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, 1998
[ ] 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,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ - $199,171
Marketable Securities 51,000 51,000
Accounts Receivable - Trade, net of allowance
for doubtful accounts of $5,000 in 1998 and 1997 249,566 106,255
Prepaid Expenses 28,185 40,201
Income Tax Receivable 55,772 55,772
--------- ----------
TOTAL CURRENT ASSETS 384,523 452,399
-------- ---------
PROPERTY AND EQUIPMENT 299,648 295,165
Less Accumulated Depreciation and Amortization (224,787) (193,222)
-------- ---------
NET PROPERTY AND EQUIPMENT 74,861 101,943
--------- ---------
OTHER ASSETS 3,089 3,089
--------- ----------
TOTAL ASSETS $462,473 $557,431
======== ========
</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,
1998 1997
------------------- ---------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Cash Overdraft $ 2,465 $ -
Notes Payable 263,000 134,787
Accounts Payable 93,000 150,874
Accrued Expenses 428,580 519,304
Deferred Income 326,257 262,079
---------- -----------
TOTAL CURRENT LIABILITIES 1,113,302 1,067,044
---------- ----------
STOCKHOLDERS' DEFICIT
Preferred Stock, $0.01 par value, 5,000,000 shares authorized - -
Common Stock, $0.01 par value, 25,000,000 shares authorized,
9,297,024 shares issued 92,970 92,970
Treasury Stock - 3,000 shares, at cost (3,071) (3,071)
Additional Paid-In Capital 1,020,687 1,020,687
Retained Deficit (1,761,415) (1,620,199)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIT (650,829) (509,613)
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 462,473 $ 557,431
========== ===========
</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,
------------------ -----------------
1998 1997 1998 1997
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Support desk services $198,376 $ 80,944 $ 495,832 $1,218,435
Software sales 107,876 281,356 320,551 467,832
--------- --------- ---------- ----------
TOTAL REVENUES 306,252 362,300 816,383 1,686,267
--------- --------- ---------- ----------
DIRECT PERSONNEL COST
OF SUPPORT DESK SERVICES
AND SOFTWARE SALES 97,447 150,807 363,171 694,294
--------- --------- ---------- -----------
REVENUES,
NET OF DIRECT COSTS 208,805 211,493 453,212 991,973
--------- --------- ---------- -----------
EXPENSES
Selling, general and administrative 156,216 250,235 558,858 957,837
Depreciation and amortization 10,418 12,745 31,565 40,280
---------- ---------- ----------- ------------
TOTAL EXPENSES 166,634 262,980 590,423 998,117
--------- --------- ---------- -----------
OPERATING (LOSS) INCOME 42,171 (51,487) (137,211) (6,144)
OTHER INCOME (EXPENSE)
Interest and other income 2,484 5,089 5,975 45,674
Interest expense (3,641) (3,046) (9,980) (11,828)
---------- ---------- ------------ -----------
INCOME (LOSS) BEFORE
INCOME TAXES 41,014 (49,444) (141,216) 27,702
INCOME TAX - - - -
---------- ---------- ---------- -----------
NET INCOME (LOSS) $ 41,014 $ (49,444) $ (141,216) $ 27,702
========== ========== ========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 9,375,024 9,375,091 9,375,024 9,375,091
========= ========= ========== ==========
NET INCOME (LOSS) PER
COMMON SHARE $ 0.00 $ (0.01) $ (0.02) $ 0.00
=========== ========= ========== ==========
</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,
1998 1997
-------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)Income $(141,216) $ 27,702
Adjustments to Reconcile Net (Loss) Income to Net
Cash (Used) Provided by Operating Activities
Depreciation and Amortization 31,565 40,280
Stock Issued for Compensation
and Services - 55,866
Changes in Assets and Liabilities
Trade Accounts Receivable (143,311) 256,284
Prepaid Expenses 12,016 (39,765)
Income Tax Receivable - 119,840
Accounts Payable (57,874) (109,496)
Accrued Liabilities (90,724) (102,591)
Deferred Income 64,178 (12,576)
Other Assets - (3,725)
Marketable Securities Purchased - (1,000)
Cash Overdraft 2,465 (2,508)
----------- ------------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (322,901) 228,311
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (4,483) (15,665)
Purchase of Treasury Stock - (3,071)
------------- -----------
NET CASH USED BY INVESTING ACTIVITIES (4,483) (18,736)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Repayments on Line of Credit - (11,233)
Borrowings Under Lines of Credit 128,213 -
--------- --------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 128,213 (11,233)
--------- ----------
(DECREASE) INCREASE IN CASH (199,171) 198,342
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 199,171 -
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ 198,342
============= =========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND
INCOME TAXES PAID DURING THE PERIOD
Interest $ 9,980 $ 11,828
=========== ===========
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, 1998
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, 1997. 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, 1998, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
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, 1998, Compared to Nine Months Ended
September 30, 1997
Revenues for the nine months ended September 30, 1998, decreased almost
$870,000, to $816,383 from $1,686,267 for the 1997 nine month period. In the
1997 period the Company began an agreement with two new significant clients for
Support desk services which had been completed in the second half of 1997. As a
result revenues from Support desk services declined to $495,832 in the first
nine months of 1998 from $1,218,435 in the first nine months of 1997. This
decline in revenues from Support desk services was also reflected by a decrease
in sales and license revenues in the 1998 period, a decrease to $320,551 from
$467,832.
Gross profit decreased in the later period to $452,212 from $991,973, largely
reflecting the large decrease in revenues from Support desk services. The
Company reduced the number of people staffing the Support desk services, but the
needs of the Company to retain a core group of personnel required to meet the
needs of the service resulted in Support desk services personnel amounting to
73% of the revenues generated from Support desk services.
The decrease in gross 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 1997. In the 1998 period the Company's operating
loss was $137,211 with a net loss of $141,216 while the 1997 period saw an
operating loss of $6,144 and net income of $27,702. The income enjoyed in the
earlier period was increased because of significant net interest income.
While gross profit decreased in the nine month period, the three months ended
September 30, 1998, reflected an operating profit of more than $40,000 and a
similar net income. This change in the third quarter was aided by greater
efficiencies in the Support desk services and the reduction of senior sales and
marketing personnel that occurred in the third quarter.
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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,465
<SECURITIES> 51,000
<RECEIVABLES> 249,566
<ALLOWANCES> 5,000
<INVENTORY> 0
<CURRENT-ASSETS> 384,523
<PP&E> 229,648
<DEPRECIATION> 224,787
<TOTAL-ASSETS> 462,473
<CURRENT-LIABILITIES> 1,113,302
<BONDS> 0
0
0
<COMMON> 92,970
<OTHER-SE> 1,017,616
<TOTAL-LIABILITY-AND-EQUITY> 462,473
<SALES> 816,383
<TOTAL-REVENUES> 816,383
<CGS> 363,171
<TOTAL-COSTS> 953,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,980
<INCOME-PRETAX> (141,216)
<INCOME-TAX> 0
<INCOME-CONTINUING> (141,216)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (141,216)
<EPS-BASIC> (0.02)
<EPS-DILUTED> 0
</TABLE>
