**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

**[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 ( d ) OF THE SECURITIES EXCHANGE ACT OF 1934**

  

**For the quarterly period ended September 30, 2010**

  

**[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 ( d ) OF THE EXCHANGE ACT**

  

**For the transition period from ____________ to____________**

  

**Commission File No. 000-49990**

  

PCS EDVENTURES!.COM, INC.

(Exact name of Registrant as specified in its charter) 
| Idaho

82-0475383

(State or Other Jurisdiction of 

(I.R.S. Employer Identification No.) 

incorporation or organization) 

  

345 Bobwhite Court, Suite 200

Boise, Idaho 83706

(Address of Principal Executive Offices) 

(208) 343-3110

(Registrant’s telephone number, including area code) 

N/A 

(Former name, former address and former fiscal year, 

if changed since last report) 

Indicate by check mark whether the Registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 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 [  ] 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ] 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer [  ]      Accelerated filer [  ]       Non-accelerated filer [  ]      Smaller reporting company [X]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes [  ] No [X] 

1

**APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**

**PROCEEDINGS DURING THE PRECEDING FIVE YEARS**

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or  15(d) of the Exchanger Act subsequent to the distribution of securities under a plan confirmed by a court.      

Not applicable.

**APPLICABLE ONLY TO CORPORATE ISSUERS**

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:

November 1, 2010:  41,053,337 Shares of Common Stock

**PART I –FINANCIAL INFORMATION**

**Item 1.  Financial Statements**

The Financial Statements of the Registrant required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant. 

2

 

 

 

 

INDEX

 

 

 

 

PART I

-               FINANCIAL INFORMATION

 

 

 

 

 

Page

Consolidated Balance Sheets (unaudited)........................................................................................

4

 

 

 

Consolidated Statements of Operations (unaudited)...........................................................................

6

 

 

 

Consolidated Statement of Stockholders’ Equity (unaudited)......................................................... ......

7

 

 

 

Consolidated Statements of Cash flows (unaudited).........................................................................

8

 

 

 

Notes to Consolidated Financial Statements (unaudited)......................................................................

10

 

 

 

Management’s Discussion and Analysis of Financial Conditions and Results of Operations.............................................................................................................................

17

 

 

 

Controls and Procedures............................................................................................................

19

 

 

 

 

 

 

PART II

-                OTHER INFORMATION...............................................................................

19

 

 

 

SIGNATURES ................................................................................................................

22

 

 

 

EXHIBIT INDEX ..................................................................................................................

22

 

 

 

3

PCS EDVENTURES!.COM, INC.

Consolidated Balance Sheets

**ASSETS**

 

September 30, 2010

March 31, 2010

 

(unaudited)

(audited)

CURRENT ASSETS

 

 

Cash

 $                 182,063 

 $                       290,141 

Accounts receivable, net of allowance for doubtful   accounts of $4,308 and $4,271 respectively

                    231,563 

                            255,846 

Interest Receivable

                      475 

                                   524 

Prepaid expenses

                      52,368 

                              17,592 

Finished goods inventory 

                    185,969 

                            207,132 

Other receivable

                         41,143     

                              30,227 

Total Current Assets

               693,581 

801,462 

 

 

 

FIXED ASSETS, net of accumulated depreciation of $185,439 and $160,613, respectively

106,292 

132,650 

EDUCATIONAL SOFTWARE, net of accumulated amortization of $240,834 and $229,381, respectively

199,020 

214,756 

GOODWILL 

202,688 

202,688 

 

 

 

OTHER ASSETS

 

 

    Mold Cost

23,589 

24,643 

Deposits

17,371 

7,371 

Total Other Assets

40,960 

32,014 

**TOTAL ASSETS**

**$1,242,541
**$1,383,570**

The accompanying notes are an integral part of these financial statements

4

PCS EDVENTURES!.COM, INC.

Consolidated Balance Sheets

**LIABILITIES & STOCKHOLDERS’ EQUITY**

 

 

 

 

September 30, 2010

March 31, 2010

 

(unaudited)

(audited)

CURRENT LIABILITIES

 

 

Accounts payable and other current liabilities

 $                 349,122 

   $          265,908 

Accrued compensation

-

6,000 

Payroll liabilities payable

19,967

17,091 

Accrued expenses 

54,703 

38,191 

Deferred revenue

93,515

105,669 

Total Current Liabilities

517,307 

432,859 

          Total Liabilities

517,307 

432,859 

 

 

 

STOCKHOLDERS’ EQUITY 

 

 

Preferred stock, no par value, 20,000,000    

-

-

authorized shares, no shares issued and outstanding

  Common stock, no par value, 60,000,000 

34,414,463 

33,526,490 

authorized shares, 40,951,407 and 39,700,831 shares         issued and outstanding, respectively

 Stock payable

142,195 

88,745 

Accumulated comprehensive income (loss)

4,022

14,425 

Accumulated deficit

(33,835,446)

(32,678,949)

Total Stockholders’ Equity

725,234 

950,711 

**TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY**

** $            1,242,541**

** $    1,383,570**

The accompanying notes are an integral part of these financial statements

5

PCS EDVENTURES!.COM, INC.

Consolidated Statements of Operations

(unaudited)

 

For the Three Months Ended

 

For the Six Months Ended

 

September 30,

 

September 30,

 

2010

 

2009

 

2010

 

2009

REVENUES

 

 

 

 

 

 

 

Lab revenue

$        446,589 

 

$        774,887 

 

$     901,743 

 

$     1,214,911 

License revenue

28,855 

 

24,834 

 

58,942 

 

49,692 

Total Revenues

475,444 

 

799,721 

 

960,685 

 

1,264,603 

 

 

 

 

 

 

 

 

COST OF SALES, exclusive of depreciation shown below

203,512 

 

377,053 

 

384,141 

 

607,961 

 

 

 

 

 

 

 

 

GROSS PROFIT

271,932 

 

422,668 

 

576,544 

 

656,642 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Salaries and wages

446,160 

 

292,097 

 

738,210 

 

592,674 

Depreciation and amortization expense 

16,548 

 

27,967 

 

39,664 

 

55,377 

Loss on stock compensation

7,847 

 

9,737 

 

7,847 

 

12,477 

General and administrative expenses

562,837 

 

554,003 

 

948,016 

 

940,662 

Total Operating Expenses

1,033,392 

 

883,804 

 

1,733,737 

 

1,601,190 

 

 

 

 

 

 

 

 

OPERATING LOSS

(761,460)

 

(461,136)

 

(1,157,193)

 

(944,548)

 

 

 

 

