at least ten (10) days prior to the date that definitive copies of this information are forwarded to our stockholders.
Upon
effectiveness of our Registration Statement on Form 10, we will also be required to file annual reports on Form 10-K and quarterly reports
on Form 10-Q with the Commission on a regular basis, and will be required to timely disclose certain material events (e.g., changes in
corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; changes
in executive officers and directors; and bankruptcy) in a Current Report on Form 8-K.
The
Company currently does not hold any intellectual property rights. While we use reasonable efforts to protect our trade and business secrets,
we cannot assure that our employees, consultants, contractors or advisors will not, unintentionally or willfully, disclose our trade
secrets to competitors or other third parties. In addition, courts outside the United States are sometimes less willing to protect trade
secrets. Moreover, the Company’s competitors may independently develop equivalent knowledge, methods and know-how. If we are unable
to defend our trade secrets from others use, or if our competitors develop equivalent knowledge, it could have a material adverse effect
on our business. Any infringement of our proprietary rights could result in significant litigation costs, and any failure to adequately
protect our proprietary rights could result in our competitors offering similar products, potentially resulting in loss of a competitive
advantage and decreased revenue. Existing patent, copyright, trademark and trade secret laws afford only limited protection. In addition,
the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States. Therefore,
we may not be able to protect our proprietary rights against unauthorized third-party use. Enforcing a claim that a third party illegally
obtained and is using the Company’s trade secrets could be expensive and time-consuming, and the outcome of such a claim is unpredictable.
Litigation may be necessary in the future to protect our trade secrets or to determine the validity and scope of the proprietary rights
of others. This litigation could result in substantial costs and diversion of resources and could materially adversely affect our future
operating results.
Smaller
Reporting Company
The
Company is a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act. There are certain exemptions available
to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section
404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of
audited financial statements, instead of three years. As long as we maintain our status as a “smaller reporting company”,
these exemptions will continue to be available to us.
We
intend to take advantage of all of these reduced reporting requirements and exemptions.
Item
1A. Risk Factors
As
a smaller reporting company, we are not required to respond to this Item.
Item
2. Financial Information
This
Registration Statement on Form 10 contains certain forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 with respect to the Plan of Operations provided below, including information regarding the Company’s financial
condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities,
and the plans and objectives of management. The statements made as part of the Plan of Operations that are not historical facts are hereby
identified as “forward-looking statements.”
The
following discussion and analysis provide information which management believes is relevant to an assessment and understanding of our
results of operations and financial condition. The discussion should be read in conjunction with the financial statements and notes included
in this report as Item 15.
Management’s
Discussion and Analysis
Critical
Accounting Policies
The
Company’s financial statements are prepared using the accrual method of accounting and in conformity with accounting principles
generally accepted in the United States. The Company has elected a March 31 fiscal year end. The Company’s accounting policies
are more fully described in Note 1 of the consolidated financial statements.
Results
of Operations for the Years Ended March 31, 2023 and 2022 and the six months ended September 30, 2023 and 2022
Revenues
The
Company’s recognizes all revenue from the sales of its products and services on a transfer of goods that occurs at a single point
in time (upon shipment or delivery.) The Company directly accepts orders for these products and is directly responsible for delivery
from its third-party warehouse locations. Payment terms for all products delivered are “due upon shipment.” The Company does
not have agreements whereby our products and services are transferred over time.
For
the fiscal year ended March 31, 2023 (FY 2023), our revenue was $7,004,575, $2.94 million greater than our revenue of $4,067,652 for
the fiscal year ended March 31, 2022 (FY 2022). This growth in revenue was largely due to the Company’s new Air Force JROTC (Air
Force) relationship which did not exist in FY 2022. The Air Force accounted for $2.61 million of revenue in FY 2023 versus zero in FY
2022.
The
Air Force buys the Company’s proprietary drone program, Discover Drones, and installs this program in select JROTC locations
in high schools. During FY 2023, the Air Force purchased 344 units of Discover Drones, with each unit going to a unique location.
Even though the Air Force exercised their option for the second year of the agreement with the Company, the Company has no assurances
whatsoever that the Air Force will order any more products from the Company. The agreement specifies product and price but allows the
Air Force to order any quantity between 1 and 750 units during the year covered by the agreement. Reasons why the Air Force would not
order more products include 1) no funding being available, 2) no end demand from their JROTC programs, and 3) a determination that the
program does not accomplish the goals it was intended to accomplish.
The
Company also reached another agreement which contributed to revenue growth in FY 2023 over FY 2022. In November of 2021, the Company’s
Ready, Set, Drone! Enrichment Program was selected by the Iowa Governor’s STEM Advisory Council for their programing in
calendar year 2022. The Advisory Council reviews applications from companies proposing their STEM products for use in the Program. The
Advisory Council selects around 12 products per year from these applications. Applications are submitted in August and awarded in November.
This award was the first for our Company from the Advisory Council, and accounted for $407,320 in revenue for FY 2023.
Revenue
by product line is summarized below:
Revenue
by Product Line
$000s
| |
Year Ended | | |
Year Ended | |
| |
March 31, 2023 | | |
March 31, 2022 | |
Enrichment Programs | |
| 2,870 | | |
| 2,491 | |
Discover Series | |
| 231 | | |
| 392 | |
BrickLab Products | |
| 305 | | |
| 309 | |
Proprietary Drones (Discover
Drones) | |
| | | |
| | |
Air Force JROTC | |
| 2,614 | | |
| 0 | |
All Other Proprietary Drones | |
| 566 | | |
| 559 | |
Steamventures BUILD Activity Book | |
| 100 | | |
| 65 | |
Professional Development Training | |
| 86 | | |
| 54 | |
Shipping | |
$ | 226 | | |
| 194 | |
Uncategorized Revenue | |
| 6 | | |
| 4 | |
| |
| | | |
| | |
Total Revenue | |
| 7,005 | | |
| 4,068 | |
The
growth in revenue from Enrichment Programs can be fully attributed to the Company’s Iowa relationship, which produced revenue of
$407,320 attributed to Enrichment Programs in FY 2023. This Iowa relationship also produced Training revenue of $49,000 and shipping
revenue of $8,160. The Company received no revenue from this Iowa customer in FY 2022.
Proprietary
drone revenue, excluding the Air Force, was flat in FY 2023 over FY 2022, while the “all other Discover Series” experienced
a slight decline in revenue.
On
a forward-looking basis, there can be no assurance that the Company will experience any revenue from the Air Force or Iowa.
During
FY 2022, the Company embarked on an initiative to target larger installations of its STEM educational products. The sales cycle in the
STEM educational products space can oftentimes be long (over one year), so most of the efforts made in FY 2022 did not produce noticeable
results in that year. However, the Company started seeing the results of this effort in FY 2023. Select sales statistics are presented
below:
Sales
Statistics
| |
FY 2023 | | |
FY 2022 | |
Number of customer transactions over $50,000 | |
| 21 | | |
| 14 | |
Number of customer transactions over $100,000 | |
| 10 | | |
| 7 | |
Median sale of top 21 customer sales | |
$ | 99,540 | | |
$ | 71,621 | |
Media sale of top 51 customer sales | |
$ | 35,071 | | |
$ | 20,950 | |
The
Iowa relationship is divided into 6 autonomous regions in Iowa, with each region having their own agreement. Thus, we account for these
regions separately for purposes of calculating the statistics in the above table.
For
the six months ended September 30, 2023, our revenue was $6,372,607 compared to revenue of $2,635,447 for the six months ended September
30, 2022. During the six months ended September 30, 2023, revenue from the Air Force, excluding shipping, was $1,246,236 versus zero
for the six months ended September 30, 2022. In addition, the Company again won an award from the Iowa Governor’s STEM Advisory
Council for calendar year 2023. For calendar year 2023, the award was for the Company’s Discover Drones product and the
Company recognized product revenue (categorized as “All Other Proprietary Drones” of $752,301 for the six months ended September
30, 2023 from this relationship. Training revenue was $49,000 and shipping revenue was $9,900.
For
calendar year 2022, the award was for the Company’s Ready, Set, Drone! product, and categorized under “Enrichment
Programs.” In the table below, the revenue from the Company’s Iowa relationship for the six months ended September 30, 2022
shows up in the “Enrichment Programs” line item. The revenue from the Company’s Iowa relationship for the six months
ended September 30, 2023 shows up in the “All Other Proprietary Drones” line item.
Revenue
by Product Line
$000s
| |
Six Months Ended | | |
Six Months Ended | |
| |
September 30, 2023 | | |
September 30, 2022 | |
Enrichment Programs | |
| 2,743 | | |
| 1,729 | |
Discover Series | |
| 351 | | |
| 127 | |
BrickLab Products | |
| 281 | | |
| 198 | |
Proprietary Drones (Discover
Drones) | |
| | | |
| | |
Air Force JROTC | |
| 1,246 | | |
| 0 | |
All Other Proprietary Drones | |
| 1,359 | | |
| 366 | |
Steamventures BUILD Activity Book | |
| 147 | | |
| 67 | |
Professional Development Training | |
| 71 | | |
| 63 | |
Shipping | |
$ | 171 | | |
| 81 | |
Uncategorized Revenue | |
| 4 | | |
| 4 | |
| |
| | | |
| | |
Total Revenue | |
| 6,373 | | |
| 2,635 | |
Revenue
across all product categories was up significantly in the six months ended September 30, 2023 versus the same period in the prior year.
Significant factors behind this revenue growth include: 1) continuing revenue from the Air Force and Iowa relationships, 2) the Company’s
marketing efforts to raise market awareness of our product offerings and value proposition, 3) sales efforts to solicit larger customers,
and 4) a favorable funding environment.
The
Company’s Enrichment Programs product line experienced a significant increase in revenue for the six months ended September 30,
2023 over the same period the prior year. This increase was even more pronounced considering that, in FY 2022, the Company’s Iowa
relationship revenue was categorized as Enrichment Programs, whereas in FY 2023, the Iowa relationship revenue was categorized as All
Other Proprietary Drones.
The
Company’s efforts to form larger customer relationships continued to show results for the first six months of fiscal year 2024
(FY 2024), as compared to the same period in FY 2023.
Sales
Statistics
| |
Six Months Ended | | |
Six Months Ended | |
| |
September 30, 2023 | | |
September 30, 2022 | |
Number of customer transactions over $50,000 | |
| 23 | | |
| 15 | |
Number of customer transactions over $100,000 | |
| 16 | | |
| 7 | |
Median sale of top 21 customer sales | |
$ | 148,910 | | |
$ | 62,292 | |
Media sale of top 51 customer sales | |
$ | 40,112 | | |
$ | 25,090 | |
Again,
the Iowa relationship is divided into 6 autonomous regions in Iowa, with each region having their own agreement. Thus, we account for
these regions separately for purposes of calculating the statistics in the above table.
Cost
of Sales
For
fiscal year 2023, our cost of sales was $2,798,617, or 40.0% of sales, compared to our cost of sales of $1,711,085, or 42.1% of sales,
for fiscal year 2022. For fiscal year 2023, our reseller revenue was $1,066,340, or 15.2% of total revenue. For fiscal year 2022, our
reseller revenue was $1,179,489, or 29.0% of total revenue. Reseller revenue carries a higher cost of sales because the revenue we receive
from resellers is discounted by their sales fee. Thus, during periods when reseller revenue is a higher percentage of total revenue,
our cost of sales is likely to be higher, all other things equal. During periods, like FY 2023, when the Company experiences large direct
orders for its products, reseller revenue as a percentage of total revenue will decline, producing a lower aggregate cost of sales experience.
For
the six months ended September 30, 2023, our cost of sales was $2,192,896, or 34.4% of sales, compared to our cost of sales of $1,081,958,
or 41.1% of sales for the six months ended September 30, 2023. For the six months ended September 30, 2023, our reseller revenue was
$1,311,998, or 20.6% of total revenue. For the six months ended September 30, 2022, our reseller revenue was $673,926, or 25.6% of total
revenue.
The
prices of the materials the Company procures as inputs into its final goods have been increasing in general at a faster pace than normal
due to inflation. The Company has employed a number of strategies to reduce this inflationary effect which include buying materials in
larger quantities to receive larger discounts, buying materials when they are on sale and storing that inventory to be used as needed,
sourcing from our contacts overseas where pricing in some areas is more competitive, and having materials shipped to us in the most economical
way possible.
The
Company prices its goods once per year and honors those prices throughout the year. Each year, the Company assesses the effects of inflation
on its final goods and reprices those goods as necessary to achieve the Company’s margin goals. The market for the Company’s
products is price inelastic for smaller changes in price (less than 10%) and exhibits some price elasticity for larger changes in price.
Thus, the Company believes that it can manage the effects of inflation on its operating margins over time.
Operating
Expenses:
For
fiscal year 2023, our operating expenses were $2,393,503, or 34.2% of sales, compared to our operating expenses of $1,881,527, or 46.3%
of sales, for fiscal year 2022. Our operating expenses are more fixed than variable and will thus typically decline as a percentage of
sales as sales increase in most operating environments.
Employee
expenses increased $238,033 to $1,521,536, or 21.7% of sales, in fiscal year 2023 from $1,283,503, or 31.5% of sales, in fiscal year
2022. We endeavor to retain all of our employees, as we believe it is costly to our Company to turn over employees frequently. Thus,
we expect the absolute value of employee expenses to increase over time as compensation increases. However, employee expenses have not
been increasing as fast as revenue and, thus, have been decreasing as a percentage of sales.
General
and administrative expenses for FY 2023 were $871,967, or 12.5% of sales, compared to $598,024, or 14.7% of sales, for FY 2022.
For
the six months ended September 30, 2023, our operating expenses were $1,549,593, or 24.3% of sales, compared to our operating expenses
of $1,056,838, or 40.1% of sales for the six months ended September 30, 2022. With sales volume significantly elevated for the six months
ended September 30, 2023 over the same period in 2022, our operating expenses, as a percentage of sales, declined significantly. Operating
expenses do not vary proportionately with sales and higher sales volume will produce lower operating expenses as a percentage of sales.
Employee
expenses increased $299,715 to $959,952, or15.1% of sales, for the six months ended September 30, 2023 from $660,237, or 25.1% of sales,
for the six months ended September 30, 2022.
General
and administrative expenses for the six months ended September 30, 2023 were $589,641, or 9.3% of sales, compared to $396,601, or 15.1%
of sales, for the six months ended September 30, 2022.
Other
Income and Expenses
For
fiscal year 2023, our other income (expense) was ($47,745) compared to $254,295 for fiscal year 2022. For fiscal year 2022, we recognized
$221,050 of Payroll Protection Program Loan forgiveness, and $198,995 of Government Relief Program (ERTC). Interest expense for FY 2023
and FY 2022 was $142,605 and 165,750, respectively. Prior to March 31, 2023, the Company had debt outstanding which generated interest
costs and contributed to frequent net expense amounts under the other income (expense) category.
For
the six months ended September 30, 2023, our other income (expense) was $41,850 compared to ($74,161) for the six months ended September
30, 2022. Starting April 1, 2023, the Company was debt-free and, consequently, does not incur significant interest expense. Starting
at this time, surplus cash is invested in a money market fund and generates interest income. Thus, interest income for the six months
ended September 30, 2023 was $11,240, compared to interest expense of $74,161 for the six months ended September 30, 2022. The Company
incurred interest expense of $648 for the six months ended September 30, 2023 due to the use of its line of credit facility for normal
operating purposes. During the six months ended September 30, 2023, the Company received $31,258 of its outstanding Employee Retention
Tax Credit refund it is claiming.
Net
Income
For
fiscal year 2023, our net income was $2,776,176 compared to $729,335 for fiscal year 2022. Fiscal year 2023 was positively impacted by
an Income Tax Benefit of $1,011,466 related to recognition of projected recovery of prior period Net Operating Losses. For the six months
ended September 30, 2023, our net income was $2,671,968 compared to $422,490 for the six months ended September 30, 2022.
At March 31, 2023, the Company had net operating loss carry-forwards of approximately $13.9 million that may be offset against future taxable income. No tax benefit has been reported in the June 30, 2023 or September 30, 2023 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. The federal and state net operating losses and tax credits expire in years beginning in 2026.
Liquidity
and Capital Resources
As
of March 31, 2023, we had $2,493,906 of current assets and $364,269 of current liabilities, for net working capital of $2,129,637. Current
assets consist of cash, accounts receivable, government rebates receivable, inventory, and prepaid expenses. Current liabilities consist
of accounts payable, payroll liabilities and accrued expenses, deferred revenue and the current portion of lease obligations. As of March
31, 2022, the Company had $2,295,409 of current assets and $1,953,805 of current liabilities, for net working capital of $341,604. The
Company’s cash balances at March 31, 2023 and 2022 were $442,657 and 584,070, respectively.
During
FY 2023, the Company paid $1,443,327 to retire notes payable to our CEO, Todd Hackett, and $50,000 to retire notes payable to our President,
Mike Bledsoe.
As
of September 30, 2023, we had $5,195,854 of current assets and $470,658 of current liabilities, for net working capital of $4,725,196.
As of September 30, 2022, the Company had $2,578,439 in current assets and $1,780,878 in current
liabilities, for net working capital of $797,561. The improvement in working capital is due to the Company’s cash flow generation
ability during a favorable operating environment. The Company’s cash balances at September 30, 2023 and 2022 were $2,118,214 and
$316,161, respectively. Prior to FY 2023, the Company applied cash balances in excess of working capital needs to debt reduction. As
of March 31, 2023, the Company had retired all debt.
The
Company has a line of credit facility with its primary bank for $300,000 which expired on November 10, 2023. This facility was renewed
on October 27, 2023 for another year. As of March 31, 2023 and September 30, 2023, 2023, the line of credit facility was undrawn.
Management
believes the current cash balance and the cash flow from operations are adequate to fund operations over the next 12 months from the
date of this Registration Statement.
Off-Balance
Sheet Arrangements
We
have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to stockholders.
Item
3. Properties
We
own no real properties. Our corporate headquarters, R&D activities, and manufacturing facilities are located at 11915 W. Executive
Dr., Ste. 101, Boise, ID 83713. The Company occupies 10,000 square feet of office and warehouse space under a triple net lease with a
monthly rental amount that started at $6,800, and escalated by $200 per month at the end of each lease year, which is due to expire on
October 31, 2024.
Item
4. Security Ownership of Certain Beneficial Owners and Management
Security
Ownership of Certain Beneficial Owners
Under
Rule 13d-3 of the Commission, a beneficial owner of a security includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct
the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares
may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose
of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares
(for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage
ownership of any person, the number of shares outstanding is deemed to include the number of shares beneficially owned by such person
(and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown
in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of
common stock actually outstanding.
The
following table sets forth, as of September 30, 2023, the names, addresses and number of shares of common stock beneficially owned
by all persons known to the management of PCS to be beneficial owners of more than 5% of the outstanding shares of common stock, and
the names and number of shares beneficially owned by all directors of PCS and all executive officers and directors of PCS as a group
(except as indicated, each beneficial owner listed exercises sole voting power and sole dispositive power over the shares beneficially
owned).
For
purposes of this table, information as to the beneficial ownership of shares of common stock is determined in accordance with the rules
of the Commission and includes general voting power and/or investment power with respect to securities. Except as otherwise indicated,
all shares of our common stock are beneficially owned, and sole investment and voting power is held, by the person named. For purposes
of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock which
such person has the right to acquire within 60 days after the date hereof. The inclusion herein of such shares listed beneficially owned
does not constitute an admission of beneficial ownership.
All
percentages are calculated based upon a total number of 124,733,494 shares of common stock outstanding as of September 30, 2023,
plus, in the case of the individual or entity for which the calculation is made, that number of options or warrants owned by such individual
or entity that are currently exercisable or exercisable within 60 days.
Name
and Address of Beneficial Owner | |
Amount and Nature
of Beneficial Ownership | | |
Percentage
of Class | |
| |
| | |
| |
Officers and Directors | |
| | | |
| | |
Common Stock Todd R. Hackett 11915 W. Executive Dr., Suite 101 Boise, ID 83713 | |
| 55,465,380 | | |
| 44.47 | % |
Common Stock Michael J. Bledsoe 11915 W. Executive Dr., Suite 101 Boise, ID 83713 | |
| 2,734,235 | | |
| 2.19 | % |
| |
| | | |
| | |
Common Stock All Officers and Directors as a group (2 persons) | |
| 58,199,615 | | |
| 46.66 | % |
| |
| | | |
| | |
>5% Holders | |
| | | |
| | |
Common Stock Daniel Fuchs (1) 526 Shoup Ave. W., Suite K Twin Falls, ID 83301 | |
| 11,662,001 | | |
| 9.35 | % |
Common Stock K2Red, LLC 526 Shoup Ave. W., Suite K Twin Falls, ID 83301 | |
| 7,300,547 | | |
| 5.85 | % |
| |
| | | |
| | |
(1) Includes shares owned in K2Red, LLC., in which Daniel Fuchs is a 33.3% owner, control person and resident agent. | |
| | | |
| | |
Changes
in Control
There
are no current or planned transactions that would or are expected to result in a change of control of our Company.
