UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2006
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 333-34308
COMMERCE PLANET, INC.
-----------------
(Exact name of small business issuer as specified in its charter)
Utah 87-0520575
---------- --------------
(state of (IRS Employer
incorporation) I.D. Number)
30 S. La Patera Lane, Suite 7
Goleta, CA 93117
-----------------------------------------------------------
(Address and telephone number of principal executive offices)
805-964-9126
--------------
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ___
Indicate by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act) Yes ___ No X
As of September 30, 2006, the Issuer had 47,299,323 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (check one): Yes ___ No X
COMMERCE PLANET, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
- --------------------------------
Item 1. Financial Statements. 1-17
Item 2. Management's Discussion and Analysis or Plan of Operation. 17
Item 3. Controls and Procedures. 20
PART II. OTHER INFORMATION
- ----------------------------
Item 1. Legal Proceedings. 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 21
Item 3. Defaults Upon Senior Securities. 21
Item 4. Submission of Matters to a Vote of Security Holders. 21
Item 5. Other Information. 21
Item 6. Exhibits and Reports on Form 8-K. 22
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
COMMERCE PLANET, INC.
CONSOLIDATED INCOME STATEMENT
Unaudited
For the three months ended For the nine months ended
-------------------------- --------------------------
Sept 30 Sept 30 Sept 30 Sept 30
2006 2005 2006 2005
------------ ------------ ------------ ------------
REVENUE:
Membership Revenue $ 6,036,364 $ 1,365,316 $ 15,134,940 $ 3,790,220
Upsell Revenue 544,961 169,904 1,070,231 706,599
Lead Revenue 438,904 134,563 1,045,717 226,010
Fulfillment/Other Revenue 607,303 107,524 1,035,806 297,726
------------ ------------ ------------ ------------
Total Revenue 7,627,533 1,777,307 18,646,694 5,020,555
------------ ------------ ------------ ------------
Cost of Goods Sold 1,216,906 578,859 2,896,452 1,168,499
------------ ------------ ------------ ------------
GROSS MARGIN 6,410,627 1,198,438 15,750,242 3,852,056
------------ ------------ ------------ ------------
EXPENSES:
Salaries 854,602 777,794 2,014,336 2,263,632
Advertising 1,322,763 642,400 4,248,198 2,299,559
Other Expenses 1,131,242 1,341,691 3,375,513 3,417,232
------------ ------------ ------------ ------------
Total Operating Expenses 3,308,607 2,761,885 9,638,047 7,980,423
------------ ------------ ------------ ------------
Other Expense (Income)
Interest (Income) (16,643) (26,745)
Interest Expense 4,302 609,210 1,370,082 1,322,152
------------ ------------ ------------ ------------
Total Other Expense (Income) (12,341) 609,210 1,343,337 1,322,152
------------ ------------ ------------ ------------
INCOME(LOSS) BEFORE INCOME TAXES 3,114,361 (2,172,657) 4,768,858 (5,450,519)
------------ ------------ ------------ ------------
Provision for income taxes - - - -
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 3,114,361 $ (2,172,657) $ 4,768,858 $(5,450,519)
============ ============= ============ ============
BASIC NET INCOME(LOSS)
PER COMMON SHARE $ 0.07 $ (0.06) $ 0.11 $ (0.15)
============ ============= ============ ============
DILUTED NET INCOME (LOSS)
PER SHARE $ 0.06 $ 0.09
============ ============= ============ ============
BASIC WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING 46,511,302 37,746,747 43,154,349 37,037,876
============ ============= ============ ============
DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING 54,580,286 51,223,333
============ ============= ============ ============
NUMBER OF COMMON SHARES OUTSTANDING 47,299,323 38,544,633 47,299,323 38,544,633
============ ============= ============ ============
<FN>
See accompanying notes to financial statements
2
COMMERCE PLANET, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
Unaudited Audited
September 30 December 31
2006 2005
-------------- --------------
ASSETS:
CURRENT ASSETS:
Cash $ 2,959,687 $ 253,856
Accounts Receivable net of Allowances 980,526 225,081
Other Receivables 985,242
Inventory 2,590 2,590
Prepaid Expenses 474,645 388,587
-------------- --------------
Total Current Assets 5,402,690 900,114
-------------- --------------
FIXED ASSETS:
Equipment 720,955 578,493
Furniture & Fixtures 111,268 75,627
Computers & Software 525,697 240,677
Leasehold Improvements 115,379 103,124
-------------- --------------
Total Fixed Assets 1,473,299 997,921
Less: Accumulated Depreciation (434,794) (292,311)
-------------- --------------
Net Fixed Assets 1,038,505 705,610
-------------- --------------
OTHER ASSETS:
Deposits 19,154 16,392
Other Assets 9,719
-------------- --------------
Total Other Assets 28,873 16,392
-------------- --------------
TOTAL ASSETS 6,470,068 1,622,116
============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities 1,309,478 710,364
Notes Payable 345,998
Deferred Revenue 1,010,797 336,000
-------------- --------------
Total current liabilities 2,320,275 1,392,362
-------------- --------------
LONG-TERM DEBT
Bank Loans 48,900
Convertible Debentures - Long Term 3,084,018
-------------- --------------
Total long-term debt 48,900 3,084,018
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized
shares at $.001 par value, 45,576,815 shares issued
and outstanding at September 30, 2006 47,299 39,096
Additional paid-in capital 10,146,585 8,230,224
Preferred Shares to be issued 0 0
Shares to be issued 0 1,843
Shares to be returned 0 (1,805)
Deferred Compensation 0 (71,853)
Subscriptions receivable 0 (189,900)
Accumulated deficit (6,092,991) (10,861,869)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) 4,100,893 (2,854,264)
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) 6,470,068 1,622,116
============== ==============
3
COMMERCE PLANET, INC.
CONSOLIDATED Cash flow statement
Unaudited
For the nine months ended
--------------------------------
September 30 September 30
2006 2005
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 4,768,858 $ (5,450,519)
Adjustment to reconcile net loss to net cash
(used in) operating activities:
Stock issued for services 128,103 436,350
Employee Stock, Options, & Warrants 357,093 305,686
Depreciation and amortization. 142,483 502,578
Debt Amortization $ 1,196,937 -
Bad Debt Expense 140,000 -
Debt conversion feature expense 37,411 746,738
Debt inducement expense - 318,225
Conversion of Debenture (1,149,417) (56,539)
Issuance of Common Stock upon conversion of debentures 1,149,417 -
Changes in Operating Assets/Liabilities
Accounts receivable (865,445) (13,253)
Other receivables (985,242) 671,886
Inventory - 12,206
Prepaid Expenses (86,058) (354,480)
Deposits (2,762) -
Deferred Revenue 674,797 111,167
Accounts payable and accruals 599,114 81,370
-------------- --------------
NET CASH FLOWS GENERATED (USED) BY OPERATING ACTIVITIES 6,105,289 (2,688,585)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (485,097) (361,127)
-------------- --------------
NET CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES (485,097) (351,127)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - -
Exercise of warrants . 152,003 -
Payments on Notes payable (453,248) (87,500)
Reduction in stock subscription receivable 189,900 -
Proceeds from long term debt - related party. 2,760,000
Proceeds from notes payable & debentures 68,000
Payment of long-term debt (15,000) (2,322)
Payment of long-term debt - related party (2,856,016) (932,000)
Issuance of Common Stock 1,212,886
-------------- --------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES (2,914,361) 2,951,064
-------------- --------------
NET INCREASE (DECREASE) IN CASH 2,705,831 (98,648)
-------------- --------------
CASH AT BEGINNING OF PERIOD 253,856 210,361
-------------- --------------
CASH AT END OF PERIOD 2,959,856 111,713
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest 234,708 59,261
============== ===========
Cash paid for taxes $ 800 -
============== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Stock issued for services $ 128,103 $ 436,350
<FN>
See accompanying notes to financial statements
4
Consolidated Condensed Statement of Stockholders' Equity
30-Sep-06
Unaudited
Common Stock
-----------------------------------------
Par
Shares 0.001
--------------- ---------------
BALANCE, December 31, 2004 33,885,117 $ 33,891
=============== ===============
Issuance of stock
for equity line 1,550,000 1,544
Issuance of stock
for inducement 808,500 810
Issuance of stock
for cash 264,000 264
Beneficial Conversion - -
Exercise of Puts
Conversion on convertible debentures 66,516 67
Stock Issued for Services 1,100,000 1,100
Re-issuance of stock as
registered. 1,420,500 1,420
Issuance of stock warrants - -
Reduction in stock subscription receivable, pre merger
Issuance of Stock Subscription Agreements -
Net Loss for Period . - -
--------------- ---------------
BALANCE, December 31, 2005
39,094,633 $ 39,096
=============== ===============
Beneficial Conversion
Exercise of Warrants 587,210 587
Conversion on convertible debentures 7,348,488 7,348
Shares returned to Company (1,805,371) (1,806)
Issuance of Stock for Services 300,000 300
Stock subscription agreements 1,774,363 1,774
Net Income for Period
--------------- ---------------
BALANCE, September 30, 2006 47,299,323 $ 47,299
=============== ===============
<FN>
(Continued)
5
Consolidated Condensed Statement of Stockholders' Equity
30-Sep-06
Unaudited
(Continued)
Common Stock
------------------------------------------------------
Total
Additional Shares Shares Stock Accum- Stock-
Paid In To be To be Deferrred Sub ulated holders'
Capital Issued Returned Compensation Receivable Deficit Equity
---------- ------ -------- ------------ ---------- ------------ --------
BALANCE, December 31, 2004 $4,844,385 $1,473 $ - $ (199,150) $ (59,880) $(4,595,945) $ 24,774
========== ====== ======== ============ ========== ============ ========
Issuance of stock
for equity line (1,165) (385) - (6)
Issuance of stock
for inducement 322,135 (410) 322,535
Issuance of stock
for cash - (264) - - 0
Beneficial Conversion 754,238 - - - 754,238
Exercise of Puts 1,348,696 - 1,348,696
Conversion on convertible debentures 56,472 - - - 56,539
Stock Issued for Services 436,000 (750) 127,297 - - 563,647
Re-issuance of stock as
registered. - - (1,420) - 0
Issuance of stock warrants 341,238 - - - 341,238
Reduction in stock subscription receivable, pre merger (59,880) 59,880 0
Issuance of Stock Subscription Agreements 188,105 1,794 (189,900) (1)
Net Loss for Period . - - - (6,265,924) (6,265,924)
---------- ------ -------- ------------ ---------- ------------ --------
BALANCE, December 31, 2005
$8,230,224 $1,843 $(1,805) $ (71,853) $(189,900) $(10,861,869)$(2,854,264)
========== ====== ======== ============ ========== ============ ========
Beneficial Conversion 37,411 37,411
Exercise of Warrants 151,416 152,003
Conversion on convertible debentures 1,314,490 1,321,838
Shares returned to Company 1,805 -
Issuance of Stock for Services 55,950 71,853 128,103
Employee Stock, Options, & Warrants 357,093 357,093
Payment received for stock subscription agreements (1,843) 189,900 188,057
Stock subscription agreements 1,774
Net Income for Period 4,768,858 4,768,858
---------- ------ -------- ------------ ---------- ------------ --------
BALANCE, June 30, 2006 $10,146,584 $ - $ - $ - $ - $(6,092,991)$4,100,893
========== ====== ======== ============ ========== ============ ========
6
COMMERCE PLANET,INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION:
- -------------
Utah Clay Technology, Inc. (the "Company"), a Utah corporation, was incorporated
on March 1, 1994. On December 24, 2003, the Company entered into an Agreement
and Plan of Reorganization with NeWave, Inc. a Nevada corporation, pursuant to
which the Company agreed that NeWave, Inc. would become the wholly-owned
subsidiary subject to the parties to the Agreement meeting certain conditions.
