<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
___________
Commission File Number: 000-27693
PCSupport.com, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 98-0211769
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 280, 4400 Dominion Street V5G 4G3
Burnaby, British Columbia, Canada (Zip Code)
(Address of principal executive
offices)
Issuer's Telephone Number: (604) 419-4490
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [ ] NO [X]
There were 6,425,569 shares of the Company's common stock outstanding on
February 11, 2000.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS......................................... 1
ITEM 2 - PLAN OF OPERATION............................................ 8
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS............................................ 11
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.................... 11
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.............................. 11
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......... 12
ITEM 5 - OTHER INFORMATION............................................ 12
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K............................. 12
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
------------- -----------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 381,277 $ 795,809
Accounts receivable 31,264 14,728
Prepaid expenses - 33,950
Deposits and advances 22,846 49,256
----------- ----------
Total current assets 435,387 893,743
Property and equipment 149,407 11,210
Intangible asset 2,162 2,697
----------- ----------
$ 586,956 $ 907,650
=========== ==========
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities:
Accounts payable and accrued liabilities $ 300,564 $ 68,266
Promissory notes (notes 3 and 5(a)) 500,000 -
----------- ----------
Total current liabilities 800,564 68,266
Stockholders' equity (deficiency) (note 4):
Common stock, $0.001 par value, authorized 100,000,000 shares;
issued 6,075,569 shares at December 31 and 6,007,169
shares at June 30, 1999 6,076 6,007
Additional paid-in capital 2,216,283 1,981,782
Deferred stock compensation (122,533) (198,909)
Treasury stock, 285,000 shares in 1999 - -
Deficit accumulated during the development stage (2,313,434) (949,496)
----------- ----------
Total stockholders' equity (deficiency) (213,608) 839,384
----------- ----------
$ 586,956 $ 907,650
=========== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
1
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
December 10,
1997
Six months ended Three months ended (inception) to
December 31, December 31, December 31,
1999 1998 1999 1998 1999
----------------------------- ----------------------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenue $ 2,320 $ - $ 1,614 $ - 2,419
Cost of services 2,132 - 1,422 - 2,218
----------- ---------- ---------- ---------- -----------
Gross profit 188 - 192 - 201
Operating expenses:
Research and development 382,849 6,542 157,628 4,892 403,309
Marketing and promotion 363,034 6,825 136,221 5,175 961,055
General and administrative 626,227 65,690 407,952 30,012 950,742
----------- ---------- ---------- ---------- -----------
1,372,110 79,057 701,801 40,079 2,315,106
----------- ---------- ---------- ---------- -----------
Loss from operations (1,371,922) (79,057) (701,609) (40,079) (2,314,905)
Interest income (expense),
net 7,984 27 131 27 1,471
----------- ---------- ---------- ---------- -----------
Loss for the period $(1,363,938) $ (79,030) $ (701,478) $ (40,052) $(2,313,434)
=========== ========== ========== ========== ===========
Net loss per common share,
basic and diluted $ (0.23) $ (0.08) $ (0.12) $ (0.04) $ (0.91)
=========== ========== ========== ========== ===========
Weighted average common
shares outstanding,
basic and diluted 6,052,770 1,000,000 6,075,569 1,000,000 2,535,638
=========== ========== ========== ========== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
2
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Statements of Stockholders' Equity
(Unaudited)
(Expressed in U.S. Dollars)
Six months ended December 31, 1999
Period from December 10, 1997 (inception) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional Deferred During Total
Common Shares Paid-in Stock Development Treasury Stock Stockholders'
------------------- -----------------
Shares Amount Capital Compensation Stage Shares Amount Equity
------ ------ ----------- ------------- ------------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 10, 1997
(inception) 200 $ - $ - $ - $ - - $ - $ -
Issuance of common stock
for compensation
in January, valued at
$0.13 per share 489,800 490 65,157 - - - - 65,647
Sale of common stock in
January, $0.13 per share 510,000 510 67,642 - - - - 68,152
Net loss - - - - (182,294) - - (182,294)
--------- ------ ---------- ------------ ----------- ---------- ------ ----------
Balance, June 30, 1998 1,000,000 1,000 132,799 - (182,294) - - (48,495)
Fair value of common stock
purchase warrants
granted to creditor - - 8,407 - - - - 8,407
Sale of common stock in
January, $0.85 per share,
