{"url_path":"/sec/pcsv/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-26","source_url":"https://www.sec.gov/Archives/edgar/data/1122020/0001493152-26-030242-index.html","accession_number":"0001493152-26-030242","cik":"0001122020","ticker":"PCSV","issuer_name":"PCS Edventures!, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1122020/0001493152-26-030242-index.html","primary_entity_key":"0001122020","primary_entity_name":"PCS Edventures!, Inc."},"word_count":3139,"has_tables":true,"body_markdown":"** **\n\n**Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.**\n\n \n\nCautionary\nStatements for Purposes of “Safe Harbor Provisions” of the Private Securities Litigation Reform Act of 1995:\n\n \n\nExcept\nfor historical facts, all matters discussed in this Annual Report, which are forward-looking, involve a high degree of risk and uncertainty.\nCertain statements in this Annual Report set forth management’s intentions, plans, beliefs, expectations, or predictions of the\nfuture based on current facts and analyses. When we use the words “believe,” “expect,” “anticipate,”\n“estimate,” “intend,” or similar expressions, we intend to identify forward-looking statements. You should not\nplace undue reliance on these forward-looking statements. Actual results may differ materially from those indicated in such statements,\ndue to a variety of factors, risks, and uncertainties. Potential risks and uncertainties include, but are not limited to, competitive\npressures from other companies within the Educational Industries, economic conditions in the Company’s primary markets, exchange\nrate fluctuation, reduced product demand, increased competition, inability to produce required capacity, unavailability of financing,\ngovernment action, weather conditions, and other uncertainties, including those detailed in our Commission filings and at the forepart\nof this Annual Report. We assume no duty to update forward-looking statements to reflect events or circumstances after the date of such\nstatements.\n\n \n\nThe\nfollowing discussion should be read in conjunction with our financial statements contained in Part II, Item 8, Financial Statements,\nbelow, of this Annual Report.\n\n** **\n\n**Overview\nof Current and Planned Operations**\n\n \n\nPCS\nEdventures!, Inc. sells STEM/STEAM products to educational and recreational entities serving youth. Because the majority of our customers\nwork in out-of-school-time settings, we have not attempted to align our products to fit in the classroom setting, until recently. Classroom\ncurriculum must promote academic achievement through rigorous alignment with specific state standards to be considered for use. Each\nstate has its own unique set of standards, making classroom curriculum development a state by-state endeavor.\n\n \n\nOn\nthe other hand, out of school programs focus more broadly on the goals of engagement, career exploration and development of 21st\ncentury skills. This difference makes it easier to penetrate out-of-school programs, as more freedoms exist for curriculum development.\nWe focus our efforts on these out-of-school programs, which include summer school, summer camps, YMCA programs, Boys and Girls club programs,\nand various other programs offered outside of the classroom, at all times of the year, that are too numerous to list. Oftentimes, these\nprograms are sponsored, administered, and/or supported by local school districts, and we employ considerable efforts to build relationships\nwith these types of school districts to provide desired programming for their out-of-school programs. The majority of the time, the out-of-school\nprograms offered are funded with grants; however, some programs are run on a for-profit basis. The Company sells to all of these types\nof entities.\n\n \n\nHowever,\ngiven the administration’s stated goals of removing federal influence and administration from education, and returning those functions\nto the states, we are now considering which of our products would be adaptable to the educational standards of certain larger states.\nWe intend to continue to weigh state-level priorities much more heavily in the development of future products as well. We view a transition\nfrom federal dominance to state dominance of the application of educational standards to curriculum as likely, albeit over a long-time\nframe, and we are adapting our product development to this change in our market.