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, 2005
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) |
5201 Great America Parkway, Suite 239
Santa Clara, California 95054
(Address of Principal Executive Offices including Zip Code)
(408) 988-1888
(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 September 30, 2005 is 16,337,499.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PEOPLENET INTERNATIONAL CORPORATION
FORM 10-QSB
For September 30, 2005
TABLE OF CONTENTS
| Part I. | Financial Information |
|
Item 1. | Financial Statements | |
Balance Sheet as of September 30, 2005 | 3 | |
Statements of Operations for the three-month and nine-month periods ended September 30, 2005 and 2004 | 4 | |
Statements of Cash Flows for the nine-month periods September 30, 2005 and 2004 | 5 | |
Notes to Financial Statements | 6 | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 10 |
Item 3. | Controls and Procedures | 12 |
Part II. | Other Information |
|
Item 1. | Legal Proceedings | 13 |
Item 2. | Changes in Securities and Use of Proceeds | 13 |
Item 3. | Defaults Under Senior Securities | 13 |
Item 4. | Submission of Matters to a Vote of Security Holders | 13 |
Item 5. | Other Information | 13 |
Item 6. | Reports on Form 8-K | 14 |
| ||
| Signatures | 14 | |
Certifications |
| 14 |
PART I
Item 1. Financial Information - (unaudited)
PEOPLENET INTERNATIONAL CORPORATION
BALANCE SHEET
Sept 30
2005
------------
(unaudited)
ASSETS
Current assets
Cash & cash equivalents $ 8,942
Advances to related party 160,440
Prepaid rent 68,827
------------
Total current assets 238,210
Property & equipment - net 55,005
Deposit - rent 23,061
------------
Total assets $ 316,276
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable & accrued expenses $ 441,798
Advance for shares to be issued 173,000
------------
Total current liabilities 614,798
------------
Stockholders' Deficit
Preferred stock, $0.0001 par value;
10,000,000 shares authorized $ -
Common stock, $0.0001 par value;
100,000,000 shares authorized;
16,337,499 shares issued and
outstanding at September 30, 2005 1,634
Additional paid-in capital 20,255,312
Deferred compensation charges (158,056)
Accumulated deficit (20,397,412)
------------
Total Stockholders' Deficit (298,522)
------------
$ 316,276
============
The accompanying notes are an integral part of these financial statements.
PEOPLENET INTERNATIONAL CORPORATION
STATEMENT OF OPERATIONS
Three-month Periods Ended Nine-month Periods Ended
------------------------- ------------------------
Sept 30 Sept 30 Sept 30 Sept 30
2005 2004 2005 2004
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES
Hosting & other $ 1,765 3,182 9,069 7,849
----------- ----------- ----------- -----------
Total revenues 1,765 3,182 9,069 7,849
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Depreciation 3,076 - 7,047 -
Rent 53,374 - 119,915 -
Salaries and payroll taxes 33,198 - 86,263 -
Professional fees 60,121 2,500 238,113 11,633
General and administrative 94,493 71,412 275,136 211,532
----------- ----------- ----------- -----------
Total costs and expenses 244,261 73,912 726,475 223,165
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (242,497) (70,730) (717,406) (215,316)
OTHER INCOME (EXPENSES)
Gain on sale of marketing and
distributor rights of software - - - 20,000
Interest income 26 - 722 -
Interest expense - (3,176) - (4,875)
----------- ----------- ----------- -----------
Total other income (expense) 26 (3,176) 722 15,125
LOSS FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (242,471) (73,906) (716,683) (200,191)
PROVISION FOR INCOME TAXES - - 800 800
----------- ----------- ----------- -----------
NET LOSS $ (242,471) $ (73,906) $ (717,483) $ (200,991)
=========== =========== =========== ===========
Basic and diluted weighted average
number of shares outstanding 16,337,499 15,846,575 16,275,096 15,785,711
=========== =========== =========== ===========
Basic and diluted loss per share $(0.01) $(0.00) $(0.04) $(0.01)
=========== =========== =========== ===========
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, 2005 Sept 30, 2004
------------- -------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (717,483) (200,991)
Adjustments to reconcile net loss
to net cash used for operating activities
Depreciation and amortization 7,047 -
Gain on sale of marketing and distributor
rights of software - (20,000)
Amortization of deferred compensation charges 203,216 203,215
(Increase) / decrease incurrent assets
Prepaid rent (68,827) -
Advance to related party (160,440) -
Deposit - rent (23,061) -
Increase / (decrease) in current liabilities
Accrued expenses (9,419) (121,114)
Advance from related party (53,191) -
