What changed in this filing

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Item 1. Financial Statements

2016-11-10 compared with 2016-08-10 · 603 added, 649 removed, 219 unchanged (85% of the section changed)

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of the Registrant.

I - FINANCIAL INFORMATION

sheet (Unaudited)

of Operations (Unaudited)

of Stockholders’

Equity (Unaudited)

of Cash Flows (Unaudited)

to Financial Statements (Unaudited)

Management’s

Discussion and Analysis of Financial Conditions and Results of Operations

and Procedures

II - OTHER INFORMATION

EDVENTURES!.COM, INC.

June 30, 2016

March 31, 2016

CURRENT ASSETS

Accounts receivable, net of allowance for doubtful accounts of $2,096 and

$2,096, respectively

Accounts receivable,

net of allowance for doubtful accounts of $2,096 and $2,096, respectively

Prepaid expenses

Finished goods inventory

Other Receivable

Intangible Assets, Net

Other Receivables

Total Current Assets

FIXED ASSETS, net of accumulated depreciation of $158,128 and $155,307, respectively

Total Other Assets

NON-CURRENT ASSETS

Fixed Assets, net

of accumulated depreciation of $160,842 and $155,307, respectively

Non-current Assets

accompanying notes are an integral part of these financial statements.

EDVENTURES!.COM, INC.

June 30, 2016

March 31, 2016

CURRENT LIABILITIES

Accounts payable and other current liabilities

Payroll liabilities payable

payable and other current liabilities

Payroll liabilities

Accrued expenses

Deferred Revenue

Note payable, convertible, related party, net discount of $0 and $0, respectively.

Note payable, related party, net discount of $0 and $0 respectively.

Lines of credit payable

Total Current Liabilities

Notes payable, related party, long term

Notes payable, long term, convertible

Total Liabilities

Note payable convertible,

related party net of $0 and $0 discount for September 30 and March 31, 2016, respectively

Note payable, related

party net of $0 and $0 discount for

September 30 and March 31, 2016

of credit payable

Notes payable, convertible

Current Liabilities

NON-CURRENT LIABILITIES

Notes payable, related

party, long term

payable, long term, convertible

Non-Current Liabilities

STOCKHOLDERS’

EQUITY (DEFICIT)

Preferred stock, no par value, 20,000,000 authorized shares, no shares issued

and outstanding

Common stock, no par value, 100,000,000 authorized shares, 82,280,682 and

76,442,668 shares issued and outstanding, respectively

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

authorized shares, no shares issued and outstanding

Common stock, no par value, 150,000,000

authorized shares, 88,800,682 and 76,442,668 shares issued and outstanding, respectively

Stock payable

Restricted Stock Units payable

Accumulated deficit

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Total Stockholders’

Equity (Deficit)

TOTAL LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

$ (1,865,709 )

$ (1,777,571 )

LIABILITIES AND STOCKHOLDERS’

accompanying notes are an integral part of these financial statements.

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of Operations

For the three months ended

Domestic STEM Sales

International Revenue

Learning Center Revenue

License and Royalty Revenue

Total Revenues

Months Ended September 30,

International service

Learning Center

License and royalty

COST OF SALES

OPERATING EXPENSE

OPERATING EXPENSES

Salaries and wages

Depreciation and amortization expense

General and administrative expenses

Total Operating Expenses

Depreciation and

amortization expense

and administrative expenses

Operating Expenses

OPERATING INCOME (LOSS)

OTHER EXPENSES

$ (1,017,975 )

OTHER INCOME AND EXPENSES

Interest expense

Total Other Expenses

Other Income/(Expense)

INCOME (LOSS) FROM OPERATIONS

$ (1,120,351 )

NET INCOME (LOSS)

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

Net income or (loss) per common share

Weighted average number of common shares outstanding:

$ (1,120,351 )

NET COMPREHENSIVE INCOME (LOSS)

$ (1,120,351 )

NET LOSS ATTRIBUTABLE

TO COMMON SHAREHOLDERS

$ (1,120,351 )

Net income per common share:

Weighted Average Number of Shares Outstanding Basic and Diluted

accompanying notes are an integral part of these financial statements.

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of Stockholders’

Equity (Deficit)

Shareholders’

Equity (Deficit)

Balance at 03/31/16

$ (40,052,059 )

$ (1,777,571 )

Stock payable for Employee

Stock issued for services

Conversion of notes payable for common stock

Stock issued for Cash

Options exercised

Conversion of notes payable for common

Option Expense

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of Cash Flows

For the Three Months Ended

Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income (Loss)

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

$ (1,120,351 )

Adjustments to reconcile net loss to

net cash provided by operating activities:

Debt discount amortization

Amortization of intangible assets

Depreciation expense

Common stock issued for services

Amortization of fair value of stock options

Depreciation and

Amortization of assets

Stock for services

Impairment of Brain

Stock payable for

Amortization of fair value of stock

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable

(Increase) decrease in prepaid expenses

(Increase) decrease in inventories

(Increase) decrease in other current assets

(Increase) decrease in other assets

(Decrease) increase in accounts payable and accrued expenses

Increase (decrease) in unearned revenue

Net Cash Used by Operating Activities

(Increase) decrease

in accounts receivable

(Increase) decrease

in prepaid expenses

(Increase) decrease

in inventories

(Increase) decrease

in other current assets

(Increase) decrease

in other assets

(Decrease) increase

in accounts payable and accrued liabilities

(decrease) in unearned revenue

Cash Provided used by Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIES

Cash paid for purchase of fixed assets

Net Cash Used by Investing Activities

paid for purchase of fixed assets

Cash Used by Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from note payable –

related party

Payment on debt –

Principle Payments on Debt

Principal payments on debt –

related party

Net Cash Provided by Financing Activities

Proceeds from sale

Borrowings on note

Proceeds from options

Borrowings on Debt

Principal payments

on debt –

payments on debt

Cash Provided by Financing Activities

Net Increase (Decrease) in Cash

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of Cash Flows (continued)

For the Three Months Ended

Months Ended September 30,

NON-CASH INVESTING & FINANCING ACTIVITIES

Common Stock for conversion of RSUs

Conversion of Debt into common Stock

Conversion of debt

CASH PAID FOR

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Edventures.com, Inc.

(the Company) sells into the STEM education market with (1) an existing STEM library and deep expertise in

creating STEM solutions comprised of curriculum and materials;

(2) a unique learning methodology –

an adaptive (customized

to individual learners), experiential (hands-on in nature) learning framework that can be monetized in a number of ways, with

what the Company believes is an approach to educational assessment and incentivizing students for the future, and the Company

is an innovative leader in this area;

(3) an innovative K12 robotics and engineering system comprised of hardware and software

specifically designed to engage students in STEM topics such as hands-on physics, engineering, and coding;

(4) a long history

as a prime STEM provider in the Kingdom of Saudi Arabia, a relationship which the Company believes will continue to provide revenue

and (5) a continual view to the future of STEM education developments, exemplified by the Company’s anticipated

release of a STEM drone program to enhance its other product offerings.

education market is seasonal in its order flow and the Company has implemented a number of initiatives to provide revenue streams

that diversify this order flow seasonality.

The Company entered the retail consumer space with a retail product launch this year

and also has a working model for experiential learning labs.

With a plan to expand higher margin digital delivery products, the

Company is now in the development stage of a unique, subscription-based online learning system that can be licensed to schools

or non-profit organizations, as well as be used in the home environment.

The Company’s acquisition of Thrust UAV is also

expected to diversify revenue streams, as drone sales are not anticipated to be as seasonal as our education products.

(the Company) develops and markets STEAM (Science, Technology, Engineering, Arts, and Math) education products

comprised of curriculum and materials.

With its acquisition of Thrust-UAV in February, 2016, the Company is also in late-stage

development of a first person view (FPV) racing drone, which it intends to assemble and market primarily through distributors.

The Company has used this racing-drone technology to create an education drone (also FPV) for the classroom to be used as a platform

to teach STEAM topics.

This initiative is also in late stage development.

The Company sells its education products into all 50

states as well as into international markets.

Most of the Company’s domestic education business is conducted with schools

and entities that cater to after-school programs for students.

Most of the Company’s international business is conducted

with governmental agencies in that local market.

The Company anticipates revenue from its FPV racing drone to come from both domestic

and international sources.

The Company expects that the vast majority of its education drone sales will be domestic.

anticipates recognizing its first meaningful revenues from its FPV racing drone division during its third fiscal quarter of 2017.

financial statements presented herein are those of the Company.

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In December 2005, the name of this subsidiary was formally changed to PCS LabMentors, Ltd..

(See Note 17).

The Company divested LabMentors, the wholly-owned subsidiary, in August of 2013.

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private learning centers and launched a pilot program in the spring of 2012.

As of June 30, 2014, two EdventuresLab programs had

been opened and were operating in the Idaho Treasure Valley.

An additional LeraningLab was opened in Eagle, Idaho

in June of 2014.