\n\n \n\nMarket\nfeedback also indicates that products that have evidence of their effectiveness are increasingly being demanded, especially in state-funded\nprograms and larger programs. While we maintain a library of the evidence we have accumulated about the outcomes one can expect when\nusing our products, and while this library of evidence has helped us win larger orders, we believe that expanding this library and upgrading\nthe tiers of evidence we have will produce meaningful benefits for future sales.\n\n \n\nWe\nhave engaged various firms to help us generate more compelling evidence of our products’ effectiveness. We are early in this process,\nbut we intend to substantially build out our library of evidence of our products’ effectiveness.\n\n \n\n12\n\n \n\n \n\nThe\ncourse we take to accomplish this endeavor will depend on our experiences with these early initiatives.\n\n \n\nWe\noffer professional development training for instructors using our products, and typically charge a fee for this service, with the fee\nprimarily covering our expenses. Management does not view this service as a profit center, but rather 1) a customer service component\nof our product that adds to its uniqueness and value in the marketplace and 2) as a market development endeavor to build out the Company’s\naddressable market.\n\n \n\nThe\nnature of our target market produces considerable seasonality for the Company’s revenue. The quarters ending June 30 and September\n30 tend to be the peak of this seasonality (with the quarter ending March 31 being close to these quarters), while the quarter ending\nDecember 31 tends to be the low point of our seasonality. The Table below reflects this seasonality.\n\n \n\n  \nQuarterly Revenue \n\n  \n2023  \n2024  \n2025 \n\n3/31 \n 2,521,470  \n 2,262,772  \n 1,292,819 \n\n6/30 \n 2,605,281  \n 3,159,923  \n 2,423,309 \n\n9/30 \n 3,767,326  \n 2,267,338  \n 1,529,503 \n\n12/31 \n 459,087  \n 701,147  \n 754,889 \n\n \n\nDuring\nthe quarter ending December 31, we focus on product development, restocking inventory, and general planning for the next year. Sales\nand marketing activities remain fairly constant throughout the year.\n\n** **\n\n**Results\nof Operations**\n\n** **\n\n*Revenue*\n\n \n\nFor\nthe year ended March 31, 2026, our revenue was $6,349,761 compared to $7,421,228 for the year ended March 31, 2025. There were five (5)\nfactors that negatively impacted our revenue in fiscal year 2026 versus that in fiscal year 2025.\n\n \n\n \n1.\nOur\nreseller revenue was significantly less in fiscal year 2026 versus that of fiscal year 2025. For the year ended March 31, 2026, reseller\nrevenue was $1.02 million versus $1.59 million for the year ended March 31, 2025.\n\n \n \n \n\n \n2.\nOur\nCatapult order was less in fiscal year 2026 versus that of fiscal year 2025. Catapult administers summer programming in Missouri\ndue to the state’s public funding of such programs. They experience annual fluctuations in their customer base, and they have\nmoved to a just-in-time inventory system. Consequently, they worked down our inventory that they held during this past season, resulting\nin a lower order volume compared to the prior year. For the year ended March 31, 2026, Catapult revenue was $0.33 million versus\n$0.59 million for the year ended March 31, 2025.\n\n \n \n \n\n \n3.\nOur\nAir Force JROTC (“AFJROTC”) contract produces less revenue as the contract ages. The AFJROTC has approximately 884 sites,\nand we have sold into approximately 652 of them thus far. For the year ended March 31, 2026, ARJROTC revenue was $0.09 million versus\n$0.45 million for the year ended March 31, 2025.\n\n \n \n \n\n \n4.\nLarger\ncustomer orders were fewer in fiscal year 2026 versus that for fiscal year 2025. For the year ended March 31, 2026, we had eleven\n(11) customer relationships whose revenue exceeded $100,000 and no customer relationships that exceeded $500,000 in revenue. For\nthe year ended March 31, 2025, we had sixteen (16) customer relationships that exceeded $100,000 and two (2) customer relationships\nthat exceeded $500,000.\n\n \n \n \n\n \n5.\nThe\nchange in Presidential administration created significant changes in the education market regarding funding streams, administration\nof grants, and general federal influence over education. These changes were and still are disruptive to educational decision making\nand, thus, disruptive to our market.