##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-QSB
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarter ended March 31, 2007
 o
    
    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: 000-30874
 CANEUM, INC.
  Nevada
State or other jurisdiction of 
Incorporation or organization
    
    33-0916900
I.R.S. Employer I.D. No.
 170 Newport Center Drive, Suite 210, Newport Beach, CA
(Address of principal executive offices)
    
    92660
(Zip Code)
 (949) 273-4000
 o þ þ o
 o þ
  o þ




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##### 



PART I
FINANCIAL INFORMATION
 Item 1. Financial Statements
   PageFinancial StatementsCondensed Consolidated Balance Sheets  Assets
    
    
    3Condensed Consolidated Balance Sheets  Liabilities and Stockholders Equity
    
    
    4Condensed
Consolidated Statements of Operations and Comprehensive Income (Loss)
    
    
    5Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    8Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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March 31,
    
    
    December 31,2007
    
    
    2006UnauditedCURRENT ASSETSCash and cash equivalents
    
    $
    544,693
    
    
    $
    335,202Accounts receivable, net of allowance of $325,017 and $229,626, respectively
    
    
    2,037,246
    
    
    
    1,840,994Prepaid assets
    
    
    104,304
    
    
    
    57,673Other current assets
    
    
    15,000
    
    
    
    15,000Total current assets
    
    
    2,701,243
    
    
    
    2,248,869LONG TERM ASSETSProperty & equipment, net
    
    
    198,048
    
    
    
    194,373Intangibles, net
    
    
    874,216
    
    
    
    938,587Goodwill
    
    
    1,464,805
    
    
    
    1,464,805Other
    
    
    4,592
    
    
    
    4,592TOTAL ASSETS
    
    $
    5,242,904
    
    
    $
    4,851,226
   3




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March 31,
    
    
    December 31,2007
    
    
    2006UnauditedCURRENT LIABILITIESAccounts payable
    
    $
    1,037,197
    
    
    $
    830,468Accrued expenses
    
    
    13,200
    
    
    
    67,098Credit lines
    
    
    994,021
    
    
    
    159,966Accrued payroll and related expenses
    
    
    158,829
    
    
    
    119,556Deferred revenue
    
    
    31,373
    
    
    
    Notes payable
    
    
    27,274
    
    
    
    61,480Current portion of installment loans
    
    
    1,090,470
    
    
    
    785,573Other current liabilities
    
    
    82,044
    
    
    
    84,522Total current liabilities
    
    
    3,434,408
    
    
    
    2,108,663LONG TERM LIABILITIESInstallment loans, less current portion
    
    
    
    
    
    
    665,862Other non current liabilities
    
    
    50,549
    
    
    
    51,127Total liabilities
    
    
    3,484,957
    
    
    
    2,825,652Minority Interest
    
    
    299,604
    
    
    
    231,227SHAREHOLDERS EQUITYPreferred stock, $0.001 par value 20,000,000 shares authorized, 3,332,500
shares issued and outstanding (Liquidation preference $1,666,250)
    
    $
    3,332
    
    
    $
    3,332Common stock, $0.001 par value 100,000,000 shares authorized, 7,952,098
and 7,918,921 shares issued and outstanding
    
    
    7,950
    
    
    
    7,917Common stock
committed
    
    
    12,500
    
    
    
    Additional paid-in capital
    
    
    7,916,060
    
    
    
    7,592,702Accumulated other comprehensive income
    
    
    14,056
    
    
    
    Accumulated deficit
    
    
    (6,495,555
    )
    
    
    (5,809,604
    )Total shareholders equity
    
    
    1,458,343
    
    
    
    1,794,347TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    5,242,904
    
    
    $
    4,851,226
   4




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Three Months EndedMarch 31,
    
    
    March 31,2007
    
    
    2006Unaudited
    
    
    UnauditedAs RestatedRevenue
    
    $
    2,750,373
    
    
    $
    900,675Cost of revenue
    
    
    2,188,212
    
    
    
    652,896Gross profit
    
    
    562,161
    
    
    
    247,779Operating expenses
    
    
    1,109,955
    
    
    
    570,562Loss from operations
    
    
    (547,794
    )
    
    
    (322,783
    )Other income (expense)Interest income (expense), net
    
    
    (52,492
    )
    
    
    31Loss on foreign exchange
    
    
    (14,303
    )
    
    
    Total other income (expense)
    
    
    (66,795
    )
    
    
    31Minority Interest
    
    
    (68,378
    )
    
    
    Loss before income tax
    
    
    (682,967
    )
    
    
    (322,752
    )Income tax expense
    
    
    2,984
    
    
    