The parties to the Agreement satisfied the required conditions to close on
January 15, 2004, including transfer of all funds. On January 15, 2004, all
outstanding shares of Utah Clay Technology, Inc. common stock were acquired by
NeWave, Inc. The purchase price consisted of $150,000 and the assumption of
$165,000 in convertible debt for 576,968 shares of NeWave, Inc. d/b/a
Onlinesupplier.com's common stock. Although from a legal perspective, NeWave,
Inc. acquired NeWave d/b/a Onlinesupplier.com, the transaction is viewed as a
recapitalization of NeWave d/b/a Onlinesupplier.com accompanied by an issuance
of stock by NeWave d/b/a Onlinesupplier.com for the net assets of NeWave, Inc.
This is because NeWave, Inc. did not have operations immediately prior to the
transaction, and following the reorganization, NeWave d/b/a Onlinesupplier.com
was the operating company. Effective February 11, 2004, the Company changed its
name from Utah Clay Technology, Inc. to NeWave, Inc.
On June 1, 2006, the Company acquired all of the assets of Onesource Imaging, a
California corporation. The assets were acquired in exchange for the assumption
of certain liabilities. On June 20, 2006,the Company established three
wholly-owned subsidiaries: OS Imaging, Inc., Legacy Media, Inc., and Consumer
Loyalty Group, Inc. Effective June 22, 2006, the Company changed its name from
NeWave, Inc. to Commerce Planet, Inc. The Company offers a comprehensive line of
products and services at wholesale prices through an online club membership.
Additionally, the Company creates, manages and maintains effective website
solutions for eCommerce.
BASIS OF ACCOUNTING:
- ----------------------
The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
RECLASSIFICATION OF COST OF SALES AND OPERATING EXPENSES:
- ----------------------------------------------------------------
In the accompanying condensed statement of operations, all of the Company's
operating expenses have been classified as cost of sales, advertising expense,
salary expense, and other operating expense. This basis of presentation is
different than in prior reports, and all prior period amounts have been changed
to comply with the current period classification.
CASH AND CASH EQUIVALENTS:
- -----------------------------
The Company considers all highly liquid debt instruments, purchased with an
original maturity of three months or less, to be cash equivalents.
USE OF ESTIMATES:
- -------------------
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
SEGMENT INFORMATION:
- --------------------
The Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131")
establishes standards for reporting information regarding operating segments in
annual financial statements and requires selected information for those segments
to be presented in interim financial reports issued to stockholders. SFAS 131
also establishes standards for related disclosures about products and services
and geographic areas. Operating segments are identified as components of an
enterprise about which separate discrete financial information is available for
evaluation by the chief operating decision maker or decision-making group. The
decision maker(s) may use this discrete information in making decisions
concerning how to allocate resources and evaluate performance. The information
disclosed herein materially represents all of the financial information related
to the Company's principal operating segment.
PROPERTY & EQUIPMENT:
- -----------------------
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets,
generally three to seven years.
7
INCOME TAXES:
- --------------
Deferred income tax assets and liabilities are computed annually for differences
between the financial statements and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted laws
and rates applicable to the periods in which the differences are expected to
affect taxable income (loss).
BASIC AND DILUTED NET LOSS PER SHARE:
- -------------------------------------------
Basic and diluted loss per share is computed on the basis on the weighted
average of common shares outstanding. Diluted earnings per share is calculated
based on the same number of shares plus additional shares representing stock
distributable under common stock warrant agreements and convertible debt
agreements. For the period ended September 30, 2006 the Company's common stock
equivalents were excluded from the calculation of diluted loss per common share
because they were anti-dilutive to the Company's net loss in that period. At
September 30, 2006, there were convertible debts and warrants to purchase common
stock which were outstanding and may dilute future earnings per share.
STOCK BASED COMPENSATION:
- ---------------------------
The Company has adopted the disclosure provisions only of SFAS No. 123 and
continues to account for stock based compensation using the intrinsic value
method prescribed in accordance with the provisions of APB No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. Common stock issued
to employees for compensation is accounted for based on the market price of the
underlying stock.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
- ----------------------------------------
Statement of financial accounting standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires that the Company disclose estimated
fair values of financial instruments. The carrying amounts reported in the
statements of financial position for current assets and current liabilities
qualifying as financial instruments are a reasonable estimation of fair
value.
COMPREHENSIVE INCOME:
- ----------------------
Statement of financial accounting standards No. 130, "Reporting Comprehensive
Income", (SFAS No. 130), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company adopted this standard in 1998 and the
implementation of this standard did not have a material impact on its financial
statements.
8
ACCOUNTS RECEIVABLE:
- ---------------------
The Company maintains an allowance for doubtful accounts for estimated losses
that may arise if any of its customers are unable to make required payments.
Management specifically analyzes the age of customer balances, historical bad
debt experience, customer credit-worthiness, and changes in customer payments
terms when making estimates of the uncollectibility of the Company's trade
accounts receivable balances. If the Company determines that the financial
conditions of any of its customers deteriorated, whether due to customer
specific or general economic issues, an increase in the allowance will be made.
Accounts receivable are written off when all collection attempts have failed.
INVENTORY:
- ----------
Inventories consist of a variety of wholesale goods purchased for individual
resale and are stated at the lower of cost, determined by the first-in,
first-out ("FIFO") method, or market.
REVENUE RECOGNITION:
- ---------------------
The Company has three primary revenue streams: membership fees earned from web
hosting and other web-based services provided to the Company's customers, upsale
of services provided by affiliated service providers, and revenue generated from
sale of our customer information or by sharing the revenues generated from
contacting the Company's customer with third parties. Other sources of revenue
include advertising income, commissions earned from referrals to affiliated
credit card processing service providers and lastly, product sales from the
Company's online store. The Company does not provide multiple deliverables to
its customers as described in EITF 00-21. Instead, the Company generally uses
one revenue stream to develop potential revenues from another source, not from
the same source. As such, the Company does not anticipate that the adoption of
EITF 00-21 has a material effect on the financial statements.
The Company's revenues earned from membership setup fees and monthly charges are
recorded when the credit card transaction is processed and the Company has
received confirmation that the credit card processing has been successful. The
Company does not recognize the revenues earned related to membership fees
charged to credit cards until the collection of the revenue is assured. This is
due to the uncertainty surrounding the credit card transactions. Current terms
of the onlinesupplier.com membership agreement stipulate that the customer
pays a nonrefundable fee of between $1.85 and $9.95 to set up an account. The
customer then has a fourteen day period to review the Company's offerings. If
the customer does not cancel the service within the fourteen day window, a
charge of $39.95 is billed to the customer's credit card on a monthly basis. The
membership terms are agreed to under a negative option that the Company will
continue to bill the customer on a monthly basis until they cancel their
account. The Company initiates the sale of products for its affiliates during
the process of selling the Company's own products, normally when an individual
accesses the Company's internet home page or calls the Company's sales or
customer service department. The Company's internal system maintains records of
each sale of an affiliate's product. The affiliate completes the sales process
by fulfilling the particular product. Payments are forwarded to the Company,
plus or minus two percent of actual billings, when the affiliate has completed
the fulfillment of their product and has approved the cross selling revenue due
to the Company. On a historical basis, the Company's affiliates have generally
approved all sales initiated by the Company. The Company recognizes cross
selling revenues once it has reconciled its internal records of cross selling
sales with the affiliate's records. The Company has several contracts with
affiliates. The terms of each contract are varied but in most cases, a
minimum/flat amount of revenue is earned per sale based on a certain volume
being reached.
The Company recognizes income when the products are received by the customer.
