LOCATEPLUS HOLDINGS CORP - FORM 10-Q

Attached files

file	filename
EX-31.1 - CEO CERTIFICATION Q3 09 - LOCATEPLUS HOLDINGS CORP	ceocertq309.htm
EX-31.2 - CFO CERTIFICATION Q3 09 - LOCATEPLUS HOLDINGS CORP	cfocertq309.htm
EX-32.1 - CEO CFO SOX Q3 09 - LOCATEPLUS HOLDINGS CORP	ceocfosoxq309.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

¨	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 000-49957

LocatePLUS Holdings Corporation

(Exact name of registrant as specified in its charter)


Delaware		04-3332304
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


100 Cummings Center, Suite 235m, Beverly, MA		01915
(Address of principal executive offices)		(Zip Code)

(978) 921-2727

(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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ¨ No x

The number of shares of Common Stock outstanding at November 13, 2009 was 49,993,987

Table of Contents

		Page

PART I	FINANCIAL INFORMATION

ITEM 1	Financial Statements

	Consolidated condensed balance sheets as of September 30, 2009 (un-audited) and December 31, 2008	1

	Un-audited consolidated condensed statements of operations for the three and nine months ended September 30, 2009 and 2008	2

	Un-audited consolidated condensed statements of cash flows for the nine months ended September 30, 2009 and 2008	3

	Notes to un-audited consolidated condensed financial statements	4

ITEM 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	8

ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	16

ITEM 4	Controls and Procedures	17


PART II	OTHER INFORMATION

ITEM 1	Legal Proceedings	18

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	18

ITEM 3	Defaults Upon Senior Securities	19

ITEM 4	Submission of Matters to Vote of Security Holders	19

ITEM 5	Other Information	19

ITEM 6	Exhibits and Reports on Form 8-K	19

	SIGNATURES AND CERTIFICATION	23

* * *

Table of Contents

PART I . FINANCIAL INFORMATION

Item 1. Financial Statements


LocatePLUS Holdings Corporation
Consolidated Condensed Balance Sheets
	September 30, 2009 (un-audited)			December 31, 2008 -
Assets
Current assets:
Cash and cash equivalents	$	142,101		$	92,465
Accounts receivable		726,839			510,964
Prepaid expenses and other current assets		163,284			222,820

Total current assets		1,032,224			826,249

Property and equipment, net		664,608			715,553
Goodwill		850,413
Other assets		95,840			79,464

Total assets	$	2,643,085		$	1,621,266

Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable		978,426			1,139,317
Accrued expenses		3,923,148			3,474,152
Deferred revenue		359,129			306,875
Current Notes Payable		336,849			607,883
Current Convertible notes payable		3,046,761			2,586,992

Total current liabilities		8,644,313			8,115,219

Notes payable		-			247
Long Term Convertible notes payable		1,500,000			1,500,000

Total liabilities		10,144,313			9,615,466

Commitments and contingencies

Stockholders’ equity:
Common Stock , $0.01 par value, 50,000,000 shares authorized
49,993,987 shares issued and outstanding at September 30, 2009		499,940			237,955
Additional paid-in capital		39,399,198			39,395,136
Warrants		3,627,194			3,627,194
Shares pending issuance		900,000
Impairment on Assets		(873,500	)		(873,500	)
Accumulated deficit		(51,054,060	)		(50,380,985	)

Total stockholders’ equity		(7,501,228	)		(7,994,200	)

Total liabilities and stockholders’ equity		2,463,085			1,621,266

The accompanying notes are an integral part of these un-audited consolidated financial statements.

See accompanying notes and accountants report

Table of Contents

LocatePLUS Holdings Corporation
Consolidated Statement of Operations



	For the three months ended September 30,						For the nine months ended September 30,
	2009			2008			2009			2008

Revenues
Information Sales – CD Rom		103,191			134,253			277,386			356,028
Information Sales - Online		1,405,839			1,428,010			4,159,543			4,302,311
Information Sales - Channel		320,948			554,903			985,247			1,671,402
Information Sales - Wireless		1,759			1,439			4,806			4,858

Total revenues	$	1,831,737		$	2,118,605		$	5,426,982		$	6,334,599

Costs and expenses:
Costs of revenues
CD Rom		23,223			8,440			40,020			38,623
Online and Channel		357,858			372,532			1,068,422			1,053,189
Selling and marketing		286,169			420,945			886,259			1,182,850
General and administrative		1,132,770			1,213,056			3,678,571			3,845,183
Research and development		132			48,531			29,424			111,690

Total operating expenses	$	1,800,152		$	2,063,504		$	5,702,696		$	6,231,535

Operating income (loss)		31,585			55,101			(275,714	)		103,064

Other income (expense):
Interest expense		(199,249	)		(150,516	)		(400,835	)		(518,116	)
Other income		440			855			3,365			6,392

Net loss	$	(167,224	)	$	(94,560	)	$	(673,184	)	$	(408,660	)

Basic and diluted net loss per share	$	(0.003	)	$	(0.005	)	$	(0.016	)	$	(0.028	)

Shares used in computing basic and diluted net loss per share		49,808,203			20,598,586			42,595,824			14,464,767

Table of Contents


LocatePLUS Holdings Corporation
Consolidated Statements of Cash Flows

	For the nine September			months ended 30,
	2009			2008
Cash flows from operating activities:
Net income (loss)	$	(673,184	)	$	(408,660	)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization of property and equipment		91,782			452,358
Provision for doubtful accounts		7,000			(56,369	)
Interest expense related to warrants issued with debt		259,651			197,051
Acquisition of Goodwill		(850,413	)		-
Shares pending issuance		900,000			-
Stock Based Compensation		-			42,977
Changes in assets and liabilities:
Accounts receivable		(222,875	)		172,861
Prepaid expenses and other assets		59,536			25,358
Accounts payable		(262,892	)		(215,469	)
Accrued expenses		448,996			(50,479	)
Deferred revenue		52,254			21,220
Security deposits		(16,376	)		-

Net cash provided (used by) by operating activities		(206,521	)		180,848

Cash flows from investing activities:
Purchases of property and equipment		(40,837	)		(1,231	)

Net cash used in investing activities		(40,837	)		(1,231	)

Cash flows from financing activities:
Repayment of debt		(78,006	)		(113,035	)
Proceeds from issuance of debt		375,000			-
Payments of obligations under capital lease		-			(33,590	)

Net cash used in financing activities		296,994			(146,625	)

Net increase (decrease) in cash and cash equivalents		49,636			32,992

Cash and cash equivalents, beginning of period		92,465			96,142

Cash and cash equivalents, end of period	$	142,101		$	129,134

The accompanying notes are an integral part of these un-audited consolidated financial statements.

See accompanying notes and accountants report

Table of Contents

1.	Nature of Business and Basis of Presentation

LocatePLUS Holdings Corporation (the “Company”) was initially incorporated in Massachusetts in 1996 as Worldwide Information, Inc. In July 1999, the Company reincorporated in Delaware and changed its name to LocatePLUS.com, Inc. On August 1, 2001, the Company changed its name from LocatePLUS.com, Inc. to LocatePLUS Holdings Corporation as part of a corporate restructuring. Also, as part of the restructuring, the Company created two wholly-owned subsidiaries, LocatePLUS Corporation and Worldwide Information, Inc. The restructuring was completed by commonly-controlled entities and, accordingly, was accounted for based on historical cost. In September 2003, the Company, through its newly formed wholly owned subsidiary Entersect Corporation, f.k.a Certifion Corporation, acquired all of the assets of Project Entersect Corporation. The acquisition was accounted for as a purchase and is recorded with the Company's operations from the date of purchase through December 31, 2003. In October 2003, the Company merged Voice Power Technology into its newly formed wholly owned subsidiary Dataphant, Inc. There were no assets acquired in this acquisition and the Company issued 2,500,000 shares of its Class B Non-Voting common stock to the stockholders of Voice Power Technology in consideration for a two year non-competition agreement with these stockholders. On January 6, 2004, the Company formed Metrigenics, Inc, a wholly-owned subsidiary.

