-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mhw/JCqFhN57y3q+6M1wbHxOkijZ13MAXcbDtiDpXGBE2tw8sE14zvlFXUw2x/HC 1XZMrCUkjjuFAz1cLehiwg== 0001145906-06-000019.txt : 20061117 0001145906-06-000019.hdr.sgml : 20061117 20061117145607 ACCESSION NUMBER: 0001145906-06-000019 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061117 DATE AS OF CHANGE: 20061117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLENET INTERNATIONAL CORP CENTRAL INDEX KEY: 0001145906 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 020575232 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-33033 FILM NUMBER: 061226325 BUSINESS ADDRESS: STREET 1: 5201 GREAT AMERICA PARKWAY STREET 2: SUITE 239 CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 408-988-1888 MAIL ADDRESS: STREET 1: 5201 GREAT AMERICA PARKWAY STREET 2: SUITE 239 CITY: SANTA CLARA STATE: CA ZIP: 95054 10QSB 1 ppnt06q3x.htm PEOPLENET INTERNATIONAL CORP - 10QSB FOR 2006Q3

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, 2006

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
AND SUBSIDIARIES

(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 November 15, 2006 is 33,639,249.

 

Transitional Small Business Disclosure Format (check one):    Yes [     ]    No     [X]

Exhibit Index is on page 20
Total Number of Pages: 24








PEOPLENET INTERNATIONAL CORPORATION
AND SUBSIDIARIES

FORM 10-QSB

For September 30, 2006


TABLE OF CONTENTS

 

Part I.

 Consolidated Financial Information

 

   Item 1.

Consolidated Financial Statements (unaudited)

 

Consolidated Balance Sheet as of September 30, 2006 (unaudited)

3

 

Consolidated Statements of Operations for The Three-Month and Nine- Month Periods ended September 30, 2006 and 2005 (unaudited)

4

 

Consolidated Statements of Cash Flows for The Nine-Month Periods ended September 30, 2006 and 2005 (unaudited)

5

 

Notes to Unaudited Consolidated Financial Statements

6

   Item 2.

Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations

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 Under Senior Securities

21

   Item 4.

Submission of Matters to a Vote of Security Holders

22

   Item 5.

Other Information

22

   Item 6.

Exhibits

22

   

 

Signatures   22

Certifications

  

23





PART I

 

Item 1. Consolidated Financial Information - (unaudited)

PEOPLENET INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)

                                                   September 30
                                                       2006
                                                   ------------
ASSETS
  Current assets
    Cash & cash equivalents                        $   523,992
    Prepaid expense                                     69,030
    Inventory                                            5,070
    Related party receivables                           49,767
                                                   ------------
      Total current assets                             647,859

  Property & equipment - net                           165,229
  Intangible assets - net                              178,535
  Deposit                                               93,645
  Investment                                         1,000,000
                                                   ------------
    Total assets                                   $ 2,085,267
                                                   ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities
    Accrued expenses                               $   441,094
    Advance for shares to be issued                     70,000
                                                   ------------
      Total current liabilities                        511,094
                                                   ------------

  Stockholders' equity
    Preferred stock, $0.0001 par value;
      10,000,000 shares authorized                         -
    Common stock, $0.0001 par value;
      100,000,000 shares authorized;
      33,639,249 shares issued and
      outstanding                                        3,364
    Stock subscription receivable                      (51,000)
    Additional paid-in capital                      63,180,537
    Deemed dividend                                (30,809,799)
    Accumulated deficit                            (30,748,929)
                                                   ------------
      Total stockholders' equity                     1,574,173
                                                   ------------
                                                   $ 2,085,267
                                                   ============

The accompanying notes are an integral part of these unaudited consolidated financial statements.






PEOPLENET INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

                                    Three Month Periods Ended   Nine Month Periods Ended
                                   --------------------------  --------------------------
                                          September 30,               September 30,
                                       2006          2005          2006          2005
                                   ------------  ------------  ------------  ------------
REVENUES
  Voice Over Internet Protocol
    (VoIP)                         $    15,771   $       -     $    35,539   $       -
  Hosting & other                          -           1,765           195         9,069
                                   ------------  ------------  ------------  ------------
    Total revenues                      15,771         1,765        35,734         9,069
                                   ------------  ------------  ------------  ------------

COST OF REVENUES                        30,395           -          54,037           -
                                   ------------  ------------  ------------  ------------
GROSS PROFIT (LOSS)                    (14,624)        1,765       (18,303)        9,069