------------- -------------
Net cash used for operating activities (822,158) (138,890)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketing and distributor
rights of software - 20,000
Purchase of property & equipment (49,025) -
------------- -------------
Net cash provided by (used in)
investing activities (49,025) 20,000
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 390,000 250,000
Proceeds from advance for shares to be issued 173,000 -
Proceeds from loans from related party - 240,682
Payment for notes from related parties (4,500) (260,964)
------------- -------------
Net cash provided by financing activities 558,500 229,718
------------- -------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (312,684) 110,828
CASH & CASH EQUIVALENTS, Beginning Balance 312,626 771
------------- -------------
CASH & CASH EQUIVALENTS, Ending Balance $ 8,942 111,599
============= =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued in settlement of debt $ - $ 60,000
============= =============
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Nature of Operations
PeopleNet International Corporation (the "Company") was incorporated on February 5, 1997 in 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.
Note 2 - Basis of presentation
The accompanying unaudited 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
Note 3 - Recent pronouncements
In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant- date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's second quarter of fiscal 2006. The adoption of FASB Statement No. 123R may have a significant impact on the Company's financial position or results of operations.
In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of Nonmonetary Assets." The Statement is an amendment of APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The adoption of SFAS Statement No. 153 does not have a significant impact on the Company's financial position or results of operations.
In April of 2004, the EITF reached consensus on the guidance provided in EITF Issue No. 03-6, "Participating Securities and the Two-Class Method under SFAS No. 128 Earnings Per Share" ("EITF 03-6"). EITF 03-6 clarifies whether a security should be considered a "participating security" for purposes of computing earnings per share ("EPS") and how earnings should be allocated to a "participating security" when using the two-class method for computing basic EPS. The adoption of EITF 03-6 does not have a significant impact on the Company's financial position or results of operations.
In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material effect on its consolidated financial position or results of operations.
Note 4 - Reclassifications
Certain comparative amounts have been reclassified to conform to the nine month periods ended September 30, 2005 and 2004.
Note 5 - Loss per share
Earnings per share for the three month and nine month periods ended September 30, 2005 and 2004 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 - Property and Equipment
The property & equipment comprised of the following at September 30, 2005:
Equipment $ 31,702 Furniture 30,350 ---------- 62,052 Less accumulated depreciation and amortization 7,047 ---------- $ 55,005 ==========
Depreciation expense was $3,076 and $-0- for the three month periods ended September 30, 2005 and 2004, respectively. Depreciation expense was $7,047 and $-0- for the nine month periods ended September 30, 2005 and 2004, respectively.
Note 7 - Related Party Transactions
On January 1, 2005, the Company, entered into a consulting agreement with ECapital Group, Inc., a party related through CEO of the Company, to manage its programming and setting up of Peoplenet.com for $125,000. This was a one-time consultation arrangement that was completed within the three month period ended March 31, 2005 and the amount was included in professional fees for that period.
The Company agrees to pay the CEO of the Company from $5,000 to $8,000 per month as a management fee and $120,000 per year after the Company raises at least $1,000,000. Total management fee amounts to $18,000 during the three month and nine month periods ended September 30, 2005 and are included in professional fees.
Note 8 - Advances to Related Parties
During the nine month period ended September 30, 2005, the Company advanced $148,000 to HereUAre, a company related to CEO of the Company, for future acquisition. Thereafter however, the acquisition was postponed while HereUAre sought third party advice on the valuation of HereUare before finalizing the merger with the Company, and the entire amount of $148,000 was returned to the Company subsequent to the quarter ended September 30, 2005.
