Delaware
|
02-0575232
|
|
(State
or Other Jurisdiction of Incorporation or Organization)
|
|
(I.R.S.
Employer Identification
Number)
|
Part
I.
|
Consolidated
Financial Information
|
||
Item 1.
|
Unaudited
Consolidated Financial Statements
|
3
|
|
Unaudited
Consolidated Balance Sheets as of September 30, 2009 and December 31,
2008
|
3
|
||
Unaudited
Consolidated Statements of Operations for The Three-Month and Nine Month
Periods ended September 30, 2009 and 2008
|
4
|
||
Unaudited
Consolidated Statements of Cash Flows for The Nine Month Periods ended
September 30, 2009 and 2008
|
5
|
||
Notes
to Unaudited Consolidated Financial Statements
|
6
|
||
Item 2.
|
Management's
Discussion and Analysis of Consolidated Financial Condition and Results of
Operations
|
15
|
|
Item 3.
|
Controls
and Procedures
|
||
Part
II.
|
Other
Information
|
||
Item 1.
|
Legal
Proceedings
|
18
|
|
Item 1A.
|
Risk
Factors
|
18
|
|
Item 2.
|
Unregistered
Sales of Equity, Securities and Use of Proceeds
|
25
|
|
Item 3.
|
Defaults
Under Senior Securities
|
25
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
25
|
|
Item 5.
|
Other
Information
|
25
|
|
Item 6.
|
Exhibits
|
26
|
|
Signatures
|
27
|
||
Exhibit
Index
|
28
|
||
Certifications
|
September
30, 2009
|
December
31, 2008
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 7,196 | $ | 6,900 | ||||
Account
receivable
|
449 | 106 | ||||||
Other
Receivable
|
9,692 | - | ||||||
Prepaid
expenses
|
8,265 | 35,301 | ||||||
Total
Current Assets
|
25,602 | 42,307 | ||||||
PROPERTY
AND EQUIPMENT-NET
|
564,161 | 701,289 | ||||||
INTANGIBLE
ASSETS-NET
|
86,794 | 206,608 | ||||||
DEPOSITS
|
50,000 | 185,293 | ||||||
Total
Non-Current Assets
|
700,955 | 1,093,190 | ||||||
TOTAL
ASSETS
|
$ | 726,557 | $ | 1,135,497 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY/(DEFICIT)
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 1,030,012 | 511,472 | |||||
Deferred
revenue
|
9,640 | 12,391 | ||||||
Due
to related parties
|
295,663 | 309,070 | ||||||
Loan
|
4,500 | - | ||||||
Convertible
notes payable, net
|
187,900 | - | ||||||
Shares
to be issued
|
30,000 | 45,000 | ||||||
Total
current liabilities
|
1,557,714 | 877,933 | ||||||
STOCKHOLDERS'
EQUITY/(DEFICIT):
|
||||||||
Common
stock, $0.0001 par value; 100,000,000 shares authorized; 34,558,813 shares
issued and 34,458,813 shares outstanding as
of September 30, 2009
and 34,538,313 shares issued and 34,438,313
outstanding as of December 31, 2008.