The Company applies the provisions of SEC Staff Accounting Bulletin ("SAB") No.
104, "Revenue Recognition in Financial Statements" which provides guidance on
the recognition, presentation and disclosure of revenue in financial statements.
SAB No. 104 outlines the basic criteria that must be met to recognize revenue
and provides guidance for the disclosure of revenue recognition policies. The
Company's revenue recognition policy for sale of products is in compliance with
SAB No. 104. Revenue from the sale of products is recognized when a formal
arrangement exists, the price is fixed or determinable, the delivery is
completed and collectibility is reasonably assured. Generally, the Company
extends credit to its customers and does not require collateral. The Company
performs ongoing credit evaluations of its customers and historic credit losses
have been within management's expectations. The Company accounts for sales
returns related to product sales on an individual basis, as they occur. Sales
returns related to product sales have not been significant in the past.
9
ADVERTISING COSTS
- ------------------
The Company expenses the media costs of advertising the first time the
advertising takes place, except for direct-response advertising that is
contracted with the Company's advertising partners on a cost per customer
acquired basis, which is capitalized and amortized over its expected period of
future benefits. Direct-response advertising consists primarily of on line
advertising that include reference codes that are used for purchasing the
Company's products and services. The capitalized costs of the advertising are
amortized over the three-month period following the receipt of a trial order for
the Company's products and services. At September 30, 2006, and September30,
2005, capitalized direct-response advertising costs of $400,021 and zero,
respectively, were included in "Prepaid Expenses" in the accompanying Balance
Sheets. Advertising expense was $1,322,763 and $642,400 For the three months
ended September 30, 2006, and September 30, 2005 and was $4,248,198 and
$2,299,559 for the nine months year-to-date ending September 30, 2006 and
September 30, 2005 respectively.
DISCONTINUED OPERATIONS
- -----------------------
In April 2004, the Company organized Discount Online Warehouse as a
wholly-owned subsidiary to offer heavily discounted products purchased in bulk
to consumers. The Company organized its subsidiary, Auction Liquidator, Inc., in
September 2004 and Auction Liquidator began to generate immaterial revenues in
October 2004. During 2005, management decided to cease operations at Auction
Liquidator, Inc. and Discount Online Warehouse in order to focus efforts and
resources on Onlinesupplier.com. Discontinued operations did not have a material
effect on the financial statements for the quarter ended September 30, 2006.
NOTE 2 - FEDERAL INCOME TAXES
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards Number 109 ("SFAS 109"). "Accounting for Income
Taxes", which requires a change from the deferred method to the asset and
liability method of accounting for income taxes. Under the asset and liability
method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities.
September 30, 2006 December 31, 2005
------------- -----------------
Deferred tax assets
Net operating loss carryforwards $ 6,157,276 $ 10,881,164
Valuation allowance (6,157,276) (10,881,164)
------------- -------------
Net deferred tax assets $ 0 $ 0
============= =============
At September 30, 2006, the Company had net operating loss carryforwards of
approximately $6,157,276 for federal income tax purposes. These carryforwards if
not utilized to offset taxable income will begin to expire in 2025.
10
NOTE 3 - ACCOUNTS RECEIVABLE
As of September 30, 2006, accounts receivable, consists of the following:
Accounts Receivable
Impact Legal $313,963
Platinum Values 72,256
Misc. Receivables 999,307
Allowance for
Doubtful accounts (405,000)
--------
$980,526
========
NOTE 4 - ACCOUNTS PAYABLE & ACCRUED EXPENSES
As of September 30, 2006, accounts payable and accrued expenses, consists of the
following:
Accounts Payable and Accrued Expenses $ 575,698
Accrued Payroll and Payroll Taxes 733,880
Accrued Interest -
----------
$1,309,478
==========
NOTE 5 - NOTES PAYABLE - RELATED PARTIES AND OTHERS
NOTES PAYABLE - RELATED PARTIES:
- -----------------------------------
The Company had Notes Payable to a majority shareholder for $25,000. The note
was unsecured, due on demand, and bore interest at a rate of 12%. The Company
retired this note during the quarter ended September 30, 2006. See Note 7 for
further information regarding convertible notes payable to related parties.
11
NOTE 6 - CONVERTIBLE DEBT
All convertible debt has been retired as of the period ended September 30, 2006
NOTE 7 - CAPITAL STOCK
COMMON STOCK
- -------------
In January 2004, the Company increased the number of authorized shares of common
stock to 100,000,000.
The Company effectuated a 3 for 1 forward stock split on February 18, 2005. All
shares have been stated to retroactively affect this forward stock split.
During the three months ended March 31, 2006, the outstanding shares of common
stock were changed by the following:
- - The Company issued 120,000 shares to a minority shareholder due to the
exercise of a warrant.
- - The Company issued 1,823,251 shares of common stock to majority
shareholders upon the conversion of $237,554 in convertible debentures
dated January 15, 2004, January 19, 2004, January 25, 2004, April 1, 2004,
May 5, 2004, and December 28, 2004. The shares were valued at 75% of the
lowest closing bid price in the fifteen days prior to execution of the
conversion.
- - The Company issued 49,000 shares of common stock to a minority shareholder
upon the conversion of $6,589 in convertible debentures dated January 6,
2004 bid price in the fifteen days prior to execution of the conversion.
- - The Company agreed to issue 300,000 shares to an unrelated party for
consulting services.
- - Two shareholders returned to the Company share certificates comprising
725,371 shares of common stock that were previously issued.
During the three months ended June 30, 2006, the outstanding shares of common
stock were changed by the following:
- - The Company issued 467,210 shares to a minority shareholder due to the
exercise of a warrant.
- - The Company cancelled warrants to exercise 750,000 shares of common stock
issued to employees who terminated employment during the quarter.
- - The Company issued 3,603,729 shares of common stock to majority
shareholders upon the conversion of $806,140 in convertible debentures
dated January 19, 2004, July 7, 2004, August 18, 2004, September 25, 2004.
The shares were valued at75% of the lowest closing bid price in the fifteen
days prior to execution of the conversion.
- - The Company issued 449,500 shares of common stock to a minority shareholder
upon the conversion of $88,410 in convertible debentures dated January 6,
2004 bid price in the fifteen days prior to execution of the conversion.
- - 1,774,363 share of common stock were issued under subscription agreements
at a purchase price of $189,900.
- - Six shareholders returned to the Company share certificates comprising
1,080,000 shares of common stock that were previously issued.
During the three months ended September 30, 2006, the outstanding shares of
common stock were changed by the following:
- - The Company issued 742,508 shares of common stock to majority shareholders
upon the conversion of $269,207 in convertible debentures and accrued
interest for instruments dated January 25, 2004, and May 5, 2004.
- - The Company issued 680,000 shares of common stock to a minority
shareholders upon the conversion of $68,000 in convertible promissory notes
dated January 3, 2006, and January 9, 2006.
12
Basic net earnings (loss) per common share is computed by dividing net earnings
(loss) applicable to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted-average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares that might be issued upon exercise of common
stock warrants and conversion of convertible debt. In periods where losses are
reported, the weighted-average number of common shares outstanding excludes
common stock equivalents, because their inclusion would be anti-dilutive. At
September 30, 2006, there were 5,709,842 warrants outstanding that were eligible
for conversion into shares of common stock.
WARRANT ACTIVITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND SUMMARY OF
OUTSTANDING WARRANTS
- --------------------------------------------------------------------------------
Warrants to Purchase Common Stock:
During the nine months ended September 30, 2006, the Board of Directors approved
the issuance of warrants to purchase common stock totaling 6,870,899 shares.
Warrants to purchase common stock totaling 750,000 shares were cancelled and
587,210 warrants to purchase common shares were exercised during the nine months
ended September 30, 2006.
A summary of common stock warrant activity for 2006 and 2005 is as
follows:
Weighted- Weighted-
Number of Average Average
Warrants Exercise Warrants Exercise
Price Exercisable Price
Outstanding, December 31, 2004
4,020,000 $ 1.23 4,020,000 $ 1.23
Granted 878,750 $ 0.67 128,750 0.06
Exercised 0 $ - 0
----------
Outstanding, December 31, 2005
4,898,750 $ 1.13 4,148,750 $ 1.19
Granted 6,870,899 $ 0.08 4,507,448 $ 0.04
Cancelled (750,000) $ 0.78
Exercised (587,210) $ 0.26 (587,210) $ 0.26
Outstanding, June 30, 2006 --------- ----------
10,432,439 $ 0.51 8,068,984 $ 0.62
At September 30, 2006, the range of warrant prices for shares under warrants and
the weighted-average remaining contractual life is as follows:
Warrants Exercisable
Outstanding Weighted Average Average Remaining Weighted Average
Range of Warrant Exercise Price Number of Warrants Exercise Price Contractural Life Number of Warrants Exercise Price
..01-1.53 10,432,439 $ 0.51 2.7 8,068,984 $ 0.62
13
NOTE 8 - COMMITMENTS
COMMITMENTS
- -----------
Minimum future rental payments under non-cancelable operating leases as of
September 30, 2006 for each of the next five years and in the aggregate are as
follows:
2006. $ 23,478
2007. $187,704
2008. $187,704
2009. $ 62,568
--------
TOTAL $461,454
========
In February 2005, the Company entered into a software agreement with Discount
Solutions, Inc. to purchase certain software license rights to software that is
used to provide web based stores to the Company's customers. The Company agreed
to purchase a perpetual license for use of the software of $52,500, and to
compensate Discount Solutions $24,000 monthly for the full service hosting and
maintenance of the Company's customers' web stores. The Company's Chief
Executive Officer is a majority owner of Discount Solutions. This agreement
automatically renews monthly unless notice is provided be either party. The
Company intends to renegotiate and extend the terms of this agreement.