January 31, 2013, the Company formed a subsidiary called Premiere Science, Inc., incorporated and registered in the State of Idaho.

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business opportunities.

There were no operations for the subsidiary during the quarter ended June 30, 2016.

There were no operations for the subsidiary during the quarter ended September 30, 2016.

September 26, 2014, the shareholders voted for the proposal to grant the Board of Directors the authority to change the name of

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No amendment to

the Company’s Articles of Incorporation has yet been filed, although the Company anticipates that, following the assignment

of a new Cusip Number and the required filing with the Financial Industry Regulatory Authority, this name change will become effective.

February 15, 2016, the Company acquired Thrust UAV, a private company engaged in the development and assembly of first person

view (FPV) racing drones, for $109,000.

the Company’s Articles of Incorporation regarding this name change has been filed, although the Company anticipates that,

following the assignment of a new Cusip Number and the required filing with the Financial Industry Regulatory Authority (“FINRA”),

this name change will become effective.

February 15, 2016, the Company acquired Thrust-UAV, a private company engaged in the development and assembly of FPV racing drones,

for $109,000.

2 - UNAUDITED FINANCIAL STATEMENTS

June 30, 2016, financial statements presented herein are unaudited, and in the opinion of management, include all adjustments

September 30, 2016, 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

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financial statements prepared in accordance with accounting principles generally accepted in the United States of America.

Quarterly Report on Form 10-Q should be read in conjunction with the Annual Report on Form 10-K for PCS Edventures!.com, Inc.

for the fiscal year ended March 31, 2016.

The June 30, 2016, balance sheet was derived from the audited balance sheet included

operating results for the three-month period ended June 30, 2016, are not necessarily indicative of the results that may be expected

for the fiscal year ending March 31, 2017.

Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal

year ended March 31, 2016.

operating results for the six-month period ended September 30, 2016, are not necessarily indicative of the results that may be

expected for the fiscal year ending March 31, 2017.

3 - GOING CONCERN

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applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course

The established sources of revenues are not sufficient to cover the Company’s operating costs.

has accumulated significant losses and payables and generated negative cash flows.

The combination of these items raises substantial

doubt about its ability to continue as a going concern.

Management’s plans to alleviate this adverse position are as follows:

Company’s strategy to remove the going concern doubt is to optimize its operational structure, focus attention on increasing

STEM education sales through both channel partners and its direct sales force, and to bring to market a racing drone and STEM

education drone product line from Thrust UAV, the Company’s recently acquired drone development and assembly business.

will continue to focus on the improvement of our web-based marketing efforts, expand our sales force and channel partners, and

tighten sales processes for our domestic STEM sales.

We will continue to use our EdventuresLab program for (1) an R&D test

bed for product improvement and refinement with a major emphasis on digital delivery of content;

(2) revenue generation through

afterschool and summer course fees;

(3) revenue through licensing EdventuresLab curriculum and methods;

and (4) revenues from

STEM retail products.

We believe e-commerce sales of kits associated with STEM learning targeting the families of students attending

the centers as well as the larger home retail market will provide a consistent, dependable boost in Q3FY2017 revenues to offset

low education sales traditionally anticipated during this time frame.

We will actively seek retail distribution methods and channels

for our robotics retail products and expand their usability for other market segments.

Thrust UAV is currently in late-stage development

for its first major product release and is forging distributor relationships to take the product to market in Q2 of FY2107.

Revenue for the quarter ending June 30, 2016,

was $653,655 compared to revenue of $1,291,219 for same quarter in the year ago period, a decrease of approximately 49%.

for the three months ended June 30, 2016, was ($410,077) compared to a net income of $130,865 for the same quarter in the year

ago period, a 413% decrease.

These decreases in revenue and net income resulted primarily from the timing of order recognition,

as a major customer’s annual order fulfillment and revenue recognition occurred during the last quarter in FY2016 (one quarter

earlier than previous historical experience) whereas the previous annual order was completed in the first quarter of FY2016.

Additionally,

no international contracts were fulfilled in the first quarter of FY2017.

Cash used in operations for the three months ended June

30, 2016, was ($26,871), predominately due to research and development costs concerning the Thrust UAV business unit.

the efforts put in by management and the entire employee team are beginning to be realized, the ability of the Company to continue

as a going concern is dependent upon our ability to successfully accomplish the plans described, to raise capital as needed, and

to attain profitable operations.

The accompanying financial statements do not include any adjustments that might be necessary

if the Company is unable to continue as a going concern.

The established sources of revenues are not presently sufficient to cover the Company’s operating costs.

Company has accumulated significant losses, accounts payable and generated negative cash flows.

The combination of these

items raises substantial doubt about its ability to continue as a going concern.

Management’s plans to alleviate this adverse

position are as follows:

Company’s strategy to remove the going concern doubt is to focus attention on increasing STEAM education sales through both

channel partners and its direct sales force, and to bring to market its FPV racing drone and STEAM education drone product lines

from Thrust-UAV.

The Company expects its first revenues from its FPV racing drone and STEAM education drone during Q3FY2017.

4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Concentration of Credit Risk

Company extends credit to customers and is therefore subject to credit risk.

The Company performs initial and ongoing credit evaluations

of its customers’

financial condition and does not require collateral.

An allowance for doubtful accounts is recorded to

account for potential bad debts.

Estimates are used in determining the allowance for doubtful accounts and are based upon an assessment

of selected accounts and as a percentage of remaining accounts receivable by aging category.

In determining these percentages,

the Company evaluates historical write-offs, and current trends in customer credit quality, as well as changes in credit policies.

At September 30, 2016, and 2015, Stemfinity, one of the Company’s major customers, accounted for 23.9% and 52.5% of

the Company’s accounts receivable, respectively.

PREPAID EXPENSES

expenses for the periods are as follows:

June 30, 2016

March 31, 2016

Prepaid insurance

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Prepaid software

Prepaid expenses, other

Total Prepaid Expenses

5 - FIXED ASSETS

and accumulated depreciation for the periods are as follows:

June 30, 2016

March 31, 2016

Computer/office equipment

Accumulated depreciation

Total Fixed Assets

asset depreciation expense for the three months ended June 30, 2016 and 2015 was $2,821 and $2,598, respectively.

Prepaid expenses,

Total Prepaid

GOODWILL AND INTANGIBLE ASSETS

and other intangible assets for the period were as follows:

June 30, 2016

March 31, 2016

Intangible Assets

Accumulated Amortization Intangible Assets

Total Goodwill and Intangible Assets

asset amortization expense for the three months ended June 30, 2016 and 2015 was $26,630 and $0, respectively.

Accumulated Amortization

Intangible Assets

Goodwill and Intangible Assets

asset amortization expense for the six months ended September 30, 2016, and 2015 was $50,896 and $0, respectively.

and depreciation for the periods were as follows:

Computer/office equipment

Accumulated depreciation

Total Fixed Assets

asset depreciation expense for the six months ended September 30, 2016, and 2015, was $5,535 and $14,316, respectively.

ACCRUED EXPENSES

expenses for the periods are as follows:

June 30, 2016

March 31, 2016

expenses for the periods were as follows:

Interest payable

Sales tax payable

Accrued commissions

Credit card debt

Total accrued expenses

Total accrued

NOTES PAYABLE

payable consisted of the following:

June 30, 2016

payable for the periods consisted of the following:

September 30, 2016

March 31, 2016

Note Payable Convertible Note, Related Party net discount of $0 and $0 for period ended June

30, 2016 and March 31, 2016, respectively

Short Term Note Payable, Related Party, net discount of $0 and $0 for period ended June 30, 2016

Short term, Note payable convertible, related party net of $0 and $0 discount for September

30 and March 31, 2016, respectively

Line of Credit

Long Term Note Payable, Related Party

Long Term Convertible Note

Short term, Note payable

Short term, Note payable, related party net of $0 and $0 discount for

September 30 and March 31, 2016

Short term, Lines of credit payable

Short term, Notes payable, convertible

Long term, Notes payable, related party

Long term, Notes payable, convertible

Total Notes Payable

February 12, 2016, the Company entered into a note payable of $84,000.

The note does not bear an interest rate, as it has a set

nine payment arrangement of $9,333 per month for nine months starting on April 1, 2016, with the final payment due on December

There was no accrued interest and the principal balance was $56,000 as of June 30, 2016.

The note does not bear a stated interest rate, as it has

a set nine payment arrangement of $9,333 per month for nine months starting on April 1, 2016, with the final payment due on December

There was no accrued interest and the principal balance was $18,666 as of September 30, 2016.

February 12, 2016, the Company entered into a note payable of $24,547.

The note does not bear an interest rate, as it has a set

nine payment arrangement of $2,727 per month for nine months starting on April 1, 2016, with the final payment due on December

There was no accrued interest and the principal balance was $16,365 as of June 30, 2016.

The note does not bear a stated interest rate, as it has

a set nine payment arrangement of $2,727 per month for nine months starting on April 1, 2016, with the final payment due on December

There was no accrued interest and the principal balance was $5,455 as of September 30, 2016.

