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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, 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>
June 30 December 31,
1997 1996
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 213,134 $ -
Marketable Securities 51,000 50,000
Accounts Receivable - Trade, net of allowance
for doubtful accounts of $69,098 in 1997 and 1996 404,219 677,744
Prepaid Expenses 36,950 -
Income Tax Receivable 184,845 184,845
Deferred Income Taxes 216,433 216,433
----------- -----------
TOTAL CURRENT ASSETS 1,106,581 1,129,022
---------- ----------
PROPERTY AND EQUIPMENT 292,674 278,548
Less Accumulated Depreciation and Amortization (169,235) (141,700)
----------- -----------
NET PROPERTY AND EQUIPMENT 123,439 136,848
----------- -----------
OTHER ASSETS
Deferred Income Taxes 119,413 119,413
Other 7,101 3,376
------------ ------------
TOTAL OTHER ASSETS 126,514 122,789
----------- -----------
TOTAL ASSETS $1,356,534 $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>
June 30, December 31,
1997 1996
--------- ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Cash Overdraft $ - $ 2,508
Note Payable 148,767 150,000
Accounts Payable 155,211 237,871
Accrued Expenses 481,852 544,802
Deferred Income 370,952 383,739
---------- ----------
TOTAL CURRENT LIABILITIES 1,156,782 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 (753,104) (830,322)
----------- -----------
757,450 627,437
Less Notes Receivable in connection with exercised stock options (557,698) (557,698)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 199,752 69,739
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,356,534 $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 June 30, Six Months Ended June 30,
1997 1996 1997 1996
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Support desk services $ 536,721 $ 68,695 $1,137,491 $ 438,214
Software sales 132,097 128,661 186,476 386,335
--------- --------- ---------- ---------
TOTAL REVENUES 668,818 197,356 1,323,967 824,549
DIRECT PERSONNEL COST OF
SUPPORT DESK SERVICES
AND SOFTWARE SALES 262,255 162,375 543,486 328,102
--------- --------- ---------- ---------
REVENUES, NET OF
DIRECT COSTS 406,563 34,981 780,481 496,447
--------- ---------- ---------- ---------
EXPENSES
Selling, general and administrative 346,001 348,800 707,601 689,993
Depreciation and amortization 14,009 11,122 27,535 22,251
---------- ---------- ----------- ----------
TOTAL EXPENSES 360,010 359,922 735,136 712,244
--------- --------- ---------- ---------
OPERATING
INCOME(LOSS) 46,553 (324,941) 45,345 (215,797)
OTHER INCOME (EXPENSE)
Interest and other income (2,032) 145 40,656 29,851
Interest expense (4,904) (42) (8,783) (924)
---------- ------------ ------------ -----------
INCOME (LOSS) BEFORE
INCOME TAXES 39,617 (324,838) 77,218 (186,870)
INCOME TAX BENEFIT - 110,445 - 63,536
------------- --------- -------------- ----------
NET INCOME (LOSS) $ 39,617 $(214,393) $ 77,218 $(123,334)
========== ========= =========== =========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 9,375,091 9,379,875 9,375,091 9,353,774
========= ========= ========== =========
NET INCOME (LOSS) PER $ 0.00 $ (0.02) $ 0.01 $ (0.01)
COMMON SHARE =========== ========== ============ ==========
</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,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 77,218 $(123,334)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities
Depreciation and Amortization 27,535 22,251
Provision for Doubtful Accounts - 90,081
Stock Issued For Compensation
and Services 55,866 -
Deferred Income Taxes - (63,536)
Changes in Assets and Liabilities
Trade Accounts Receivable 273,525 (99,638)
Prepaid Expenses (36,950) 13,395
Accounts Payable (82,659) 10,045
Accrued Liabilities (62,952) (43,196)
Deferred Income (12,786) -
Other Assets (3,725) -
Purchase of Marketable Securities (1,000) -
Cash Overdraft (2,508) -
--------- -------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 231,564 (193,932)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (14,126) (26,567)
Purchase of Treasury Stock (3,071) -
--------- ------------
NET CASH USED BY INVESTING ACTIVITIES (17,197) (26,567)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Repayments on Line of Credit (1,233) -
Borrowings Under Line of Credit - 13,000
Collections on Notes Receivable in Connection
with Exercised Stock Options - 40,398
Issuance of Common Stock for Warrants Exercised - 40,500
----------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (1,233) 93,898
--------- ----------
INCREASE (DECREASE) IN CASH 213,134 (126,601)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD - 131,653
------------ ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $213,134 $ 5,052
======== ==========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND
INCOME TAXES PAID DURING THE PERIOD
Interest $ 8,783 $ 421
========= ===========
Income Taxes $ - $ -
============ =============
</TABLE>
The accompaning note is an
integral part of these financial statements
F-4
<PAGE>
KNOWLEDGEBROKER, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 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 six month period
ended June 30, 1997, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1997.
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, 1997, Compared to Six Months Ended June 30, 1996
Revenues for the six months ended June 30, 1997, increased approximately
$500,000, to $1,323,967 from $824,549 for the 1996 six 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.
Because of the increased Support desk revenues the Company's gross profit
increased for the six month period to $780,000 from $496,000. This increase in
operating profit resulted in a net profit of $77,000 for the 1997 period
compared to the 1996 six month's period's loss of $123,000, the later period
covering the Selling, general and administrative costs that were essentially
unchanged between the periods.
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 12, 2000 /s/ Sharon Stanley
-----------------------------------
Sharon Stanley,
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 213,134
<SECURITIES> 51,000
<RECEIVABLES> 404,219
<ALLOWANCES> 69,098
<INVENTORY> 0
<CURRENT-ASSETS> 1,106,581
<PP&E> 292,674
<DEPRECIATION> 169,235
<TOTAL-ASSETS> 1,356,534
<CURRENT-LIABILITIES> 1,156,782
<BONDS> 0
0
0
<COMMON> 93,751
<OTHER-SE> 859,105
<TOTAL-LIABILITY-AND-EQUITY> 1,356,534
<SALES> 1,323,967
<TOTAL-REVENUES> 1,323,967
<CGS> 543,486
<TOTAL-COSTS> 1,278,622
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,798
<INTEREST-EXPENSE> 8,783
<INCOME-PRETAX> 77,218
<INCOME-TAX> 0
<INCOME-CONTINUING> 77,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,218
<EPS-BASIC> 0.01
<EPS-DILUTED> 0
</TABLE>
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