14
The Company entered into a consulting agreement with Barrett Evans, a former
member of the Board of Directors, effective November 1, 2005. The term of the
agreement was for twelve months at $5,000 per month. All payments are current as
of September 30, 2006.
The Company entered into a consulting agreement with a related party for
ecommerce business consulting services with Olive Tree Holdings, effective
January 1, 2006. The term of the agreement was for 12 months at $23,667 per
month. All payments are current as of September 30, 2006.
NOTE 10 - RELATED PARTY TRANSACTIONS
On February 11, 2005, the Company issued a Note to Dutchess Private Equities
Fund, II, in the amount of $360,000, at a discount of $60,000. The Note has a 0%
interest rate. During the year ended December 31, 2005, this Note was repaid,
and the balance at December 31, 2005 was zero. The Company issued 37,500 shares
to the Holder as an inducement to provide financing. The shares were valued at
$40,219.
In February 2005, the Company entered into a software agreement with Discount
Solutions, Inc. to purchase certain software license rights to software that is
used to provide web based stores to the Company's customers. The Company agreed
to purchase a perpetual license for use of the software of $52,500, and to
compensate Discount Solutions $24,000 monthly for the full service hosting and
maintenance of the Company's customers' web stores. The Company's Chief
Executive Officer is a majority owner of Discount Solutions. This agreement
automatically renews monthly unless notice is provided be either party. The
Company intends to renegotiate and extend the terms of this agreement.
On April 18, 2005, the Company issued $132,000 of non-interest bearing
Convertible Promissory Notes, due August 18, 2005 at a discount of $44,000, to
eFund Capital Partners, LLC and Dutchess Private Equities Fund, II, LP. The
Notes have a 0% interest rate. During the year ended December 31, 2005, this
Note was repaid, and the balance at December 31, 2005 was zero. The Company
issued 13,750 shares to eFund Capital Partners and Dutchess Private Equities
Fund, II, LP as an inducement to provide financing. The shares were valued at
$31,968.
On May 20, 2005, the Company issued a $402,750 non-interest bearing Convertible
Promissory Note, due December 20, 2005 at a discount of $52,750, to Dutchess
Private Equities Fund, II, LP. The Note has a 0% interest rate. During the year
ended December 31, 2005, $112,500 of this Note was repaid, and the balance was
exchanged into a Convertible Debenture effective December 18, 2005. The balance
at December 31, 2005 was zero. The Company issued 40,000 shares to Dutchess
Private Equities Fund, II, LP as an inducement to provide financing. The shares
were valued at $46,500.
On June 2, 2005, the Company issued a $540,000 non-interest bearing Convertible
Promissory Note, due December 20, 2005 at a discount of $80,000, to Dutchess
Private Equities Fund, II, LP. The Note has a 0% interest rate. During the year
ended December 31, 2005, none of this Note was repaid, and the balance was
exchanged into a Convertible Debenture effective December 18, 2005. The balance
at December 31, 2005 was zero. The Company issued 54,000 shares to Dutchess
Private Equities Fund, II, LP as an inducement to provide financing. The shares
were valued at $50,700.
On July 22, 2005, the Company issued a $258,000 non-interest bearing Convertible
Promissory Note, due December 22, 2005 at a discount of $33,000, to Dutchess
Private Equities Fund, II, LP. The Note has a 0% interest rate. During the year
ended December 31, 2005, none of this Note was repaid, and the balance was
exchanged into a Convertible Debenture effective December 18, 2005. The balance
at December 31, 2005 was zero. The Company issued 10,000 shares to Dutchess
Private Equities Fund, II, LP as an inducement to provide financing. The shares
were valued at $8,925.
15
The Company awarded seven hundred and fifty thousand warrants to the Company's
Chief Financial Officer upon his hiring during July 2005. Five hundred thousand
of the warrants vest one year after his date of hire, and two hundred fifty
thousand vest two years after his date of hire. Five hundred thousand of the
warrants are priced at $1.12 per share, and two hundred fifty thousand are
priced at $0.10 per share.
On August 4, 2005, the Company issued a $162,000 non-interest bearing
Convertible Promissory Note, due January 4, 2006 at a discount of $17,000, to
Dutchess Private Equities Fund, II, LP. The Note has a 0% interest rate. During
the year ended December 31, 2005, none of this Note was repaid, and the balance
was exchanged into a Convertible Debenture effective December 18, 2005. The
balance at December 31, 2005 was zero. The Company issued 25,000 shares to
Dutchess Private Equities Fund, II, LP as an inducement to provide financing.
The shares were valued at $15,937.
On August 17, 2005, the Company issued a $247,200 non-interest bearing
Convertible Promissory Note, due January 17, 2006 at a discount of $40,200, to
Dutchess Private Equities Fund, II, LP. The Note has a 0% interest rate. During
the year ended December 31, 2005, none of this Note was repaid, and the balance
was exchanged into a Convertible Debenture effective December 18, 2005. The
balance at December 31, 2005 was zero. The Company issued 37,000 shares to
Dutchess Private Equities Fund, II, LP as an inducement to provide financing.
The shares were valued at $24,975.
On August 18 2005, the Company issued $221,000 of non-interest bearing
Convertible Promissory Notes, due December 18, 2005 at a discount of $37,000, to
eFund Capital Partners. The Note has a 0% interest rate. During the year ended
December 31, 2005, $18,211 of this Note was repaid, and the balance was
exchanged into a Convertible Debenture effective December 18, 2005. The balance
at December 31, 2005 was zero. The Company issued 30,000 shares to eFund Capital
Partners as an inducement to provide financing. The shares were valued at
$19,125.
On August 18 2005, the Company issued $84,000 of non-interest bearing
Convertible Promissory Notes, due December 18, 2005 at a discount of $14,000, to
Barrett Evans. The Note has a 0% interest rate. During the year ended December
31, 2005, none of this Note was repaid, and the balance was exchanged into a
Convertible Debenture effective December 18, 2005. The balance at December 31,
2005 was zero. The Company issued 10,000 shares to Barrett Evans as an
inducement to provide financing. The shares were valued at $6,375.
On September 16, 2005, the Company issued a $192,000 non-interest bearing
Convertible Promissory Note, due March 15, 2006 at a discount of $32,000, to
Dutchess Private Equities Fund, II, LP. The Note has a 0% interest rate. During
the year ended December 31, 2005, $162,752 of this Note was repaid, and the
balance at December 31, 2005 was $29,248. The Company issued 50,000 shares to
Dutchess Private Equities Fund, II, LP as an inducement to provide financing.
The shares were valued at $31,500. This note was repaid in full on March 1,
2006.
On September 30, 2005, the Company issued a $276,000 non-interest bearing
Convertible Promissory Note, due March 30, 2006 at a discount of $46,000, to
Dutchess Private Equities Fund, LP. The Note has a 0% interest rate. During the
year ended December 31, 2005, none of this Note was repaid, and the balance at
December 31, 2005 was $276,000. The Company issued 70,000 shares to Dutchess
Private Equities Fund, LP as an inducement to provide financing. The shares were
valued at $42,000. The Company repaid $210,000 of this note on March 1, 2006.
As of the period ended September 30, 2006 this promissory note is fully repaid.
On October 11, 2005, the Company issued a $30,000 non-interest bearing
Convertible Promissory Note, due April 11, 2006 at a discount of $5,000, to
Dutchess Private Equities Fund, LP. The Note has a 0% interest rate. During the
year ended December 31, 2005, none of this Note was repaid, and the balance
December 31, 2005 was $30,000. The Company issued 8,000 shares to Dutchess
Private Equities Fund, LP as an inducement to provide financing. The shares were
valued at $5,000.
16
The Company entered into a consulting agreement with Barrett Evans, a member of
the Board of Directors, effective November 1, 2005. The term of the agreement
was for twelve months at $5,000 per month. The Company made no payments on the
agreement during the year ended December 31, 2005. The Company is current on
this agreement through September 30, 2006
Effective November 1, 2005, the Company to issued a convertible debenture to
eFund Capital Partners, in the amount of $180,000, at a discount of $176,200.
The debenture has a 10% interest rate and is due and payable November 1, 2009.
The debentures are convertible into shares of common stock at a price equal to
the lesser of; (i) seventy-five percent of the average of the closing bid price
of the stock for the five days prior to conversion or (ii) the average of the
closing bid price of the stock on the five days immediately preceding the date
of the of debenture agreement.
Effective December 15, 2005, the Company entered into a Convertible Debenture
Exchange Agreement with Dutchess Private Equities Fund, II, LP and eFund Capital
Partners to exchange the unpaid balance of promissory notes issued in 2005 worth
$1,784,239 into 10%, 4-year term, Convertible Debentures. The debentures are
convertible at the lesser of (i) seventy-five percent of the average of the
lowest closing bid price during fifteen immediately preceding the conversion
date or (ii) 100% of the average of the closing bid price of the stock for the
twenty days immediately preceding the closing date of the debenture agreement.
NOTE 11 - AQUIRED ASSETS & LIABILITIES
On June 1, 2006, we acquired all of the assets of Onesource Imaging, a
California corporation. The assets relate to graphic design, printing services,
data merge, mailing and finishing. The assets were acquired in exchange for our
assumption of $54,747 in liabilities of Onesource Imaging.