May 1, 2014, the Company entered into a 36 month note payable of $20,000.

The note bears interest at twelve percent (12%) per

The Company had paid $12,209 in principal, leaving a balance of $7,791 at June 30, 2016.

Total interest accrued as of June

30, 2016 was $2,609.

On April 11, 2014, the Company entered into

a 36 month note payable of $60,000.

The note bears interest at twelve percent (12%) per annum.

Company has paid $36,141 in principal, leaving a balance of $23,859 at June 30, 2016.

Total interest accrued as of June 30, 2016,

The Company had paid $14,465 in principal, leaving a balance of $5,535 at September 30, 2016.

Total interest accrued as

of September 30, 2016, was $3,002.

April 11, 2014, the Company entered into a 36 month note payable of $60,000.

The note bears interest at twelve percent (12%) per

The Company has paid $43,858 in principal,

leaving a balance of $16,142 at September 30, 2016.

Total interest accrued as of September 30, 2016, was $1,524.

Note Payable –

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Related Party

June 8, 2016, the Company executed a promissory note with one of its shareholders and board members, for $340,000 at 10% interest

per annum that consolidated the following notes:

February 6, 2016, for $100,000;

March 16, 2016, for $100,000;

April 1, 2016,

for $100,000;

and April 19, 2016 for $40,000.

This promissory note is secured with the Company’s inventory, fixed and liquid

assets, property, equipment, intangible assets and intellectual property, and the Company’s net loss carry forward.

promissory note is due December 31, 2016.

Total interest accrued as of September 30, 2016, for all four promissory notes discussed

above totaling $340,000 and combined on June 8, 2016 was $18,882.

On April 18, 2012, the Company entered

into a long-term promissory note with one of its employees and board members for $25,000 with an interest rate of seven and one-half

percent (7.5%) per annum.

The balance is due in full on or before April 18, 2017.

Monthly payments are required for interest only

to the Lender’s financial intuition.

On September 30, 2016, $6,034 over the interest only payment had been paid resulting

in an ending principal amount of $18,966.

No interest is accrued for this note payable.

Total interest paid during the quarter

ending September 30, 2016, was $307.

September 13, 2011, the Company drew down a line of credit at a financial institution in the amount of $39,050.

The line of credit

bears interest at 17.5% per annum.

The Company makes variable monthly payments.

For the period ending September 30, 2016, the

Company paid $1,224 in principal.

Since inception, the Company has paid $23,662 in principal, leaving a balance of $15,389 payable.

Total interest paid during the period ending September 30, 2016, was $499.

Payable, Related Party, Long Term

January 13, 2012, the Company entered into two separate promissory notes in the amount of $35,000 each for an aggregate amount

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financial institution.

The note was amended April 1, 2013, and re-written with a new principal amount of $32,100 each for an aggregate amount of $64,200.

The notes were amended April 1, 2013, and re-written with a new principal amount of $32,100 each for an aggregate amount of $64,200.

The notes bear interest at nine percent (9%) per annum and are due and payable on or before April 1, 2020.

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of each month, beginning May 1, 2013, and continuing each month in like amounts until the final payment due on April 1, 2020.

The Company had paid $24,152 in principal, leaving a balance of $40,048 at June 30, 2016.

No interest is accrued for this

note payable.

Total Interest paid during the quarter ending June 30, 2016 was $944.

April 18, 2012, the Company entered into a long-term promissory note with one of its employees and board members for $25,000 with

an interest rate of seven and one-half percent (7.5%) per annum.

The balance is due in full on or before April 18, 2017.

payments are made for interest only to the Lender’s financial intuition.

On June 30, 2016, $4,557 over the interest only

payment had been paid resulting in an ending principal amount of $20,443.

No interest is accrued for this note payable.

Total Interest paid during the quarter ending June 30, 2016 was $246.

February 6, 2016 the Company executed a promissory note with one of its shareholders and board members, for $100,000 at 10% interest

The promissory note was due February 29, 2016, and was extended multiple months to June 30, 2016.

On June 8, 2016 this

promissory note was combined with promissory notes:

March 16, 2016, for $100,000;

April 1, 2016, for $100,000;

and April 19, 2016,

The resulting $340,000 promissory note bearing an interest rate of ten percent (10%) per annum has a due date of

December 31, 2016.

Total interest accrued as of June 30, 2016 was $3,945.

March 16, 2016, the Company executed a promissory note with one of our shareholders and board members, for $100,000 at ten percent

(10%) interest per annum.

The promissory note was due April 30, 2016, and was extended multiple months to June 30, 2016.

8, this note was consolidated with promissory notes:

February 6, 2016, for $100,000;

April 1, 2016, for $100,000;

and April 19,

2016, for $40,000.

The resulting $340,000 promissory note bearing an interest rate of ten percent (10%) per annum has a due date

of December 31, 2016.

Total interest accrued as of June 30, 2016 was $2,877.

April 1, 2016, the Company executed a promissory note with one of our shareholders and board members, for $100,000 at ten percent

(10%) interest per annum.

The promissory note was due April 30, 2016, and was extended multiple months to June 30, 2016.

8, this note was consolidated with promissory notes:

February 6, 2016, for $100,000;

March 16, 2016, for $100,000;

and April 19,

2016, for $40,000.

The resulting $340,000 promissory note bearing an interest rate of ten percent (10%) per annum has a due date

of December 31, 2016.

Total interest accrued as of June 30, 2016 was $2,493.

April 19, 2016, the Company executed a promissory note with one of our shareholders and board members, for $40,000 at ten percent

(10%) interest per annum.

The promissory note was due April 30, 2016, and was extended multiple months to June 30, 2016.

note was consolidated with promissory notes:

February 6, 2016, for $100,000;

March 16, 2016, for $100,000;

April 1, 2016, for

The resulting $340,000 promissory note bearing an interest rate of ten percent (10%) per annum has a due date of December

Total interest accrued as of June 30, 2016 was $997.

On June 8, 2016 the Company executed a promissory

note with one of its shareholders and board members, for $340,000 at 10% interest per annum that consolidated the following notes:

February 6, 2016, for $100,000;

March 16, 2016, for $100,000;

April 1, 2016, for $100,000;

and April 19, 2016 for $40,000.

promissory note is secured with the Company’s inventory, fixed and liquid assets, property, equipment, intangible assets

and intellectual property, and the Company’s net loss carry forward .

The promissory

note is due December 31, 2016.

Total interest accrued as of June 30, 2016 for all four promissory notes discussed above and combined

on June 8, 2016 was $10,312.

On September 13, 2011, the Company drew down

a line of credit at a financial institution in the amount of $39,050.

The line of credit bears interest at 17.5% per annum.

Company makes variable monthly payments.

For the period ending June 30, 2016, the company paid $890 in principle.

Since inception,

the Company has paid $22,437 in principal, leaving a balance of $16,613 payable.

Total interest paid during the period ending

June 30, 2016, was $393.

Payable, Related Party, Long Term

On October 21, 2014, the Company executed

a promissory note with one of its shareholders and board members in the amount of $870,457.

The note, originally due May 31, 2015,

was non-convertible, had an interest rate of ten percent (10%) per annum, was secured by accounts receivable, fixed assets, intellectual

property, and the Company’s net loss carry forward and was used to finance operations and purchase inventory.

This note’s

due date was extended to September 30, 2015, and included new cash loaned to the Company of $175,000.

This note includes $7,957

of accrued interest on the paid off notes listed below.

This note paid off the following notes:

$50,000 of the February 11, 2014,

The Company had paid $32,289 in principal, leaving a balance of $37,711 at September 30, 2016, on these notes.

No interest is

accrued for these notes payable.

Total Interest paid during the quarter ending September 30, 2016, was $762.

October 21, 2014, the Company executed a promissory note with one of its shareholders and board members in the amount of

The note, originally due May 31, 2015, was non-convertible, had an interest rate of ten percent (10%) per annum,

was secured by accounts receivable, fixed assets, intellectual property, and the Company’s net loss carry forward, and

was used to finance operations and purchase inventory.

This note’s due date was extended to September 30, 2015, and

included new cash loaned to the Company of $175,000.

This note includes $7,957 of accrued interest on the paid off notes

listed below:

$50,000 of the February 11, 2014 note;

$250,000 of the Convertible long term related party note;

$145,000 of the note dated May 7, 2014;

$29,500 of the June 27,

2014, 105,000 note;

$105,000 of the note dated July 21, 2014;

the note dated May 7, 2014;

$29,500 of the June 27, 2014 note;

$105,000 of the note dated July 21, 2014;

$25,000 of the note dated

August 8, 2014;

$210,000 of the note

dated July 28, 2014;

$25,000 of the note dated August 8, 2014;

and $123,000 of the note dated August 20, 2014.

$22,222 of interest was rolled into principal on January 1, 2015, resulting in a principal balance of $892,679.

