PCS Edventures!, Inc. 10-K

Item 8. Financial Statements. Report of Independent Registered Public Accounting Firm Balance Sheets as of March 31, 201 5 and March 31, 20 1 4 Statements of Operations for the years ended March 31, 201 5 and 20 1 4 Statements of Stockholders' Equity for the years ended March 31, 201 5 and 20 1 4 Statements of Cash Flows for the years ended March 31, 201 5 and 20 1 4 Notes to Financial Statements 23 23 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors PCS Edventures!.com, Inc. Boise, Idaho We have audited the accompanying balance sheets of PCS Edventures!.com, Inc. (the “Company”) as of March 31, 201 5 and 201 4 and the related statements of operations, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PCS Edventures!.com, Inc. and Subsidiary as of March 31, 201 5 and 201 4 and the results of its operations and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America . The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered reoccurring losses and negative cash flow from operations, both of which raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ M&K CPAS, PLLC www.mkacpas.com Houston, Texas June 15 , 201 5 24 24 Table of Contents PCS EDVENTURES!.COM, INC. Balance Sheets (USD $) As of March 31, 201 5 201 4 CURRENT ASSETS Cash $ 130,162 $ 27,860 Accounts receivable, net of allowance for doubtful accounts of $ 3,184 and $ 4,063 , respectively 358,033 489,751 Prepaid expenses 112,704 68,906 Finished goods inventory 251,164 187,386 Other receivable 3,236 3,424 Total Current Assets 855,299 777,327 FIXED ASSETS, net of accumulated depreciation of $ 144,821 and $ 118,005 , respectively 25,854 19,462 OTHER ASSETS Note Receivable net of allowance ($ 47,998) 1,515 - Mold Cost 10,229 14,668 Deposits 9,450 7,371 Total Other Assets 21,194 22,039 TOTAL ASSETS $ 902,347 $ 818,828 CURRENT LIABILITIES Accounts payable and other current liabilities $ 312,951 $ 471,426 Payroll liabilities payable 28,907 35,973 Accrued expenses 102,936 124,753 Deferred revenue 158,420 68,467 Note payable, convertible, related party, net discount of $ 24,063 and $ 0 as of March 31, 2015 and 2014 respectively 175,937 50,000 Note Payable 18,117 - Note payable, related party, net discount of $ 38,184 and $ 0 as of March 31, 2015 and 2014 respectively 1,438,870 707,251 Lines of credit payable 21,708 27,089 Total Current Liabilities 2,257,846 1,484,959 Notes payable, related party, long term 81,165 23,846 Notes payable, long term, convertible, net discount of $ 0 and $ 7,333 as of March 31, 2015 and 2014, respectively 202,729 236,541 Notes payable, convertible, related party, long term, net of discount of $ 0 and $ 315,721 , as of March 31, 2015 and 2014, respectively 34,011 293,436 Total Liabilities 2,575,751 2,038,782 STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock, no par value, 20,000,000 authorized shares, no shares issued and outstanding - - Common stock, no par value, 90,000,000 authorized shares, 74,235,284 and 52,970,332 shares issued and outstanding, respectively 37,923,485 36,919,152 Stock payable 21,117 31,080 Accumulated deficit (39,618,006 ) (38,170,186 ) Total Stockholders' Equity (Deficit) (1,673,404 ) (1,219,954 ) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 902,347 $ 818,828 The accompanying notes are an integral part of these financial statements. 25 25 Table of Contents PCS EDVENTURES!.COM, INC. Statements of Operations (USD $) For the years ended March 31, 201 5 201 4 REVENUES Domestic sales revenue $ 1,678,328 $ 1,544,849 Learning Center revenue 217,732 116,998 License & Royalty revenue 34,042 14,974 International revenue 971,011 178,890 Total Revenues 2,901,113 1,855,711 COST OF SALES 1,590,549 911,808 GROSS PROFIT 1,310,564 943,903 OPERATING EXPENSES Salaries and wages 786,178 625,709 Depreciation and amortization expense 26,816 18,715 General and administrative expenses 1,396,697 1,052,565 Total Operating Expenses 2,209,691 1,696,989 OPERATING LOSS (899,127 ) (753,086 ) OTHER INCOME AND (EXPENSES) Interest expense (561,028 ) (177,638 ) Other income 12,335 89 Total Other Income and Expenses (548,693 ) (177,549 ) NET LOSS FROM CONTINUING OPERATIONS (1,447,820 ) (930,635 ) NET LOSS FROM DISCONTINUED OPERATIONS - (30,580 ) Foreign currency translation - (3,533 ) NET COMPREHENSIVE LOSS $ (1,447,820 ) $ (964,748 ) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (1,447,820 ) $ (964,748 ) Basic and diluted loss per share from continuing operations $ (0.02 ) $ (0.02 ) Basic and diluted loss per share from discontinued operations $ (0.00 ) $ (0.00 ) Basic and diluted net loss per share $ (0.02 ) $ (0.02 ) Weighted Average Number of Shares Outstanding, Basic and Diluted 61,071,903 51,343,776 The accompanying notes are an integral part of these f inancial statements . 26 26 Table of Contents PCS EDVENTURES!.COM, INC. Statements of Stockholders' Equity (Deficit) (USD $) # of Common Shares O/S Capital Stock Stock Payable Accumulated Deficit Other Comprehensive Income Total Stockholders' Equity Balance at 03/31/2013 49,293,845 36,199,846 40,640 (37,208,971) (4,546) (973,031) Common stock for services 1,675 (1,640) 35 Common stock for bonuses 95,000 5,080 2,080 7,160 Common Stock for RSU's 442,857 60,000 10,000 70,000 RSU's forfeitures (20,000) (20,000) Conversion of notes payable 3,138,630 100,000 100,000 Option Expense 35,625 35,625 Discontinued Operations 140,926 8,079 149,005 Debt discount 376,000 376,000 Foreign currency translation (3,533) (3,533) Net Loss 8,236 (961,215) (961,215) Balance at 03/31/201 4 52,970,332 36,919,152 31,080 (38,170,186) (1,219,954) Common stock for services 1,750,000 97,500 (2,080) 94,420 Common stock for bonuses 170,000 8,160 8,160 Common Stock for RSU's 489,286 26,911 (1,825) 25,086 Common Stock for Legal Settlement 400,000 22,000 22,000 RSU's forfeitures (6,058) (6,058) Conversion of notes payable 18,455,666 696,374 696,374 Option Expense 17,161 17,161 Related Party Debt Forgiveness 19,510 19,510 Debt discount 116,717 116,717 Net Loss (1,447,820) (1,447,820) Balance at 03/31/201 5 74,235,284 $ 37,923,485 $ 21,117 $ (39,618,006) $ - $ (1,673,404) The accompanying notes are an integral part of these financial statements. 27 27 Table of Contents PCS EDVENTURES!.COM, INC. Statements of Cash Flows (USD $) For the years ended March 31, 201 5 201 4 CASH FLOWS FROM OPERATING ACTIVITIES NET LOSS $ (1,447,820 ) $ (961,215 ) Adjustments to reconcile net loss to net cash provided (used) by operating activities Stock on Settlement 22,000 - Debt discount amortization 374,738 81,803 Depreciation and amortization expense 31,254 23,154 Common stock issued for services 122,608 57,195 Amortization of fair value of stock options 17,161 35,625 Bad debt expense (Gain on Collection of Bad Debt) (3,621 ) 52,134 (Increase) decrease in inventories reserve 926 22,122 (Increase) decrease in accounts receivable 135,339 (372,254 ) (Increase) decrease in prepaid expenses (43,798 ) (33,163 ) (Increase) decrease in inventories (64,705 ) (115,791 ) (Increase) decrease in other current assets (3,408 ) (1,280 ) (Decrease) increase in accounts payable and accrued liabilities (135,094 ) 104,181 Increase (decrease) in unearned revenue 89,953 (15,289 ) Net Cash Used by Operating Activities (904,467 ) (1,122,778 ) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for purchase of fixed assets (33,328 ) - Net Cash Used by Investing Activities (33,328 ) - CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on bank line of credit (9,869 ) (5,119 ) Proceeds from notes payable 80,000 - Proceeds from notes payable - related party 1,299,387 1,215,000 Principal payments on debt - related party (529,421 ) (302,956 ) Proceeds from notes payable - related party, convertible 200,000 - Net Cash Provided by Financing Activities 1,040,097 906,925 Foreign currency translation - (3,533 ) Net Increase (Decrease) in Cash 102,302 (219,385 ) Cash at Beginning of Year 27,860 247,246 Cash at End of Year $ 130,162 $ 27,860 28 28 Table of Contents PCS EDVENTURES!.COM, INC. Statements of Cash Flows (USD $) For the years ended March 31, 201 5 201 4 NON-CASH INVESTING & FINANCING ACTIVITIES Common stock issued for services (stock payable) $ 2,080 $ 1,640 Common stock issued for conversion of RSUs (stock payable) 20,000 21,250 Common stock issued for conversion of RSUs Forfeiture - (20,000 ) Conversion of Debt 696,373 100,000 Debt discount 116,717 376,000 Debt Forgiveness 19,510 - Sale of subsidiary - 149,005 Convertible debt issued for non-convertible debt - 530,000 CASH PAID FOR: Interest $ 47,729 $ 54,809 Income taxes - - The accompanying notes are an integral part of these financial statements. PCS EDVENTURES!.COM, INC. Notes to the Financial Statements March 31, 2015 and 2014 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS The financial statements presented are those of PCS Edventures!.com, Inc., an Idaho corporation (“PCS” or “the Company”). On August 3, 1994, PCS Education Systems, Inc. was incorporated under the laws of Idaho to develop and operate stand-alone learning labs. In October 1994, PCS exchanged common stock on a one-for-one basis for common stock of PCS Schools, Inc. As a result of this exchange, PCS Schools, Inc. became a wholly-owned subsidiary of PCS. In the late 1990s, the Company divested the stand-alone learning labs to focus on the creation of turn-key lab modules coupled with web-based technology for use in the classroom and afterschool programs. On March 27, 2000, PCS changed its name from PCS Education Systems, Inc. to PCS Edventures!.com, Inc. On September 26, 2014, the shareholders voted for the proposal to grant the Board of Directors the authority to change the name of the Company in a fashion that will remove the “.com”, but retain the current brand. On November 30, 2005, PCS entered into an agreement with 511092 N.B. LTD., a Canadian corporation (LabMentors), to exchange PCS common stock for common stock of 511092 N.B. LTD., which exchange was completed in December, 2005, with LabMentors becoming a wholly-owned subsidiary. 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. In January, 2012, the Company committed to a business plan enhancement, which included the opening, operating, and licensing of EdventuresLab 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. On January 31, 2013, PCS formed a subsidiary called Premiere Science, Inc., incorporated and registered in the State of Idaho. The subsidiary is 100 % wholly-owned by the Company and was formed to use as an additional sales and marketing tool to gain other business opportunities. There were no operations for this subsidiary during the fiscal years ended March 31, 2015 and 2014. 29 29 Table of Contents NOTE 2 – GOING CONCERN The Company’s 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. The Company 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 with respect to alleviating this adverse position are as follows: As we enter FY2016, our strategy is profitability driven seeking to optimize and streamline operations while moving our digital learning and robotics product strategy forward. A continued underlying principle will be the building of services and products with recurring revenue traits such as online licenses. Tactically we will focus on improving product quality, improving our delivery and support infrastructure to accommodate larger scale, improving our sales infrastructure, and building our new, higher margin digital products to add to our lineup of STEM products and services. 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 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 in FY2016; (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 Q3 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. Revenue for the twelve months ended March 31, 2015, was $ 2,901,113 , an increase of 56 % compared to the same period in the prior year. Net loss from continuing operations for the 12 month period ended March 31, 2015 was ($ 1,447,820 ). Net loss for the same period of the prior year, was ($ 930,635 ). Cash flow from operations for the 12 months ended was March 31, 2015 was ($ 904,467 ), compared to ($ 1,122,778 ) for the prior twelve months ended March 31, 2014. While the efforts put in by management and the entire employee team are beginning to be realized, as illustrated by the improved revenues during the fiscal year ending March 31, 2015, the ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described to raise capital as needed, to continue to monitor and reduce overhead costs, 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. NOTE 3 – OTHER RECEIVABLES March 31, 2015 2014 Other Receivable $ 3,236 $ 3,424 Total Other Receivable $ 3,236 $ 3,424 In FY 2014, the Company paid for a contractor’s international travel to present PCS in conjunction with Robert Grover for qualification with Tatweer Holding Company of Saudi Arabia in a Kingdom of Saudi Arabia tender competition. PCS did not attain that specific contract. Collection of the receivable was unsuccessful and the $ 3,424 was taken to bad debt expense. In FY 2012, the Company entered into a license and royalty agreement with Creya Learning. As part of that agreement, Creya Learning prepaid $ 25,000 in royalty fees. That prepayment has been exhausted, leaving Creya Learning with a $3,236 royalty balance outstanding with PCS recorded as Other Receivable as of March 31, 2015. 30 30 Table of Contents NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Accounting Method The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a March 31 year-end. b. Estimates The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. c. Concentration of Credit Risks and Significant Customers The Company maintains cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade receivables. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses which when realized have been within the range of management's expectations. The Company does not require collateral from its customers. The Company has established an allowance for doubtful accounts of $ 3,184 and $ 4,063 for the fiscal years ended March 31, 2015 and 2014, respectively. During one of the last two fiscal years ended March 31, 2015 and March 31, 2014, the following major customers exceeded 10% of revenue: For the Years Ended March 31, 2015 2014 Tatweer $ 971,391 33 % $ 167,897 8 % Stemfinity $ 434,410 15 % $ 198,489 11 % Catapult Learning $ 218,960 8 % $ 340,130 18 % Major customer accounts receivable near or greater than 10% of total accounts receivable at March 31, 2015 and March 31, 2014, were as follows: For the Years Ended March 31, 2015 2014 Tatweer $ 170,771 47 % $ 84,380 17 % Catapult Learning $ 103,394 29 % $ 340,130 69 % d. Foreign Currency Translation The functional currency of our subsidiary is considered the local currency. Our former LabMentors' subsidiary had a functional currency in Canadian dollars (CAD). The subsidiary’s financial statements have been translated into US dollars in accordance with generally accepted accounting principles regarding foreign currency translation, as applicable. All assets and liabilities are translated at the exchange rate on the balance sheet date and all revenues and expenditures are translated at the average rate for the period. Translation adjustments are reflected as a separate component of stockholders' equity, accumulated other comprehensive income (loss) and the net change for the year are reflected separately in the statements of operations and other comprehensive income (loss). Through this, all of the Company’s financial documents are stated within the functional currency of the parent company, which is the United States dollar (USD). 31 31 Table of Contents In accordance with generally accepted accounting principles regarding the presentation of the Statement of Cash Flows, the cash flows of the Canadian subsidiary, LabMentors, was translated using the weighted average exchange rates during the respective period. As a result, amounts in the statement of cash flows related to changes in assets and liabilities wwould not necessarily agree with the changes in the corresponding balances on the balance sheet that was translated at the exchange rate at the end of the period. The Company divested Labmentors, the wholly owned subsidiary, in August of 2013. There was no foreign currency translation recognized in fiscal year 2015. (See Note 17) e. Fair Value of Financial Instruments On January 1, 2008, the Company adopted guidance which defines fair value, establishes a framework for using fair value to measure financial assets and liabilities on a recurring basis, and expands disclosures about fair value measurements. Beginning on January 1, 2009, the Company also applied the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis, which includes goodwill and intangible assets. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows: Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. The following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balance sheet as of March 31, 2015. Fair Value Measurements at March 31, 2015 Liabilities Level 1 Level 2 Level 3 Gain/(loss) $ - $ - $ - $ - $ - $ - $ - $ - The following table presents assets and liabilities that are measured and recognized at fair value as of March 31, 2014, on a non-recurring basis: Fair Value Measurements at March 31, 2014 Liabilities Level 1 Level 2 Level 3 Gain/(loss) $ - $ - $ - $ - $ - $ - $ - $ - 32 32 Table of Contents The standard issued by the FASB concerning the fair value option for financial assets and liabilities became effective for the Company on January 1, 2008. The standard establishes a fair value option that permits entities to choose to measure eligible financial instruments and certain other items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value options have been elected in earnings at each subsequent reporting date. For the periods ended March 31, 2015 and 2014 there were no applicable items on which the fair value option was elected. f. Revenue Recognition PCS recognizes revenue for its two revenue streams: Product (Learning Labs) and Licensing in accordance with generally accepted accounting standards pertaining to revenue recognition of single unit and/or multiple deliverables. The Company recognizes product revenue in accordance with generally accepted accounting standards, which is codified under FASB ASC Topic 605 “Revenue Recognition,” under which revenue is recognized when it is realizable and when earned. Licensing Revenue is in relation to the sales of the learning labs. This revenue is based on a contractual term of one year, which begins when the physical lab is shipped to the customer. Should the customer terminate the licensing prior to the expiration of the contract, PCS does not have an obligation to refund any portion of the fees. As such, revenue is amortized and recorded over the life of the contractual license, in accordance with generally accepted accounting standards. g. Provision for Inco me Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recorded net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and results of recent operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related taxing authority. The Company has no uncertain tax positions to disclose. Net deferred tax assets and liabilities consist of the following components as of March 31, 2015 and 2014: March 31, 2015 2014 Deferred Tax Assets NOL carryover $ 4,967,771 $ 4,695,386 Accumulated depreciation 3,239 0 Deferred revenue 9,263 26,702 Unearned revenue 52,521 0 Idaho ITC 7,307 7,485 Allowance for Bad Debt 1,242 1,585 Gross deferred tax assets 5,041,343 4,731,158 Valuation allowance (5,041,343 ) (4,722,544 ) Net deferred tax asset $ 0 $ 8,614 Deferred Tax Liabilities Accumulated depreciation $ (0 ) $ (8,614 ) Other - - Gross deferred tax liabilities $ (0 ) $ (8,614 ) Net deferred tax assets (liabilities) $ - $ - 33 33 Table of Contents The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory tax rate is as follows: March 31, 2015 2014 Book income $ (492,259 ) $ (326,813 ) State taxes (72,393 ) (48,062 ) Options expense 6,693 13,767 Other 1,150 5,167 NOL utilization - - Valuation allowance 556,809 355,941 $ - $ - At March 31, 2015 the Company had a net operating loss carry-forward of approximately $ 12,737,874 that may be offset against future taxable income. No tax benefit has been reported in the March 31, 2015 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forward for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, the net operating loss carry-forward may be limited as to use in future years. The Company files income tax returns in the United States, the State of Idaho and the State of California. The statute of limitations on a Federal tax return is the due date of the tax return plus three years. In the case of NOLs, the year in which the NOL was generated remains open up to the amount of the NOL until the statute of limitations expires on the year it was used. PCS Edventures first filed a tax return in 1994. Therefore no statutes have closed. The Company does not have any unrecognized tax benefits to report in the current period. The Company’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. h. Basic Loss Per Share The computation of basic loss per share of common stock is based on the weighted average number of shares outstanding during the period of the financial statements in accordance with generally accepted accounting standards. Diluted loss per share is equal to basic loss per share as the result of the anti-dilutive nature of the stock equivalents. For the Years Ended March 31, 2015 2014 Basic loss per share from operations: Net loss $ (1,426,528 ) $ (961,215 ) Weighted average number of shares outstanding 61,071,903 51,343,776 Basic loss per share $ (0.02 ) $ (0.02 ) 34 34 Table of Contents i. Recently Issued Accounting Pronouncements Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. The update requires entities to disclose additional information about reclassification adjustments, including changes in accumulated other comprehensive income balances by component and significant items reclassified out of accumulated other comprehensive income. The update was effective for the Company in the first quarter of 2013. The update primarily impacted our disclosures and did not have a material impact on our financial position, results of operations or cash flows. Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists In July 2013, the FASB issued an accounting standards update which requires an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. The update was effective in the first quarter of 2014. The update did not have a material impact on the Company’s financial position, results of operations or cash flows. Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period In June 2014, the FASB issued an accounting standard which provides new guidance that requires share-based compensation to meet a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations. Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities In June 2014, the FASB issued guidance to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations. 35 35 Table of Contents Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern In August 2014, the FASB issued an accounting standard that requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the standard (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The standard in this Update is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position or results of operations. Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity In November 2014, the FASB issued new guidance for determining when separation of certain embedded derivative features in a hybrid inancial instrument is required. That is, an entity will continue to evaluate whether the economic characteristics and risks of the embedded derivative feature are clearly and closely related to those of the host contract, among other relevant criteria. The amendments clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods. The adoption of ASU 2014-16 is not expected to have a material impact on our financial position or results of operations. Pushdown Accounting In November 2014, the FASB issued guidance to provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. The amendments in this Update are effective on November 18, 2014. The adoption of ASU 2014-17 is not expected to have a material impact on our financial position or results of operations. j. Educational Software Educational software was purchased by the Company as a part of its acquisition of 511092 N.B. LTD. In addition, the Company has internally developed education computer programs and student exercises to be accessed on the Internet. In accordance with financial accounting standards pertaining to internally developed software, the costs associated with research and initial feasibility of the programs and student exercises are expensed as incurred. Once economic feasibility has been determined, the costs to develop the programs and student exercises are capitalized until the software is ready for sale. At that point, the development costs are reported at the lower of unamortized cost or net realizable value. Capitalized programs and student exercise inventory items are amortized on a straight-line basis over the estimated useful life of the program or exercise, generally 24 to 48 months. The Company evaluates its purchased intangibles for possible impairment on an ongoing basis. When impairment indicators exist, the Company will perform an assessment to determine if the intangible asset has been impaired and to what extent. The assessment of purchased intangibles impairment is conducted by first estimating the undiscounted future cash flows to be generated from the use and eventual disposition of the purchased intangibles and comparing this amount with the carrying value of these assets. If the undiscounted cash flows are less than the carrying amounts, impairment exists and future cash flows are discounted at an appropriate rate and compared to the carrying amounts of the purchased intangibles to determine the amount of the impairment. k. Intellectual Property The Company's intellectual property consists of capitalized costs associated with the development of the Internet software and delivery platform developed by the Company to enable access to the various educational programs and exercises developed by the Company. In accordance with generally accepted accounting standards as discussed previously regarding inventory, the initial costs associated with researching the delivery platform and methods were expensed until economic feasibility and acceptance were determined. Thereafter, costs incurred to develop the Internet online delivery platform and related environments were capitalized until ready for sale. Costs incurred thereafter to maintain the delivery and access platform are expensed as incurred. These capitalized costs are being amortized on a straight-line basis over the estimated useful life of the Company’s delivery and access platform, which has been determined to be 60 months. 36 36 Table of Contents l. Property and Equipment Property and equipment are recorded at cost and are being depreciated for financial accounting purposes on the straight-line method over their respective estimated useful lives ranging from three to seven years. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are reflected in the results of operations. Expenditures for maintenance and repairs are charged to operating expense. Renewals and betterments are capitalized. m. Finished Goods Inventory Finished goods inventory is composed of items produced in-house, as well as items from outside suppliers. These items include, but are not limited to, K’NEX manipulatives, fischertechnik® manipulatives, IBA manipulatives, LEGO® manipulatives, digital media equipment, furniture units, curriculum, blocks, poster packs, and other miscellaneous items used in our various labs. Our inventory is carried at the lower of cost or market and valued using the average cost method for each item. In addition, we have established a reserve of $ 13,265 for obsolete and slow moving items. n. Stock Options and S tock G rants Effective January 1, 2006, the Company accounts for stock issued for employee benefits and goods and services received from non-employees in accordance with generally accepted accounting standards. The Company is required to recognize expense of options or similar equity instruments including 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. The Company accounts for shares issued to employees and others based upon the closing price of our common stock at the grant date. The Company has granted options and warrants to purchase PCS Edventures!.com common stock. These instruments have been valued using the Black-Scholes model and are fully detailed in Note 12. 