On September 24, 2009, the Company acquired all the stock of Employment Screening Profiles, Inc.(d/b/a Trubackgrounds), a Florida corporation (“Trubackgrounds”), Oldsmar (Tampa) Florida, engaged in the business of developing and delivering integrated, customized Web-enabled solutions designed to aid in background verification, applicant management and human resource collaboration processes, in exchange for nine-million (9,000,000) shares of common stock of the company. In addition, the Company is obligated to deliver all nine-million shares of Common Stock on or before September 1, 2011. The seller shall have the right to require the Company to deliver up to four million five hundred thousand (4,500,000) shares at any time after September 1, 2010. If the Company is unable to deliver the four million five hundred thousand shares by September 1, 2010, then the seller shall be entitled to an escrow fee payable in cash on a quarterly basis. The escrow fee shall be calculated at a rate of five percent (5.00%) per annum for the first 12 months following closing, then seven and one-half percent (7.5%) per annum for months 13 through 18 inclusive and then twelve and one-half percent (12.5%) per annum thereafter (multiplied by the product of the number of shares remaining in the Escrow account for the benefit of the seller and $0.1944). See www.trubackgrounds.com. Trubackgrounds serves large and small businesses with systems and information designed to enable intelligent decisions and reducing costs through automation. Trubackgrounds will continue to be operated as a wholly-owned subsidiary of the Company and will collaborate in providing enhanced service capability to the Company’s customers.

All inter-company accounts and transactions have been eliminated in consolidation.

The Company provides access to public information such as bankruptcy filings, real estate transactions, motor vehicle records, and drivers’ licenses to commercial, private sector and law enforcement entities in the United States. In 1999 and prior periods, this information was delivered to customers on compact disks. In March 2000, the Company began providing information through the Internet and in 2002 began providing information through the use of handheld wireless devices.

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and notes receivable. The risk with respect to cash and cash equivalents is minimized by the Company’s policies in which such investments are placed only with highly rated financial institutions and in instruments with relatively short maturities. The financial stability of these financial institutions is constantly reviewed by senior management. The notes receivable are placed with unrelated companies that are also reviewed by management. Consequently, the carrying value of cash and cash equivalents, and notes receivable approximates their fair value based on the short-term maturities of these instruments.

Revenue Recognition

The Company provides access to public information such as bankruptcies, real estate transactions and motor vehicles and drivers’ licenses. The Company provides this information as an online service through its website, wirelessly to handheld wireless devices, via XML over the Internet to Channel Partners, or through licenses of the information on compact disks.

The Company updates the information contained in compact disks (CD ROMs) either quarterly or semi-annually. Revenue is recognized upon delivery to the customer of a compact disk, provided that no significant obligations remain, evidence of the arrangement exists, the fees are fixed or determinable, and collectability is reasonably assured. Subsequent to October 2002, compact disks are sold individually and customers may choose to have the disks automatically shipped and billed.

Online customers are charged fees which vary based on the type of information requested. Revenue is recognized when the information requested is downloaded, there is evidence of an arrangement, the fees are fixed or determinable, and collectability is reasonably assured.

Wireless customers using LocatePLUS Anywhere are charged a monthly subscription fee billed in arrears. Revenue is recognized on a monthly basis when there is evidence of an arrangement, the fees are fixed or determinable, and collectability is reasonably assured.

Table of Contents

Un-audited Interim Financial Statements

The accompanying interim consolidated condensed financial statements are un-audited and have been prepared in accordance with accounting principles generally accepted in the United States of America. These statements include the accounts of LocatePLUS Holdings Corporation and its subsidiaries. Certain information and footnote disclosures normally included in LocatePLUS Holdings Corporation’s annual consolidated financial statements have been condensed or omitted in accordance with Securities and Exchange Commission ("SEC") rules for interim financial statements. The interim consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring accruals) necessary to fairly present the financial position as of September 30, 2009 and the results of operations and cash flows for the three and nine months then ended. There were no material unusual charges or credits to operations during the recently completed fiscal quarter.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2008, which are contained in LocatePLUS Holdings Corporation’s Annual Report filed on Form 10-K filed with the Securities and Exchange Commission on May 14, 2009.

Liquidity and Operations

The financial statements included in this quarterly report have been prepared assuming that the Company will continue as a going concern, and contemplate continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred significant net losses in each of the last two years. In addition, the Company has incurred an accumulated deficit of approximately $51 million through September 30, 2009.

On March 20, 2007, the Company issued a secured convertible debenture to Cornell Capital Partners (now YA Global Investments, L.P. ) in the aggregate principal amount of $6,000,000 of which $3,000,000 was advanced immediately. The second installment of $2,000,000 will be advanced immediately prior to the filing by the Company with the Securities and Exchange Commission (the "Commission") of the Registration Statement. The last installment of $1,000,000 will be advanced immediately prior to the date the Registration Statement is declared effective by the Commission. The Debentures mature on the third anniversary of the date of issuance. The holder of the Debentures may convert at any time amounts outstanding under the Debentures into shares of common stock of the Company at a fixed conversion price per share equal to $0.314. Under the Purchase Agreement the debentures are secured by substantially all of the Company's, and its wholly owned subsidiaries’ assets.

Under the Purchase Agreement, we also issued to Cornell five-year warrants in six separate series as follows:

A Warrants to purchase 2,384,814 shares of common stock at $0.314 per share;

B Warrants to purchase 2,186,079 shares of common stock at $0.343 per share;

C Warrants to purchase 2,017,919 shares of common stock at $0.372 per share;

D Warrants to purchase 1,748,863 shares of common stock at $0.429 per share;

E Warrants to purchase 1,499,026 shares of common stock at $0.50 per share;

F Warrants to purchase 1,500,000 shares of common stock at $0.01 per share.

Table of Contents

2. Other Assets

Other assets consist of the following at September 30, 2009:

Restricted trading securities	$ 1,500
Security deposits and other	$ 94,340

Total	$ 95,840

Restricted trading securities consist of 200,000 restricted shares of common stock in Data Evolution Holdings, Inc. (DEH), which trades over the counter under the symbol DTEV. These shares were acquired as part of an agreement to provide service and data to DEH. The service and data was valued at $875,000. At the time the service and data was valued, November 22, 2004, the trailing 10 day average closing price of DTEV was $5.96 per share, or $1,192,000. Due to the fact that these shares were restricted, a mutually agreed upon 25% liquidity discount was applied to the value, or $875,000, as such 200,000 shares were exchanged for the service. At December 31, 2008, the 10-day trailing average closing price was $0.01 per share, or the value of the shares was $2,000. An impairment to the current value has been recorded to adjust the security carrying value to the original 25% discount. The company recorded an impairment of $873,500 and the adjusted carrying value is now $1,500.

3. Stock Options

Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R)(FASB ASC 718), “Share Based Payment” (“SFAS No. 123(R)”) using the modified prospective transition method. Under that transition method, compensation cost recognized in the nine months ended September 30, 2009 includes: (a) compensation cost for all stock-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all stock-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). Results for prior periods have not been restated, as provided for under the modified-prospective method.