On June 8, 2016,

this note was combined with the January 22, 2015, promissory note, at ten percent (10%) per annum, with the principal balance

of $400,000, resulting in a new note with a balance due of $1,292,679, due July 1, 2018.

interest was rolled into principal on January 1, 2015 resulting in a principal balance of $892,679.

On June 8, 2016, this

note was combined with the January 22, 2015, promissory note, at ten percent (10%) per annum, with the principal balance of

$400,000, resulting in a new note with a balance due of $1,292,679, due July 1, 2018.

This promissory note is secured with

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the Company’s net loss carry forward.

The accrued interest was $174,243 as of June 30, 2016.

The accrued interest for the $1,292,679 consolidated note was $206,826 as of

September 30, 2016.

January 22, 2015, the Company issued 2,000,000 warrants to a shareholder and board member with a 36 month term to purchase “restricted”

Rule 144 common stock, no par value (the “Shares”), as consideration for the issuance of a promissory note in the

amount of $400,000, from the Company at a purchase price of $0.04 per share of common stock (the “Exercise Price”).

These warrants are fully vested and exercisable.

The warrants were evaluated for embedded derivatives in accordance with ASC 815

and were found to not include any embedded derivatives.

The warrants attached to the note were valued using the Black Scholes

Valuation Model.

The assumptions used in the model included the historical volatility of the Company’s stock of 180%, and

the risk-free rate for the periods within the expected life of the warrant based on the U.S.

Rule 144 common stock, no par value (the “Shares”), at a purchase price of $0.04 per share of common stock (the “Exercise

Price”) as consideration for the issuance of a promissory note in the amount of $400,000 from the Company.

These warrants

are fully vested and exercisable.

The warrants were evaluated for embedded derivatives in accordance with ASC 815 and were found

to not include any embedded derivatives.

The warrants attached to the note were valued using the Black Scholes Valuation Model.

The assumptions used in the model included the historical volatility of the Company’s stock of 180%, and the risk-free rate

for the periods within the expected life of the warrant based on the U.S.

Treasury yield curve in effect of 0.35%.

The resulting fair value was $66,717.

The resulting

fair value was $66,717.

This value was recorded as a debt discount and fully amortized as of March 31, 2016.

On June 8, 2016, this note was combined with the January 22, 2015, promissory note, at 10% per annum, with the principal balance

of $400,000, resulting in a new note with a balance of $1,292,679, due July 1, 2018.

The accrued interest was $174,243 as of June

February 17, 2015 and April 20, 2015, the Company executed Promissory Notes with one of our shareholders and board members for

On June 8, 2016,

this note was combined with the January 22, 2015, promissory note, at 10% per annum, with the principal balance of $400,000, resulting

in a new note with a balance of $1,292,679, due July 1, 2018.

The accrued interest for the $1,292,679 was $206,826 as of September

February 17, 2015, and April 20, 2015, the Company executed promissory notes with one of its shareholders and board members for

$135,000 each at ten percent (10%) interest per annum, due June 30, 2015, secured by accounts receivable on completed contracts

to finance operations and purchase inventory.

$95,000 of the principle balance of the April 20, 2015 note was paid, leaving a

$40,000 principle balance.

The Lender had provided the Company with extensions of due dates for both notes through June 30, 2016.

The principal of $135,000 was combined with the $40,000 remaining principal into a $175,000 note due January 15, 2019.

interest at June 30, 2016, was $27,355.

On June 8, 2016, the company executed Promissory

Notes with one of our shareholders and board members for $1,292,679.

The note is due July

1, 2018, has an interest rate of ten percent (10%) per annum, is secured by inventories, fixed assets, intellectual property,

and the Company’s net loss carry forward.

This promissory note for $1,292,679, combined and replaced the October

21, 2014 promissory note for $892,679 and January 16, 2015 promissory note for $400,000 per the table below.

On June 8, 2016, the company executed Promissory Notes with one of our shareholders

and board members for $175,000.

The note is due January 15, 2019, has an interest rate of

ten percent (10%) per annum, is secured by inventories, fixed assets, intellectual property, and the Company’s net loss

carry forward.

This promissory note for $175,000, combined and replaced the promissory note dated February 17 th and

March 5 th , 2015 for $135,000 and the unpaid principle balance of $40,000 remaining on the promissory note dated April

20, 2015 per the table below.

Note Due Date

2/17/15,3/5/15

The principal on the April 20, 2015, note was paid down to $40,000.

The Lender had

provided the Company with extensions of due dates for both notes through June 30, 2016.

The principal on the February 17, 2015,

note of $135,000 was combined with the $40,000 remaining principal on the April 20, 2015, note into a $175,000 note due January

The accrued interest on the $175,000 note, on September 30, 2016, was $31,766.

June 8, 2016, the Company executed a promissory note with one of its shareholders and board members for $1,292,679.

note is due July 1, 2018, has an interest rate of ten percent (10%) per annum, and is secured by inventory, fixed assets, intellectual

property, and the Company’s net loss carry forward.

This promissory note for $1,292,679, combined and replaced the

October 21, 2014, promissory note for $892,679 and the January 16, 2015, promissory note for $400,000 as detailed in the table

June 8, 2016, the Company executed promissory notes with one of its shareholders and board members for $175,000.

note is due January 15, 2019, has an interest rate of ten percent (10%) per annum, and is secured by inventory, fixed assets,

intellectual property, and the Company’s net loss carry forward.

This promissory note for $175,000 combined and replaced

the promissory note dated February 17, 2015 and March 5, 2015, for $135,000 and the unpaid principal balance

of $40,000 remaining on the promissory note dated April 20, 2015, per the table below.

The accrued interest on the $175,000

note, on September 30, 2016, was $31,766.

Note Payable –

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August 1, 2012, the Company issued amendments to the convertible note agreements (convertible into common stock at a rate of $0.15

per share) in the aggregated amount of $215,000 and extended the due date with repayment in the amount of $40,000 per quarter

to begin April, 2013, and the final payment due in August, 2014, with any remaining balance due at that time.

per share) in the aggregate amount of $215,000 and extended the due date with repayment in the amount of $40,000 per quarter to

begin April, 2013, with the final payment due in August, 2014, to include any remaining balance due at that time.

In consideration

for extending the due date of the promissory notes, the expiration dates on the warrants issued (fully expensed in the prior period)

on March 31, 2011, and June 27, 2011, were amended and extended an additional three years, making the new expiration dates August

on March 31, 2011, which were subsequently extended to June 27, 2014, were amended and extended again an additional three years,

making the new expiration dates August 1, 2017.

At the Lenders’

sole option, Lenders may elect to receive payment of their respective notes and all accrued interest

in restricted common stock of the Company at the price per share of said common stock at same rate as the warrants.

2013, the Company executed an amendment to the loan transaction.

The amended transaction involved the extension of the promissory

notes from April 30, 2013, to April 30, 2016, with the creditors waiving any default under the previous note.

The Company made

interest payments to each of the eight note holders for all accrued interest from August 1, 2012, to April 30, 2013, for consideration

of the extension.

On the fourth extension, all accrued interest was combined with the original principal amount as of July 31,

On July 13, 2015, three non-related party conversions with a principal balance of $102,033, combined with the accrued interest

to date of $17,894, were converted to 799,514 shares of common stock.

As of June 30, 2016, the ending principal balance was $90,696.

Interest accrued as of June 30, 2016 was $24,972.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Company includes fair value information in the notes to financial statements when the fair value of its financial instruments

is different from the book value.

When the book value approximates fair value, no additional disclosure is made.

sole option, Lenders may elect to receive payment of their

respective notes and all accrued interest in “restricted”

common stock of the Company at the price per share of said

common stock at the same rate as the warrants.

On June 7, 2013, the Company executed an amendment to the loan transaction.

amended transaction involved the extension of the promissory notes from April 30, 2013 to April 30, 2016, with the Lenders waiving

any default under the previous note.

The Company made interest payments to each of the eight note holders for all accrued interest

from August 1, 2012 to April 30, 2013 for consideration of the extension.

On the fourth extension, all accrued interest was combined

with the original principal amount as of July 31, 2012.

On July 13, 2015, three non-related party conversions with a principal

balance of $102,033, combined with the accrued interest to date of $17,894, were converted to 799,514 shares of common stock.

As of September 30, 2016, the ending principal balance was $90,696.

Interest accrued as of September 30, 2016 was $27,258.

NOTE RECEIVABLE

July 31, 2013, the Company signed a Memorandum of Understanding with a Canadian company owned by Joseph Khoury (“JAK”)

proposing a purchase agreement in which JAK would purchase LabMentors from the Company for USD $150,000.

JAK agreed to assume

100% of LabMentors outstanding liabilities of approximately $100,000, and to pay the remainder through a note receivable in the

amount of $50,740, carried an annual interest rate of three percent (3%) compounded annually and was to be paid over a period

of 60 months in equal monthly payments beginning in month 13 of the 60 month period.