net of issuance costs of
$131,708 291,838 292 116,062 - - - - 116,354
Issuance of common stock
for services in January
and May, valued at
approximately $0.85 per
share 52,848 53 45,101 - - - - 45,154
Conversion of note payable
to common stock 66,029 66 109,977 - - - - 110,043
Issuance of common stock
for services in January 63,440 63 53,861 - - - - 53,924
Issuance of common stock
for services in April 1,500,000 1,500 777,620 (392,356) - - - 386,764
Amortization of deferred
stock compensation - - - 45,247 - - - 45,247
Issuance of common stock
for acquisition in June,
net of acquisition costs
of $46,753 3,033,014 3,033 886,155 - - - - 889,188
Treasury stock repurchased
by Company in June, at
cost - - (148,200) 148,200 - (285,000) - -
Net loss - - - - (767,202) - - (767,202)
--------- ------ ---------- ------------ ----------- ---------- ------ ----------
Balance, June 30, 1999 6,007,169 6,007 1,981,782 (198,909) (949,496) (285,000) - 839,384
Exercise of warrants in
July 68,400 69 58,197 - - - - 58,266
Fair value of options
issued to employees and
consultants - - 176,235 - - - - 176,235
Amortization of deferred
stock compensation - - - 76,376 - - - 76,376
Net loss - - - - (1,363,869) - - (1,363,869)
--------- ------ ---------- ------------ ----------- ---------- ------ ----------
Balance, December 31, 1999 6,075,569 $6,076 $2,216,214 $(122,533) $(2,313,365) $(285,000) $ - $ (213,608)
========= ====== ========== ============ =========== ========== ====== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
December 10, 1997
Six months ended (inception) to
December 31, December 31,
1999 1998 1999
---------------------------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $(1,363,869) $(79,030) $(2,313,365)
Items not affecting cash:
Depreciation and amortization 16,652 1,230 22,608
Stock options issued to employees
and consultants 176,235 - 176,235
Common stock issued in exchange
for services - - 506,591
Amortization of deferred stock
compensation 76,376 - 121,623
Discount on notes payable - - 8,407
Changes in operating assets and liabilities:
Accounts receivable (16,536) (4,119) (31,264)
Prepaid expenses 33,950 - -
Deposits and advances 26,410 242 (22,846)
Accounts payable and accrued liabilities 232,298 55,537 300,564
----------- -------- -----------
Net cash used in operating activities (818,484) (26,140) (1,231,447)
----------- -------- -----------
Cash flows from investing activities:
Purchase of property and equipment (154,314) - (170,691)
Purchase of intangible asset - - (3,486)
----------- -------- -----------
Net cash used in investing activities (154,314) - (174,177)
----------- -------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable - 15,777 110,043
Proceeds from issuance of bridge loan - 17,088 17,088
Repayment of bridge loan - - (17,088)
Cash acquired in acquisition - - 888,932
Proceeds from promissory notes 500,000 - 500,000
Proceeds from exercise of share
purchase warrants 58,266 - 58,266
Net proceeds from sale of common stock - - 229,660
----------- -------- -----------
Net cash provided by financing activities 558,266 32,865 1,786,901
----------- -------- -----------
Net increase (decrease) in cash and cash
equivalents (414,532) 6,725 381,277
Cash and cash equivalents at beginning of period 795,809 - -
----------- -------- -----------
Cash and cash equivalents at end of period $ 381,277 $ 6,725 $ 381,277
=========== ======== ===========
Supplemental disclosure of non-cash financing activities:
Notes payable converted into common stock $ - $ - $ 110,043
Deferred stock compensation - - 198,909
Income taxes paid - - -
Interest paid - - -
=========== ======== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Six months ended December 31, 1999
Period from December 10, 1997 (inception) to December 31, 1999
_______________________________________________________________________________
1. Nature of development stage activities:
These interim consolidated financial statements have been prepared on a
going concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, discussed below,
currently exist which raise substantial doubt upon the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company's future operations are dependent upon the market's acceptance
of its services and the Company's ability to secure cost effective third
party license service supply agreements. There can be no assurance that the
Company's services will be able to secure market acceptance or that cost
effective license and service supply agreements will exist or continue to
exist. As of December 31, 1999, the Company is considered to be in the
development stage as the Company has not generated significant revenues, is
continuing to develop its business, and has experienced negative cash flow
from operations. Operations have primarily been financed through the
issuance of common stock and debt. The Company does not have sufficient
working capital to sustain operations until December 31, 2000. Additional
debt or equity financing will be required and may not be available on
reasonable terms or on any terms at all.
