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Previous: KNOWLEDGEBROKER INC, 10QSB, 2000-01-14 |
Next: AVIRON, 8-K, 2000-01-14 |
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 September 30, 1997
[ ] 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>
September 30, December 31,
1997 1996
---------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 198,342 $ -
Marketable Securities 51,000 50,000
Accounts Receivable - Trade, net of allowance
for doubtful accounts of $69,098 in 1997 and 1996 421,460 677,744
Prepaid Expenses 39,765 -
Income Tax Receivable 65,005 184,845
Deferred Income Taxes 216,433 216,433
---------- -----------
TOTAL CURRENT ASSETS 992,005 1,129,022
---------- ----------
PROPERTY AND EQUIPMENT 294,213 278,548
Less Accumulated Depreciation and Amortization (181,980) (141,700)
----------- -----------
NET PROPERTY AND EQUIPMENT 112,233 136,848
----------- -----------
OTHER ASSETS
Deferred Income Taxes 119,413 119,413
Other 7,101 3,376
------------ ------------
TOTAL OTHER ASSETS 126,514 122,789
----------- -----------
TOTAL ASSETS $1,230,752 $1,388,659
========== ==========
</TABLE>
(Continued)
The accompanying note is an
integral part of these financial statements
F-1
<PAGE>
KNOWLEDGEBROKER, INC.
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- --------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Cash Overdraft $ - $ 2,508
Note Payable 138,767 150,000
Accounts Payable 128,375 237,871
Accrued Expenses 442,211 544,802
Deferred Income 371,163 383,739
----------- -----------
TOTAL CURRENT LIABILITIES 1,080,516 1,318,920
----------- ----------
STOCKHOLDERS' EQUITY
Preferred Stock, $0.01 par value, 5,000,000 shares authorized - -
Common Stock, $0.01 par value, 25,000,000 shares authorized,
9,375,091 shares issued 93,751 93,751
Treasury Stock - 3,000 shares, at cost (3,071) -
Additional Paid-In Capital 1,419,874 1,364,008
Retained Deficit (802,620) (830,322)
------------ -----------
707,934 627,437
Less Notes Receivable in connection with exercised stock options (557,698) (557,698)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 150,236 69,739
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,230,752 $1,388,659
============ ============
</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 Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
1997 1996 1997 1996
----------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Support desk services $ 80,944 $ 142,603 $1,218,435 $ 580,817
Software sales 281,356 193,749 467,832 580,084
--------- --------- ----------- ---------
TOTAL REVENUES 362,300 336,352 1,686,267 1,160,901
--------- --------- ---------- ---------
DIRECT PERSONNEL COST
OF SUPPORT DESK SERVICES
AND SOFTWARE SALES 150,808 106,406 694,294 434,508
--------- --------- ----------- ---------
REVENUES,
NET OF DIRECT COSTS 211,492 229,946 991,973 726,393
--------- --------- ----------- ---------
EXPENSES
Selling, general and administrative 250,235 110,421 957,837 800,418
Litigation settlement and
related legal expenses - 100,000 - 100,000
Depreciation and amortization 12,745 11,126 40,280 33,373
---------- ---------- ----------- ----------
TOTAL EXPENSES 262,980 221,547 998,117 933,791
--------- --------- ----------- ---------
OPERATING (LOSS) INCOME (51,488) 8,399 (6,144) (207,398)
OTHER INCOME (EXPENSE)
Interest and other income 5,089 (5,294) 45,674 24,557
Interest expense (3,046) (1,928) (11,828) (2,852)
---------- ---------- ----------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES (49,445) 1,177 27,702 (185,693)
INCOME TAX BENEFIT - 35,275 - 98,812
----------- ---------- ------------ ----------
NET INCOME (LOSS) $ (49,445) $ 36,452 $ 27,702 $ (86,881)
=========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 9,375,091 9,308,447 9,375,091 9,306,230
========= ========= ========= =========
NET INCOME (LOSS) PER
COMMON SHARE $ 0.00 $ 0.00 $ 0.00 $ (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>
Nine Months Ended September 30,
1997 1996
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 27,702 $ (86,881)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities
Deferred Income Tax (Benefit) - (98,812)
Depreciation and Amortization 40,280 33,373
Provisions for Doubtful Accounts - (134,709)
Stock Issued for Compensation
and Services 55,866 -
Changes in Assets and Liabilities
Trade Accounts Receivable 256,284 123,301