The Company also advanced $12,440 to the CEO of the Company for office equipment that the CEO will purchase for the Company. The balance of Advance to Related Parties is $160,440 as of September 30, 2005.
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. For the year ended December 31, 2001, the Company recognized $450,000 film income in relation to this distribution agreement, $193,000 of which was collected before year-end. The Company did not earn any revenue from the films in 2002. A 100% reserve on the remaining receivable was also established as of June 30, 2002. Because collection activity through December 31, 2001 raises substantial doubt with respect to amounts due in future years under this agreement and because there a re currently no other agreements in place, 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, 2005.
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 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 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, 2005, the outstanding balance under the settlement agreement was $72,000. The Company has accrued $72,000 on its financial statements for the year ended December 31, 2004.
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 December 31, 2004, audited financial statements of MarketRoot have not yet been submitted to the Company. The Company's Board of Directors have decided to cancel the stock exchange agreement due to MarketRoot's default and nullify a total of 1,620,621 shares of the Company's stock options granted in the year 2002 to owners of MarketRoot Corporation.
On January 27, 2005, the Company entered into a 16-month sublease agreement with Teknion LLC. The Company paid the full amount of $115,000 for the entire sublease period. Rent expense for the three month period ended September 30, 2005 was $21,581. Rent expense for the nine month period ended September 30, 2005 was $57,519.
On February 16, 2005, the Company entered into a 3-year lease agreement with CarrAmerica Techmart. Monthly payment amounts to $10,604. Rent expense for the three month period ended September 30, 2005 was $31,812. Rent expense for the nine month period ended September 30, 2005 was $62,415.
Note 10 - Common Stock / Options
During the nine month period ended September 30, 2005, the Company issued 195,000 shares of common stock for cash amounting to $390,000. The Company did not have any issuances of common stock during the three month period ended September 30, 2005.
During the three month and nine month periods ended September 30, 2004, the Company issued 125,000 shares of common stock for cash amounting to $250,000. During the three month and nine month periods ended September 30, 2004, the Company issued 30,000 shares of common stock valued at $60,000 for settlement of debt of $60,000.
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, amount totaling $3,915,930. 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. The remaining unvested options are deferred and will be amortized over the vesting period.
During the three month periods ended September 30, 2005 and 2004, the Company amortized deferred compensation of $67,739 and 67,739, respectively. During the nine month periods ended September 30, 2005 and 2004, the Company amortized deferred compensation of $203,216 and 203,216, respectively.
On February 21, 2005, the company granted 350,000 options to one employee. 175,000 options vested on May 6, 2006; 25,000 options vested on June 30, 2005, and remaining options vest quarterly in the next 3 year. The options expire in 2007.
The following summary presents the incentive and non-qualified options under the plan granted, exercised, expired and outstanding at September 30, 2005:
Weighted
Average
Exercise
Under Plan Price
------------ ---------
Balance, December 31, 2003 6,680,620 $0.10
Granted - -
Exercised or lapsed - -
------------ ---------
Balance, December 31, 2004 6,680,620 $0.10
Granted 350,000 2.00
Exercised or lapsed - -
------------ ---------
Balance, September 30, 2005 7,030,620 $0.19
============ =========
The following summary presents the weighted average exercise prices, number of options outstanding and exercisable, and the remaining contractual lives of the Company's stock options at September 30, 2005:
Options
Outstanding Options Exercisable
Weighted ------------------------
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Outstanding Life Price Exercisable Price
2005:
Options 7,030,620 3.44 $0.19 4,903,063 $0.10
No compensation cost was recognized for the options granted during the three month and nine month periods ended September 30, 2005 as the options granted were equal to fair market value of the stock on the date of grant.
Pro forma net earnings and earnings per share information, as required by SFAS 123, has been determined as if the Company had accounted for employee and non-employee director stock options under SFAS 123's fair value method. The fair value of these options was estimated at grant date using a Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 3.25%; dividend yield of 0%; expected weighted average option life of 3 years; and volatility of 0%.