 

 

 

 

OTHER INCOME AND EXPENSES

 

 

 

 

 

 

 

Interest income

932 

 

877 

 

1,901 

 

5,633 

Other income

-

 

15,391

 

-

 

44,345 

Other expense

(595)

 

-

 

(1,205)

 

-

Total Other Income and Expenses

337 

 

16,268 

 

696 

 

49,978 

 

 

 

 

 

 

 

 

NET LOSS

(761,123)

 

(444,868)

 

(1,156,497)

 

(894,570)

Foreign currency translation

5,533 

 

13,536 

 

(10,403)

 

29,154 

NET COMPREHENSIVE LOSS

**$      (755,590)**

 

**$      (431,332)**

 

**$     (1,166,900)**

 

**$     (865,416)**

 

 

 

 

 

 

 

 

Basic Loss per Share

($0.02)

 

($0.01)

 

($0.03)

 

($0.03)

Weighted Average Number of Shares Outstanding

40,838,176

 

37,708,335

 

40,520,096

 

37,723,953

The accompanying notes are an integral part of these financial statements

6

PCS EDVENTURES!.COM, INC.

Consolidated Statement of Stockholders’ Equity

(unaudited)

 

 

 

 

Other

Total

 

Common Stock

  

Stock

Accumulated

Comprehensive

Stockholders’

 

(shares)

(amount)

Payable

Deficit

Income

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 3/31/2010

              39,700,831 

  $ 33,526,490 

            88,745

      $(32,678,949) 

                        14,425

           $  950,711

 Stock for Services 

              164,579 

                116,512 

(2,444)

 

 

114,068

 

 

 

 

 

 

 

 Stock for RSU’s 

 - 

 - 

45,000

 

        

45,000 

 

 

 

 

 

 

 

 Stock for Exercise of Options - Cash 

            50,332 

                27,000 

 

 

 - 

 27,000 

 

 

 

 

 

 

 

 Stock for Exercise of Options -  Cashless

            149,819 

 - 

 

 

 - 

 - 

 

 

 

 

 

 

 

    Stock for Employee Bonus 

              135,846 

                96,408 

10,894

 

 

107,302 

 

 

 

 

 

 

 

 Option Expense 

                      -   

                198,053 

 

 

 - 

 198,053 

 

 

 

 

 

 

 

 Stock Issued for Cash

            750,000 

              450,000 

 

 

 - 

 450,000 

 

 

 

 

 

 

 

 Foreign Currency Translation 

 - 

 - 

 

 

(10,403)  

 (10,403) 

 

 

 

 

 

 

 

 Net Loss through 9/30/2010 (unaudited)

 - 

 - 

 

(1,156,497)

 

          (1,156,497)

 

 

 

 

 

 

 

Balance at 9/30/2010 (unaudited)

            40,951,407 

        34,414,463 

           142,195

         (33,835,446)

                 $  4,022 

              $  725,234

The accompanying notes are an integral part of these financial statements

7

PCS EDVENTURES!.COM, INC.

Consolidated Statements of Cash Flows

(unaudited)

 

For the Six  Months Ended

 

September  30,

 

2010

 

2009

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net Loss

$         (1,156,497)

 

$         (894,570)

 

Adjustments to reconcile net loss to net cash provided (used) by operating activities:

 

 

 

 

Depreciation

               39,664 

 

               55,377 

 

Amortization of fair value of stock options

             198,053 

 

             213,448 

 

Stock issued for services

               266,369 

 

               142,249 

 

 Change in accounting policy

 - 

 

              (43,498)

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

(Increase) decrease in accounts receivable

            24,283

 

            (158,833)

 

(Increase) decrease in prepaid expenses

                 (34,776) 

 

                 9,864 

 

(Increase) decrease in interest receivable

 - 

 

                    944 

 

(Increase) decrease in other receivables

(9,080) 

 

 - 

 

(Increase) decrease in inventories

               21,163 

 

               34,390 

 

Increase in deferred costs

 - 

 

              (24,640)

 

(Decrease) increase in accounts payable and accrued liabilities

               96,603 

 

               56,661 

 

Increase (decrease) in unearned revenue

             (12,154) 

 

             236,636 

 

(Increase) decrease in other assets

(8,303) 

 

(7,000) 

 

Net Cash Used by Operating Activities

$        (574,675)

 

$        (378,972)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Cash outflow from fixed asset purchase

-

 

              (98,466)

 

Net Cash Used by Investing Activities

-

 

              (98,466)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Payments on notes payable

 - 

 

                (6,142)

 

Proceeds from sale of common stock

               450,000 

 

 - 

 

Proceeds from exercise of options

               27,000 

 

               10,177 

 

Net Cash Provided by Financing Activities

477,000

 

                 4,035 

 

 

 

 

 

 

Foreign currency translation

               (10,403) 

 

               29,154 

 

Net Increase (Decrease) in Cash

            (108,078)

 

            (444,249)

 

Cash at Beginning of Period

             290,141 

 

             548,443 

 

Cash at End of Period

 $          182,063 

 

$          104,194

 

The accompanying notes are an integral part of these financial statements

8

PCS EDVENTURES!.COM, INC.

Consolidated Statements of Cash Flows (continued)

(unaudited)

 

For the Six Months Ended

 

September 30,

NON-CASH TRANSACTIONS:

2010

 

2009

Common stock issued for services

   $             35,427 

 

$            90,409    

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

September 30,

 

2010

 

2009

CASH PAID FOR:

 

 

 

Interest

 $                        - 

 

 $                        - 

Income taxes

 $                        - 

 

 $                        - 

The accompanying notes are an integral part of these financial statements

9

PCS EDVENTURES!.COM, INC

Notes to the Consolidated Financial Statements

September 30, 2010

(unaudited)

**NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS**

The consolidated financial statements presented are those of PCS Edventures!.com, Inc., an Idaho corporation, and its wholly owned subsidiary, PCS LabMentors, Ltd., a Canadian company (collectively,  “the Company”).

On August 3, 1994, PCS Edventures!.com, Inc. was incorporated under the laws of Idaho to engage in web-based and site-licensable educational products.

In October 1994, an agreement was authorized allowing PCS to exchange, on a one-for-one basis, common stock for stock of PCS Schools, Inc. As a result of this agreement, PCS Schools, Inc. became a wholly owned subsidiary of PCS.  In the late 1990s, the Company divested the stand-alone learning labs to focus more on a hands-on module coupled with web-based technology for use in the classroom.

On March 27, 2000, PCS changed its name from PCS Education Systems, Inc. to PCS Edventures!.com, Inc.

