UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO _____________
Commission file number 000-33033
PEOPLENET INTERNATIONAL CORPORATION
(Name of small business issuer in its charter)
Delaware | 02-0575232 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
1600 Adams Drive
Menlo Park, California 94025
(Address of Principal Executive Offices including Zip Code)
(650) 323-6688
(Registrant's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Applicable only to issuers involved in bankruptcy proceedings during the past five years:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
Number of shares of common stock, par value $0.0001, outstanding as of November 14, 2003 is 15,749,999.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PEOPLENET INTERNATIONAL CORPORATION
FORM 10-QSB
For September 30, 2003
TABLE OF CONTENTS
| Part I. | Financial Information |
|
Item 1. | Financial Statements | |
Balance Sheet as of September 30, 2003 | 4 | |
Statements of Operations for the three-month and nine-month periods ended September 30, 2003 and 2002 | 5 | |
Statements of Cash Flows for the nine-month periods ended September 30, 2003 and 2002 | 6 | |
Notes to Financial Statements | 7 | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 11 |
Item 3. | Controls and Procedures | 14 |
Part II. | Other Information |
|
Item 1. | Legal Proceedings | 15 |
Item 2. | Changes in Securities and Use of Proceeds | 16 |
Item 3. | Defaults Under Senior Securities | 16 |
Item 4. | Submission of Matters to a Vote of Security Holders | 16 |
Item 5. | Other Information | 16 |
Item 6. | Reports on Form 8-K | 16 |
| ||
| Signatures | 16 | |
Certifications |
| 17 |
PART I
Item 1. Financial Information - (unaudited)
PEOPLENET INTERNATIONAL CORPORATION
BALANCE SHEET
September 30
2003
------------
(unaudited)
ASSETS
Current Assets
Cash & cash equivalents $ 197
Accounts receivable 61,000
------------
Total current assets 61,197
Intangible assets, net 150,600
------------
Total Assets $ 211,797
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable & accrued expenses $ 355,940
Payroll taxes payable 77,708
Advances from related parties 265,395
Note payable - related party 60,000
------------
Total current liabilities 759,043
------------
Stockholders' Deficit
Preferred stock, $0.0001 par value,
10,000,000 shares authorized,
none issued $ -
Common stock, $0.0001 par value,
100,000,000 shares authorized,
15,749,999 shares issued and
outstanding at September 30, 2003 1,575
Additional paid-in capital 19,080,371
Deferred compensation charges (699,965)
Related party receivable (260,682)
Accumulated deficit (18,668,545)
------------
Total Stockholders' Deficit (547,246)
------------
$ 211,797
============
The accompanying notes are an integral part of these financial statements.
PEOPLENET INTERNATIONAL CORPORATION
STATEMENT OF OPERATIONS
Three-month Periods Ended Six-month Periods Ended
------------------------- -------------------------
Sept 30 Sept 30 Sept 30 Sept 30
2003 2002 2003 2002
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES
Licensing fee - software $ 839 $ 3,754 $ 2,656 $ 6,951
Management fees 85,000 - 122,300 -
Hosting & other 2,119 - 4,427 -
----------- ----------- ----------- -----------
Total revenues 87,958 3,754 129,383 6,951
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Amortization of intangibles 151,670 88,378 455,180 176,670
Salaries and payroll taxes - 130,557 5,210 259,030
Professional fees 9,231 - 57,367 -
General and administrative 99,041 284,241 408,320 4,009,110
----------- ----------- ----------- -----------
Total costs and expenses 259,942 503,176 926,077 4,444,810
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (171,984) (499,422) (796,694) (4,437,859)
OTHER INCOME (EXPENSES)
Interest expense (1,555) (4) (4,309) (4)
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (173,539) (499,426) (801,003) (4,437,863)
PROVISION FOR INCOME TAXES - - 800 -
----------- ----------- ----------- -----------
NET LOSS $ (173,539) $ (499,426) $ (801,803) $(4,437,863)
=========== =========== =========== ============
Basic and diluted weighted average
number of common stock
outstanding 15,749,999 15,749,999 15,749,999 15,749,999
=========== =========== =========== ===========
Basic and diluted loss per share $(0.01) $(0.03) $(0.05) $(0.28)
=========== =========== =========== ===========
Weighted average number of shares used to compute basic and diluted loss per share is the
same since the effect of dilutive securities is anti-dilutive.