This sale was finalized during the period

ending September 30, 2013.

On April 14, 2015, JAK informed the Company of the potential

closure of LabMentors and an inability to meet its note obligations.

LabMentors had made three note payments as of the

date of the notification totaling $3,399.

In evaluation of the notes potential for collectability,

a note allowance was accrued to the full amount of the note receivable balance.

The note receivable principal balance at June

proposing a purchase agreement in which JAK shall purchase LabMentors from PCS for USD $150,000.

JAK has agreed to assume 100%

of LabMentors outstanding liabilities and to pay the remainder of the USD $150,000 through a note payable.

The Company note receivable

in the amount of $50,740, carries an annual interest rate of 3% compounded annually and is to be paid over a period of 60 months

in equal monthly payments beginning in month 13 of the 60 month period.

This sale was finalized during the period ending September

On April 14, 2015, JAK informed PCS of the potential closure of LabMentors and

an inability to meet its note obligations.

LabMentors had made three note payments as of the date of the notification totaling

In evaluation of the notes potential for collectability, a note allowance was accrued to the full amount of the note receivable

The note receivable principal balance at June 30, 2015, was $49,513.

The note receivable principal balance at September

30, 2016, was $49,513.

The note receivable allowance balance at June 30, 2016, and June 30, 2015, was $49,513 and $49,513, respectively.

The note receivable allowance balance at September 30, 2016 is $49,513, resulting in a net $0 balance

for this note receivable.

August 10, 2016, the Company entered into a note receivable with one of its consultants for the amount of $21,198, with

an interest rate of eighteen percent (18%) per annum, and secured by future payables owed to the consultant by the Company

for services rendered.

Interest and principal are due by January 31, 2017.

ACCOUNTS RECEIVABLE

The Company had accounts receivable of $786,241

net of an allowance for $2,096 for the fiscal year ended March 31, 2016.

This accounts receivable balance included a major international

customer’s final work orders;

a major domestic customer’s annual sales order;

and an international customer’s

lab royalty fees.

The Company had an accounts receivable balance of $307,677 net of allowance of $2,096 as of June 30, 2016.

quarter over quarter decrease reflects the payments from these two major customers.

NOTE 12 –

The Company had inventory of $192,527 net

of an inventory reserve of $3,391 for the fiscal year ended March 31, 2016.

The inventory reserve is consideration for obsolete

and slow moving inventories.

This March 31, 2016 inventory balance reflected the shipment of the two major customer orders mentioned

Company had accounts receivable of $752,922 net of an allowance for $2,096 for the fiscal year ended March 31, 2016.

accounts receivable balance included a major international customer’s final work orders;

a major domestic customer’s

annual sales order;

and an international customer’s lab royalty fees.

All international outstanding accounts receivable

balances were paid within terms.

The Company had an accounts receivable balance of $192,643, net of allowance of $2,096 as of

September 30, 2016.

Company had inventory of $192,527 net of an inventory reserve of $3,391 for the fiscal year ended March 31, 2016.

The inventory

reserve is consideration for obsolete and slow moving inventories.

The March 31, 2016, inventory balance reflected the shipment

of the two major customer orders mentioned in Note 11.

The majority of summer camp sales span February through June, 2016.

Summer camp components are generally purchased within

the week ordered to keep inventories lean.

The company had an inventory balance of $176,740 net of an inventory reserve of $3,391

as of June 30, 2016.

The quarter over quarter decrease reflects the shipment of summer camp sales orders in que during peak season.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

camp components are generally purchased within the week ordered to keep inventories lean.

The Company had an inventory balance

of $342,686 net of an inventory reserve of $3,391 as of September 30, 2016.

The growth in inventory on-hand is due to receipt

of an ocean container of our proprietary BrickLab product.

13 - COMMITMENTS AND CONTINGENCIES

Operating Lease Obligation

Company leases its main office under a non-cancelable lease agreement accounted for as an operating lease.

On December 31, 2013,

the Company signed an amendment to the existing lease to reduce the leased square feet to 5,412 for $6,765 per month for the 12

months ending December 31, 2014.

On February 1, 2015, the Company signed a new lease to reduce the square feet to 3,609 for $4,511

per month for the 12 months ending January 31, 2016.

The Company signed a lease amendment for the main office space on May

11, 2016, for $15.48 per square foot or $4,647 per month for the 12 months expiring May 31, 2017.

expense for the corporate offices was $17,896 and $14,185 for the quarters ended June 30, 2016, and 2015, and $54,135 and $77,869

for the 12 months ended March 31, 2016, and 2015, respectively, under this lease arrangement.

The Company leases its main office under a

non-cancelable lease agreement accounted for as an operating lease.

On December 31, 2013, the Company signed an amendment to the

existing lease to reduce the leased square feet to 5,412 for $6,765 per month for the 12 months ending December 31, 2014.

On February 1, 2015, the Company signed a new lease to reduce the square feet to 3,609 for $4,511 per month for the 12 months

ending January 31, 2016.

The Company signed a lease amendment for the main office space on May 11, 2016, for $15.48 per square

feet or $4,647 per month for the 12 months expiring May 31, 2017.

Rent expense for the corporate offices was $32,676 and

$29,397 for the six months ended September 30, 2016, and 2015, respectively, and $54,135 and $77,869 for

the 12 months ended March 31, 2016, and 2015, respectively, under this lease arrangement.

Company leases additional warehouse space in Boise, Idaho.

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The lease was extended to

a new expiration of October 31, 2015.

The Company signed a sixth amendment on April 15, 2015, to lease an additional approximately

1,400 square feet bay adjacent to the existing leased space.

Rent expense for the warehouse was $5,620 and $5,620 for the quarters

ended June 30, 2016, and 2015, respectively, and $25,130 and $16,225 for the 12 months ended March 31, 2016, and 2015, respectively.

a new term ending October 31, 2015.

The Company signed a sixth amendment on April 15, 2015, to lease additional warehouse space

of approximately 1,400 square feet adjacent to the existing leased space to April 30, 2016.

The Company moved all warehousing

to the new facility, vacating and completing the lease agreement ending April 30, 2016.

March 15, 2016, the Company leased a warehouse, office space, and manufacturing facility of approximately 10,000 square feet for

$6,300 per month for 12 months.

On April 28, 2016, the Company moved all inventories, property, plant, and equipment to a new

On April 28, 2016, the Company moved all inventories, property, plant, and equipment to this new

warehouse facility.

Rent expense for the new warehouse location was $18,265 and $0 for the quarters ended June 30, 2016, and 2015,

respectively, and $3,150 and $0 for the 12 months ended March 31, 2016, and 2015, respectively.

Rent expense for the new warehouse location was $37,800 and $0 for the six months ended September

30, 2016, and 2015, respectively, and $3,150 and $0 for the 12 months ended March 31, 2016, and 2015, respectively.

Company leased an additional learning lab site in Eagle, Idaho, in the first quarter of FY2015.

The lease term has a three year

term for 1,050 square feet, for an annual base rent of $16,640 or $1,387 per month, with three percent (3%) growth per year.

The lease has a three-year term

for 1,050 square feet, for an annual base rent of $16,640 or $1,387 per month, with three percent (3%) growth per year.

or about May 18, 2015, the Company was named as a co-defendant in a legal action related to one of its employees, alleged to have

2 unchanged sentences

County of Ada, Civil Action number CV PI 1507419.

The insurance carrier has indicated the claim would not be supported if the

employee was not on company business.

The Company has engaged legal counsel to represent it in this matter.

October 13, 2015, the Company filed a Summons and Complaint against Ty Jacobsen, dba Jacobsen Enterprises.

The complaint primarily

involved defamation and breach of contract.

The Complaint is un-resolved at this time, and the Company is in negotiations with

The outcome of this matter is unknown as of the date of this Quarterly Report.

The insurance carrier indicated the claim would not be supported if the employee

was not on company business, which the Company asserted was the case.

The Company engaged legal counsel to represent it in this

On October 25, 2016, the case was dismissed with prejudice.

October 13, 2015, the Company filed a Summons and Complaint against a person the Company contracted to promote the Company.

complaint primarily involved defamation and breach of contract.

The Complaint was unresolved at quarter end as the Company was

in negotiations with the person to settle this dispute.

In early October, an agreement was reached and both parties signed a confidential

The matter was settled amicably.

Contingencies

14 - STOCKHOLDERS’

the three months ending June 30, 2015, $22,000 has been accrued in Restricted Stock Units payable for the issue of 200,000 shares

for services that will be issued in future periods.

Each restricted stock unit is valued at a range from $0.11, based on the closing

price of the Company’s common stock at the date of grant.

The total amount recorded in stock payable as of June 30, 2015,

for these services and other prior period services is $31,000.

the three months ending June 30, 2015, the Company expensed amounts related to stock options and warrants granted in the current

period as well as prior periods valued at $3,547.

the three months ended June 30, 2015, the company accrued $8,250 payable in Restricted Stock Unit to its non-management directors.