On November 30, 2005, PCS entered into an agreement with 511092 N.B. LTD. dba LabMentors to exchange PCS stock for stock of 511092 N.B. LTD. as disclosed in the 8-K as filed with the SEC on December 9, 2005 and amended on February 15, 2006.  As a result of the Share Exchange Agreement, 511092 N.B. LTD. became a wholly owned subsidiary of PCS.  In December 2005, the name of this subsidiary was formally changed to PCS LabMentors, Ltd. It remains a Canadian corporation.

**NOTE 2 - UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

The September 30, 2010 consolidated financial statements presented herein are unaudited, and in the opinion of management, include all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation of financial position, results of operations and cash flows. Such financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. This Quarterly Report on Form 10-Q should be read in conjunction with the Annual Report on Form 10-K for PCS Edventures!.com for the year ended March 31, 2010. The September 30, 2010, consolidated balance sheet is derived from the audited balance sheet included therein.

The operating results for the three-month and six-month period ended September 30, 2010, are not necessarily indicative of the results that may be expected for the year ending March 31, 2011.

**NOTE 3 - GOING CONCERN**

The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The established sources of revenues are not sufficient to cover the Company’s operating costs. Although the Company has positive working capital, it has accumulated significant losses and payables. The combination of these items raises substantial doubt about its ability to continue as a going concern. Management’s plans with respect to alleviating this adverse position are as follows:    

During the fiscal quarter ended September 30, 2010, the Company continued to develop and enhance the Strategic Business Units (SBUs) that were established during the fourth quarter of fiscal year 2010.  The SBU strategy has allowed for increased penetration of our robotics and engineering programs throughout the state of Idaho in addition to other Technical Education programs within the United States. The Afterschool SBU established a national level pilot program with the YMCA as well as gained momentum with our newest product, the Discovery STEM lab.   The domestic market strategy is to continue building upon and adding to our strengths through product development along with the continuance and addition of partnership alliances that will allow for the advancement of market share and to increasingly work with current and future customers in fulfilling needs within this market segment.

10

PCS EDVENTURES!.COM, INC

Notes to the Consolidated Financial Statements

September 30, 2010

(unaudited)

**NOTE 3 - GOING CONCERN (Continued)**

The Company also continues to focus efforts on the Middle East and is actively working towards expansion into Central and South America. The Company has developed alliances and relationships with the Al Khaymah Establishment, an organization with a diverse network of affiliates and associations across the Middle East-North African Region (MENA) as well as Africa and Central Asia. The Company plans to continue its efforts in establishing market share and growth within the International Market. PCS EDVENTURES!.COM, INC

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraphs, raise capital as and when needed,  and eventually attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

**NOTE 4 - FIXED ASSETS**

Assets and depreciation for the periods are as follows:

 

September 30,

March 31,

 

2010

2010

  Computer/office equipment

$               17,878

 $                15,252 

  Server equipment

146,498

150,656 

  Software

127,355

127,355 

  Accumulated depreciation

(185,439)

(160,613)

   Total Fixed Assets

 $              106,292 

 $              132,650 

**NOTE 5 - EDUCATIONAL SOFTWARE**

Educational software was purchased by the Company as a part of the acquisition of 511092 N.B. LTD. and consists of internally developed education computer programs and exercises to be accessed on the Internet. In accordance with financial accounting standard pertaining to internally developed software, the costs associated with research and initial feasibility of the programs and exercises are expensed as incurred. Once economic feasibility has been determined, the costs to develop the programs and exercises are capitalized until they are ready for sale and customer access and are reported at the lower of unamortized cost or net realizable value. Capitalized program and exercise inventory are amortized on a straight-line basis over the estimated useful life of the program or exercise, generally 24 to 48 months. 

**NOTE 6 - GOODWILL**

The entire goodwill balance of $202,688 at September 30, 2010 and March 31, 2010, which is not deductible for tax purposes due to the purchase being completed through the exchange of stock, is related to the Company’s acquisition of PCS LabMentors in November 2005. Included within this amount of goodwill are capital costs associated with the acquisition. The capitalized costs are for accounting, consulting and legal fees associated with the transaction. With the acquisition of PCS LabMentors, the Company gained LabMentors’ significant interest in the technical college market and increased the products available to educational outlets. The Company also obtained the information technology and programming expertise of LabMentors’ workforce, gained additional cost optimization and gained greater market flexibility in optimizing market information and access to collegiate level sales.

Generally accepted accounting standards require that a two-step impairment test be performed annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The first step of the test for impairment compares the book value of the Company to its estimated fair value. 

We undertook an impairment review during fiscal year 2010. After reviewing current operating losses and future growth potential of the subsidiary, the Company determined that impairment was not necessary.

11

PCS EDVENTURES!.COM, INC

Notes to the Consolidated Financial Statements

September 30, 2010

(unaudited)

**NOTE 7 - ACCRUED EXPENSES**

  

Accrued expenses for the periods are as follows:

 

September 30,

March 31,

 

2010

2010

 Credit card debt

 $               24,476 

 $           24,435 

Professional fees: accounting

                           -

5,000

 Professional fees: Legal 

                           -   

              10,640 

 Professional fees:  Consulting

9,407

-

 Sales tax payable 

                           9,000 

                     13 

 Prepaid Expense

10,000

-

 GST payable 

                  (3,570)

              (1,897)

 BOE printer payout 

                   5,390 

               -

 Total Accrued Expenses 

 $              54,703 

 $           38,191 

**NOTE 8 - COMMITMENTS AND CONTINGENCIES**

 

a. Operating Lease Obligation

The Company leases its main office under a non-cancelable lease agreement accounted for as an operating lease. The lease expires in May 2012. Rent expense for the corporate offices was $29,967 and $29,800 for the quarters ended September 30, 2010, and 2009, respectively, under this lease arrangement.

The Company leases additional warehouse space in Boise, Idaho. This warehouse space consists of approximately 2,880 square feet. The lease expires in June 2012.Rent expense for the warehouse was $4,200 for the quarter ended September 30, 2010 and $5,136 for the quarter ended September 2009.

The Company relinquished its leased space for the LabMentors subsidiary located in Fredericton, New Brunswick, Canada.  Effective April 1, 2010, the employees of LabMentors worked from their respective homes. There was no rent expense for the quarter ended September 30, 2010, as compared to $1,734 in the quarter ended September 30, 2009.  LabMentors entered into a five year office lease effective October, 2010.  The rent is to be paid in Canadian dollars.  Monthly rent for the first year will be $1,713 CAD/month.