The accompanying notes are an integral part of these financial statements.
PEOPLENET INTERNATIONAL CORPORATION
STATEMENT OF CASH FLOWS
Nine Months Nine Months
Ended Ended
------------- -------------
Sept 30, 2003 Sept 30, 2002
------------- -------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (801,803) $ (4,437,863)
Adjustments to reconcile net loss
to net cash used in operating activities
Allowance for doubtful accounts - 129,000
Depreciation and amortization 470,494 227,370
Common stock issued in lieu of compensation - 15,790
Common stock options issued for services - 484,942
Common stock options issued in lieu of compensation - 3,092,405
Amortization of deferred compensation charges 353,095 144,695
(Increase) decrease in current assets
Accounts receivable (61,000) (1,000)
Inter-company accounts - (2,474)
Increase (decrease) in current liabilities:
Accrued expenses (36,987) 77,951
Other - (15,399)
------------- -------------
Net cash used in operating activities (76,210) (284,583)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property & equipment - (3,678)
(Increase) decrease of notes receivable 55,109 (1,223)
------------- -------------
Net cash provided by (used in) investing activities 55,109 (4,901)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock - 120,000
Proceeds on notes payable - -
Proceeds on loans from related parties 19,895 169,912
------------- -------------
Net cash provided by financing activities 19,895 289,912
------------- -------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (1,197) 428
CASH & CASH EQUIVALENTS, Beginning Balance 1,394 -
------------- -------------
CASH & CASH EQUIVALENTS, Ending Balance $ 197 $ 428
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for
Interest $ - $ 1,004
============= =============
Foreign and state income taxes $ - -
============= =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Common stock issued for services $ - $ 3,751,537
============= =============
Common stock issued for purchase of
intellectual properties $ - $ 1,059,500
============= =============
Conversion of intercompany balances upon
spin-off $ - $ 12,199,785
============= =============
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
For the three-month period ended September 30, 2003
Note 1 - Nature of operations, Stock Split, Spin-off, and Business Agreements
Nature of Operations - PeopleNet International Corporation (the "Company")was incorporated on February 5, 1997in the state of Delaware. The Company focuses on development and sales of communication software solutions and management of media-related programs. The software solutions include a controlled and safe Internet browser for children and a multiple-module web-based email and office automation bundle. The Company had been a wholly owned subsidiary of Pacific Systems Control Technology, Inc. ("PSCT") until February 8, 2002 when the Company completed its spin-off transaction from PSCT and became an independent entity.
Spin-off agreement - On June 22, 2001, PSCT approved a plan to spin-off the Company to the shareholders as a tax-free distribution. Under the plan, each stockholder of PSCT received one share of PeopleNet stock for every 17 shares of PSCT stock held as of the record date of January 16, 2002. Subsequent to and as part of the spin-off, the Company issued 374,587 shares of common stock, with registration rights to ECapital, in exchange for the worldwide exclusive rights to market and distribute ChiBrow, a safe web browser software for children for three years. The related party note payable was converted to common stock. The spin-off became effective in January 2002 and all shares were distributed to the above parties on February 8, 2002.
As part of this plan, inter-company advances were offset against the amounts due to PSCT and the net amount was converted to additional paid-in-capital. Also, as a part of the transaction, Pacific agreed to pay to the Company $314,000 in 2002, since liabilities incurred by Pacific for the same amount, were recorded by the Company.
Note 2 - Basis of presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 2002.
Note 3 - Recent pronouncements
On April 30, 2003, the FASB issued FASB Statement No. 149 ("SFAS 149"), "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". FAS 149 amends and clarifies the accounting guidance on (1) derivative instruments (including certain derivative instruments embedded in other contracts) and (2) hedging activities that fall within the scope of FASB Statement No. 133 ("SFAS 133"),Accounting for Derivative Instruments and Hedging Activities. SFAS 149 also amends certain other existing pronouncements, which will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS 149 is effective (1) for contracts entered into or modified after June 30, 2003, with certain exceptions, and (2) for hedging relationships designated after June 30, 2003. The guidance is to be applied prospectively. The adoption of SFAS No. 149 does not have a material impact on the Company's financial position or results of operations or cash flows.