SFAS No. 123(R) requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes-Merton (“BSM”) option valuation model, which incorporates various assumptions including volatility, expected life, and interest rates. The assumptions used for the nine-month periods ended September 30, 2009 and September 30, 2008 and the resulting estimates of weighted-average fair value per share of options granted during those periods are as follows:

	For the nine months ended
	September
	2009	2008
Expected life	6 years	6 years
Volatility	33%	31%
Risk free interest rate	4.54 %	4.86 %
Dividend yields	-	-
Weighted-average fair value of options granted during the period	-	-

The expected life of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. For 2009 and 2008, expected stock price volatility is based on a combination of historical volatility of the Company’s stock and the one-year implied volatility of its traded options, for the related vesting periods. Prior to the adoption of SFAS 123R, expected stock price volatility was estimated using only historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The Company has not paid dividends in the past and does not plan to pay any dividends in the near future.

Table of Contents

4. Notes Payable

In 2001, the Company issued a Convertible promissory note in the original principal amount of $10,000, due on demand that bears interest at the rate of 12% per annum. The note is convertible into 44,444 shares of Common Stock at the note holder’s option. The note requires quarterly payment of interest until the principal is repaid or converted.

During 2003, the Company received $2.3 million, by issuing subordinated promissory notes bearing simple interest ranging from 10% and 12% per annum. In 2007, the terms of these notes were re-negotiated and now bear interest ranging from 19% to 30%. The balance of this debt at September 30, 2009 is $80,135

On March 20, 2007, the Company issued a secured convertible debenture to Cornell Capital Partners (now YA Global Investments, L.P.) in the aggregate principal amount of $6,000,000 of which $3,000,000 was advanced immediately. The second installment of $2,000,000 will be advanced immediately prior to the filing by the Company with the Securities and Exchange Commission of the Registration Statement. The last installment of $1,000,000 will be advanced immediately prior to the date the Registration Statement is declared effective by the Commission. The Debentures mature on the third anniversary of the date of issuance. The holder of the Debentures may convert at any time amounts outstanding under the Debentures into shares of common stock of the Company at a fixed conversion price per share equal to $0.314. Under the Purchase Agreement the debentures are secured by substantially all of the Company's, and its wholly owned subsidiaries’ assets.

Under the Purchase Agreement, we also issued to Cornell five-year warrants in six separate series as follows:

A Warrants to purchase 2,384,814 shares of common stock at $0.314 per share;

B Warrants to purchase 2,186,079 shares of common stock at $0.343 per share;

C Warrants to purchase 2,017,919 shares of common stock at $0.372 per share;

D Warrants to purchase 1,748,863 shares of common stock at $0.429 per share;

E Warrants to purchase 1,499,026 shares of common stock at $0.50 per share;

F Warrants to purchase 1,500,000 shares of common stock at $0.01 per share.

Also in connection with the sale and issuance of the Debentures, the Company entered into a settlement agreement with Dutchess Private Equities Fund, Ltd. for the settlement of a dispute regarding the amount due under debt instruments issued by the Company to Dutchess during 2005 and 2006. Pursuant to the terms of the Settlement, the Company immediately paid a cash amount of $1,500,000 with two additional cash payments in the amount of $300,000 each to be made on the date that (i) the Company files the Registration Statement (or, if earlier, within 45 days) and (ii) the Registration Statement is declared effective (or, if earlier, within 145 days). The Company also issued a Note in the amount of $1,500,000 and agreed to reduce to $0.10 per share the exercise price of the warrants issued to Dutchess. Dutchess agreed to terminate any security interest in the Company’s assets upon the Initial Payment.

On December 11, 2007, the Company received a letter dated December 6, 2007 ( the "Notice Letter"), from YA Global Investments, L.P., (formerly known as Cornell Capital Partners, L.P.) notifying the Company of certain Events of Default under the Secured Convertible Debenture dated March 20, 2007 of the Company (the "Debenture"). As a result of this default, the entire note has been re-classified as short term.

Table of Contents

5. Legal Proceedings

On September 15, 2008, Carl L. Green on behalf of Dawn Martinson Green, a stockholder, filed a complaint against the Company, James Fields, and Jon Latorella,, Carl Green et al v LocatePlus Holdings et al, Delaware Court of Chancery C.A. No 4032-CC. . The defendants have moved to dismiss and moved for a more definite statement. The Plaintiffs generally allege that the individual defendants somehow acted wrongfully when they agreed to allow certain debt to be exchanged for stock. The Plaintiffs allege against the individual defendants that as directors they breached their duty of loyalty by "enriching and entrenching" themselves and that they engaged in self-dealing by diluting the shares of the Company for the purpose of entrenching themselves. Against the Company the plaintiffs allege that the Company failed to allow an inspection of books and records. On March 15, 2009, the court granted the Company’s motion to dismiss the complaint.

On April 3, 2009, the Company filed a lawsuit styled LocatePLUS Holdings Corp., v. Dutchess Capital Management, LLC, James Fields et al, in Suffolk County Superior Court, in Massachusetts (Case No. 09-385-A). The Company is seeking the return of 19,866,461 shares of our common stock (the “Dutchess Shares”) improperly issued to and converted by Dutchess Capital Management, LLC and its related entities (“Dutchess”). Specifically, the lawsuit alleges that Dutchess breached the debenture agreements between LocatePLUS and Dutchess by converting more stock than the maximum allowable under the agreements (4.99%). In addition, the lawsuit alleges that Dutchess violated Massachusetts state law by charging usurious interest and by knowingly and willfully committing unfair and deceptive acts or practices. The suit names the former President and CEO of the Company, James Fields (“Fields”) as an improper transferee the Dutchess Shares. The lawsuit seeks, among others, a temporary restraining order and a preliminary injunction enjoining Dutchess and Fields from transferring the improperly-converted Dutchess Shares from voting the Shares on any corporate matters until an arbitration can be completed, seeks the return of the improperly-converted Shares, requests unspecified compensatory damages and costs, and prays for such other relief as the court deems proper. Fields and Dutchess denied liability. Fields also counter-claimed for amounts due under the severance provisions in his employment agreement.

On or about May 17, 2009, the Company signed an agreement with Fields settling all issues contained in the lawsuit, as well as his counterclaims. The case against Fields, including his counterclaims, was dismissed on May 18, 2009. The Dutchess Shares are currently held in escrow pending completion of the payments required under the Settlement Agreement.

LocatePLUS intends to pursue the remaining claims vigorously to protect the interests of its shareholders.

6. Segment Information

The Company has two reportable segments which management operates as distinct sales organizations; these two segments are segregated by the nature of products and services provided. The Company measures and evaluates its two reportable segments based on revenues and costs of revenues. The CD ROM segment provides information on motor vehicles and drivers’ licenses, contained on compact disks. The online segment provides information on individuals throughout the United States of America through the Company’s website. No material operating costs, other than costs of revenues, or assets and liabilities relate to the CD ROM segment.