|
3,456 | 3,454 | ||||||
Treasury
Stock; 100,000 shares
|
(10 | ) | (10 | ) | ||||
Prepaid
consulting
|
(35,858 | ) | - | |||||
Additional
paid in capital
|
85,004,628 | 77,466,062 | ||||||
Subscription
receivable
|
(8,000 | ) | (8,000 | ) | ||||
Accumulated
deficit
|
(85,797,260 | ) | (77,205,829 | ) | ||||
Translation
Adjustment
|
1,887 | 1,887 | ||||||
Total
stockholders' equity/(deficit)
|
(831,158 | ) | 257,564 | |||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 726,557 | $ | 1,135,497 |
Three
month periods ended September 30,
|
Nine
month periods ended September, 30
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
NET
REVENUE
|
$ | 1,130 | $ | 6,576 | $ | 5,275 | $ | 23,160 | ||||||||
COST
OF GOODS SOLD
|
807 | 9,601 | 2,567 | 27,794 | ||||||||||||
GROSS
PROFIT (LOSS)
|
323 | (3,025 | ) | 2,709 | (4,634 | ) | ||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Depreciation
and amortization
|
72,677 | 105,808 | 258,447 | 317,421 | ||||||||||||
Rent
|
188,121 | 113,439 | 371,216 | 323,158 | ||||||||||||
Salaries
and payroll taxes
|
58,373 | 349,348 | 118,902 | 965,796 | ||||||||||||
Professional
fees
|
103,007 | 305,029 | 256,918 | 849,424 | ||||||||||||
General
and administrative expenses
|
346,269 | 787,393 | 7,587,165 | 4,281,481 | ||||||||||||
Total
operating expenses
|
768,466 | 1,661,017 | 8,592,647 | 6,737,280 | ||||||||||||
LOSS
FROM OPERATIONS
|
(768,123 | ) | (1,664,042 | ) | (8,589,939 | ) | (6,741,914 | ) | ||||||||
OTHER
INCOME
|
||||||||||||||||
Interest
income
|
5 | 633 | 107 | 2,166 | ||||||||||||
LOSS
BEFORE INCOME TAXES
|
(768,117 | ) | (1,663,409 | ) | (8,589,832 | ) | (6,739,748 | ) | ||||||||
INCOME
TAX
|
- | - | 1,600 | 2,520 | ||||||||||||
NET
LOSS
|
(768,117 | ) | (1,663,409 | ) | (8,591,432 | ) | (6,742,268 | ) | ||||||||
Common
stock, $0.0001 par value; 100,000,000 shares authorized; 34,558,813 shares
issued and 34,458,813 shares outstanding as
of September 30, 2009 and 34,538,313 shares issued
and 34,438,313 outstanding as of December 31, 2008.
|
||||||||||||||||
*BASIC
AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON STOCK
OUTSTANDING
|
34,255,893 | 34,413,230 | 34,358,813 | 34,307,515 | ||||||||||||
BASIC
AND DILUTED NET LOSS PER SHARE
|
$ | (0.02 | ) | $ | (0.05 | ) | $ | (0.25 | ) | $ | (0.20 | ) |
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
loss
|
$ | (8,591,432 | ) | $ | (6,742,268 | ) | ||
Adjustments
to reconcile net loss
|
||||||||
to
net cash used in operating activities:
|
||||||||
Depreciation
and amortization
|
258,447 | 317,421 | ||||||
Issuance
of stock options for compensation
|
7,106,017 | 3,579,875 | ||||||
Issuance
of warrants for services
|
263,772 | - | ||||||
(Increase)
decrease in current assets:
|
||||||||
Account
receivable
|
(343 | ) | (1,019 | ) | ||||
Other
Receivable
|
(9,692 | ) | - | |||||
Inventory
|
- | (2,706 | ) | |||||
Prepaid
expense
|
27,036 | 88,778 | ||||||
Deposits
|
135,293 | (78,303 | ) | |||||
Related
party receivable
|
- | 68,618 | ||||||
Increase
(decrease) in current liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
520,462 | 93,663 | ||||||
Deferred
Revenue
|
(2,751 | ) | 13,327 | |||||
Net
cash used in operating activities
|