Assets/Equipment $47,748
Intangible Property $ 7,000
-------
$ 54,748
Assumed Liabilities $ 54,747
NOTE 12 - SUBSEQUENT EVENTS
None.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Report on Form 10-QSB contains forward-looking statements, including,
without limitation, statements concerning possible or assumed future results of
operations and those preceded by, followed by or that include the words
"believes," "could," "expects," "intends," "anticipates," or similar
expressions. Our actual results could differ materially from these anticipated
in the forward-looking statements for many reasons including: materially adverse
changes in economic conditions in the markets that we and our subsidiaries
serve; competition from others in the markets and industry segments occupied by
us and our subsidiaries; the ability to enter, the timing of entry and the
profitability of entering new markets; greater than expected costs or
difficulties related to the integration of the businesses acquired by our
subsidiaries; and other risks and uncertainties as may be detailed in our 10-KSB
for the year ended December 31, 2005 and from time to time in our public
announcements and SEC filings. Although we believe the expectations reflected in
the forward-looking statements are reasonable, they relate only to events as of
the date on which the statements are made, and our future results, levels of
activity, performance or achievements may not meet these expectations. We do not
intend to update any of the forward-looking statements after the date of this
document to conform these statements to actual results or to changes in our
expectations, except as required by law.
17
OVERVIEW
We incorporated in the State of Utah on March 1, 1994 as Utah Clay Technology,
Inc. From our formation until January 15, 2004, our business plan included:
(1) locating kaolin deposits in Utah;
(2) obtaining the legal rights to these deposits;
(3) conducting exploratory operations;
(4) testing the extracted minerals in the laboratory; and
(5) selling samples of the processed form of our kaolin to a commercial company
for market evaluation.
Although we did obtain certain legal rights to properties possibly containing
kaolin, due to a lack of capital, we never commenced mining operations. As a
result, we have had no revenues since our inception. On January 15, 2004, we
abandoned our business plan. On the same date, pursuant to an Agreement and Plan
of Reorganization with NeWave, Inc., a Nevada corporation, we changed our name
to NeWave, Inc. and OnlineSupplier.com became our wholly-owned subsidiary. We
own and operate an online membership club that offers a comprehensive line of
products and services at wholesale prices through our membership program. As a
result of this change in our focus and direction, the entire former management
team and board of directors resigned and we employed a new management team and
appointed a new board of directors.
On January 30, 2004, the State of Utah recognized our name change to NeWave,
Inc. We acquired our operating subsidiary, Onlinesupplier.com, on January 15,
2004. On May 18, 2006 the State of Utah recognized our name change to Commerce
Planet, Inc.
On June 20, 2006 the Company established three wholly owned subsidiaries,
OS Imaging, Inc., Legacy Media, Inc., and Consumer Loyalty Group, Inc. A
description of the services provided by our subsidiaries is listed below.
CONSUMER LOYALTY GROUP, INC.
Consumer Loyalty Group provides "how to" programs that help customers to
establish home based business opportunities. Consumer Loyalty Group's suite of
products includes the following programs:
- - A real estate investment program that instructs consumers how to purchase,
manage and sell real property. This program also provides its customers
with access to thousands of distressed property listings.
- - An online supplier program that informs consumers how to establish a home
based e-commerce business. The program includes instruction on how to set
up an e-commerce website and run a successful e-commerce business,
including access to a domain name registration system, a credit card
merchant processing account and marketing support. This program also
provides the customer with access to over 30,000 brand name electronics at
wholesale prices for product resale as part of their e-commerce business.
- - A software tutoring program provides customers with instruction on how to
use basic software programs including Microsoft Word, Excel, Power Point
and other commonly used programs.
- - A health program that provides users with discounted access to a network of
over 500,000 physicians, healthcare facilities and pharmacies. The program
coverage includes savings for health, vision and dental services.
Consumer Loyalty Group's products also include packages that provide customers
with access to additional business advice and coaching services.
OS IMAGING, INC.
OS IMAGING offers business to business services including graphic design,
printing, data merge, mailing and packaging services to help develop a
successful marketing strategy for its clients. OS Imaging also offers
warehousing and inventory management services.
LEGACY MEDIA INC.
Legacy Media is a full service marketing company comprised of three operating
divisions to meet its clients marketing needs. Legacy is able to leverage its
relationship with Consumer Loyalty Group and OS Imaging to create and implement
marketing campaigns on behalf of its clients. Legacy's marketing campaigns
consist of both online and offline media outlets. The offline components consist
of direct mailings and ads in trade and industry publications. The online
components include email advertisements, banner advertisements, keyword search
listings, search engine optimization and marketing amongst Legacy's affiliates.
In addition, Legacy provides customers with tailored marketing lists and access
to its affiliate marketing network to more effectively market the customer's
products.
COMMERCE PLANET INC.
Upon establishing these subsidiaries Commerce Planet began to provide corporate
services to the subsidiary organizations. These services include accounting,
information services, human resources, facilities management and executive
management.
The table that follows summarizes the activity of these subsidiaries for the
three months ended September 30, 2006.
SEGMENT RESULTS FOR THREE MONTHS ENDED SEPTEMBER 30, 2006
For the three months ended September 30, 2006
--------------------------------------------------------------------
Commerce Consumer Legacy O.S. Combined
Planet Loyalty Grp Media Imaging Total
------------ ------------ ------------ ------------ ------------
REVENUE $ 732,330 $ 6,744,690 $ 1,603,566 $ 629,980 $ 9,710,567
------------ ------------ ------------ ------------ ------------
Cost of Goods Sold - 854,243 $ 1,053,378 398,214 2,305,836
------------ ------------ ------------ ------------ ------------
GROSS MARGIN 732,330 5,890,447 550,188 231,765 4,282,711
------------ ------------ ------------ ------------ ------------
Operating Expenses 1,204,610 2,553,380 1,401,451 196,648 5,356,089
------------ ------------ ------------ ------------ ------------
Other Expense (Income) (16,686) 112 2,823 1,411 (12,341)
------------ ------------ ------------ ------------ ------------
INCOME(LOSS) BEFORE INCOME TAXES (455,593) 3,336,955 199,293 33,707 3,114,361
------------ ------------ ------------ ------------ ------------
Provision for income taxes - - - - -
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (455,593) $ 3,336,955 $ 199,293 $ 33,707 $ 3,114,361
============ ============= ============ ============ ============
INTERSEGMENT ADJUSTMENTS FOR THREE MONTHS ENDED SEPTEMBER 30, 2006
For the three months ended September 30, 2006
------------------------------------------------------
Revenue COGS Expenses/Other Income
------------ ------------ ------------ ------------
Combined 9,710,567 2,305,836 4,290,370 3,114,361
------------ ------------ ------------ ------------
Intersegment Adjustments (2,083,034) (1,088,929) (944,105) -
------------ ------------ ------------ ------------
Adjusted 7,627,533 1,216,906 3,296,266 3,114,361
THREE MONTHS ENDED SEPTEMBER 30, 2006 AS COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2005.
Revenues
We generated net revenues of $7,627,533 for the three months ended September 30,
2006, as compared to $1,777,307 for the three months ended September 30, 2005,
an increase of 329.2%. Net revenues were $18,646,694 for the nine months ended
September 30, 2006, as compared to $5,020,555 for the nine months ended
September 30, 2005, an increase of 271.4%. Our revenues are derived from four
primary sources, - membership revenue, upsell revenue, lead revenue, and
fulfillment and other revenue.
The following summarizes our revenue:
For the three months ended For the nine months ended
-------------------------- --------------------------
Sept 30 Sept 30 Sept 30 Sept 30
2006 2005 2006 2005
------------ ------------ ------------ ------------
REVENUE:
Membership Revenue $ 6,036,364 $ 1,365,316 $ 15,134,940 $ 3,790,220
Upsell Revenue 544,961 169,904 1,070,231 706,599
Lead Revenue 438,904 134,563 1,405,717 226,010
Fulfillment/Other Revenue 607,303 107,524 1,035,806 297,726
------------ ------------ ------------ ------------
Total Revenue $ 7,627,533 $ 1,777,307 $ 18,646,694 $ 5,020,555
------------ ------------ ------------ ------------
Membership revenue is our largest source of revenue, and comprised 81.3% and
75.5% of total revenue for the nine months ended September 30, 2006 and 2005,
respectively. Membership revenues have increased due to a significant increase
in new members acquired during the 2006. The increase in new members reflects
the success of our initiatives to emphasize the internet as our preferred method
of allowing our customers to activate a trial for our products.
18
Upsell revenues increased 51.5% during the nine months ended September 30, 2006
as compared to the same period in 2005. We provide three primary offers to
existing customers through telephone sales staff. These offers allow customers
to purchase additional related products and generate our upsell revenue.
Lead revenue increased by 522.0% during the nine months ended September 30, 2006
due to an increase in our activations and the initiation of a new program at the
beginning of 2006 to increase our focus on selling extended business coaching
products and services to our members.
Fulfillment and other revenue increased by 247.9% during the nine months ended
September 30, 2006 compared to the same period in 2005. The increased revenue is
due to the success of our new subsidiary, OS Imaging, Inc., and its related
fulfillment activities.
Costs of Sales
We incurred costs of sales of $2,896,452 (15.6% of revenue) for the nine months
ended September 30, 2006, as compared to $1,168,499 (23.3% of revenue)for the
nine months ended September 30, 2005. Cost of sales were a greater percentage of
revenue in 2005 because we began to distribute a welcome kit to new customers
beginning in the second quarter of 2005 which increased our expenses. Also, in
2006, we have achieved greater economies due to increasing volumes of sales
resulting in proportional savings across cost areas.
Operating Expenses
Operating expenses were comprised of the following:
For the three months ended For the nine months ended
-------------------------- --------------------------
Sept 30 Sept 30 Sept 30 Sept 30
2006 2005 2006 2005
------------ ------------ ------------ ------------
EXPENSES:
Salaries $ 854,602 $ 777,794 $ 2,014,336 $ 2,263,632
Advertising 1,322,763 642,400 4,248,198 2,299,559
Other Expenses 1,131,242 1,341,691 3,375,513 3,417,232
------------ ------------ ------------ ------------
Total Operating Expenses $ 3,308,607 $ 2,761,885 $ 9,638,047 $ 7,980,423
------------ ------------ ------------ ------------
Salaries were 10.8% of revenue for the nine months ended September 30, 2006
compared to 45.1% in the year earlier period. The proportional reduction is due
to our focus on utilizing the internet as the primary method for our customers
to activate their trial subscriptions. We reduced the size of our sales staff
late in the fourth quarter of 2005 in keeping with this strategy resulting in
reduced salary costs.