Each restricted stock unit is valued at a range from $0.05 to $0.10, based on the closing price of the Company’s common

stock at the date of grant.

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.

As of June 30, 2015, $20,367 has been accrued for director services and recorded in stock payable.

the three months ended June 30, 2015, the company issued a total of 75,000 Rule 144 restricted common stock shares in two transactions,

to a contractor for services.

On April 26, 2016, the company issued 50,000 shares valued at $0.08, based on the common stock closing

price of the company on the day of grant.

On May 10, 2016 the company issued 25,000 Rule 144 restricted common stock shares valued

at $0.09, based on the common stock closing price of the company on the date of grant.

the three months ending June 30, 2016, $1,620 had been accrued in Restricted Stock Units payable for the issue of 81,000 shares

for services that will be issued in future periods.

Each Restricted Stock Unit was valued at $0.04, based on common stock closing

price of the Company on the date of any grant, then revalued quarterly to $0.08 at March 31, 2016, and June 30, 2016.

amount recorded in Restricted Stock Units payable as of June 30, 2016, for these services and other prior period services, was

the three months ending June 30, 2016, the Company expensed amounts related to stock options and warrants granted in the current

the six months ended September 30, 2016, the Company expensed amounts related to stock options and warrants granted in the current

period as well as prior periods valued at $15,149.

the three months ended June 30, 2016, the Company accrued $16,000 in Stock Payable as a stock award of 200,000 Rule 144 restricted

common stock shares to an employee.

E ach stock unit awarded was valued at $0.08, based on

the closing price of the Company’s common stock at the date of grant.

The common stock was subsequently issued on July 8,

On October 21, 2014, the

Company entered into at ten percent (10%) Convertible Promissory Note with a current board member and shareholder, in the amount

of $200,000, convertible into shares of common stock of the Company, at the closing market price of $0.04 on such date.

April 29, 2016, the note was converted, along with $30,521 in accrued interest, into 5,763,014 shares of common stock.

conversion within the terms of the note, no gain or loss was recognized.

the six months ended September 30, 2016, an employee exercised 70,000 options earned from an Incentive Stock Option (ISO) Agreement

dated January 14, 2014.

The ISO Agreement option price was $0.0362 per exercised share of “restricted”

common stock,

totaling $2,534.

the six months ended September 30, 2016, the Company issued 200,000 shares of Rule 144 “restricted”

common stock shares

to an employee.

The shares were valued based on the fair market price of $0.08, the closing price of the Company’s common

stock at the date of grant, for a total of $16,000.

the six months ended September 30, 2016, the Company issued a total of 75,000 Rule 144 “restricted”

common stock shares

in two transactions to a contractor for services.

On April 26, 2016, the Company issued 50,000 shares valued at $0.08, based on

the common stock closing price of the Company on the date of grant.

On May 10, 2016, the Company issued 25,000 Rule 144 “restricted”

common stock shares valued at $0.09, based on the common stock closing price of the Company on the date of grant.

The cumulative

stock compensation for services totaled $6,250.

the six months ended September 30, 2016, the Company issued a total of 5,763,014 Rule 144 “restricted”

On October 21, 2014, the Company entered into a ten percent (10%) convertible

promissory note with a current board member and shareholder in the amount of $200,000 convertible into shares of common stock

of the Company at the closing market price of $0.04 on such date.

O n April 29, 2016,

the note was converted, along with $30,521 in accrued interest, into 5,763,014 shares of common stock.

Due to conversion within

the terms of the note, no gain or loss was recognized.

the six months ended September 30, 2016, the Company issued a total of 6,250,000 Rule 144 “restricted”

shares from a private equity sale offering on July 18, 2016, at a price of $0.08

totaling $500,000.

the six months ended September 30, 2016, the Company accrued $265,000 in stock payable due to the September 28, 2016, offer of

5,076,922 shares of its common stock for $330,000 comprised of “restricted securities”

as defined under Rule 144 of

the SEC, solely to “accredited investors.”

The purchase price was $0.065 per share.

The $65,000 variance between the

sale proceeds of $265,000 and $330,000 was due to the sale of 1,000,000 shares at $0.065 finalized on October 1, 2016.

the six months ending September 30, 2016, $6,480 in accrued Restricted Stock Units payable was reversed.

Stock compensation in

the form of Restricted Stock Units is only authorized for independent directors.

The current Board of Directors does not have

a qualifying independent member.

Preferred Stock

Company has 20,000,000 authorized shares of preferred stock.

As of June 30, 2016, there are no preferred shares issued or outstanding.

As of September 30, 2016, there were no preferred shares issued or

15 - BASIC AND DILUTED NET LOSS PER COMMON SHARE

Basic net loss per common share for the three-month

periods ended June 30, 2016, and 2015, are based on 80,418,842 and 74,235,284, respectively, of weighted average common shares

Diluted net loss per share for the three-month period ended June 30, 2016 and 2015, are based on 84,818,314 and 78,791,182,

net losses per common share for the three month periods ended September 30, 2016, and 2015, are based on 87,507,204 and 74,917,541,

respectively, of weighted average common shares outstanding.

Net income (loss) per common share:

Weighted average number of common shares outstanding:

Dilutive net loss per common share for the six month periods ended

September 30, 2016, and 2015, are based on 83,982,390 and 74,356,534 respectively, of weighted average common shares outstanding.

Months Ended September 30,

Net income per common share:

Weighted Average Number of Shares Outstanding,

Basic and Diluted

16 - DILUTIVE INSTRUMENTS

Options and Warrants

Company is required to recognize expense of options or similar equity instruments issued to employees using the fair-value-based

2 unchanged sentences

awards, share appreciation rights, and employee share purchase plans.

Application of this pronouncement requires significant judgment

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.

1 unchanged sentence

the expected term of the award.

Total Issued and Outstanding

Balance as of March 31, 2016

Common Stock Options

Balance as of June 30, 2016

common stock options were exercised during the quarter ended June 30, 2016.

January 1, 2014, the Company granted 40,000

incentive options each to three employees per year for three years.

These options were issued as incentive compensation to the

employee and require the achievement of certain milestones.

Balance as of September 30, 2016

August 31, 2016, an employee of the Company exercised 70,000 options for “restricted”

common stock issued during the

period ended September 30, 2016.

The options vest over a three-year period, are exercisable at $0.0362 per share, and are valued

at $2,534 which represented the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.

Board of Directors resolved on July 14, 2016, to increase the Company authorized common stock from 100,000,000 shares with no

par value to 150,000,000 shares of common stock with no par value.

The resolution was ratified on September 23, 2016, by the shareholders

at the Annual Meeting.

The Articles Of Amendment were filed with the Idaho Secretary of State on September 23, 2016 (Exhibit

1, 2014, the Company granted 40,000 incentive options each to three employees per year for three years.

These options were issued

as incentive compensation to the employees.

The options were valued using the Black-Scholes valuation model.

options have an expected volatility rate of 259.07% calculated using the Company common stock price for a three-year period.

A risk free interest rate of 0.26% - 0.76% was used to value the options.

The options have

an expected volatility rate of 259.07% calculated using the Company stock price for a three-year period.

A risk-free interest

rate of 0.26% - 0.76% was used to value the options.

The total value of these options was $17,726.

vest over a three-year period and are exercisable at a range of $.05 to $0.6 per share, which represents the fair market

value at the date of grant in accordance with the 2009 Equity Incentive Plan.

As of June 30, 2015, $6,923 of the total value was

$1,041 was expensed in the quarter ending June 30, 2015.

As of June 30, 2016, $15,735 of the total value was expensed.

$516 was expensed in the quarter ending June 30, 2016.

February 1, 2014, the Company granted 40,000

incentive options each to one employee per year for three years.

These options were issued as incentive compensation to the employee

and require the achievement of certain milestones.

The options vest over a three-year

period and are exercisable at a range of $.05 to $0.6 per share, which represented the fair market value at the date of grant

in accordance with the 2009 Equity Incentive Plan.

As of September 30, 2016, $12,801 of the total value was expensed.

expensed in the six months ending September 30, 2016.

1, 2014, the Company granted 40,000 incentive options to one employee per year for three years.

These options were issued as incentive

compensation to the employee.

The options were valued using the Black-Scholes valuation model.

have an expected volatility rate of 258.20% calculated using the Company common stock price for a three-year period.

free interest rate of 0.41% - 0.64% was used to value the options.

The options have an expected volatility

rate of 258.20% calculated using the Company stock price for a three-year period.

A risk-free interest rate of 0.41% -

0.64% was used to value the options.

The total value of these options was $4,107.

The options vest

over a three-year period and are exercisable at a range of $.05 to $0.6 per share, which represents the fair market value at the

date of grant in accordance with the 2009 Equity Incentive Plan.

As of June 30, 2015, $1,710 of the total value was expensed.

$345 was expensed in the quarter ending June 30, 2015.

As of June 30, 2016, $3,417 of the total value was expensed.