On May 15 2003, the FASB issued FASB Statement No. 150 ("SFAS 150"),Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or "mezzanine" equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the statement of financial position. Further, SFAS 150 requires disclosure regarding the terms of those instruments and settlement alternatives. SFAS 150 affects an entity's classification of the following freestanding instruments: a) Mandatorily redeemable instruments b) Financial instruments to repurchase an entity's own equity instruments c) Financial instruments embodying obligations that the issuer must or could choose to settle by issuing a variable number of its shares or other equity instruments based solely on (i) a fixed monetary amount known at inception or ( ii) something other than changes in its own equity instruments d) SFAS 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. The guidance in SFAS 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. For private companies, mandatorily redeemable financial instruments are subject to the provisions of SFAS 150 for the fiscal period beginning after December 15, 2003. The adoption of SFAS No. 149 does not have a material impact on the Company's financial position or results of operations or cash flows.
Note 4 - Reclassifications
Certain prior period amounts have been reclassified to conform to the period ended September 30, 2003 presentation.
Note 5 - Loss per share
Earnings per share for the nine month periods ended September 30, 2003 and 2002 were determined by dividing net income for the periods by the weighted average number of both basic and diluted shares of common stock and common stock equivalents outstanding. Weighted average number of shares used to compute basic and diluted loss per share is the same since the effect of dilutive securities is anti-dilutive.
Note 6 - Advances from Related Parties
The advances from related parties are due on demand, non-interest bearing and unsecured.
Note 7 - Notes Payable - related party
At September 30, 2002, the Company has an unsecured note payable of $60,000 from a related party, related through president of the Company. The note is due on demand and bears interest at 9% per annum. Interest fro the period ended September 30, 2003 and 2002 amounted $4,050.
Note 8 - Related Party Transactions
In March 2002, the Company acquired ChiBrow from ECapital Group, Inc., which is a related party who owns approximately 19% of our Company prior to the acquisition. The Company also acquired an office communication software from PeopleNet Corporation whose certain owners indirectly own our shares through their ownership of ECapital Group, Inc.
The Company provides management services to two companies related through a common officer. Through the nine month period ended September 30, 2003, the Company has provided services amounting $122,300 to the two entities, out of which $61,000 was outstanding at September 30, 2003.
Note 9 - Commitments and Contingencies
On December 27, 2000, the Company entered into a worldwide distribution agreement with respect toThe Adventures with Kanga Roddytelevision program with World Channel, Inc. Under the agreement, World Channel will have the exclusive rights for exhibition, distribution, process and reproduction and all commercial exploitation of the program for a period of five years. The agreement requires World Channel to make five annual installments of $600,000 on or before the end of each of the years 2001 through 2005. The Company did not earn any revenue from the films in 2002 and the period ended September 30, 2003. A 100% reserve on the remaining receivable was also established as of September 30, 2003. The Company has reserved the remaining unamortized film costs for "The Adventures With Kanga Roddy" television program.
In June 2001 the Company signed an agreement with ECapital Group, Inc. ("ECapital") to purchase the exclusive licensing and marketing rights to ChiBrow, a safe web browser software for children. Under the terms of the agreement and upon the effectiveness of the spin-off of the Company from PSCT, the Company issued 374,587 shares of common stock, with registration rights, to ECapital in exchange for the worldwide exclusive rights to market and distribute ChiBrow for three years (see Note 1). The Company intends to file a registration statement for such shares immediately after the effectiveness of the spin-off transaction. Pursuant to the terms of the agreement, the Company shall retain 35% of all revenues generated from such marketing efforts and the balance shall be paid to ECapital. The registration for the 374,587 shares of PeopleNet common stock issued to ECapital has not yet been filed as of September 30, 2003.