\n\n \n\n13\n\n \n\n \n\nThe\nCompany has been soliciting larger customers for over four (4) years and has seen some success until fiscal year 2026. The table below\nshows customer transactions by size for the periods indicated.\n\n \n\nNumber\nof Customer Transactions by size\n\n \n\n  \n> $1 million  \n> $500,000  \n> $100,000  \n> $50,000  \n> $25,000  \n> $10,000 \n\nYear ended March 31, 2026 \n 0  \n 0  \n 11  \n 34  \n 54  \n 102 \n\nYear ended March 31, 2025 \n 0  \n 2  \n 16  \n 26  \n 49  \n 103 \n\nYear ended March 31, 2024 \n 2  \n 3  \n 17  \n 27  \n 40  \n 94 \n\nYear ended March 31, 2023 \n 1  \n 1  \n 10  \n 21  \n 38  \n 60 \n\n \n\nWhile\nwe continue to find success increasing customer revenue sizes below the $50,000 threshold, the relationships larger than that were more\nelusive during fiscal year 2026.\n\n** **\n\n*Cost\nof Sales*\n\n \n\nFor\nthe year ended March 31, 2026, our cost of sales was $2,509,692, or 39.5% of revenue. For the year ended March 31, 2025, our cost of\nsales was $2,983,940, or 40.2% of revenue.\n\n \n\nWe\nstrive to have a cost of sales that is less than 40% of revenue. We price our products once per year, at the beginning of the calendar\nyear, and maintain that pricing level throughout the year. During inflationary environments, when the price level of the Company’s\nraw materials is increasing, the Company must absorb that negative impact to gross margins until we can reprice our products at the beginning\nof the next calendar year. This repricing analysis considers the current pricing level of materials, as well as the likely increase in\nthose levels in the year ahead. We attempt to incorporate shipping costs into the cost of raw materials, but oftentimes during the course\nof the year, we are compelled to ship in a more expedient manner, which is more expensive than our baseline assumptions.\n\n \n\nFactors\naffecting cost of sales include:\n\n \n\nHelps\nsub 40% cost of sales\n \nImpedes\nsub 40% cost of sales\n\nHigher\nrevenue\n \nHigher\ninflation\n\nLarger\norder size\n \nExpedited\nshipping\n\nAbility\nto take advantage of volume discounts\n \nQuality\nissues with raw materials\n\nLower\npercentage of reseller sales\n \nHigher\npercentage of reseller sales\n\n \n\nFor\nthe year ended March 31, 2026, reseller sales were 16.1% of total revenue as compared to 21.4% for the year ended March 31, 2025. The\nlower reseller revenue, as a percentage of total revenue, for fiscal year 2026 versus fiscal year 2025 was the primary factor behind\nthe lower cost of sales, as a percentage of revenue, for fiscal year 2026 versus fiscal year 2025.\n\n \n\n*Operating\nExpenses*\n\n \n\nOperating\nexpenses are divided into two categories – salary + wages, and general + administrative. Salary and wages tend to increase over\ntime as the Company has been increasing its number of employees, and we expect to continue to do so in the future. Also, we desire to\nretain employees over the long term, which requires periodic increases in compensation as their value to the Company increases.\n\n \n\nPrior\nto January 1, 2026, the Company had a discretionary quarterly bonus program based on qualified revenue. Qualified revenue was defined\nas revenue where there were no reseller fees or other price adjustments associated with that\nrevenue. Thus, all reseller sales were disqualified from the discretionary quarterly bonus calculation, as were other miscellaneous transactions\nwhere the Company did not receive a full margin.\n\n \n\n14\n\n \n\n \n\nBeginning\nJanuary 1, 2026, the Company modified the formula for its quarterly bonus program to be 10% of income before interest and taxes. Thus,\nquarterly bonuses depend on profitability, not revenue. Management believes that this new bonus program formula better aligns employee\nincentives with shareholder interests.\n\n \n\nAlso\nbeginning January 1, 2026, the Company initiated a Simple IRA program. Employees can withhold a percentage of their income each pay period\nwhich is deposited into an IRA for the employee. The company matches the first 3% of employee income contributions. Management believes\nthat this program helps retain employees.\n\n \n\nDuring\nquarters with higher profitability, salaries and wages will increase all other things equal.\n\n \n\nSalary\nand wages were $2,205,008 for the year ended March 31, 2026, compared to $1,914,941 for the year ended March 31, 2025. As of March 31,\n2026, we had 28 full-time employees. As of March 31, 2025, we had 25 full-time employees.