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, 2000
[ ] 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 X No
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: 9,711,090
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KNOWLEDGEBROKER, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------------- -----------------
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 15,459 $ 44,027
Marketable Securities 51,547 51,504
Accounts Receivable - Trade, net of allowance
for doubtful accounts of $5,000 in 2000 and 1999 86,522 102,111
Prepaid Expenses 3,185 18,157
-------- --------
TOTAL CURRENT ASSETS 156,713 215,799
-------- --------
PROPERTY AND EQUIPMENT 312,005 311,469
Less Accumulated Depreciation and Amortization (280,572) (270,193)
-------- --------
NET PROPERTY AND EQUIPMENT 31,433 41,276
------- ---------
OTHER ASSETS 3,089 3,089
-------- --------
TOTAL ASSETS $191,235 $260,164
======== ========
</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,
2000 1999
-------------- ----------------
(Unaudited)
CURRENT LIABILITIES
<S> <C> <C>
Notes Payable $ 320,000 $ 275,000
Accounts Payable 98,346 86,269
Accrued Expenses 41,852 106,689
Deferred Income 136,226 168,455
----------------------
TOTAL CURRENT LIABILITIES 596,424 636,413
NOTES PAYABLE - SHAREHOLDERS 116,250 -
COMMITMENTS AND CONTINGENCIES - Note 2 - -
-------- --------
TOTAL LIABILITIES 712,674 636,413
---------- --------
STOCKHOLDERS' DEFICIT
Preferred Stock, $0.01 par value, 5,000,000 shares authorized - -
Common Stock, $0.01 par value, 25,000,000 shares authorized,
9,711,090 and 9,624,690 shares issued in 2000 and 1999,
respectively 97,111 96,247
Additional Paid-In Capital 1,272,149 1,262,213
Retained Deficit (1,881,029) (1,725,039)
Treasury Stock, at cost, 11,000 shares (9,670) (9,670)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (521,439) (376,249)
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 191,235 $ 260,164
=========== ==========
</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,
--------------------------- -----------------------------
2000 1999 2000 1999
---------- --------- -------- ---------
REVENUES
<S> <C> <C> <C> <C>
Support Desk Services $ 47,806 $ 69,962 $ 146,084 $ 579,426
Software Sales 85,159 168,966 196,242 299,089
---------- --------- -------- ---------
TOTAL REVENUES 132,965 238,928 342,326 878,515
DIRECT PERSONNEL COST OF
SUPPORT DESK SERVICES
SERVICES AND SOFTWARE SALES 60,699 122,918 149,315 250,376
---------- --------- -------- ---------
REVENUES,
NET OF DIRECT COSTS 72,266 116,010 193,011 628,139
--------- --------- --------- ---------
EXPENSES
Selling, General and Administrative 156,937 172,771 312,922 349,101
Depreciation and Amortization 5,011 9,640 10,379 19,338
---------- ---------- --------- ----------
TOTAL EXPENSES 161,948 182,411 323,301 368,439
-------- --------- ---------- ---------
OPERATING
(LOSS) INCOME (89,682) (66,401) (130,290) 259,700
OTHER INCOME (EXPENSE)
Interest and Other Income 2,530 8,050 4,123 13,720
Interest Expense (20,459) (7,343) (29,823) (18,397)
---------- --------- -------- ---------
(LOSS) INCOME BEFORE
INCOME TAXES (107,611) (65,694) (155,990) 255,023
INCOME TAX - - - -
---------- --------- -------- ---------
NET (LOSS) INCOME $(107,611) $ (65,694) $(155,990) $ 255,023
========= ========== ========= =========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 9,646,290 9,624,690 9,637,033 9,624,690
========= ========= ========= =========
NET (LOSS) INCOME PER
COMMON SHARE $ (.01) $ (0.01) $ (.02) $ 0.03
============ ========= ========= =========
</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,
2000 1999
--------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(155,990) $255,023
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities
Depreciation and Amortization 10,379 19,338
Issuance of Common Stock for Payment
of Interest 10,800 -
Changes in Assets and Liabilities
Trade Accounts Receivable 15,589 161,184
Prepaid Expenses 14,972 1,000
Accounts Payable 12,077 (73,813)
Accrued Liabilities (64,837) (175,081)
Marketable Securities (43) 3,536
Deferred Income (32,229) (42,725)
-------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (189,282) 148,462
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (536) (4,894)
Purchase of Treasury Stock - (5,571)
----- ---------
NET CASH USED BY INVESTING ACTIVITIES (536) (10,465)