Minimum lease obligation

over the next 5 years

 

 

Fiscal Year

Amount ($)

2011

78,121

2012

166,591

2013

49,746

2014

25,137

2015

27,236

12

PCS EDVENTURES!.COM, INC

Notes to the Consolidated Financial Statements

September 30, 2010

(unaudited)

**NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)**

b. Litigation

 

                (i)   Status of SEC Proceedings:  The Company announced that on August 27, 2010, it obtained a copy of a complaint filed by the U.S. Securities and Exchange Commission (SEC) commencing a civil lawsuit against PCS, its Chief Executive Officer Anthony A. Maher, and its former Chief Financial Officer Shannon Stith (“Parties”).  The complaint (Case 1:10-cv-00433-CWD) was filed in the United States District Court For The District Of Idaho.  The lawsuit involves disclosures made by the Company concerning its March 26, 2007 License Agreement with Global Techniques dba PCS Middle East (“PCS ME”). The complaint alleges: 1) the Parties violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]  And, in doing so, the Parties are alleged to have committed fraud in connection with the purchase and sale of securities; 2) the Parties violated of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, and 13a-11 thereunder [17 C.F.R. 240.12b-20, 240.13a-1, and 240.13a-11] by making alleged false filings with the SEC and aiding and abetting false filings with the SEC; and 3) Mr. Maher and Ms. Stith violated Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rule 13a-14 thereunder [17 C.F.R. § 240.13a-14] in making false certifications of an annual report.  The complaint seeks among other items, to require the Parties to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act, and permanently bar Mr. Maher and Mrs. Stith from serving as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, as amended, or that is required to file reports pursuant to Section 15(d) of the Exchange Act. On November 9, 2010, the Company filed a Motion to Dismiss (and/or for Summary Judgment), and a Motion to strike the SEC’s Amended Complaint. 

Under its bylaws, PCS is obligated, subject to certain exceptions and conditions, to indemnify and advance expenses to current and former officers and directors in connection with the SEC suit.   The costs incurred by PCS in addressing the SEC suit will likely have a material adverse effect on PCS’ business, financial position, results of operations and cash flows (including its liquidity and its plan of operation as outlined in management’s discussion and analysis in PCS’ most recent 10-K and 10-Q reports).

PCS’ directors and officers insurance carrier has denied coverage of any claims relating to the SEC investigation, including defense costs, based on its contention that PCS did not give the insurer timely notice of the SEC’s non-public investigation or the related issuance of subpoenas by the SEC.  PCS disagrees with the carrier’s coverage position. The Company engaged the legal services of Briane Nelson Mitchell of Mauk & Burgoyne, Attorneys at Law, to provide legal services, including legal counsel, advice and representation services in matters relating to the refusal of Navigators Insurance to honor contractual obligations under its 2007-2008 and 2008-2009 Insurance Policies.  In June 2010, the Company initiated suit against the insurer (PCS Edventures!.com Inc. v. Navigators Insurance Company  in the District Court of the Fourth Judicial District of the State of Idaho, in and for the county of Ada, Case NO. CV-OC 1012105) for among other things, breach of contract and bad faith.

(ii) The Company, along with its current CEO have been informed that three class action lawsuits involving allegations similar to the SEC case have or will be filed. The one case that has been filed and served (Niederklein v. PCS Edventures!.com, Inc., et al., U.S. District Court for the District of Idaho, Case 1:10-cv-00479-CWD) was brought on behalf of shareholders who purchased shares of the Company’s common stock during the period between March 28, 2007 and August 15, 2007.     Under its bylaws, PCS is obligated, subject to certain exceptions and conditions, to indemnify and advance expenses to current and former officers and directors in connection with this suit.   The costs incurred by PCS in addressing this suit may have a material adverse effect on PCS’ business, financial position, results of operations and cash flows (including its liquidity and its plan of operation as outlined in management’s discussion and analysis in PCS’ most recent 10-K and 10-Q reports).

c. Contingencies

The Company is currently working with the state of California regarding the review of sales and use taxes due for sales to California customers during certain prior periods.  The estimated amount due to the California State Board of Equalization with respect to those periods currently under review is approximately $9,000.  The Company will pay this amount and attempt to recoup it from the pertinent customers.  At this point, the Company cannot determine what other prior periods might be reviewed or the amount of sales and use taxes that might be due to the California State Board of Equalization as a result of any such further review.

13

PCS EDVENTURES!.COM, INC

Notes to the Consolidated Financial Statements

September 30, 2010

(unaudited)

**NOTE 9 - STOCKHOLDERS’ EQUITY**

During the six-month period ended September 30, 2010, the Company issued 50,332 shares of common stock upon exercise of employee stock options, and received cash proceeds of $27,000.

During the six-month period ended September 30, 2010, the Company issued 149,819 shares of common stock upon exercise of employee stock options issued in cashless transactions.

During the six-month period ended September 30, 2010, the Company issued 135,846 shares of common stock as additional compensation to employees valued at $96,408, based on the closing price of the Company’s common stock on the date of grant.  Of the 135,846 shares issued, 9,312 were issued in payment of amounts accrued as of March 31, 2010.  As of September 30, 2010, a shares payable for $27,896 has been accrued, representing 61,810 shares that will be issued to employees in a future period.

During the six-month period ended September 30, 2010, the Company issued 164,579 shares of common stock for services, valued at $116,512, based on the closing price of the Company’s common stock on the date of grant. Of the $116,512, $27,620 represents amounts for services that were provided and accrued in stock payable as of March 31, 2010.  In regards to the 164,579 shares issued during the six month period, 40,512 shares were issued for amounts payable at March 31, 2010.  As of September 30, 2010, a shares payable for $20,617 has been accrued, representing 40,120 shares that will be issued in a future period.

During the six month period ended September 30, 2010, the Company issued 750,000 shares of common stock for $450,000 in cash.  For every three shares of common stock purchased, the purchaser received one warrant that entitles the holder to purchase one share of common stock at a price of $0.60 per share and expires two years from the date issued.  A total of 250,000 warrants were issued, with a relative fair market value of $78,316.  The warrants were valued using  the Black-Scholes Valuation Model using the stock price on the date of grant, discount rates ranging from 0.76% to 0.81%, and volatility ranging from 114% to 116%.

During the six-month period ended September 30, 2010, the Company expensed amounts related to stock options granted in the current and prior periods totaling $198,053.