(293,192 | ) | (2,662,614 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase
of property and equipment
|
(1,100 | ) | (483,573 | ) | ||||
Purchase
of intangible assets
|
(405 | ) | (69,070 | ) | ||||
Leasehold
Improvement
|
- | (89,768 | ) | |||||
Net
cash used in investing activities
|
(1,505 | ) | (642,411 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds
from warrants
|
55,000 | - | ||||||
Proceeds
from/(payment to) related parties
|
(13,407 | ) | - | |||||
Proceeds
from convertible notes payable
|
187,900 | - | ||||||
Proceeds
from notes payable
|
4,500 | - | ||||||
Proceeds
from subscription receivable
|
- | 45,000 | ||||||
Proceeds
from issuance of common stock for cash
|
61,000 | 2,686,028 | ||||||
Repurchase
treasury stock
|
- | (50,000 | ) | |||||
Net
cash provided by financing activities
|
294,993 | 2,681,028 | ||||||
EFFECT
OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
- | (437 | ) | |||||
NET
INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
|
296 | (624,435 | ) | |||||
CASH
& CASH EQUIVALENTS, BEGINNING BALANCE
|
6,900 | 705,839 | ||||||
CASH
& CASH EQUIVALENTS, ENDING BALANCE
|
$ | 7,196 | $ | 81,404 | ||||
SUPPLEMENTAL
DISCLOSURES:
|
||||||||
Income
tax payments
|
$ | 1,600 | $ | 2,520 | ||||
Interest
payments
|
$ | - | $ | - |
|
September 30, 2009
|
December 31, 2008
|
||||||
Equipment
|
$ |
936,064
|
$ |
934,964
|
||||
Furniture
|
141,078
|
141,078
|
||||||
Leasehold
improvement
|
89,768
|
89,768
|
||||||
Total
Property & Equipment
|
1,166,910
|
1,165,810
|
||||||
Less
accumulated depreciation
|
(602,749)
|
(464,521
|
)
|
|||||
Net
Property & Equipment
|
$ |
564,161
|
$ |
701,289
|
September 30, 2009
|
December 31, 2008
|
|||||||
Software
solutions
|
$ |
547,317
|
$ |
546,912
|
||||
Domain
name
|
32,321
|
32,321
|
||||||
Total
Intangible Assets
|
579,638
|
579,233
|
||||||
Less
accumulated amortization
|
(492,844)
|
(372,625
|
)
|
|||||
Net
Intangible Assets
|
$ |
86,794
|
$ |
206,608
|
Amortization
|
||||
2009:
|
$
|
83,594
|
September 30, 2009
|
December 31, 2008
|
|||||||
Rent
deposit – Mountain View
|
$
|
-
|
$
|
114,750
|
||||
Rent
deposit – Los Angeles
|
-
|
2,189
|
||||||
Rent
deposit – Vietnam
|
-
|
10,000
|
||||||
Attorney
retainer deposit
|
50,000
|
50,000
|
||||||
Other
deposits
|
8,354
|
|||||||
Total
deposits
|
$
|
50,000
|
$
|
185,293
|
September 30, 2009
|
December 31, 2008
|
|||||||
Accounts
payable
|
$
|
872,490
|
$
|
373,873
|
||||
Accrued
litigation
|
72,000
|
72,000
|
||||||
Other
accrued expenses
|
85,522
|
65,599
|
||||||
Total
accounts payable &
|
||||||||
accrued
expenses
|
$
|
1,030,012
|
$
|
511,472
|
2010:
|
|
$
|
199,558
|
|
2011:
|
$
|
227,537
|
||
2012:
|
$
|
312,800
|
||
2013:
|
$
|
131,396
|
||
Thereafter:
|
$
|
52,700
|
Weighted
|
||||||||||||
|
Average
|
Aggregate
|
||||||||||
|
Exercise
|
Intrinsic
|
||||||||||
|
Under Plan
|
Price
|
Value
|
|||||||||
Balance, December 31, 2008
|
5,383,999
|
0.97
|
$
|
5,222,479
|
||||||||
Granted
|
-
|
-
|
||||||||||
Lapsed
|
338,000
|
2.99
|
||||||||||
Exercised
|
-
|
-
|
||||||||||
Balance,
September 30, 2009
|
5,045,999
|
0.83
|
$
|
-
|
Options
|
||||||||||||||||||||
|
|
Outstanding
|
||||||||||||||||||
|
Weighted
|
Options Exercisable
|