2. Basis of presentation:
(a) These interim consolidated financial statements have been prepared
using generally accepted accounting principles in the United States.
The interim financial statements include the accounts of the Company's
wholly-owned subsidiary, Reconnaissance International Ltd. and all
adjustments, consisting solely of normal recurring adjustments, which
in management's opinion are necessary for a fair presentation of the
financial results for the interim periods. The financial statements
have been prepared consistent with the accounting policies described
in the Company's Registration Statement on Form 10-SB filed with the
Securities and Exchange Commission, and should be read in conjunction
therewith. Certain comparative figures have been reclassified to
conform to the presentation adopted in the current period.
(b) Use of estimates:
The preparation of interim consolidated financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
reported revenues and expenses for the reporting periods. Actual
results may significantly differ from these estimates.
5
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 2
(Unaudited)
(Expressed in U.S. Dollars)
Six months ended December 31, 1999
Period from December 10, 1997 (inception) to December 31, 1999
________________________________________________________________________________
2. Basis of presentation (continued):
(c) Net loss per share:
Basic loss per share is computed using the weighted average number of
common stock outstanding during the periods. Diluted loss per share is
computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company
has a net loss in each of the periods presented, basic and diluted net
loss per share is the same.
Excluded from the computation of diluted loss per share for the six
months ended December 31, 1999 are warrants to purchase 243,438
(December 31, 1998- nil) shares of common stock and options to
purchase 647,950 (December 31, 1998 - nil) shares of common stock
because their effects would be anti-dilutive.
Excluded from the computation of diluted loss per share for the six
months ended December 31, 1998 are approximately 38,100 shares of
potential common stock resulting from the assumed conversion of
convertible notes payable because their effects would be anti-
dilutive.
3. Long-term liability:
(a) Promissory notes:
In November, 1999, the Company issued promissory notes to an investor
totaling $500,000 with interest payable monthly, not in advance, at a
rate of 10% per annum. Subsequent to December 31, 1999, these notes
were converted to equity (see Note 5.)
4. Stockholders' equity:
(a) Stock options and stock-based compensation:
During the three months ended December 31, 1999, the Company recorded
non-cash compensation expense of approximately $102,000 related to the
issuance of options to purchase shares of common stock to employees
and consultants. The options have exercise prices ranging from $1.00
to $2.00 and have a vesting period ranging from immediate up to 36
months.
5. Subsequent events:
(a) Conversion of promissory notes:
On January 11, 2000, promissory notes totalling $500,000 were
converted into 350,000 common shares of the Company and warrants to
purchase 240,000 common shares at a price of $1.40 for a period of two
years.
6
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 3
(Unaudited)
(Expressed in U.S. Dollars)
Six months ended December 31, 1999
Period from December 10, 1997 (inception) to December 31, 1999
________________________________________________________________________________
5. Subsequent events (continued):
(b) Revolving debt facility:
On January 11, 2000, the Company obtained a $1,000,000 revolving debt
facility. Draw-downs are subject to the Company's satisfying certain
conditions, including the condition that, in order to draw-down any
amount, the Company must have secured at least one commercial
transaction through certain third parties, on terms sufficient, in the
sole opinion of the lender, to allow the Company to repay the amount
drawn under the facility. The Company is required to issue a total of
1,500,000 warrants upon its initial draw under the facility. These
warrants consist of 1,000,000 "A" warrants, with an exercise price of
$1.05, and 500,000 "B" warrants, with an exercise price of $2.00.
Draw-downs under this facility bear interest at 11% per annum, are
payable monthly, and are secured by substantially all of the assets of
the Company. As at February 4, 2000, no funds had been drawn against
this facility.