\n\n \n\nGeneral\nand administrative expenses include all operating expenses outside of salaries and wages. These include the following categories:\n\n \n\n \n1.\nAdvertising\nand marketing expenses;\n\n \n2.\nTrade\nshow and travel expenses;\n\n \n3.\nProduct\ndevelopment expenses;\n\n \n4.\nFinance\ncharges;\n\n \n5.\nContract\nlabor expenses;\n\n \n6.\nLease\nexpenses;\n\n \n7.\nInsurance\npremiums;\n\n \n8.\nWorkers’\ncompensation expenses;\n\n \n9.\nOffice\nsupplies and repairs;\n\n \n10.\nProfessional\nexpenses;\n\n \n11.\nLicenses;\n\n \n12.\nState\nsales tax expenses; and\n\n \n13.\nOffice\nand warehouse infrastructure expenses.\n\n \n\nMost\nof these expenses are not strongly correlated with changes in revenue, but they tend to increase over time. General and administrative\nexpenses were $1,418,083 for the year ended March 31, 2026. For the year ended March 31, 2025, general and administrative expenses were\n$1,386,177. While most expenses increased, we experienced significant decreases from two (2) areas.\n\n \n\nIn\nlate October and early November of 2024, we ended our lease on our 10,000 square foot combined warehouse and office facility, and entered\ninto two (2) new leases - a 20,880 square foot warehouse and R&D facility, and a 5,016 square foot corporate office facility. The\nexpenses associated with those moves, which were part of the general and administrative expenses in fiscal year 2025, were not present\nin fiscal year 2026.\n\n \n\nOur\ntax expenses for fiscal year 2026 were $32,056 versus $153,041 in fiscal year 2025. The decrease is primarily attributable to\nsignificantly lower taxable income in the current year compared to the prior year. Additionally, the state income tax payments for fiscal\nyear 2025 included approximately $88,000 related to underpaid state estimated taxes from the fiscal year ended March 31, 2024. Fiscal\nyear 2024 was an exceptionally strong year financially, and the state estimated tax payments made during that year were insufficient\nto fully cover the ultimate tax liability due upon filing. As a result, a substantial portion of the taxes paid during fiscal year 2025\nrelated to the prior year liability rather than current year operations.\n\n \n\nTotal\nOperating expenses for the year ended March 31, 2026, were $3,623,091, compared to $3,301,118 for the year ended March 31, 2025.\n\n \n\n15\n\n \n\n* *\n\n*Other\nIncome:*\n\n** **\n\nOther\nincome for the years ended March 31, 2026, and 2025, was entirely comprised of net interest income. The Company invests surplus cash\nin a Vanguard money market fund that invests exclusively in repurchase agreements and short-term U.S. government securities. The ticker\nsymbol of this fund is “VMFXX.” Interest accrues daily and is paid monthly.\n\n \n\nFor\nthe year ended March 31, 2026, other income was $104,477. For the year ended March 31, 2025, other income was $127,930. Average account\nbalances in our savings account and interest rates were lower in fiscal year 2026 versus those in fiscal year 2025, which accounts for\nthe decline in interest income.\n\n \n\n*Net\nIncome Before Tax*\n\n** **\n\nFor\nthe year ended March 31, 2026, net income before tax was $321,455 versus $1,211,263 for the year ended March 31, 2025. The Company experienced\na lower sales level in fiscal year 2026 versus that of fiscal year 2025, which largely accounts for the difference in net income before\ntax for these two periods. Operating expenses in fiscal year 2026 were also higher than those for fiscal year 2025 due to increased employee\nexpenses.\n\n** **\n\n*Taxes*\n\n** **\n\nThe\nCompany has significant net operating losses which arose due to past losses. At March 31, 2026, the Company had net operating losses\nof approximately $7.7 million that may be offset against future taxable income. The federal net operating losses and tax credits expire\nin years beginning in 2030. The state net operating losses and tax credits expire in years beginning in 2027.