COSTS AND EXPENSES
  Depreciation & amortization           30,823         3,076        57,805         7,047
  Rent                                  48,887        53,374       156,280       119,915
  Salaries and payroll taxes           247,734        33,198       721,847        86,263
  Professional fees                     80,218        60,121       422,633       238,113
  General and administrative            92,941        94,493     8,661,468       275,136
                                   ------------  ------------  ------------  ------------
    Total costs and expenses           500,602       244,261    10,020,033       726,476
                                   ------------  ------------  ------------  ------------

LOSS FROM OPERATIONS                  (515,226)     (242,497)  (10,038,336)     (717,406)


OTHER INCOME
  Interest income                          727            26         5,093           722
                                   ------------  ------------  ------------  ------------
  Total other income                  (514,500)           26         5,093           722

                                   ------------  ------------  ------------  ------------
LOSS FROM OPERATIONS BEFORE
  PROVISION FOR INCOME TAXES          (514,500)     (242,471)  (10,033,243)     (716,683)

PROVISION FOR INCOME TAXES                 -             -             800           800
                                   ------------  ------------  ------------  ------------
NET LOSS                           $  (514,500)  $  (242,471) $(10,034,043)     (717,483)
                                   ============  ============  ============  ============
Basic & diluted weighted average
  number of shares outstanding      17,674,632    16,337,499    17,316,932    16,275,096
                                   ============  ============  ============  ============
Basic & diluted loss per share          $(0.03)       $(0.01)       $(0.58)       $(0.04)
                                   ============  ============  ============  ============

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 unaudited consolidated financial statements.






PEOPLENET INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

                                                    Nine Months Periods Ended
                                                  -----------------------------
                                                          September 30,
                                                      2006             2005
                                                  -------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                         $(10,034,043)    $  (717,483)
  Adjustments to reconcile net loss
    to net cash used for operating activities
      Depreciation and amortization                     57,805           7,047
      Options granted for services                   8,413,773         203,216
      (Increase) decrease in current assets
         Prepaid expenses                                6,694         (68,827)
         Advance to related party                          -          (160,440)
         Deposits                                        6,498         (23,061)
      Increase (decrease) in current liabilities
         Accrued expenses                              (13,873)         (9,419)
                                                   ------------    ------------
      Net cash used in operating activities         (1,563,146)       (822,158)
                                                   ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property & equipment                     (81,768)        (49,025)
  Purchase of intangible assets                       (190,000)            -
  Cash from acquired subsidiary                        474,851             -
                                                   ------------    ------------
    Net cash used in investing activities              203,083         (49,025)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from sale of common stock                 1,034,500         390,000
  Payment for notes from related parties                   -            (4,500)
  Advance to related party                            (447,505)        (53,191)
  Advances for shares to be issued                         -           173,000
                                                   ------------    ------------
    Net cash provided by financing activities          586,995         558,500
                                                   ------------    ------------

NET DECREASE IN CASH & CASH EQUIVALENTS               (773,069)       (312,684)

CASH & CASH EQUIVALENTS, beginning balance           1,297,061         321,626
                                                   ------------    ------------
CASH & CASH EQUIVALENTS, ending balance            $   523,992     $     8,942
                                                   ============    ============

The accompanying notes are an integral part of these unaudited consolidated 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 including web-based email and office automation bundle and a voice over internet protocol telephony product. The Company had been a wholly owned subsidiary of Pacific Systems Control Technology, Inc. ("PSCT") until February 8, 2002 when the Company completed its spin-off transaction from PSCT and became an independent entity.

In December 2005, the Company formed Completo Communications Corporation, a wholly owned subsidiary, to support voice termination services within the Company's international VoIP solutions.

On September 22, 2006, the Company acquired hereUare Communications, Inc., a Delaware corporation ("hereUare"). hereUare is an operator of web-based search engine and other Internet software solutions founded in 2002. Consequently, hereUare's financial position, results of operations and cash flows subsequent to the acquisition are included in the accompanying unaudited consolidated financial statements.

Note 2 - Basis of presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2005, which were included in the annual report on Form 10-KSB.

Note 3 - Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, hereUare Communications, Inc. and Completo Communications Corporation. All material inter-company accounts have been eliminated in consolidation.

Note 4 - Recent pronouncements

In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".  SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.  This statement is effective for all financial instruments acquired or issued after the beginning of the Company's first fiscal year that begins after September 15, 2006.  SFAS No. 155 is not expected to have a material effect on the financial position or results of operations of the Company.

In March 2006 FASB issued SFAS 156 'Accounting for Servicing of Financial Assets' this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:

1. Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract.

2. Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

3. Permits an entity to choose 'Amortization method' or 'Fair value measurement method' for each class of separately recognized servicing assets and servicing liabilities.