Through December 31, 2001, the Company was still a subsidiary of Pacific Systems Control Technology, the following cases were either filed against Pacific Systems naming all of its subsidiaries including PeopleNet as the defendants, or Pacific Systems' initiated complaint resulted in a cross-complaint by the defendant naming Pacific Systems and all of its subsidiaries including PeopleNet as the defendants in the cross-complaint. Pacific Systems has agreed to indemnify all of its subsidiaries including PeopleNet from the liabilities of the following cases including expenses, fees or judgment.
In October 2001, Pacific Systems filed a complaint against a former employee in licensing and marketing activities for breach of contract, breach of fiduciary duty and unjust enrichment, among other causes of action, seeking declaratory relief from the court. A counter claim from the employee was filed in April 2002 against Pacific Systems and its subsidiaries. On April 15, 2002, judgment was entered against Pacific Systems and its subsidiaries in the amount of $70,527. As of June 30, 2002, $56,727 was still outstanding on the judgment. On February 11, 2003, Pacific Systems and its subsidiaries entered into a global settlement and mutual release of all claims with the former employee. Under the agreement, the defendants, including the Company, will pay to the former employee a total sum of $100,000 plus interest at the rate of 10% per year, payable in installments through August 15, 2003.
On April 9, 2002, the Company entered into a stock exchange agreement with MarketRoot Corporation where the Company intends to acquire all of the outstanding shares of MarketRoot for 1,740,000 shares of the Company's common stock. MarketRoot has developed and owned an e-commerce software product. The agreement is subject to the submission of audited financial statements of MarketRoot for the years ended December 31, 2001 and 2000 and the acceptance of such financial statements by the Company. As of September 30, 2003, audited financial statements of MarketRoot have not yet been submitted to the Company.
Note 10 - Common Stock
Between April and May 2002, the Company issued a total of 6,680,620 stock options with exercise prices ranging from $0.08 to $0.12 per share and with gradual vesting arrangements. Due to the difference in valuation between certain intangible assets the Company acquired in March 2002 with the Company's common stock at $0.08 per share and common stock the Company sold to an investor in June 2002 at the price of $1.00 per share, the Company valued these options at a total of approximately $4.5 million. During the year ended December 31, 2002, the Company recognized $3,915,930 in non-cash expenses for the stock options vested as of December 31, 2002. The remaining unvested options are deferred and will be amortized over the vesting period. During the nine month period ended September 30, 2003, the Company amortized deferred compensation of $353,095.
Note 11 - Going concern
The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has accumulated deficit of $18,668,545 at September 30 30, 2003. The Company's total liabilities exceeded the total assets by $547,246 as of September 30, 2003. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unabl e to continue as a going concern.
Management's plans and the ongoing operations of the Company are expected to require additional working capital in next twelve months. The Company has historically financed operating and capital cash requirements from funds received from the parent company PSCT. The Company is attempting to raise additional capital through a private placement in the amount of $1,000,000. However, there can be no assurance that this placement could be successfully executed due to the current adverse investment climate. During each of the quarters going forward, the Company intends to make smaller private sale of stock to accredited individuals and to obtain loans from ECapital Group, Inc. or other individuals for operation cash needs.
Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations
Forward Looking Information
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for forward-looking statements. Certain information included in this Form 10-QSB and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by or on behalf of the Company) are forward-looking, such as statements relating to operational and financing plans, capital uses and resources, competition, and demands for the Company's products and services. Such forward-looking statements involve important risks and uncertainties, many of which will be beyond the control of the Company. These risks and uncertainties could significantly affect anticipated results in the future, both short-term and long-term, and accordingly, such results may differ from those expressed in forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, changes in external competitive market factors or in the Company's internal budgeting process which might impact trends in the Company's results of operations, unanticipated working capital or other cash requirements, changes in the Company's business strategy or an inability to execute its strategy due to unanticipated change in the industries in which it operates, and various competitive factors that may prevent the Company from competing successfully in the marketplace. The following discussion may contain forward-looking statements that are subject to risks and uncertainties. For a discussion of factors that could cause actual results to differ, please see the discussion contained herein. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequence events or circumstances. Readers are also encouraged to review the Company's publicly available filings with the Securities and Exchange Commission.