Advertising expense increased 84.7% from the prior year period resulting in an
increase in the number of new members acquired during 2006. Advertising expense
decreased on a pro-rata basis with sales to 22.8% of revenue compared to 45.8%
in the prior year because our cost per customer acquired decreased and because
of the impact of the capitalization and amortization of certain advertising
costs. We expense the media costs of advertising the first time the advertising
takes place, except for direct-response advertising that is contracted with our
advertising partners on a cost per customer acquired basis, which is capitalized
and amortized over its expected period of future benefits. The capitalized costs
of the advertising are amortized over the three-month period following the
receipt of a trial order for our products and services. At September 30, 2006,
and September 30, 2005, capitalized direct-response advertising Costs of
$400,021 and zero, respectively, were included in "Prepaid Expenses" in the
accompanying Balance Sheets.
Other expenses increased 1.2% over the prior year period for the nine months
ending September 30, 2006. Other expenses fell to 18.1% of revenue compared to
68.1% in the same period last year. Certain of the expenses in this category do
not change significantly because of changes in revenue. Included in other
expenses are expenses related to our facility, professional fees, depreciation,
insurance, and investor relations. The nine months ended September 30, 2006,
include $736,150 in executive compensation as well as $357,093 of expense
related to the companies stock option plan and stock and warrant awards.
19
For the three months ended For the nine months ended
-------------------------- --------------------------
Sept 30 Sept 30 Sept 30 Sept 30
2006 2005 2006 2005
------------ ------------ ------------ ------------
Other Expense (Income)
Interest (Income) (16,643) (26,745)
Interest Expense 4,302 609,210 1,370,082 1,332,152
------------ ------------ ------------ ------------
Total Other Expense (Income) (12,341) 609,210 1,343,337 1,332,152
------------ ------------ ------------ ------------
Interest expense was $1,343,337 and $1,332,152 for the nine months ended
September 30, 2006 and 2005 respectively. Interest expense was accelerated due
to the repayment and conversion of certain debts prior to their scheduled
maturities. All convertible debt has been retired as of September 30, 2006.
Net Income (Loss)
- -----------------
Net income for the three months ending September 30, 2006 was $3,114,361
compared to a net loss of $2,172,657 for the three months ended September 30,
2005. For the nine months ending September 30, 2006, net income totaled
$4,768,858 compared to a net loss of $5,450,519 for the same period in 2005.
Basic and Diluted Income Per Share
- --------------------------------
Our basic and diluted income per share for the three months ended September 30,
2006 was $0.07 and $0.06 respectively. Basic and diluted income per share for
the nine months ended September 30, 2006 was $0.11 and $0.09 respectively. Basic
loss per share for the three and nine months ended September 30, 2005 was $0.06
and $0.15 respectively. For the period ended June 30, 2005, our common stock
equivalents were excluded from the calculation of diluted loss per common share
because they were anti-dilutive to our net loss in that period. At June 30,
2005, there were convertible debts and warrants to purchase common stock which
were outstanding and may dilute future earnings per share. For the quarter ended
September 30, 2006, the weighted average number of common shares outstanding was
46,511,302. The fully diluted weighted average number of common shares
outstanding was 54,580,286.
Liquidity and Capital Resources
- -------------------------------
For the quarter ended September 30, 2006, we generated $2,642,395 in cash from
operations. For the nine months ended September 30, 2006, we generated
$6,105,289 in cash from operations. During the nine months ending September 30,
2006, we issued $68,000 in convertible debt, received $189,900 in cash for stock
subscriptions sold in December 2005 and collected in January 2006, and received
$152,000 from the exercise of warrants. During the same period, we repaid
$3,324,261 of debt and made asset purchases of $485,097. The net increase in
cash during the quarter ended September 30, 2006 was $1,103,343 and $2,705,831
for the nine months ended September 30, 2006.
Financing activities
- --------------------
During the three months ended September 30, 2006 we did not issue additional
debt or raise funds through equity issuance.
Subsidiaries
- ------------
As of September 30 2006, we had five subsidiaries, Onlinesupplier.com, Inc.,
Legacy Media, Inc., Consumer Loyalty Group, Inc., OS Imaging, Inc. and Auction
Liquidator, Inc. We ceased operations of Auction Liquidator in 2005.
ITEM 3. CONTROLS AND PROCEDURES.
Our management evaluated, with the participation of our Chief Executive Officer
and our Chief Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this Quarterly Report on
Form 10-QSB. Based on this evaluation, our Chief Executive Officer and our Chief
Financial Officer have concluded that our disclosure controls and procedures are
effective to ensure that information we are required to disclose in reports that
we file or submit under the Securities Exchange Act of 1934 (i) is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms, and (ii) is accumulated and
communicated to our management, including our Chief Executive Officer and our
Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. Our disclosure controls and procedures are designed to
provide reasonable assurance that such information is accumulated and
communicated to our management. Our disclosure controls and procedures include
components of our internal control over financial reporting. Management's
assessment of the effectiveness of our internal control over financial reporting
is expressed at the level of reasonable assurance that the control system, no
matter how well designed and operated, can provide only reasonable, but not
absolute, assurance that the control system's objectives will be met.
There was no change in our internal control over financial reporting that
occurred during our last fiscal quarter that materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We believe that there are no claims or litigation pending, the outcome of which
could have a material adverse effect on our financial condition or operating
results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders held on October 10, 2006, stockholders
elected three directors to serve until the 2007 annual meeting and until their
successors are duly elected and qualified. The votes for each director are as
follows:
For Withheld
Michael Hill 25,870,590 131,455
Charlie Gugliuzza 25,870,590 131,455
David Foucar 25,870,590 131,455
ITEM 5. OTHER INFORMATION.
None.
21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBIT
NUMBER DESCRIPTION
- ---------------------------------------------
2.1 Agreement and Plan of Reorganization between Utah Clay Technology, Inc. and
NeWave, Inc., D.B.A. Online Supplier NeWave Shareholders and Dutchess
Advisors, Ltd., dated December 24, 2003 (included as Exhibit 2.1 to the
Form 8-K filed February 12, 2004, and incorporated herein by reference).
3.1 Articles of Incorporation (included as Exhibit 3.(i) to the Form SB-2/A
filed April 11, 2000, and incorporated herein by reference).
3.2 Amended Articles of Incorporation (included as Exhibit 3.(i) to the Form
10-QSB filed November 14, 2001, and incorporated herein by reference).
3.3 Articles of Amendment to Articles of Incorporation, dated January 30, 2004
(included as Exhibit 3.2 to the 10-QSB filed May 24, 2004, and incorporated
herein by reference).
3.4 By-laws (included as Exhibit 3.(ii) to the Form SB-2/A filed April 11,
2000, and incorporated herein by reference).
3.5 Articles of Amendment to the Amended and Restated Articles of
Incorporation, dated May 18, 2006 (include as Exhibit 3.1 to the Form 8K
filed June 8, 2006, and incorporated herein by reference).
3.6 Certificate of Designation of Series C Convertible Preferred Stock
(included as Exhibit 4.1 to the 10-KSB filed April 14, 2004, and
incorporated herein by reference).
3.7 Certificate of Designation for Series D Convertible Preferred Stock
(included as Exhibit 3.1 to the Form 8-K filed August 9, 2006, and
incorporated herein by reference).
3.8 Restated Bylaws (included as Exhibit 3.1 to the Form 8-K filed September 8,
2006, and incorporated herein by reference).
4.1 Form Series C Convertible Preferred Stock Purchase Agreement (included as
Exhibit 4.2 to the 10-KSB filed April 14, 2004, and incorporated herein by
reference).
4.2 Debenture Agreement between the Company and Dutchess Private Equities Fund,
dated January 5, 2004 (included as Exhibit 4.1 to the Form 10-QSB filed May
24, 2004, and incorporated herein by reference).
4.3 Debenture Agreement between the Company and Dutchess Private Equities Fund,
dated January 25, 2004 (included as Exhibit 4.2 to the Form 10-QSB filed
May 24, 2004, and incorporated herein by reference).
4.4 Debenture Agreement between the Company and eFund Capital Partners, LLC,
dated January 26, 2004 (included as Exhibit 4.3 to the Form 10-QSB filed
May 24, 2004, and incorporated herein by reference).
4.5 Debenture Agreement between the Company and eFund Capital Partners, LLC,
dated February 19, 2004 (included as Exhibit 4.4 to the Form 10-QSB filed
May 24, 2004, and incorporated herein by reference).
4.6 Debenture Agreement between the Company and Preston Capital Partners, LLC,
dated March 3, 2004 (included as Exhibit 4.5 to the Form 10-QSB filed May
24, 2004, and incorporated herein by reference).
4.7 Debenture Agreement between the Company and Dutchess Private Equities Fund,
II, dated April 1, 2004 (included as Exhibit 4.6 to the Form 10-QSB filed
August 23, 2004, and incorporated herein by reference).
4.8 Debenture Agreement between the Company and eFund Capital Partners, dated
April 2, 2004 (included as Exhibit 4.7 to the Form 10-QSB filed August 23,
2004, and incorporated herein by reference).
4.9 Debenture Agreement between the Company and Dutchess Private Equities Fund,
II, dated May 5, 2004 (included as Exhibit 4.8 to the Form 10-QSB filed
August 23, 2004, and incorporated herein by reference).