\n\n \n\nPrior\nto fiscal year 2023, the Company offset its potential tax benefit from the operating loss carry-forwards with a valuation allowance in\nthe same amount. As it became clear that the Company will more likely than not use its tax loss carry-forward amounts, the valuation\nallowance was partially removed for the fiscal year ending March 31, 2023, such that the tax benefit recognized by us in fiscal year\n2023 was $1,011,466. The valuation allowance was fully removed as of March 31, 2024, resulting in a tax benefit of $1,529,793 for fiscal\nyear 2024. Once the valuation allowance was fully removed, a provision for income taxes was disclosed. For the fiscal year ending March\n31, 2026, the Company’s provision for income taxes was ($68,273). For the fiscal year ending March 31, 2025, the Company’s\nprovision for income taxes was ($317,235).\n\n \n\n*Net\nIncome*\n\n** **\n\nFor\nthe year ended March 31, 2026, net income was $253,182 versus $946,865 for the year ended March 31, 2025.\n\n** **\n\n**Liquidity\nand Capital Resources**\n\n* *\n\n*Cash\nFlow from Operations*\n\n \n\nFor\nthe year ended March 31, 2026, cash provided by operations was $96,440 compared to cash provided by operations of $2,520,966 for the\nyear ended March 31, 2025. Several factors contributed to the decline in cash provided by operations from fiscal year 2025 to fiscal\nyear 2026. The largest factors were net income decreased by $693,683; the provision for income taxes decreased by 209,952; and accounts\nreceivable increased by $338,726 in fiscal year 2026 versus a decrease of $1,291,987 in fiscal year 2025;\n\n \n\nAs\nof March 31, 2026, total current assets were $5,631,022 and total current liabilities were $448,856, resulting in working capital of\n$5,182,166. As of March 31, 2025, total current assets were $5,918,984 and total current liabilities were $326,439, resulting in working\ncapital of $5,592,545.\n\n \n\nThe\nCompany had a current ratio as of March 31, 2026, of 12.5 compared to a current ratio of 18.1 as of March 31, 2025.\n\n \n\n16\n\n \n\n \n\nAs\nof March 31, 2026, we had $2,674,538 in cash compared to $3,223,147 in cash as of March 31, 2025.\n\n \n\n*Cash\nFlow from Investing Activities*\n\n \n\nFor\nthe year ended March 31, 2026, cash used by investing activities was $18,730 compared to cash used by investing activities of $79,814\nfor the year ended March 31, 2025. We purchased warehouse and office equipment related to our move from one facility to two during fiscal\nyear 2025. These expenses were absent in fiscal year 2026, which accounts for the decrease in cash used by investing activities.\n\n \n\n*Cash\nFlow from Financing Activities*\n\n \n\nFor\nthe year ended March 31, 2026, cash used by financing activities was $626,319. We made the following common stock repurchase transactions\nduring fiscal year 2026, which accounts for this activity:\n\n \n\nDate \nShares  \nPrice  \nTotal Consideration \n\n5/20/2025 \n 23,747  \n$1.68  \n$39,894 \n\n5/22/2025 \n 8,333  \n$1.63  \n$13,607 \n\n7/7/2025 \n 83,333  \n$1.44  \n$120,007 \n\n7/16/2025 \n 16,666  \n$1.32  \n$22,007 \n\n7/21/2025 \n 1,583  \n$1.14  \n$1,802 \n\n7/22/2025 \n 1,917  \n$1.19  \n$2,284 \n\n7/23/2025 \n 2,000  \n$1.13  \n$2,263 \n\n7/24/2025 \n 2,167  \n$1.08  \n$2,347 \n\n7/25/2025 \n 2,167  \n$1.07  \n$2,321 \n\n7/28/2025 \n 201,514  \n$1.08  \n$217,400 \n\n7/29/2025 \n 988  \n$1.32  \n$1,303 \n\n8/22/2025 \n 5,458  \n$1.56  \n$8,516 \n\n9/19/2025 \n 4,167  \n$1.56  \n$6,507 \n\n9/30/2025 \n 8,647  \n$1.38  \n$11,933 \n\n10/28/2025 \n 250  \n$1.50  \n$383 \n\n12/1/2025 \n 10,873  \n$1.34  \n$14,620 \n\n12/4/2025 \n 417  \n$1.44  \n$600 \n\n12/8/2025 \n 2,031  \n$1.50  \n$3,046 \n\n12/10/2025 \n 14,123  \n$1.32  \n$18,643 \n\n12/10/2025 \n 133  \n$1.32  \n$176 \n\n12/12/2025 \n 458  \n$1.47  \n$676 \n\n12/19/2025 \n 2,500  \n$1.44  \n$3,607 \n\n12/23/2025 \n 917  \n$1.56  \n$1,431 \n\n12/29/2025 \n 1,571  \n$1.56  \n$2,458 \n\n1/9/2026 \n 1,667  \n$1.59  \n$2,647 \n\n1/26/2026 \n 35,566  \n$1.38  \n$49,081 \n\n2/2/2026 \n 1,110  \n$1.62  \n$1,797 \n\n2/11/2026 \n 1,250  \n$1.26  \n$1,575 \n\n2/19/2026 \n 1,667  \n$1.50  \n$2,505 \n\n2/26/2026 \n 16,667  \n$1.44  \n$24,007 \n\n3/13/2026 \n 8,134  \n$1.61  \n$13,135 \n\n3/27/2026 \n 11,207  \n$1.68  \n$18,834 \n\n3/31/2026 \n 8,333  \n$1.79  \n$14,907 \n\n  \n    \n    \n   \n\nTotal \n 481,561  \n    \n$626,319 \n\n \n\nFor\nthe year ended March 31, 2025, cash used by financing activities was $547,713. We purchased 211,977 shares of our common stock for $2.58\nper share, which accounts for this activity.\n\n \n\n17\n\n \n\n* *\n\n*Off-Balance\nSheet Arrangements*\n\n \n\nWe\nhad no Off-Balance Sheet arrangements during the years ended March 31, 2026, or 2025."}