Item
5. Directors and Executive Officers
Identification
of Directors and Executive Officers
The
following table sets forth the names of all of our current directors and executive officers. These persons will serve until the next
annual meeting of the stockholders or until their successors are elected or appointed and qualified.
Name |
|
Age |
|
Positions
Held |
|
Date
of Election or Designation |
Todd
R. Hackett
|
|
63
|
|
Chairman,
CEO
|
|
Chairman,
December 10, 2015
CEO,
November 20, 2015
|
Michael
J. Bledsoe |
|
58 |
|
Director,
President |
|
Director, July 1, 2016
President, August 21, 2018 |
Business
Experience
Todd
R. Hackett – Chairman of the Board of Directors and CEO
Todd
Hackett is the owner of a successful construction company in Iowa who first became aware of PCS as an investment opportunity in 2007.
Over the past eight years, his involvement with PCS has grown from a casual investor to a strong advocate for bringing educational opportunities
to both children and young adults to strengthen their knowledge in math and science. He has demonstrated his abilities in the building
of his own company from a startup in 1981 to a major construction firm now handling multimillion-dollar projects. Many of his projects
involve educational institutions such as community colleges, middle schools, libraries, and applied technology labs.
Mr.
Hackett is actively involved in his community, is passionate about the potential of PCS and is actively engaged in helping to create
a company with deep shareholder value which also actively works to improve STEM education around the world.
Michael
Bledsoe – President, Principal Financial Officer and Director
Michael
Bledsoe joined PCS in July of 2016. As President and a member of the Board of Directors, he brings over 20 years of financial experience,
executive leadership and strategic management to his position. Mike received a BBA in Quantitative Management with an emphasis in Finance,
from Boise State University in 1989 and was honored as the top graduate in his major. In 1993, he earned his MBA from Boise State University.
Prior
to joining PCS, Mike spent his career in the investment management field, most recently at D.A. Davidson, where he was a Senior Vice
President and Portfolio Manager for 18 years. He earned the CFA Charterholder designation in 1994 and was an adjunct faculty member at
Boise State University, where he taught classes in personal investing, fostering his passion for education and the sculpting of tomorrow’s
best thinkers.
We
believe that, based on education and experience, both of our directors are qualified to serve.
Family
Relationships
There
are no family relationships between our officers and directors.
Involvement
in Certain Legal Proceedings
During
the past 10 years, none of our present or former directors, executive officers or persons nominated to become directors or executive
officers:
(1)
A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at
or within two years before the time of such filing;
(2)
Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3)
Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
(i)
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing,
or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection
with such activity;
(ii)
Engaging in any type of business practice; or
(iii)
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities laws;
(4)
Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State
authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described
in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
(5)
Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or
vacated;
(6)
Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated
any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated;
(7)
Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged violation of:
(i)
Any Federal or State securities or commodities law or regulation; or
(ii)
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order; or
(iii)
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(8)
Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a member.
Directorships
None
of our Directors have held any other directorships during the past five years.
Significant
Employees
There
are no employees who are not executive officers who are expected to make a significant contribution to our Company’s business.
Item
6. Executive Compensation
The
following table sets forth the aggregate compensation paid by us for services rendered during the periods indicated:
SUMMARY
COMPENSATION TABLE
Name and Principal Position | |
Year | | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards ($) | | |
Option Awards ($) | | |
Non-Equity Incentive Plan Compensation($) | | |
Nonqualified Deferred Compensation ($) | | |
All Other Compensation($) | | |
Total ($) | |
(a) | |
| (b) | | |
| (c) | | |
| (d) | | |
| (e) | | |
| (f) | | |
| (g) | | |
| (h) | | |
| (i) | | |
| (j) | |
Todd Hackett CEO | |
| 3/31/23 | | |
$ | - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 0 | |
& Chairman | |
| 3/31/22 | | |
$ | - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 0 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Michael J. Bledsoe President | |
| 3/31/23 | | |
$ | 94,667 | | |
$ | 13,046 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 107,713 | |
& Director | |
| 3/31/22 | | |
$ | 84,000 | | |
$ | 3,050 | | |
| - | | |
$ | 42,292 | | |
| - | | |
| - | | |
| - | | |
$ | 129,342 | |
Outstanding
Equity Awards
There
were no options or warrants outstanding as of March 31, 2023 or September 30, 2023. At March 31, 2022, 1,000,000 options were held
by Michael J. Bledsoe to purchase 1,000,000 shares of common stock at $0.025 per share, and 250,000 options were held by Michelle Fisher,
Director of Curriculum, to purchase 250,000 shares at $0.02 per share. During Fiscal year 2023, these 1,250,000 employee performance
options were exercised.
Director
Compensation
Name |
|
Fees
Earned or Paid in Cash ($) |
|
Stock
Awards ($) |
|
Option
Awards ($) |
|
Non-Equity
Incentive Plan Compensation ($) |
|
Nonqualified
Deferred Compensation Earnings ($) |
|
All
Other Compensation ($) |
|
Total
($) |
None |
|
None |
|
None |
|
None |
|
None |
|
None |
|
None |
|
None |
Employment
Agreements
The
Company does not have any employment agreements with any of its executive officers
Long-Term
Incentive Plans
There
are no arrangements or plans in which the Company would provide pension, retirement or similar benefits for our directors or executive
officers.
Compensation
Committee
The
Company currently does not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive
compensation.
Compensation
of Directors
The
Company does not currently compensate its directors and has not for the past five years.
Item
7. Certain Relationships and Related Transactions, and Director Independence
Transactions
with Related Persons
On
August 21, 2018, the Company granted 1,000,000 stock options to our President, Michael J. Bledsoe. The expected volatility rate of 254.03%
was calculated using the Company’s stock price over the period beginning August 21, 2018, through date of issue. A risk-free interest
rate of 0.27% was used to value the options. The options were valued using the Black-Scholes valuation model. The options vested immediately
and were exercisable at $0.025 per share which represents the fair market value at the date of grant in accordance with the 2009 Equity
Incentive Plan. The maturity date was August 21, 2021. The entire value of the options were expensed at time of grant as they vested
immediately. On August 21, 2021, the options expired and the Company issued 1,000,000 new options with a one year maturity and a strike
price of $0.025 accounted for as a modification. These options were exercised on August 18, 2022.
From
April 1, 2013 to March 31, 2017, the Company executed related party promissory notes with the Chairman and CEO for $1,292,679, $175,000,
$340,000 paid down to a principal balance of $220,648, with interest of 10% per annum. Monthly interest payments have been made in cash
starting in January of 2019. On April 19, 2019, these notes were consolidated to one promissory note for $1,688,327, with interest of
10% per annum, and extending the due date to April 20, 2020. Total interest accrued and paid in the fiscal year ending March 31, 2020
totaled $142,210. Principal payments were made totaling $245,000 for an ending principal balance at March 31, 2020 of$1,443,327. The
note was subsequently amended with a maturity date of May 1, 2021, with all other terms and conditions remaining the same. No principal
payments were made on this note in fiscal year 2021, leaving a principal balance as of March 31, 2021 of $1,443,327. This promissory
note due date was subsequently amended to a new due date of May 1, 2022, with all other terms and conditions remaining the same. No principal
payments were made on this note during fiscal year 2022, leaving a principal balance as of March 31, 2022 of $1,443,327. During fiscal
year 2023, this promissory note was paid in full.
On February 1, 2017, the Company, in the capacity of borrower, executed a non-convertible promissory note payable,
with no warrants attached, with lender Mike Bledsoe, a member of the Executive Management Team and Board of Directors, for $50,000 at
20% interest per annum, due April 30, 2017. The note’s principal balance of $50,000, and accrued interest of $23,342 as of May 31,
2019 was amended on June 1, 2019. The promissory note June 1, 2019 amendment reduced the interest rate to 10% per annum, but to accrue
interest on both the $50,000 principal balance and the $23,342 accrued interest and extended the due date to May 31, 2020. This promissory
note due date was subsequently amended to a new due date of May 31, 2021. As of March 31, 2021, the principal balance on this note was
$50,000 and the accrued interest was $36,805. This promissory note due date was subsequently amended to a new due date of May 1, 2022,
with all other terms and conditions remaining the same. During fiscal year 2023, the Company paid off this promissory note in full to
Mike Bledsoe.
Transactions
with Promoters and Control Persons
Except
as disclosed above, there were no material transactions, or series of similar transactions, during our Company’s last five fiscal
years, or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to
be a party and in which any promoter or founder of ours or any member of the immediate family of any of the foregoing persons, had an
interest. We have not had any promoters or parents during the past five fiscal years.
Director
Independence
Our
Board of Directors is currently composed of two members, Todd R. Hackett and Michael J. Bledsoe, both of whom do not qualify as independent
directors in accordance with the published listing requirements of the NASDAQ Global Market (the Company has no plans to list on the
NASDAQ Global Market). The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and
has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged
in various types of business dealings with us. In addition, our Board of Directors has not made a subjective determination, as to our
directors, that no relationships exist which, in the opinion of our Board of Directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had
our Board of Directors made these determinations, our Board of Directors would have reviewed and discussed information provided by our
directors and us with regard to our directors’ business and personal activities and relationships as they may relate to us and
our management.
Item
8. Legal Proceedings
There
are no pending legal proceedings to which PCS is a party or of which any of its properties is the subject.
Item
9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Market
Information
Since
August 1, 2001, our common stock has been quoted under the symbol “PCSV.” Our common stock currently trades on the OTC Pink
Market. Any over-the-counter market quotations for our common stock reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily reflect actual transactions.
The
following table summarizes our common stock quote history, as provided to us by the OTC Markets Group.
| |
Closing | | |
High | | |
Low | | |
High | | |
Low | | |
Closing | |
Period | |
Bid | | |
Closing Bid | | |
Closing Bid | | |
Price | | |
Price | | |
Price | |
7/1/2023 – 9/30/2023 | |
| .185 | | |
| .185 | | |
| .065 | | |
| .19 | | |
| .06892 | | |
| .1851 | |
4/1/2023 – 6/30/2023 | |
| .065 | | |
| .075 | | |
| .057 | | |
| .088 | | |
| .0415 | | |
| .065 | |
1/1/2023 – 3/31/2023 | |
| .075 | | |
| .0869 | | |
| .055 | | |
| .089 | | |
| .056 | | |
| .0789 | |
10/1/2022 – 12/31/2022 | |
| .06 | | |
| .07 | | |
| .05 | | |
| .0889 | | |
| .0488 | | |
| .055 | |
7/1/2022 – 9/30/2022 | |
| .046 | | |
| .0522 | | |
| .0411 | | |
| .0599 | | |
| .045 | | |
| .045 | |
4/1/2022 – 6/30/2022 | |
| .0411 | | |
| .066 | | |
| .041 | | |
| .0747 | | |
| .041 | | |
| .0411 | |
1/1/2022 – 3/31/2022 | |
| .041 | | |
| .045 | | |
| .041 | | |
| .05 | | |
| .041 | | |
| .041 | |
10/1/2021 – 12/31/2021 | |
| .0415 | | |
| .048 | | |
| .041 | | |
| .0505 | | |
| .0401 | | |
| .0415 | |
7/1/2021 – 9/30/2021 | |
| .0453 | | |
| .0501 | | |
| .0371 | | |
| .0625 | | |
| .04 | | |
| .05 | |
4/1/2021 – 6/30/2021 | |
| .0401 | | |
| .041 | | |
| .0205 | | |
| .0455 | | |
| .02 | | |
| .0449 | |
Holders
As
of September 30, 2023, we had 124,733,494 shares of common stock outstanding, and there were approximately 238 accounts
of record; this number does not include an indeterminate number of stockholders whose shares may be held by brokers in street name.
Dividends
We
have not declared any cash dividends with respect to our common stock, and do not intend to declare dividends in the foreseeable future.
Our future dividend policy cannot be ascertained with any certainty. There are no material restrictions limiting, or that are likely
to limit, our ability to pay dividends on our securities.
Securities
Authorized for Issuance under Equity Compensation Plans
Plan
Category |
|
Number
of Securities to be issued upon exercise of outstanding options, warrants and rights |
|
Weighted-average
exercise price of outstanding options, warrants and rights |
|
Number
of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) |
|
|
(a) |
|
(b) |
|
(c) |
Equity
compensation plans approved by security holders |
|
- |
|
- |
|
None |
Equity
compensation plans not approved by security holders |
|
- |
|
- |
|
None |
|
|
|
|
|
|
|
Total |
|
- |
|
- |
|
None |
Item
10. Recent Sales of Unregistered Securities
The
following information represents securities purchased and sold by the Company during fiscal years ending March 31, 2023, March 31, 2022,
and March 31, 2021, which were not registered under the Securities Act of 1933, as amended (the “Securities Act”).
During
the fiscal years ending March 31, 2023, 2022, and 2021, the Company expensed amounts related to stock options granted of $15,990, $25,839
and 0, respectively. For the six months ended September 30, 2023, the Company did not have option-related expenses.
During
the fiscal year ended March 31, 2023, the Company issued 1,250,000 shares of “restricted” Rule 144 common stock related to
the exercise of employee performance options. During the fiscal year ended March 31, 2022, the Company issued 1,000,000 shares of “restricted”
Rule 144 common stock related to the exercise of warrants attached to a promissory note. During the fiscal year ended March 31, 2021,
the Company did not issue shares of common stock. During the six months ended September 30, 2023, the Company did not issue
shares of common stock.
During
the quarter ended June 30, 2023, the Company entered into an agreement to purchase 998,985 shares of common stock, 120,000 of which being
“restricted” Rule 144 common stock from a shareholder who solicited the Company with the offer. This transaction was completed
on August 2, 2023 at $0.065 per share for total consideration of $64,934.03. These shares were retired.
The
Company relied on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of the Commission in
connection with these issuances.
Item
11. Description of Registrant’s Securities to be Registered
We
are authorized to issue a total of 170,000,000 shares of capital stock which consists of two classes of stock designated, respectively,
150,000,000 shares of common stock, with no par value per share, and 20,000,000 shares of preferred stock, with no par value per share.
As of September 30, 2023, common shares outstanding were 124,733,494. As of March 31, 2022, common shares outstanding were
124,482,479. As of March 31, 2023 and September 30, 2023, there were no shares of preferred stock outstanding. The following is a description
of the material terms of our securities.
Common
Stock
Holders
of our common stock are entitled to one vote per share with respect to each matter presented to our stockholders on which the holders
of common stock are entitled to vote. Subject to the rights of the holders of any preferred stock we may designate or issue in the future,
or as may otherwise be required by law or our articles of incorporation, our common stock is our only common stock entitled to vote in
the election of directors and on all other matters presented to our stockholders. The common stock does not have cumulative voting rights
or preemptive rights. Subject to the prior rights of holders of preferred stock, if any, holders of our common stock are entitled to
receive dividends as may be lawfully declared from time to time by our board of directors. Upon our liquidation, dissolution or winding
up, whether voluntary or involuntary, holders of our common stock will be entitled to receive such assets as are available for distribution
to our stockholders after there shall have been paid, or set apart for payment, the full amounts necessary to satisfy any preferential
or participating rights to which the holders of any outstanding series of preferred stock are entitled.
Preferred
Stock
Our
board of directors is authorized to issue preferred stock in one or more series and, with respect to each series, to determine the preferences,
rights, qualifications, limitations and restrictions thereof, including the dividend rights, conversion rights, voting rights, redemption
rights and terms, liquidation preferences, sinking fund provisions, the number of shares constituting the series and the designation
of such series.
We
had previously authorized and issued a Series A Preferred Stock. All issued shares of Series A Preferred Stock were subsequently converted
into shares of common stock and there are no shares of preferred stock outstanding.
Options
During
the fiscal years ending March 31, 2023 and 2022, the Company expensed amounts related to stock options granted of $15,990 and $25,839
respectively. During the six months ended September 30, 2023 and 2022, the Company expensed amounts related to stock options
granted of $0 and $10,544 respectively.
During
the fiscal year ended March 31, 2023, the Company issued 1,250,000 shares of “restricted” Rule 144 common stock related to
the exercise of employee performance options. During the fiscal year ended March 31, 2022, the Company issued 1,000,000 shares of “restricted”
Rule 144 common stock related to the exercise of warrants attached to a promissory note.
As
of March 31, 2023 and September 30, 2023, the Company had no outstanding options or warrants.
Item
12. Indemnification of Directors and Officers
Section
30-29-851(a) (1) of the Idaho Business Corporation Act (the “Idaho Law”) authorizes an Idaho corporation to indemnify any
director against liability incurred in any proceeding if he or she acted in good faith and in a manner he or she reasonably believed
to be not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful. Under Section 30-29-856(a)(1) of the Idaho Law, an Idaho corporation may also indemnify
and advance expenses to an officer to the same extent as a director.
Unless
ordered by a court, Section 30-29-851 (d) prohibits an Idaho corporation from indemnifying a director in a proceeding by or in the right
of the corporation, except for reasonable expenses incurred in the proceeding if it is determined that the director has met the relevant
standard of conduct, or in connection with any proceeding with respect to conduct for which the director was adjudged liable on the basis
that he or she improperly received a financial benefit to which he or she was not entitled, whether or not involving action in his or
her official capacity.
Under
Section 30-29-852 of the Idaho Law, a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which he or she was a party because he or she was a director of the corporation against expenses incurred
by the director in the proceeding. Section 30-29-856(c) extends this right to non-director officers of the corporation as well.
Section
30-29-853(a) allows an Idaho corporation to advance funds to pay for or reimburse a director who is a party to a proceeding because he
or she is a director if the director delivers to the corporation a signed written undertaking to repay the funds advanced if the director
is not entitled to mandatory indemnification under Section 30-29-852.
Section
30-29-854(a) authorizes a director to apply for indemnification or an advance of expenses to the court conducting the proceeding or another
court of competent jurisdiction. Section 30-29-856(c) extends this right to non-director officers of a corporation as well.
To
date, we have not obtained directors and officers liability (“D&O”) insurance. Without limiting the application of the
foregoing, our board of directors may adopt bylaws from time to time with respect to indemnification, to provide at all times the fullest
indemnification permitted by the laws of the State of Idaho, and may cause us to purchase and maintain insurance on behalf of any person
who is or was our director or officer, or is or was serving at our request as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust, or other enterprise against any liability asserted against such person and incurred
in any such capacity or arising out of such status, whether or not we would have the power to indemnify such person. The indemnification
provided shall continue as to a person who has ceased to be a director, officer, employee, or agent, and shall inure to the benefit of
the heirs, executors and administrators of such person.
Article
6 of our Articles of Incorporation provides as follows:
To
the fullest extent permitted by law, this Corporation shall have the power to indemnify any person and to advance expenses incurred or
to be incurred by such person in defending a civil, criminal, administrative or investigative action, suit or proceeding threatened or
commenced by reason of the fact said person is or was a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer employee or agent of another corporation, partnership, joint venture, trust
or other enterprise. Any such indemnification or advancement of expenses shall not be deemed exclusive of any other rights to which such
person may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in
such person’s official capacity and as to action in another capacity while holding such office. Any indemnification or advancement
of expenses so granted or paid by the Corporation shall, unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs and personal representative of
such a person.
No
director shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty except (i) for any
breach of the director’s duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law; (iii) for liability imposed for failure to comply with the applicable
legal standard of conduct for a director in any of the circumstances described in Section 30-1-48, Idaho Code; or for any transaction
from which the director derives an improper personal benefit.
Item
13. Financial Statements and Supplementary Data
The
Company’s audited financial statements for fiscal years ending March 31, 2023 and 2022 appear immediately following the signature
page hereof. The Company’s unaudited financial statements for the six months ending September 30, 2023 and 2022 appear
immediately following the audited fiscal year financial statements.
Item
14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
During
our two most recent fiscal years, and since then, no independent accounting firm who was previously engaged as our principal accountant
to audit our financial statements has resigned (or indicated it has declined to stand for re-election after the completion of the current
audit) or been dismissed.
Item
15. Financial Statements and Exhibits
(a)
Financial Statements
Unaudited
Financial Statements:
(b)
Exhibits
*
Summaries of all exhibits contained within this Registration Statement are modified in their entirety by reference to these exhibits.