4.10 Debenture Agreement between the Company and eFund Capital Partners, dated
May 5, 2004 (included as Exhibit 4.9 to the Form 10-QSB filed August 23,
2004, and incorporated herein by reference).
4.11 Warrant Agreement between the Company and Dutchess Private Equities Fund,
II, LP, dated April 1, 2004 (included as Exhibit 4.10 to the Form SB-2
filed October 8, 2004, and incorporated herein by reference).
4.12 Warrant Agreement between the Company and eFund Capital Partners, dated
April 2, 2004 (included as Exhibit 4.11 to the Form SB-2 filed October 8,
2004, and incorporated herein by reference).
4.13 Warrant Agreement between the Company and Dutchess Private Equities Fund,
II, LP, dated May 5, 2004 (included as Exhibit 4.12 to the Form SB-2 filed
October 8, 2004, and incorporated herein by reference).
4.14 Warrant Agreement between the Company and eFund Capital Partners, dated May
5, 2004 (included as Exhibit 4.13 to the Form SB-2 filed October 8, 2004,
and incorporated herein by reference).
4.15 Warrant Agreement between the Company and Dutchess Private Equities Fund,
II, LP, dated July 9, 2004 (included as Exhibit 4.14 to the Form SB-2 filed
October 8, 2004, and incorporated herein by reference).
4.16 Debenture Agreement between the Company and Dutchess Private Equities Fund
II, LP, dated July 9, 2004 (included as Exhibit 4.15 to the Form SB-2 filed
October 8, 2004, and incorporated herein by reference).
4.17 Debenture Agreement between the Company and Dutchess Private Equities Fund
II, LP, dated August 15, 2004 (included as Exhibit 4.16 to the Form SB-2
filed October 8, 2004, and incorporated herein by reference).
4.18 Debenture Agreement between the Company and eFund Small Cap Fund, LP, dated
August 15, 2004 (included as Exhibit 4.17 to the Form SB-2 filed October 8,
2004, and incorporated herein by reference).
4.19 Warrant Agreement between the Company and Dutchess Private Equities Fund,
II, LP, dated August 18, 2004 (included as Exhibit 4.18 to the Form SB-2
filed October 8, 2004, and incorporated herein by reference).
4.20 Warrant Agreement between the Company and eFund Small Cap Fund, LP, dated
August 18, 2004 (included as Exhibit 4.19 to the Form SB-2 filed October 8,
2004, and incorporated herein by reference).
4.21 Debenture Agreement between the Company and Dutchess Private Equities Fund,
LP, dated September 25, 2004 (included as Exhibit 4.20 to the Form SB-2
filed October 8, 2004, and incorporated herein by reference).
4.22 Debenture Agreement between the Company and eFund Small Cap Fund, LP, dated
September 25, 2004 (included as Exhibit 4.21 to the Form SB-2 filed October
8, 2004, and incorporated herein by reference).
4.23 Warrant Agreement between the Company and Dutchess Private Equities Fund,
LP, dated September 25, 2004 (included as Exhibit 4.22 to the Form SB-2
filed October 8, 2004, and incorporated herein by reference).
4.24 Warrant Agreement between the Company and eFund Small Cap Fund, LP, dated
September 25, 2004 (included as Exhibit 4.23 to the Form SB-2 filed October
8, 2004, and incorporated herein by reference).
4.25 Debenture Agreement between the Company and Dutchess Private Equities Fund,
dated February 4, 2004 (included as Exhibit 4.24 to the Form SB-2 filed
December 9, 2004, and incorporated herein by reference).
4.26 Debenture Agreement between the Company and Dutchess Private Equities Fund,
II, LP, dated October 25, 2004 (included as Exhibit 4.25 to the Form 10-KSB
filed April 15, 2005, and incorporated herein by reference).
4.27 Warrant Agreement between the Company and Dutchess Private Equities Fund,
II, LP, dated October 25, 2004 (included as Exhibit 4.26 to the Form 10-KSB
filed April 15, 2005, and incorporated herein by reference).
4.28 Debenture Agreement between the Company and Dutchess Private Equities Fund,
II, LP, dated November 11, 2004 (included as Exhibit 4.27 to the Form
10-KSB filed April 15, 2005, and incorporated herein by reference).
4.29 Warrant Agreement between the Company and Dutchess Private Equities Fund,
LP, dated November 11, 2004 (included as Exhibit 4.28 to the Form 10-KSB
Filed April 15, 2005, and incorporated herein by reference).
4.30 Debenture Agreement between the Company and Dutchess Private Equities Fund,
II, LP, dated December 28, 2004 (included as Exhibit 4.29 to the Form
10-KSB filed April 15, 2005, and incorporated herein by reference).
4.31 Warrant Agreement between the Company and Dutchess Private Equities Fund,
LP, dated December 28, 2004 (included as Exhibit 4.30 to the Form 10-KSB
filed April 15, 2005, and incorporated herein by reference).
4.32 Promissory Note between the Company and Dutchess Private Equities Fund, II,
LP, dated February 11, 2005 (included as Exhibit 4.31 to the Form 10-QSB
filed May 23, 2005, and incorporated herein by reference).
4.33 Promissory Note between the Company and eFund Small Cap Fund, L.P., dated
April 8, 2005 (included as Exhibit 4.34 to the Form 10-QSB filed August 19,
2005, and incorporated herein by reference).
4.34 Promissory Note between the Company and Dutchess Private Equities Fund, II,
LP, dated April 12, 2005 (included as Exhibit 4.38 to the Form 10-QSB filed
August 19, 2005, and incorporated herein by reference).
4.35 Promissory Note between the Company and Dutchess Private Equities Fund, II,
LP, dated May 20, 2005 (included as Exhibit 4.38 to the Form 10-QSB filed
August 19, 2005, and incorporated herein by reference).
4.36 Promissory Note between the Company and Dutchess Private Equities Fund, II,
LP, dated June 2, 2005 (included as Exhibit 4.38 to the Form 10-QSB filed
August 19, 2005, and incorporated herein by reference).
4.37 Receivable Factoring Agreement between the Company and Dutchess Private
Equities Fund, II, LP, dated June 8, 2005 (included as Exhibit 4.38 to the
Form 10-QSB filed August 19, 2005, and incorporated herein by reference).
4.38 Promissory Note between the Company and Dutchess Private Equities Fund, II,
LP, dated July 22, 2005 (included as Exhibit 4.39 to the Form 10-QSB filed
November 14, 2005, and incorporated herein by reference).
4.39 Promissory Note between the Company and Dutchess Private Equities Fund, II,
LP, dated August 4, 2005 (included as Exhibit 4.40 to the Form 10-QSB filed
November 14, 2005, and incorporated herein by reference)
4.40 Promissory Note between the Company and Dutchess Private Equities Fund, II,
LP, dated August 17, 2005 (included as Exhibit 4.41 to the Form 10-QSB
filed November 14, 2005, and incorporated herein by reference)
4.41 Promissory Note between the Company and eFund Capital Partners, LLC, dated
August 18, 2005 (included as Exhibit 4.42 to the Form 10-QSB filed November
14, 2005, and incorporated herein by reference)
4.42 Promissory Note between the Company and Barrett Evans, dated August 18,
2005 (included as Exhibit 4.43 to the Form 10-QSB filed November 14, 2005,
and incorporated herein by reference)
4.43 Promissory Note between the Company and eFund Capital Partners, LLC, dated
August 18, 2005 (included as Exhibit 4.44 to the Form 10-QSB filed November
14, 2005, and incorporated herein by reference)
4.44 Promissory Note between the Company and eFund Capital Partners, LLC, dated
August 18, 2005 (included as Exhibit 4.45 to the Form 10-QSB filed November
14, 2005, and incorporated herein by reference)
4.45 Promissory Note between the Company and Dutchess Private Equities Fund,,
LP, dated September 16, 2005 (included as Exhibit 4.46 to the Form 10-QSB
filed November 14, 2005, and incorporated herein by reference)
4.46 Promissory Note between the Company and Dutchess Private Equities Fund,
L.P., dated September 30, 2005 (included as Exhibit 4.47 to the Form 10-QSB
filed November 14, 2005, and incorporated herein by reference)
4.47 Convertible Debenture Exchange Agreement between the Company and Dutchess
Private Equities Fund, II, LP dated December 18, 2005 (included as Exhibit
4.2 to the Form 8-K filed February 17, 2006, and incorporated herein by
reference).
4.48 Convertible Debenture Exchange Agreement between the Company and eFund
Capital Partners, LLC dated December 18, 2005 (included as Exhibit 4.1 to
the Form 8-K filed February 17, 2006, and incorporated herein by
reference).
4.49 Promissory Note between the Company and Dutchess Private Equities Fund,
L.P., dated October 11, 2005 (included as Exhibit 4.50 to the Form 10-KSB
dated March 21, 2006, and incorporated by reference).
4.50 Stock Subscription Agreement between the Company and Gary D. Elliston,
dated December 22, 2005, (included as Exhibit 4.51 to the Form 10-KSB dated
March 21, 2006, and incorporated by reference).
4.51 Stock Subscription Agreement between the Company and Cliff M. Holloway,
dated December 22, 2005, (included as Exhibit 4.52 to the Form 10-KSB dated
March 21, 2006, and incorporated by reference).
4.52 Stock Subscription Agreement between the Company and John C. Boutwell, Jr,
dated December 22, 2005, (included as Exhibit 4.53 to the Form 10-KSB dated
March 21, 2006, and incorporated by reference).
4.53 Stock Subscription Agreement between the Company and Mr. and Mrs. Jack B.
Manning, dated December 22, 2005, (included as Exhibit 4.54 to the Form
10-KSB dated March 21, 2006, and incorporated by reference).