The following section discusses the significant operating changes, business trends, financial condition, earnings and liquidity that have occurred in the three-month period ended September 30, 2003. This discussion should be read in conjunction with the Company's financial statements and notes appearing elsewhere in this report.
Critical Accounting Policies
In the ordinary course of business, the company has made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company believes that the following discussion addresses the Company's most critical accounting policies, which are those that are most important to the portrayal of the Company's financial condition and results. The Company constantly re-evaluates these significant factors and makes adjustments where facts and circumstances dictate. Although historically, actual results have not significantly deviated from those determined using the necessary estimates inherent in the preparation of financial statements, future actual results may vary significantly. Estimates and assumptions include, but are not limited to, customer receivables, long-term asset lives, contingencies and litigation. The Company has also chosen certain accounting policies when options were available, including:
- The intrinsic value method, or APB Opinion No. 25, to account for our common stock incentive awards; and
- We record an allowance for credit losses based on estimates of customers' ability to pay. If the financial condition of our customers were to deteriorate, additional allowances may be required.
- We adopt SFAS 142, Goodwill and Other Intangible Assets, in fiscal year 2002 to account for the carrying amount of the intangible assets.
- The Company expects to apply the provisions of Statement of Position 97-2 and 98-4 as well as SAB 101, to account for the sales of software and related services that may be bundled with the software license.
These accounting policies are applied consistently for all years presented. Our operating results would be affected if other alternatives were used. Information about the impact on our operating results is included in the footnotes to our consolidated financial statements.
Results of Operation
PeopleNet was formed in February 1997, under the name American Champion Media, as a wholly owned subsidiary of Pacific Systems Control Technology ("PSCT"), formerly known as American Champion Entertainment. On February 8, 2002, the Company completed the spin-off from PSCT and became its own entity independent of PSCT. The shareholders of PSCT received one share of the Company's common stock for every 17 shares of PSCT stock held as of the record date of January 16, 2002.
On March 21, 2002, the Company entered into an asset purchase agreement with a company to acquire an intellectual property known as "The Children's Browser" in exchange for 3,799,999 shares of the Company's common stock. The acquisition price included the source codes, trademark, copyright, domain name and website of The Children's Browser.
On March 21, 2002, the Company entered into an asset purchase agreement with a company to acquire an office communication program and associated modules in exchange for 9,620,000 shares of the Company's common stock.
On April 9, 2002, the Company entered into a stock exchange agreement with MarketRoot Corporation where the Company intends to acquire all of the outstanding shares of MarketRoot for 1,740,000 shares of the Company's common stock. MarketRoot has developed and owns an e-commerce software product. The agreement is subject to the submission of audited financial statements of MarketRoot for the years ended December 31, 2001 and 2000 and the acceptance of such financial statements by the Company. As of September 30, 2003, MarketRoot has not yet submitted such financial statements to the Company.
Revenues
During the three-month period ended September 30, 2003, the Company focused on the preparation of its software products for marketing and had insignificant revenue from its software sales. The Company's revenues totaled $87,958 which mainly came from management and web hosting activities for this period.
Costs and Expenses
During the three-month period ended September 30, 2003, we had no salaries and payroll expense, and $99,041 in general and administrative expenses. We also incurred amortization of intangibles in the amount of $151,670.
As a result of foregoing factors, our net loss was ($173,539) for the three-month period ended September 30, 2003, as compared to ($499,426) for the same period in 2002. Net loss per share decreased to ($0.01) for this third quarter in 2003 as compared to ($0.03) for the same period in 2002, while weighted average number of shares outstanding remained the same at 15,749,999 shares.
Liquidity and Capital Resources
Stockholders' equity, as of September 30, 2003, was a negative ($547,246) and cash decreased by ($1,197) from the beginning of the year. Cashflow from operations was a negative ($76,201) while proceeds from investing and financing activities provided $75,004.
A related party receivable in the amount of $260,682 was set up to account for payables that were included in the financial statement of the Company as a result of the spin-off transaction. As part of the spin-off the former parent company agreed to reimburse the Company for these liabilities.
