Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussions and Analysis
of Financial Condition and Results of Operations .
Cautionary Statements for Purposes of “Safe Harbor Provisions”
of the Private Securities Litigation Reform Act of 1995:
Except for historical facts, all matters discussed
in this report, which are forward-looking, involve a high degree of risk and uncertainty. Certain statements in this report set
forth management’s intentions, plans, beliefs, expectations, or predictions of the future based on current facts and analyses.
When we use the words “believe”, “expect”, “anticipate”, “estimate”, “intend”
or similar expressions, we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking
statements. Actual results may differ materially from those indicated in such statements, due to a variety of factors, risks and
uncertainties. Potential risks and uncertainties include, but are not limited to, competitive pressures from other companies within
the Educational Industries, economic conditions in the Company’s primary markets, exchange rate fluctuation, reduced product
demand, increased competition, inability to produce required capacity, unavailability of financing, government action, weather
conditions and other uncertainties, including those detailed in the Company’s Securities and Exchange Commission filings.
The Company assumes no duty to update forward-looking statements to reflect events or circumstances after the date of such statements.
The following discussion should be read in
conjunction with our audited financial statements and Management’s Discussion and Analysis of Financial Condition and Results
of Operations (“MD&A”) contained in our Form 10-K for the year ended March 31, 2015.
Plan of Operation.
PCS sells into the STEM education market with
( 1) an existing STEM library and deep expertise in creating STEM solutions comprised of curriculum and materials; ( 2) a unique
PCS learning methodology – an adaptive (customizes to individual learners), experiential (hands-on in nature),
learning framework that can be monetized in a number of ways , with what we believe is an approach to educational assessment and
incentivizing students for the future, and PCS is an innovative leader in this area; ( 3) PCS has developed an innovative
K12 robotics and engineering system comprised of hardware and software specifically designed to engage students in STEM topics
such as hands-on physics and engineering and coding; (4) PCS has established itself as a prime STEM provider in the Kingdom of
Saudi Arabia and is growing its revenues from the Kingdom; and (5) PCS entered the B2C space with a retail product launch
this year and also has a working model for experiential learning labs operational. With a plan to expand higher margin digital
delivery products, PCS is now in the development stage of a unique, subscription-based online learning system that can be licensed
to schools or non-profit organizations, as well as be used in the home environment.
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 licensing.
Tactically we will focus on improving product quality, improving our delivery and support infrastructure to accommodate larger
scale delivery, 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 annual 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.
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Results of Operations.
For the quarter ended June 30, 2015, the Company
reported a net income of $130,865 as compared to a net loss for the quarter ended June 30, 2014, of ($327,260), a 350% increase
to the bottom line. The increase is primarily attributable to invoicing of our backlog . The Diluted Earnings per Share for the
quarter ended June 30, 2015, is $0.00, which is market improvement on the ($0.01) loss per share for the three-month period ended
June 30, 2014.
Revenue for the quarter ended June 30, 2015,
was $1,291,219, as compared to revenue during the quarter ended June 30, 2014, of $1,002,566. Cost of sales decreased 13% over
the same quarter last year due to higher margins on current international projects.
The Diluted Income per Share for the quarter
ended June 30, 2015, is $0.00, an improvement over the ($0.01) loss per share for the three-month period ended June 30, 2014.
Total operating expenses for the three-month
period ended June 30, 2015, decreased by $123,625, or 24% to $509,140, over the three-month period ended June 30, 2014. The table
below identifies the quarter over quarter changes:
Operating Expenses
International Selling Expenses
$ (8,955)
(1
)
Administrative Contract labor
(16,145)
(2
)
Employee Expenses
(19,733)
(3
)
Marketing
(42,837)
(4
)
Office Rent
(17,673)
(5
)
Product Development
(17,443)
(6
)
Other, net
(839)
$ 123,625
(1)
International selling expense decreased from last year due to no international travel within the quarter.
(2)
Administrative Contract labor decreased due to a reduction of local contractor work on IT and Marketing.
(3)
Employee expenses decreased due to lower staff levels in sales and marketing.
(4)
Marketing expenses were reduced by reduction in trade show activities
and moving lead generation and marketing activities away from several vendors to a more efficiently in house model.
(5)
The corporate office suite square footage was reduced by 50% to a more efficient configuration
(6)
Product Development expense decreased from prior year investment in development of the Edventures Lab model.
Liquidity
Cash used by operating activities for Q1 was
($172,431) compared to cash used by operating activities of ($191,904) in the same period last year. The Company ended the first
quarter of FY 2016, with $78,187 in cash, total current assets of $1,277,639 and total current liabilities of $2,460,936 resulting
in a working capital deficit of ($1,183,297) compared to a working capital deficit of ($1,384,430) for the year ended March 31,
2015.
The Company had a current ratio at June 30,
2015, and March 31, 2015, of 0.51 and 0.38, respectively. This increase in current assets was due primarily to an increase in accounts
receivable due to two Tatweer contract milestones invoicing. We have an accumulated deficit of ($38,487,141) and shareholders’
equity of ($1,508,742).
The Company has accumulated significant losses
and payables and generated past negative cash flows. The combination of these items raises substantial doubt about its ability
to continue as a going concern. The Company cannot predict that it will be successful in obtaining funding for its plans or that
it will achieve profitability in fiscal 2016.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
The Company is a smaller reporting company
as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is not required
to provide the information required under this item.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.