	For the three months ended September 30,				For the nine months ended September 30,
	2009			2008		2009		2008
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Reportable segment sales:
CD Rom	$	103,191	$	134,253	$	277,386	$	356,028
Online and Channel		1,726,788		1,982,913		5,144,790		5,973,713
Total Reportable segment sales	$	1,829,979	$	2,117,166	$	5,422,176	$	6,329,741

Costs of segment sales:
CD Rom		23,223		8,440		40,020		38,623
Online and Channel		357,858		372,532		1,068,422		1,053,189
Total costs of reportable segment sales	$	381,081	$	380,972	$	1,108,442	$	1,091,812

7. Net Income (Loss) Per Share

The computations of basic and diluted income (loss) per common share are based upon the weighted average number of common shares outstanding during the period. The Company’s Common Stock potentially issuable upon the exercise of stock options and warrants are anti-dilutive for the period ending September 30, 2009 and were not included in the computations for the diluted net loss per share.

8. Subsequent Events

None

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our consolidated financial condition and results of operations together with our un-audited consolidated financial statements and related notes included elsewhere in this quarterly report. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of 1934, each as amended. Such forward-looking statements are based on current information and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from those described. Factors that may cause such differences include but are not limited to, uncertainties relating to our ability to successfully compete in our industry, uncertainties regarding our ability to obtain financial and other resources for our product development and commercial activities, and uncertainties relating to privacy regulations. These factors, and others, are discussed from time to time in the Company’s filings with the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after the date they are made. Further discussion of risk factors is also available in our registration statements filed with the Securities and Exchange Commission.

Overview

The LocatePLUS Group is a business-to-business and business-to-government provider of public information via our proprietary data integration solutions. Since 1996, we have sold a CD-ROM-based product, which we refer to as Worldwide Information™, that enables users to search certain motor vehicle records and driver’s license information in multiple states through a dynamic search engine, using complete or partial information. Since March 1, 2000, we have maintained a database that is accessible through the Internet, known as LocatePLUSÔ. Our LocatePLUSÔ product contains searchable and cross-referenced public information on individuals throughout the United States, including individuals’ names, addresses, dates of birth, Social Security numbers, prior residences, and, in certain circumstances, real estate holdings, recorded bankruptcies, liens, judgments, drivers’ license information and motor vehicle records. Since September 2003, our wholly-owned subsidiary, Entersect Corporation, f.k.a Certifion Corporation , has offered personal information for self-certification purposes.

We distribute our content both directly (through the Internet in the case of our LocatePLUSÔ product and through the mail in the case of our Worldwide Information™ CD-ROM) and through “channel partner” arrangements, by which third-party database providers obtain access to our databases in consideration for a royalty (such as job search and on-line dating sites, in the case of our EntersectÔ product).

On September 1, 2003, through our wholly-owned subsidiary, Entersect Corporation, f.k.a Certifion Corporation, we acquired all the assets of Project Entersect Corporation in consideration for $62,662. The acquisition was accounted for as a purchase and is recorded and reflected with our operations from the time of purchase. The subsidiary operates under the trade name Entersect. Entersect provides a self-identification and validation service for online job posting and dating sites.

Table of Contents

On October 17, 2003, through our wholly-owned subsidiary, Dataphant, Inc., we acquired Voice Power Technologies, Inc., a Texas-based provider of data technology. In connection with this acquisition, Voice Power Technologies, Inc. merged with and into Dataphant, Inc. As consideration for the merger, shareholders of Voice Power Technologies, Inc. received an aggregate of 2,500,000 shares of LocatePLUS Class B Non-voting Common Stock. Through this acquisition, we now have information concerning virtually all landline phone numbers in the United States and approximately 25% of United States cell phone numbers. This data has been integrated into our current product lines.

On January 6, 2004, the Company formed a wholly-owned subsidiary, Metrigenics, Inc., with operations located in New York State. Metrigenics was formed to develop new ways to integrate biometrics with data. Metrigenics has finished first stage testing on matching DNA to facial characteristics. In March, 2009, management made the decision to suspend funding of this subsidiary which consisted primarily of research and development costs. Management is hopeful that it will be able to resume funding by year end and that a beta product be ready to test within that timeframe.

Although our products consist primarily of publicly available – and therefore non-proprietary – information, we integrate data in our products in a proprietary manner that allows users to access data rapidly and efficiently. In addition, our LocatePLUS™ product utilizes proprietary methodologies to link data from different sources associated with a given individual to a single background report, even though the sources of data with respect to a given individual may be incomplete or contain only partial information with respect to that individual.

During the quarter ended June 30, 2003 we launched our patent-pending Bull's-Eye technology, which is currently integrated into a LocatePLUSÔ product. Bull's-Eye is the first search tool in our industry that allows users to correctly identify a person's current address based upon certain currently available information. Typically, when a search is performed on an individual using competing technologies, a number of addresses are pulled from a database of public records. Bull's-Eye enhances or improves the search process by cross-referencing current public utility and telephone records with historical data to more accurately identify a person's current address. We have also sought patent protection with respect to aspects of our CareerScanÔ and TrustmeIDÔ products.

On February 23, 2009, the Company announced that at a meeting of the Board of Directors held on February 18, 2009, the Board of Directors voted to terminate the employment of James C. Fields, the then current President, Chief Executive Officer, Acting Chief Financial Officer and Treasurer. Following this decision, the Board voted to appoint Geoffrey Lee, President of Entersect, a wholly owned subsidiary of LocatePLUS Holdings and Vice President of Online Services for LocatePLUS as Interim Chief Executive Officer and President. At a Board meeting held on February 24, 2009, the Board elected Mr. Lee to the additional position of Acting Treasurer.

Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results. Note that our preparation of our Consolidated Condensed Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Our accounting policies that are the most important to the portrayal of our financial condition and results, and which require the highest degree of management judgment relate to revenue recognition and the provision for uncollectible accounts receivable. We estimate the likelihood of customer payment based principally on a customer’s credit history and our general credit experience. To the extent our estimates differ materially from actual results, the timing and amount of revenues recognized or bad debt expense recorded may be materially misstated during a reporting period.

Table of Contents

Revenue associated with our Worldwide InformationÔ product is recognized upon delivery to the customer of a CD-ROM, provided that no significant obligations remain, evidence of the arrangement exists, the fee is fixed or determinable and collectibility is reasonably assured. Information in our Worldwide InformationÔ product is updated and released either quarterly or twice a year. In the case of our LocatePLUSÔ product, we charge a fee to customers, which varies based upon the type and quantity of information requested. Capitalizing on the synergies gained through the Companies acquisitions, in 2004, Worldwide was able to utilize the technology acquired through Voicepower Technologies, when it merged into Dataphant, to develop the industry's first ever searchable

non-published and cell phone CD-ROM.

Revenue from our LocatePLUSÔ product is recognized when there is either an agreed upon royalty fee or the requested information is downloaded, there is evidence of an arrangement, the fee is fixed or determinable, and collectability is reasonably assured. We charge our fees to customers’ credit cards (approximately 60% of our current LocatePLUSÔ customer base) or invoice customers for such fees on a monthly basis (approximately 40% of our LocatePLUSÔ customer base).

Revenue from our EntersectÔ product is recognized when certifications are purchased online (and paid for via credit card) or the requested information is downloaded, there is evidence of an arrangement, the fee is fixed or determinable, and collectibility is reasonably assured.

Revenue from Dataphant is generated exclusively through inter-company sales to our other wholly owned subsidiaries and eliminated on consolidation.

Revenue from the sale of web-based solutions for employment screening and related activities is recognized upon the delivery of the system and upon receipt of ongoing service fees.