4. At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.

5. Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

This Statement is effective as of the beginning of the Company's first fiscal year that begins after September 15, 2006. Management believes that this statement will not have a significant impact on the consolidated financial statements.

In September 2006, FASB issued SFAS 157 'Fair Value Measurements'.  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements.  However, for some entities, the application of this Statement will change current practice.  This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on the consolidated financial statements.

In September 2006, FASB issued SFAS 158 'Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

1. A brief description of the provisions of this Statement

2. The date that adoption is required

3. The date the employer plans to adopt the recognition provisions of this Statement, if earlier.

The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on the consolidated financial statements.

Note 5 - Reclassifications

Certain comparative amounts have been reclassified to conform to the nine month periods ended September 30, 2006 and 2005.

Note 6 - Loss per share

Earnings per share for the three and nine month periods ended September 30, 2006 and 2005 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 7 - Property and Equipment

The property & equipment comprised of the following at September 30, 2006:

Equipment                                        $  192,888
Furniture                                            33,000
                                                 -----------
                                                    225,888
Less accumulated depreciation                       (60,659)
                                                 -----------
                                                 $  165,229
                                                 ===========

Depreciation expense was $14,011 and $3,076 for the three month periods ended September 30, 2006 and 2005, respectively. Depreciation expense was $34,590 and $7,047 for the nine month periods ended September 30, 2006 and 2005, respectively.

Note 8 - Intangible Assets

Intangible assets comprised of the following at September 30, 2006:

            Domain name purchased            $   8,085
            Software products                  194,368
                                             ----------
                                               202,453
            Less accumulated amortization      (23,918)
                                             ----------
                                             $ 178,535
                                             ==========

Amortization expense was $16,812 and $0 for the three month periods ended September 30, 2006 and 2005, respectively. Amortization expense was $23,440 and $0 for the nine month periods ended September 30, 2006 and 2005, respectively.

Amortization expenses of intangible assets over the next three years are as follows:

            2007:    $66,028
            2008:    $66,028
            2009:    $46,479

Investment

In November 2005, the Company has made an investment of $1,000,000 in cash in an entity that is engaged in the internet search engine business. The Company evaluated the investment and determined that the investment has not impaired as of September 30, 2006. The investment represents approximately 10.5% of that entity.

Note 9 - Deposits

Deposits comprised of the following at September 30, 2006:

            Legal fee retainer               $ 50,000
            Rent deposit                       43,644
                                             --------
                                             $ 93,644
                                             ========

Note 10 - Accrued Expenses

Accrued expenses comprised of the following at September 30, 2006:

            Accrued operational expenses     $136,420
            Accrued litigation                 72,000
            Accrued interest                    6,400
            Other liabilities                 298,274
                                             --------
                                             $441,094
                                             ========

Note 11 - Commitments and Contingencies

As a result of litigation against its prior parent corporation, Pacific Systems Control Technology ("PSCT"), PSCT and its subsidiaries, including the Company, entered into a global settlement and mutual release of all claims with a former PSCT employee, on February 11, 2003. Under the agreement, PSCT and the other former parties to the litigation, including the Company, agreed to 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 December 31, 2004, the outstanding balance under the settlement agreement was $72,000. The Company accrued the $72,000 on its financial statements as of December 31, 2004 in the event PSCT is unable to fulfill its obligations under the settlement agreement. The balance of the accrued litigation is $72,000 as of September 30, 2006.

During the third and fourth quarters of fiscal year 2005, three shareholders of the Company, through their representative, claimed that the Company made misleading representations when the shareholders purchased a total of 826,500 shares of the Company from 2002 to 2005. The Company's counsel had oral dialogue and exchanged letters with the representative. In January 2006, two of the three shareholders demanded and the Company rejected rescission of their investments, amounting up to $735,000. The Company, while continuing to assert that there is no impropriety in the Company's sale of securities to any shareholder, has continued to have communication with the shareholders and their representative regarding this matter. The last communication regarding rescission was in January 2006; however, during October and November 2006, one of these shareholders contacted the Company to claim that he owned a 1.2 million share warrant exercisable at $2.00 per share. The Company is currently investigating this claim.

On February 16, 2005, the Company entered into a 3-year lease agreement with CarrAmerica Techmart. Monthly payment according to this lease agreement amounts to $10,604. Under this agreement, rent expense for the three month periods ended September 30, 2006 and 2005 was $31,812 and $31,812 respectively. Rent expense for the nine month periods ended September 30, 2006 and 2005 was $95,436 and $95,436 respectively.