During the six month period ended September 30, 2010, the Company recognized $45,000 restricted stock units payable to non-management directors for services rendered at a rate of one share of common stock for each restricted stock unit. Each restricted stock unit is valued at $0.85, based on the closing price of the Company’s common stock at the date of grant. In addition, the non-management directors were issued new RSU agreements on September 23, 2010.  These agreements call for payment of current year director fees via issuance of restricted stock units over a vesting period of not less than twelve months, and require continued service for twelve months and reelection at the next annual shareholder meeting.

**NOTE 10 - BASIC AND DILUTED NET LOSS PER COMMON SHARE**

Basic and diluted net loss per common share for the three-month periods ended September 30, 2010, and 2009, are based on 40,838,176 and 37,708,335, respectively, of weighted average common shares outstanding. No adjustment has been made for any common stock equivalents outstanding because their effects would be antidilutive.

Basic and diluted net loss per common share for the six-month periods ended September 30, 2010, and 2009, are based on 40,520,096 and 37,723,953, respectively, of weighted average common shares outstanding. No adjustment has been made for any common stock equivalents outstanding because their effects would be antidilutive.

14

PCS EDVENTURES!.COM, INC

Notes to the Consolidated Financial Statements

September 30, 2010

 (unaudited)

**NOTE 11  – DEPRECIATION AND AMORTIZATION EXPENSE**

During the three and six month periods ended September 30, 2010, the Company had depreciation expense of $16,548 and $39,664, respectively.  This amount was related to depreciation of fixed assets, educational software, and intellectual property for the quarter.

**NOTE 12 - DILUTIVE INSTRUMENTS**

Stock Options and Warrants

The Company is required to recognize expense of options or similar equity instruments issued to employees using the fair-value-based method of accounting for stock-based payments in compliance with the financial accounting standard pertaining to share-based payments. This standard covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Application of this standard requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior. Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking over the expected term of the award.

 

 

 

 

Total Issued

 

 

Not

 

Issued

Cancelled

Executed

and Outstanding

 

Exercisable

Vested

 

 

 

 

 

 

 

 

Balance as of March 31, 2010

20,759,370

7,871,085

8,955,196

3,933,089

 

3,578,589

354,500

 

 

 

 

 

 

 

 

Warrants

250,000

-

-

250,000

 

250,000

 

Common Stock

1,403,355

-

                736,228

667,127

 

 (552,873)

1,220,000

Balance as of September 30, 2010

22,412,725

7,871,085

9,691,424

4,850,216

 

3,275,716

1,574,500

Between May 17 and May 21 of 2010, the Company sold 750,000 shares in a non-public offering.  The private offering was fully subscribed by current shareholders and accredited investors who purchased the 750,000 shares of the Company’s common stock at a price of $0.60 per share.  The price at which the offering was completed represented a 10% discount from the closing price of the Company’s common stock on the OTC Bulletin Board on the date of the offering.  Investors also received common stock purchase warrants equivalent to 33% of the number of common shares purchased in the offering.  Each stock purchase warrant expires in 24 months and allows the warrant holder to purchase shares of the Company’s common stock at a price of $0.60 per share.  

The warrants computed volatility range from a low of 114.88% to a high of 116.44%.  A risk free interest rate  ranging from a low of .76% to a high of .83% was used to value the warrants.

On June 17, 2010, the Company granted 300,000 incentive stock options to an officer.  These options were issued as incentive compensation to the officer.  The options were valued using the Black-Scholes valuation model.  The options have an expected volatility rate of 113.82% calculated using the Company stock price for a two-year period beginning June 17, 2010.  A risk free interest rate of .48% was used to value the options.  The total value of these options was $92,897.  The options vest over a three-year period and are exercisable at $.60 per share which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.  During the six months ended September 30, 2010, $10,320 of the total value was expensed.

15

PCS EDVENTURES!.COM, INC

Notes to the Consolidated Financial Statements

September 30, 2010

(unaudited)

On June 24, 2010, the Company granted 800,000 incentive options to a select group of employees.  These options were issued as incentive compensation to the employees.  The options were valued using the Black-Scholes valuation model. The options have an expected volatility rate of 114.06% calculated using the Company stock price for a two-year period beginning June 24, 2010.  A risk free****interest rate of  .53% was used to value the options.  The total value of these options was $258,170.  The options vest over a three-year period and are exercisable at $.55 per share which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.  During the six months ended September 30, 2010, $28,685 of the total value was expensed.

On July 7, 2010, the Company granted 70,000 incentive stock options to an employee.  These options were issued as additional incentive compensation to the employee.  The options were valued using the Black-Scholes valuation model.  The shares have an expected volatility rate of 113.61% calculated using the company stock price for a two-year period beginning July 7, 2010.  A risk free interest rate of .31% was used to value the options.  The total value of these options was $14,768. The options vest at the end of one year,  contain a number of performance conditions and are exercisable at $.65 per share which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.  During the six months ended September 30, 2010, $3,692 in value of the options was expensed.

On August 23, 2010, the Company granted 50,000 options to a consultant.  These options were issued to the consultant due to exemplary performance. .  The shares have an expected volatility rate of 109.81% calculated using the Company stock price for a two-year period beginning August 23,, 2010.  A risk free interest rate of .37% was used to value the options.  The options were valued using the Black-Scholes valuation model. The total value of these options was $11,988. The options vest over a three year period,  contain a number of performance conditions and are exercisable at $.71 per share which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.  During the six months ended September 30, 2010, $666 in value of the options was expensed.

On September 27, 2010, the Company granted 183,355 incentive options to an officer.  These options were issued as additional incentive compensation to the officer.  The options were valued using the Black-Scholes valuation model.  The shares have an expected volatility rate of 241.48% calculated using the Company stock price for a two-year period beginning September 27, 2010.  A risk free interest rate of 1.31% was used to value the options.  The total value of these options was $54,616.  The options vested at issuance and are exercisable at $.45 per share which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.  During the six months ended September 30, 2010, the entire value of the options was expensed.

During the six months ended September 30, 2010, the Company had 736,228 common stock options exercised by employees the value per share ranged from $0.50 to $0.54. Of this amount, 149,819 were issued in a cashless exercise.

**NOTE 13 - SUBSEQUENT EVENTS**

On October 1, 2010, Mr. Glen McCandless of Focus Marketing notified the Company of intent to termination the Consulting Agreement dated April 1, 2010. Under this agreement, Mr. McCandless was acting as Interim Vice President of Marketing. The termination is effective November 30, 2010.   Mr. McCandless will be retained and has agreed to continue working with the Company on a project based need. 

On October 4, 2010, the Company retained Summit Associates, LLC, for the purpose of expanding capacity and support in the Middle East as well as business development in other strategic areas.  Summit Associates has worked in the Middle East, is active in business development in Saudi Arabia, a region where for the past 27 years they have been engaged, and they have strong expertise and international connections for developing and managing large scale project initiatives.