Our costs of revenue consist primarily of our costs to obtain data and software maintenance expenses, which consist primarily of payroll and related expenses for information technology personnel, Internet access and hosting charges, and expenses relating to Web content and design. We obtain our data from multiple sources and we have entered into various license agreements with related data providers. In the nine months ended September 30, 2009 and 2008, we recorded $1,068,233 and $1,053,189 respectively, in costs related to these agreements. In the event that any of our primary sources of data became unavailable to us, we believe that we would be able to integrate alternate sources of data without significant disruption to our business or operations, as there are currently a number of providers of such data.

Our selling and marketing expenses consist of salaries and commissions paid to sales representatives for the products that we offer, as well as direct mail advertising campaigns and magazine and Internet-banner advertisements.

General and administrative expenses consist of payroll and related expenses for non-sales, non-research and development and executive and administrative personnel, facilities expenses, insurance, professional services, travel and other miscellaneous expenses.

Interest income consists of earnings on our cash and cash equivalents, short-term investments and notes receivable. Interest expense is primarily attributable to various notes issued through September 30, 2009. As of September 30, 2009, we had gross notes payable (current and long-term) totaling $4,977,648.

We have incurred significant net losses since our inception. We incurred net losses of approximately $673,000 during the nine months ended September 30, 2009 and $409,000 during the nine months ended September 30, 2008. Our accumulated deficit as of September 30, 2009 was approximately $51 million.

On March 20, 2007, we issued a secured convertible debenture to Cornell Capital Partners (now YA Global Investments, L.P.) in the aggregate principal amount of $6,000,000 of which $3,000,000 was advanced immediately. The second installment of $2,000,000 will be advanced immediately prior to the filing by the Company with the Securities and Exchange Commission (the "Commission") of the Registration Statement. The last installment of $1,000,000 will be advanced immediately prior to the date the Registration Statement is declared effective by the Commission. The Debentures mature on the third anniversary of the date of issuance. The holder of the Debentures may convert at any time amounts outstanding under the Debentures into shares of common stock of the Company at a fixed conversion price per share equal to $0.314. Under the Purchase Agreement the debentures are secured by substantially all of the Company's, and its wholly owned subsidiaries’ assets.

Table of Contents

Under the Purchase Agreement, we also issued to Cornell five-year warrants in six separate series as follows:

A Warrants to purchase 2,384,814 shares of common stock at $0.314 per share;

B Warrants to purchase 2,186,079 shares of common stock at $0.343 per share;

C Warrants to purchase 2,017,919 shares of common stock at $0.372 per share;

D Warrants to purchase 1,748,863 shares of common stock at $0.429 per share;

E Warrants to purchase 1,499,026 shares of common stock at $0.50 per share;

F Warrants to purchase 1,500,000 shares of common stock at $0.01 per share.

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Revenues. Revenues from our Worldwide InformationTM CD-ROM product decreased to $103,191 for the three months ended September 30, 2009 from $134,253 for the three months ended September 30, 2008, a decrease of 23%. This decrease is attributable to the timing of shipments of product as revenue is only recognized upon shipment. Revenues from our Internet-based products decreased to $1,405,839 for the three months ended September 30, 2009, as compared to $1,428,010 for the three months ended September 30, 2008, a decrease of 2%. Revenue from channel partners decreased to $320,948 from $554,903 a decrease of 42%. This decrease is attributable to the loss a of large channel partner agreement in 2008. Revenues from our wireless product, LocatePLUS AnyWhere™, were $1,759 during the three months ended September 30, 2009 as compared to $1,439 during the three months ended September 30, 2008, an increase of 22%.

Costs of revenues. For the three months ended September 30, 2009, costs of revenues for Worldwide InformationTM were $23,223 as compared to $8,440 for the three months ended September 30, 2008, an increase of 175%. This increase is attributable to the purchasing timeline of data and increased costs of this data in various states. For the three months ended September 30, 2009, our costs of revenues associated with LocatePLUS™ online and channel were $357,858 as compared to $372,532 for the three months ended September 30, 2008, a decrease of 4%.

Selling and marketing expenses. Selling and marketing expenses for the three months ended September 30, 2009 were $286,169 as compared to $420,945 for the three months ended September 30, 2008, a decrease of 32%. The primary reason for the reduction is due to the elimination of marketing activities that generated less revenue than the cost to acquire that revenue as well as a reduction in personnel.

General and administrative expenses. General and administrative expenses for the three months ended September 30, 2009 were $1,132,770 as compared to $1,213,056 for the three months ended September 30, 2008, a decrease of 7%. This decrease is attributable to various cost cutting efforts by management.

Table of Contents

Research and Development expenses. Research and development expenses for the three months ended September 30, 2009 were $132 as compared to $48,531 for the three months ended September 30, 2008, a decrease of 99%. This decrease is attributable to managements’ decision to suspend funding of the Metrigenics subsidiary.

Interest expense. Interest expense increased to $199,249 for the three months ended September 30, 2009, from $150,516 for the three months ended September 30, 2008, an increase of 32%. This expense is attributable to interest payments being made on certain notes payable.

Other Income. Other income decreased to $440 for the three months ended September 30, 2009, down from other income of $855 for the three months ended September 30, 2008, a decrease of 49%. This income is attributable to the collection of certain accounts receivable that have previously been written off.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Revenues. Revenues from our Worldwide InformationTM CD-ROM product decreased to $277,386 for the nine months ended September 30, 2009 from $356,028 for the nine months ended September 30, 2008, a decrease of 22%. This decrease is attributable to the timing of shipments of product as revenue is only recognized upon shipment. Revenues from our Internet-based products decreased to $4,159,543 for the nine months ended September 30, 2009, as compared to $4,302,311 for the nine months ended September 30, 2008, a decrease of 3%. Revenue from channel partners decreased to $985,247 from $1,671,402, a decrease of 41%. This decrease is attributable to the loss a of large channel partner agreement in 2008. Revenues from our wireless product, LocatePLUS AnyWhere™, were $4,806 during the nine months ended September 30, 2009 as compared to $4,858 during the nine months ended September 30, 2008, a decrease of 1%.

Costs of revenues. For the nine months ended September 30, 2009, costs of revenues for Worldwide InformationTM were $40,020 as compared to $38,623 for the nine months ended September 30, 2008, an increase of 4%. For the nine months ended September 30, 2009, our costs of revenues associated with LocatePLUS™ online and channel were $1,068,422 as compared to $1,053,189 for the nine months ended September 30, 2008, an increase of 1%.

Selling and marketing expenses. Selling and marketing expenses for the nine months ended September 30, 2009 were $886,259 as compared to $1,182,850 for the nine months ended September 30, 2008, a decrease of 25%. The primary reason for the reduction is due to the elimination of marketing activities that generated less revenue than the cost to acquire that revenue as well as a reduction in personnel.

General and administrative expenses. General and administrative expenses for the nine months ended September 30, 2009 were $3,678,571 as compared to $3,845,183 for the nine months ended September 30, 2008, a decrease of 4%. Included in this amount is a one-time charge of $387,500 for expenses of litigation and settlement. This reduction is principally due to cost cutting efforts by management.

Research and Development expenses. Research and development expenses for the nine months ended September 30, 2009 were $29,424 as compared to $111,690 for the nine months ended September 30, 2008, a decrease of 74%. This decrease is attributable to downsizing of personnel as well as managements decision to suspend funding of the Metrigenics subsidiary

Interest expense. Interest expense decreased to $400,835 for the nine months ended September 30, 2009, from $518,116 for the nine months ended September 30, 2008, a decrease of 23%. This expense is primarily attributable to interest payments being made on certain notes payable.

Other Income. Other income decreased to $3,365 for the nine months ended September 30, 2009, down from other income of $6,392 for the nine months ended September 30, 2008, a decrease of 47%.