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
PCS
EDVENTURES!, INC. |
|
|
|
|
Date: |
November
15, 2023 |
By: |
/s/
Michael Bledsoe |
|
|
|
Michael
Bledsoe, President, Director, Principal Financial Officer |
![A white background with black and white clouds
Description automatically generated with medium confidence](https://www.sec.gov/Archives/edgar/data/1122020/000149315223041418/form10-12ga_001.jpg)
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders
of
PCS Edventures!, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of PCS Edventures!, Inc. (the Company) as of March 31, 2023 and 2022, and the related statements
of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two year period ended March 31, 2023,
and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and
its cash flows for each of the years in the two-year period ended March 31, 2023, in conformity with accounting principles generally
accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Deferred
Tax Asset
The
Company has significant net operating losses (NOLs) which arose due to past losses. During the current year, the Company determined that
a large portion of those NOLs will be realized and reversed the corresponding allowance. Management of the Company used judgement to
determine how much of the asset can be recognized and how much allowance should be recorded. Because the recording of the asset directly
affects net income, we considered this a significant estimate that involved subjective judgments made by management.
How
We Addressed it During Our Audit
We
considered the relevant professional accounting guidance surrounding income taxes and considered both positive and negative evidence
to consider the realization of the Company’s deferred tax assets. We obtained a memo from the Company that included the assumptions
used in their evaluation and estimate. We evaluated the assumptions used by the Company in making their determination and reviewed the
Company’s tax provision prepared by a 3rd party accountant.
![](https://www.sec.gov/Archives/edgar/data/1122020/000149315223041418/form10-12ga_003.jpg)
Haynie
& Company
We
have served as the Company’s auditor since 2019.
Salt
Lake City, Utah
June
30, 2023
![A red line with black text
Description automatically generated](https://www.sec.gov/Archives/edgar/data/1122020/000149315223041418/form10-12ga_002.jpg)
PCS
EDVENTURES!, INC.
Balance
Sheets
| |
As of March 31, | |
| |
2023 | | |
2022 | |
CURRENT ASSETS | |
| | | |
| | |
Cash | |
$ | 442,657 | | |
$ | 584,070 | |
Accounts receivable, net of allowance for doubtful accounts of $18,469 and $3,438, respectively | |
| 363,947 | | |
| 360,670 | |
Accounts receivable, other receivables | |
| 13,312 | | |
| 105,314 | |
Prepaid expenses | |
| 436,118 | | |
| 85,728 | |
Inventory, net | |
| 1,237,872 | | |
| 1,159,627 | |
Total Current Assets | |
| 2,493,906 | | |
| 2,295,409 | |
| |
| | | |
| | |
NON-CURRENT ASSETS | |
| | | |
| | |
Lease right-of-use asset | |
| 173,352 | | |
| 266,680 | |
Deposits | |
| 6,300 | | |
| 6,300 | |
Property and equipment, net | |
| 31,533 | | |
| 17,165 | |
Deferred tax asset | |
| 1,011,466 | | |
| - | |
Total Noncurrent Assets | |
| 1,222,651 | | |
| 290,145 | |
TOTAL ASSETS | |
$ | 3,716,557 | | |
$ | 2,585,554 | |
| |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable | |
$ | 27,927 | | |
$ | 90,314 | |
Payroll liabilities and accrued expenses | |
| 226,231 | | |
| 276,837 | |
Deferred revenue | |
| 7,085 | | |
| - | |
Lease liabilities, current portion | |
| 103,026 | | |
| 93,327 | |
Notes payable, related party | |
| - | | |
| 1,493,327 | |
Total Current Liabilities | |
| 364,269 | | |
| 1,953,805 | |
| |
| | | |
| | |
Lease liabilities, net of current portion | |
| 72,726 | | |
| 174,353 | |
TOTAL LIABILITIES | |
| 436,995 | | |
| 2,128,158 | |
| |
| | | |
| | |
STOCKHOLDERS’ EQUITY (DEFICIT) | |
| | | |
| | |
Preferred stock, no par value, 20,000,000 authorized shares, No shares issued and outstanding | |
| - | | |
| - | |
Common stock, no par value, 150,000,000 authorized shares, 125,732,479 and 124,482,479, respectively, shares issued and outstanding | |
| - | | |
| - | |
Additional Paid-in Capital | |
| 40,635,392 | | |
| 40,589,402 | |
Accumulated deficit | |
| (37,355,830 | ) | |
| (40,132,006 | ) |
Total Stockholders’ Equity | |
| 3,279,562 | | |
| 457,396 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 3,716,557 | | |
$ | 2,585,554 | |
PCS
EDVENTURES!, INC.
Statements
of Operations
| |
For the years ended March 31, | |
| |
2023 | | |
2022 | |
REVENUE | |
| | | |
| | |
Revenue | |
$ | 7,004,575 | | |
$ | 4,067,652 | |
Total Revenue | |
| 7,004,575 | | |
| 4,067,652 | |
| |
| | | |
| | |
COST OF SALES | |
| 2,798,617 | | |
| 1,711,085 | |
| |
| | | |
| | |
GROSS PROFIT | |
| 4,205,958 | | |
| 2,356,567 | |
| |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | |
Salaries and wages | |
| 1,521,536 | | |
| 1,283,503 | |
General and administrative expenses | |
| 871,967 | | |
| 598,024 | |
Total Operating Expenses | |
| 2,393,503 | | |
| 1,881,527 | |
OPERATING INCOME | |
| 1,812,455 | | |
| 475,040 | |
| |
| | | |
| | |
OTHER INCOME AND (EXPENSES) | |
| | | |
| | |
Interest expense | |
| (142,605 | ) | |
| (165,750 | ) |
Payroll Protection Program Loan forgiveness | |
| - | | |
| 221,050 | |
Other income, government relief program (ERTC) | |
| 94,860 | | |
| 198,995 | |
Net Other Income (Expense) | |
| (47,745 | ) | |
| 254,295 | |
| |
| | | |
| | |
Net Income before income tax provision | |
| 1,764,710 | | |
| 729,335 | |
| |
| | | |
| | |
Income Tax Benefit | |
| 1,011,466 | | |
| - | |
NET INCOME | |
$ | 2,776,176 | | |
$ | 729,335 | |
| |
| | | |
| | |
Net Income per common share: | |
| | | |
| | |
Basic | |
$ | 0.02 | | |
$ | 0.01 | |
Fully diluted | |
$ | 0.02 | | |
$ | 0.01 | |
The
accompanying audited notes are an integral part of these audited financial statements.
PCS
EDVENTURES!, Inc.
Statement
of Stockholders’ Equity (Deficit)
| |
# of Common | | |
Common | | |
Additional
Paid-in | | |
Accumulated | | |
Stockholders’Equity | |
| |
Shares O/S | | |
Stock | | |
Capital | | |
Deficit | | |
(Deficit) | |
| |
| | |
| | |
| | |
| | |
| |
Balance at 3/31/2021 | |
| 123,482,479 | | |
| - | | |
$ | 40,548,563 | | |
$ | (40,861,341 | ) | |
$ | (312,778 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
$ | 729,335 | | |
$ | 729,335 | |
Shares issued (exercise of warrants) | |
| 1,000,000 | | |
| - | | |
$ | 15,000 | | |
| - | | |
$ | 15,000 | |
Option expense | |
| - | | |
| - | | |
$ | 25,839 | | |
| - | | |
$ | 25,839 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 3/31/2022 | |
| 124,482,479 | | |
| - | | |
$ | 40,589,402 | | |
$ | (40,132,006 | ) | |
$ | 457,396 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
$ | 2,776,176 | | |
$ | 2,776,176 | |
Shares issued (exercise of options) | |
| 1,250,000 | | |
| - | | |
$ | 30,000 | | |
| - | | |
$ | 30,000 | |
Option expense | |
| - | | |
| - | | |
$ | 15,990 | | |
| - | | |
$ | 15,990 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 3/31/2023 | |
| 125,732,479 | | |
| - | | |
$ | 40,635,392 | | |
$ | (37,355,830 | ) | |
$ | 3,279,562 | |
The
accompanying audited notes are an integral part of these audited financial statements.
PCS
EDVENTURES!, INC.
Statements
of Cash Flows
| |
For the years ended March 31, | |
| |
2023 | | |
2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | | |
| | |
NET INCOME | |
$ | 2,776,176 | | |
$ | 729,335 | |
Stock based compensation | |
| 15,990 | | |
| 25,839 | |
Depreciation and amortization | |
| 5,127 | | |
| 1,663 | |
Amortization of right of use asset | |
| 93,328 | | |
| - | |
Debt forgiveness of Payroll Protection Program loan | |
| - | | |
| (221,050 | ) |
Non cash interest expense on Payroll Protection Program loan | |
| - | | |
| 1,175 | |
Deferred tax benefit | |
| (1,011,466 | ) | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
(Increase) decrease in accounts receivable | |
| (3,277 | ) | |
| (81,102 | ) |
(Increase) decrease in prepaid expenses | |
| (350,389 | ) | |
| (57,956 | ) |
(Increase) decrease in inventories | |
| (78,245 | ) | |
| (350,821 | ) |
(Decrease) increase in accounts payable and accrued liabilities | |
| (112,994 | ) | |
| 168,456 | |
(Increase) decrease in other current assets | |
| 92,002 | | |
| 45,705 | |
(Decrease) increase in lease liability | |
| (91,928 | ) | |
| - | |
(Increase) decrease in unearned revenue | |
| 7,085 | | |
| (2,059 | ) |
Net Cash Provided by Operating Activities | |
| 1,341,409 | | |
| 259,185 | |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
Purchase of equipment | |
| (19,495 | ) | |
| (18,828 | ) |
Net Cash (Used) by Investing Activities | |
| (19,495 | ) | |
| (18,828 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds from sale of stock | |
| 30,000 | | |
| 15,000 | |
Principal payments on debt | |
| (1,493,327 | ) | |
| (171,437 | ) |
Net Cash Provided (Used) by Financing Activities | |
| (1,463,327 | ) | |
| (156,437 | ) |
| |
| | | |
| | |
Net increase (decrease) in Cash | |
| (141,413 | ) | |
| 83,920 | |
Cash at Beginning of Year | |
| 584,070 | | |
| 500,150 | |
Cash at End of Year | |
$ | 442,657 | | |
$ | 584,070 | |
The
accompanying audited notes are an integral part of these audited financial statements.
PCS
EDVENTURES!, INC.
Notes
to the Financial Statements March 31, 2023 and 2022
NOTE
1 - DESCRIPTION OF BUSINESS AND SIGNIFICANTACCOUNTING POLICIES
Description
of Business
The
financial statements presented are those of PCS Edventures!, Inc., an Idaho corporation (“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.
PCS
educational and drone 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 strategies.
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 30 different enrichment programs and typically develops at least two new programs
each year. Some of the more popular programs include Ready, Set, Drone!; Drone Designers; Traveling Artist; Unleash Your Wild
Side, Build a Better World; Claymation; Oceanic Exploration; Pirate; and Flight and Aerodynamics. |
|
|
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 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. |
|
|
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. |
|
|
|
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.
Notes
to audited financial statements
Accounting
Method
The
Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a March 31 fiscal year
end.
Cash
and Cash Equivalents
Cash
and cash equivalents, totaling $442,657 and $584,070 as of March 31, 2023 and 2022, respectively, consist of operating accounts. For
purposes of the statements of cash flows, the Company considers all highly-liquid financial instruments with original maturities of three
months or less at date of purchase to be cash equivalents.
Use
of Estimates
The
preparation of these financial statements in conformity with Generally Accepted Accounting Principles (“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 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.
Concentration
of Credit Risks
The
Company extends credit to customers and is therefore subject to credit risk. Financial instruments that potentially subject the Company
to concentration of credit risk consist primarily of trade receivables. In the normal course of business, the Company provides credit
terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible
losses which when realized have been within the range of Management’s expectations. An allowance for doubtful accounts is recorded
to account for potential bad debts. Estimates are used in determining the allowance for doubtful accounts and are based upon an assessment
of selected account, historic averages, and as a percentage of remaining accounts receivable by aging category. In determining these
percentages, the Company evaluates historical write-offs, and current trends in customer credit quality, as well as changes in credit
policies. The Company does not require collateral from its customers. The Company has established an allowance for doubtful accounts
of $18,469 and $3,438 for the fiscal years ended March 31, 2023 and 2022, respectively.
Inventory
Inventory
is composed of items produced in-house, as well as items from outside suppliers. These items include, but are not limited to, Fischertechnik®
manipulatives, Brick manipulatives, drone components, digital media equipment, storage units, curriculum, and other miscellaneous items
used in our various products. Our inventory is carried at the lower of cost or net realizable value, where cost is computed using the
average cost method for each item.
When
indicators of inventory impairment exist, the Company measures the carrying value of the inventory against its market value, and if the
carrying value exceeds the market value, the inventory value is adjusted down accordingly. For the year ended March 31, 2023, the Company’s
gross inventory was $1,244,216. The Company’s provision for excess and obsolete inventory reserve was $6,343, resulting in a net
inventory of $1,237,872. For the year ended March 31, 2022, the Company’s inventory was $1,167,766. The Company’s provision
for excess and obsolete inventory reserve was $8,139, resulting in a net inventory of $1,159,627.
Notes
to audited financial statements
Property
and Equipment
Depreciation
on property and equipment is computed using the straight-line method over the estimated useful life of the asset. The Company had fully
depreciated property and equipment of $224,282 and software of $127,355 prior to March 31, 2018 and had a balance of $0 as of March 31,
2021. During fiscal year 2022, the Company purchased various warehouse equipment for $18,828 and recognized $1,663 in depreciation of
that equipment for a total property and equipment of $17,165 as of March 31, 2022. As of March 31, 2023, Property and Equipment were
$25,156 with $4,240 in depreciation recognized resulting in a net Property and Equipment of $20,917.
During
fiscal year 2023, the Company purchased various computer equipment for $13,167 and recognized $2,550 in depreciation resulting in a net
Computer Equipment of $10,616 as of March 31, 2023.
Software
has been fully depreciated as of March 31, 2023 and March 31, 2022.
Impairment
of Long-Lived Assets
Long-lived
assets are reviewed for impairment annually, or when events or circumstances arise that indicate the existence of impairment. There was
no impairment recorded during the fiscal years ended March 31, 2023 and 2022.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date.
In
November 2015, the Financial Accounting Standards Board issued ASU No. 2015-17, “Income Taxes (Topic 740)- Balance Sheet Classification
of Deferred Taxes” (ASU 2015-17), which requires reporting the net amount of deferred tax assets and liabilities as a single noncurrent
item on the classified balance sheet. Before this change, the net amounts of current and noncurrent deferred tax assets and liabilities
were reported separately.
We
account for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 prescribes the use of the asset and
liability method to compute the differences between the tax bases of assets and liabilities and the related financial amounts, using
currently enacted tax laws. If necessary, a valuation allowance is established, based on the weight of available evidence, to reduce
deferred tax assets to the amount that is more likely than not to be realized. Realization of the deferred tax assets, net of deferred
tax liabilities, is principally dependent upon achievement of sufficient future taxable income. We exercise significant judgment in determining
our provisions for income taxes, our deferred tax assets and liabilities and our future taxable income for purposes of assessing our
ability to utilize any future tax benefit from our deferred tax assets.
In
accordance with GAAP, the Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns
for the open tax years in such jurisdictions. The Company currently believes that all significant filing positions are highly certain
and that all of its significant income tax filing positions and deductions would be sustained upon audit. Therefore, the Company has
no significant reserves for uncertain tax positions, and no adjustment to such reserves was required by GAAP. No interest or penalties
have been levied against the Company and none are anticipated, therefore no interest or penalty has been included in the provision for
income taxes in the consolidated statements of operations. The Internal Revenue Code contains provisions which reduce or limit the availability
and utilization of net operating loss (NOL) carry forwards in the event of a more than 50% change in ownership. If such an ownership
change occurs with the Company, the use of these net operating losses could be limited. The following table details the years that remain
open to tax examinations:
Tax
Year |
|
Fiscal
Year End |
|
Filed
Date |
|
Open
Through |
2021 |
|
3/31/2022 |
|
2/3/2023 |
|
2/3/2026 |
2020 |
|
3/31/2021 |
|
1/18/2022 |
|
1/18/2025 |
2019 |
|
3/31/2020 |
|
1/28/2021 |
|
1/28/2024 |
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 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 $7,085 for the fiscal year ending March 31, 2023 related to contractual commitments with customers where
the performance obligation will be satisfied within the following fiscal year ending March 31, 2024. The revenue associated with these
performance obligations is recognized as the obligation is satisfied. The Company had no deferred revenue as of March 31, 2022. 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.
Stock-Based
Compensation
We
recognize stock-based compensation expense under the provisions of ASC 718, Compensation -Stock Compensation (“ASC 718”).
We use the Black-Scholes option pricing model to calculate the fair value of stock options at their respective grant date. The use of
option valuation models requires the input of highly subjective assumptions, including the expected stock price volatility and the expected
term of the option. The fair value of restricted stock awards is the fair market value on the date of grant. We recognize these compensation
costs on a straight-line basis over the requisite service period, which is generally the vesting period of the award.
During
fiscal year 2023, two sets of performance options were exercised. Mike Bledsoe, President, exercised 1,000,000 options at 2.5 cents per
share. Michelle Fisher, Director of STEM Curriculum, exercised 250,000 options at 2 cents per share. As of March 31, 2023, the Company
had no outstanding warrants or options.
Notes
to audited financial statements
Business
Segments and Related Information
GAAP
establishes standards for the way public business enterprises are to report information about operating segments in annual financial
statements and requires enterprises to report selected information about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosure about products and services, geographic areas and major customers. The Company currently
operates in one business segment.
Net
Earnings (Loss) Per Share of Common Stock
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 following schedule presents the calculation
of basic and diluted net income per share:
| |
For the Year Ended March 31, | |
Net Income per common share | |
| 2023 | | |
| 2022 | |
Basic | |
$ | 0.02 | | |
$ | 0.01 | |
Diluted | |
$ | 0.02 | | |
$ | 0.01 | |
| |
| | | |
| | |
Weighted average number of common shares outstanding Basic | |
| 125,109,876 | | |
| 123,967,411 | |
Weighted average number of common shares outstanding Fully Diluted | |
| 125,109,876 | | |
| 124,532,253 | |
Net
income for the years ended March 31, 2023 and 2022 was $2,776,176 and $729,335, respectively.
As
of March 31, 2023, the Company had no dilutive instruments outstanding. As of March 31, 2022, the Company had options totaling 1,250,000
shares included in the dilutive share calculation.
NOTE
2 - BUSINESS CONDITION
Although
the Company has recorded an accumulated deficit of ($37,355,830), for the last five fiscal years including the most recent one ending
March 31, 2023, the Company generated cumulative income before tax benefits of $4,270,572. The Company was profitable in four out of
five of those fiscal years, with the lone loss occurring at the height of the Covid-19 pandemic and school closures in fiscal year 2021
when the Company reported a loss of ($115,763).
The
Company reported income before tax benefits of $1,764,710 on sales of $7,004,575 for its fiscal year ending March 31, 2023, both Company
records. The Company retired all its debt during fiscal year 2023. The Company has a line of credit with its primary bank for $300,000
that was paid in full as of March 31, 2023. This line of credit facility expires on November 10, 2023. As of March 31, 2023, stockholders’
equity was $3,279,562, while the Company had $436,995 in liabilities and $442,657 in cash.
Notes
to audited financial statements
The
Company has a large tax-loss carry-forward asset that it has been valuing at zero on its financial statements. Given the Company’s
history of losses prior to 2018, prudence dictated that there was substantial doubt as to whether the Company could realize the value
of this asset. Thus, even after the Company demonstrated profitability in fiscal year 2019, and again in 2020, there was still enough
doubt about the sustainability of this performance to continue valuing the asset at zero on the Company’s financial statements.
Although the Company’s loss in fiscal year 2021 can be attributed to the pandemic environment, it still had the effect on enforcing
the doubt about the sustainability of the Company’s future profitability.
The
Company is now two full years into the post-pandemic world. The Company reported a record year for fiscal year 2023, after a
profitable fiscal year 2022, and its outlook is for continued profitability in its fiscal year 2024. The Company’s recent
success, coupled with the Company’s established history of significant aggregate profitability for the past 5 years,
accomplished under the supervision of different Management than the team that oversaw the period prior to fiscal year 2019,
compelled Management, in consultation with Company tax advisors and auditors, to recognize a portion of the tax- loss carry-froward
asset on the Company’s financial statements. The value of this recognition is $1,011,466, which represents the portion of the
total tax-loss carry-forward amount that Management feels confident in realizing. For the fiscal year ended March 31, 2023, the
Company reported net income of $2,776,176 which includes the recognition of the tax-deferred asset.