37 37 Table of Contents NOTE 5 - PREPAID EXPENSES Prepaid expenses for the periods are as follows: March 31, 2015 March 31, 2014 Prepaid insurance $ 41,372 $ 9,709 Prepaid trade show/travel - 1,150 Prepaid inventory 50,057 38,452 Prepaid software 10,406 8,138 Prepaid expenses, other 10,869 11,457 Total Prepaid Expenses $ 112,704 $ 68,906 NOTE 6 - FIXED ASSETS Assets and depreciation for the period are as follows: March 31, 2015 2014 Computer/office equipment $ 43,320 $ 10,112 Software 127,355 127,355 Accumulated depreciation (144,821 ) (118,005 ) Total Fixed Assets $ 25,854 $ 19,462 Fixed Asset depreciation expense for the years ended March 31, 2015 and 2014 was $ 26,816 and $ 18,715 , respectively. NOTE 7 - COMMON AND PREFERRED STOCK TRANSACTION S a. Common Stock During the fiscal year ended March 31, 2014, the Company granted 135,000 shares of common stock as bonus to employees. As of March 31, 2014, the Company issued 95,000 shares of common stock to employees. The per share value ranged from $ 0.05 to $ 0.06 for a net value of $ 5,080 based on the closing price of the Company’s common stock on the date of grant. The remaining 40,000 is recorded as stock payable with a value of $ 2,080 as of March 31, 2014. During the fiscal year ended March 31, 2014, the Company recognized $ 50,000 of 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 $ 0.07 or $ 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. One non-management director resigned in resigned in August 2014, forfeiting his restricted stock units payable. Another non-management director resigned and forfeited his restricted stock units in February 2014. The total current forfeited total $ 20,000 . The remaining directors were reelected at the Annual Meeting in September 2013 and the shares are fully vested and have been issued to those directors who chose not to defer their compensation. $ 40,000 was recorded to common stock for the issuances in January 2014. The total number of shares of common stock issued for RSU’s is 442,857 . Restricted stock units payable were accrued of $ 20,000 as of March 31, 2014, representing shares that will be issued in future periods. A total of $ 21,250 of restricted stock units accrued as of March 31, 2013 were issued during the current period ended March 31, 2014. During the fiscal year ending March 31, 2014, the Company issued 3,138,630 shares of common stock for the conversion of promissory notes issued to a private investor. The price per share value of $ 0.03 resulted in a net value of $ 100,000 . Due to conversion within the terms of the note, no gain or loss was recorded as a result of the conversion During the fiscal year ended March 31, 2014, the Company expensed amounts related to stock options and warrants granted in the current period as well as prior periods valued at $ 35,625 . 38 38 Table of Contents During the fiscal year ending March 31, 2014, the Company recognized $ 376,000 in debt discount as an increase to stockholders’ equity pursuant to the terms of convertible promissory notes. The debt discount consists of a beneficial conversion feature on a $ 260,000 and $ 150,000 and 25,000 , long-term convertible notes payable. During the fiscal year ended March 31, 2015, the Company issued 1,750,000 shares of common stock for services. The per share value ranged from $ 0.05 to $ 0.06 for a net value of $ 97,500 based on the closing price of the Company’s common stock on the date of grant. During the fiscal year ended March 31, 2015, the Company granted 170,000 shares of common stock as bonus to employees. The per share value ranged from $ 0.04 to $ 0.052 for a net value of $ 8,160 based on the closing price of the Company’s common stock on the date of grant. During the fiscal year ended March 31, 2015, the Company recognized $ 26,911 of 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 $ 0.055 , 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. One non-management director resigned in June 2014, forfeiting his restricted stock units payable. The remaining directors were reelected at the Annual Meeting in September 2014 and the shares are fully vested and have been issued to those directors who chose not to defer their compensation. $ 26,911 was recorded to common stock for the issuances in March 2015. The total number of shares of common stock issued for RSU’s is 489,286 . Restricted stock units payable were accrued of $ 12,117 as of March 31, 2015, representing shares that will be issued in future periods. During the fiscal year ending March 31, 2015, the Company issued 18,455,666 shares of common stock for the conversion of promissory notes issued to private investors. The price per share value range of $ 0.03 to $ 0.06 resulted in a net value of $ 696,374 . Due to conversion within the terms of the note, no gain or loss was recorded as a result of the conversion During the fiscal year ended March 31, 2015, the Company expensed amounts related to stock options and warrants granted in the current period as well as prior periods valued at $ 17,161 . During the fiscal year ended March 31, 2015, the Company settlement in an employment contract mediation for issuance of 400,000 shares of common stock. The per share value of $ 0.055 , a net value of $ 22,000 based on the closing price of the Company’s common stock on the date of grant. During the fiscal year ending March 31, 2015, the Company granted 80,000 shares of common stock to employees. The per share value of range of $0.04 to $0.05, a net value of $ 3,600 based on the closing price of the Company’s common stock on the date of grant. During the fiscal year ending March 31, 2015, the Company recognized $ 50,000 in debt discount as an increase to stockholders’ equity pursuant to the terms of convertible promissory notes. The debt discount consists of a beneficial conversion feature on a $ 200,000 , related party, long-term convertible note payable. During the fiscal year ending March 31, 2015, the Company recognized $ 66,717 in debt discount as an increase to stockholders’ equity pursuant to the terms of convertible promissory notes. The debt discount consists of warrants attached with a $ 400,000 , related party, short-term note payable. During the fiscal year ending March 31, 2015, the Company recognized $ 19,510 in debt forgiveness related to the December 30, 2011 note payable in the amount of $ 30,000 . This note was satisfied as of March 31, 2015 with a principle payment of $ 20,000 . The remaining principle of $ 10,000 and accrued interest of $ 9,510 were taken to Additional Paid In Capital. Due to related party relationship, the Company recorded such balance as an increase to stockholders’ equity. b. Preferred Stock The Company has 20,000,000 authorized shares of preferred stock. As of March 31, 2015 and 2014, there are no preferred shares issued or outstanding. 39 39 Table of Contents NOTE 8 - NOTES PAYABLE Notes payable consisted of the following at March 31, 2015 and March 31, 2014 March 31, 2015 2014 Short Term Convertible Note, net discount of $ 0 as of March 31, 2015 and 2014 $ - $ 50,000 Short Term Convertible Note, Related Party net discount of $ 24,063 and $ 0 as of March 31, 2015 and 2014. 175,937 - Short Term Note Payable, Related Party, net discount of $ 38,184 and $ 0 as of March 31, 2015 and 2014 respectively 1,438,870 707,251 Note Payable 18,117 - Line of Credit 21,708 27,089 Long Term Note Payable, Related Party 81,165 23,846 Long Term Convertible Note, net discount of $ 0 and $ 7,333 as of March 31, 2015 and 2014, respectively 202,729 236,541 Long Term Convertible Note, Related Party, net discount of $ 0 and $ 315,721 as of March 31, 2015 and 2014, respectively 34,011 293,436 Total Notes Payable $ 1,972,537 $ 1,338,163 Note Payable On May 1, 2014, the Company entered into a 36 month note payable of $ 20,000 . The note bears interest at twelve percent ( 12 %) per annum. The principle balance as of March 31, 2015 was $ 18,117 . Accrued interest payable as of March 31, 2015 was $ 1,611 . Note Payable – Related Party On December 30, 2011, the Company entered into a note payable in the amount of $ 30,000 . The note bears interest at ten percent ( 10 %) per annum and was due on February 28, 2012. This note was extended under the same terms and conditions, with a new maturity of March 31, 2015. This note was satisfied as of March 31, 2015 with a principle payment of $ 20,000 and Gain on Debt Forgiveness of $ 10,000 . Accrued interest of $ 9,510 was taken to Additional Paid In Capital . On January 13, 2012, the Company entered into two separate promissory notes in the amount of $ 35,000 each for an aggregate amount of $ 70,000 . The notes bear interest at nine percent ( 9 %) per annum and are due and payable on or before January 10, 2013. Minimum monthly payments of 1.5 % of the loan balances are required and are submitted to Lenders’ 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 bear interest at nine percent ( 9 %) per annum and are due and payable on or before April 1, 2020. The underlying loan requires that the Company pay to the lenders financial institution monthly payments of $ 1,033 on or before the 1 st day of each month, beginning May 1, 2013, and continuing each month in like amount until the final payment due on April 1, 2020. During FY 2015 payments were drawing down the principal balance $ 7,877 , paid $ 4,519 in interest, to a March 31, 2015 ending principle balance of $ 49,375 . On February 26, 2013, we executed a promissory note with one of our shareholders, for $ 65,000 at 15 % interest per annum, secured by seven of our sales orders to finance inventory purchases. The promissory note was due on or before April 20, 2013. There is no conversion feature associated with this promissory note. A payment of $ 20,000 was made against the principal on the note on April 1, 2013. The remaining $ 45,000 was extended and made part of the $ 95,000 convertible promissory note issued on May 24, 2013 which included an additional $50,000 promissory note as describe in the 8-K filed on May 24, 2013, with a maturity date of August 24, 2016 ( See Convertible Note Payable – Related Party ). The debt discount was calculated as $ 21,923 . This note was converted on July 21, 2014 with total accrued interest of $ 6,041 into 3,108,944 shares. During the period ended September 30, 2014, $ 1,639 discount was amortized and the remaining debt discount of $ 15,176 was fully expensed upon conversion. Due to conversion within the terms of the note, no gain or loss was recognized. 40 40 Table of Contents On March 22, 2013, we entered into a loan transaction that bears interest at a rate of 8 % per annum, secured with one of our board members in the amount of $ 25,000 . The note is secured by three of our accounts receivables to finance inventory purchases. This note was extended on September 30, 2013 and reclassed to a long term convertible promissory note with board member and shareholder of an 8 % Convertible Promissory Note in the amount of $ 25,000 , convertible into shares of common stock of the Company, at a price of $ 0.04 per share ( See Convertible Note Payable – Related Party) , which represents a 50 % discount from the market price as of the date of the note. The note is due 36 months from the date of the note on or before September 30, 2016. The debt discount was calculated as $ 25,000 . This note was converted on July 21, 2014 with total accrued interest as of July 21, 2014 was $ 1,611 into 665,274 shares. During the period ended September 30, 2014, $ 455 discount was amortized and the remaining $ 21,448 was fully expensed. Due to conversion within the term of the note, no gain or loss was recognized. On January 22, 2014 the Company entered into a loan transaction with one of our board members in the amount of $ 200,000 , which was non-convertible. The note bears interest at a rate of 15 % per annum, secured by Catapult PO NA1314-001 to finance inventory purchases and payoff the promissory notes dated January 7 and January 15, 2014. The promissory note and accrued interest of $ 6,247 were due and payable on April 30, 2014. This note was paid in full including all accrued interest on April 8, 2014. On February 13, 2014 the Company entered into a loan transaction with one of our board members in the amount of $ 250,000 , which was non-convertible. The note bears interest at a rate of 15 % per annum, secured by Tatweer Company for Educational Services Mobile Outreach Saudi Work Order 001 to finance inventory purchases. The promissory note and all accrued interest were due and payable on May 13, 2014. This note was extended to September 30, 2014, to account for the delay in invoice acceptance and payment by Tatweer Company for Educational Services. On September 9, 2014, the Company accrued and paid interest in the amount of $ 20,445 On October 21, 2014 this note was paid off when the Company entered into at 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 market price of $ 0.04 . The note is due on or before October 22, 2015. The remaining $ 50,000 was paid in full by the issuance of that certain Promissory Note in the principal amount of $ 870,457 . On February 21, 2014 the Company entered into a loan transaction with one of our board members in the amount of $ 70,000 , which was non-convertible. The note bears interest at a rate of 15 % per annum, secured by Catapult Learning PO NA1314-090 to finance inventory purchases. The promissory note and all accrued interest were due and payable on April 30, 2014. This note was paid in full including accrued interest of $ 1,870 on April 22, 2014. On March 4, 2014 the Company entered into a loan transaction with one of our board members in the amount of $ 50,000 . The note is non-convertible and bears interest at a rate of 15 % per annum, secured by T4EDU Training Academy Contract to finance inventory purchases. The promissory note and all accrued interest were due and payable on April 30, 2014. $ 37,500 of this note was paid during the period and the remaining $ 12,500 was extended and rolled into a new promissory note dated July 21, 2014 for $ 105,000 (includes a $ 75,000 and $ 17,500 promissory notes) with interest at 15 % per annum due on or before August 30, 2014. On October 21, 2014 this $ 105,000 note was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. On April 3, 2014, the Company executed a promissory note with one of our board members, for $ 60,000 at 15 % interest per annum, secured by sales orders finance operations and inventory purchases. The promissory note was due April 30, 2014. There is no conversion feature associated with this promissory note. The note was extended on April 30, 2014 to September 30, 2014. The note was replaced with note dated July 28, 2014 for $210,000. This note was paid in full by the issuance of that certain Promissory Note of even date herewith in the principal amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. All accrued interest as of the date of replacement was paid in full. 