Prepaid Expenses (39,765) 17,902
Accounts Receivable Affiliates - (24,004)
Income Tax Receivable 119,840 -
Accounts Payable (109,496) (15,022)
Accrued Liabilities (102,591) (174,308)
Accrued Payroll Settlement - 100,000
Deferred Income (12,576) -
Other Assets (3,725) -
Marketable Securities Purchased (1,000) -
Cash Overdraft (2,508) -
------------- ---------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 228,311 (259,160)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Joint Venture - (15,407)
Purchase of Property and Equipment (15,665) (22,922)
Purchase of Treasury Stock (3,071) -
------------ --------------
NET CASH USED BY INVESTING ACTIVITIES (18,736) (38,329)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Repayments on Line of Credit (11,233) -
Borrowings Under Lines of Credit - 90,000
Collections on Notes Receivable in Connection with
Exercised Stock Options - 40,397
Issuance of Common Stock for Warrants Exercised - 40,500
--------------- -----------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES (11,233) 170,897
----------- ----------
INCREASE (DECREASE) IN CASH 198,342 (126,592)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD - 131,653
------------ ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 198,342 $ 5,061
========== ==========
</TABLE>
(Continued)
The accompanying note is an
integral part of these financial statements
F-4
<PAGE>
KNOWLEDGEBROKER, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
SUPPLEMENTAL DISCLOSURE OF INTEREST AND
INCOME TAXES PAID DURING THE PERIOD
<S> <C> <C>
Interest $ 11,828 $ (2,852)
=========== ============
Income Taxes $ - $ -
=========== ============
</TABLE>
The accompanying note is an
integral part of these financial statements
F-5
<PAGE>
KNOWLEDGEBROKER, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
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, 1996. 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 nine month
period ended September 30, 1997, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997.
F-6
<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.
Nine Months Ended September 30, 1997, Compared to Nine Months Ended
September 30, 1996
Revenues for the nine months ended September 30, 1997, increased approximately
$525,000, to $1,686,267 from $1,160,901 for the 1996 nine month period. The
increase in overall revenues reflects the addition of two large clients for
Support desk services in the first quarter of 1997 but masked the significant
drop in sales and licensing of the Company's software.
Although these trends reflect the nine month period, the three month period
ended September 30, 1997, saw a marked decline in revenues for Support desk
services as the Company completed the work for two clients that initiated
contracts in the first part of 1997. The third quarter, nonetheless, saw a
recovery in software sales and licensing, particularly with smaller clients.
Gross profit increased in the later period to $991,973 from $726,393. However,
the Company was unable to reduce the number of people staffing the Support desk
services as rapidly as the declining revenues from Support desk services
required.
The increased operating 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 the 1997 nine month period as well as cover the
expenses of being a public company. In the 1996 period the Company's operating
loss was $207,398, the loss being affected by $100,000 of litigation expenses.
The Company did enjoy a profit of $27,702 in the 1997 nine month period compared
to a loss of $86,881 in the earlier period. In the 1997 period the Company's net
interest income was sufficient to offset its operating loss.
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 198,342
<SECURITIES> 51,000
<RECEIVABLES> 421,460
<ALLOWANCES> 69,098
<INVENTORY> 0
<CURRENT-ASSETS> 992,005
<PP&E> 294,213
<DEPRECIATION> 181,980
<TOTAL-ASSETS> 1,230,752
<CURRENT-LIABILITIES> 1,080,516
<BONDS> 0
0
0
<COMMON> 93,751
<OTHER-SE> 859,105
<TOTAL-LIABILITY-AND-EQUITY> 1,230,752
<SALES> 1,686,267
<TOTAL-REVENUES> 1,686,267
<CGS> 694,294
<TOTAL-COSTS> 1,692,411
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,798
<INTEREST-EXPENSE> 11,828
<INCOME-PRETAX> 27,702
<INCOME-TAX> 0
<INCOME-CONTINUING> 27,702
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,702
<EPS-BASIC> 0.00
<EPS-DILUTED> 0
</TABLE>
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