------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings Under Lines of Credit 45,000 -
Principal Repayments on Lines of Credit - (100,342)
Loans from Shareholders 116,250 -
-------- --------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 161,250 (100,342)
-------- --------
INCREASE (DECREASE) IN CASH (28,568) 37,655
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 44,027 196,009
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 15,459 $233,664
========== ========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND
INCOME TAXES PAID DURING THE PERIOD
Interest $ 12,611 $ 18,397
========== =========
Income Taxes $ - $ -
========== =========
</TABLE>
The accompanying note is an
integral part of these financial statements
F-4
<PAGE>
KNOWLEDGEBROKER, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
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, 1999. 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 30,2000, are not necessarily indicative of the results that may
be expected for the year ending December 31, 2000.
NOTE 2: LITIGATION
A summary judgment in the amount of $982,581 plus accrued interest was
entered against KnowledgeBroker, Inc. ("KBI") in June 2000. This judgment
against KBI is being vigorously contested by a countersuit. The outcome of
the countersuit is yet uncertain and cannot be estimated.
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, 2000, Compared to Six Months Ended June 30, 1999
Because of the cost of Support desk services, the Company determined to reduce
support desk services and emphasize Sales and licensing of software in 1999.
Additionally, prior to the Company determining to reduce Support desk services,
the first quarter of the year usually reflected strong revenues because of the
introduction of computer and software products in the holiday season that
required support. Accordingly, revenue from Support desk services declined to
$146,084 in the first half of 2000 compared to $579,426 in the first half of
1999. Furthermore, revenue from software sales and licensing also declined in
the first half of 2000 to $196,242 from $299,089 in the first half of 1999
largely because of the favorable timing of software sales and licensing in the
first half of 1999 and the unfavorable timing of software sales and licensing in
the first half of 2000.
Revenues for the first half of 1999 were $878,515 compared to $342,326 in the
first half of 2000, and gross profit in the first half of 1999 was $628,139
compared to gross profit of $193,011 in the first half of 2000.
Selling, general and administrative expenses also declined in 2000, to $312,922,
when compared to the $349,101 in the first half of 1999, largely reflecting the
reduced management effort required for decreased Support desk services.
The large gross profit in the first half of 1999 absorbed the Company's expenses
resulting in Net income of $255,023 in the 1999 period compared to a loss of
$155,990 in the first half of 2000.
Liquidity and Capital Resources
The Company's operating capital has been provided by operations, the issuance of
stock and bank lines of credit, supplemented by stockholder loans. 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 which have declined
throughout 2000. This default judgment entered against the Company in June 2000
could possibly add to the Company's liquidity problems. The Company's emphasis
upon software and license revenues makes cash flows less even because revenues
are tied to large sales rather than continued, daily services.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Matters
On May 30, 2000 Software Affiliates Company filed an Affidavit of Foreign
Judgment in the Second Judicial District Court of the State of Nevada in and for
the Court of Washoe against KnowledgeBroker, Inc. This affidavit was filed to
enforce a default judgment entered in the Superior Court of the State of
California for the County of Los Angeles against KnowledgeBroker, Inc. in the
amount of $982,580.62. The California judgment is being vigorously challenged on
numerous procedural and substantive grounds and arises from litigation
originally filed against Software Affiliates Company by KnowledgeBroker, Inc.
for nonpayment of a receivable owed by Software Affiliates Company.
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.
August 22, 2000 /s/ Sharon Stanley
-----------------------------------
Sharon Stanley,
Principal Financial Officer