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. There is no conversion feature associated with this promissory note. $ 830 was paid toward principal, leaving and ending principal balance of $ 59,170 as of March 31, 2015. All interest accrued as of March 31, 2015 was paid by March 31, 2015. 41 41 Table of Contents On April 15, 2014, the Company executed a promissory note with one of our board members, for $ 160,000 at 15 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note was due June 30, 2014. There is no conversion feature associated with this promissory note. On October 21, 2014 these notes were paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. All accrued interest as of the date of replacement was paid in full. On May 1, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 60,000 at 15 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note was due July 15, 2014. There is no conversion feature associated with this promissory note. The note was extended to September 30, 2014. During the period ended September 30, 2014, the notes were separated split into two notes, $ 17,500 and $ 42,500 and included in two separate notes dated July 21, 2014 for $ 105,000 and July 28, 2014 for $210,000, respectively. On October 21, 2014 the notes for $105,000 and $ 210,000 were paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. Accrued interest of $ 7,568 as of the date of replacement was paid in full. On May 5, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 145,000 at 15 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note was due July 15, 2014. There is no conversion feature associated with this promissory note. The note was extended to September 30, 2014. On October 21, 2014 this note was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. Total interest accrued and paid as of March 31, 2015 was $ 2,384 . On May 16, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 150,000 at 15 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note was due September 30, 2014. There is no conversion feature associated with this promissory note. $ 75,000 of this note was added to a $ 150,000 note payable executed June 21, 2014. The other $ 75,000 was added to another $150,000 note dated June 27, 2014. Total interest accrued up through dates of replacement was $ 3,329 . On May 21, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 50,000 at 15 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note was due August 30, 2014. There is no conversion feature associated with this promissory note. This promissory note was rolled into promissory note dated July 28, 2014 for $210,000. All interest was paid at the time of roll into the $210,000 note. On October 21, 2014 the $ 210,000 note was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. On June 3, 2014 the Company executed a promissory note with one of our shareholders and board members (part of a replacement note for promissory note dated April 15, 2014), for $ 25,000 at 15 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note was due September 3, 2014. There is no conversion feature associated with this promissory note. This promissory note was rolled into a promissory note dated July 28, 2014 for $210,000. All interest was paid at the time of roll into the $210,000 note. On October 21, 2014 the $ 210,000 note was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. On June 27, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 150,000 at 15 % interest per annum (compose of two separate $ 75,000 notes that was previously issued and replaced dated May 16, 2014 and April 16,2014, respectively), secured by sales orders to finance operations and inventory purchases. The promissory note was due September 30, 2014. There is no conversion feature associated with this promissory note. This note is replaced by three different notes: $ 63,000 note payable executed on August 20, 2014, a part of the $ 123,000 promissory note; $ 25,000 note payable executed on August 7, 2014; and $ 32,500 note executed on July 28, 2014. The remaining principal balance of $ 29,500 was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 on October 21, 2014. The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. Total interest accrued as of the date of pay off was $ 242 . On July 21, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 105,000 at 15 % interest per annum, secured by T4EDU Contract 0006/2014, to finance operations and inventory purchases. The promissory note is due October 31, 2014. There is no conversion feature associated with this promissory note. This promissory note composed of prior issued notes dated March 4, 2014 for $ 12,500 ; May 1, 2014 for $ 17,500 ; and May 16, 2014 for $ 75,000 . On October 21, 2014 the note for $ 105,000 was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. Total accrued interest of $ 2,243 as of the date of replacement was paid in full. 42 42 Table of Contents On July 21, 2014, the Company converted $ 646,500 in convertible long term related party, notes payable, and the related $ 49,874 in accrued interest (individual notes identified in the convertible related parties notes payable section of (See Convertible note – related party). The strike price varied from $ 0.0325 to $ 0.065 depending on the note terms. The conversion resulted in 18,455,666 shares of common stock. Due to conversion within the terms of the note, no gain or loss was recognized. On July 28, 2014, the Company executed a promissory note with one of our shareholders and board members, for $ 210,000 at 15 % interest per annum, secured by T4EDU Contract 0006/2014, to finance operations and inventory purchases. The promissory note is due October 31, 2014. There is no conversion feature associated with this promissory note. This promissory note composed of prior issued notes dated April 3, 2014 for $ 60,000 ; May 1, 2014 for $ 42,500 ; May 21, 2014 for $ 50,000 ; June 3, 2014 for $ 25,000 and June 27, 2014 for $ 32,500 . Total Interest accrued as of September 30, 2014 was $ 5,523 . All interest was paid at the time of roll into the $210,000 note. On October 21, 2014 the $ 210,000 note was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. On July 28, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 100,000 at 5 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note is due November 28, 2014. There is no conversion feature associated with this promissory note. The note was paid in full on December 30, 2014. Total interest accrued and paid at payoff was $ 2,137 . On August 7, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 25,000 at 15 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note was due October 31, 2014. There is no conversion feature associated with this promissory note. This note replaced prior issued note dated June 27, 2014. On October 21, 2014 this note was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due October 22, 2015. Accrued interest of $ 247 as of the date of replacement was paid in full. On August 20, 2014 the Company executed a promissory note with one of our shareholders and board members, for $ 123,000 at 15 % interest per annum, secured by sales orders to finance operations and inventory purchases. The promissory note was due November 30, 2014. There is no conversion feature associated with this promissory note. This notes replaced prior issued note dated June 27, 2014 for $ 63,000 and April 15, 2014 for $ 60,000 . On October 21, 2014 this note was paid off by an issuance of a promissory note with one of our board members in the amount of $ 870,457 . The note is non-convertible and bears and interest rate of 10 % per annum, and due May 31, 2015. Accrued interest of $ 2,072 as of the date of replacement was paid in full. On October 21, 2014 the Company executed a promissory note with one of our shareholders and board members in the amount of $ 870,457 . The note is non-convertible, bears and interest rate of 10 % per annum, 800x600 Normal 0 false false false EN-US X-NONE X-NONE is secured by accounts receivable, fixed assets, intellectual property, and the public entity PCSV net loss carry forward to finance operations and inventory purchases, due May 31, 2015. This note due date was subsequently extended to September 30, 2015. This note includes new cash lent to Borrower under this note of $ 175,000 . This note includes $ 7,957 of accrued interest on the paid off notes listed below. This note pays off the following notes: $ 50,000 of the February 11, 2014 $ 250,000 Convertible long term related party;$ 145,000 dated May 7, 2014; $ 29,500 of the June 27, 2014 $ 105,000 ; $105,000 dated July 21, 2014; $ 210,000 dated July 28, 2014; $ 25,000 dated 08/08/2014; $ 123,000 dated August 20, 2014. $ 22,222 of interest was rolled into principal on January 1, 2015; resulting in a principal balance of $ 892,679 and accrued interest as of March 31, 2015 of $ 22,011 . On October 22, 2014 the Company executed a promissory note with a related party for credit up to $ 20,000 at 12 % interest per annum. The promissory note was due December 31, 2014. There is no conversion feature associated with this promissory note. The principle balance on December 31, 2014 was $ 14,217 . This note was subsequently extended to February 15, 2015. This note was paid in full with all accrued interest on February 14, 2015. 43 43 Table of Contents On February 17, 2015 the Company executed a promissory note with one of our shareholders and board members, for $ 135,000 at 10 % interest per annum, due June 30, 2015, secured by T4EDU existing AR on completed contracts, to finance operations and inventory purchases. This note due date was subsequently extended to September 30, 2015. There is no conversion feature associated with this promissory note. Total interest accrued as of March 31, 2015 was $ 1,373 . On January 16, 2015 the Company executed a non-convertible promissory note with warrants attached, with one of our shareholders and board members, for $ 400,000 at 10 % interest per annum, due June 30, 2015, secured by T4EDU Contract 0006/2017 Work Orders 5, 6, 7, and 8 less Zakat and holdback, to finance operations and inventory purchases. The warrants were valued using the stock price on the date of grant, discount rates 0.35 %, and volatility approximating 180 %. The value of the debt discount is accreted up to the face value of the promissory note over the term of the note using the effective interest method. The debt discount was calculated as $ 66,717 . $ 28,533 of the debt discount was amortized during the quarter ending March 31, 2015. Line of Credit On April 18, 2012, the Company entered into a long-term promissory note with Anthony A. Maher for $ 25,000 with an interest rate of 7.5 % per annum. The balance is due in full on or before April 18, 2017. Monthly payments are made for interest only to the lenders financial intuition. On March 31, 2015 $ 1,998 over the interest only payment had been paid resulting in ending principle amount of $ 21,995 . Convertible Note Payable – Non-related party On 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 the repayments in the amount of $ 40,000 per quarter to begin April, 2013, and the final payments due in August, 2014, with 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 1, 2017. At the Lender’s sole option, Lenders may elect to receive payment of their respective note and all accrued interest in restricted common stock of the Borrower at the price per share of said common stock at same rate as the warrants. Subsequently and effective June 7, 2013, we executed an amendment to the loan transaction. The amended transaction involved the extension of the Promissory Note 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, 2012. The Company has agreed to make quarterly interest payments to each of the note holders during the term of the extension. All other terms of the previous Promissory Note, Security Agreement and related warrants remain in full force and effect. As of March 31, 2015, the ending principle balance was $ 226,740 , including the related party convertible note balance of $ 34,011 noted below. $17,005 of this group of notes was satisfied with $ 15,000 in cash payments and $ 2,005 taken as Gain on Cancellation of debt. Interest accrued as of March 31, 2015 for the total set of notes remaining was $33,683. On April 30, 2013, the Company entered into a loan transaction with an “accredited investor” for a Promissory Note, payable with interest at 8 % per annum in the amount of $ 5,000 , convertible into shares of common stock of the Company at a price of $ 0.20 per share. The note is due twenty-four months from the date of the note, on or before August 31, 2015. Total accrued interest as of March 31, 2015 was $ 800 . On July 30, 2013, the Company entered into a loan transaction with an “accredited investor” for a promissory Note, payable with interest at 8 % per annum in the amount of $ 5,000 , convertible into shares of common stock of the Company at a price of $ 0.20 per share. The note is due twenty-four months from the date of the note, on or before July 30, 2015. No debt discount was recognized as the conversion price is considered “out of the money”, therefore no discount was necessary. Total accrued interest as of March 31, 2015 was $ 661 . Convertible Note Payable – Related Party For the transactions described above in regard to the original $215,000 convertible notes, $34,011 was loaned from a related party and has been separated out as described in the Company’s financial statements and accompanying notes at March 31, 2013. Interest expense for the related party convertible note ending March 31, 2015 was $5,641. 