On June 8, 2006, the Company entered into a 5-year lease agreement with CarrAmerica Techmart for rental of office space that was expiring in July 2006. Rent expense per this new lease agreement is as following:

August 2006 - July 2007: $7,033.55 per month
August 2007 - July 2008: $7,243.06 per month
August 2008 - July 2009: $7,452.57 per month
August 2009 - July 2010: $7,692.01 per month
August 2010 - July 2011: $7,901.52 per month

Note 12 - 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 amount was included in the professional fees for the nine month period ended September 30, 2005.

During the year ended December 31, 2005, the Company agreed to pay the CEO of the Company from $5,000 to $8,000 per month as management compensation and $120,000 per year after the Company raises at least $1,000,000. During the nine month period ended September 30, 2006, the Company paid management compensation amounting to $85,000 to its CEO.

During the nine month period ended September 30, 2006 the Company paid salary of $60,000 to its CFO.

On September 22, 2006, the Company acquired hereUare, issuing 15,985,500 Company common shares to retire an equal number of hereUare common shares.  hereUare was a privately-held operator of web-based search engine and other Internet software solutions founded in 2002. Certain officers, directors, and major equity holders of the Company also were officers, directors, or major equity holders of hereUare.  Benedict Van, Registrant's Chairman of the Board and CEO, and a member of the Company's board of directors, was the CEO and sole director of hereUare. Mr. Van and his affiliated company owned approximately 55.6% of the outstanding hereUare common stock and therefore received 55.6% of the Company's stock being issued in connection with the acquisition. Mr. Van and his affiliated companies owned approximately 47.3 % of the outstanding capital stock of the Company immediately prior to the acquisition and, after the acquisition, Mr. Van and his affiliated companies owned approximately 51.3% of the outstanding stock of the resulting company. In addition, Anthony K. Chan, a director of the Company and its CFO, was the CFO of hereUare.

Note 13 - Common Stock / Options

Common Stock

During the nine month period ended September 30, 2006, the Company completed the issuance of 50,000 shares of common stock which had been subscribed and paid for during the fourth quarter of fiscal 2005, adjusting "Advances for Shares to be Issued" from $170,000 to $70,000.

During the nine month period ended September 30, 2006, the Company issued 517,250 shares of common stock for cash amounting to $1,034,500.

On September 27, 2006, the Company issued 15,985,500 shares of common stock for the acquisition of hereUare Communications. See Note 16.

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.

Stock Options

Between April and May 2002, the Company issued a total of 6,680,620 stock options with exercise prices ranging from $0.08 to $0.12 per share and with gradual vesting arrangements. Due to the difference in valuation between certain intangible assets the Company acquired in March 2002 with the Company's common stock at $0.08 per share and common stock the Company sold to an investor in June 2002 at the price of $1.00 per share, the Company valued these options at a total of approximately $4.5 million. The remaining unvested options are deferred and will be amortized over the vesting period.

On February 21, 2005, the Company granted 350,000 options exercisable at $2 per share to one Director. 175,000 options vested on May 6, 2005; 25,000 options vested on June 30, 2005 and then 15,000 options vest per quarter thereafter. The options expire on December 31, 2007.

On February 13, 2006, the Company granted 250,000 options exercisable at $2 per share to one Director. 125,000 options vested immediately; 25,000 options shall vest on each of June 30 and December 31 of 2006 and 2007; and the last 25,000 options shall vest on February 13, 2008. The options expire on February 12, 2011.

On February 22, 2006, the Company granted 700,000 options exercisable at $2 per share to one employee. 175,000 options vested immediately; 10,937.50 options shall vest monthly thereafter over the following 48 months. The options expire on February 21, 2012.

On March 30, 2006, the Company granted 250,000 options exercisable at $2 per share to one Director. 125,000 options vested immediately; 25,000 options shall vest on each of June 30 and December 31 of 2006 and 2007; and the last 25,000 options shall vest on March 30, 2008. The options expire on March 29, 2011.

On May 5, 2006, the Company issued a total of 1,493,000 options to 9 employees and 1 consultant of the Company. The options have an exercise price of $2 per share and they expire in 5 years. These options vest over four years per the schedule of 25% after one year of service and monthly thereafter over the next 36 months at the rate of 2.083%.

In January 2006, the Board of Directors approved the extension of expiration of 4,139,999 options granted in 2002 to certain officers and staff of the Company. Such options would have otherwise expired in May 2006 and the approval extended the expiration date for another 3 years to 2009. Expense due to the extension of those options is recorded in the three month period ended June 30, 2006. 