6. Uncertainty due to the Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. To date, the Company has not
experienced any problems relating to the Year 2000 Issue. However, it is
not possible to be certain that all aspects of the Year 2000 Issue
affecting the entity, including those related to the efforts of customers,
suppliers, or other third parties, have been fully resolved.
7
<PAGE>
ITEM 2 - PLAN OF OPERATION
All statements, other than statements of historical fact, included in
this Form 10-QSB, involve assumptions, known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, to be materially different from
any future results, performance or achievements expressed or implied by
such statements contained in this Form 10-QSB. Such potential risks and
uncertainties include, without limitation, the impact of competitive
products and pricing, the need to raise additional capital, uncertain
markets for the Company's products and services, the Company's dependence
on third parties and licensing/service supply agreements, and the ability
of competitors to license the same technologies the Company uses for the PC
Support Center or develop or license other functionally equivalent
technologies.
The following describes in general terms the Company's plan of
operation and development strategy for the next twelve-month period (the
"Next Year"). During the Next Year, the primary focus of the Company will
be to expand marketing efforts for its services, continue to enhance the PC
Support Center, and to develop and/or contract to provide the
infrastructure necessary to deliver its services to its subscribers and
customers.
a. Current Services
----------------
The Company currently offers three services. The Company's current
primary service, PC Support Center, is a Web-based support portal for PCs
which aggregates a number of support technologies, including software and
driver updates, hard disk maintenance, a technical support forum, and
others. Global Replace combines an on-line backup service for notebook and
desktop computers with three methods of restoring data in the event of a PC
failure. Phoenix allows a notebook user to transfer a full-image of all
data, applications, preferences and settings to a new notebook.
b. Cash Flow Requirements
----------------------
In November 1999, the Company secured $500,000 in debt financing from
a private investor. In January 2000, all of the investor's outstanding debt
was converted into 350,000 shares of the Company's Common Stock plus two-
year warrants to purchase an additional 240,000 shares at an exercise price
of $1.40.
In December 1999, the Company signed an engagement letter with an
investment banking firm pursuant to which this firm agreed to secure for
the Company, on a best efforts basis, a revolving debt financing in an
amount of between $1,000,000 and $1,200,000. In January 2000, this
financing was secured for the Company in an amount of $1,000,000. The
Company agreed that, upon the first draw down under this financing, it
would issue to the lender an 18-month warrant to purchase 1,000,000 shares
of Common Stock at an exercise price of $1.05 and a 30-month warrant to
purchase 500,000 shares of Common Stock at an exercise price of $2.00.
Draw downs on this financing are subject to the Company's satisfying
certain conditions, including the condition that, in order for the Company
to draw down any amount, the Company must have secured at least one
commercial transaction through certain third parties, on terms sufficient,
in the sole opinion of the lender, to allow the Company to repay the amount
to be
8
<PAGE>
drawn down. All amounts drawn down by the Company under this financing will
be secured by a first lien on substantially all of the Company's assets.
This lien may adversely affect the Company's ability to obtain additional
financing.
The Company recently has hired several new employees and has begun the
development and implementation of additional features of the PC Support
Center. As a result of its increased level of expenditures, the Company
does not have sufficient working capital to sustain its current level of
operations. Although the Company plans to obtain this working capital
through fundings under the debt financing described above, there can be no
assurance that the Company will be able to satisfy the conditions to its
being permitted to utilize this financing on a timely basis or at all. If
this financing is not available to the Company by March 2000, the Company
will need to obtain financing from another source and does not have any
commitment from any third party to provide this financing. Furthermore, the
Company expects to hire a significant number of additional employees and to
continue the development of additional features of the PC Support Center,
which will require working capital prior to July 2000 in addition to any
funding provided by the debt financing described above. The Company
anticipates funding these additional working capital requirements either
through the proceeds from a private placement of its Common Stock or
through revenues generated from customers. The investment banking firm
engaged by the Company has agreed to use its best efforts to secure for the
Company an equity financing of at least $3,000,000 by June 30, 2000, which
should be more than sufficient to provide the Company with the working
capital necessary for the Company to proceed with its business plan through
December 31, 2000. However, there can be no assurance that this financing
will, in fact, occur or that revenues from customers, if any, will provide
the working capital necessary for the Company to proceed with its business
plan.