44 44 Table of Contents On February 26, 2013, we executed a promissory note with one of our shareholders, for $65,000 at 15% interest per annum, secured by seven of our sales orders to finance inventory purchases. The promissory note was due on or before April 20, 2013. There is no conversion feature associated with this promissory note. A payment of $20,000 was made against the principal on the note on April 1, 2013. The remaining $45,000 was extended and made part of the $95,000 convertible promissory note issued on May 24, 2013 which included an additional $50,000 promissory note as describe in the 8-K filed on May 24, 2013, with a maturity date of August 24, 2016 and conversion rate of $0.0325. The debt discount was calculated as $21,923. This note was converted on July 21, 2014 with total accrued interest of $6,041 into 3,108,944 shares. During the period ended September 30, 2014, $1,639 discount was amortized and the remaining debt discount of $15,176 was fully expensed upon conversion. Due to conversion within the terms of the note, no gain or loss was recognized. On February 29, 2012, the Company entered into three separate convertible promissory notes in the aggregate amount of $ 100,000 . The notes bear interest at ten percent ( 10 %) per annum and were due on May 30, 2012. At the sole option of each respective Lender, the outstanding balance of the notes may be converted into shares of restricted Rule 144 common stock of the Borrower at a price per share of $ 0.05 . In the event Lender elects to convert any outstanding balance due under this note into such shares, Lender shall give written notice to the Borrower seven (7) days prior to the effective date of such exercise. At Borrower’s sole option, Borrower may elect to pay Lender in cash up to one-half (1/2) of the then principal and interest due under the note. In such event, the remaining balance of principal and interest shall be converted as provided under the note agreement. On June 14, 2012, one of the notes, in the amount of $ 50,000 , was converted into 1,028,770 shares of our “restricted” common stock in accordance with the terms of the convertible promissory note. The remaining two notes were extended, with no changes to the terms, were due and payable on June 30, 2014. On July 21, 2014 the principal balance of the notes at $35,000 and $15,000 totaling to the $50,000 plus the accrued interest of $11,959 was converted into 1,239,178 shares of our “restricted” common stock in accordance with the terms of the convertible promissory note. Discount recognized on the convertible note were fully expensed in the prior period. Due to conversion within the terms of the note, no gain or loss was recognized. On December 3, 2012, the Company entered into a long term convertible promissory note with a board member and shareholder in the amount of $ 45,000 . The note is convertible into common stock at a rate of $ 0.04 per share. The note bears interest at eight ( 8 %) per annum and is due 36 months from the date of the agreement, on or before December 03, 2015. The proceeds from the note were used by the Company to pay off the Security Purchase Agreement (tranche 2) issued on June 4, 2012, along with any accrued interest, penalties and administrative costs. The debt discount was calculated as $18,255, of which $5,300 was amortized during the twelve months ended March 31, 2014, leaving the discount balance remaining of $11,722. This note was converted on July 21, 2014 with total accrued interest of $ 1,105 into 1,152,617 shares of our “restricted” common stock in accordance with the terms of the convertible promissory note. During the period ended September 30, 2014, $ 1,471 discount was amortized and the remaining $ 10,251 was fully expensed upon conversion of the promissory note. Due to conversion within the terms of the note, no gain or loss was recognized. On January 11, 2013, the Company entered into an 8 % Convertible Promissory Note with an “accredited investor,” in the amount of $ 21,500 , convertible into shares of common stock of the Company, at the market price of $ 0.065 . The note is due thirty six months from the date of note. The note is secured by a secondary security interest in all of the Company’s intellectual property. The proceeds received by the Company from the sale of this note were used by the Company for prepaying the Promissory Note dated June 5, 2012 (Tranche 3) issued to Asher Enterprises, Inc., as well as any administrative costs associated with the payment. This final payment completes and pays off all outstanding notes with Asher Enterprises. The Company recognized a discount on the debt issued related to the derivative liability. This debt discount was calculated as $ 9,285 , of which $ 4,592 was amortized during the twelve months ended March 31, 2014. This note was converted on July 21, 2014 with total accrued interest of $ 1,385 into 352,084 shares of our “restricted” common stock in accordance with the terms of the convertible promissory note. During the period ended September 30, 2014, $ 740 discount was amortized and the remaining $ 3,953 was fully expensed upon conversion of the promissory note. Due to conversion within the terms of the note, no gain or loss was recognized. On March 22, 2013, we entered into a loan transaction that bears interest at a rate of 8 % per annum, secured with one of our board members in the amount of $25,000. The note is secured by three of our accounts receivables to finance inventory purchases. This note was extended on September 30, 2013 and reclassed to a long term convertible promissory note with board member and shareholder of an 8% Convertible Promissory Note in the amount of $25,000, convertible into shares of common stock of the Company, at a price of $0.04 per share, which represents a 50% discount from the market price as of the date of the note. The note is due 36 months from the date of the note on or before September 30, 2016. The debt discount was calculated as $25,000. This note was converted on July 21, 2014 with total accrued interest as of July 21, 2014 was $1,611 into 665,274 shares. During the period ended September 30, 2014, $455 discount was amortized and the remaining $21,448 was fully expensed up conversion. Due to conversion within the term of the note, no gain or loss was recognized. 45 45 Table of Contents On September 30, 2013, the Company entered into a long term convertible promissory note with board member and shareholder of an 8 % Convertible Promissory Note in the amount of $150,000, convertible into shares of common stock of the Company, at a price of $ 0.04 per share, which represents a 50 % discount from the market price as of the date of the note. The note is due 36 months from the date of the note on or before September 30, 2016. The debt discount was calculated as $150,000, of which $ 18,579 was amortized during the twelve months ended March 31, 2014, leaving the discount balance remaining of $ 131,421 . This note was converted on July 21, 2014 with total accrued interest of $ 9,666 into 3,991,644 shares of our “restricted” common stock in accordance with the terms of the convertible promissory note. During the period ended September 30, 2014, $ 2,728 was amortized and the remaining $ 128,693 was fully expensed upon conversion of the promissory note. Due to conversion within the terms of the note, no gain or loss was recognized. On September 30, 2013, the Company entered into a Promissory Note in the amount of $ 260,000 with one of our board members, payable with interest at 10 % per annum, in cash on or before November 29, 2013. The Promissory Note funded payables and other corporate purposes of borrower. This note is secured by that certain license agreement and other agreements between borrower and Kindle Education, now Creya Learning. A long-term Convertible Promissory Note (convertible at a rate of $ 0.035 per share) was executed on January 8, 2014 that replaced the September 30, 2013, payable with interest at 8 % per annum on or before January 8, 2017. The debt discount was calculated as $ 156,000 , of which $ 22,286 was amortized during the twelve months ended March 31, 2014, leaving the discount balance remaining of $ 133,714 . This note was converted on July 21, 2014 with total accrued interest of $ 18,107 into 7,945,925 shares of our “restricted” common stock in accordance with the terms of the convertible promissory note. During the period ended September 30, 2014, $ 12,251 was amortized and the remaining $ 121,463 was fully expensed upon conversion of the promissory note. Due to conversion within the terms of the note, no gain or loss was recognized. On October 21, 2014 the Company entered into at 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 market price of $ 0.04 . The note is due on or before October 22, 2015. The debt discount was calculated as $ 50,000 . During the year ended March 31, 2015, $25,937 discount was amortized. NOTE 9 - 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 Company signed a lease on February 1, 2015 on 3609 square feet of the original corporate offices for a period of 12 months, expiring on January 31, 2016. Rent expense for the corporate offices was $ 14 , 1 85 and 21 , 196 for the quarter ended March 31, 201 5 and 201 4 , and $ 77,869 and $ 99,318 for the twelve months ended March 31, 201 5 and 201 4 , respectively, under this lease arrangement. On December 31, 2013 the Company signed an amendment to the existing contract to reduce the leased square feet to 5,412 for $ 6,765 / month for 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 / month for 12 months ending January 31, 2016. The Company leases additional warehouse space in Boise, Idaho. This warehouse space consists of approximately 2,880 square feet. The lease expire d in June 2012. This lease was extended for 24 months, beginning July 1, 2012. The lease was extended to a new expiration of October 31, 2015. The C ompany signed a sixth amendment on April 15, 2015 to lease an additional approximately 1400 square foot bay adjacent to the existing leased space. Rent expense for the warehouse was $ 4,170 and $ 3 , 975 for the quarter ended March 31, 201 5 and 201 4 , and $ 16,225 and $ 15,901 for the twelve - months ended March 3 1, 201 5 and 201 4 , respectively. The Company leased and additional learning lab site in Eagle Idaho in Q1 of fiscal year 2015. The lease term is 3 years for 1,050 sf for an annual base rent of $ 16,640 or $ 1,387 per month, with 3 % growth per year. 46 46 Table of Contents Minimum lease obligation over the next 5 years Fiscal Year Amount (USD) 2016 $ 76,562 2017 17,143 2018 3,000 2019 - 2020 - Total $ 96,705 b. Litigation Anthony Maher brought suit against PCS in January of 2014 , claiming breach of an employment contract, interference with economic expectancy, and fraud. A s ettlement was agreed in exchange for dismissal of the suit, and release of PCS from any liability to Mr. Maher for any and all claims related to Mr. Maher’s employment contract with PCS, PCS issued Mr. Maher 400,000 shares of the common stock of PCS, and pa id him $ 50,000 . PCS does not admit the allegations or any other wrongdoing, but would rather settle the matter for a modest amount costing the Company $ 10,000 after insurance settlement and $ 2,650 in mediation fees, to avoid the expense of defending it in court. The settlement agreement was execut ed on July 9 , 2014. NOTE 10 - EDUCATIONAL SOFTWARE Educational software was purchased by the Company as a part of its acquisition of 511092 N.B. LTD. and consists of internally developed education computer programs and student exercises to be accessed on the Internet. In accordance with financial accounting standards pertaining to internally developed software, the costs associated with research and initial feasibility of the programs and student exercises are expensed as incurred. Once economic feasibility has been determined, the costs to develop the programs and student exercises are capitalized until the software is ready for sale . At that point, the development costs are reported at the lower of unamortized cost or net realizable value. Capitalized program s and student exercise inventory items are amortized on a straight-line basis over the estimated useful life of the program or exercise, generally 24 to 48 months. NOTE 1 1 - ACCRUED EXPENSES Accrued expenses are made up of the following at March 31, 201 5 and March 31, 20 1 4 . March 31, 2015 2014 Interest payable 68,963 67,933 Sales tax payable 634 3,442 Credit card debt 31,685 43,853 Other 1,654 9,525 Total accrued expenses $ 102,936 $ 124,753 47 47 Table of Contents 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 pronouncement 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, 2013 27,166,655 13,327,336 9,722,210 4,117,109 3,032,109 1,085,000 Warrants 30,000 100,000 (70,000 ) (100,000 ) 30,000 Common Stock Options 660,000 1,361,964 (701,964 ) (611,964 ) (90,000 ) Balance as of March 31, 2014 27,856,655 14,789,300 9,722,210 3,345,145 2,320,145 1,025,000 Warrants 2,000,000 605,000 - 1,395,000 1,395,000 - Common Stock Options - 750,150 - (750,150 ) (80,150 ) (670,000 ) Balance as of March 31, 2015 29,856,655 16,144,450 9,722,210 3,989,995 3,634,995 355,000 No common stock options were exercised during the year s ended March 31, 201 5 and 201 4 , respectively . During the year ended March 31, 2015, the Company issued and cancelled 2,000,000 and 605,000 warrants, respectively. Stock options issued and cancelled during the same period was 0 and 750,150 respectively. During the year ended March 31, 201 4 , the Company issued and cancelled 30,000 and 100,000 warrants , respectively . Stock options issued and cancelled during the same period was 660,000 and 1,361,964 respectively. Cancellations are, in general, due to employee terminations prior to the common stock option being fully vested. Expirations are due to common stock options not being exercise d prior to the stated expiration date. Options February 1, 2014, the C ompany granted 40,000 incentive options each to t hree employees 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. The options have an expected volatility rate of 2 59 .0 7 % 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 $ 1 5 , 926 . 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 March 31, 201 4 and 2015 , $ 1,752 and $ 5,284 in value of the options was expensed. January 1, 2014 , the C ompany granted 40 ,000 incentive options each 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. The options have an expected volatility rate of 2 58 . 20 % calculated using the Company stock price for a t hree -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 $ 5,908 . 