On October 14, 2010, the Company issued 20,254 shares of common stock to employees in lieu of cash compensation, valued at $9,196, based on the closing price of the Company’s common stock on the date of grant.

On October 14, 2010, the Company issued 16,845 shares of common stock for consulting services rendered valued at $6,999, based on the closing price of the Company’s common stock on the date of grant.

On October 14, 2010, the Company issued 41,556 shares of common stock for employee bonus payments valued at

$18,700, based on the closing price of the Company’s common stock on the date of grant.

 

16

PCS EDVENTURES!.COM, INC

Notes to the Consolidated Financial Statements

September 30, 2010

(unaudited)

**NOTE 13 - SUBSEQUENT EVENTS (Continued)**

On October 25, 2010, the Company issued 23,275 shares of common stock for consulting services rendered valued at $13,618, based on the closing price of the Company’s common stock on the date of grant.

During October 2010, LabMentors entered into a five-year lease for office space.  The rent is to be paid in Canadian dollars.  Monthly rent for the first year will be $1,713 CAD/month. 

On November 9, 2010, the Company received $50,000 of a $150,000 planned financing, the terms of which have not been finalized.

 

**Item 2.** **Management’s Discussion and Analysis of Financial Condition and Results of Operations**.****

**Cautionary Statements for Purposes of “Safe Harbor Provisions” of the Private Securities Litigation Reform  Act of 1995:**

Except for historical facts, all matters discussed in this Quarterly Report, that are forward-looking, involve a high degree of risk and uncertainty. Certain statements in this Quarterly Report set forth management’s intentions, plans, beliefs, expectations, or predictions of the future based on current facts and analyses. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” or similar expressions, we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Actual results may differ materially from those indicated in such statements, due to a variety of factors, risks and uncertainties. Potential risks and uncertainties include, but are not limited to, competitive pressures from other companies within the Educational Industries, economic conditions in the Company’s primary markets, exchange rate fluctuation, reduced product demand, increased competition, inability to produce required capacity, unavailability of financing, government action, including but not limited to those related to the SEC’s lawsuit, the class action lawsuits, weather conditions and other uncertainties, including those detailed in the Company’s SEC filings. The Company assumes no duty to update forward-looking statements to reflect events or circumstances after the date of such statements. 

The following discussion should be read in conjunction with our audited consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contained in our Form 10-K for the year ended March 31, 2010. 

 

**Plan of Operation**

The Company continues to evaluate and re-evaluate various means of operations. In an effort to continue the development and support of the SBUs, the Company reorganized its development department during the second quarter of fiscal year 2011, to formally implement the Agile management processes and to align team functions. In addition, the accounting department has reorganized in order to maximize efficiency and effectiveness. 

The Technical Education SBU expanded its reach throughout the state of Idaho through direct sales efforts and saw deployments of PCS robotics and engineering programs expand to a total of six school districts.  PCS has been selected as one of four approved vendors to provide comprehensive professional technical education solutions for Idaho schools.  Outside the state of Idaho, PCS Tech Ed programs were established and expanded in Iowa, Oklahoma, and Kentucky.  Tech Ed also established its first university implementation of its Mindsi solution into Philadelphia University for use in an advanced mechatronics course, and also held its first International Robotics Invitational, hosting visiting teams from King Saud University and Al Riyadh Schools in Saudi Arabia, as well as a number of local Idaho teams.

The Afterschool SBU established a national level pilot program in the YMCA, sold into multiple new Kentucky 21st Century Community Learning Center sites, completed and launched the first module of the  Discover STEM lab, a new program that was specifically designed by PCS to address critical STEM needs in the afterschool marketplace.  As of September 30, 2010, the program has sold multiple units confirming its strong appeal to the market.  Additional modules to 

17

further expand the program are under development. The SBU has continued to develop a strong relationship with the US military, delivering and managing hands-on summer programs to students at seven bases within the USAF PACAF and cultivating a relationship with various US Army programs to support youth service initiatives around the world.

The International SBU has focused its efforts on two primary areas, expanding Middle East capacity and laying groundwork for expansion into Central and South America.  To expand Middle East capacity, PCS retained Al Khamayh Establishment on September 8, 2010. With offices in Saudi Arabia, Egypt, and the United States, Al Khaymah Establishment USA maintains a diverse network of affiliates and associates across the Middle East-North African region (MENA), with a reach into Africa and Central Asia. Al Khaymah provides discrete services for clients and affiliated firms based on diverse experience, practical analysis, atmospherics, and personalized interaction.   PCS began the development of a business plan and funding solution for increasing resources and support for IntelTech, the Company’s distributor in Mexico, and a similar plan for expanding operations into South America.

**Results of Operations**

The quarter ended September 30, 2010 resulted in a net loss of ($761,123) as compared to the net loss during the quarter ended September 30, 2009 of ($444,868).  The Company’s  losses increased from the prior fiscal year, same three-month period by $316,255, or approximately seventy-one percent (71%).  The increase can be attributed to a planned marketing initiative, increased legal fees related to the U.S. Securities and Exchange Commission (SEC) commencing a civil lawsuit against PCS, its Chief Executive Officer Anthony A. Maher, and its former Chief Financial Officer Shannon Stith, and increased non-cash compensation costs during the three months ended September 30, 2010.  The Basic Loss per Share for the quarter ended September 30, 2010, is ($0.02), which is a $0.01 increase in loss per share from the three-month period ended September 30, 2009, of ($0.01) per share.

The six-month period ended September 30, 2010, resulted in a net loss of ($1,156,497) as compared to the net loss during the six-month period ended September 30, 2009 of ($894,570).  The Company’s  losses increased  from the prior fiscal year, same six-month period by $261,927, or approximately twenty-nine percent (29%), primarily for the same reasons cited above relating to the three month year over year change.  The Basic Loss per Share for the six-month period ended September 30, 2010, is ($0.03), which is equivalent to the six-month period ended September 30, 2009, of ($0.03) per share.

Three-month period ended September 30, 2010, compared to three-month period ended September 30, 2009.

Revenues for the three-month period ended September 30, 2010, decreased to $475,444 or by approximately $324,277, or forty-one percent (41%) as compared to revenues of $799,721 for the three-month period ended September 30, 2009.  This decrease is attributable to the fear surrounding the general economy, a change in federal and state funding schedules, as well as a decrease in the expenditure of grant monies by some school districts. 