Had the Company determined employee stock based compensation cost based on a fair value model at the grant date for its stock options under SFAS 123, the Company's net loss per share would have been adjusted to the pro forma amounts for the three month and nine month periods ended September 30, 2005, as follows ($ in thousands, except per share amounts):
Three months Nine months
Net loss - as reported $ (242) $ (717)
Stock-Based employee compensation expense
included in reported net income, net of tax - -
Total stock-based employee compensation
expense determined under fair-value-based
method for all rewards, net of tax (3) (40)
------------ -----------
Pro forma net loss $ (245) $ (757)
============ ===========
Net loss per share
Basic and diluted, as reported $ (0.01) $ (0.04)
Basic and diluted, pro forma $ (0.02) $ (0.05)
The Company did not issue any stock options in the nine month period ended September 30, 2004.
Note 11 - Going concern
The Company's 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 $20,397,412 at September 30, 2005.The Company incurred a net loss of $717,483 and $200,991 for the nine month periods ended September 30, 2005 and 2004, respectively. 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 unable to continue as a going concern.
Management's plans and the ongoing operations of the Company are expected to require additional working capital in the next twelve months. The Company is marketing its software and communication products and is expected to generate revenues in future periods. The Company is also looking at several software companies to acquire. However, there can be no assurance that these plans could be successfully executed due to current adverse investment climate. The management believes that the Company needs to bring in at least $2M with in the next quarter to market the Company's new products.
Note 12 - Subsequent Event
On October 2, 2005, the Company sold an aggregate of 780,500 shares of common stock to 36 individuals in a private placement exempt from registration under section 4(2) of the Securities Act of 1933. The shares were sold at a price of $2.00 per share for an aggregate proceed of $1,561,000. All of the investors were accredited investors.
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, 2005. 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.
For the quarterly period ended September 30, 2005 and also since the end of our last fiscal year which ended on December 31, 2004, the Company has been active in further developing our software products.
Revenues
During the three and nine month periods ended September 30, 2005, the Company had insignificant revenues.
Costs and Expenses
During the three-month and nine-month periods ended September 30, 2005, we incurred rent expenses in the amounts of $53,374 and $119,915 respectively, while there was no rent expense for the corresponding periods in 2004. We also had salaries and payroll taxes for the same periods in 2005 in the amounts of $33,198 and $86,263 respectively, while we did not have any salary expense in 2004. We paid professional fees in the amounts of $60,121 and $238,113 for the three and nine month periods ended September 30, 2005, while the amounts were $2,500 and $11,633 for corresponding periods in 2004. Similarly, general and administrative expenses for the periods in 2005 were $94,493 and $275,136 respectively, and $71,412 and $211,532 for corresponding periods in 2004.
Liquidity and Capital Resources
Stockholders' equity, as of September 30, 2005, was a negative ($298,522) and operational cash was provided by proceeds from the issuance of common stock in the amount of $390,000 and advances for shares to be issued in the amount of $173,000.
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, 2005, the outstanding balance under the settlement agreement was $72,000. The Company has accrued $72,000 on its financial statements as of December 31, 2004.
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.
On October 2, 2005, the Company sold an aggregate of 780,500 shares of common stock to 36 individuals in a private placement exempt from registration under section 4(2) of the Securities Act of 1933. The shares were sold at a price of $2.00 per share for an aggregate proceed of $1,561,000. All of the investors were accredited investors.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 99.906 Certification pursuant to the Sarbanes-Oxley Act of 2002
There is no report filed on Form 8-K for the three-month period ended September 30, 2005.
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 18, 2005 by the undersigned, thereunto duly authorized.
PEOPLENET INTERNATIONAL CORPORATION
(Registrant)
By: /s/ Benedict Van
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Benedict Van
Chief Executive Officer
CERTIFICATIONS
I, Benedict Ban, 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 18, 2005
/s/ Benedict Van
Benedict Van
Chief Executive Officer and Chief Financial Officer
Exhibit 99.906
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 3 months ended September 30, 2005 (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 18, 2005
/s/ Benedict Van
Benedict Van
Chief Executive Officer
and
Chief Financial Officer