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 March 31, 201 4 and 2015 , $ 480 and $ 1,964 in value of the options was expensed. August 1, 2013 , the C ompany granted 60,000 incentive options to an employee. These options were issued as incentive compensation to the employee. The options were valued using the Black-Scholes valuation model. The options have an expected volatility rate of 289.05 % calculated using the Company stock price for a three -year period. A risk free interest rate of 0.24 % - 0.50 % was used to value the options. The total value of these options was $ 3,490 . The options vest over a three -year period and are exercisable at $ .0362 per share, which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan. The employee resigned prior to March 31, 2015 and $ 325 was expense through date of resignation. Options were forfeited due to termination. 48 48 Table of Contents August 1 6 , 2013, the company granted 120,000 incentive options to an employee. These options were issued as incentive compensation to the employee. The options were valued using the Black-Scholes valuation model. The options have an expected volatility rate of 289.05 % calculated using the Company stock price for a three -year period. A risk free interest rate of 0.24 % - 0.50 % was used to value the options. The total value of these options was $ 6,295 . The options vest over a three -year period and are exercisable at $ .06 per share, which represents the fair market value at the date of grant in accordance with the 2009 Equity Incentive Plan. The employee resigned prior to March 31, 2014 and $ 848 was expense through date of resignation. O ptions were forfeited due to termination. On May 15, 2012, the Company granted 850,000 incentive stock options to an officer , Robert Grover . The expected volatility rate of 223.62 % was calculated using the Company stock price over the period beginning June 1, 2009 through date of issue. A risk free interest rate of 0.38 % was used to value the options. The options were valued using the Black-Scholes valuation model. The total value of this option was $ 46,175 . 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 March 31, 201 4 and 201 5 , $ 19,311 and $ 9,914 in value of the options was expensed. On August 24, 2010, the Company granted 133,930 incentive options to an employee. These options were issued as additional incentive compensation. The options were valued using the Black-Scholes valuation model. The shares have an expected volatility rate of 109.70 % calculated using the Company stock price for a two-year period beginning August 25, 2010. A risk free interest rate of .39 % was used to value the options. The options vest over a three -year period and are exercisable at $ .70 per share which represents the fair market value at the date of grant in accordance with th e 2009 Equity Incentive Plan. The total value of these options was $ 44,715 . As of March 31, 2013, $ 7,259 , of the total value was expensed. During the period ended March 31, 2014, the options were fully vested and the remaining $ 202 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 $ 20,655 . 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. As of March 31, 20 13, $ 3,097 of the total value was expensed. During the period ended March 31, 2014, the options were fully vested and the remaining $ 1,392 was expensed. 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 0.48 % 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 tw elve-months ended March 31, 2013, $ 28, 146 of the total value was expensed. During the period ended March 31, 2014, the options were fully vested and the remaining $ 5,212 was expensed. 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 .53 % 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 tw elve-months ended March 31, 2013 , $ 13,547 of the total value was expensed. During the period ended March 31, 2014, the options were fully vested and the remaining $ 3,486 was expensed. Warrants On September 12, 2013 the Company issued contingent warrants to purchase an aggregate of 30,000 shares of restricted Rule 144 common stock at $ 0.10 to $ 0.20 per share. The warrant expires 18 months from date of warrant. The warrants were valued using the Black Scholes Valuation Model, resulting in a fair value of $ 1,581 . The warrants expired on March 17, 2015. On January 17, 2013, the Company issued 100,000 warrants to a shareholder with a 36 month term at $ 0.07 per share exercise price as consideration for the issuance of a Promissory Note in the amount of $ 200,000 , in which $ 63,000 was to be considered advanced under a previous Note between Borrower and Lender dated December 26, 2012. 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, resulting in a fair value of $ 7,977 . This value was recorded as a debt discount and is being amortized over the life of the loan. The note was paid in full on April 1, 2013. 49 49 Table of Contents On 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 "Share"), 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 0.35 %. The resulting fair value is $ 66,717 . This value was recorded as a debt discount and is being amortized over the life of the loan. $ 28,533 was amortized as of March 31, 2015. NOTE 1 3 - RELATED PARTY TRANSACTIONS During the fiscal year ending March 31, 2015 the Company converted 489,286 restricted stock units (RSUs) of the 4 89 , 286 issued to common stock for non-management directors for services rendered dur ing the period September 1, 2013 to August 31, 201 4 at a rate of one share of common stock for each restricted stock unit. See Note 7. During the fisc al period ending March 31, 2015 , the Company issued 170,000 shares of common stock to employee s . The per share price range was $ 0.04 to $ 0.52 for a net value of $ 81,600 based on the closing price of the Company’s common stock on the date of grant. See Note 7. During the f iscal year ending March 31, 2015 , the Company issued 18 , 455,666 shares of common stock for the conversion of promissory notes issued to a private investor , former officer, and members of the board of directors . The price per share value ranged from $ 0.03 to $ 0.06 resulting in a net value of $ 696,374 . Due to conversion within the terms of the note, no gain or loss was recorded as a result of the conversion . See Note 7. During the year ended March 31, 201 5 , the Company issued 400,000 shares of common stock in settled mediation of a previous employment contract. The per share was $ 0.06 for a net value of $ 22,000 based on the closing price of the Company’s common stock on the date of grant. See Note 7. During the fiscal year ended March 31, 201 5 and March 31, 201 4 , the Company entered into various loan transactions with members of the Board of Directors (Todd Hackett and Murali Ranganathan) and Shareholders. The loans were done at arms - length and are fully disclosed in Note 8. During the fiscal period ending March 31, 201 5 , the Company issued 40,000 shares of common stock to an employee. The per share is $ 0.05 for a net value o f $ 2 , 0 00 based on the closing price of the Company’s common stock on the date of grant. See Note 7. During the fiscal period ending March 31 , 2015, the Company issued 40,000 shares of common stock to an employee. The per share is $ 0.04 for a net value o f $ 1,600 based on the closing price of the Comp any’s common stock on the date of grant. See Note 7. During the fiscal period ending March 31 , 2015, the Company issued 10,000 shares of common stock to an employee. The per share is $ 0.04 for a net value o f $ 400 based on the closing price of the Company’ s common stock on the date of grant. See Note 7. During the fiscal year ended March 31, 201 4 , the Company granted 25,000 shares of restricted stock to Lead Accountant , Shannon Hull. The per share is $ 0.06 for a net value of $ 1,500 based on the closing price of the Company’s common stock on the date of grant. See Note 7. During the fiscal year ended March 31, 201 4 , the Company granted 40,000 shares of restricted stock to project manager, Mike Mira g lio and Director of Sales, Michael Brown . The per share is $ 0.05 for a net value of $ 2,080 each based on the closing price of the Company’s common stock on the date of grant. See Note 7. 50 50 Table of Contents During the fiscal year ending March 31, 2014 the Company converted 442,857 restricted stock units (RSUs) of the 4 42 , 857 issued to common stock for non-management directors for services rendered dur ing the period September 1, 2012 to August 31, 201 3 at a rate of one share of common stock for each restricted stock unit. See Note 7. During the fiscal period ending March 31, 2014, the Company issued 30,000 shares of common stock to an employee. The per share is $ 0.05 for a net value of $ 1,500 based on the closing price of the Company’s common stock on the date of grant. See Note 7. During the fiscal period ending March 31, 2014, the Company issued 40,000 sh ares of common stock and $9,500 in cash payment for wages to an employee, Heidi Grover (spouse of Robert Grover) for services . The price per share is 0.05 for a net value of $ 2,080 based on the closing price of the Company’s common stock on the date of grant . See Note 7. During the fiscal year ending March 31, 2014, the Company issued 3,138,630 shares of common stock for the conversion of promissory notes issued to a private investor , who is a member of the board of directors . The price per share value of $ 0.03 resulted in a net value of $ 100,000 . Due to conversion within the terms of the note, no gain or loss was recorded as a result of the conversion . See Note 7. NOTE 1 4 – ACCOUNTS RECEIVABLE The Company’s concentration of credit risk consists primarily of trade receivables. In the normal course of business, the Company provides credit terms to its customers, which generally range from net 15 to 30 days. The Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses, which, when realized, have been within the range of management's expectations. The allowance is based on the higher of the prior three-year historical uncollectable accounts as a percentage of sales or specifically identified aging accounts over 90 days . Total bad debt allowance as of March 31, 201 5 and 201 4 , was $ 3 , 184 and $ 4,063 , respectivel y. NOTE 15 – OTHER ASSETS During the year ended March 31, 2009, the Company contracted for the production of a plastic mold ( a covering for the third generation proprietary electronic controller, “ The Brain ”) . The Brain is incorporated into AOR product line. The cost of the m old was $ 28,426 . The cost is amortized on a per unit basis with a total estimated 10,000 units. As of March 31, 201 3 , the Company had amortized 2,805 units. Due to usage of the mold being slower than anticipated an additional amortization charge of $ 4,592 was recorded during the year ended March 31, 2012 to better approximate straight-line depreciation. During the fiscal year ended March 31, 2013, the Company continued to use the straight-line method to depreciate the mold . As a cost savings measure the Company outsourced some of its manufacturing to a company in China for the controller case, “The Brain”, in which a new mold was created. The cost of the mold was $ 7,088 USD. Use of this mold began in December 2012, in which at that time amortization began using the straight-line method. Amortization of the mold is included in cost of sales for AOR. The Company recorded a charge of $ 4,439 during the fiscal year ended March 31, 201 4 for the amortization of both molds. The Company recorded a charge of $ 4,439 during the fiscal year ended March 31, 201 5 for the amortization of both molds. NOTE 1 6 – OTHER INCOME Other income is made up of the following at March 31, 201 5 and March 31, 20 1 4 . 201 5 201 4 Interest Income 3057 - Gain on Bad Debt Collection 2,996 - Gain on Cancellation of Debt 4,414 - Other 1,868 89 Total Other Income $ 12,335 $ 89 51 51 Table of Contents NOTE 17 – DISCONTINUED OPERATIONS On 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 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 $150,000 through a note payable. The note shall carry an annual interest rate of 3 % compounded annually and be paid over a period of 60 months in equal monthly payments beginning in month 13 of the 60 month period. This sale was finalized during the period ending September 30, 2013. The results of discontinued operations is a net loss of ($ 0) and ($ 30,580) for the period ended March 31 , 201 5 and 201 4. As of the LabMentors sale, income and expenses are netted in the income statement and appropriately labeled as discontinued operations. A full allowance of 50,740 was recorded for the promissory note. NOTE 1 8 - SUBSEQUENT EVENTS On October 21, 2014 the Company executed a promissory note with one of our shareholders and board members in the amount of $ 870,457 . The note is non-convertible and bears an interest rate of 10 % per annum, and due May 31, 2015. This note due date was subsequently extended to September 30, 2015 . On February 17, 2015 the Company executed a promissory note with one of our shareholders and board members, for $ 135,000 at 10 % interest per annum, due June 30, 2015 , secured by T4EDU existing AR on completed contracts, to finance operations and inventory purchases. This note due date was subsequently extended to September 30, 2015. On April 15, 2015, the Company signed a sixth lease amendment with Landmark Business Center, LLC, for lease of additional warehouse space for $ 725 monthly for a six month term. On April 20, 2015, the Company executed a promissory note with one of our shareholders and board members, for $ 135,000 at 10 % interest per annum, due June 30, 2015 , secured by existing AR, to finance operations and inventory purchases. There is no conversion feature associated with this promissory note. On May 20, 2015 this note was extended to September 30, 2015. Todd R. Hackett, the Company’s Co-CEO, shareholder, predominant promissory note holder, and Board of Directors member, has purchased 1,520,972 shares of PCS Edventures! common stock on the open market between fiscal year end March 31, 2015 and filing of this Annual Report. On May 1, 2015, the Chief Executive Officer, Robert Grover’s daughter, Dalton Grover was hired as the Curriculum Coordinator. On 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. The Company has engaged legal counsel to represent it in this matter, and it is not presently in a position to determine what, if any, liability it may have for the actions of its employee, or even whether such employee was negligence in any manner. The Company also believes that it has adequate insurance coverage for its legal representation and any potential liability. On May 20 and 26, 2015, respectively, PCS appointed Paula LuPriore and K. Sue Redman to the Board of Directors. 