PCSV PCS Edventures Com Inc (PK)

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 (the “Company,” “PCS,” “PCSV,” “we,” “our,” “us” or similar words), incorporated in 1994, in the State of Idaho. PCS specializes in experiential, hands-on, K12 education and drone technology. PCS has extensive experience and intellectual property (IP) that includes drone hardware, product designs, and K-12 curriculum content. PCS continually develops new educational products based upon market needs that the Company identifies through its sales and customer networks.

Our products facilitate STEM education by providing engaging activities that demonstrate STEM concepts and inspire further STEM studies, with the goal of ultimately leading students to pursue STEM career pathways. Due to our exceptionally detailed curriculum, our products are easy to teach and do not require a teaching degree or experience to administer.

Our educational products are developed from both in-house efforts and contracted services. They are marketed through reseller channels, direct sales efforts, partner networks, and web-based channels.

PCS has developed and sells a variety of STEM education products into the K12 market which can be categorized as follows:

These camps are for the informal learning market and are designed to be highly engaging for students while easily administered by the instructor. The Company offers approximately thirty (30) different enrichment programs and typically develops at least two (2) new programs each year. Some of the more popular programs include Ready, Set, Drone!; Traveling Artist; Unleash Your Wild Side, Build a Better World; Claymation; Oceanic Exploration; Pirate; and Flight and Aerodynamics.

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.

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.

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.

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.

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.

NOTE 2 – BUSINESS CONDITION

As of December 31, 2023, the Company had $2.0 million in cash, $1.8 million in inventory, and $0.9 million in prepaid inventory, with no debt. Management strongly believes that the Company can sustain its operations over the course of the next twelve (12) months with the cash it has on hand, and with the revenue and associated profit generated from the sales expected over the course of the next twelve (12) months, especially given the Company’s large inventory and prepaid inventory balances.

NOTE 3 – ACCOUNTS RECEIVABLE

In the Company’s normal course of business, the Company provides credit terms to its customers, which generally range from net fifteen (15) to thirty (30) days. The Company performs ongoing credit evaluations of its customers. The Company established an allowance for doubtful accounts of $18,469 at December 31, 2023, and March 31, 2023.

NOTE 4 – ACCOUNTS RECEIVABLE, OTHER RECEIVABLES

Other Receivables include receivables due to the Company derived from activities outside of its typical business transactions. As of December 31, 2023, these other receivables included overpayments to the Internal Revenue Service of payroll taxes in the amount of $44,570 and an $800 advance to an employee for a total of $45,370. As of March 31, 2023, these other receivables included an Employee Retention Tax Credit of $13,312, which was ultimately deemed uncollectable by the Company as of September 30, 2023.

NOTE 5 - PREPAID EXPENSES

NOTE 6 - COMMON AND PREFERRED STOCK TRANSACTIONS

The Company has 150,000,000 authorized shares of common stock, no par value. At December 31, 2023 the total common shares issued and outstanding was 124,733,494.

During the nine months ended December 31, 2023, the Company had no option expense.

During the nine months ended December 31, 2023, the Company did not issue shares of common stock.

During the nine months ended December 31, 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 December 31, 2023, and March 31, 2023, there were no preferred shares issued or outstanding.

NOTE 7 - NOTES PAYABLE

The Company had no notes payable outstanding as of December 31, 2023, and March 31, 2023.

NOTE 8 - 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 term of the lease.

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 nineteen and one-half (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 $80,020 and $79,093 for the nine months ended December 31, 2023, and 2022, respectively.

The Company leased a production printer for sixty-three (63) months commencing on November 3, 2023. The first three payments were deferred, with the first payment due February 3, 2024. Equipment lease expense was $28,596 for the nine months ended December 31, 2023, and $23,922 for the nine months ended December 31, 2022.

As of December 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 7 years

Supplemental cash flow information related to operating leases:

NOTE 9 – ACCOUNTS PAYABLE

NOTE 10 – PAYROLL LIABILITIES & ACCRUED EXPENSES

NOTE 11 – INCOME TAXES

For the three and nine months ended December 31, 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 nine month period ended December 31, 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 nine months ended December 31, 2023, and the effective tax rate is 0.00%. For the three and nine months ended December 31, 2023, 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 December 31, 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 December 31, 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 12 - DILUTIVE INSTRUMENTS

Stock Options and Warrants

As of December 31, 2023, and March 31, 2023, the Company had no dilutive instruments outstanding.

NOTE 13 - 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.

From April 1, 2013 to March 31, 2017, the Company executed related party promissory notes with the Chairman and CEO of the Company, Todd R. Hackett, for $1,292,679, $175,000, and $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 ended March 31, 2020 totaled $142,210. Principal payments were made totaling $245,000 for an ended 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 to Mr. Hackett.

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 J. 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 this promissory note in full to Mr. Bledsoe.

NOTE 14 - SUBSEQUENT EVENTS

At the time of the filing of this Quarterly Report, there were no subsequent events to report.