4.54 Stock Subscription Agreement between the Company and Stephen Moore, dated
December 22, 2005, (included as Exhibit 4.55 to the Form 10-KSB dated March
21, 2006, and incorporated by reference).
4.55 Stock Subscription Agreement between the Company and Monte L. Roach, dated
December 22, 2005, (included as Exhibit 4.56 to the Form 10-KSB dated March
21, 2006, and incorporated by reference).
4.56 Convertible Promissory Notes between the Company and Ronald Feldman, dated
January 9, 2006 (included as Exhibit 4.57 to the Form 10-QSB filed May 8,
2006 and incorporated herein by reference).
4.57 Convertible Promissory Notes between the Company and Ronald Feldman, dated
January 9, 2006 (included as Exhibit 4.58 to the Form 10-QSB filed May 8,
2006 and incorporated herein by reference).
4.58 Convertible Promissory Notes between the Company and Wakelin McNeel, dated
January 6, 2006 (included as Exhibit 4.57 to the Form 10-QSB filed May 8,
2006 and incorporated herein by reference).
10.1 2000 Stock Option Plan (included as Exhibit 9 to the Form SB-2/A filed
April 11, 2000, and incorporated herein by reference).
10.2 Sublease between the Company and Pinnacle Sales Group, LLC, dated August
18, 2003 (included as Exhibit 10.1 to the Form 10-KSB filed April 14, 2004,
and incorporated herein by reference).
10.3 Sublease Agreement between the Company and Mammoth Moving Inc., dated July
14, 2003 (included as Exhibit 10.2 to the Form 10-KSB filed April 14, 2004,
and incorporated herein by reference).
10.4 Investment Agreement between the Company and Preston Capital Partners, LLC,
dated September 13, 2004 (included as Exhibit 10.3 to the Form SB-2 filed
October 8, 2004, and incorporated herein by reference).
10.5 Registration Rights Agreement between the Company and Preston Capital
Partners, LLC, dated September 13, 2004 (included as Exhibit 10.4 to the
Form SB-2 filed October 8, 2004, and incorporated herein by reference).
10.6 Placement Agent Agreement between the Company, Preston Capital Partners,
and Legacy Trading Co., LLC, Inc., dated September 13, 2004 (included as
Exhibit 10.5 to the Form SB-2 filed October 8, 2004, and incorporated
herein by reference).
10.7 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, LP, dated January 14, 2004 (included as Exhibit 10.1 to the
Form 10-QSB filed May 24, 2004, and incorporated herein by reference).
10.8 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, LP, dated January 26, 2004 (included as Exhibit 10.2 to the
Form 10-QSB filed May 24, 2004, and incorporated herein by reference).
10.9 Registration Rights Agreement between the Company and eFund Capital
Partners, LLC, dated January 26, 2004 (included as Exhibit 10.3 to the Form
10-QSB filed May 24, 2004, and incorporated herein by reference).
10.10 Registration Rights Agreement between the Company and eFund Capital
Partners, LLC, dated February 19, 2004 (included as Exhibit 10.4 to the
Form 10-QSB filed May 24, 2004, and incorporated herein by reference).
10.11 Registration Rights Agreement between the Company and Preston Capital
Partners, LLC, dated March 3, 2004 (included as Exhibit 10.5 to the Form
10-QSB filed May 24, 2004, and incorporated herein by reference).
10.12 Consulting Agreement between the Company and Luminary Ventures, Inc.,
dated March 2, 2004 (included as Exhibit 99.1 to the Form S-8 filed March
11, 2004, and incorporated herein by reference).
10.13 Consulting Agreement between the Company and Jeffrey Conrad, dated January
30, 2004 (included as Exhibit 99.2 to the Form S-8 filed February 13, 2004,
and incorporated herein by reference).
10.14 Consulting Agreement between the Company and Catherine Basinger, dated
January 30, 2004 (included as Exhibit 99.3 to the Form S-8 filed February
13, 2004, and incorporated herein by reference).
10.15 Consulting Agreement between the Company and Barrett Evans, dated August
18, 2003 (included as Exhibit 10.11 to the Form 10-QSB filed August 23,
2004, and incorporated herein by reference).
10.16 Consulting Agreement between the Company and Michael Hill, dated August
18, 2003 (included as Exhibit 10.12 to the Form 10-QSB filed August 23,
2004, and incorporated herein by reference).
10.17 Lead Marketing Agreement between the Company and Vandalay Venture, Group,
Inc. d/b/a Applied Merchant, dated June 2004 (included as Exhibit 10.13 to
the Form 10-QSB filed August 23, 2004, and incorporated herein by
reference).
10.18 Standard Multi-Tenant Office Lease between the Company and La Patera
Investors, dated April 9, 2004 (included as Exhibit 10.17 to the Form SB-2
filed October 8, 2004, and incorporated herein by reference).
10.19 ASP Software Subscription Agreement between the Company and Net Chemistry,
dated August 11, 2004 (included as Exhibit 10.18 to the Form SB-2 filed
October 8, 2004, and incorporated herein by reference).
10.20 Consulting Agreement between the Company and Pacific Shore Investments,
LLC, dated August 15, 2004 (included as Exhibit 10.19 to the Form SB-2
filed October 8, 2004, and incorporated herein by reference).
10.21 Membership Agreement between the Company and Memberworks, dated September
30, 2003 (included as Exhibit 10.20 to the Form SB-2 filed October 8, 2004,
and incorporated herein by reference).
10.22 Amendment to Membership Agreement between the Company and Memberworks,
dated August 17, 2004 (included as Exhibit 10.21 to the Form SB-2 filed
October 8, 2004, and incorporated herein by reference).
10.23 Revolving Credit Facility between the Company and Dutchess Private
Equities Fund and eFund, dated March 9, 2004 (included as Exhibit 10.23 to
the Form 10-QSB filed November 22, 2004, and incorporated herein by
reference).
10.24 Line of Credit Agreement between the Company and Barrett Evans, dated
August 18, 2003 (included as Exhibit 10.23 to the Form SB-2 filed December
9, 2004, and incorporated herein by reference).
10.25 Debt Financing Agreement between the Company and Shirley Oaks, dated
January 26, 2004 (included as Exhibit 10.24 to the Form SB-2 filed December
9, 2004, and incorporated herein by reference).
10.26 Consulting Agreement between the Company and Aaron Gravitz, dated August
18, 2003 (included as Exhibit 10.25 to the Form SB-2 filed December 9,
2004, and incorporated herein by reference).
10.27 Debt Financing Agreement between the Company and Sharon Paugh, dated
January 26, 2004 (included as Exhibit 10.26 to the Form SB-2 filed December
9, 2004, and incorporated herein by reference).
10.28 Debt Financing Agreement between the Company and Jennifer Strohl, dated
March 22, 2004 (included as Exhibit 10.27 to the Form SB-2 filed December
9, 2004, and incorporated herein by reference).
10.29 Business Services Agreement between the Company and Luminary Ventures,
Inc., dated March 3, 2005 (included as Exhibit 10.1 to the Form S-8 filed
April 29, 2005, and incorporated herein by reference).
10.30 Employment Offer Letter between the Company and Paul Daniel, dated June
24, 2005 (included as Exhibit 10.1 to the Form 8-K filed August 25, 2005,
and incorporated herein by reference).
10.31 Corporate Consulting Agreement between the Company and eFund Capital
Partners LLC dated November 1, 2005 (included as Exhibit 10.1 to the Form
8-K filed February 17, 2006, and incorporated by reference herein).
10.32 Corporate Consulting Agreement between the Company and Olive Tree LLC
dated June 28, 2005, as amended on October 25, 2005, October 31, 2005, and
January 4, 2006, (included as Exhibit 10.32 to the Form 10-KSB filed March
21 2006, and incorporated herein by reference).
10.33 Corporate Consulting Agreement between the Company and SeaCoast Financial
LLC, dated February 7, 2006(included as Exhibit 10.33 to the Form 10-QSB
filed May 8, 2006 and incorporated herein by reference).
10.34 Asset Purchase Agreement by and among the Company and Onesource Imaging,
Miquel A. Vazquez and Joanie Vazquez dated June 1, 2006 (included as
Exhibit 10.1 to the Form 8-K filed June 8, 2006, and incorporated herein by
reference).
10.35 General Assignment and Bill of Sale between the Company and Onesource
Imaging, Inc., dated June 1, 2006 (included as Exhibit 10.2 to the Form 8-K
filed June 8, 2006, and incorporated herein by reference).
10.36 Executive Employment Agreement between the Company and Miguel Vazquez,
dated June 1, 2006 (included as Exhibit 10.3 to the Form 8-K filed June 8,
2006, and incorporated herein by reference).
10.37 Employment Offer Letter between the Company and Dave Foucar, dated June 8,
2006 (included as Exhibit 10.1 to the Form 8-K filed June 21, 2006, and
incorporated herein by reference).
10.38 Employment Agreement between the Company and Michael Hill, dated September
7, 2006 (included as Exhibit 10.1 to the Form 8-K filed September 8, 2006,
and incorporated herein by reference).
10.39 Employment Agreement between the Company and Charlie Gugliuzza, dated
September 7, 2006 (included as Exhibit 10.2 to the Form 8-K filed September
8, 2006, and incorporated herein by reference).
14.1 Corporate Code of Conduct and Ethics (included as Exhibit 14.1 to the
10-KSB filed April 14, 2004, and incorporated herein by reference).
21.1 List of Subsidiaries
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
Date: November 6, 2006 Commerce Planet, Inc.
/s/ Michael Hill
-----------------------
Michael Hill
Chief Executive Officer
Dated: November 6, 2006
/s/ David Foucar
-----------------
David Foucar
Chief Financial Officer and
Principal Accounting Officer
23