$345 was expensed

in the quarter ending June 30, 2016.

November 18, 2015, the Company granted 200,000 stock options to an officer, Robert Grover.

The options vest over a three-year period and

are exercisable at a range of $.03 to $0.6 per share, which represents the fair market value at the date of grant in accordance

with the 2009 Equity Incentive Plan.

As of September 30, 2016, $3,762 of the total value was expensed.

$900 was expensed in the

six months ending September 30, 2016.

November 18, 2015, the Company granted 200,000 stock options to an officer, Robert O.

The expected volatility rate of

186.52% calculated using the Company stock price over the two-year period ending November 17, 2015.

A risk free interest rate of 0.80

% was used to value the options.

A risk-free interest

rate of 0.80 % was used to value the options.

The options were valued using the Black-Scholes valuation model.

The total value of the options

The options vest over a three year period and are exercisable at $0.09 per share, which represents the fair market

value at the date of grant in accordance with the 2009 Equity Incentive Plan.

As of June 30, 2016, $9,027 of the total value of

the options had been expensed.

In the quarter ending June 30, 2016, $3,635 of the total value was expensed.

February 16, 2016, the Company granted 850,000 incentive stock options to three employees.

The expected volatility rate of 218.68%

was calculated using the Company stock price over the period beginning February 14, 2014, through the last business date prior

A risk free interest rate of 0.29 % was used to value the options.

The options were valued using the Black-Scholes valuation

The total value of these options was $24,154.

The options vest over a two-year period and are exercisable at $0.04 per

share, which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.

The total value

of the options was $14,659.

The options vest over a three year period and are exercisable at $0.09 per share, which represents

the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.

As of September 30, 2016, $12,702

of the total value of the options had been expensed.

In the quarter ending June 30, 2016, $2,840 of the

total value was expensed.

During the quarter ending June 30, 2016, the

Company did not grant options.

January 22, 2015, the Company issued 2,000,000 warrants to a shareholder and board member with a 36 month term to purchase “restricted”

Rule 144 common stock, no par value (the “Shares”), as consideration for the issuance of a promissory note in the

amount of $400,000, from the Company at a purchase price of $0.04 per share of common stock (the “Exercise Price”).

These Warrants are fully vested and exercisable.

The warrants were evaluated for embedded derivatives in accordance with ASC 815

and were found to not include any embedded derivatives.

The warrants attached to the note were valued using the Black Scholes

Valuation Model.

The assumptions used in the model included the historical volatility of the Company’s stock of 180%, and

the risk-free rate for the periods within the expected life of the warrant based on the U.S.

Treasury yield curve in effect of

The resulting fair value was $66,717.

This value was recorded as a debt discount and was amortized over the life of the

The remaining $38,184 of the debt discount was amortized during the quarter ending June 30, 2015.

$7310 was expensed in the six months ending September 30, 2016.

May 15, 2012, the Company granted 850,000 incentive stock options to an officer, Robert O.

The expected volatility rate

of 223.62% calculated using the Company stock price over the period beginning June 1, 2009 through date of issue.

interest rate of 0.38 % was used to value the options.

The options were valued using the Black-Scholes valuation model.

total value of this option was $44,495.

The options vest over a three year period and are exercisable at $0.06 per share which

represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan.

As of June 30, 2015,

the entire value of the options was expensed.

July 30, 2015, 120,000 common stock warrants were exercised at a price of $.07 per share for a total of $8,400, resulting in the

issuance of 120,000 shares of “restricted”

common stock.

17 - SUBSEQUENT EVENTS

July 8, 2016, the Company issued 200,000 shares of “restricted”

Rule 144 common stock, no par value per share, to

a new employee based on the common stock’s closing price on the grant date of June 8, 2016, of $0.08.

Board of Directors resolved on July 14, 2016, to set the annual shareholder meeting on September 23, 2016 (the “Annual Meeting),

and associated record date to July 26, 2016.

Board of Directors resolved on July 14, 2016, to increase the Company’s authorized common stock from 100,000,000 shares

with no par value to 150,000,000 shares of common stock with no par value, and has further directed that management submit the

resolution for ratification by the shareholders at the Annual Meeting.

Board of Directors also resolved on July 14, 2016, to increase the Company 2009 Equity Incentive Plan shares from 8,000,000 to

10,000,000 authorized common stock shares with no par value and has further directed that management submit the resolution for

ratification by the shareholders at the Annual Meeting.

July 18, 2016, the Company completed the offer and sale of 6,250,000 shares of its common stock comprised of “restricted

securities”

as defined under Rule 144 of the SEC for $500,000, to “accredited investors,”

two of whom were directors

or executive officers of the Company.

October 11, 2016, the Company issued the September 28, 2016, offer and sale of 5,076,922 shares of its common stock comprised

of “restricted securities”

as defined under Rule 144 of the SEC for $329,999.93, solely to “accredited investors.”

The purchase price was $0.065 per share.

Prior to the completion of this private offering,

there were 82,480,682 shares of the Company’s common stock outstanding, and when these 6,250,000 shares are issued of record,

there will be 88,730,682 outstanding shares.

The 6,250,000 shares offered and sold will represent approximately seven percent

of the outstanding securities of the Company when issued.

Prior to the completion of this private offering, there were 88,800,682 shares of the

Company’s common stock outstanding, and when these 5,076,922 shares are issued of record, there will be 93,877,604 outstanding

The 5,076,922 shares offered and sold will represent approximately five percent of the outstanding securities of the Company.

October 14, 2016, the Company executed a non-convertible promissory note with no warrants attached, with an “accredited

investor,”

for $50,025 at 20% interest per annum, due November 30, 2016.

The note was secured by the 2016/0003-001 work

order with T4EDU.

October 6, 2016, the Company negotiated a settlement on Ada County Case No.

CV OC 1517581 originating in the Idaho Fourth

Judicial District Court.

The parties to the suit negotiated an agreement that included a confidentiality clause.

October 24, 2016, the Company issued an October 14, 2016, offer and sale of 769,230 shares of its common stock comprised of “restricted

securities”

as defined under Rule 144 of the SEC for $50,000, solely to an “accredited investor.”

price was $0.065 per share.

Prior to the completion of this private offering, there were 93,877,604 shares of the Company’s

common stock outstanding.

These 769,230 shares bring to the Company issued of record, to 94,646,834 outstanding shares.

The 5,076,922

shares offered and sold will represent approximately five percent of the outstanding securities of the Company.

or about May 18, 2015, the Company was named as a co-defendant in a legal action related to one of its employees, alleged to have

been driving an automobile negligently while on work related services for the Company, and causing damages to the plaintiffs in

The action was brought in the District Court of the Fourth Judicial District of the State of Idaho, in and for the

County of Ada, Civil Action number CV PI 1507419.

On October 25, 2016, the case was dismissed with prejudice.

Management’s Discussions and Analysis of Financial Condition and Results of Operations .

3 unchanged sentences

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

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, weather conditions and other uncertainties, including those

detailed in the Company’s Securities and Exchange Commission (the “SEC”) filings.

The Company assumes no duty

to update forward-looking statements to reflect events or circumstances after the date of such statements.

Certain statements in this 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.

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, weather conditions and other uncertainties, including those detailed in the Company’s Securities

and Exchange Commission filings.

The Company assumes no duty to update forward-looking statements to reflect events or circumstances

after the date of such statements.

following discussion should be read in conjunction with our audited financial statements and Management’s Discussion and

Analysis of Financial Condition and Results of Operations (“MD&A”) contained in our 10-K Annual Report for the

fiscal year ended March 31, 2016, filed with the SEC on June 22, 2016.

Analysis of Financial Condition and Results of Operations (“MD&A”) contained in our Form 10-K Annual Report for

the fiscal year ended March 31, 2016, filed with the SEC on June 22, 2016.

of Operation.

Company sells into the STEM education market with (1) an existing STEM library and deep expertise in creating STEM solutions comprised

of curriculum and materials;

Company sells into the STEAM education market with (1) an existing STEAM library and deep expertise in creating STEAM solutions

comprised of curriculum and materials;

(2) a unique learning methodology –

an adaptive (customized to individual learners), experiential

(hands-on in nature) learning framework that can be monetized in a number of ways, with what the Company believes is an approach

to educational assessment and incentivizing students for the future, and the Company is an innovative leader in this area;

innovative K12 robotics and engineering system comprised of hardware and software specifically designed to engage students in

STEM topics such as hands-on physics, engineering, and coding;

(4) a long history as a prime STEM provider in the Kingdom of Saudi

Arabia, a relationship which the Company believes will continue to provide revenue growth;

and (5) a continual view to the future

of STEM education developments, exemplified by the Company’s anticipated release of a STEM drone program to enhance its

other product offerings.