The following summary presents the incentive and non-qualified options under the plan granted, exercised, expired and outstanding at September 30, 2006:

                                                Weighted
                                                Average    Aggregate
                                                Exercise   Intrinsic
                                  Under Plan     Price       Value
                                 ------------   --------   ----------
  Balance, December 31, 2005       7,060,620      $0.19    $6,037,346
    Granted                        2,693,000       2.00
    Lapsed                        (3,870,621)      0.73
    Exercised                            -          -
                                 ------------   --------   ----------
  Balance, September 30, 2006      5,882,999      $0.65    $7,915,198
                                 ============   ========   ==========

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, 2006:

                           Options
                          Outstanding                 Options Exercisable
                           Weighted                 -----------------------
                            Average      Weighted                  Weighted
                           Remaining     Average                   Average
              Number      Contractual    Exercise      Number      Exercise
            Outstanding      Life         Price      Exercisable    Price

  Options    5,882,999       3.01         $0.65      4,702,707     $0.32

Prior to January1, 2006, the Company measured stock compensation expense using the intrinsic value method of accounting in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations (APB No. 25).

The company adopted SFAS No. 123-R effective January 1, 2006 using the modified prospective method. Under this transition method, stock compensation expense recognized in the three and nine month periods ended September 30, 2006 includes compensation expense for all stock-based compensation awards vested during the three and nine month periods ended September 30, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123-R.

For the periods presented prior to the adoption of SFAS No.123R, pro forma information regarding net income and earnings per share as required by SFAS No. 123R has been determined as if the Company had accounted for its employee stock options under the original provisions of SFAS No.123. The fair value of these options was estimated using the Black-Scholes option pricing model. For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense over the option's vesting period. The pro forma expense to recognize during the nine month period ended September 30, 2005 is 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 report                  $     (0.01)   $     (0.04)
    Basic and diluted, pro forma                  $     (0.02)   $     (0.05)

Impact of adoption of SFAS No. 123-R in the three and nine month periods ended September 30, 2006

Stock compensation expense measured in accordance with SFAS No. 123-R totaled approximately $8,413,773 or $0.49 per basic and diluted share during the nine month period ended September 30, 2006. The adoption of SFAS No. 123-R resulted in increased expense of approximately $371,566 as compared to the stock compensation expense that would have been recorded pursuant to APB No. 25.

Stock compensation expense measured in accordance with SFAS No. 123-R totaled approximately $7,391 or $0.00 per basic and diluted share during the nine month period September 30, 2006. The adoption of SFAS No. 123-R resulted in increased expense of approximately $7,391 as compared to the stock compensation expense that would have been recorded pursuant to APB No.25.

During the three month and nine month periods ended September 30, 2006, the Company recorded $7,391 and $8,413,773 of stock based compensation expense. 

Methods of estimating fair value

Under both SFAS No. 123-R and under the fair value method of accounting under SFAS No. 123 (i.e., SFAS No. 123 Pro Forma), the fair value of stock options is determined using the Black-Scholes model.

Significant assumptions used to estimate fair value

The weighted-average assumptions used in estimating the fair value of stock options granted were as follows:

The fair value of options granted in 2005 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%.

The fair value of the options granted during the three month period ended March 31, 2006 was estimated at grant date using a Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 4.50%; dividend yield of 0%; expected average option life of 5 years to 6 years; and volatility of 0%.

The fair value of the options granted, or with expiration extended, during the three month period ended June 30, 2006 was estimated at grant date using a Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 5.00%; dividend yield of 0%; expected average option life of 5 years to 6 years; and volatility of 0%.

Under SFAS No. 123-R, the company's expected volatility assumption is based on the historical volatility of the Company's stock. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Stock compensation expense recognized in the nine month period ended September 30, 2006 is based on awards expected to vest, and there were no estimated forfeitures. SFAS No. 123-R requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.

Note 14 - Supplemental disclosure of cash flows

The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95.

During the nine month periods ended September 30, 2006 and 2005, the Company paid income tax of $-0- for each of the periods. During the nine month periods ended September 30, 2006 and 2005, the Company paid interest expense of $-0- for each of the periods.

On September 27, 2006, the Company issued 15,985,500 shares of common stock for the acquisition of hereUare Communications. See Note 16.

Note 15- Going concern

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has accumulated deficit of $30,748,929 at September 30, 2006. The Company incurred a net loss of $10,034,043 and $717,483 for the nine month periods ended September 30, 2006 and 2005, 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 consolidated 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 beginning to market its software and communication products and expects to generate revenues in future periods but also expects its operations to use substantial amounts of cash, especially in the near-term. The Company has conducted financing during the third fiscal quarter and currently plans to raise more monies in this financing during the upcoming quarter in order to funds its operations. However, there can be no assurance that the Company will generate material revenue from its products, will be able to raise additional monies in the ongoing financing, will be able to consummate such a merger, or will be able to raise monies in a financing subsequent to the merger, and if so on attractive terms.