On
October 3, 2022, the Company announced a contract award from the United States Air Force Junior Reserve Officers’ Training Corps.
This contract contemplates a five-year term, with each year subject to renewal by the Air Force. To date, the Air Force has placed two
orders under the terms of the first year of the contract. On February 23, 2023, the Air Force notified the Company of its intent to exercise
its option for the second year of the contract, with the explicit statement that the notice is preliminary and does not commit the Air
Force to the extension. As of March 31, 2023, the Air Force had placed orders totaling has placed orders totaling $2,655,336.
On
January 11, 2023, the Company announced that it would be partnering with the Iowa Governor’s STEM advisory Council to provide the
Company’s Discover Drones program to middle and high school students for the 2023-2024 school year via Iowa’s Scale-Up
Program. This is the second year in a row that the Company has been awarded this partnership. The Iowa legislature must approve the funding
for the Scale-Up Program before this business is official. However, they have always approved the funding, Scale-Up awardees have already
been notified, and the Company is preparing for the two-day trainings that will be conducted in Iowa in July and August of 2023.
Management
contemplates corporate decisions in a long-term context. Corporate efforts to secure larger customer relationships have been successful.
The Company has a healthy financial position and its business outlook for fiscal year 2024 is bright. Management strongly believes that
the Company will be able to operate as a going concern over the next year from the date of this report.
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 15
to 45 days. The Company performs ongoing credit evaluations of its customers. During fiscal year 2022, the Company had two customers
-A and B below- who exceeded 10% of Company revenue. Neither of those customers represented over 10% of Company sales in fiscal year
2023. Only one customer - Customer C - represented over 10% of Company sales in fiscal year 2023.
| |
2023 % of Revenue | | |
3/31/2023 %
of A/R | | |
2022 % of Revenue | | |
3/31/2022 %
of A/R |
Customer A | |
|
4 | % | |
| 10 | % | |
| 12 | % | |
8% |
Customer B | |
|
7 | % | |
| 45 | % | |
| 22 | % | |
0% |
Customer C | |
|
38 | % | |
| 0 | % | |
| 0 | % | |
0% |
Notes
to audited financial statements
NOTE
4 - PREPAID EXPENSES
Prepaid
expenses consisted of the following for the fiscal years ended March 31, 2023 and 2022:
| |
March 31, 2023 | | |
March 31, 2022 | |
Prepaid insurance | |
$ | 8,891 | | |
$ | 5,571 | |
Prepaid tradeshows | |
| 34,316 | | |
| 3,498 | |
Prepaid inventory | |
| 374,926 | | |
| 49,082 | |
Prepaid software | |
| 16,287 | | |
| 15,138 | |
Other prepaid expenses | |
| 1,698 | | |
| 12,439 | |
Total Prepaid Expenses | |
$ | 436,118 | | |
$ | 85,728 | |
NOTE
5 - COMMON AND PREFERRED STOCK TRANSACTIONS
a.
Common Stock
The
Company has 150,000,000 authorized shares of common stock. As of March 31, 2023, shares outstanding were 125,732,479. As of March 31,
2022, shares outstanding were 124,482,479.
During
the fiscal years ending March 31, 2023 and 2022, the Company expensed amounts related to stock options granted of $15,990 and $25,839
respectively.
During
the fiscal year ended March 31, 2023, the Company issued 1,250,000 shares of “restricted” Rule 144 common stock related to
the exercise of employee performance options. During the fiscal year ended March 31, 2022, the Company issued 1,000,000 shares of “restricted”
Rule 144 common stock related to the exercise of warrants attached to a promissory note.
b.
Preferred Stock
The
Company has 20,000,000 authorized shares of preferred stock. As of March 31, 2023 and 2022, there were no preferred shares issued or
outstanding.
NOTE
6 - NOTES PAYABLE
Notes
payable consisted of the following as of March 31, 2023 and 2022:
| |
March 31, | |
| |
2023 | | |
2022 | |
Notes payable, related party | |
| - | | |
| 1,493,327 | |
Total Notes Payable | |
$ | - | | |
$ | 1,493,327 | |
Note
Payable Related Party
From
April 1, 2013 to March 31, 2017, the Company executed related party promissory notes with the Chairman and CEO for $1,292,679, $175,000,
and $340,000 paid down to a principal balance of $220,648, with interest of 10% per annum. All of these notes were in default by April
30, 2016. All accrued interest as of December 31, 2018 was converted to shares of “restricted” Rule 144 common stock with
a per share value of $0.02 to $0.04. Monthly interest payments have been made in cash starting in January of 2019. On April 19, 2019,
these notes were consolidated to one promissory note for $1,688,327, with interest of 10% per annum, and extending the due date to April
20, 2020. The note was subsequently amended, extending the due date to May 1, 2021. The note was subsequently amended to extend the due
date to May 1, 2022. The note was subsequently amended to extend the due date to May 1, 2023. Total interest accrued and paid in the
fiscal year ending March 31, 2022 totaled $143,938. The principal balance as of March 31, 2022 was $1,443,327 with $11,863 interest accrued.
No principal payments were made during fiscal year 2022. During fiscal year 2023, this note was paid off in full.
Notes
to audited financial statements
On
February 1, 2017, the Company executed a non-convertible promissory note with no warrants attached with a member of the Executive Management
Team and Board of Directors, for $50,000 at 20% interest per annum, due April 30, 2017. The note’s principal balance of $50,000,
and accrued interest of $23,342 as of May 31, 2019 was amended on June 1, 2019. The promissory note June 1, 2019 amendment reduced the
interest rate to 10% per annum, but to accrue interest on both the $50,000 principal balance and the $23,342 accrued interest and extended
the due date to May 31, 2020. The promissory note was subsequently amended on June 1, 2020, with a principal balance of $50,000 and accrued
interest of $30,697. As of March 31, 2022, total interest accrued was $43,928. This promissory note due date was subsequently amended
to a new due date of May 31, 2023 with all other terms and conditions remaining the same. During fiscal year 2023, this note was paid
off in full.
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Leases
The
Company adopted ASC 842 as of November 9, 2019 using a modified retrospective transition approach for all leases existing at December
31, 2019, the date of the initial application. Consequently, financial information will not be updated, and disclosures required under
ASC 842 will not be provided for dates and periods before January 1, 2020.
As
of March 31, 2023, the Company recognized operating lease liabilities of $175,752 based on the present value of the remaining minimum
rental payments determined under prior lease accounting standards and corresponding Right of Use Assets (ROU) of $173,353.
The
Company determines if a contract is a lease or contains a lease at inception. Right of use assets related to operating type leases are
reported in other noncurrent assets and the present value of remaining lease obligations is reported in accrued and other liabilities
and other noncurrent liabilities on the Balance Sheets. The Company does not currently have any financing type leases.
Operating
lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement
date. The Company’s leases do not provide an implicit rate. The Company determines the incremental borrowing rates applicable to
the economic environment based on the information available at commencement date, in determining the present value of future payments.
The right of use asset for operating leases is measured using the lease liability adjusted for the impact of lease payments made prior
to commencement, lease incentives received, initial direct costs incurred and any asset impairments. Lease te1ms may include options
to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for minimum lease payments
is recognized on a straight-line basis over the lease term.
The
Company re-measures and reallocates the consideration in a lease when there is a modification of the lease that is not accounted for
as a separate contract. The lease liability is re-measured when there is a change in the lease te1m or a change in the assessment of
whether the Company will exercise a lease option. The Company assesses right of use assets for impairment in accordance with its long-lived
asset impairment policy.
Notes
to audited financial statements
The
Company accounts for lease agreements with contractually required lease and non-lease components on a combined basis. Lease payments
made for cancellable leases, variable amounts that are not based on an observable index and lease agreements with an original duration
of less than twelve months are recorded directly to lease expense.
a.
Office and Warehouse
The
Company leases one building containing its main office and warehouse space under a non-cancelable lease agreement, which commenced on
March 2, 2016, accounted for as an operating lease expiring March 14, 2020. On March 3, 2020, a third amendment extended the lease for
19.5 months, expiring October 31, 2021 at $0.60 a square foot. On September 16, 2021, the Company signed a fourth amendment to the lease
with a monthly rental amount starting at $6,800 and escalating by $200 per month at the end of each lease year, which is due to expire
on October 31, 2024. Building lease expenses were $106,462 and $98,602 for the fiscal years ended March 31, 2023, and 2022, respectively.
b.
Equipment
The
Company leased one production printer on November 12, 2015 for a term of 60 months, with a purchase option of fair market value, expiring
December 2020. The Company leased a replacement production printer for 60 months commencing on January 14, 2020. Equipment lease expense
was $31,896 for the fiscal years ended March 31, 2023 and 2022.
As
of March 31, 2023, accounted for and presented under ASC 842 guidance, the future minimum lease payments on operating leases, were as
follows:
Total
minimum lease obligation over the next 5 years
Fiscal Year | |
Amount | |
2024 | |
$ | 103,026 | |
2025 | |
| 70,327 | |
2026 | |
| - | |
2027 | |
| - | |
Total | |
$ | 173,353 | |
| |
Balance Sheet Location | |
March 31, 2023 | |
Right of use assets | |
Other noncurrent assets | |
$ | 173,353 | |
| |
| |
| | |
Lease payable | |
Current liabilities | |
| 103,026 | |
Lease payable | |
Long-term liabilities | |
| 2,726 | |
Total lease payable | |
| |
$ | 175,752 | |
Supplemental cash flow information related to operating leases:
| |
March 31, 2023 | |
Operating cash paid to settle lease liabilities | |
$ | 114,496 | |
Right of use asset additions in exchange for lease liabilities | |
| - | |
| |
| | |
| |
| March 31, 2023 | |
Weighted average remaining lease term (in years) | |
| 1.46 | |
| |
| | |
Weighted average discount rate | |
| 10 | % |
Notes
to audited financial statements
NOTE
8 - PAYROLL LIABILITIES & ACCRUED EXPENSES
Accrued
expenses are made up of the following as of March 31, 2023 and 2022:
| |
March 31, | |
| |
2023 | | |
2022 | |
Payroll liabilities | |
$ | 201,724 | | |
$ | 226,237 | |
Interest payable | |
| - | | |
| 43,928 | |
Sales tax payable | |
| 3,399 | | |
| 6,672 | |
State tax payable | |
| 21,108 | | |
| - | |
Total accrued expenses | |
$ | 226,231 | | |
$ | 276,837 | |
NOTE
9 - INCOME TAXES
Although
we believe that our tax estimates are reasonable, the ultimate tax determination involves significant judgments that could become subject
to examination by tax authorities in the ordinary course of business. We periodically assess the likelihood of adverse outcomes resulting
from these examinations to determine the impact on our deferred taxes and income tax liabilities and the adequacy of our provision for
income taxes. Changes in income tax legislation, statutory income tax rates or future taxable income levels, among other things, could
materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among
financial reporting periods.
Net
deferred tax assets and liabilities consist of the following components as of March 31, 2023 and 2022:
| |
March 31, | |
| |
2023 | | |
2022 | |
Deferred tax assets | |
| | | |
| | |
Right of use liabilities | |
| 48,539 | | |
| 74,950 | |
Goodwill amortization | |
| 15,041 | | |
| 16,961 | |
Charitable Contribution carryover | |
| 19 | | |
| | |
NOL carryover | |
| 3,255,242 | | |
| 3,803,535 | |
Total deferred tax assets | |
| 3,318,841 | | |
| 3,895,447 | |
| |
| | | |
| | |
Deferred tax liabilities | |
| | | |
| | |
Right of use assets | |
| (48,539 | ) | |
| (74,950 | ) |
Depreciation | |
| (5,101 | ) | |
| (4,806 | ) |
Total deferred tax liabilities | |
| (53,640 | ) | |
| (79,757 | ) |
Net deferred tax assets | |
| 3,265,201 | | |
| 3,815,690 | |
| |
| | | |
| | |
Less valuation allowance | |
| (2,253,735 | ) | |
| (3,815,690 | ) |
Net deferred tax assets | |
| 1,011,466 | | |
| - | |
The
reconciliation of the Company’s net income taxes for fiscal 2023 and 2022 are as follows:
Notes
to audited financial statements
| |
March 31, 2023 | | |
March 31, 2022 | |
U.S. Federal income tax at statutory rate | |
$ | 376,732 | | |
$ | 147,723 | |
Non-taxable income | |
| - | | |
| (54,659 | ) |
State taxes, net of Federal benefit | |
| 127,569 | | |
| 49,241 | |
Non-taxable income | |
| (4,200 | ) | |
| - | |
Change in valuation allowance | |
| (1,511,567 | ) | |
| (142,305 | ) |
Income Tax Benefit | |
| (1,011,466 | ) | |
| - | |
The
Company files income tax returns in the United States, the State of Idaho, and the State of California. The statute of limitations on
a Federal tax return is the due date of the tax return plus three years. In the case of NOLs, the year in which the NOL was generated
remains open up to the amount of the NOL until the statute of limitations expires on the year it was used. All required tax returns of
the Company due since inception have been filed.
Summary
of Federal Operating Loss Carryforwards
Unused operating loss carryforward March 31, 2022 | |
$ | 13,926,426 | |
Operating loss carryforwards realized | |
$ | 1,815,072 | |
Expiration of operating loss carryforward | |
| - | |
Unused operating loss carryforward March 31, 2023 | |
$ | 12,111,354 | |
NOTE
10 - DILUTIVE INSTRUMENTS
Stock
Options and Warrants
The
following table summarizes option / warrant activity during the year ended March 31, 2023:
| |
Number of Options | | |
Weighted Average
Exercise
Price | | |
Weighted
Average Fair Value at Issuance | | |
Weighted Average Remaining Contract
Life | | |
Intrinsic
Value | |
| |
| | |
| | |
| | |
| | |
| |
Outstanding at March 31, 2022 | |
| 1,250,000 | | |
$ | 0.024 | | |
$ | 0.024 | | |
| 0.51 | | |
$ | 21,250 | |
Granted | |
| - | | |
| 0.025 | | |
| - | | |
| - | | |
| - | |
Expired | |
| - | | |
| 0.025 | | |
| - | | |
| - | | |
| - | |
Exercised | |
| 1,250,000 | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Outstanding at March 31, 2023 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Exercisable at March 31, 2023 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
During
fiscal year 2023, 1,250,000 employee performance options were exercised. There were no options or warrants outstanding as of March 31,
2023.
NOTE
11 - RELATED PARTY TRANSACTIONS
On
August 21, 2018, the Company granted 1,000,000 stock options to our President, Michael J. Bledsoe. The expected volatility rate of 254.03%
was calculated using the Company’s stock price over the period beginning August 21, 2018, through date of issue. A risk-free interest
rate of 0.27% was used to value the options. The options were valued using the Black-Scholes valuation model. The options vested immediately
and were exercisable at $0.025 per share which represents the fair market value at the date of grant in accordance with the 2009 Equity
Incentive Plan. The maturity date was August 21, 2021. The entire value of the options were expensed at time of grant as they vested
immediately. On August 21, 2021, the options expired and the Company issued 1,000,000 new options with a one year maturity and a strike
price of $0.025 accounted for as a modification. These options were exercised on August 18, 2022.
Notes
to audited financial statements
From
April 1, 2013 to March 31, 2017, the Company executed related party promissory notes with the Chairman and CEO for $1,292,679, $175,000,
$340,000 paid down to a principal balance of $220,648, with interest of 10% per annum. Monthly interest payments have been made in cash
starting in January of 2019. On April 19, 2019, these notes were consolidated to one promissory note for $1,688,327, with interest of
10% per annum, and extending the due date to April 20, 2020. Total interest accrued and paid in the fiscal year ending March 31, 2020
totaled $142,210. Principal payments were made totaling $245,000 for an ending principal balance at March 31, 2020 of $1,443,327. The
note was subsequently amended with a maturity date of May 1, 2021, with all other terms and conditions remaining the same. No principal
payments were made on this note in fiscal year 2021, leaving a principal balance as of March 31, 2021 of $1,443,327. This promissory
note due date was subsequently amended to a new due date of May 1, 2022, with all other terms and conditions remaining the same. No principal
payments were made on this note during fiscal year 2022, leaving a principal balance as of March 31, 2022 of $1,443,327. During fiscal
year 2023, this promissory note was paid in full.
On
February 1, 2017, the Company executed a non-convertible promissory note with no warrants attached with a member of the Executive Management
Team and Board of Directors, for $50,000 at 20% interest per annum, due April 30, 2017. The note’s principal balance of $50,000,
and accrued interest of $23,342 as of May 31, 2019 was amended on June 1, 2019. The promissory note June 1, 2019 amendment reduced the
interest rate to 10% per annum, but to accrue interest on both the $50,000 principal balance and the $23,342 accrued interest and extended
the due date to May 31, 2020. This promissory note due date was subsequently amended to a new due date of May 31, 2021. As of March 31,
2021, the principal balance on this note was $50,000 and the accrued interest was $36,805. This promissory note due date was subsequently
amended to a new due date of May 1, 2022, with all other terms and conditions remaining the same. During fiscal year 2023, this promissory
note was paid in full.
NOTE
12 - SUBSEQUENT EVENTS
On
June 14th, 2023, the Company entered into an agreement to purchase 998,985 shares of its common stock, 120,000 of these shares being
“restricted” Rule 144 common stock, at a price per share of $0.05, for a total amount of $49,949 from a shareholder who solicited
the Company with the offer. The transaction has not been finalized as of the date of this report. The Company intends to retire the stock
once the transaction is completed.
The
Company opened a money market account with Vanguard to invest surplus cash. The account was funded with $500,000 on June 27, 2023. At
the time of funding the account, the money market fund had a 7-day SEC yield of 5.04% and an expense ratio of 0.11%.
Notes
to audited financial statements
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
PCS
EDVENTURES!, INC.
Balance
Sheets
(unaudited)
| |
September 30, 2023 | | |
March 31, 2023 | |
CURRENT ASSETS | |
| | | |
| | |
Cash | |
$ | 2,118,214 | | |
$ | 442,657 | |
Accounts receivable, net of allowance for doubtful | |
| | | |
| | |
Accounts of $18,469 at September 30, 2023 and March 31, 2023 | |
| 1,541,694 | | |
| 363,947 | |
Accounts receivable, other receivables | |
| 55,119 | | |
| 13,312 | |
Prepaid expenses | |
| 308,814 | | |
| 436,118 | |
Inventory, net | |
| 1,172,013 | | |
| 1,237,872 | |
Total Current Assets | |
| 5,195,854 | | |
| 2,493,906 | |
| |
| | | |
| | |
NONCURRENT
ASSETS | |
| | | |
| | |
Lease Right-of-Use Asset | |
| 123,125 | | |
| 173,352 | |
Deposits | |
| 6,300 | | |
| 6,300 | |
Property and equipment, net | |
| 35,294 | | |
| 31,533 | |
Deferred tax asset | |
| 1,011,466 | | |
| 1,011,466 | |
Total Noncurrent Assets | |
| 1,176,185 | | |
| 1,222,651 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 6,372,039 | | |
$ | 3,716,557 | |
| |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable | |
$ | 118,333 | | |
$ | 27,927 | |
Payroll liabilities and accrued expenses | |
| 237,000 | | |
| 226,231 | |
Deferred revenue | |
| 4,584 | | |
| 7,085 | |
Lease Liability, current portion | |
| 110,741 | | |
| 103,026 | |
Total Current Liabilities | |
| 470,658 | | |
| 364,269 | |
| |
| | | |
| | |
NONCURRENT LIABILITIES | |
| | | |
| | |
Lease liabilities, net of current portion | |
| 14,784 | | |
| 72,726 | |
Total Noncurrent Liabilities | |
| 14,784 | | |
| 72,726 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
$ | 485,442 | | |
$ | 436,995 | |
| |
| | | |
| | |
STOCKHOLDERS’ EQUITY (DEFICIT) | |
| | | |
| | |
Preferred stock, no par value, 20,000,000 authorized shares, No shares issued and outstanding | |
| - | | |
| - | |
Common stock, no par value, 150,000,000 authorized shares, 124,733,494 shares issued and outstanding | |
| - | | |
| - | |
Additional Paid-in Capital | |
| 40,570,459 | | |
| 40,635,392 | |
Accumulated deficit | |
| (34,683,862 | ) | |
| (37,355,830 | ) |
Total Stockholders’ Equity | |
| 5,886,597 | | |
| 3,279,562 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 6,372,039 | | |
$ | 3,716,557 | |
The
accompanying notes are an integral part of these unaudited financial statements.