Operating expenses for the three-month period ended September 30, 2010, increased by approximately $149,588 or seventeen percent (17%) to $1,033,392 as compared to operating expenses of 883,804 for the three-month period ended September 30, 2009. 

Six-month period ended September 30, 2010, compared to six-month period ended September 30, 2009.

Revenues for the six-month period ended September 30, 2010, decreased to $960,685 or by approximately ($303,918), or twenty-four percent (24%) as compared to revenues of $1,264,603 for the six-month period ended September 30, 2009.  This decrease is attributable to the hesitation surrounding the general economy, a change in federal and state funding schedules, as well as a decrease in the expenditure of grant monies by some school districts. 

Operating expenses for the six-month period ended September 30, 2010, increased by approximately $132,547 or eight percent (8%) to $1,733,737 as compared to operating expenses of $1,601,190 for the six-month period ended September 30, 2009. This increase is due to additional marketing expenses related to the increase in market focus and a customer centric orientation.

**Liquidity**

As of September 30, 2010, we had $182,063 in cash, with total current assets of $1,242,541 and total current liabilities of $517,307. We have an accumulated deficit of ($33,835,446) and stockholders’ equity of $725,234.

18

The Company has a current ratio of 1.3. The ratio, while lower than in the past, indicates that we have worked hard 

managing debt, and have utilized available resources well in an effort to continue Company growth through internal and external means. We have utilized the current ratio over a quick ratio due to the fact that most items in inventory are easily saleable should the need to liquidate arise.

The Company has working capital of $176,274 at September 30, 2010. The working capital indicates that our ability to pay current debt obligations through our current assets is favorable. 

**Item 3.  Quantitative and Qualitative Disclosures About Market Risk.**

The Company is a smaller reporting company as defined by Rule 12b-2 of “Exchange Act” and is not required to provide the information required under this item.

**Item 4.  Controls and Procedures**

**Changes in Internal Control Over Financial Reporting.**

Our management, with the participation of the chief executive officer /acting CFO, has concluded there were no significant changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

**Management’s Report on Internal Control Over Financial Reporting*.***

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  

Management has concluded that the Company maintained effective internal control over financial reporting as of September 30, 2010, based on the criteria established in “Internal Control-Integrated Framework” issued by the COSO.

**PART II - OTHER INFORMATION**

  

**Item 1. Legal Proceedings.**

(i) Status of SEC Proceedings:  The Company announced that on August 27, 2010, it obtained a copy of a complaint filed by the U.S. Securities and Exchange Commission (SEC) commencing a civil lawsuit against PCS, its Chief Executive Officer Anthony A. Maher, and its former Chief Financial Officer Shannon Stith (“Parties”).  The complaint (Case 1:10-cv-00433-CWD) was filed in the United States District Court For The District Of Idaho.  The lawsuit involves disclosures made by the Company concerning its March 26, 2007 License Agreement with Global Techniques dba PCS Middle East (“PCS ME”). The complaint alleges: 1) the Parties violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]  And, in doing so, the Parties are alleged to have committed fraud in connection with the purchase and sale of securities; 2) the Parties violated of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, and 13a-11 thereunder [17 C.F.R. 240.12b-20, 240.13a-1, and 240.13a-11] by making alleged false filings with the SEC and aiding and abetting false filings with the SEC; and 3) Mr. Maher and Ms. Stith violated Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rule 13a-14 thereunder [17 C.F.R. § 240.13a-14] in making false certifications of an annual report.  The complaint seeks among other items, to require the Parties to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act, and permanently bar Mr. Maher and Mrs. Stith from serving as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, as amended, or that is required to file reports pursuant to Section 15(d) of the Exchange Act. On November 9, 2010, the Company filed a Motion to Dismiss (and/or for Summary Judgment), and a Motion to strike the SEC’s Amended Complaint. 

Under its bylaws, PCS is obligated, subject to certain exceptions and conditions, to indemnify and advance expenses to current and former officers and directors in connection with the SEC suit.   The costs incurred by PCS in addressing the SEC suit will likely have a material adverse effect on PCS’ business, financial position, results of operations and cash flows (including its liquidity and its plan of operation as outlined in management’s discussion and analysis in PCS’ most recent 10-K and 10-Q reports).

 

19

PCS’ directors and officers insurance carrier has denied coverage of any claims relating to the SEC investigation, 

including defense costs, based on its contention that PCS did not give the insurer timely notice of the SEC’s non-public investigation or the related issuance of subpoenas by the SEC.  PCS disagrees with the carrier’s coverage position. The Company engaged the legal services of Briane Nelson Mitchell of Mauk & Burgoyne, Attorneys at Law, to provide legal services, including legal counsel, advice and representation services in matters relating to the refusal of Navigators Insurance to honor contractual obligations under its 2007-2008 and 2008-2009 Insurance Policies.  In June 2010, the Company initiated suit against the insurer (PCS Edventures!.com Inc. v. Navigators Insurance Company  in the District Court of the Fourth Judicial District of the State of Idaho, in and for the county of Ada, Case NO. CV-OC 1012105) for among other things, breach of contract and bad faith.

(ii) The Company, along with its current CEO have been informed that three class action lawsuits involving allegations similar to the SEC case have or will be filed. The one case that has been filed and served (Niederklein v. PCS Edventures!.com, Inc., et al., U.S. District Court for the District of Idaho, Case 1:10-cv-00479-CWD) was brought on behalf of shareholders who purchased shares of the Company’s common stock during the period between March 28, 2007 and August 15, 2007.     Under its bylaws, PCS is obligated, subject to certain exceptions and conditions, to indemnify and advance expenses to current and former officers and directors in connection with this suit.   The costs incurred by PCS in addressing this suit may have a material adverse effect on PCS’ business, financial position, results of operations and cash flows (including its liquidity and its plan of operation as outlined in management’s discussion and analysis in PCS’ most recent 10-K and 10-Q reports). 