We historically financed our operating and capital outlays from funds received from our parent company. We intend to seek debt or equity funding in the amount of approximately $1 million to fund our operations for the next twelve months, although there can be no assurance that we will be successful in obtaining such funding on terms acceptable to us, or at all. Alternatives to a lump sum $1 million financing include making smaller private sales of our stock to accredited investors during each quarter going forward, as well as obtaining smaller loan amounts from ECapital Group, Inc. or other individuals. We estimate that our capital requirements for the year should not exceed $1 million. However, there is no assurance that we will be successful in raising capital from a private placement. In the event that a private placement is unsuccessful, we will rely on revenues generated from the ChiBrow project, if any, plus debt financing to fund operations on a short-term basis. ECapital Group, Inc. has expressed the possibility of extending a loan to us for our operational needs if the private placement is not completed. However, there are no assurances that such debt financing from ECapital Group is available to us for our operational needs. Management has a reasonable belief that we can fund our operations through the above mentioned means through the end of year 2003.
The Company expects to continue to grow by exploring acquisition of other companies. However, given our current financial status and also that our securities are not currently traded on any exchange, there is no assurance that we will be able to make more acquisitions. ECapital Group, Inc. has expressed the ability to extend loans to us for our current operations, but there is no assurance that ECapital will continue to fund our operations in the future.
Item 3. Controls and Procedures
Based on their most recent review, which was completed within 90 days of the filing of this report, the Company's principal executive officer and principal financial officer has concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. There were no significant changes in the Company's internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As of December 31, 2001, while PeopleNet International Corporation was still a subsidiary of Pacific Systems Control Technology, the following cases were either filed against Pacific Systems naming all of its subsidiaries including PeopleNet as the defendants, or Pacific Systems' initiated complaint resulted in a cross-complaint by the defendant naming Pacific Systems and all of its subsidiaries including PeopleNet as the defendants in the cross-complaint. Pacific Systems has agreed to indemnify all of its subsidiaries including PeopleNet from the liabilities of the following cases including expenses, fees or judgment.
In October 2001, Pacific Systems filed a complaint against a former employee in licensing and marketing activities for breach of contract, breach of fiduciary duty and unjust enrichment, among other causes of action, seeking declaratory relief from the court. A counter claim from the employee was filed in April 2002 against Pacific Systems and its subsidiaries. On April 15, 2002, judgment was entered against Pacific Systems and its subsidiaries in the amount of $70,527. As of December 31, 2002, $56,727 was still outstanding on the judgment. On February 11, 2003, Pacific Systems and its subsidiaries entered into a global settlement and mutual release of all claims with the former employee. Under the agreement, the cross-defendants, including the Company, will pay to the former employee a total sum of $100,000 plus interest at the rate of 10% per year, payable in installments at the rate of $3,000 per month. As of September 30, 2003, the outstanding balance under the settlement agreement was $72,000.
With the exception of the foregoing, no lawsuits or proceedings are currently pending against PeopleNet International Corporation.
Item 2. Changes in 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 and Reports on Form 8-K.
There was no report filed on Form 8-K during the quarter ended September 30, 2003.
Exhibit 99.1 Certification pursuant to the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf on November 14, 2003 by the undersigned, thereunto duly authorized.
PEOPLENET INTERNATIONAL CORPORATION
(Registrant)
By: /s/ Benedict Van
- ------------------------------
Benedict Van
Chairman of the Board,
Chief Executive Officer and Chief Financial Officer
CERTIFICATIONS
I, Benedict Ban, Chairman of the Board, Chief Executive Officer and Chief Financial Officer of PeopleNet International Corporation, certify that:
1. I have reviewed this quarterly report an Form 10-QSB of PeolpleNet International Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying Officers and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as pf the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2003
/s/ Benedict Van
Benedict Van
Chairman of the Board,
Chief Executive Officer and Chief Financial Officer
Exhibit 99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Benedict Van, Chief Executive Officer and Chief Financial Officer of PeopleNet International Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:
1. the Quarterly Report on Form 10-QSB of the Company for the quarter ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 14, 2003
/s/ Benedict Van
Benedict Van
Chief Executive Officer
and
Chief Financial Officer