PCS
EDVENTURES!, INC.
Statements
of Operations
(unaudited)
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
September 30, 2023 | | |
September 30, 2022 | | |
September 30, 2023 | | |
September 30, 2022 | |
REVENUES | |
| | | |
| | | |
| | | |
| | |
Revenue | |
$ | 3,767,326 | | |
$ | 1,243,662 | | |
$ | 6,372,607 | | |
$ | 2,635,447 | |
Total Revenues | |
| 3,767,326 | | |
| 1,243,662 | | |
| 6,372,607 | | |
| 2,635,447 | |
| |
| | | |
| | | |
| | | |
| | |
COST OF SALES | |
| 1,188,826 | | |
| 525,339 | | |
| 2,192,896 | | |
| 1,081,958 | |
| |
| | | |
| | | |
| | | |
| | |
GROSS PROFIT | |
| 2,578,500 | | |
| 718,323 | | |
| 4,179,711 | | |
| 1,553,489 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | |
Salaries and wages | |
| 513,676 | | |
| 333,965 | | |
| 959,952 | | |
| 660,237 | |
General and administrative expenses | |
| 294,807 | | |
| 182,418 | | |
| 589,641 | | |
| 396,601 | |
Total Operating Expenses | |
| 808,483 | | |
| 516,383 | | |
| 1,549,593 | | |
| 1,056,838 | |
OPERATING INCOME (LOSS) | |
| 1,770,017 | | |
| 201,940 | | |
| 2,630,118 | | |
| 496,651 | |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME AND (EXPENSES) | |
| | | |
| | | |
| | | |
| | |
Interest income (expense) | |
| 10,315 | | |
| (36,582 | ) | |
| 11,240 | | |
| (74,161 | ) |
Other income | |
| 31,258 | | |
| - | | |
| 30,610 | | |
| - | |
Net Other Expense | |
| 41,573 | | |
| (36,582 | ) | |
| 41,850 | | |
| (74,161 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) | |
$ | 1,811,590 | | |
$ | 165,358 | | |
$ | 2,671,968 | | |
$ | 422,490 | |
| |
| | | |
| | | |
| | | |
| | |
Net Income (loss) per common share: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.01 | | |
$ | 0.00 | | |
$ | 0.02 | | |
$ | 0.00 | |
Fully Diluted | |
$ | 0.01 | | |
$ | 0.00 | | |
$ | 0.02 | | |
$ | 0.00 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted Average number of shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 125,091,826 | | |
| 124,949,871 | | |
| 125,410,402 | | |
| 124,717,453 | |
Fully Diluted | |
| 125,091,826 | | |
| 125,106,123 | | |
| 125,410,402 | | |
| 124,873,705 | |
The
accompanying notes are an integral part of these unaudited financial statements.
PCS
EDVENTURES!, INC.
Statement
of Stockholders’ Equity (Deficit)
(unaudited)
| |
# of Common | | |
Common | | |
Additional Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares O/S | | |
Stock | | |
Capital | | |
Deficit | | |
Equity | |
| |
| | |
| | |
| | |
| | |
| |
Balance at 6/30/2022 | |
| 124,482,479 | | |
| - | | |
$ | 40,599,946 | | |
$ | (39,874,874 | ) | |
$ | 725,072 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income | |
| | | |
| | | |
| | | |
| 165,358 | | |
| 165,358 | |
Shares Issued (exercise of options) | |
| 1,000,000 | | |
| - | | |
| 25,000 | | |
| - | | |
| 25,000 | |
Option Expense | |
| - | | |
| - | | |
| 5,446 | | |
| - | | |
| 5,446 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 9/30/2022 | |
| 125,482,479 | | |
| - | | |
| 40,630,392 | | |
| (39,709,516 | ) | |
| 920,876 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 3/31/2022 | |
| 124,482,479 | | |
| - | | |
$ | 40,589,402 | | |
$ | (40,132,006 | ) | |
$ | 457,396 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income | |
| | | |
| | | |
| | | |
| 422,490 | | |
| 422,490 | |
Shares Issued (exercise of options) | |
| 1,000,000 | | |
| - | | |
| 25,000 | | |
| - | | |
| 25,000 | |
Option Expense | |
| - | | |
| - | | |
| 15,990 | | |
| - | | |
| 15,990 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 9/30/2022 | |
| 125,482,479 | | |
| - | | |
$ | 40,630,392 | | |
$ | (39,709,516 | ) | |
$ | 920,876 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 6/30/2023 | |
| 125,732,479 | | |
| - | | |
$ | 40,635,392 | | |
$ | (36,495,452 | ) | |
$ | 4,139,940 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income | |
| | | |
| | | |
| | | |
| 1,811,590 | | |
| 1,811,590 | |
Shares repurchased and cancelled | |
| (998,985 | ) | |
| - | | |
| (64,933 | ) | |
| - | | |
| (64,933 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 9/30/2023 | |
| 124,733,494 | | |
| - | | |
$ | 40,570,459 | | |
$ | (34,683,862 | ) | |
$ | 5,886,597 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 3/31/2023 | |
| 125,732,479 | | |
| - | | |
$ | 40,635,392 | | |
$ | (37,355,830 | ) | |
$ | 3,279,562 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income | |
| | | |
| | | |
| | | |
| 2,671,968 | | |
| 2,671,968 | |
Shares repurchased and cancelled | |
| (998,985 | ) | |
| - | | |
| (64,933 | ) | |
| - | | |
| (64,933 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at 9/30/2023 | |
| 124,733,494 | | |
| - | | |
$ | 40,570,459 | | |
$ | (34,683,862 | ) | |
$ | 5,886,597 | |
The
accompanying notes are an integral part of these unaudited financial statements.
PCS
EDVENTURES!, INC.
Statements
of Cash Flows
(unaudited)
| |
For the Six Months ended September 30, | |
| |
2023 | | |
2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | | |
| | |
NET INCOME (LOSS) | |
$ | 2,671,968 | | |
$ | 422,490 | |
Stock based compensation | |
| - | | |
| 15,990 | |
Depreciation and amortization | |
| 4,895 | | |
| 1,641 | |
Right of use asset amortization | |
| 50,227 | | |
| 47,842 | |
Changes in operating assets and liabilities | |
| | | |
| | |
(Increase) decrease in accounts receivable | |
| (1,219,554 | ) | |
| (377,595 | ) |
(Increase) decrease in prepaid expenses | |
| 127,304 | | |
| (244,961 | ) |
(Increase) decrease in inventories | |
| 65,859 | | |
| 71,618 | |
(Decrease) increase in accounts payable and accrued liabilities | |
| 101,175 | | |
| (37,247 | ) |
(Increase) decrease in lease liability | |
| (50,227 | ) | |
| (46,642 | ) |
Increase (Decrease) in unearned revenue | |
| (2,501 | ) | |
| 5,333 | |
Net Cash Provided by (Used by) Operating Activities | |
| 1,749,146 | | |
| (141,531 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
Cash paid for purchase of fixed assets | |
| (8,656 | ) | |
| (8,051 | ) |
Net Cash Provided by (Used by) Investing Activities | |
| (8,656 | ) | |
| (8,051 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Common stock repurchased (Treasury shares) and cancelled | |
| (64,933 | ) | |
| - | |
Proceeds from sale of stock | |
| - | | |
| 25,000 | |
Principal payments on debt | |
| - | | |
| (143,327 | ) |
Net Cash Provided by (Used by) Financing Activities | |
| (64,933 | ) | |
| (118,327 | ) |
| |
| | | |
| | |
Net Increase (Decrease) in Cash | |
| 1,675,557 | | |
| (267,909 | ) |
Cash at Beginning of Quarter | |
| 442,657 | | |
| 584,070 | |
Cash at End of Quarter | |
$ | 2,118,214 | | |
$ | 316,161 | |
The
accompanying notes are an integral part of these unaudited financial statements.
PCS
EDVENTURES!, INC.
Notes
to the Financial Statements (unaudited) September 30, 2023 and 2022
NOTE
1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description
of Business
The
financial statements presented are those of PCS Edventures!, Inc., an Idaho corporation (“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.
PCS
educational and drone 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 strategies.
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 30 different enrichment programs and typically develops at least
two new programs each year. Some of the more popular programs include Ready, Set, Drone!; Drone Designers; Traveling Artist; Unleash
Your Wild Side, Build a Better World; Claymation; Oceanic Exploration; Pirate; and Flight and Aerodynamics. |
|
|
|
|
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 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. |
|
|
|
|
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.
Accounting
Method
The
Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a March 31 fiscal year
end.
Notes
to audited financial statements
Cash
and Cash Equivalents
Cash
and cash equivalents, totaling $2,118,214 and $442,657 at September 30, 2023 and March 31, 2023, respectively, consist of operating and
savings accounts. For purposes of the statements of cash flows, the Company considers all highly-liquid financial instruments with original
maturities of three months or less at date of purchase to be cash equivalents.
Use
of Estimates
The
preparation of these financial statements in conformity with Generally Accepted Accounting Principles (“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 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.
Concentration
of Credit Risks and Significant Customers
The
Company extends credit to customers and is therefore subject to credit risk. Financial instruments that potentially subject the Company
to concentration of credit risk consist primarily of trade receivables. In the normal course of business, the Company provides credit
terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible
losses which when realized have been within the range of management’s expectations. An allowance for doubtful accounts is recorded
to account for potential bad debts. Estimates are used in determining the allowance for doubtful accounts and are based upon an assessment
of selected accounts, historic averages, and as a percentage of remaining accounts receivable by aging category. In determining these
percentages, the Company evaluates historical write-offs, and current trends in customer credit quality, as well as changes in credit
policies. The Company generally does not require collateral from its customers. The Company has established an allowance for doubtful
accounts of $18,469 at September 30, 2023 and March 31, 2023.
Inventory
Finished
goods inventory is composed of items produced in-house, as well as items from outside suppliers. These items include, but are not limited
to, Fischertechnik® manipulatives, Brick manipulatives, drone components, digital media equipment, furniture units, curriculum, and
other miscellaneous items used in our various labs. Our inventory is carried at the lower of cost or market and valued using the average
cost method for each item.
When
indicators of inventory impairment exist, the Company measures the carrying value of the inventory against its market value, and if the
carrying value exceeds the market value, the inventory value is adjusted accordingly. The provision for excess and obsolete inventory
reserve as of September 30, 2023 and March 31, 2023 was $6,343 and $6,343, respectively.
Property,
Plant and Equipment
Depreciation
on property and equipment is computed using the straight-line method over the estimated useful life of the asset. The Company had fully
depreciated property and equipment of $224,282 and software of $127,355 prior to March 31, 2018. Beginning in fiscal year 2022 through
the current reporting period, the Company purchased various warehouse and office equipment for $46,979 and recognized $11,685 in depreciation
of that equipment for a total property and equipment of $35,294 as of September 30, 2023. As of March 31, 2023, property and equipment
was $31,533, net of $6,790 in depreciation.
Software
has been fully depreciated as of September 30, 2023 and March 31, 2023.
Impairment
of Long-Lived Assets
Long-lived
assets are reviewed for impairment annually, or when events or circumstances arise that indicate the existence of impairment for patents
and other intangibles. There was no impairment recorded during the three months ended September 30, 2023 and 2022.
Notes
to audited financial statements
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date.
In
November 2015, the Financial Accounting Standards Board issued ASU No. 2015-17, “Income Taxes (Topic 740)- Balance Sheet Classification
of Deferred Taxes” (ASU 2015-17), which requires reporting the net amount of deferred tax assets and liabilities as a single noncurrent
item on the classified balance sheet. Before this change, the net amounts of current and noncurrent deferred tax assets and liabilities
were reported separately.
We
account for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 prescribes the use of the asset and
liability method to compute the differences between the tax bases of assets and liabilities and the related financial amounts, using
currently enacted tax laws. If necessary, a valuation allowance is established, based on the weight of available evidence, to reduce
deferred tax assets to the amount that is more likely than not to be realized. Realization of the deferred tax assets, net of deferred
tax liabilities, is principally dependent upon achievement of sufficient future taxable income. We exercise significant judgment in determining
our provisions for income taxes, our deferred tax assets and liabilities and our future taxable income for purposes of assessing our
ability to utilize any future tax benefit from our deferred tax assets.
In
accordance with GAAP, the Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns
for the open tax years in such jurisdictions. The Company currently believes that all significant filing positions are highly certain
and that all of its significant income tax filing positions and deductions would be sustained upon audit. Therefore, the Company has
no significant reserves for uncertain tax positions, and no adjustment to such reserves was required by GAAP. No interest or penalties
have been levied against the Company and none are anticipated, therefore no interest or penalty has been included in the provision for
income taxes in the consolidated statements of operations. The Internal Revenue Code contains provisions which reduce or limit the availability
and utilization of net operating loss (NOL) carry forwards in the event of a more than 50% change in ownership. If such an ownership
change occurs with the Company, the use of these net operating losses could be limited. The following table details the years that remain
open to tax examinations:
Tax Year |
|
Fiscal Year End |
|
Filed Date |
|
Open Through |
2021 |
|
3/31/2022 |
|
2/3/2023 |
|
2/3/2026 |
2020 |
|
3/31/2021 |
|
1/18/2022 |
|
1/18/2025 |
2019 |
|
3/31/2020 |
|
1/28/2021 |
|
1/28/2024 |
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 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 $4,784 as of September 30, 2023 related to contractual commitments with customers where the performance
obligation will be satisfied within the fiscal year ending March 31, 2024. The revenue associated with these performance obligations
is recognized as the obligation is satisfied. The Company had $7,085 of deferred revenue as of March 31, 2023.
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.
Notes
to audited financial statements
Stock-Based
Compensation
We
recognize stock-based compensation expense under the provisions of ASC 718, Compensation —Stock Compensation (“ASC 718”).
We use the Black-Scholes option pricing model to calculate the fair value of stock options at their respective grant date. The use of
option valuation models requires the input of highly subjective assumptions, including the expected stock price volatility and the expected
term of the option. The fair value of restricted stock awards is the fair market value on the date of grant. We recognize these compensation
costs on a straight-line basis over the requisite service period, which is generally the vesting period of the award.
During
fiscal year 2023, two sets of performance options were exercised. Mike Bledsoe, President, exercised 1,000,000 options at 2.5 cents per
share. Michelle Fisher, Director of STEM Curriculum, exercised 250,000 options at 2 cents per share. As of September 30, 2023 and March
31, 2023, the Company had no outstanding warrants or options.
Business
Segments and Related Information
GAAP
establishes standards for the way public business enterprises are to report information about operating segments in annual financial
statements and requires enterprises to report selected information about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosure about products and services, geographic areas and major customers. The Company currently
operates in one business segment.
Net
Earnings (Loss) Per Share of Common Stock
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
September 30, | |
| |
2023 | | |
2022 | |
Net Income per common Share: | |
| | | |
| | |
Basic | |
$ | 0.01 | | |
$ | 0.00 | |
Diluted | |
$ | 0.01 | | |
$ | 0.00 | |
| |
| | | |
| | |
Weighted average number of common shares outstanding Basic | |
| 125,091,826 | | |
| 124,949,871 | |
Weighted average number of common shares outstanding Fully diluted | |
| 125,091,826 | | |
| 125,106,123 | |
Net
income for the three months ended September 30, 2023 and 2022 was $1,811,590 and $165,358, respectively.
| |
For the Six Months ended September 30, | |
| |
2023 | |
2022 | |
Net Income per common Share: | |
| | | |
| | |
Basic | |
$ | 0.02 | | |
$ | 0.00 | |
Diluted | |
$ | 0.02 | | |
$ | 0.00 | |
| |
| | | |
| | |
Weighted average number of common shares outstanding Basic | |
| 125,410,402 | | |
| 124,717,453 | |
Weighted average number of common shares outstanding Fully diluted | |
| 125,410,402 | | |
| 124,873,705 | |
Net
Income for the six months ended September 30, 2023 and 2022 was $2,671,968 and $422,490, respectively.
Notes
to audited financial statements
Recently
Issued Accounting Pronouncements
In
November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivative and Hedging (Topic 815). This
new guidance was effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual
reporting periods. The Company does not expect ASU 2019-10 to have a material effect on its financial statements.
ASU
2016-02, Leases (Topic 842) - In February 2016, the FASB issued ASU 2016-02, and subsequently amended this update by issuing additional
ASU’s that provide clarification and further guidance around areas identified as potential implementation issues. These updates
require a lessee to recognize in the balance sheet a liability to make lease payments and a corresponding right-of-use asset for virtually
all leases, other than leases with a term of 12 months or less if the short- term lease exclusion expedient is elected. The updates also
require additional disclosures about the amount, timing, and uncertainty of cash flows arising from leases. These updates are effective
for annual and interim periods for fiscal years beginning after December 15, 2018, which required us to adopt these provisions in the
fiscal year ending March 31, 2020.
In
June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting,” which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services
from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires
goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that
Topic 718 does not apply to share- based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction
with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in ASU 2018-07 are effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted these amendments
in the fiscal year ended March 31, 2019 and the impact was immaterial.
In
December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“ASU 2019-12”). The
objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by ASC Topic 740 Income Taxes and clarifying
existing guidance to facilitate consistent application. The standard will become effective for the Company beginning on January 1, 2021.
The Company is currently evaluating the new standard to determine the potential impact of ASU 2019-12 on its financial statements and
related disclosures.
The
Company has reviewed other 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 September 30, 2023, the Company had $2,118,214 in cash and $1,541,694 in accounts receivable, with no debt. Management strongly believes
that the Company can sustain its operations over the course of the next 12 months with the cash and accounts receivable it has on hand,
and with the revenue and associated profit generated from the sales expected over the course of the next 12 months.
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 15
to 30 days. The Company performs ongoing credit evaluations of its customers. The Company established an allowance for uncollectible
accounts of $18,469 at September 30, 2023 and March 31, 2023.
NOTE 4 - PREPAID EXPENSES
Prepaid expenses for the periods are as
follows:
| |
September 30, 2023 | | |
March 31, 2023 | |
Prepaid insurance | |
$ | 24,013 | | |
$ | 8,891 | |
Prepaid tradeshows | |
| 24,162 | | |
| 34,316 | |
Prepaid inventory | |
| 232,207 | | |
| 374,926 | |
Prepaid software | |
| 8,555 | | |
| 16,287 | |
Prepaid other | |
| 19,877 | | |
| 1,698 | |
Total Prepaid Expenses | |
$ | 308,814 | | |
$ | 436,118 | |
NOTE
5 - COMMON AND PREFERRED STOCK TRANSACTIONS
The
Company has 150,000,000 authorized shares of common stock, no par value. At September 30, 2023 the total common shares issued and outstanding
was 124,733,494.
During
the six months ended September 30, 2023, the Company had no option expense.
During
the six months ending September 30, 2023, the Company did not issue shares of common stock.
During
the six months ending September 30, 2023, the Company repurchased 998,985 shares common stock at $0.065 per share for total payments
of $64,933. These shares were then immediately cancelled.
The
Company has 20,000,000 authorized shares of preferred stock. As of September 30, 2023 and 2022, there were no preferred shares issued
or outstanding.
Notes
to audited financial statements
NOTE
6 - NOTES PAYABLE
The
Company had no notes payable outstanding as of September 30, 2023 and March 31, 2023.
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Leases
The
Company adopted ASC 842 as of November 9, 2019 using a modified retrospective transition approach for all leases existing at December
31, 2019, the date of the initial application. Consequently, financial information will not be updated, and disclosures required under
ASC 842 will not be provided for dates and periods before January 1, 2020.
The
Company determines if a contract is a lease or contains a lease at inception. Right of use assets related to operating type leases are
reported in other noncurrent assets and the present value of remaining lease obligations is reported in accrued and other liabilities
and other noncurrent liabilities on the Balance Sheets. The Company does not currently have any financing type leases.
Operating
lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement
date. The Company’s leases do not provide an implicit rate. The Company determine the incremental borrowing rates applicable to
the economic environment based on the information available at commencement date, in determining the present value of future payments.
The right of use asset for operating leases is measured using the lease liability adjusted for the impact of lease payments made prior
to commencement, lease incentives received, initial direct costs incurred and any asset impairments. Lease terms may include options
to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for minimum lease payments
is recognized on a straight-line basis over the lease term.
The
Company re-measures and reallocates the consideration in a lease when there is a modification of the lease that is not accounted for
as a separate contract. The lease liability is re-measured when there is a change in the lease term or a change in the assessment of
whether the Company will exercise a lease option. The Company assesses right of use assets for impairment in accordance with its long-lived
asset impairment policy.