**Item 2. Recent Sale of Unregistered Securities.**

  

The following table provides information about all “unregistered” and “restricted” securities that PCS has sold during the three month period ended September 30, 2010, which were not registered under the Securities Act of 1933, as amended (the “Securities Act”):

Name

Date

Shares

Value

Description

 

 

 

 

 

Employees/Officers

4/8/2010

8,369

$5,510

Common stock in lieu of salary

Director

4/8/2010

17,045

15,000

Common stock issued for services

Consultant

4/8/2010

4,517

5,385

Common stock issued for services

Employees/Officers

5/12/2010

8,476

5,225

Common stock in lieu of salary

Employee

5/12/2010

21,000

 

Cashless exercise of stock options at $.54/share

Employee

5/12/2010

27,000

 

Exercise of stock options at $.54

Employee

5/12/2010

3,736

2,970

Common stock issued for services

Employee

5/12/2010

8,333

 

Cashless exercise of stock options at $.50/share

Employee

5/12/2010

3,636

 

Cashless exercise of stock options at $.54/share

Employee

5/12/2010

21,648

 

Cashless exercise of stock options at $.54/share

Employee

5/12/2010

13,636

 

Cashless exercise of stock options at $.54/share

Officer

5/12/2010

45,455

 

Cashless exercise of stock options at $.54/share

Private Investor

5/17/2010

166,667

100,000

Stock and warrant sold for working capital

Private Investor

5/18/2010

83,333

50,000

Stock and warrant sold for working capital

Private Investor

5/18/2010

83,333

50,000

Stock and warrant sold for working capital

Private Investor

5/19/2010

83,333

50,000

Stock and warrant sold for working capital

Private Investor

5/20/2010

116,667

70,000

Stock and warrant sold for working capital

Private Investor

5/21/2010

100,000

60,000

Stock and warrant sold for working capital

Private Investor

5/20/2010

116,667

70,000

Stock and warrant sold for working capital

Officer

5/28/2010

24,800

 

Cashless exercise of stock options at $.50/share

Employee

5/28/2010

5,769

 

Cashless exercise of stock options at $.50/share

Employee

5/26/2010

4,500

 

Cashless exercise of stock options at $.50/share

Employee

5/28/2010

332

 

Exercise of stock options at $.80/share

Employees/Officers

6/4/2010

9,416

5,558

Common stock in lieu of salary

Employee

6/4/2010

1,042

 

Cashless exercise of stock options at $.50/share

Employee

6/11/2010

14,175

12,183

Shares issued for performance bonus

Employee

6/11/2010

4,371

3,060

Common stock issued for services

Employee

6/11/2010

2,133

1,919

Shares issued for performance bonus

Employees/Officers 
7/15/2010 
9,495 
4,558 
Common stock in lieu of salary

 

 

Name

Date

Shares

Value

Description

Employee

7/15/2010

6,750

3,915

Common stock issued for services

Employees/Officers

8/9/2010

10,650

5,357

Common stock in lieu of salary

Employee

8/9/2010

3,876

2,326

Common stock issued for services

Employee

8/24/2010

2,450

1,544

Common stock issued for services

Employee

8/9/2010

3,370

2,528

Common stock issued for services

Employee

8/9/2010

1,265

1,025

Common stock issued for services

Employee

8/24/2010

7,231

4,700

Common stock issued for services

Employee

8/24/2010

9,538

5,723

Shares issued for performance bonus

Employee

9/9/2010

9,229

5,445

Common stock issued for services

Employees/Officers

9/9/2010

10,945

5,363

Common stock in lieu of salary

We issued all of these securities to persons who were “accredited investors” or “sophisticated investors” as that term is defined in Regulation D of the SEC, or persons who came within the definition of an “employee”; and each such  person  had prior access to all material information about us by reason of such designation or by reason of the relationship of the person to the Company.  We believe that the offer and sale of these securities were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Sections 4(2) and 4(6) thereof, and Rule 506 of Regulation D of the Securities and Exchange Commission ; and under Rule 701 of the Securities and Exchange Commission with respect to persons who came within the definition of an “employee.”  Registration of sales to “accredited investors” and to limited numbers of “sophisticated investors” is preempted from state regulation by Section 18 of the Securities Act, though states may require the filing of notices, a fee and other administrative documentation; Rule 701 offers and sales of securities are believed to be exempt from registration under Section 30-14-202(21) of the Idaho Uniform Securities Act; and conversions of outstanding securities (options or warrants are believed to be exempt from registration under Section 30-14-202(15) thereof.

**Item 3. Defaults Upon Senior Securities.**

  

None; not applicable.

  

**Item 4.  (Removed and Reserved) 
**Item 5. Other Information.**

  

**Submission of Matters to a Vote of Security Holders.**

  

On August 25, 2010, the Company held its Annual Meeting of Shareholders at its principal location in Boise, Idaho.  A quorum was represented at the meeting in person and via proxy.  Of the 39,956,717 shares outstanding at the record date July 15, 2010, proxies to vote 36,173,991 shares  were received by the Company.

At the Annual Meeting, two proposals were submitted to vote by the shareholders. The first item of business was to re-elect the Board of Directors until the next annual meeting.  Of the total number of proxies received, each member of the Board of Directors’ standing for election had received in excess of 26,900,000 votes in favor. The Board of Directors was re-elected as follows:

Board of Directors

For

Against

Abstain

 

 

 

 

Anthony A. Maher

16,375,901

36,000

1,426,245 

Donald J. Farley

16,460,901 

 

1,377,245

Dehryl A. Dennis

16,553,457

23,300

1,367,245

Michael K. McMurray

16,411,601

59,300

1,367,245

The second item of business was the ratification of M&K, CPAS, PLLC as the Company’s Independent Auditors.  The matter passed with the results listed below:

**For**

**Against**

**Abstain**

**Broker Non-Vote**

35,969,251

113,224

1,660

-

21

**Item 6. Exhibits.**

Identification of Exhibit

31 

  

32 

99.1

Rule 13a-14(a) or 15d-14(a) Certification of the Registrant’s principal executive officer. Filed herewith.

 

Rule 13a-14(b) or 15d-14(b) Certification of the Registrant’s principal executive officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Rule 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

8K’s filed in period, as they are referenced in the notes 

SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  

PCS EDVENTURES!.COM, INC.

Dated:

November 15, 2010

 

By:

/s/ Anthony A. Maher

 

 

 

 

Anthony A. Maher

 

 

 

 

CEO, Chairman of the Board of Directors, and acting CFO 

Dated:

November 15, 2010

 

By:

/s/ Robert O. Grover

 

 

 

 

Robert O. Grover

 

 

 

 

President, Chief Operating Officer, and Chief Technology Officer 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

 

 

 

Dated:

November 15, 2010

 

By:

/s/ Donald J. Farley

 

 

 

 

Donald J. Farley

 

 

 

 

Secretary and Director

 

 

 

 

 

Dated:

November 15, 2010

 

By:

/s/ Dehyrl A Dennis

 

 

 

 

Dehryl A. Dennis

 

 

 

 

Director

 

 

 

 

 

Dated:

November 15, 2010

 

By:

/s/ Michael K. McMurray

 

 

 

 

Michael K. McMurray

 

 

 

 

Director

22**** |
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