Note 16 - Acquisition of hereUare Communications, Inc.

On August 25, 2006, the Company entered into an Agreement and Plan of Merger (the "Agreement"), with hereUare Communications, Inc., a privately-held Delaware corporation ("hereUare"). The transaction closed on September 22, 2006 and pursuant to terms of the Agreement, the Company effectively acquired hereUare as a wholly owned subsidiary of the Company.  hereUare is an operator of web-based search engine and other Internet software solutions founded in 2002.  As a result, the assets and liabilities of hereUare as of September 30, 2006 have been included in the consolidated financial statements of this quarterly report.

The consideration paid by the Company for 100% of the outstanding shares (15,985,500 shares) of hereUare prior to the transaction, consisted of a total of 15,985,500 shares of newly issued common stock of the Company. 

The acquisition price is estimated at $31,971,000 which is determined by the number shares of the Company's stock issued at $2 per share, the fair market value of the shares as evidenced by the sale of the Company's shares to investors immediately prior to the closing of the acquisition. The amount of acquisition price in excess of the net equity value of hereUare on the acquisition date is recorded on the consolidated balance sheet as Deemed Dividend of ($30,809,799) because major shareholder and CEO of hereUare is also a major shareholder and CEO of the Company at the time of the acquisition.

The following is the proforma combined financial information of the Company and hereUare, for the three and nine month periods ended September 30, 2006 and 2005, assuming the transaction had been consummated at the beginning of the fiscal years of 2006 and 2005:

                                                  Proforma (unaudited)
                               --------------------------------------------------------
                                Three Month Periods Ended     Nine Month Periods Ended
                                      September 30,                 September 30,
                                   2006          2005            2006          2005
                               ------------  ------------    ------------  ------------
Statement of Operations:
  Revenues                     $    34,149   $     1,765     $    54,112   $     9,069
  Cost of sales                     23,689           -            47,331            -
                               ------------  ------------    ------------  ------------
  Gross profit (Loss)               10,461         1,765           6,782         9,069

  Operating expenses               564,218       248,117      10,243,142       780,772
                               ------------  ------------    ------------  ------------
  Loss from operations            (553,758)     (246,352)    (10,236,361)     (771,703)

  Other income                         808            26           6,235           722
                               ------------  ------------    ------------  ------------
  Net loss                     $  (552,950)  $  (246,326)   $(10,230,126)     (770,981)
                               ============  ============    ============  ============

  Basic & diluted loss /share       $(0.02)       $(0.01)         $(0.31)       $(0.02)







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, 2006. This discussion should be read in conjunction with the Company's consolidated financial statements and notes appearing elsewhere in this report.

Based on the experiences we had with the safe web browser and business communication software, the Company has developed a Voice over Internet Protocol ("VoIP") telephony product. Our VoIP service, branded as "hereUare Connected," is a true peer-to-peer (P2P) solution, delivering high quality audio while utilizing minimal (20kbps) bandwidth overhead.  Our Softphone is a multi-media application that works in association with our VoIP technology and enables a user to make calls directly from a personal computer or laptop and allows a customer to communicate over the Internet. Appearing as an image of a telephone on a customer's computer, the Softphone application can be downloaded from our web site and uses simple hardware such as a USB phone or headset connected to the computer.  hereUare Connected's Softphone uses Windows software that will eventually allow customers to incorporate Instant Messaging (IM) and email.  The solution also contains highly secure, proprietary encryption methods and gate-keeper algorithms to ensure secure conversations, text messages, and file transfers.

The Company plans to sell its VoIP services directly to large, international phone companies and resellers wishing to gain entry into the marketplace and take advantage of the cost savings associated with VoIP.  The Company believes that VoIP allows these entities to complement their current services with one that otherwise would be cannibalizing their markets.  We have been contacting such potential customers in Vietnam, and are in the process of attempting to create partnerships with local governments and agencies in North America and other parts of the Asia Pacific region. The Company's initial marketing strategy is to leverage certain relationships our senior management team and Board of Directors have with high level contacts at certain of such entities and we are currently leveraging these relationships to try to enter the VoIP market while maintaining low costs of sales and marketing, although no assurance of success can be given.

Competition for the VoIP market includes companies that are pure-play VoIP providers such as Packet8, Lingo, Skype and Vonage, as well as larger service providers seeking to reduce cost of voice delivery and compete with new players that will continue to cannibalize their core voice revenues and customers.  These include Verizon, as well as most of the cable operators including Comcast and Time Warner that are using VoIP to provide "triple play" offerings of voice, video and data.  Currently, these companies are also working towards a "quadruple play," which includes wireless services to their customers.

At the end of 2005, the US had approximately 4 million VoIP subscribers, up nearly 300% from a 1.5 million subscribers at the end of 2004, according to latest data from Telegeography. Further research by Frost & Sullivan states that the North American VoIP residential revenues will hit $4.07 billion by 2010, up 1300% from 2004 sales of $295.1 million.  Residential subscribers are likely to replace second lines with wireless or VoIP, stated a senior analyst with Frost & Sullivan. eMarketer forecasts that by 2010, there will be 32.6 million US VoIP subscribers, equating to nearly 40% of all broadband households. eMarketer's report "Consumer VoIP: A Fierce Battle In a Larger War" notes that major telecommunications companies have traditionally monopolized the $190 billion US fixed-line telephony market. However, VoIP allows other players such as cable companies, ISPs, Internet portals and pure-play VoIP providers to compete for that revenue base. The Company would be attempting with a new and unproven product to enter this marketplace already occupied by companies many times in size, with many times its resources, and with proven products; there can be no assurance that the Company will succeed.

The Company has tested its products internally only on a limited scale. There can be no assurance that the Company's VoIP product line will prove commercially ready when tested on a larger scale by third parties. The Company began limited beta-testing of a portion of its VoIP product beginning in the 2nd quarter and throughout the 3rd quarter of 2006, and also began beta-testing of its search engine technology and Internet based classified ads solution during the 3rd quarter. The Company has generated insignificant revenue from its VoIP products and has no wholesale customers for its VoIP products as of the date of filing of this quarterly 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 consolidated 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, litigation, and value of option expenses. 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
  • The fair value method under SFAS 123R to account for our options that vested during this period; 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

During the three-month period ended September 30, 2006 the Company has been primarily active in further developing our software products and in creating a marketing and sales infrastructure. The Company released a portion of its software product during the quarter ended September 30, 2006, on a limited trial basis.

Revenues

During the three month periods ended September 30, 2006 and 2005 the Company had insignificant revenues.

Costs and Expenses

During the three-month periods ended September 30, 2006 and 2005, we incurred rent expenses in the amounts of $48,887 and $53,374 respectively.  We also had $247,734 in salaries and payroll taxes for the three-month period ended September 30, 2006 as we employed several engineers for the development of our software products; while salaries and payroll taxes for the same period in 2005 were $33,198. We paid professional fees in the amounts of $80,218 and $60,121 respectively for same periods in 2006 and 2005.  The professional fees for the fiscal 2006 third quarter were primarily for consultants in technology and business development and for legal fees, while those for the fiscal 2005 third quarter were primarily for software development and legal fees. General and administrative expenses for the quarter ended September 30, 2006 were $92,941, including $10,448 for promotional services, $22,636 for insurance, $14,311 in travel expense and non-cash compensation charges of $7,391. The general and administration expense was $94,493 for the same period in 2005.

For the nine month period ended September 30, 2006, the Company's depreciation and amortization expenses were $57,805 as compared to $7,047 for the same period in 2005. Rent expenses were $156,280 and $119,915 for the same periods in 2006 and 2005. Salaries and payroll taxes increased to $721,847 for the first nine months of 2006 as technical and marketing staff were added, from $86,263 for the same period in 2005. Professional fees were $422,633 and $238,113 for the same periods in 2006 and 2005. General and administrative expenses were $8,661,468 for the first nine months of 2006, which included $8,413,773 in non-cash compensation charge due to the fair market value of options vested during the period.

Liquidity and Capital Resources

Stockholders' equity, as of September 30, 2006, was $1,574,173 and net cash used for operating activities was $1,563,146 for the first nine months of 2006. During the same nine-month period, we purchased property and equipment plus invested into software products in aggregate of $271,768 and raised $1,034,500 from sales of common stock. Including the cash acquired from hereUare as part of the acquisition, as of September 30, 2006, the Company had only approximately $524,000 in cash and current liabilities of about $510,000. The Company had only enough cash for utilization until November so the Company began to attempt to raise funds for operations subsequent to the close of the quarter ended September 30, 2006. 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 beginning to market its software and communication products and expects to generate revenues in future periods but also expects its operations to use substantial amounts of cash, especially in the near-term. The Company currently plans to raise more monies in this financing during the quarter in order to funds its operations. The Company consummated an acquisition of a search engine software company, hereUare, during its third fiscal quarter which did not require the approval of the stockholders of the Company, and the Company issued 15,985,500 shares of common stock for this acquisition. The Company intends to conduct a subsequent financing during fiscal 2006 to raise additional working capital. However, there can be no assurance that the Company will generate material revenue from its products, will be able to raise additional monies in the ongoing financing, and if so on attractive terms.