The
Company accounts for lease agreements with contractually required lease and non-lease components on a combined basis. Lease payments
made for cancellable leases, variable amounts that are not based on an observable index and lease agreements with an original duration
of less than twelve months are recorded directly to lease expense.
The
Company leases one building containing its main office and warehouse space under a non-cancelable lease agreement, which commenced on
March 2, 2016, accounted for as an operating lease expiring March 14, 2020. On March 3, 2020, a third amendment extended the lease for
19.5 months, expiring October 31, 2021 at $0.60 a square foot. On September 16, 2021, the Company signed a fourth amendment to the lease
with a monthly rental amount starting at $6,800 and escalating by $200 per month at the end of each lease year, which is due to expire
on October 31, 2024. Building lease expense was $52,561 and $52,800 for the six months ended September 30, 2023 and 2022, respectively.
The
Company leased one production printer on November 12, 2015 for a term of 60 months, with a purchase option of fair market value, expiring
December 2020. The Company leased a replacement production printer for 60 months commencing on January 14, 2020. Equipment lease expense
was $15,948 for the six months ended September 30, 2023 and 2022.
As
of March 31, 2023, accounted for and presented under ASC 842 guidance, the future minimum lease payments on operating leases, were as
follows:
Total minimum lease obligation over the next 5 years
Fiscal Year | |
Amount | |
2024 | |
| 52,798 | |
2025 | |
| 70,327 | |
2026 | |
| - | |
2027 | |
| - | |
Total | |
$ | 123,125 | |
| |
Balance Sheet Location | |
| September 30, 2023 | |
Right of use assets | |
Other noncurrent assets | |
$ | 123,125 | |
| |
| |
| | |
Lease payable | |
Current liabilities | |
$ | 110,741 | |
Lease payable | |
Long-term liabilities | |
| 14,784 | |
Total lease payable | |
| |
$ | 125,525 | |
Notes
to audited financial statements
Supplemental cash flow information related to operating leases:
| |
September 30, 2023 | |
Operating cash paid to settle lease liabilities | |
$ | 57,948 | |
Right of use asset additions in exchange for lease liabilities | |
| - | |
| |
| September
30, 2023 | |
Weighted average remaining lease term (in years) | |
| 1.25 | |
Weighted average discount rate | |
| 10 | % |
NOTE
8 – PAYROLL LIABILITIES & ACCRUED EXPENSES
Accrued expenses for the periods are as follows:
| |
September 30,2023 | | |
March 31, 2023 | |
Payroll liabilities | |
$ | 221,944 | | |
$ | 201,724 | |
Income tax payable | |
| 11,112 | | |
| 3,399 | |
State tax payable | |
| 3,944 | | |
| 21,108 | |
Total | |
$ | 237,000 | | |
$ | 226,231 | |
NOTE
9 – INCOME TAXES
For
the three and six months ended September 30, 2023, the Company recognized no income tax expense (or benefit) due to the partial reversal
of its valuation allowance. For the year ended March 31, 2023, the Company partially reversed its valuation allowance recognizing an
income tax benefit of $1,011,466, which represents an effective tax rate of (57%). As the Company recently generated positive income,
management expects the effective tax rate to differ from its annual effective tax rate from the most recent year and from its U.S. Federal
statutory rate due to changes in the valuation allowance. For the three and six month period ending September 30, 2023, the Company relieved
its valuation allowance equal to the estimated income tax expense based on U.S statutory rate of 21% and a State statutory rate of 7%.
The net effect is that no income tax expense was recorded for the three and six months ended September 30, 2023, and the effective tax
rate is 0.00%. For the three and six months ended September 30, 2012, no benefit from income taxes was recorded due to the Company being
in a full valuation allowance position, resulting in an effective tax rate of 0.0%.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than
not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2023. The Company
recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the
payment of interest and penalties as of September 30, 2023. The Company is currently not aware of any issues under review that could
result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by
major taxing authorities since inception.
The
Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance
with federal, state, and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits
will materially change over the next twelve months.
Although
we believe that our tax estimates are reasonable, the ultimate tax determination involves significant judgments that could become subject
to examination by tax authorities in the ordinary course of business. We periodically assess the likelihood of adverse outcomes resulting
from these examinations to determine the impact on our deferred taxes and income tax liabilities and the adequacy of our provision for
income taxes. Changes in income tax legislation, statutory income tax rates or future taxable income levels, among other things, could
materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among
financial reporting periods.
The
Company files income tax returns in the United States, the State of Idaho and the State of California. The statute of limitations on
a Federal tax return is the due date of the tax return plus three years. In the case of NOLs, the year in which the NOL was generated
remains open up to the amount of the NOL until the statute of limitations expires on the year it was used. All required tax returns of
the Company due since inception have been filed. The Company does not have any unrecognized tax benefits to report in the current period.
NOTE
10 - DILUTIVE INSTRUMENTS
Stock
Options and Warrants
As
of September 30, 2023 and March 31, 2023, the Company had no dilutive instruments outstanding.
Notes
to audited financial statements
NOTE
11 - RELATED PARTY TRANSACTIONS
For the three and six months ended September 30, 2023, the Company recognized no income tax expense (or benefit) due to the partial reversal of its valuation allowance. For the year ended March 31, 2023, the Company partially reversed its valuation allowance recognizing an income tax benefit of $1,011,466, which represents an effective tax rate of (57%). As the Company recently generated positive income, management expects the effective tax rate to differ from its annual effective tax rate from the most recent year and from its U.S. Federal statutory rate due to changes in the valuation allowance. For the three and six month period ending September 30, 2023, the Company relieved its valuation allowance equal to the estimated income tax expense based on U.S statutory rate of 21% and a State statutory rate of 7%. The net effect is that no income tax expense was recorded for the three and six months ended September 30, 2023, and the effective tax rate is 0.00%. For the three and six months ended September 30, 2012, no benefit from income taxes was recorded due to the Company being in a full valuation allowance position, resulting in an effective tax rate of 0.0%.
From
April 1, 2013 to March 31, 2017, the Company executed related party promissory notes with the Chairman and CEO for $1,292,679, $175,000,
$340,000 paid down to a principal balance of $220,648, with interest of 10% per annum. Monthly interest payments have been made in cash
starting in January of 2019. On April 19, 2019, these notes were consolidated to one promissory note for $1,688,327, with interest of
10% per annum, and extending the due date to April 20, 2020. Total interest accrued and paid in the fiscal year ending March 31, 2020
totaled $142,210. Principal payments were made totaling $245,000 for an ending principal balance at March 31, 2020 of $1,443,327. The
note was subsequently amended with a maturity date of May 1, 2021, with all other terms and conditions remaining the same. No principal
payments were made on this note in fiscal year 2021, leaving a principal balance as of March 31, 2021 of $1,443,327. This promissory
note due date was subsequently amended to a new due date of May 1, 2022, with all other terms and conditions remaining the same. No principal
payments were made on this note during fiscal year 2022, leaving a principal balance as of March 31, 2022 of $1,443,327. During fiscal
year 2023, this promissory note was paid in full.
On
February 1, 2017, the Company executed a non-convertible promissory note with no warrants attached with a member of the Executive Management
Team and Board of Directors, for $50,000 at 20% interest per annum, due April 30, 2017. The note’s principal balance of $50,000,
and accrued interest of $23,342 as of May 31, 2019 was amended on June 1, 2019. The promissory note June 1, 2019 amendment reduced the
interest rate to 10% per annum, but to accrue interest on both the $50,000 principal balance and the $23,342 accrued interest and extended
the due date to May 31, 2020. This promissory note due date was subsequently amended to a new due date of May 31, 2021. As of March 31,
2021, the principal balance on this note was $50,000 and the accrued interest was $36,805. This promissory note due date was subsequently
amended to a new due date of May 1, 2022, with all other terms and conditions remaining the same. During fiscal year 2023, this promissory
note was paid in full.
NOTE
12 - SUBSEQUENT EVENTS
On
October 3, the Company filed a Form 10-12g Registration Statement to register its securities with the SEC under the Securities Exchange
Act of 1934, as amended. This type of registration statement typically becomes effective sixty days after the filing date and will require
the Company to periodically file Forms 10-K, 10-Q, and 8-K among other filing requirements, including certain beneficial ownership filings
of “affiliates” and 5% or more holders of the Company’s common stock.
On
October 4, 2023, the Company entered into a lease for a new production printer. The term of the lease is 63 months, with monthly lease
payments of $4,995.
On
October 25, 2023, the Company received payment on the most recent order from the Air Force Junior Reserve Officers Training Corps in
the amount of $339,636. All orders that the Company has received to date from the Air Force have been fulfilled and invoiced, with payment
received.
On
October 26, 2023, the Company received a comment letter from the Securities and Exchange Commission regarding the Company’s Form
10-12g filing. The comment letter identified nine areas where the Commission has requested additional information. The Company intends
to respond to the letter addressing each additional request for information.
On
October 27, 2023, the Company renewed its line of credit facility with its primary bank for another year, to mature on November 8, 2024.
Notes
to audited financial statements
Exhibit 3.1
PCS Edventures!, Inc.
SECOND
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
PCS EDVENTURES!.COM, INC.
Pursuant
to Section 30-1-1007 of the Idaho Business Corporation Act (“the Act”), the undersigned corporation, effective as of October
2, 2006 (the “Effective Date”), adopts the following Amended and Restated Articles of Incorporation (the “Articles”),
which restate and supersede in their entirety the corporation’s Articles of Incorporation as originally filed and all prior amendments
and restatements of the corporation’s Articles of Incorporation.
Article
1
The
name of the corporation is PCS Edventures!.com, Inc. and its duration shall be perpetual.
Article
2
[Deleted]
Article
3
The
corporation is organized to engage in any and all lawful activities for which corporations may be organized under the Idaho Business
Corporation Act.
Article
4
[Deleted]
Article
5
5.1
Capital Stock. This corporation is authorized to issue two (2) classes of stock designated, respectively, “Preferred Stock”
and “Common Stock.” This corporation is authorized to issue a total of eighty million (80,000,000) shares (without par value)
consisting of twenty million (20,000,000) shares of Preferred Stock, and sixty million (60,000,000) shares of Common Stock. Each outstanding
share of Common Stock shall be entitled to one (1) vote on each matter submitted to a vote in a meeting of the shareholders. Votes may
not be cumulative. Holders of Common Stock shall have no preemptive rights.
AMENDED
BYLAWS
5.2
Terms of Classes or Series Determined by Board of Directors. The Board of Directors is expressly authorized to exercise, without shareholder
approval, all powers permitted by Idaho Code Section 30-1-602, including the authority (i) to classify any unissued shares of the corporation’s
authorized stock into one or more classes or into one or more series within a class; (ii) to reclassify any unissued shares of any class
of the corporation's authorized stock into one or more classes or into one or more series within one or more classes; or (iii) to reclassify
any unissued shares of any series of any class of the corporation's authorized stock into one or more classes or into one or more series
within a class. If the Board acts pursuant to this authorization, it must determine (prior to issuance or reissuance of any such shares)
the terms, including the preferences, rights and limitations, of the shares of any such class or series such as (without limitation)
dividend rights and preferences, conversion rights, voting rights (including, without limitation, any special, conditional or limited
voting rights or no right to vote), rights of redemption (including any sinking fund provisions) and liquidation preferences of such
series or class. The Board of Directors is also expressly authorized to fix the number of shares constituting each such class or series
of the corporation's authorized stock and to increase or decrease the number of shares of any class or series prior to the issuance or
reissuance of shares of that class or series. Prior to issuing any shares of any class or series of stock classified or reclassified
by the Board of Directors pursuant to this Section 5.2, the corporation shall deliver to the Idaho Secretary of State articles of amendment
setting forth the terms of such class or series.
5.3
Reacquired Common Stock. Unless a resolution of the Board of Directors provides that reacquired shares of Common Stock shall constitute
authorized and unissued shares, any shares of Common Stock reacquired by the corporation shall be treasury shares; and the corporation
may hold, use, resell, cancel or dispose of such reacquired Common Stock free of any restrictions that would be imposed on the original
issuance of Common Stock.
5.4
Reacquired Preferred Stock. Unless a resolution of the Board of Directors provides otherwise, any shares of Preferred Stock reacquired
by the corporation (whether by redemption, repurchase, conversion to Common Stock or other means) shall, upon such reacquisition, resume
the status as authorized and unissued shares of Preferred Stock, undesignated as to series and available for classification or reclassification
by the Board of Directors and reissuance by the corporation as provided in Section 5.2.
5.5
Convertible Preferred Stock. Prior to the effective date of these Articles, all of the issued and outstanding Convertible Preferred Stock
of the Company, as provided in the Articles of Amendment to the Articles of Incorporation of the Company dated September 5, 2003, were
reacquired by the Company. All reacquired and all unissued and authorized shares of Convertible Preferred Stock of the Company shall
resume the status of authorized and unissued shares of Preferred Stock, undesignated as to series and available for classification or
reclassification by the Board of Directors and reissuance by the corporation as provided in Section 5.2.
Article
5A
Series
A Preferred Stock
5A.1
Definitions. Capitalized terms used and not otherwise defined within this Article 5A that are defined in the Purchase Agreement (as defined
below), shall have the meanings given such terms in the Purchase Agreement. With respect to this Article 5A, the following terms shall
have the following meanings:
AMENDED
BYLAWS
5A.1.1
“Affiliate” means any Person that directly or indirectly, through one or more intermediaries controls, or is controlled by,
or is under common control with the another Person.
5A.1.2
“Bankruptcy Event” means any of the following events: (a) the corporation or any Significant Subsidiary (as such term is defined
in Rule 1.02(s) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the corporation or
any Significant Subsidiary thereof; (b) there is commenced against the corporation or any Significant Subsidiary thereof any such case
or proceeding that is not dismissed within 60 days after commencement; (c) the corporation or any Significant Subsidiary thereof is adjudicated
insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the corporation or
any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property
that is not discharged or stayed within 60 days; (e) the corporation or any Significant Subsidiary thereof makes a general assignment
for the benefit of creditors; (f) the corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view
to arranging a composition, adjustment or restructuring of its debts; or (g) the corporation or any Significant Subsidiary thereof, by
any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate
or other action for the purpose of effecting any of the foregoing.
5A.1.3
“Closing Date” means the date on which the payment of the Purchase Price (as defined herein) by the Investor to the corporation
is completed pursuant to the Purchase Agreement to purchase the Preferred Stock and Warrants, which shall occur on or before December
29, 2005.
5A.1.4
“Commission” means the Securities and Exchange Commission.
5A.1.5
“Common Stock” means the corporation's common stock without par value, and stock of any other class into which such shares
may hereafter have been reclassified or changed.
5A.1.6
“Common Stock Equivalents” means any securities of the corporation or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
5A.1.7
“Conversion Date” shall have the meaning set forth in Section 5A.6.1.
5A.1.8
“Conversion Ratio” shall have the meaning set forth in Section 5A.6.1.
AMENDED
BYLAWS
5A.1.9
“Conversion Value” shall have the meaning set forth in Section 5A.6.1.
5A.1.10
“Conversion Shares” means, collectively, the shares of Common Stock into which the shares of Series A Preferred Stock are convertible
in accordance with the terms hereof.
5A.1.11
“Conversion Shares Registration Statement” means a registration statement that meets the requirements of the Registration Rights
Agreement and registers the resale of all Conversion Shares by the Holder, who shall be named as a “selling stockholder” thereunder,
all as provided in the Registration Rights Agreement.
5A.1.12
“Dilutive Issuance” shall have the meaning set forth in Section 5A.7.4 hereof.
5A.1.13
“Effective Date” means the date that the Conversion Shares Registration Statement is declared effective by the Commission.
5A.1.14
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
5A.1.15
“Exempt Issuance” means the issuance of (a) shares of Common Stock, warrants, options or other rights (i) to employees, officers,
or directors of the corporation pursuant to any stock or option plan (including, without limitation, the corporation's 2004 Nonqualified
Stock Option Plan) duly adopted by a majority of the non-employee members of the Board of Directors of the corporation or a majority
of the members of a committee of non-employee directors established for such purpose, (ii) to consultants or advisors to the corporation
or to financial institutions or lessors in connection with commercial credit arrangements, equipment financings, real property lease
transactions or similar transactions, pursuant to arrangements approved by the Board of Directors, or (iii) in payment of compensation
of the corporation's directors, (b) securities upon the exercise or conversion of any securities issued hereunder, (c) shares of Common
Stock issued to (i) former shareholders of LabMentors pursuant to the Share Exchange Agreement dated November 30, 2005 (excluding, however,
shares of Common Stock to be issued pursuant to the earnout provisions of that agreement if issued for less than $0.50 per share), (ii)
certain financial advisors in connection with the LabMentors acquisition, and (iii) LabMentors' president, Joe Khoury, pursuant to an
employment agreement made in connection with the LabMentors acquisition, (d) shares of Common Stock and warrants issued to Cyndel &
Co., Inc., a consultant to the corporation, pursuant to a Consulting Agreement effective November 1, 2005, (e) shares of Common Stock
issuable pursuant to options, warrants or rights outstanding as of the Effective Date of the Amended and Restated Articles of Incorporation,
provided that such securities have not been amended since the Effective Date of the Second Amended and Restated Articles of Incorporation
to increase the number of such securities, (f) shares of Common Stock issuable in payment of noncash dividends or upon conversion of
corporation's outstanding shares of preferred stock, (g) securities issued pursuant to acquisitions or strategic transactions provided
however that there is no variable rate pricing mechanisms without a floor price included in any such transaction (including, without
limitation, securities issued in connection with the acquisition of Back-Up Training Corporation of Coeur d'Alene, Idaho), provided any
such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic
with the business of the corporation and in which the corporation receives benefits in addition to the investment of funds, but shall
not include a transaction in which the corporation is issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.
AMENDED
BYLAWS
5A.1.16
“Fundamental Transaction” shall have the meaning set forth in Section 5A.7.9 hereof.
5A.1.17
“Holder” shall have the meaning given such term in Section 5A.2 hereof.
5A.1.18
“Junior Securities” means the Common Stock and all other equity or equity equivalent securities of the corporation other than
those securities that are explicitly senior in rights or liquidation preference to the Series A Preferred Stock.
5A.1.19
“Original Issue Date” shall mean the date of the first issuance of any shares of the Series A Preferred Stock regardless of
the number of transfers of any particular shares of Series A Preferred Stock and regardless of the number of certificates which may be
issued to evidence such Series A Preferred Stock.
5A.1.20
“Person” means a company, an association, a partnership, a limited liability company, a business association, an individual,
a government or political subdivision thereof or a governmental agency.
5A.1.21
“Purchase Agreement” means the Note Purchase Agreement, dated as of the December 29, 2005, to which the corporation and the
original Holders are parties, as amended, modified or supplemented from time to time in accordance with its terms, a copy of which is
on file at the principal offices of the corporation.
5A.1.22
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Closing Date, to which the corporation
and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms.
5A.1.23
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
AMENDED
BYLAWS
5A.1.24
“Series A Preferred Stock” shall have the meaning set forth in Section 5A.2.
5A.1.25
“Subscription Amount” shall mean the One Million Dollars ($1,000,000.00) to be paid for the Note purchase pursuant to the Purchase
Agreement, in United States Dollars and in immediately available funds.
5A.1.26
“Subsidiary” shall mean a company, limited liability company, partnership, joint venture or other business entity of which
the corporation owns beneficially or of record more than 19% of the equity interest.
5A.1.27
“Trading Day” means a day on which the Common Stock is traded on a Trading Market.
5A1.28
“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the
date in question: the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or
the OTC Bulletin Board.
5A.1.29
“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.
5A.1.30
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock
is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the primary Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function; (b) if the Common Stock is not then listed
or quoted on the Trading Market and if prices for the Common Stock are then reported in the "Pink Sheets" published by the
National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most
recent bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock
as determined by a nationally recognized-independent appraiser selected in good faith by Purchasers holding a majority of the principal
amount of Series A Preferred Stock then outstanding.
5A.2
Designation, Amount and Par Value. Pursuant to Section 5.2 of Article 5 and subject to the terms and conditions of this Article 5A, a
series of preferred stock shall be designated as the corporation's Series A Convertible Preferred Stock without par value (the "Series
A Preferred Stock" or "Preferred Stock") and the number of shares so designated shall be five million (5,000,000) (which
shall not be subject to increase without the consent of the holders of a majority of the outstanding shares of the Series A Preferred
Stock (each a "Holder" and collectively, the "Holders"). Capitalized terms not otherwise defined within this Article
5A shall have the meaning given such terms in Section 5A.1 hereof.
