U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ______________
Commission file number: 0-26626
KnowledgeBroker, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 84-0856578
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
13295 Mira Loma Road, Reno, NV 89511
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(775) 852-5711
(Registrant's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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__
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 9,692,490
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KNOWLEDGEBROKER, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 12,072 $ 199,171
Marketable Securities 51,000 51,000
Accounts Receivable - Trade, net of allowance
for doubtful accounts of $5,000 in 1998 and 1997 176,887 106,255
Prepaid Expenses 28,185 40,201
Income Tax Receivable 55,772 55,772
--------- ----------
TOTAL CURRENT ASSETS 323,916 452,399
-------- ---------
PROPERTY AND EQUIPMENT 299,648 295,165
Less Accumulated Depreciation and Amortization (214,369) (193,222)
-------- ---------
NET PROPERTY AND EQUIPMENT 85,279 101,943
--------- ---------
OTHER ASSETS 3,089 3,089
--------- ----------
TOTAL ASSETS $412,284 $557,431
======== ========
</TABLE>
(Continued)
The accompanying note is an
integral part of these financial statements
F-1
<PAGE>
KNOWLEDGEBROKER, INC.
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 190,000 $ 134,787
Accounts Payable 98,622 150,874
Accrued Expenses 445,523 519,304
Deferred Income 369,982 262,079
---------- -----------
TOTAL CURRENT LIABILITIES 1,104,127 1,067,044
---------- ----------
STOCKHOLDERS' DEFICIT
Preferred Stock, $0.01 par value, 5,000,000 shares authorized - -
Common Stock, $0.01 par value, 25,000,000 shares authorized,
9,297,024 shares issued 92,970 92,970
Treasury Stock - 3,000 shares, at cost (3,071) (3,071)
Additional Paid-In Capital 1,020,687 1,020,687
Retained Deficit (1,802,429) (1,620,199)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (691,843) (509,613)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 412,284 $ 557,431
========== ==========
</TABLE>
The accompanying note is an
integral part of these financial statements
F-2
<PAGE>
KNOWLEDGEBROKER, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Support desk services $ 170,132 $ 536,721 $ 297,456 $1,137,491
Software sales 84,336 132,097 212,675 186,476
----------- ----------- ----------- ---------
TOTAL REVENUES 254,468 668,818 510,131 1,323,967
DIRECT PERSONNEL COST OF
SUPPORT DESK SERVICES
SERVICES AND SOFTWARE SALES 147,313 262,255 265,724 543,486
---------- ----------- ----------- ----------
REVENUES,
NET OF DIRECT COSTS 107,155 406,563 244,407 780,481
---------- ----------- ----------- -----------
EXPENSES
Selling, general and administrative 206,826 346,001 402,642 707,601
Depreciation and amortization 10,397 14,009 21,147 27,535
----------- ----------- ----------- -----------
TOTAL EXPENSES 217,223 360,010 423,789 735,136
---------- ---------- ----------- -----------
OPERATING
INCOME (LOSS) (110,068) 46,553 (179,382) 45,345
OTHER INCOME (EXPENSE)
Interest and other income 792 (2,032) 3,491 40,656
Interest expense (3,642) (4,904) (6,339) (8,783)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES (112,918) 39,617 (182,230) 77,218
INCOME TAX - - - -
-------------- ------------ ----------- ---------
NET INCOME (LOSS) $ (112,918) $ 39,617 $(182,230) $ 77,218
========== =========== ========= =========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 9,270,024 9,375,091 9,270,024 9,375,091
========== ========== ========= ==========
NET (LOSS) INCOME PER
COMMON SHARE $ (0.01) $ 0.00 $ (0.02) $ 0.01
=========== =========== ========= ==========
</TABLE>
The accompanying note is an
integral part of these financial statements
F-3
<PAGE>
KNOWLEDGEBROKER, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
--------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) Income $(182,230) $ 77,218
Adjustments to Reconcile Net (Loss) Income to Net
Cash Provided (Used) by Operating Activities
Depreciation and Amortization 21,147 27,535
Stock Issued for Compensation and Services - 55,866
Changes in Assets and Liabilities
Trade Accounts Receivable (70,632) 273,525
Prepaid Expenses 12,016 (36,950)
Accounts Payable (52,252) (82,659)
Accrued Liabilities (73,781) (62,952)
Other Assets - (3,725)
Purchase of Marketable Securities - (1,000)
Cash Overdraft - (2,508)
Deferred Income 107,903 (12,786)
--------- --------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (237,829) 231,564
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (4,483) (14,126)
Purchase of Treasury Stock - (3,071)
------------- ----------
NET CASH USED BY INVESTING ACTIVITIES (4,483) (17,197)
----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings Under Line of Credit 55,213 -
Principal Repayments on Line of Credit - (1,233)
------------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 55,213 (1,233)
---------- ---------
(DECREASE) INCREASE IN CASH (187,099) 213,134
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 199,171 -
--------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,072 $213,134
========== ========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND
INCOME TAXES PAID DURING THE PERIOD
Interest $ 6,339 $ 8,783
========== =========
Income Taxes $ - $ -
============= ============
</TABLE>
The accompanying note is an
integral part of these financial statements
F-4
KNOWLEDGEBROKER, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulations S-X. They do not include all information and notes required
by generally accepted accounting principals for complete financial
statements. However, except as disclosed, there has been no material change
in the information disclosed in the notes to financial statements included
in the Annual Report on Form 10-K of KnowledgeBroker, Inc. for the year
ended December 31, 1997. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30,1998, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998.