Table of Contents

Liquidity and Capital Resources

From our incorporation in 1996 through December 31, 2008, we raised approximately $43 million through a series of private placements and public offerings of equity and convertible debt to fund marketing and sales efforts and develop our products and services.

As of September 30, 2009, our cash and cash equivalents totaled $142,101.

In connection with an offering that closed on August 15, 2005 we entered into a Purchase Agreement with certain institutional and accredited investors relating to the private placement of convertible term notes issued by the Company in the principal amount of $8,965,000 and warrants to purchase up to 41,189,000 shares of our capital stock. Of the proceeds from this offering, approximately $4.1 million was used to retire current secured convertible notes, and the remainder will be used for general working capital.

All of the notes are convertible, and the warrants are exercisable, first into as many shares of our Class A Voting Common Stock, par value $0.01 per share, as are available for issuance at the time of conversion or exercise, and then into shares of our Class B Non-Voting Common Stock, par value $0.01 per share. As part of our agreement with these investors, we agreed to seek the approval from our stockholders of the recapitalization of each outstanding share of our Class A Voting Common Stock and our Class B Non-Voting Common Stock into a single class of voting common stock, as well as a one-for-fifty reverse split of this new class of common stock Upon approval these measures, the notes automatically convert into shares of the new class of common stock, and any unexercised warrants will be exercisable for shares of that class of stock as well. Without taking into consideration interest payable on the notes, the notes are convertible into 89,650,000 shares of our common stock (regardless of class) at a current conversion rate of $0.10 per share and the warrants are exercisable for ten years from the date they were issued for up to 41,189,000 shares of our common stock (regardless of class) at a current exercise price of $0.15 per share. The conversion price of the notes and the exercise price of the warrants are each subject adjustment for a variety of events, including, for example, payment of dividends, certain mergers or asset sales, and certain securities issuances. In conjunction with this offering, we also entered into related Registration Rights and Voting Agreements. On November 14, 2005, at the annual meeting of the shareholders, the recapitalization was

approved by a majority of the outstanding shares of both classes of stock. On December 12, 2005, we completed the plan of recapitalization which triggered the mandatory conversion of certain notes payable in the amount of $8,965,000 into 1,793,000 of the new common stock.

On December 29, 2005, we entered into an Investment Agreement with Dutchess Private Equities Fund II, L.P. Pursuant to that Investment Agreement, we received proceeds of $1,500,000 by issuing a note payable convertible into 300,000 shares of Common Stock at $5.00 per share and 200,000 founders shares and Common Stock purchase warrant for 750,000 shares with an exercise price of $5.00 per share. We also entered into an agreement where we may, at our discretion, periodically “put” or require Dutchess to purchase shares of our Common Stock. The aggregate amount that Dutchess is obligated to pay for our shares will not exceed $10.0 million. For each share of Common Stock purchased under the Investment Agreement, Dutchess will pay 93% of the lowest closing bid price on the Over-the-Counter Bulletin Board (or other principal market on which our Common Stock is traded) during the ten day period immediately following the date on which we give notice to Dutchess of our intention to put such stock. Our ability to put the shares under the Investment Agreement is conditioned upon us registering the shares of Common Stock with the Securities and Exchange Commission and satisfaction of certain other customary closing conditions.

Table of Contents

On July 21, 2006 we issued a Debenture to Dutchess Private Equities Fund, LP , a related private equities fund and received proceeds of $750,000. The Debenture is due on July 21, 2011 and pays twelve per cent (12%) interest. Interest and principal are payable at such times and under such conditions are outlined in the Debenture. The Debenture is convertible into shares of our Common Stock at the lesser of $.70 per share or 75% of the lowest closing bid price during the 20 trading days next preceding the date of conversion (collectively, the two funds “Dutchess”). The holder may not convert if it would cause the holder to own more than 4.9% of the outstanding Common Stock of the Company.

On March 20, 2007, we issued a secured convertible debenture to Cornell Capital Partners (now YA Investments L.P. ) in the aggregate principal amount of $6,000,000 of which $3,000,000 was advanced immediately. The second installment of $2,000,000 will be advanced immediately prior to the filing by the Company with the Securities and Exchange Commission (the "Commission") of the Registration Statement. The last installment of $1,000,000 will be advanced immediately prior to the date the Registration Statement is declared effective by the Commission. The Debentures mature on the third anniversary of the date of issuance. The holder of the Debentures may convert at any time amounts outstanding under the Debentures into shares of common stock of the Company at a fixed conversion price per share equal to $0.314. Under the Purchase Agreement the debentures are secured by substantially all of the Company's, and its wholly owned subsidiaries’ assets.

Under the Purchase Agreement, we also issued to Cornell five-year warrants in six separate series as follows:

A Warrants to purchase 2,384,814 shares of common stock at $0.314 per share;

B Warrants to purchase 2,186,079 shares of common stock at $0.343 per share;

C Warrants to purchase 2,017,919 shares of common stock at $0.372 per share;

D Warrants to purchase 1,748,863 shares of common stock at $0.429 per share;

E Warrants to purchase 1,499,026 shares of common stock at $0.50 per share;

F Warrants to purchase 1,500,000 shares of common stock at $0.01 per share.

Table of Contents

within 45 days) and (ii) the Registration Statement is declared effective (or, if earlier, within 145 days). The Company also issued a Note in the amount of $1,500,000 and agreed to reduce to $0.10 per share the exercise price of the warrants issued to Dutchess. Dutchess agreed to terminate any security interest in the Company’s assets upon the Initial Payment

On January 26, 2009 the Company announced that it had received the consent of a majority of the shareholders of record to amend the Certificate of Incorporation to increase the number of shares of Common Stock authorized for issuance by the Corporation from 25,000,000 shares to 50,000,000 shares. The reason for increasing the number of authorized shares was to ensure that shares were available to allow for conversions of debt into stock.

Commitments and Contingencies

Operating Leases

The Company leases office space and equipment under various operating lease agreements which terminate on various dates through 2015. Future minimum payments under our non-cancelable operating leases total $1,976,578.

Capital Leases

As of September 30, 2009 the Company no longer has any obligations with regards to capital leases.

License Agreements

The following represents the contractual obligation and commercial commitments as of September 30, 2009.


Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years
Long-Term Debt including current portion	$	4,977,648	$	3,477,648	$	1,500,000		-
Operating Leases		1,976,578		356,578		1,080,000		540,000

Total	$	6,954,226	$	3,834,226	$	2,580,000	$	540,000

Table of Contents

Recently Issued Accounting Pronouncements

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157 (FASB ASC 820) “Fair Value Measurements” (SFAS No. 157), which provides a consistent definition of fair value that focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over company-specific inputs. SFAS No. 157 requires expanded disclosures about fair value measurements and establishes a three-level hierarchy for fair value measurements based on the observable inputs to the valuation of an asset or liability at the measurement date. The standard also requires that a company consider its own nonperformance risk when measuring liabilities carried at fair value, including derivatives. In February 2008 the Financial Accounting Standards Board (FASB) approved the FASB Staff Position (FSP) No. FAS 157-2, “Effective Date of FASB Statement No. 157” (FSP No. FAS 157-2), that permits companies to partially defer the effective date of SFAS No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed as fair value in the financial statements on a nonrecurring basis. FSP No. FAS 157-2 does not permit companies to defer recognition and disclosure requirements for financial assets and financial liabilities or for nonfinancial assets and nonfinancial liabilities that are remeasured at least annually. SFAS No. 157 is effective for financial assets and financial liabilities and for nonfinancial assets and nonfinancial liabilities that are remeasured at least annually for fiscal years beginning after November 15, 2007. The provisions of SFAS No. 157 are applied prospectively. The Company has decided to defer adoption of SFAS No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. These include fixed assets. The effect of adopting SFAS No. 157 on January 1, 2008 was not material and no adjustment to Accumulated deficit was required. The Company is currently unable to quantify the effect, if any, that the adoption of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities will have on its financial condition and results of operations.

