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, 1999
[ ] 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,
1999 1998
---------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 233,664 $196,009
Marketable Securities 51,468 55,004
Accounts Receivable - Trade, net of allowance
for doubtful accounts of $5,000 in 1999 and 1998 121,131 282,316
Prepaid Expenses 3,185 4,185
TOTAL CURRENT ASSETS 409,448 537,514
--------- --------
PROPERTY AND EQUIPMENT 307,742 302,848
Less Accumulated Depreciation and Amortization (253,921) (234,583)
-------- --------
NET PROPERTY AND EQUIPMENT 53,821 68,265
---------- ---------
OTHER ASSETS 3,089 3,089
---------- ----------
TOTAL ASSETS $466,358 $608,868
======== ========
</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,
1999 1998
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 203,500 $ 303,842
Accounts Payable 47,393 121,206
Accrued Expenses 111,134 286,215
Deferred Income 272,542 315,267
---------- ----------
TOTAL CURRENT LIABILITIES 634,569 1,026,530
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' DEFICIT
Preferred Stock, $0.01 par value, 5,000,000 shares authorized - -
Common Stock, $0.01 par value, 25,000,000 shares authorized,
9,624,690 shares issued 96,247 96,247
Additional Paid-In Capital 1,262,213 1,262,213
Retained Deficit (1,517,001) (1,772,023)
Treasury Stock, at cost 35,000 and 11,000 shares, respectively (9,670) (4,099)
----------- ------------
TOTAL STOCKHOLDERS' DEFICIT (168,211) (417,662)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 466,358 $ 608,868
========== ==========
</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,
-------------------------- -----------------------------
1999 1998 1999 1998
------------ ----------- -------------- ---------
<S> <C> <C> <C> <C>
REVENUES
Support Desk Services $ 69,962 $ 170,132 $ 579,426 $ 297,456
Software Sales 168,966 84,336 299,089 212,675
--------- ---------- --------- ---------
TOTAL REVENUES 238,928 254,468 878,515 510,131
DIRECT PERSONNEL COST OF
SUPPORT DESK SERVICES
SERVICES AND SOFTWARE SALES 122,918 147,313 250,376 265,724
--------- --------- --------- ---------
REVENUES,
NET OF DIRECT COSTS 116,010 107,155 628,139 244,407
--------- --------- --------- ---------
EXPENSES
Selling, General and Administrative 172,771 206,826 349,101 402,642
Depreciation and Amortization 9,640 10,397 19,338 21,147
---------- ---------- ---------- ----------
TOTAL EXPENSES 182,411 217,223 368,439 423,789
--------- --------- --------- ---------
OPERATING
INCOME (LOSS) (66,401) (110,068) 259,700 (179,382)
OTHER INCOME (EXPENSE)
Interest and Other Income 8,050 792 13,720 3,491
Interest Expense (7,343) (3,642) (18,397) (6,339)
---------- ---------- ---------- ----------
(LOSS) INCOME BEFORE
INCOME TAXES (65,694) (112,918) 255,023 (182,230)
INCOME TAX - - - -
------------- ------------ ------------- ----------
NET (LOSS) INCOME $ (65,694) $(112,918) $ 255,023 $(182,230)
========== ========= ========= =========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 9,624,690 9,270,024 9,624,690 9,270,024
========= ========== ========= =========
NET (LOSS) INCOME PER
COMMON SHARE $ (0.01) $ (0.01) $ 0.03 $ (0.02)
========== ============ ========= ==========
</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,
1999 1998
--------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $255,022 $(182,230)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities
Depreciation and Amortization 19,338 21,147
Changes in Assets and Liabilities
Trade Accounts Receivable 161,185 (70,632)
Prepaid Expenses 1,000 12,016
Accounts Payable (73,813) (73,781)
Accrued Liabilities (175,081) (52,252)
Marketable Securities 3,536 -
Deferred Income (42,725) 107,903
-------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 148,462 (237,829)
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (4,894) (4,483)
Purchase of Treasury Stock (5,571) -
-------- -------------
NET CASH USED BY INVESTING ACTIVITIES (10,465) (4,483)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings Under Lines of Credit - 55,213
Principal Repayments on Lines of Credit (100,342) -
-------- -------------
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES (100,342) 55,213
-------- ----------
INCREASE (DECREASE) IN CASH 37,655 (187,099)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 196,009 199,171
-------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $233,664 $ 12,072
======== ==========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND
INCOME TAXES PAID DURING THE PERIOD
Interest $ 18,397 $ 6,339
======== ==========
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, 1999
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, 1998. 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 30,1999, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.
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, 1999, Compared to Six Months Ended June 30, 1998
Revenues for the six months ended June 30, 1999, increased more than $368,000,
to $878,515 from $510,131 for the 1998 six month period. Revenues for Support
desk services were up strongly in the first quarter largely as the result of the
introduction of products in the holiday season required support in the first
quarter, something that did not occur in the first quarter of 1998. These
revenues did not continue into the second quarter. Revenues from Support desk
services increased about $280,000 to $579,426 in the first six months of 1999
from $297,456 in the first six months of 1998, making the majority of the
increase in revenues in the first half of 1999 being derived from Support desk
services. Sales and licensing revenues increased in 1999 when compared to the
Sales and licensing revenues in 1998 for the same period.
Gross profit increased in the later period to $628,139 from $244,407, reflecting
the large increase in revenues from both Support desk services and Sales and
licensing revenues. The Company was able to hold Support desk services personnel
to 43% of the revenues generated from Support desk services. The second quarter
1999 saw declining revenues from Support desk services and the cost to maintain
those services was higher as percentage of revenues than in the first quarter of
1999, although not as high as that in the second quarter of 1998.
The Company enjoyed an operating profit of $259,700 in the 1999 period compared
to an operating loss of $179,382 in the 1998 period, reflecting both the
improved gross profit and lower Selling, general and administrative costs in the
1999 period. Some of the reduced Selling, general and administrative costs
reflect reduced marketing and sales personnel in the later period.
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 17, 2000 /s/ Sharon Stanley
-----------------------------------
Sharon Stanley,
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 233,664
<SECURITIES> 51,468
<RECEIVABLES> 121,131
<ALLOWANCES> 5,000
<INVENTORY> 0
<CURRENT-ASSETS> 409,448
<PP&E> 307,742
<DEPRECIATION> 253,921
<TOTAL-ASSETS> 466,358
<CURRENT-LIABILITIES> 634,569
<BONDS> 0
0
0
<COMMON> 96,247
<OTHER-SE> 1,252,543
<TOTAL-LIABILITY-AND-EQUITY> 466,358
<SALES> 878,515
<TOTAL-REVENUES> 878,515
<CGS> 250,376
<TOTAL-COSTS> 618,815
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,397
<INCOME-PRETAX> 255,023
<INCOME-TAX> 0
<INCOME-CONTINUING> 255,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255,023
<EPS-BASIC> 0.03
<EPS-DILUTED> 0
</TABLE>