F-5
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
General
The Company's results of operations are strongly affected by the size and timing
of contracts for support desk services and software sales. Contracts for the
Company's Support desk services are often tied to the introduction of a new
computer product for which support will be required as the new product is
introduced and for a period of time thereafter. In other instances the Company
will have agreements for Support desk services that are not so much based on a
particular product but require more general support for personal computers and
that rely upon the Company's data base. Revenues for Support desk services,
accordingly, often fluctuate significantly. The direct personnel costs for
Support desk services also have to be managed carefully and fluctuate
significantly, depending upon the volume of calls generated by the Support desk
services.
Software sales, which include sales and licensing of the Company's AskMe Pro and
KnowledgeBases, also fluctuate significantly. However, the gross margins for
software sales and licensing are significantly larger than for Support desk
services.
Six Months Ended June 30, 1998, Compared to Six Months Ended June 30, 1997
Revenues for the six months ended June 30, 1998, decreased more than $800,000,
to $510,131 from $1,323,967 for the 1997 six month period. In the 1997 period
the Company began an agreement with two new significant clients for Support desk
services which had been completed in the second half of 1997. As a result
revenues from Support desk services declined to $297,456 in the first six months
of 1998 from $1,137,491 in the first six months of 1997. This decline in
revenues from Support desk services was partially offset by increased sales and
license revenues in the 1998 period, an increase to $212,675 from $186,476.
Gross profit decreased in the later period to $244,407 from $780,481, largely
reflecting the large decrease in revenues from Support desk services. The
Company reduced the number of people staffing the Support desk services, but the
needs of the Company to retain a core group of personnel required to meet the
needs of the service resulted in Support desk services personnel amounting to
89% of the revenues generated from Support desk services.
The decrease in gross profit was not sufficient to cover operating expenses,
particularly since the Company had begun to increase its selling and marketing
efforts in the later part of 1997. In the 1998 period the Company's operating
loss was $179,382 with a net loss of $182,230 while the 1997 period saw an
operating profit of $45,345 and net income of $77,218. The income enjoyed in the
earlier period was increased from the operating profit because of significant
net interest income.
Liquidity and Capital Resources
The Company's operating capital has been provided by operations, the issuance of
stock and bank lines of credit. The Company's long-term continuation depends
upon its ability to generate profits. Because the Company's losses have largely
been funded with debt, its ongoing ability to survive will depend upon its
ability to increase revenues.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Index
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KnowledgeBroker, Inc.
January 14, 2000 /s/ Sharon Stanley
-----------------------------------
Sharon Stanley,
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 12,072
<SECURITIES> 51,000
<RECEIVABLES> 176,887
<ALLOWANCES> 5,000
<INVENTORY> 0
<CURRENT-ASSETS> 323,916
<PP&E> 299,648
<DEPRECIATION> 214,369
<TOTAL-ASSETS> 412,284
<CURRENT-LIABILITIES> 1,104,127
<BONDS> 0
0
0
<COMMON> 92,970
<OTHER-SE> 1,017,616
<TOTAL-LIABILITY-AND-EQUITY> 412,284
<SALES> 510,131
<TOTAL-REVENUES> 510,131
<CGS> 265,724
<TOTAL-COSTS> 389,513
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,339
<INCOME-PRETAX> (182,230)
<INCOME-TAX> 0
<INCOME-CONTINUING> (182,230)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (182,230)
<EPS-BASIC> (0.02)
<EPS-DILUTED> 0
</TABLE>