The carrying amounts of cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, deferred revenue, current portion of capital lease obligations, current portion of notes payable and convertible notes payable approximate fair value because the best valuation for them is the use in the business and the short maturity of those instruments. The long-term portion of notes payable is at 12% per annum and approximates fair value.

Off-Balance-Sheet Arrangements

The Company has no off-balance-sheet arrangements currently in effect or in effect during the nine months ended September 30, 2009, including but not limited to any guarantee contracts that has the characteristics defined in paragraph 3 of FASB Interpretation No. 45 (November 2002), as amended; any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement, any obligation that could be accounted for as a derivative instrument, or any obligation arising out of a variable interest (as referenced in FASB Interpretation No. 46, as amended).

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We do not invest in or hold securities or other financial market instruments as a regular part of our business. We conduct our business in US dollars. Our market risk is limited to domestic economic and regulatory factors

Table of Contents

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

1.	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

3.	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.

Our management, including the Interim Chief Executive Officer evaluated the effectiveness of our internal control over financial reporting as of September 30, 2009, based on the standards and framework established by the Committee of Sponsoring Organizations of the Treadway Commission, COSO. Based upon the evaluation performed it was concluded that our disclosure controls and procedures were not effective as of September 30, 2009.

Based on our evaluation for the period ended September 30, 2009, our Interim Chief Executive Officer has concluded that at the end of this reporting period we have identified matters that would constitute material weakness (as such term is defined under the Public Company Accounting Oversight Board Auditing Standard No. 2 in our internal controls over financial reporting. It is concluded that because material weaknesses exist, internal controls over financial reporting are not effective at this time.

The material weaknesses relate to the financial closing process and a lack of segregation of financial responsibilities. Based on the evaluation performed, disclosure controls and procedures were not effective for the nine months ended September 30, 2009.

This quarterly report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this quarterly report.

Changes In Internal Control Over Financial Reporting

During the nine months ended September 30, 2009, we have taken actions to remediate the reportable conditions and material weakness, including the devotion of additional resources to the quarterly closing process, and realignment of certain financial responsibilities to achieve stronger segregation of financial duties. We intend to continue to further strengthen our controls and procedures regarding the closing process.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

LocatePLUS intends to pursue the remaining claims vigorously to protect the interests of its shareholders.”

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

On March 20, 2007, we issued a secured convertible debenture to Cornell Capital Partners in the aggregate principal amount of $6,000,000 of which $3,000,000 was advanced immediately. The second installment of $2,000,000 will be advanced immediately prior to the filing by the Company with the Securities and Exchange Commission (the "Commission") of the Registration Statement. The last installment of $1,000,000 will be advanced immediately prior to the date the Registration Statement is declared effective by the Commission. The Debentures mature on the third anniversary of the date of issuance. The holder of the Debentures may convert at any time amounts outstanding under the Debentures into shares of common stock of the Company at a fixed conversion price per share equal to $0.314. Under the Purchase Agreement the debentures are secured by substantially all of the Company's, and its wholly owned subsidiaries’ assets.

Under the Purchase Agreement, we also issued to Cornell five-year warrants in six separate series as follows:

A Warrants to purchase 2,384,814 shares of common stock at $0.314 per share;

B Warrants to purchase 2,186,079 shares of common stock at $0.343 per share;

C Warrants to purchase 2,017,919 shares of common stock at $0.372 per share;

D Warrants to purchase 1,748,863 shares of common stock at $0.429 per share;

E Warrants to purchase 1,499,026 shares of common stock at $0.50 per share;

F Warrants to purchase 1,500,000 shares of common stock at $0.01 per share.

Table of Contents

Item 3. Defaults Upon Senior Securities

On December 11, 2007, we received a letter dated December 6, 2007 ( the "Notice Letter"), YA Global Investments, L.P., (formerly known as Cornell Capital Partners, L.P.) notifying the Company of certain Events of Default under the Secured Convertible Debenture dated March 20, 2007 of the Company (the "Debenture"). Management is currently working with YA towards a resolution.

Item 4. Submission of Matters to Vote of Security Holders.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

Exhibits

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2	Certification of Acting Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Table of Contents

Reports on Form 8-K

On January 7, 2008, we filed a Form 8-K and reported under item 2.04 that by letter received December 11, 2007, dated December 6, 2007 ( the "Notice Letter"), YA Global Investments, L.P., (formerly known as Cornell Capital Partners, L.P.) notified the Company of certain Events of Default under the Secured Convertible Debenture dated March 20, 2007 of the Company (the "Debenture").

On January 26, 2009, we filed a Form 8-K and reported under items 5.02 and 8.01 that the Company had received the consent of a majority of the shareholders of record to amend the Certificate of Incorporation to increase the number of shares of Common Stock authorized for issuance by the Corporation from 25,000,000 shares to 50,000,000 shares and to the elimination of the current classification of the Directors into different terms and replacement with a uniform one year term for all directors, the reduction of the Board to seven members and the election of the following individuals to the Board of Directors:

Dr. Christian T. Williamson

Richard L. Pyle

David Skerrett

Ralph Caruso

Patrick F. Murphy

James Ahern

George G. Isaac

CHRISTIAN T. WILLIAMSON, Ph.D., 35, Chairman of the Board, is currently Vice President of Global Market Strategies at Trojan Technologies a subsidiary of Danaher Corporation, a $10 Billion industrial conglomerate which operates within multiple platforms including water treatment. Dr. Williamson joined Trojan in 2001 through the acquisition of Advanced UV Solutions and was promoted to Vice-President, Global Market Strategies in January 2008 - Executive Team Member. Prior to that, Dr. Williamson was Managing Director, Environmental Contaminant Treatment since 2001 in Trojan. Prior to that Dr. Williamson was Managing Partner for Advanced UV Solutions, LLP, a "spin-off" of the consulting firm Hydro Geo Chem, Inc. The main goal of AUVS was to liquidate the asset for Hydro Geo Chem through the sale of the AUVS Company. Dr. Williamson holds a B.S. in Engineering Mathematics and a Doctorate in Hydrology with an emphasis in Systems Engineering from The University of Arizona.

RICHARD L. PYLE, Ph.D., 64, Director, holds a bachelors in physics, an MBA, and a doctorate in business. He is a former professor of management in the University of Massachusetts system. In addition to an academic and theoretical perspective on business management, he also brings years of management experience across a broad range of manufacturing industries. In particular, he brings the sales / manufacturing / distribution perspective and experience of being an owner/manager of a sales and marketing related business. He also provides consulting services to other businesses and is a commercial real estate investor and property manager. Dr. Pyle also enjoys philanthropic work and public service. The focus of his charitable work has been with children, youth, and in higher education. Dr. Pyle has been the CEO of Continental Consolidated, Inc. of Worcester, MA. since January 1993

DAVID SKERRETT, 57, Director, has been Vice President of the Middlesex Corporation for 23 years. Middlesex Corporation is in the top 400 heavy civil construction companies in the nation with $140 million in revenue. Mr. Skerrett holds a Bachelor of Engineering from College of Technology. Mr. Skerrett is currently a member of the Board of Directors and is being nominated to serve an additional one year term.