The Company does not currently have any commitment from any third
party to provide additional financing, and the Company may be unable to
obtain financing on reasonable terms or at all. Furthermore, if the Company
raises additional working capital through equity, its shareholders will
experience dilution. If the Company is unable to secure additional
financing when needed and its revenues are inadequate to provide the
necessary working capital, the Company may be required to slow down or
suspend its growth or reduce the scope of its then current level of
business operations, any of which would have a material adverse effect on
the Company's competitive position.
c. Sales and Marketing
-------------------
The Company plans to increase marketing efforts for its services
through direct and indirect channels, including the following:
PC Manufacturers. The Company is negotiating with several of the
world's largest PC manufacturers to market the Company's services to the
manufacturers' customers, and the Company plans to expand its marketing
efforts to other top PC manufacturers during the Next Year. No agreements
have yet been reached with any PC manufacturer, and there can be no
assurance that any such agreements can be reached on terms favorable to the
Company or at all.
OEMs. The Company is negotiating with companies which integrate PCs
with internet access and other related services and sell them to PC end-
users via a monthly payment schedule over a number of years, typically
three, to include the Company's services. In January 2000, the Company and
Go Figure Technologies entered into a one-year Services Agreement in which
Go
9
<PAGE>
Figure has agreed to use commercially reasonable efforts to secure
agreements with third parties that will in the aggregate forecast delivery
during calendar year 2000 of at least one million PCs that will provide
access to customized versions of the PC Support Center. Go Figure has also
agreed that it will not during the one-year term of the agreement directly
or indirectly offer services similar to or competitive with the PC Support
Center's services.
Computer Service Companies. There are several international companies
which provide a comprehensive range of computer services that permit large
corporations to out-source some or all of their PC support requirements.
The Company's services complement and extend the range of such support
services. In April 1999 the Company entered into an agreement with Unisys,
an international computer service company, to private label Global Replace
under the Unisys brand name for resale to Unisys' corporate customers. The
Company intends to market its services to other international service
companies during the Next Year, although there can be no assurance that the
Company will be able to negotiate any agreements with computer service
companies.
StorageTek. In 1998, the Company's wholly-owned subsidiary entered
into a contract with StorageTek in which the Company licensed StorageTek's
backup storage software, which the Company markets under the name Global
Replace. StorageTek also agreed to market the Company's hardware
replacement services in conjunction with its own backup software. In the
fiscal year ending June 30, 1999, StorageTek did not secure any orders for
the Company's services, and no orders have been secured to date during the
current fiscal year. During the Next Year, the Company intends to expand
its training and co-selling activities with StorageTek.
Web Portals. The Company is negotiating with one company which is
developing a Web site or portal specifically targeting the mobile PC user.
The Company is negotiating to provide the support services, which will be a
prominent feature of the portal. The Company is also negotiating with a
large portal company which targets a broad base of Internet users. However,
there can be no assurance that an agreement will be reached with these
companies or any other Web portal companies.
Direct Sales. The Company is marketing to a small number of large and
small corporations on a direct basis. Although no contracts have been
secured to date, the Company intends to expand its direct marketing efforts
to a select number of large corporations in the United States and Canada.
There can be no assurance that any contracts will be reached with any
company on a direct basis.
d. Research and Development
------------------------
The Company's primary research and development effort over the Next
Year will be to continue to add features to the PC Support Center (which
the Company launched in October 1999) and to release subsequent versions
during the Next Year. Due to the constantly evolving nature of the Internet
and related technologies, the Company will continuously monitor changes in
PC support technologies and Internet-based support offerings with the goal
of adding additional functionality in new releases of the PC Support
Center. An Education Center was added to the PC Support Center in January,
2000 which provides self-administered tutorials for PC users. A service
called "FixMyPC" was also added to the PC Support Center in January, 2000
which allows a technician to take control of the user's PC with the user's
permission and to perform preventative maintenance and solve technical
problems using an online chat session.