800x600 Normal 0 false false false EN-US X-NONE X-NONE On June 8, 2015, the Company executed a promissory note with one of our Co- CEO, shareholders and board members, for $ 150,000 at 10 % interest per annum, due September 30, 2015 , secured by existing AR, to finance operations and inventory purchases. There is no conversion feature associated with this promissory note. 52 52 Table of Contents Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 9(A). Controls and Procedures. Disclosure Controls and Procedures We maintain “disclosure controls and procedures”, as the SEC defines such term. We have designed these controls and procedures to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-K, is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms. We have also designed our disclosure controls to provide reasonable assurance that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, in this case, our Controller, as appropriate, to allow them to make timely decisions regarding our required disclosures. Our management has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of March 31, 2015. Based on this evaluation, the Chief Executive Officer and Vice President/Controller, acting as principle financial officer, concluded that our Company’s disclosure controls and procedures, including the accumulation and communication of disclosures to the Company’s Chief Executive Officer and Vice President/Controller, acting as our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure were not effective as of this date to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. The Company’s year-end closing process did not adequately ensure that all transactions were accounted for in accordance with GAAP and that required adjustments were made to the financial statements to prevent them from being materially misstated. Management acknowledges that as a smaller reporting entity, it is difficult to have adequate accounting staff to perform appropriate additional reviews of the financial statements. In addition, three personnel positions turned over in the finance area just prior to year-end and training new personnel has taken time. 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 internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Our management, including our Chief Executive Officer and Vice President/Controller, acting as our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented. Our management, with the participation of the Chief Executive Officer and Vice President/Controller, acting as our Chief Financial Officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of March 31, 2015. 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. As a result of its review, management identified a material weakness in the internal control over financial reporting. This material weakness was evidenced through the Company’s year-end closing process, which did not adequately ensure that all transactions were accounted for in accordance with GAAP and that required adjustments were made to the financial statements to prevent them from being materially misstated. Based on this evaluation, our management, with the participation of the Chief Executive Officer and Vice President/Controller, acting as our Chief Financial Officer, concluded, as of March 31, 2015, our internal control over financial reporting was not effective. Management acknowledges that as a smaller reporting entity, it is difficult to have adequate accounting staff to perform appropriate additional reviews of the financial statements. 53 53 Table of Contents This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report. Changes in I nternal C ontrol O ver F inancial R eporting None. Item 9(B). Other Information None. PART III Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. Identification of Directors and Executive Officers. The following table sets forth the name, age and position of each officer and director of the Company: Name Age Position Robert O. Grover 52 Appointed 01/04/12 Chief Executive Officer Russelee V. Horsburgh 43 Appointed 02/01/15 Vice President/Treasurer Britt E. Ide 44 Appointed 01/31/14 Director Chair & Secretary Todd R. Hackett 54 Appointed 08/03/12 Co-CEO & Director Murali Ranganathan 45 Appointed 01/11/13 Director Paula LuPriore 57 Appointed 05/20/15 Director K. Sue Redman 58 Appointed 05/26/15 Director Term of Office. The terms of office of the current directors shall continue until the annual meeting of stockholders, which has been scheduled by the Board of Directors to be held no later than September of each year. The annual meeting of the Board of Directors immediately follows the annual meeting of stockholders, at which executive officers for the coming year are elected. Business Experience. Robert O. Grover . On January 5, 2012, Mr. Grover was appointed Chief Executive Officer, Mr. Grover became Executive Vice President in May 1996 and served as President, Chief Operating Officer, and Chief Technology Officer from March 2010 until January 2012. Mr. Grover has been instrumental in the continued development and growth of the PCS family of products. He joined PCS at its inception. Mr. Grover graduated from Boise State University in 1987 with a Bachelor of Arts degree in English and an A.A.S. in Business Management. Russelee V. Horsburgh . On February 1, 2015, Ms. Horsburgh was appointed as Vice President and Treasure. Ms. Horsburgh started as the Controller in January of 2014. Ms. Horsburgh brings 20 plus years of executive leadership, financial management, and accountancy experience to PCS. The last 10 years specifically as Controller and interim General Manager for Doubletree Riverside Hotel and personal real estate investments. Russelee Horsburgh earned her Bachelor in Accountancy and MBA (Financial Emphasis) from Boise State University. Britt E. Ide . Ms. Ide is the President of Ide Law & Strategy, PLLC and has worked as an engineer and lawyer for companies including Battelle Memorial Institute, Boise Cascade Corporation, Albertson’s, Inc., and Idaho Power Company. Ms. Ide has a B.S. in Mechanical Engineering from The Ohio State University, a M.S. in Environmental Engineering from Montana State University, a J.D. from the SJ Quinney School of Law at the University of Utah, and a Certificate in Mediation from Harvard University. Ms. Ide is active in the Idaho STEM community, is on the Fulbright Roster of Specialists, and serves on the Advisory Council of the Responsible Business Initiative at the Boise State University College of Business and Economics. She brings expertise in engineering, law, mediation, energy, communications, marketing, and social media. 54 54 Table of Contents Todd R. Hackett. Mr. Hackett is the owner Todd Hackett Construction Co., a successful construction company in Iowa where he has served as President for the last 25 years. Mr. Hackett first became aware of PCS as an investment opportunity in 2007. Over the past five years, his involvement with PCS has grown from a casual investor to providing short-term financing to us to meet our operational needs. He is a strong advocate for bringing educational opportunities to both children and young adults to strengthen their knowledge in math and science. Mr. Hackett brings a strong business background to PCS, well founded in the fundamental principles of building a successful company. He has demonstrated his abilities in the building of his own company from a start-up in 1981 to a major construction firm now handling multi-million dollar projects. Many of his projects involve educational institutions such as community colleges, middle schools, libraries and applied technology labs. Murali Ranganathan . Mr. Ranganathan is the Senior Manager of Finance Strategy for Micron, where he is the financial lead for evaluating, negotiating, and conducting due diligence on Micron’s M&A and venture investment opportunities. Mr. Ranganathan is a planning and financial expert who is well versed in due diligence. Mr. Ranganathan is Chairman of the Audit Committee for PCS Edventures. Mr. Ranganathan has a long and impressive career in both engineering and finance, with a Masters in Industrial and Systems Engineering from Ohio State, and an MBA from the Booth School of Business at the University of Chicago. Significant Employees. None. Family Relationships. Chief Executive Officer, Robert Grover spouse, Heidi Grover works for the company as Director of Product Development. Involvement in Certain Legal Proceedings. None. Compliance with Section 16(a) of the Exchange Act. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended March 31, 2015, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with. Code of Ethics. We adopted a Code of Ethics and it was attached as Exhibit 14 to our 2004 Annual Report. The Code was revised in 2010 and is available on our web site at https://edventures.com. Nominating Committee. No changes have been made to the process by which shareholders may nominate a person or persons to serve as a member of the Company’s Board of Directors. Audit Committee. We chartered an audit committee in 2001 for the purpose of engaging an accounting firm, which is currently M&K CPAs, PLLC, for the annual audit and quarterly reviews. The audit committee currently consists of Board members Murali Ranganathan and Todd R. Hackett. K. Sue Redman joined the audit committee on May 26, 2015. Mr. Ranganathan is considered an audit committee financial expert based on his previous work experience and the definition contained in Reg. 228.401 Instructions to paragraph (e)(1) of Item 401 of the Sarbanes-Oxley Act. The audit committee continued to implement its Charter regarding the scope and responsibilities for the audit committee adopted in fiscal year 2005 and revised in fiscal year 2010. The audit committee meets with M&K CPAs, PLLC via telephone on a quarterly basis and meets separately with management to review quarterly financial results and discuss any issues. The audit committee facilitated a teleconference meeting with the Board of Directors and M&K CPAs, PLLC during the Company’s Annual Meeting. In addition, the audit committee discusses auditing issues as needed during regularly scheduled board meetings, which are documented in the Company’s minutes. 55 55 Table of Contents Item 11. Executive Compensation. Compensation. SUMMARY COMPENSATION TABLE FOR FISCAL YEARS 201 3 -201 5 The following table provides information relative to compensation paid to our executive officers for the years ended March 31, 2013 through March 31, 2015. During the fiscal year ended March 31, 2015, Mr. Grover’s salary comprised 14.8% of the total compensation paid to all employees. Name and Principal Position Year Salary ($) Bonus ($) Stock Awards Option Awards Non-Equity Incentive Plan Compensation Change in Pension Value and Nonqualified Deferred Compensation Earnings All Other Comp. Total ($) ($) ($) ($) ($) ($) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Robert O. Grover, CEO FY2015 100,000 (i) 100,000 FY2014 100,000 (i) 100,000 FY2013 (iii) 104,166 9,000 42,500 (i) 155,666 Leann R. Gilberg, Former CFO (ii) FY2015 FY2014 FY2013 62,977 2,500 18,000 (i) 83,477 Brett A. Newbold, Former COO (ii) FY2015 FY2014 FY2013 (iii) 58,285 4,000 6,000 13,600 (i) 81,885 Russelee V. Horsburgh, VP & Treasurer FY2015 72,800 (i) FY2014 FY2013 (i) Aggregate amount of other compensation is less than $50,000 or 10% of the total annual salary and bonus reported. (ii) Ms. Gilberg’s compensation is pro-rated based on a hire date of September 15, 2011 and termination date of November 30, 2012. Mr. Newbold’s compensation is pro-rated based on a hire date of March 16, 2012 and a termination date of February 11, 2013. Ms. Grindle’s compensation is pro-rated based on her resignation effective January 4, 2012. (iii) Base Salary paid in a percentage of cash and Restricted Rule 144 Stock under the 2009 Equity Incentive Plan 56 56 Table of Contents Options Grants in Last Fiscal Year. GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 201 5 There were no equity-based awards granted to our executive officers for the fiscal year ended March 31, 2015. Name Grant Date Estimated Future Payouts Under Non-Equity Incentive Plan Awards Estimated Future Payouts Under Equity Incentive Plan Awards All Other Stock Awards: Number of Shares of Stock or Units (#) All Other Option Awards: Number of Securities Underlying Options (#) Exercise or Base Price of Option Awards ($/Sh) Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) Robert O. Grover, CEO - - - - - - - - - - - - - - - - - - - - - - - - - - - OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 201 5 Option Awards Stock Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares of Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Robert O. Grover 11,250 - - 0.60 06/17/15 - - - - 57 57 Table of Contents OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR The following table provides information related to stock option exercises by executive officers of the Company, as well as any stock awards vesting during the Fiscal Year Ended March 31, 2014. Option Awards Stock Awards Name Number of Shares Acquired on Exercise (#) Value Realized on Exercised ($) Number of Shares Acquired on Vesting (#) Value Realized on Vesting ($) (a) (b) (c) (d) (e) Robert O. Grover - - - - Audit Committee Financial Expert. We chartered an audit committee in 2001 for the purpose of engaging an accounting firm, which is currently M&K CPAs, PLLC, for the annual audit and quarterly reviews. The audit committee currently consists of Board members Murali Ranganathan and Todd Hackett. Mr. Ranganathan is considered an audit committee financial expert based on his previous work experience and the definition contained in Reg. 228.401 Instructions to paragraph (e)(1) of Item 401 of the Sarbanes-Oxley Act. The audit committee continued to implement its Charter regarding the scope and responsibilities for the audit committee adopted in fiscal year 2005 and revised in fiscal year 2010. The audit committee meets with M&K CPAs, PLLC via telephone on a quarterly basis and meets separately with management to review quarterly financial results and discuss any issues. The audit committee facilitated a teleconference meeting with the Board of Directors and M&K CPAs, PLLC during the Company’s Annual Meeting. In addition, the audit committee discusses auditing issues as needed during regularly scheduled board meetings, which are documented in the Company’s minutes. Compensation of Directors. Effective October 1, 2009, the Board resolved and adopted the annual fees to be paid to outside Directors of the Board to be $30,000 annually and paid in the form of Restricted Stock Units, or other form authorized under the PCS 2009 Equity Incentive Plan as the Board determines. Effective September 1, 2012, the Board resolved and adopted the annual fees to be paid to outside Directors of the Board be reduced to $15,000 annually and paid in the form of Restricted Stock Units, or other form authorized under the PCS 2009 Equity Incentive Plan as the Board determines. Restricted Stock Units are subject to forfeiture as described in the 2009 Plan. Effective September 1, 2014, the Board resolved and adopted the annual fees to be paid to outside Directors of the Board be reduced to $7,500 annually and paid in the form of Restricted Stock Units, or other form authorized under the PCS 2009 Equity Incentive Plan as the Board determines. Effective July 30, 2014, with respect to the time period of director service from September 1, 2014 through September 30, 2015 , the Board approved the grant to each Director for compensation for service of 150,000 Restricted Stock Units under the PCS Equity Incentive Plan. The one-time 13-month term will allow the future yearly grant timing to match the Annual Meeting cycle Restricted Stock Units are subject to forfeiture as described in the 2009 Plan. As of March 31, 2015, the Company had $12,111 of director fees accrued. The CEO is excluded from receiving additional compensation as a Board member beginning the second fiscal quarter of 2006 by unanimous consent of the Board. The following table shows awards and payments to outside Directors of our Board for fiscal year 2015 as compensation. Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Change in Pension value and Nonqualified Deferred Compensation Earnings All Other Compensation ($) Total ($) (a) (b) (c) (d) (e) (f) (g) (h) Dehryl Dennis - 15,000 - - - - 15,000 Donald Farley - (i) - - - - - Andrew Scoggin - (ii) - - - - - Todd Hackett - 15,000 - - - - 15,000 Britt Ide 8,750 - - - - 8,750 Murali Ranganathan - 10,000 - - - - 10,000 58 58 Table of Contents (i) Don Farley resigned effective August 1, 2013 announced in an 8-K Current Report dated July 29, 2013. Restricted Stock Unit agreements for non-management directors 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 12 months and reelection at the next annual shareholder meeting. Therefore Don Farley’s Restricted Stock Units for FY2014 was forfeited upon resignation. (ii) Andrew Scoggin resigned effective January 31, 2015 announced in an 8-K Current Report dated January 31, 2015. Restricted Stock Unit agreements for non-management directors 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. Therefore Andrew Scoggin’s Restricted Stock units for FY2015 were forfeited upon resignation. Employment Agreements We had written employment agreements with the following employees: ROBERT O. GROVER We entered into an “at will” Employment Agreement with Mr. Grover on May 15, 2012, which either party can terminate on 30 days prior written notice. The Employment Agreement provides for compensation of $100,000 annually, for his service as Co-CEO; the right to participate in health, dental and related benefits provided to other employees, including our 2009 Equity Incentive Plan; and four weeks paid vacation, among other customary provisions. He was also entitled to an award of 150,000 shares of our common stock comprised of “restricted securities” at or about the execution and delivery of the Employment Agreement, which was issued to him in 2012. Stock Option Plans and Other Incentive Compensation Plans. On August 27, 2009, the Board of Directors adopted and the shareholders subsequent approved the PCS Edventures!.com, Inc. 2009 Equity Incentive Plan (“2009 Plan”). The 2009 Plan was designed to replace the existing 2004 Nonqualified Stock Option Plan (“2004 Plan”). The 2009 Plan provides for the grant of various types of equity instruments, including grants of restricted and unrestricted PCS common stock as well as options and other types of awards. The 2009 Plan was implemented to align the interests of the Company’s employees with those if the shareholders and to motivate, attract, and retain its employees and provide an incentive for outstanding performance. An 8K was filed on November 19, 2009 registering the Plan. On April 4, 2012, the Board adopted and the shareholders approved an Amendment to an increase in the number of shares of common stock available for grants, incentive or other purposes under the Company’s 2009 Equity Incentive Plan from 4,000,000 shares to 8,000,000 shares. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Security Ownership of Management and Others CERTAIN BENEFICIAL OWNERS The following table outlines information provided to the Company as of March 31, 2015 regarding beneficial ownership of PCS common stock by the Company’s directors, executive management, and any 5% beneficial owners: 59 59 Table of Contents DIRECTORS AND EXECUTIVE OFFICERS Amount and Nature of Beneficial Ownership (1) Name and Address of Shares Owned Shares Issuable Upon Exercise of Options Shares Issuable Upon Receipt of Restricted Stock Units Shares Issuable Upon Exercise of Warrants Shares Issuable Upon Exercise of Convertible Note Total Percentage Owned Beneficial Owner (5) Robert O. Grover, President & CEO 345 Bobwhite Court, Suite 200 Boise, Idaho 83706 (2) 764,974 11,250 776,224 1.05% Dehryl A. Dennis Former Director 345 Bobwhite Court, Suite 200 Boise, Idaho 83706 426,788 20,971 426,788 Less than 1.0% Donald J. Farley Former Director and Secretary 345 Bobwhite Court, Suite 200 Boise, Idaho 83706 968,117 92,690 - 65,000 1,125,807 1.5% Todd Hackett Director 345 Bobwhite Court, Suite 200 Boise, ID 83706 (1)23,004,418 - 80,780 2,200,000 5,226,740 30,511,938 41.1% Murali Ranganathan Director 345 Bobwhite Court, Suite 200 Boise, Idaho 83706 1,034,267 - 80,780 - - 1,115,047 1.5% Britt Ide Director and Secretary 345 Bobwhite Court, Suite 200 133,000 - 80,780 - - 213,780 Less than Boise, Idaho 83706 1.0% All officers and directors (as a group) 25,566,590 124,911 242,340 2,265,000 5,226,740 33,425,581 45% Unless otherwise noted above, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. For purposes hereof, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date hereof upon the exercise of warrants or options or the conversion of convertible securities. Each beneficial owner's percentage of ownership is determined by assuming that any warrants, options or convertible securities that are held by such person (but not those held by any other person) and which are exercisable within 60 days from the date hereof, have been exercised. Currently, Todd Hackett is the only beneficial owners, as defined by the Securities Exchange Commission as owners with greater than 5% ownership. Includes 764,974 shares owned of record by Mr. Grover; of which 55,000 shares are beneficially owned by spouse Heidi Grover. Changes in Control. To our knowledge, there are no present arrangements or pledges of our securities that may result in a change in control of the Company. 60 60 Table of Contents Item 13. Certain Relationships and Related Transactions. Transactions with Related Persons. Please refer to Note 13 for a full disclosure at March 31, 2015 Parents. None, not applicable. Promoters and Control Persons. None, Director Independence. We believe that all members of our Board of Directors with the exception of our Co-Chief Executive Officers, Robert O. Grover and Todd R. Hackett, are independent based on the following definition of NASDAQ, which is quoted below from Rule 5605(a)(2): “Independent Director” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship, which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. For purposes of this rule, “Family Member” means a person’s spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person’s home. The following persons shall not be considered independent: (A) a director who is, or at any time during the past three years was, employed by the Company; (B) a director who accepted or who has a Family Member who accepted any compensation from the Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the determination of independence, other than the following: (i) compensation for board or board committee service; (ii) compensation paid to a Family Member who is an employee (other than an Executive Officer) of the Company; or (iii) benefits under a tax-qualified retirement plan, or non-discretionary compensation. Provided, however, that in addition to the requirements contained in this paragraph (B), audit committee members are also subject to additional, more stringent requirements under Rule 5605(c)(2). (C) a director who is a Family Member of an individual who is, or at any time during the past three years was, employed by the Company as an Executive Officer; (D) a director who is, or has a Family Member who is, a partner in, or a controlling Shareholder or an Executive Officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s gross revenues for that year, or $200,000, whichever is more, other than the following: (i) payments arising solely from investments in the Company’s securities; or (ii) payments under non-discretionary charitable contribution matching programs. (E) a director of the Company who is, or has a Family Member who is, employed as an Executive Officer of another entity where at any time during the past three years any of the Executive Officers of the Company serve on the compensation committee of such other entity; or (F) a director who is, or has a Family Member who is, a current partner of the Company’s outside auditor, or was a partner or employee of the Company’s outside auditor who worked on the Company’s audit at any time during any of the past three years. (G) in the case of an investment company, in lieu of paragraphs (A)-(F), a director who is an “interested person” of the Company as defined in Section 2(a)(19) of the Investment Company Act of 1940, other than in his or her capacity as a member of the board of directors or any board committee. Our Board of Directors has adopted this definition of an “independent director” even though we are not required to have independent directors. 61 61 Table of Contents Item 14. Principal Accountant Fees And Services. Fees Paid to Principal Accountants Fee Category FY2015 FY2014 Audit Fee $ 46,626 $ 53,576 Audit Related Fee - - All Other Fee - - Total Fees $ 46,626 $ 53,576 Pre-approval and Policies The Audit Committee must approve all audit and non-audit engagements of our independent public accounting firm in writing. Part IV Item 15. Exhibits. (a)(3) Exhibits. The following exhibits are filed as part of this Annual Report: Exhibit 3.1 Second Amended and Restated Articles of Incorporation Filed October 2, 2006. Exhibit 3.2 Articles of Amendment to Second Amended and Restated Articles of Incorporation filed April 4, 2012. Exhibit 3.2 Third Amended By-Laws. Exhibit 14 Code of Ethics. Exhibit 31.1 302 Certification. Exhibit 32.1 906 Certification. Exhibits. The following exhibits are incorporated by reference: Exhibit 10.1 Election of Director, 8-K Current Report dated May 27, 2015 filed June 1, 2015 Exhibit 10.2 Election of Director, 8-K Current Report dated May 20, 2015 filed May 27, 2015 Exhibit 10.3 Form of Extension, 8-K Current Report dated May 20, 2015 filed May 27, 2015 Exhibit 10.4 Press Release, 8-K filed April 23, 2015 Exhibit 10.5 Form of Promissory Note, 8-K Current Report dated February 5, 2015 filed February 10, 2015 Exhibit 10.6 Form of Warrant, 8-K Current Report dated February 5, 2015 filed February 10, 2015 Exhibit 10.7 Form of Promissory Note, 8-K Current Report dated January 31, 2015 filed February 5, 2015 Exhibit 10.8 Departure of Director, 8-K Current Report dated January 31,, 2015filed January 6, 2015 Exhibit 10.9 Convertible Promissory Note, 8-K Current Report dated July 30, 2014 filed July 31, 2014 Exhibit 10.10 Election of Director, 8-K Current Report dated July 30, 2014 filed June 3, 2014 Exhibit 10.11 Election of Director, 8-K Current Report dated January 31, 2014 filed February 4, 2014 Exhibit 10.12 Departure of Director, 8-K Current Report dated January 30, 2014 filed February 4, 2014 Exhibit 10.13 Form of Extension, 8-K Current Report dated January 8, 2014 filed January 10, 2014 Exhibit 10.14 Press Release, 8-K filed December 13, 2013 Exhibit 10.15 Form of Promissory Note, 8-K Current Report dated September 30, 2013 filed October 4, 2013 Exhibit 10.16 Convertible Promissory Note, 8-K Current Report dated September 30, 2013 filed October 4, 2013 Exhibit 10.17 Submission of Matters to Vote, 8-K Current Report dated September 20, 2013 filed September 23, 2013 Exhibit 10.18 LabMentors Disposition, 8-K Current Report dated September 9, 2013filed September 9, 2013 Exhibit 10.19 Press Release, 8-K filed August 28, 2013 Exhibit 10.20 Departure of Director, 8-K Current Report dated July 26, 2013filed July 30, 2013 Exhibit 10.20 Form of Extension, 8-K/A Current Report dated March 31, 2013 filed June 18, 2013. Exhibit 10.21 Form of Promissory Note, 8-K Current Report dated May 24, 2013 filed May 30, 2013. Exhibit 10.22 Convertible Promissory Note, 8-K Current Report dated May 24, 2013filed May 30, 2013. 62 62 Table of Contents Exhibit 10.23 Convertible Promissory Note, 8-K Current Report dated May 24, 2013 filed May 30, 2013. Exhibit 21 Subsidiaries of the Company 101 INS XBRL Instance Document 101 PRE XBRL Taxonomy Extension Presentation Linkbase Document 101 LAB XBRL Taxonomy Extension Label Linkbase Document 101 DEF XBRL Taxonomy Extension Definition Linkbase Document 101 CAL XBRL Taxonomy Extension Calculation Linkbase Document 101 SCH XBRL Taxonomy Extension Schema Document SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated: 06/15/2015 By: /s/ Robert O. Grover Robert O. Grover President & CEO Dated: 06/15/2015 By: /s/Russelee V. Horsburgh Russelee V. Horsburgh Vice President & Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, 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: 06/15/2015 By: /s/Britt E. Ide Britt E. Ide Secretary & Director Dated: 06/15/2015 By: /s/Murali Rananathan Murali Ranganathan Director Dated: 06/15/2015 By: /s/Todd Hackett Todd Hackett Director 63 63 Table of Contents