RALPH CARUSO 57, Director, is the founder and President of Caruso Companies, a conglomerate involved in many facets of industrial construction that has been in business for over 25 years. Mr. Caruso is currently a member of the Board of Directors and is being nominated to serve an additional two year term.

Table of Contents

PATRICK F. MURPHY, J.D.,55, Director, is the Chairman of the Pulsar Network, Inc. Board of Directors. A graduate of the Harvard Law School and practicing in Massachusetts for the last twenty years, he also provides consulting services to growing businesses. He is familiar with government relations, public relations, and has experience in developing resources and assets. Prior to his career in law he was a manager at a prominent social service agency and handled personnel and operation issues in a crisis-based environment. Mr. Murphy beneficially owns no shares of the Common Stock of the Company. The business address of Mr. Murphy is P.O. Box 604, Avon, MA 02322-0604.

JAMES AHERN, 68, Director, is the COO of the Tracy Group, a Casino Management and Development Company. The Tracy Group focuses on work-out strategies, development of management and marketing strategies, and ground-up development for a variety of clients. Prior to joining the Tracy Group, Mr. Ahearn had extensive experience in executive management in a variety of areas including 30 years experience with the Federal Bureau of Investigation where he was nominated by the Director of the FBI for the highest award for executive service in the U.S. Department of Justice. Mr. Ahearn recently served on the Board of Directors, and acted as a consultant to Trackpower, Inc., a company operating two race tracks/casinos in New York State. He has held gaming licenses in New York, Arizona, Oregon and Washington, as well as the National Indian Gaming Commission.

GEORGE G. ISAAC, CPA , 63, Director and Audit Committee Chairman is a Massachusetts Certified Public Accountant and is affiliated with Massachusetts Board of Certified Public Accountants and the American Institute of Certified Public Accountants. He is well experienced in all areas of financial management having practiced as a CPA for 25 years within a financial career that reaches back nearly 40 years. His experience includes management, business consulting, budgeting, managerial accounting, risk management, internal controls, tax advice and preparation, financial planning and reporting, audit functions, banking functions, and all treasury functions including SEC compliance. Specifically, his current practice involves services as a consulting CFO. In the past he has served as CFO for a publicly traded company, a managing partner of a public accounting firm, has managed a commercial office building. As a board member of a community bank and a publicly traded company he has served as a member and is familiar with the functioning of board audit committees, executive committees, and compensation committees. His experience includes the negotiation of significant expansion and growth credit availability but also downsizing to maintain profitability where necessary. He is proficient in Russian and German. For the past five years Mr. Isaac has served as a consulting Chief Financial Officer for several closely businesses in Massachusetts with responsibility for all financial planning and reporting, tax preparation, banking and related treasury functions for each of his clients.

On January 30, 2009, we filed a Form 8-K and reported under item 5.02 that at a meeting of the Board of Directors held on January 29, 2009, the Board had voted to elect current Director, Patrick Murphy to the position of Corporate Secretary.

On February 25, 2009, we filed a Form 8-K and reported under items 5.02 and 9.01 announcing that at a meeting of the Board of Directors held on February 18, 2009, the Board of Directors voted to terminate the employment of James C. Fields, the then current President, Chief Executive Officer, Acting Chief Financial Officer and Treasurer. Following this decision, the Board voted to appoint Geoffrey Lee, President of Entersect, a wholly owned subsidiary of LocatePLUS Holdings and Vice President of Online Services for LocatePLUS as Interim Chief Executive Officer and President. At a Board meeting held on February 24, 2009, the Board elected Mr. Lee to the additional position of Acting Treasurer. It is the intent of the Board of Directors to actively pursue and interview qualified candidates within a reasonable amount of time to fill the permanent position of President and CEO and the position of CFO and Treasurer. Item 9.01 of this filing contained a Press Release to the effect of the announcement under 5.02 and is attached to this filing.

On April 17, 2009, we filed a Form 8-K and reported under item 5.01 announcing that at a meeting of the Board of Directors held on April 15, 2009, the Board accepted the resignation of Director Ralph Caruso from the Board of Directors due to an increased demand from other business matters. Mr. Caruso stated that he wished to “thank the current Board and shareholders for giving me the opportunity to serve and wish the future Board and shareholders the best of luck with the challenges to come.” Christian Williamson, the current Chairman of the Board thanked Mr. Caruso for his dedicated services throughout the years as a member of the Board and wished him well in his future endeavors. Following the resignation of Mr. Caruso, the Board voted to extend the open seat on the Board of Directors to Bart Valdez.

Table of Contents

Mr. Valdez is the former President of the Employee Screening Segment of First Advantage, a leading risk mitigation and business solutions provider.

Mr. Valdez began his career at First Advantage in 2001 where he developed and executed a strategic plan that improved an $18M regional employment verification company into a $253M global talent acquisition business. Additionally, Mr. Valdez has been credited with improving financial performance from an EBITDA loss of $5M in 2003 to an EBITDA gain of $36M in 2006.

Prior to his employment with First Advantage, Mr. Valdez worked as Vice President of Business Development at Employee Information Services, Inc., where he managed all aspects of finance, information services, sales partnerships, and operations

Mr. Valdez has a B.S. in Management from Colorado State University and a Masters of Business Administration with a concentration in Finance from the University of Colorado.

On May 29, 2009, we filed a Form 8-K and reported under items 8.01 and 9.01 that Christiam Williamson, Chairman of the Board had issued a letter to shareholders. To view this letter, please go to http://www.sec.gov/Archives/edgar/data/1160084/000116008409000020/shareholderletter09.htm

On June 1, 2009, we filed a form 8-K and reported under item 1.01 and announced a confidential settlement agreement with James Fields, former Chief Executive Officer and President. The agreement resolves all issues between LocatePLUS Holdings Corporation and Mr. Fields concerning previously disclosed litigation.

On August 17, 2009, we filed a Form 8-K and reported under item 1.01 and announced a strategic alliance between the Company and the MindBreeeze Enterprise Search Division of Fabasoft Corporation, Needham, Massachusetts, a leading provider of enterprise content management solutions. The strategic alliance enables the two companies to market and deliver a sophisticated public records search solution – Mindbreeze PR (Mindbreeze Public Records) that seamlessly connects users to the critical background information they need – from sources both in side and outside the enterprise firewall.

On September 25, 2009, we filed a Form 8-K and reported under items 1.01 and 5.02 that the Company had acquired all of the stock of Employment Screening Profiles, Inc.(d/b/a Trubackgrounds), a Florida corporation (“Trubackgrounds”), Oldsmar (Tampa) Florida, engaged in the business of developing and delivering integrated, customized Web-enabled solutions designed to aid in background verification, applicant management and human resource collaboration processes. At this time, the Board of Directors accepted the voluntary resignation of David Skerrett and voted to appoint Derrick Spatorico, founder of TruBackgrounds, as a member of the Board of Directors.

* * *

Table of Contents

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LOCATEPLUS HOLDINGS CORPORATION

(Registrant)

SIGNATURE	TITLE	DATE
/s/ Geoffrey Lee	Interim President and Chief Executive Officer	November 13, 2009
Geoffrey Lee
/s/ Geoffrey Lee	Interim Treasurer	November 13, 2009
Geoffrey Lee

Attached files

LOCATEPLUS HOLDINGS CORP Reports

Also read