||||||||||||||||||
|
Average
|
Weighted
|
Weighted
|
|||||||||||||||||
|
Remaining
|
Average
|
Average
|
|||||||||||||||||
|
Number
|
Contractual
|
Exercise
|
Number
|
Exercise
|
|||||||||||||||
|
Outstanding
|
Life
|
Price
|
Exercisable
|
Price
|
|||||||||||||||
Options
|
5,045,999
|
2.28
|
$
|
0.83
|
4,930,353
|
$
|
0.73
|
Weighted
|
||||||||||||
Average
|
Aggregate
|
|||||||||||
Exercise
|
Intrinsic
|
|||||||||||
Price
|
Value
|
|||||||||||
Balance,
December 31, 2008
|
750,000
|
$
|
6.00
|
$
|
-
|
|||||||
Granted
|
300,000
|
-
|
-
|
|||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Balance,
September 30, 2009
|
1,050,000
|
$
|
6.00
|
$
|
-
|
Warrants
|
||||||||||||||||||||
Outstanding
|
|
|
||||||||||||||||||
Weighted
|
Warrants Exercisable
|
|||||||||||||||||||
Average
|
Weighted
|
Weighted
|
||||||||||||||||||
Remaining
|
Average
|
Average
|
||||||||||||||||||
Number
|
Contractual
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Outstanding
|
Life
|
Price
|
Exercisable
|
Price
|
||||||||||||||||
Warrants
|
1,050,000
|
1.22
|
$
|
6.29
|
983,333
|
$
|
6.10
|
·
|
limit shareholders' ability to
elect or remove directors;
|
·
|
delay or prevent a change in the
control;
|
·
|
impede a merger, consolidation,
take over or other transaction involving the Company;
or
|
·
|
discourage a potential acquirer
from making a tender offer or otherwise attempting to obtain control of
the Company.
|
Item 2.
|
Unregistered Sales of Equity,
Securities and Use of
Proceeds. None
|
Item
3.
|
Defaults Under
Senior Securities. None
|
Item
4.
|
Submission of
Matters to a Vote of Security Holders. None
|
Item
5.
|
Other
Information. None
|
Item 6.
|
Exhibits.
|
By:
/s/ Benedict Van
|
|
Benedict
Van
|
|
Chief
Executive Officer & Chief Financial Officer
|
Exhibit No.
|
Exhibit
Description
|
|
3.1
(1)
|
Certificate
of Incorporation, as amended on July 24, 2001
|
|
3.1
(5)
|
Certificate
of Ownership and Merger of PeopleNet Name Change Subsidiary, Inc. with and
into PeopleNet International Corporation
|
|
3.2
(1)
|
By-laws
|
|
4.1
(1)
|
2001
Stock Option Plan
|
|
4.2
(1)
|
2001
Non-Employee Director Stock Option Plan
|
|
4.3
(1)
|
2001
Stock Incentive Plan
|
|
10.1
(1)
|
Agreement
between American Champion Media & American Champion Entertainment
dated as of July 10, 2001
|
|
10.2
(1)
|
Agreement
among ACEI, American Champion Media, ECapital Group & Anthony Chan,
dated as of June 20, 2001
|
|
10.3
(1)
|
Agreement
between American Champion Media & World Channel dated as of December
27, 2000
|
|
10.4
(1)
|
Agreement
between American Champion Media & Brighter Child Interactive dated as
of September 30, 1999
|
|
10.5
(1)
|
Agreement
between American Champion Media & Prestige Toys Corp dated as of
October 13, 1999
|
|
10.6
(2)
|
Agreement
- Sale of Assets between ECapital Group & PeopleNet International
dated March 21, 2002
|
|
10.7
(2)
|
Agreement
- Sale of Assets between PeopleNet Corporation & PeopleNet
International dated March 21, 2002
|
|
10.8
(3)
|
Lease
Agreement with CarrAmerica Techmart, LLC
|
|
10.9
(4)
|
Agreement
and Plan of Merger with hereUare Communications, Inc., dated August 25,
2006
|
|
10.10
(6)
|
Lease
Agreement with 1061 Terra Bella Associates,
LLC
|