10
<PAGE>
Among the functions and services the Company expects to add to the PC
Support Center over the next six months are: email notification of driver
and other recommended updates, virus scan, telephone support, PC
performance enhancement, enhanced platform maintenance, asset-tracking,
extended warranty, anti-theft deterrent, theft and damage insurance,
technician dispatch, and repair co-ordination. There can be no assurance,
however, that all or any of these features will be added. The Company
expects to incur costs of between $400,000 and $600,000 over the next six
months in order to develop and implement these additional functions of the
PC Support Center. Of this amount, approximately 75% represents costs
expected to be incurred internally by the Company, with the balance
representing amounts expected to be paid to third-party contractors.
e. Operations
----------
To support the Global Replace program, the Company will expand its
capability to restore full image backups onto replacement notebooks. During
the Next Year, the Company plans to develop infrastructure internally to
provide the capacity to restore three to five notebooks per working day. To
increase capacity beyond this level to meet future demand, the Company will
make a decision to build additional infrastructure internally, or to
contract the restoration process to an external computer services firm. The
Company anticipates that it will make this decision during the Next Year.
f. Employees
---------
During the Next Year, the Company plans to hire additional senior
management employees in the areas of sales and marketing, as well as
additional technical, operations, sales and marketing, and administrative
staff as required to expand its service offerings, sales and marketing
efforts, and to maintain service levels to its then existing and new
subscribers. The number and skill sets of individual employees will be
primarily dependent on the relative rates of growth of the Company's
different services, and the extent to which sales and marketing,
operations, and development are executed internally or contracted to
outside parties. Subject to the availability of sufficient working capital
and assuming significant customer acceptance of the Company's products, the
Company currently plans to increase staffing to approximately 100 people
during the Next Year, although there can be no assurance that such hiring
will take place or will be adequate to execute the growth plans as
described herein.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
11
<PAGE>
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. The exhibits listed in the accompanying Index to Exhibits are filed as
part of this Quarterly Report on Form 10-QSB.
b. Reports on Form 8-K: None.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PCSUPPORT.COM, INC.
Date: February 11, 2000 By: /s/ Michael G. McLean
---------------------
Michael G. McLean
President and Chief Executive Officer
Date: February 11, 2000 By: /s/ David W. Rowat
---------------------
David W. Rowat
Vice President,
Finance and Business Development
13
<PAGE>
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------- -----------
<S> <C>
5.1 Termination Letter dated as of December 31, 1999 from the Company to SCI.*
5.2 Employment Agreement dated as of November 17, 1999 between the Company and Bruce McDonald.*
5.3 Directors, Officers and Employee Stock Option Plan as amended on November 30, 1999.*
5.4 Engagement Letter dated as of October 6, 1999 between the Company and Sitrick and Company.*
5.5 Engagement Letter dated as of December 21, 1999 between the Company and ICE Holdings North America, L.L.C.*
27 Financial Data Schedule
</TABLE>
*Incorporated by reference to the Company's Amendment No. 2 to Form 10-SB filed
on January 12, 2000.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FILED AS PART OF THE REPORT ON FORM 10-QSB TO WHICH
THIS IS AN EXHIBIT, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-START> OCT-01-1999 JUL-01-1999
<PERIOD-END> DEC-31-1999 DEC-31-1999
<CASH> 381,277 381,277
<SECURITIES> 0 0
<RECEIVABLES> 31,264 31,264
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 435,387 435,387
<PP&E> 170,691 170,691
<DEPRECIATION> 21,284 21,284
<TOTAL-ASSETS> 586,956 586,956
<CURRENT-LIABILITIES> 800,564 800,564
<BONDS> 0 0
0 0
0 0
<COMMON> 6,076 6,076
<OTHER-SE> (219,684) (219,684)
<TOTAL-LIABILITY-AND-EQUITY> 586,956 586,956
<SALES> 1,614 2,320
<TOTAL-REVENUES> 1,614 2,320
<CGS> 1,422 2,132
<TOTAL-COSTS> 701,801 1,372,110
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (131) (7,984)
<INCOME-PRETAX> (701,478) (1,363,938)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (701,478) (1,363,938)
<EPS-BASIC> (0.12) (0.23)
<EPS-DILUTED> (0.12) (0.23)
</TABLE>