AMENDED
BYLAWS
5A.3
Dividends and Other Distributions. No dividends shall be payable with respect to the Series A Preferred Stock. No dividends shall be
payable with respect to the Common Stock while the Series A Preferred Stock is outstanding. The Common Stock shall not be redeemed while
the Series A Preferred Stock is outstanding.
5A.4
Voting Rights. The Series A Preferred Stock shall have no voting rights. However, so long as any shares of Series A Preferred Stock are
outstanding, the corporation shall not, without the affirmative approval of the Holders of the shares of the Series A Preferred Stock
then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend
the terms or conditions of the Series A Preferred Stock set forth in the Amended and Restated Articles of Incorporation of the corporation,
(b) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section
5A.5) senior to or otherwise pari passu with the Series A Preferred Stock, or any of preferred stock possessing greater voting rights
or the right to convert at a more favorable price than the Series A Preferred Stock, (c) amend the Second Amended and Restated Articles
of Incorporation or other charter documents in breach of any of the provisions hereof, (d) increase the authorized number of shares of
Series A Preferred Stock, or (e) enter into any agreement with respect to the foregoing.
5A.5
Liquidation. Upon any liquidation, dissolution or winding-up of the corporation, whether voluntary or involuntary (a "Liquidation"),
the Holders shall be entitled to receive out of the assets of the corporation, whether such assets are capital or surplus, for each share
of Series A Preferred Stock an amount equal to $0.60 (the "Liquidation Value") before any distribution or payment shall be
made to the holders of any Junior Securities, and if the assets of the corporation shall be insufficient to pay in full such amounts,
then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full. At the election of a Holder made by written
notice delivered to the corporation at least two (2) business days prior to the effective date of the subject transaction, as to the
shares of Series A Preferred Stock held by such Holder, a Fundamental Transaction (excluding for purposes of this Section 5A.5 any Fundamental
Transaction described in Section 5A.7.9(d)(A) or 5A.7.9(d)(B)) or Change of Control shall be treated as a Liquidation.
AMENDED
BYLAWS
5A.6
Conversion.
5A.6.1
Conversions at Option of Holder. Each share of Series A Preferred Stock shall be initially convertible (subject to the limitations set
forth in Section 5A.6.3), into one (1) share of Common Stock (as adjusted as provided below, the "Conversion Ratio") at the
option of the Holders, at any time and from time to time from and after the Original Issue Date. Holders shall effect conversions by
providing the corporation with the form of conversion notice attached hereto as Annex A (a "Notice of Conversion") as fully
and originally executed by the Holder, together with the delivery by the Holder to the corporation of the stock certificate(s) representing
the number of shares of Series A Preferred Stock so converted, with such stock certificates being duly endorsed in full for transfer
to the corporation or with an applicable stock power duly executed by the Holder in the manner and form as deemed reasonable by the transfer
agent of the Common Stock. Each Notice of Conversion shall specify the number of shares of Series A Preferred Stock to be converted,
the number of shares of Series A Preferred Stock owned prior to the conversion at issue, the number of shares of Series A Preferred Stock
owned subsequent to the conversion at issue, the stock certificate number and the shares of Series A Preferred Stock represented thereby
which are accompanying the Notice of Conversion, and the date on which such conversion is to be effected, which date may not be prior
to the date the Holder delivers such Notice of Conversion and the applicable stock certificates to the corporation by overnight delivery
service (the "Conversion Date"). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be
the Trading Day immediately following the date that such Notice of Conversion and applicable stock certificates are received by the corporation.
The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. Shares
of Series A Preferred Stock converted into Common Stock in accordance with the terms hereof shall be canceled and may not be reissued.
The initial value of the Series A Preferred Stock on the Conversion Date shall be equal to $0.60 per share (as adjusted pursuant to Section
5A.7 or otherwise as provided herein, the "Conversion Value"). If the initial Conversion Value is adjusted pursuant to Section
5A.7 or as otherwise provided herein, the Conversion Ratio shall likewise be adjusted and the new Conversion Ratio shall equal the Liquidation
Value divided by the new Conversion Value. Thereafter, subject to any further adjustments in the Conversion Value, each share of Series
A Preferred Stock shall be initially convertible into that number of shares of Common Stock equal to the new Conversion Ratio.
5A.6.2
Automatic Conversions. Subject to Section 5A.5, all of the outstanding shares of Series A Preferred Stock shall be automatically converted
into the Conversion Shares upon the close of business on the business day immediately preceding the date fixed for consummation of any
transaction resulting in a Change of Control of the corporation (an "Automatic Conversion Event"). A "Change in Control"
means a consolidation or merger of the corporation with or into another company or entity in which the corporation is not the surviving
entity or the sale of all or substantially all of the assets of the corporation to another company or entity not controlled by the then
existing stockholders of the corporation in a transaction or series of transactions. The corporation shall not be obligated to issue
certificates evidencing the Conversion Shares unless certificates evidencing the shares of Series A Preferred Stock so converted are
either delivered to the corporation or its transfer agent or the holder notifies the corporation or its transfer agent in writing that
such certificates have been lost, stolen, or destroyed and executes an agreement satisfactory to the corporation to indemnify the corporation
from any loss incurred by it in connection therewith. Upon the conversion of the Series A Preferred Stock pursuant to this Section 5A.6.2,
the corporation shall promptly send written notice thereof, by hand delivery or by overnight delivery, to the holder of record of all
of the Series A Preferred Stock at its address then shown on the records of the corporation, which notice shall state that certificates
evidencing shares of Series A Preferred Stock must be surrendered at the office of the corporation (or of its transfer agent for the
Common Stock, if applicable).
AMENDED
BYLAWS
5A.6.3
Beneficial Ownership Limitation. Except as provided in Section 5A.6.2 above, the corporation shall not effect any conversion of the Series
A Preferred Stock, and the Holder shall not have the right to convert any portion of the Series A Preferred Stock to the extent that
after giving effect to such conversion, the Holder (together with the Holder's affiliates), as set forth on the applicable Notice of
Conversion, would beneficially own in excess of 4.9% of the number of shares of the Common Stock outstanding immediately after giving
effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder
and its affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock with respect
to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, nonconverted shares of Series A Preferred Stock beneficially owned by the Holder or any of its
affiliates, so long as such shares of Series A Preferred Stock are not convertible within sixty (60) days from the date of such determination,
and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the corporation (including the Warrants)
subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any
of its affiliates, so long as such other securities of the corporation are not exercisable nor convertible within sixty (60) days from
the date of such determination. For purposes of this Section 5A.6.3, in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of the following: (A) the corporation's
most recent quarterly reports, Form 10-Q, Form 10-QSB, Annual Reports, Form 10-K, or Form 10-KSB, as the case may be, as filed with the
Commission under the Exchange Act (B) a more recent public announcement by the corporation or (C) any other written notice by the corporation
or the corporation's transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request
of the Holder, the corporation shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect
to the conversion or exercise of securities of the corporation, including the Series A Preferred Stock, by the Holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock was publicly reported by the corporation. This Section 5A.6.3
may be waived or amended only with the consent of the Holders of all of the Series A Preferred Stock and the consent of the holders of
a majority of the shares of outstanding Common Stock of the corporation who are not Affiliates. For the purpose of the immediately preceding
sentence, the term "Affiliate" shall mean any person: (a) that directly or indirectly, through one or more intermediaries controls,
or is controlled by, or is under common control with the corporation, or (b) who beneficially owns (i) any shares of Series A Preferred
Stock, or (ii) the corporation's Common Stock Purchase Warrant(s) dated December 29, 2005. For purposes of this Section 5A.6.3, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.
AMENDED
BYLAWS
5A.6.4
Mechanics of Conversion.
(a)
Delivery of Certificate Upon Conversion. Except as otherwise set forth herein, not later than three Trading Days after each Conversion
Date (the "Share Delivery Date"), the corporation shall deliver to the Holder (A) a certificate or certificates which, after
the Effective Date, shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement)
representing the number of shares of Common Stock being acquired upon the conversion of shares of Series A Preferred Stock, and (B) a
bank check in the amount of accrued and unpaid dividends (if the corporation has elected or is required to pay accrued dividends in cash).
After the Effective Date, the corporation shall, upon request of the Holder, deliver any certificate or certificates required to be delivered
by the corporation under this Section electronically through the Depository Trust Corporation or another established clearing corporation
performing similar functions. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as
directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written
notice to the corporation at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion,
in which event the corporation shall immediately return the certificates representing the shares of Series A Preferred Stock tendered
for conversion.
AMENDED
BYLAWS
(b)
Obligation Absolute; Partial Liquidated Damages. The corporation's obligations to issue and deliver the Conversion Shares upon conversion
of Series A Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the corporation or any violation or alleged violation of law by the Holder
or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the corporation to the
Holder in connection with the issuance of such Conversion Shares. In the event a Holder shall elect to convert any or all of its Series
A Preferred Stock, the corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated
with the Holder of has been engaged in any violation of law, agreement or for any other reason unless an injunction from a court, on
notice, restraining and or enjoining conversion of all or part of this Series A Preferred Stock shall have been sought and obtained and
the corporation posts a surety bond for the benefit of the Holder in the amount of 150% of the Conversion Value of Series A Preferred
Stock outstanding, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation
of the dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of an injunction
precluding the same, the corporation shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the
corporation fails to deliver to the Holder such certificate or certificates pursuant to Section 5A.6.4(a) within two (2) Trading Days
of the Share Delivery Date applicable to such conversion, the corporation shall pay to such Holder, in cash, as liquidated damages and
not as a penalty, for each $5,000 of Conversion Value of Series A Preferred Stock being converted, $200 per Trading Day (increasing to
$400 per Trading Day after three (3) Trading Days and increasing to $800 per Trading Day six (6) Trading Days after such damages begin
to accrue) for each Trading Day after the Share Delivery Date until such certificates are delivered. Nothing herein shall limit a Holder's
right to pursue actual damages for the corporation's failure to deliver certificates representing shares of Common Stock upon conversion
within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or injunctive relief.
(c)
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. If the corporation fails to deliver to the Holder
such certificate or certificates pursuant to Section 5A.6.4(a) by a Share Delivery Date, and if after such Share Delivery Date the Holder
purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion
Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a "Buy-In"), then
the corporation shall pay in cash to the Holder the amount by which (x) the Holder's total purchase price (including brokerage commissions,
if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder
was entitled to receive from the conversion at issue multiplied by (2) the price at which the sell order giving rise to such purchase
obligation was executed. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted conversion of shares of Series A Preferred Stock with respect to which the aggregate sale price giving rise
to such purchase obligation is $10,000, under clause (A) of the immediately preceding sentence the corporation shall be required to pay
the Holder $1,000. The Holder shall provide the corporation written notice indicating the amounts payable to the Holder in respect of
the Buy-In, together with applicable confirmations and other evidence reasonably requested by the corporation. Nothing herein shall limit
a Holder's right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief with respect to the corporation's failure to timely deliver certificates representing
shares of Common Stock upon conversion of the shares of Series A Preferred Stock as required pursuant to the terms hereof.
AMENDED
BYLAWS
(d)
Reservation of Shares Issuable Upon Conversion. The corporation covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Series A Preferred Stock,
each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders,
not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the corporation as to reservation
of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5A.7)
upon the conversion of all outstanding shares of Series A Preferred Stock. The corporation covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Conversion
Shares Registration Statement is then effective under the Securities Act, registered for public sale in accordance with such Conversion
Shares Registration Statement.
(e)
Fractional Shares. Upon a conversion hereunder, the corporation shall not be required to issue stock certificates representing fractions
of shares of the Common Stock.
(f)
Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of the Series A Preferred Stock shall be made
without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the corporation shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares
of Series A Preferred Stock so converted and the corporation shall not be required to issue or deliver such certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the corporation the amount of such tax or shall have established
to the satisfaction of the corporation that such tax has been paid.
AMENDED
BYLAWS
5A.7
Certain Adjustments.
5A.7.1
Stock Dividends and Stock Splits. If the corporation, at any time while the Series A Preferred Stock is outstanding: (A) shall pay a
stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the
corporation pursuant to this Series A Preferred Stock), (B) subdivide outstanding shares of Common Stock into a larger number of shares,
(C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue
by reclassification of shares of the Common Stock any shares of capital stock of the corporation, then the Conversion Value shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this Section 5A.7.1 shall become effective immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
5A.7.2
Subsequent Equity Sales. From the date hereof until such time as no Purchaser holds any of the Securities, the corporation shall be prohibited
from effecting or entering into an agreement to effect any Subsequent Financing involving a "Variable Rate Transaction" or
an "MFN Transaction" (each as defined below). The term "Variable Rate Transaction" shall mean a transaction in which
the corporation issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include
the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based
upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of
such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly
related to the business of the corporation or the market for the Common Stock. The term "MFN Transaction" shall mean a transaction
in which the corporation issues or sells any securities in a capital raising transaction or series of related transactions which grants
to an investor the right to receive additional shares based upon future transactions of the corporation on terms more favorable than
those granted to such investor in such offering. Any Purchaser shall be entitled to obtain injunctive relief against the corporation
to preclude any such issuance, which remedy shall be in addition to any right to collect damages. Notwithstanding the foregoing, this
Section 5A.7.2 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction or MFN Transaction shall be
an Exempt Issuance.
5A.7.3
Subsequent Rights Offerings. The corporation, at any time while the Series A Preferred Stock is outstanding, shall not issue rights,
options or warrants to holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share
less than the Conversion Price.
AMENDED
BYLAWS
5A.7.4
Anti-Dilution Price Adjustment. From the date hereof until such time as the Holder holds less than 10% of the shares of Series A Preferred
Stock issued to the original Holder, the corporation closes on the sale (other than an Exempt Issuance) of a note or notes, shares of
Common Stock, or shares of any class of convertible preferred stock at a price per share of Common Stock, or with a conversion right
to acquire Common Stock at a price per share of Common Stock, that is less than the Conversion Value (as adjusted to the capitalization
per share as of the Closing Date, following any stock splits, stock dividends, or the like) (collectively, "Dilutive Issuance"),
the corporation shall make a post-Closing adjustment in the Conversion Value of the Series A Preferred Stock so that the effective price
per share paid by the Investor is reduced to a price determined by multiplying the current exercise price by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding immediately prior to such Dilutive Issuance plus the number of shares
of Common Stock which the aggregate consideration received by the corporation for the shares of Common Stock issuable in the Dilutive
Issuance would purchase at the current Conversion Value, and the denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Dilutive Issuance plus the number of additional shares of Common Stock to be issued in the Dilutive Issuance.
For the purposes of the foregoing calculation, the number of shares of Common Stock outstanding immediately prior to such Dilutive Issuance
shall be determined on a fully diluted basis as if, immediately prior to the Dilutive Issuance, all convertible securities issued by
the corporation (including the Series A Preferred Stock) had been fully converted into shares of Common Stock and all outstanding warrants,
options or other rights for the purchase of shares of Common Stock or convertible securities had been fully exercised and converted (and
the resulting securities fully converted into shares of Common Stock, if so convertible). Such reduction of the Conversion Value shall
be made at the time such Dilutive Issuance is executed.
5A.7.5
Waiver of Anti-Dilution Adjustment. Notwithstanding anything herein to the contrary, the operation of, and any adjustment of the Series
A Conversion Value Price pursuant to this Section 5A.7.5 may be waived with respect to any specific share or shares of Series A Preferred
Stock, either prospectively or retroactively and either generally or in a particular instance by a writing executed by the registered
Holder of such share or shares. Any waiver pursuant to this Section 5A.7.5 shall bind all future Holders of such shares of Series A Preferred
Stock for which such rights have been waived.
5A.7.6
Adjustment Based on EBITDA. In the event the corporation's EBITDA is less than $4.5 million for the audited fiscal year ended March 31,
2007 as reported to the Commission on Form 10-KSB (where "EBITDA" means earnings before interest, tax, depreciation and amortization
as reported from continuing operations before any non-recurring items), then the Conversion Value shall be reduced proportionately by
the same percentage as the percentage decline below the $4.5 million EBITDA target, subject to a maximum reduction of 71.43% if the EBITDA
is $1,285,714 or less. For example, if the corporation earns $3.6 million, or 20% below $4.5 million, then the Conversion Value shall
be reduced by 20%. Such reduction shall be made at the time the March 31, 2007 financial results are reported and shall be made from
the starting Conversion Value, and shall be cumulative upon any other changes to the Conversion Value that may already have been made.
However, the Conversion Value shall not in any circumstance be dropped below $0.1714 per share.
AMENDED
BYLAWS
5A.7.7
Pro Rata Distributions. If the corporation, at any time while Series A Preferred Stock is outstanding, shall distribute to all holders
of Common Stock (and not to Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security,
then in each such case the Conversion Value shall be determined by multiplying such Conversion Value in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall
be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less
the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall
be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
5A.7.8
Calculations. All calculations under this Section 5A.7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case
may be. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account
of the corporation, and the description of any such shares of Common Stock shall be considered on issue or sale of Common Stock. For
purposes of this Section 5A.7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding treasury shares, if any) actually issued and outstanding.
5A.7.9
Notice to Holders.
(a)
Adjustment to Conversion Price. Whenever the Conversion Value is adjusted pursuant to any of Section 5A.7, the corporation shall promptly
mail to each Holder a notice setting forth the Conversion Value after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the corporation issues a variable rate security, despite the prohibition thereon in the Purchase Agreement,
the corporation shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement),
or the lowest possible adjustment price in the case of an MFN Transaction (as defined in the Purchase Agreement).
AMENDED
BYLAWS
(b)
Notices of Other Events. If (A) the corporation shall declare a dividend (or any other distribution) on the Common Stock; (B) the corporation
shall declare a redemption of the Common Stock; (C) the corporation shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders
of the corporation shall be required in connection with any reclassification of the Common Stock or any Fundamental Transaction, (E)
the corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the corporation;
then in each case, the corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of the Series
A Preferred Stock, and shall cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the
corporation, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record
is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such reclassification is expected to become effective or close, and
the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification or Fundamental Transaction; provided, that the failure
to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to
be specified in such notice.
(c)
Exempt Issuance. Notwithstanding the foregoing, no adjustment will be made under this Section 5A.7 in respect of an Exempt Issuance.
(d)
Fundamental Transaction. If, at any time while this Series A Preferred Stock is outstanding, (A) the corporation effects any merger or
consolidation of the corporation with or into another Person, (B) the corporation effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the corporation or another Person)
is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or
property, or (D) the corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which
the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental
Transaction"), then upon any subsequent conversion of this Series A Preferred Stock, the Holder shall have the right to receive,
for each Conversion Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount
of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had
been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the "Alternate Consideration").
For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction,
and the corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any conversion of this Series A Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the corporation or surviving entity in such Fundamental Transaction shall file a new Certificate
of Designations with the same terms and conditions and issue to the Holder new preferred stock consistent with the foregoing provisions
and evidencing the Holder's right to convert such preferred stock into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions
of this Section 5A.7.9(d) and insuring that this Series A Preferred Stock (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
AMENDED
BYLAWS
5A.8
Miscellaneous.
5A.8.1
Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier
service, addressed to the corporation, at the address provided in the Purchase Agreement, facsimile number (208) 344-1321 Attn: President,
or such other address or facsimile number as the corporation may specify for such purposes by notice to the Holders delivered in accordance
with this Section. Any and all notices or other communications or deliveries to be provided by the corporation hereunder shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service addressed to each Holder at
the facsimile telephone number or address of such Holder appearing on the books of the corporation, or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to 5:30 p.m. (New York City time), (ii) the date after the
date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this
Section later than 5:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the
second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given.
AMENDED
BYLAWS
5A.8.2
Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation
of the corporation, which is absolute and unconditional, to pay the liquidated damages (if any) on, the shares of Series A Preferred
Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
5A.8.3
Lost or Mutilated Preferred Stock Certificate. If a Holder's Series A Preferred Stock certificate shall be mutilated, lost, stolen or
destroyed, the corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate,
or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series A Preferred
Stock so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such certificate,
and of the ownership thereof, and indemnity, if requested, all reasonably satisfactory to the corporation. 5A.8.4 Next Business Day.
Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
Article
6
To
the fullest extent permitted by law, this corporation shall have the power to indemnify any person and to advance expenses incurred or
to be incurred by such person in defending a civil, criminal, administrative or investigative action, suit or proceeding threatened or
commenced by reason of the fact said person is or was a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer employee or agent of another corporation, partnership, joint venture, trust
or other enterprise. Any such indemnification or advancement of expenses shall not be deemed exclusive of any other rights to which such
person may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors of otherwise, both as to action in
such person's official capacity and as to action in another capacity while holding such office. Any indemnification or advancement of
expenses so granted or paid by the corporation shall, unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs and personal representative of
such a person.
No
director shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty except (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; (iii) for liability imposed for failure to comply with the applicable legal
standard of conduct for a director in any of the circumstances described in Section 30-1-48, Idaho Code; or (iv) for any transaction
from which the director derives an improper personal benefit.
AMENDED
BYLAWS
Article
7
The
name and address of the incorporator is as follows:
Name |
Address |
|
|
Donald
J. Farley |
702
W. Idaho Street, Suite 700 |
|
Boise,
Idaho 83702 |
DATED
this 2nd day of October, 2006.
![](https://www.sec.gov/Archives/edgar/data/1122020/000149315223041418/form10-12ga_004.jpg)
AMENDED
BYLAWS
Exhibit 3.2
PCS Edventures!, Inc.
ARTICLES
OF AMENDMENT TO SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
PCS
EDVENTURES!.COM, INC.
Pursuant
to Section 30-1-1006 of the Idaho Business Corporation Act (the “Act”), the undersigned Corporation, effective April 4, 2012
(the “Effective Date”) adopts the following amendment to the Corporation’s Second Amended and Restated Articles of
Incorporation.
ARTICLE
5
5.1
COMMON STOCK. This Corporation is authorized to issue two (2) classes of stock designated, respectively, “Preferred Stock”
and “Common Stock.” This Corporation is authorized to issue a total of One Hundred Ten Million (110,000,000) shares (without
par value) consisting of Twenty Million (20,000,000) shares of Preferred Stock, and Ninety Million (90,000,000) shares of Common Stock.
Each outstanding share of Common Stock shall be entitled to one (1) vote on each matter submitted to a vote in a meeting of Shareholders.
Votes may not be cumulative. Holders of Common Stock shall have no preemptive rights.
All
other provisions of the Corporation’s Second Amended and Restated Articles of Incorporation remain in effect and are not amended
hereby.
The
undersigned certifies that the foregoing Amendment was approved by the Shareholders of the Corporation by vote at a Special Meeting of
Shareholders on April 4, 2012 in the manner required by the Idaho Business Corporation Act and by the Second Amended and Restated Articles
of Incorporation of PCS Edventures!.Com, Inc.
DATED
this 4th day of April, 2012.
|
/s/
Robert Grover |
|
Robert
Grover |
|
Chief
Executive Officer |
AMENDED
BYLAWS
Exhibit 3.3
PCS Edventures!, Inc.
ARTICLES
OF AMENDMENT TO SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
PCS
EDVENTURES!. INC.
Pursuant
to Section 30-1-1006 of the Idaho Business Corporation Act (the “Act”), the undersigned Corporation, effective April 4, 2012
(the “Effective Date”) adopts the following amendment to the Corporation’s Second Amended and Restated Articles of
Incorporation.
ARTICLE
1
The
name of the corporation is PCS Edventures!, Inc. and its duration shall be perpetual.
All
other provisions of the Corporation’s Second Amended and Restated Articles of Incorporation remain in effect and are not amended
hereby.
The
undersigned certifies that the foregoing Amendment was approved by the Shareholders of the Corporation by vote at a Special Meeting of
Shareholders on September 25, 2014 in the manner required by the Idaho Business Corporation Act and by the Second Amended and Restated
Articles of Incorporation of PCS Edventures!, Inc.
DATED
this 25th day of September, 2014.
|
/s/
Robert Grover |
|
Robert
Grover |
|
Chief
Executive Officer |
AMENDED
BYLAWS
Exhibit 3.4
PCS Edventures!, Inc.
ARTICLES
OF AMENDMENT TO SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
PCS
EDVENTURES!. INC.
Pursuant
to Section 30-1-1006 of the Idaho Business Corporation Act (the “Act”), the undersigned Corporation, effective April 4, 2012
(the “Effective Date”) adopts the following amendment to the Corporation’s Second Amended and Restated Articles of
Incorporation.
ARTICLE
5
5.1
COMMON STOCK. This Corporation is authorized to issue two (2) classes of stock designated, respectively, “Preferred Stock”
and “Common Stock.” This Corporation is authorized to issue a total of One Hundred Twenty Million (120,000,000) shares (without
par value) consisting of Twenty Million (20,000,000) shares of Preferred Stock, and One Hundred Million (100,000,000) shares of Common
Stock. Each outstanding share of Common Stock shall be entitled to one (1) vote on each matter submitted to a vote in a meeting of Shareholders.
Votes may not be cumulative. Holders of Common Stock shall have no preemptive rights.
All
other provisions of the Corporation’s Second Amended and Restated Articles of Incorporation remain in effect and are not amended
hereby.
The
undersigned certifies that the foregoing Amendment was approved by the Shareholders of the Corporation by vote at a Special Meeting of
Shareholders on September 25, 2015 in the manner required by the Idaho Business Corporation Act and by the Second Amended and Restated
Articles of Incorporation of PCS Edventures!.Com, Inc.
DATED
this 25th day of September, 2015.
|
/s/
Michael Bledsoe |
|
Michael
Bledsoe |
|
Vice
President and Treasurer |
AMENDED
BYLAWS
Exhibit 3.5
PCS Edventures!, Inc.
ARTICLES
OF AMENDMENT TO SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
PCS
EDVENTURES!. INC.
Pursuant
to Section 30-1-1006 of the Idaho Business Corporation Act (the “Act”), the undersigned Corporation, effective April 4, 2012
(the “Effective Date”) adopts the following amendment to the Corporation’s Second Amended and Restated Articles of
Incorporation.
ARTICLE
5
5.1
COMMON STOCK. This Corporation is authorized to issue two (2) classes of stock designated, respectively, “Preferred Stock”
and “Common Stock.” This Corporation is authorized to issue a total of One Hundred Seventy Million (170,000,000) shares (without
par value) consisting of Twenty Million (20,000,000) shares of Preferred Stock, and One Hundred Fifty Million (150,000,000) shares of
Common Stock. Each outstanding share of Common Stock shall be entitled to one (1) vote on each matter submitted to a vote in a meeting
of Shareholders. Votes may not be cumulative. Holders of Common Stock shall have no preemptive rights.
All
other provisions of the Corporation’s Second Amended and Restated Articles of Incorporation remain in effect and are not amended
hereby.
The
undersigned certifies that the foregoing Amendment was approved by the Shareholders of the Corporation by vote at a Special Meeting of
Shareholders on September 23, 2016 in the manner required by the Idaho Business Corporation Act and by the Second Amended and Restated
Articles of Incorporation of PCS Edventures!.Com, Inc.
DATED
this 23th day of September, 2016.
|
/s/
Michael Bledsoe |
|
Michael
Bledsoe |
|
Vice
President and Treasurer |
AMENDED
BYLAWS
Exhibit 3.6
PCS Edventures!, Inc.
THIRD
AMENDED BYLAWS
OF
PCS
EDVENTURES!.COM, INC.
ARTICLE
I
Offices
The
principal office of the Corporation in the State of Idaho shall be located in the City of Boise, County of Ada. The Corporation may have
such other offices as the Board of Directors may designate.
The
registered office of the Corporation in the State of Idaho, as required by the Idaho Business Corporation Act, may, but need not, be
identical with the principal office in the State of Idaho. The address of the registered office may be changed from time to time by the
Board of Directors.
ARTICLE
II
Shareholders
Section
1. Annual Meeting. The annual meeting of the shareholders shall be held between June 15 and September 30 of each year for
the purpose of electing directors and for the transaction of such other business as may come before the meeting.
Section
2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute
or the Corporation's Articles of Incorporation, may be called by the President or by the Board of Directors. The President shall call
a special meeting at the request of the holders of not less than one-fifth (1/5) of all outstanding shares of the Corporation entitled
to vote at the meeting.
Section
3. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Idaho, as the place
of meeting for the annual meeting or for any special meeting. A waiver of notice signed by all shareholders entitled to vote at a meeting
may designate any place, either within or without the State of Idaho, as the place for the holding of such meeting. If no designation
is made, the place of meeting shall be the principal office of the Corporation in the State of Idaho.
AMENDED
BYLAWS
Section
4. Notice of Meeting. Written notice stating the place, day and time of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall, unless otherwise prescribed by statute, be delivered not less than 10 or more
than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the President or the Secretary or
the officer or other persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at the shareholder's address as
it appears on the stock transfer books of the Corporation, or at such other last known address of which the Corporation may have notice,
with postage thereon prepaid.
Section
5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or
to vote at any meeting of shareholders, or any adjournment thereof, or shareholders entitled to receive payment of any dividend or in
order to make a determination of shareholders for any other proper purpose, the Board of Directors of the Corporation may provide that
the stock transfer books shall be closed for a stated period but not to exceed, in any case, 50 days. If the stock transfer books shall
be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 50
days and, in case of a meeting of shareholders, not less than 10 days prior to the date of which the particular action requiring such
determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive a dividend, the date
on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted,
as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.
Section
6. Voting Record. The officer or agent having charge of the stock transfer books for shares of the Corporation shall have
available a complete record of the shareholders entitled to vote at each meeting of shareholders, or any adjournment thereof. Such record
shall be produced and kept open at the meeting and shall be subject to the inspection of any shareholder during the meeting.
Section
7. Quorum. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy at
a meeting, shall constitute a quorum at a meeting of shareholders. The shareholders present at a duly organized and convened meeting
where a quorum has been present can continue to do business as a quorum until adjournment, notwithstanding the withdrawal of enough shareholders
to leave less than a quorum. If a quorum is present, action on any matter (other than election of directors) is approved if the votes
cast in favor of the action exceed votes cast in opposition to the matter, unless the vote of the greater number of voting by classes
is required by these Bylaws or the Articles of Incorporation.
AMENDED
BYLAWS
Section
8. Proxies. At all meetings of shareholders, a shareholder may vote in person or by properly executed written proxy. Such
proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after 11 months
from the date of its execution unless otherwise provided in the proxy.
Section
9. Voting of Shares. Subject to the provisions of Section 12 of this Article II, each outstanding share entitled to vote shall
be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders.
Section
10. Voting of Shares by Certain Holders. Shares standing in the name of another Corporation may be voted by such officer,
agent or proxy as the Bylaws of such Corporation may prescribe or, in the absence of such provision, as the Board of Directors of such
other corporation may determine.
Shares
held by a personal representative, guardian or conservator may be voted by such personal representative, guardian or conservator, either
in person or by proxy, without a transfer of such shares into the name of such personal representative, guardian or conservator. Shares
standing in the name of a trustee may be voted by such trustee, either in person or by proxy, but no trustee shall be entitled to vote
shares held by such trustee without a transfer of such shares into the trustee's name.
Shares
standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted
by such receiver without the transfer thereof into the receiver's name if authority so to do be contained in an appropriate order of
the court by which such receiver was appointed.
A
shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither
treasury shares held by this Corporation nor shares held by another corporation, if a majority of the voting shares of such other corporation
are held by this Corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given
time for purposes of any meeting.
Section
11. Informal Action by Shareholders. Any action required or permitted to be taken at a meeting of the shareholders may be
taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
AMENDED
BYLAWS
Section
12. Voting. Each outstanding share, regardless of class, shall be entitled to one (1) vote on each matter submitted to a vote
at a meeting of shareholders. The affirmative vote of the majority of shares represented at a meeting at which a quorum is present shall
be the act of the shareholders.
ARTICLE
III
Board
of Directors
Section
1. General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors.
Section
2. Number, Tenure and Qualifications. The number of directors of the Corporation shall not be less than one (1) nor more than
nine (9), which number may be increased from time to time by resolution of the Board of Directors. Each director shall hold office until
the next annual meeting of shareholders and until the director's successor shall have been elected and qualified. Directors need not
be residents of the State of Idaho or shareholders of the Corporation.
Section
3. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and
place, either within or without the State of Idaho, for the holding of additional regular meetings without other notice than such resolution.
Any meetings of the Board may be conducted by telephone conferencing, or any other telecommunication means.
Section
4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the President or by
a majority of the directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either
within or without the State of Idaho, as the place for holding any special meeting of the Board of Directors called by them or such meeting
may be held by conference telephone call.
Section
5. Notice. Notice of any special meeting shall be given at least three days prior thereto by written notice delivered personally
or mailed to each director at the director's business address or by telegram. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The
attendance of a director at a meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice
or waiver of notice of such meeting.
AMENDED
BYLAWS
Section
6. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors; but if less than such majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without further notice.
Section
7. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
Section
8. Action Without a Meeting. Any action required or permitted to be taken by the Board of Directors at a meeting may be taken
without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the directors.
Section
9. Vacancies. Any vacancy occurring on the Board of Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired
term of such director's predecessor in office. Any additional director required by reason of an increase in the number of directors may
be elected by the Board of Directors, such additional director to serve only until the next election of directors by the shareholders.
Section
10. Compensation. By resolution of the Board of Directors, each director may be paid expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board
of Directors, or both. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation
therefor.
Section
11. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors at which action
on any corporate matter is taken shall be presumed to have assented to the action taken unless such director's dissent shall be entered
in the minutes of the meeting or unless the director shall file a written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.
AMENDED
BYLAWS
ARTICLE
IV
Officers
Section
1. Number. The officers of the Corporation shall be a President, one or more Vice-Presidents, as determined by the Board of
Directors, a Secretary and a Treasurer. The Board of Directors may elect or appoint such other officers and assistant officers as it
may deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. Officers need
not be directors.
Section
2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at the
meeting held after each annual meeting of the shareholders. Each officer shall hold office until such officer's successor shall have
been elected and qualified or until such officer's death, resignation or removal in the manner hereinafter provided.
Section
3. Removal. Any officer or agent may be removed by the Board of Directors whenever, in its judgment, the best interest of
the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointments of an officer or agent shall not of itself create contract rights.
Section
4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise may be filled
by the Board of Directors for the unexpired portion of the term.
Section
5. Duties. The duties and powers of the corporate officers, in addition to those herein provided, may be fixed and determined
by the Board of Directors.
Section
6. President. The President shall be the principal executive officer of the Corporation; the President shall preside over
all meetings of the stockholders and of the directors. The President shall sign as President all certificates of stock and all contracts,
deeds, conveyances and other instruments necessary to the transaction of the business of the Corporation that are authorized by the Board
of Directors, provided the Board of Directors, by resolution, may authorize some person other than the President to execute instruments
on behalf of the Corporation.
The
President shall call special meetings of the Board of Directors when the President may deem it necessary and must call a special meeting
of the directors upon the request of a majority of the members thereof; and the President shall have, subject to the control of the Board
of Directors, general direction of the affairs of the Corporation and shall discharge such other and further duties as may be required
of the President by the Board of Directors in the proper conduct of the business of the Corporation.
Section
7. Vice-Presidents. In the absence of the President, or in the event of the President's inability or refusal to act, the Vice-Presidents,
in the order designated at the time of their election, shall perform the duties of the President and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the President.
AMENDED
BYLAWS
Section
8. Secretary. It shall be the duty of the Secretary to cause a record to be kept of the proceedings of the Board of Directors
and of all meetings of the shareholders; the Secretary shall be responsible for the corporate seal and the book of blank certificates
of stock and shall cause the stock certificates to be issued and shall countersign the same and cause the corresponding entries to be
made on the margin of said stock book of such issue; the Secretary shall affix the corporate seal and may countersign all contracts,
deeds, conveyances and all other instruments and obligations in writing, of whatever kind or nature, authorized by the Board of Directors
to be entered into and executed by the Corporation; the Secretary shall cause to be kept a proper transfer book and a stock ledger showing
the number of shares issued to and transferred by each shareholder and the date of such issuance and transfer; the Secretary shall keep
a register of the post office address of each shareholder furnished to the Secretary by such shareholder; and the Secretary shall further
do and perform each and every duty pertaining to the Secretary's office as required by law, the Bylaws of this Corporation or resolution
of the Board of Directors; and in case of the Secretary's absence, inability or refusal to act, all the Secretary's duties shall be performed
by an Assistant Secretary or an acting Secretary to be appointed by the President or by a Vice-President when performing the duties of
the President.
Section
9. Treasurer. The Treasurer shall have charge of and be responsible for all funds and securities of the Corporation, receive
and give receipts for monies due and payable to the Corporation from any source whatsoever and deposit all such monies in the name of
the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article
VI of these Bylaws and, in general, perform all of the duties incident to the office of Treasurer. If required by the Board of Directors,
the Treasurer shall give a bond for the faithful discharge of the Treasurer's duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
Section
10. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries, when authorized by the Board of Directors,
may sign, with the President certificates for shares of the Corporation, the issuance of which shall have been authorized by a resolution
of the Board of Directors. The Assistant Treasurers shall, respectively, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and
Assistant Treasurers in general, shall perform such duties as shall be assigned to them by the Secretary or the Treasurer, respectively,
or by the President or the Board of Directors.
Section
11 Salaries. The salaries of the officers shall be fixed by the Board of Directors, and no officer shall be prevented from receiving
such salary by reason of the fact that such officer is also a director of the Corporation.
AMENDED
BYLAWS
ARTICLE
V
Indemnification
Against Liability
To
the fullest extent permitted by law, this Corporation shall indemnify any person and to advance expenses incurred or to be incurred by
such person in defending a civil, criminal, administrative or investigative action, suit or proceeding threatened or commenced by reason
of the fact said person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise.
Any such indemnification or advancement of expenses shall not be deemed exclusive of any other rights to which such person may be entitled
under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office. Any indemnification or advancement of expenses so granted or
paid by the Corporation shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the heirs and personal representative of such a person.
AMENDED
BYLAWS
NOTES TO AUDITED FINANCIAL STATEMENTS
No
director shall be liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty except: For any breach
of the director's duty of loyalty to the Corporation or its shareholders; for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; for liability imposed for failure to comply with the applicable legal standard of conduct for
a director in any of the circumstances described in Section 30-1-48, Idaho Code; or for any transaction from which the director derives
an improper personal benefit.
ARTICLE
VI
Contracts,
Loans, Checks and Deposits
Section
1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to
specific instances.
Section
2. Loans. No loans shall be contracted on behalf of the Corporation, and no evidences of indebtedness shall be issued in its
name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.
Section
3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation and in such manner
as shall from time to time be determined by resolution of the Board of Directors.
Section
4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board of Directors may select.
ARTICLE
VII
Certificates
for Shares and Their Transfer
Section
1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined
by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or an Assistant Secretary and sealed
with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate
is manually signed on behalf of a transfer agent or a registrar other than the Corporation itself or one of its employees. Each certificate
for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled, and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe.
NOTES TO AUDITED FINANCIAL STATEMENTS
Section
2. Transfer of Shares. Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation
by the holder of record thereof or by the holder's legal representative or duly authorized attorney in fact, who shall furnish proper
evidence of authority to transfer, and on surrender for cancellation of the certificate for such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes.
ARTICLE
VIII
Dividends
The
Board of Directors may from time to time declare, and the Corporation may pay, dividends in cash, property or its own shares, except
when the Corporation is insolvent or when the payment thereof would render the Corporation insolvent, subject to the following provisions:
(a)
Dividends may be declared and paid in cash or property only out of the unreserved and unrestricted earned surplus of the
Corporation, except as otherwise provided in this section.
(b)
Dividends may be declared and paid in treasury shares.
(c)
Dividends may be declared and paid in authorized but unissued shares out of any unreserved and unrestricted surplus of the
Corporation only as provided by law.
ARTICLE
IX
Corporate
Seal
The
Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the Corporation,
the state of incorporation and the words "Corporate Seal."
ARTICLE X
Waiver
of Notice
Whenever
any notice is required to be given to any shareholder or director of the Corporation under the provisions of these Bylaws or under the
provisions of the Idaho Business Corporation Act, a waiver thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
NOTES TO AUDITED FINANCIAL STATEMENTS
ARTICLE XI
Amendments
The
Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by the shareholders at any regular
or special meeting.
I,
the undersigned, a member of the Board of Directors of PCS EDVENTURES!.COM, INC., and the Secretary of the Corporation, hereby certify
the above and foregoing Amended Bylaws as the Amended Bylaws of the Corporation, duly adopted and amended by the Board of Directors on
or about April 28, 2004.
DATED
at Boise, Idaho, this 29th day of August 2006.
|
/s/ Donald J. Farley |
|
Donald J. Farley, Secretary |
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