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, 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.
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(Exact name of small business issuer as specified in its charter)
Nevada 84-0856578
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
13295 Mira Loma Road, Reno, NV 89511
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(Address of principal executive offices) (Zip Code)
(775) 852-5711
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(Registrant's telephone number)
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(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>
September 30, December 31,
2000 1999
---------------- ------------
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 38,703 $ 44,027
Marketable Securities 51,547 51,504
Accounts Receivable - Trade, net of allowance
for doubtful accounts of $5,000 in 2000 and 1999 93,995 102,111
Prepaid Expenses 3,185 18,157
--------- ---------
TOTAL CURRENT ASSETS 187,430 215,799
--------- ---------
PROPERTY AND EQUIPMENT 312,005 311,469
Less Accumulated Depreciation and Amortization (285,601) (270,193)
--------- ---------
NET PROPERTY AND EQUIPMENT 26,404 41,276
--------- ---------
OTHER ASSETS 3,089 3,089
--------- ---------
TOTAL ASSETS $ 216,923 $ 260,164
========= =========
</TABLE>
(Continued)
The accompanying notes are 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,
2000 1999
--------------- --------------
(Unaudited)
CURRENT LIABILITIES
<S> <C> <C>
Notes Payable $ 327,000 $ 275,000
Accounts Payable 115,011 86,269
Accrued Expenses 1,049,642 106,689
Deferred Income 78,484 168,455
----------- -----------
TOTAL CURRENT LIABILITIES 1,570,137 636,413
NOTES PAYABLE - SHAREHOLDERS 165,250 -
COMMITMENTS AND CONTINGENCIES - Note 2 - -
----------- -----------
TOTAL LIABILITIES 1,735,387 636,413
----------- -----------
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 (2,878,054) (1,725,039)
Treasury Stock, at cost, 35,000 shares (9,670) (9,670)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (1,518,464) (376,249)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 216,923 $ 260,164
=========== ============
</TABLE>
The accompanying notes are an
integral part of these financial statements
F-2
<PAGE>
KNOWLEDGEBROKER, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------ ------------------------------------
2000 1999 2000 1999
---------------- ---------------- ---------------- ---------------
REVENUES
<S> <C> <C> <C> <C>
Support Desk Services $ 49,947 $ 35,039 $ 196,031 $ 614,465
Software Sales 124,381 152,506 320,623 451,595
---------- ---------- ------------- ----------
TOTAL REVENUES 174,328 187,545 516,654 1,066,060
---------- ---------- ------------- ----------
DIRECT PERSONNEL COST
OF SUPPORT DESK
SERVICES AND SOFTWARE
SALES 48,931 89,254 198,246 339,630
---------- ---------- ------------- ----------
REVENUES,
NET OF DIRECT COST 125,397 98,291 318,408 726,430
---------- ---------- ------------- ----------
EXPENSES
Selling, General and
Administrative 105,749 153,069 418,671 502,172
Litigation Expense 982,581 - 982,581 -
Depreciation and Amortization 5,029 9,191 15,408 28,528
---------- ---------- ------------- ----------
TOTAL EXPENSES 1,093,359 162,260 1,416,660 530,700
---------- ---------- ------------- ----------
OPERATING (LOSS)
INCOME (967,962) (63,969) (1,098,252) 195,730
OTHER INCOME (EXPENSE)
Interest and Other Income 915 5,233 5,038 18,953
Interest Expense (29,978) (6,673) (59,801) (25,070)
---------- ---------- ------------- ----------
(LOSS) INCOME BEFORE
INCOME TAXES (997,025) (65,409) (1,153,015) 189,613
INCOME TAX - - - -
---------- ---------- ------------- ----------
NET (LOSS) INCOME $ (997,025) $ (65,409) $ (1,153,015) $ 189,613
==========- ========== ============= ==========
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 9,711,090 9,624,690 9,650,610 9,624,690
========== ========== ============= ==========
NET (LOSS) INCOME PER
COMMON SHARE $ (0.10) $ (0.01) $ (0.12) $ 0.02
========== ========== ============= ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements
F-3
<PAGE>
KNOWLEDGEBROKER, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------
2000 1999
---------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (Loss) Income $ (1,153,015) $ 189,613
Adjustments to Reconcile Net (Loss) Income to Net
Cash Used by Operating Activities
Depreciation and Amortization 15,408 28,528
Issuance of Common Stock for Payment of Interest 10,800 -
Changes in Assets and Liabilities
Trade Accounts Receivable 8,116 140,270
Prepaid Expenses 14,972 1,000
Accounts Payable 28,742 (54,752)
Accrued Liabilities 942,953 (237,026)
Deferred Income (89,971) (88,367)
Marketable Securities (43) 3,519
------------ ---------
NET CASH USED BY
OPERATING ACTIVITIES (222,038) (17,215)
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (536) (8,621)
Purchase of Treasury Stock - (5,571)
------------ ---------
NET CASH USED BY INVESTING ACTIVITIES (536) (14,192)
------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Repayments on Lines of Credit - (100,342)
Borrowings Under Lines of Credit 52,000 -
Loans from Shareholders 165,250 -
------------ ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 217,250 (100,342)
------------ ---------
(DECREASE) IN CASH (5,324) (131,749)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 44,027 196,009
------------ ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 38,703 $ 64,260
============ =========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND
INCOME TAXES PAID DURING THE PERIOD
Interest $ 28,819 $ 25,070
============ =========
Income Taxes $ - $ -
============ =========
</TABLE>
The accompanying notes are an
integral part of these financial statements
F-4
<PAGE>
KNOWLEDGEBROKER, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 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 nine month
period ended September 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 was entered against
KnowledgeBroker, Inc. ("KBI") in September 2000 and has been accrued in
these unaudited financial statements. This judgment against KBI is being
contested and vigorously explored.
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, 2000, Compared to Nine Months Ended September
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
$196,031 in the first nine months of 2000 compared to $614,465 in the first nine
months of 1999. Furthermore, revenue from software sales and licensing also
declined in the first nine months of 2000 to $320,623 from $451,595 in the first
nine months of 1999 largely because of the favorable timing of software sales
and licensing in the first nine months of 1999 and the unfavorable timing of
software sales and licensing in the first nine months of 2000.
Revenues for the first nine months of 1999 were $1,066,060 compared to $516,654
in the first nine months of 2000, and gross profit in the first nine months of
1999 was $726,430 compared to gross profit of $318,408 in the first nine months
of 2000.
Selling, general and administrative expenses also declined, excluding litigation
expense, in 2000, to $434,079, when compared to the $530,700 in the first nine
months of 1999, largely reflecting the reduced management effort required for
decreased Support desk services. In the third quarter of 2000, the Company
accrued $982,581 in connection with litigation against the Company commenced in
the second quarter of 2000.
For the first nine months of 1999 Company had a Net income of $189,613 compared
to a loss of $1,153,015 in the first nine months of 2000 of which $982,581 was
litigation expense.
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 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.
November 8, 2000 /s/__Sharon Stanley________________
-----------------------------------
Sharon Stanley,
Principal Financial Officer