Company’s strategy is profitability driven, seeking to optimize operations while moving our core STEM, digital learning,

an adaptive (customized to individual learners),

experiential (hands-on in nature) learning framework that can be monetized in a number of ways, with what the Company believes

is an approach to educational assessment and incentivizing students for the future, and the Company is an innovative leader in

(3) an innovative K12 robotics and engineering system comprised of hardware and software specifically designed

to engage students in STEAM topics such as hands-on physics, engineering, and coding;

(4) a long history as a prime STEAM provider

in the Middle East, a relationship which the Company believes will continue to provide revenue growth;

and (5) a continual view

to the future of STEAM education developments, exemplified by the Company’s anticipated release of a STEAM drone program

to enhance its other product offerings.

Company’s strategy is profitability driven, seeking to optimize operations while moving our core STEAM, digital learning,

robotics, and drone product strategies forward.

1 unchanged sentence

with recurring revenue traits such as online licensing.

Tactically, we will focus on maintaining fresh product offerings, improving

our delivery and support infrastructure to accommodate larger scale delivery, improving our sales infrastructure, building

our new, higher margin digital products to add to our lineup of STEM products and services, and entering the retail market for

the Company’s STEM products.

We will continue to focus on the improvement of our web-based marketing efforts, expand our

sales force and channel partners, and tighten sales processes for our domestic STEM sales.

We will also continue to fulfill existing,

and capture new, STEM contracts with the Kingdom of Saudi Arabia.

We will continue to use our EdventuresLab program for (1)

an R&D test bed for product improvement and refinement with a major emphasis on digital delivery of content;

(2) revenue generation

through afterschool and summer course fees;

(3) revenue through licensing EdventuresLab curriculum and methods;

and (4) revenues

from STEM retail products.

We believe e-commerce sales of kits associated with STEM learning targeting the families of students

attending the centers as well as the larger home retail market will provide a consistent, dependable boost in the third quarter

of FY2017 revenues to offset low education sales traditionally anticipated during this time frame.

We will actively seek retail

distribution methods and channels for our robotics and drone retail products and expand their usability for other market segments.

Tactically, the Company will focus on maintaining fresh product offerings,

improving delivery and support infrastructure to accommodate larger scale delivery, improving sales infrastructure, building

new, higher margin digital products to add to the Company’s lineup of STEAM products and services, and entering the retail

market for the Company’s STEAM products.

The Company will continue to focus on the improvement of its web-based marketing

efforts, expand its sales force and channel partners, and tighten sales processes for domestic STEAM sales.

The Company will also

continue to fulfill existing, and capture new, STEAM contracts with a customer in the Middle East.

The Company will continue to

use our EdventuresLab program for (1) an R&D test bed for product improvement and refinement with a major emphasis on

digital delivery of content;

(2) revenue generation through afterschool and summer course fees;

(3) revenue through licensing

EdventuresLab curriculum and methods;

and (4) revenues from STEAM retail products.

The Company will actively seek retail

distribution methods and channels for its robotics and drone retail products and expand their usability for other market segments.

Company is actively marketing the Thrust-UAV brand for its FPV racing drone and is forming distributor relationships.

also is preparing to sell components and parts for its FPV racing drone on its website.

The Company has formed several partnerships

with the FPV community and intends to leverage these relationships to promote its FPV racing drone.

of Operations

For the quarter ended June 30, 2016, the Company

reported a net loss of $410,077 as compared to a net income for the quarter ended June 30, 2015, of $130,865, a 414% decrease

to the bottom line.

The decrease is attributable to three areas:

a major customer annual order fulfillment and revenue recognition

occurred one quarter earlier than usual, occurring in the fourth quarter of FY2016, whereas the previous annual order was completed

in the first quarter of FY2016;

no international contracts were fulfilled in the first quarter of FY2017;

and, additional research

and development costs incurred associated with the operations of the Thrust UAV business unit.

The Diluted Earnings per Share

for the quarter ended June 30, 2016, was ($0.00), compared to the $0.00 earnings per share for the three-month period ended June

for the quarter ended June 30, 2016, was $653,655 as compared to revenue during the quarter ended June 30, 2015, of $1,291,219.

Cost of sales increased 18% over the same quarter last year due to lower margins on product lines.

The Basic and Diluted Net Loss per Share for

the quarter ended June 30, 2016, were ($0.01) and ($0.00) respectively, compared to the $0.00 and $0.00 basic and diluted net

income per share for the three-month period ended June 30, 2015, respectively.

operating expenses for the three-month period ended June 30, 2016, increased by $105,693, or 21% to $614,832, over the three-month

period ended June 30, 2015.

The table below identifies the quarter over quarter changes:

International Selling

$ (25,955 )(1)

Employee Expenses

Warehouse Expense

Product Development

International

selling expense decreased from last year due to no international contract fulfillment within the quarter.

expenses increased due to additional staff levels in product development and Thrust UAV.

expenses increased with the production of Thrust UAV promotional materials and videos.

expense increased with the new warehouse facilities lease starting on March 15, 2016.

Development expense increased from the prior year due to additional development of both STEM education and Thrust UAV product

Cash used by operating activities for the

first quarter of FY2017 was ($26,871) compared to cash used by operating activities of ($172,431) in the same period last year.

The Company ended the first quarter of FY2017 with $117,929 in cash, total current assets of $685,334 and total current liabilities

of $1,083,223, resulting in a working capital deficit of ($399,889) compared to a working capital deficit of $1,661,514 for the

year ended March 31, 2016.

The Company had a current ratio at June 30,

2016, and March 31, 2016, of 0.63 and 0.42, respectively.

This increase in liquidity was primarily due to the long term extension

notes payable.

The Company had an accumulated deficit of $40,462,123 and Stockholders’

Equity Deficit of $1,925,921 as of

June 30, 2016.

Company has accumulated significant losses and payables and generated past negative cash flows.

The combination of these items

raises substantial doubt about its ability to continue as a going concern.

The Company cannot predict that it will be successful

in obtaining funding for its plans or that it will achieve profitability in fiscal 2017.

the six month period ended September 30, 2016, the Company reported a net loss of ($1,120,351), as compared to a net loss of ($200,682)

for the six month period ended September 30, 2015.

The ($919,669) increase in loss was due to a 51% reduction in revenue predominantly

due to the timing of major customer order fulfilled by our March 31, 2016, fiscal year end.

The same order previous year was fulfilled

in April and May of 2015.

Additional contributors were the reduction in international work orders fulfilled year over year, and

the ramp up of Thrust UAV.

Direct operational, marketing, and product development costs for THRUST UAV ramp up were $488,366

for the six month period ending September 30, 2016.

The Basic Loss per Share for the six month period ended September 30,

2016, was ($0.01), which varies from the ($0.00) loss per share for the six month period ended September 30, 2015.

for the six month period ended September 30, 2016, was $965,954, as compared to revenue during the six month period ended September

30, 2015, of $1,816,026.

The revenue decrease was due to timing of major customer order fulfillments mentioned above and a decrease

in international work orders and Learning Center enrollment.

the three months ended September 30, 2016, the Company reported a net loss of ($710,274) as compared to a net loss of

($331,548) for the quarter ended September 30, 2015.

This increase in net loss was predominantly due to the investment in

research and development in its Thrust-UAV division.

Direct operational, marketing, and product development costs for

THRUST UAV ramp up were $312,674 for the three month period ending September 30, 2016.

The Basic Loss per Share for the quarter ended

September 30, 2016, was ($0.01), which varies from the ($0.00) loss per share for the three-month period ended September 30,

for the three months ended September 30, 2016, was $312,299 as compared to revenue during the quarter ended September 30, 2015,

The decrease in revenue was due to $190,655 less in domestic sales and a $19,693 decrease in Learning Center sales.

Operating expenses increased by $125,647

(23%) and $231,430 (22%) in the three and six months of fiscal 2017, respectively, relative to prior year periods.

factor behind this increase in operating expenses was the Company’s acquisition of Thrust-UAV which increased Company overhead.

Product development expense increased significantly due to investment in research and development at Thrust-UAV.

expense decreased by $12,917 and $62,662 in the three and first six months of fiscal 2017, respectively, relative to prior year

periods due to the conversion of debt.

Cash used by operations for the second quarter

of fiscal 2017 was $537,421, compared to cash provided by operations of $38,571 in the same period last year.

The Company ended

the second quarter of fiscal 2016 with $311,659 in cash, total current assets of $954,547, and total current liabilities

of $1,341,756, resulting in a working capital deficit of $387,209 compared to a working capital deficit of $1,661,514

for the year ended March 31, 2016.

Company had a current ratio at September 30, 2016, and March 31, 2016, of .70 and .42, respectively.

Significant short

term debt was consolidated with an extended due date reclassifying the promissory notes from short term to long term, related

There is no guarantee that this lender will continue to provide extensions for payments and the Company cannot predict

that it will be successful in obtaining funding or generating cash in order to pay the lender.

The Company has an accumulated

deficit of ($41,172,410) and shareholders’

equity (deficit) of ($1,865,709).

Quantitative and Qualitative Disclosures About Market Risk.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements