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, 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>
September 30, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 64,260 $196,009
Marketable Securities 51,485 55,004
Accounts Receivable - Trade, net of allowance
for doubtful accounts of $5,000 in 1999 and 1998 142,046 282,316
Prepaid Expenses 3,185 4,185
---------- ----------
TOTAL CURRENT ASSETS 260,976 537,514
-------- --------
PROPERTY AND EQUIPMENT 311,469 302,848
Less Accumulated Depreciation and Amortization (263,111) (234,583)
-------- --------
NET PROPERTY AND EQUIPMENT 48,358 68,265
--------- ---------
OTHER ASSETS 3,089 3,089
---------- ----------
TOTAL ASSETS $312,423 $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>
September 30, December 31,
1999 1998
------------------- --------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 203,500 $ 303,842
Accounts Payable 66,454 121,206
Accrued Expenses 49,189 286,215
Deferred Income 226,900 315,267
---------- -----------
TOTAL CURRENT LIABILITIES 546,043 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 (1,582,410) (1,772,023)
Treasury Stock, at cost 35,000 and 11,000 shares, respectively (9,670) (4,099)
----------- ------------
TOTAL STOCKHOLDERS' DEFICIT (233,620) (417,662)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 312,423 $ 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 Nine Months Ended
September 30, September 30,
----------------------- --------------------------
1999 1998 1999 1998
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
REVENUES
Support Desk Services $ 35,039 $198,376 $ 614,465 $ 495,832
Software Sales 152,506 107,876 451,595 320,551
---------- --------- ------------ ---------
TOTAL REVENUES 187,545 306,252 1,066,060 816,383
---------- --------- ---------- ----------
DIRECT PERSONNEL COST
OF SUPPORT DESK SERVICES
AND SOFTWARE SALES 89,254 97,447 339,630 363,171
----------- --------- ------------ ----------
REVENUES,
NET OF DIRECT COSTS 98,291 208,805 726,430 453,212
----------- --------- ------------ ----------
EXPENSES
Selling, General and Administrative 153,069 156,216 502,171 558,858
Depreciation and Amortization 9,191 10,418 28,529 31,565
------------ ---------- ------------ -----------
TOTAL EXPENSES 162,260 166,634 530,700 590,423
---------- --------- ----------- ----------
OPERATING (LOSS) INCOME (63,969) 42,171 195,730 (137,211)
OTHER INCOME (EXPENSE)
Interest and Other Income 5,233 2,484 18,953 5,975
Interest Expense (6,673) (3,641) (25,070) (9,980)
----------- ---------- ------------ ------------
(LOSS) INCOME BEFORE
INCOME TAXES (65,409) 41,014 189,613 (141,216)
INCOME TAX - - - -
-------------- ------------ ----------- ------------
NET (LOSS) INCOME $ (65,409) $ 41,014 $ 189,613 $ (141,216)
=========== ========= ============ =========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 9,624,690 9,375,024 9,624,690 9,375,024
========= ========= ========= ==========
NET (LOSS) INCOME PER
COMMON SHARE $ (0.01) $ 0.00 $ 0.02 $ (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>
Nine Months Ended September 30,
1999 1998
------------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) Income $189,613 $(141,216)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Used by Operating Activities
Depreciation and Amortization 28,528 31,565
Changes in Assets and Liabilities
Trade Accounts Receivable 140,270 (143,311)
Prepaid Expenses 1,000 12,016
Accounts Payable (54,752) (57,874)
Accrued Liabilities (237,026) (90,724)
Deferred Income (88,367) 64,178
Marketable Securities 3,519 -
Cash Overdraft - 2,465
------------ -----------
NET CASH USED BY
OPERATING ACTIVITIES (17,215) (322,901)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (8,621) (4,483)
Purchase of Treasury Stock (5,571) -
-------- -------------
NET CASH USED BY INVESTING ACTIVITIES (14,192) (4,483)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Repayments on Lines of Credit (100,342) -
Borrowings Under Lines of Credit - 128,213
------------ ---------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES (100,342) 128,213
-------- ---------
(DECREASE) IN CASH (131,749) (199,171)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 196,009 199,171
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 64,260 $ -
======== =============
SUPPLEMENTAL DISCLOSURE OF INTEREST AND
INCOME TAXES PAID DURING THE PERIOD
Interest $ 25,070 $ 9,980
======== ===========
Income Taxes $ - $ -
============ ===========
</TABLE>
The accompanying note is an
integral part of these financial statements
F-4
<PAGE>
KNOWLEDGEBROKER, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 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 nine month period ended September 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.
Nine Months Ended September 30, 1999, Compared to Nine Months Ended
September 30, 1998
Revenues for the nine months ended September 30, 1999, increased almost
$250,000, to $1,066,060 from $816,383 for the 1998 nine 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 and third quarter. Revenues from
Support desk services increased about $119,000 to $614,465 in the nine months of
1999 from $495,832 in the first nine months of 1998 and Sales and licensing
revenues increased in 1999 about $131,000 to $451,595 from $320,551 when
compared to the Sales and licensing revenues in 1998 for the same period.
Gross profit increased in the later period to $726,430 from $453,212 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 55% of the revenues generated from Support desk services. The second and
third quarters of 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 and third
quarters of 1998.
The Company enjoyed an operating profit in the 1999 period of $195,730 in the
1999 period compared to an operating loss of $137,211 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 64,260
<SECURITIES> 51,485
<RECEIVABLES> 142,046
<ALLOWANCES> 5,000
<INVENTORY> 0
<CURRENT-ASSETS> 260,976
<PP&E> 311,469
<DEPRECIATION> 263,111
<TOTAL-ASSETS> 312,423
<CURRENT-LIABILITIES> 546,043
<BONDS> 0
0
0
<COMMON> 96,247
<OTHER-SE> 1,252,543
<TOTAL-LIABILITY-AND-EQUITY> 312,423
<SALES> 1,066,060
<TOTAL-REVENUES> 1,066,060
<CGS> 339,630
<TOTAL-COSTS> 870,330
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,070
<INCOME-PRETAX> 189,613
<INCOME-TAX> 0
<INCOME-CONTINUING> 189,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189,613
<EPS-BASIC> 0.02
<EPS-DILUTED> 0
</TABLE>