Office-Balance Sheet Arrangements

We have no off-balance sheet arrangement that has or is reasonably likely to have a current or future effect on our financial condition, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that is material to investors.





Item 3. Controls and Procedures

(a) Disclosure Controls and Procedures.

Disclosure Controls and Procedures. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed in the Company's reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, including, without limitation, that such information is accumulated and communicated to Company management, including the Company's principal executive and financial officer, as appropriate to allow timely decisions regarding required disclosures.

Limitations on the Effectiveness of Disclosure Controls. In designing and evaluating the Company's disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, Company management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Evaluation of Disclosure Controls and Procedures. The Company's principal executive and financial officers have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Exchange Act Rules 13a-14(c) as of September 30, 2006, and have determined that they are reasonably effective, taking into account the totality of the circumstances, including the limitations described above.

(b) Internal Control over Financial Reporting.

Our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) is designed to provide reasonable assurance regarding the reliability of our financial reporting and preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. There were no significant changes in the Company's internal control over financial reporting that occurred during the third quarter of fiscal 2006 that have materially affected, or are reasonably likely to materially affect, such control.






PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings. None

Item 2. Unregistered Sales of Equity, Securities and Use of Proceeds.

In the quarterly period ended September 30, 2006, the Company sold an aggregate of 517,250 shares of common stock to 27 individuals in a private placement exempt from registration under Rule 506 of Regulation D of the Securities Act of 1933.  The shares were sold at a price of $2.00 per share for an aggregate proceed of $1,034,500.  All of the investors were accredited investors.

Item 3. Defaults Under Senior Securities. None

Item 4. Submission of Matters to a Vote of Security Holders. None. The acquisition of hereUare did not require the approval of the stockholders of the Company.

Item 5. Other Information. None

Item 6. Exhibits.

Exhibit 31.1 Rule 13a-14(a) / 15d-14(a) Certification of Benedict Van, CEO, is included beginning on page 21
Exhibit 31.1 Rule 13a-14(a) / 15d-14(a) Certification of Anthony K. Chan, CFO, is included beginning on page 22
Exhibit 32.0 Section 1350 Certifications, is included beginning on page 25






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 17, 2006 by the undersigned, thereunto duly authorized.

 

PEOPLENET INTERNATIONAL CORPORATION

(Registrant)

By: /s/ Benedict Van
Benedict Van
Chief Executive Officer






EXHIBIT INDEX

Exhibit 31.1 Rule 13a-14(a) / 15d-14(a) Certification of Benedict Van, CEO, is included beginning on page 20
Exhibit 31.1 Rule 13a-14(a) / 15d-14(a) Certification of Anthony K. Chan, CFO, is included beginning on page 22
Exhibit 32.0 Section 1350 Certifications, is included beginning on page 23






Exhibit 31.1

Rule 13a-14(a) / 15d-14(a) Certification of Benedict Van, CEO

I, Benedict Van, Chief Executive Officer, of PeopleNet International Corporation, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of PeopleNet International Corporation for the quarterly period ended September 30, 2006;

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 small business issuer as of, and for, the periods presented in this quarterly report;

4. The small business issuer's other certifying Officer and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have;

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, 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 small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures; as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's first fiscal quarter that has materially affected or is reasonably like to affect, the small business issuer's internal control over financial reporting;

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function);

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which could adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.


Date: November 17, 2006

/s/ Benedict Van
Benedict Van
Chief Executive Officer






Exhibit 31.1

Rule 13a-14(a) / 15d-14(a) Certification of Anthony K. Chan, CFO

I, Anthony K. Chan, Chief Financial Officer, of PeopleNet International Corporation, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of PeopleNet International Corporation for the quarter period ended September 30, 2006;

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 small business issuer as of, and for, the periods presented in this quarterly report;

4. The small business issuer's other certifying Officer and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have;

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, 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 small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures; as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's first fiscal quarter that has materially affected or is reasonably like to affect, the small business issuer's internal control over financial reporting;

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function);

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which could adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.


Date: November 17, 2006

/s/ Anthony K. Chan
Anthony K. Chan
Chief Financial Officer






Exhibit 32.0

SECTION 1350 CERTIFICATIONS

We, Benedict Van, Chief Executive Officer and Anthony K. Chan, 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 our knowledge:

1. the Quarterly Report on Form 10-QSB of the Company for the period ended September 30, 2006 (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 17, 2006

/s/ Benedict Van
Benedict Van
Chief Executive Officer

and

/s/ Anthony K. Chan
Anthony K. Chan
Chief Financial Officer


The material contained in Exhibit 32.0 is not deemed "filed" with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.




-----END PRIVACY-ENHANCED MESSAGE-----