    800Net loss
    
    $
    (685,951
    )
    
    $
    (323,552
    )Beneficial Conversion Charge upon Issuance of
Preferred Shares
    
    
    
    
    
    
    755,048Net Loss Attributable to Common Stockholders
    
    $
    (685,951
    )
    
    $
    (1,078,600
    )Basic and diluted net loss per common share
    
    $
    (.09
    )
    
    $
    (0.19
    )Weighted average number of
Common Shares outstanding used in the the calculation
    
    
    7,946,621
    
    
    
    5,820,551Net loss
    
    $
    (685,951
    )
    
    $
    (323,552
    )Comprehensive income:Foreign currency translation adjustment (Note 2)
    
    
    14,056
    
    
    
    Comprehensive (loss)
    
    $
    (671,895
    )
    
    $
    (323,552
    )
   5




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For the Three Months EndedMarch 31,
    
    
    March 31,2007
    
    
    2006Unaudited
    
    
    UnauditedAs RestatedCASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (685,951
    )
    
    $
    (323,552
    )Adjustments to reconcile net loss to net cash used in operating activitiesStock-based compensation expense
    
    
    161,857
    
    
    
    129,272Expenses paid by stock issuances
    
    
    174,035
    
    
    
    15,000Interest accreted to TierOne notes
    
    
    17,026
    
    
    
    Depreciation and amortization
    
    
    17,464
    
    
    
    3,939Amortization of acquired intangibles from business combinations
    
    
    67,188
    
    
    
    1,600Bad Debt expense
    
    
    
    
    
    
    2,721Minority interest
    
    
    68,378
    
    
    
    (Increase) decrease inAccounts receivable
    
    
    (189,980
    )
    
    
    (42,553
    )Prepaid expenses and other current assets
    
    
    (45,425
    )
    
    
    16,380Increase (decrease) inAccounts payable and accrued expenses
    
    
    151,020
    
    
    
    (100,033
    )Accrued payroll and related expenses
    
    
    40,258
    
    
    
    109,426Deferred revenue
    
    
    31,373
    
    
    
    Net cash used in operating activities
    
    
    (192,756
    )
    
    
    (187,800
    )CASH FLOWS FROM INVESTING ACTIVITIESCash paid for acquisition of TierOne Consulting, Inc., net of cash acquired
    
    
    
    
    
    
    (1,338,627
    )Purchase of property & equipment
    
    
    (18,663
    )
    
    
    (945
    )Net cash used in investing activities
    
    
    (18,663
    )
    
    
    (1,339,572
    )CASH FLOWS FROM FINANCING ACTIVITIESIssuance of common stock and warrants for cash
    
    
    
    
    
    
    350,004Issuance of Series A Preferred Shares and warrants for cash, net
    
    
    
    
    
    
    1,790,000Payment of debt
    
    
    (441,381
    )
    
    
    (6,231
    )Addition to debt
    
    
    24,225
    
    
    
    Exercise of options
    
    
    
    
    
    
    132,250Increase in credit line
    
    
    834,055
    
    
    
    Net cash provided by financing activities
    
    
    416,898
    
    
    
    2,266,023Effect of changes in foreign currency exchange rates on cash
    
    
    4,012
    
    
    
    Net increase in cash and cash equivalents
    
    
    205,479
    
    
    
    738,651CASH AND
CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    335,202
    
    
    
    99,760CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    544,693
    
    
    $
    838,411SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONInterest paid
    
    $
    38,076
    
    
    $
    430Income taxes paid
    
    $
    2,984
    
    
    $
    800
   6




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7




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NOTE 1  CORPORATE HISTORY
 Organization
    Basis of Presentation
    8




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NOTE 2  SIGNIFICANT ACCOUNTING POLICIES
 Consolidation
  Revenue Recognition
 Revenue Recognition
  9




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Segment Reporting
  Customer Concentrations
  Accounts Receivable Policy
  Advertising
  Cash and Cash Equivalents
  Stock-Based Compensation
 Share-Based
Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to
Employees
  10




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Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets,
 Accounting
for the Impairment or Disposal of Long-lived Assets.
 Fair Value of Financial Instruments
  Accounting for Income Taxes
 Accounting for Income Taxes
  11




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Long-Lived Assets
  Property & Equipment
   Foreign Currency
    12




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Per Share Data
 Earnings Per Share, Computations of Earnings Per Share
      Use of Estimates
   13




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Comprehensive Income
 Reporting
Comprehensive Income
 New Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Considering the Effects of Prior Year Misstatements when Quantifying Current Year
Misstatements
 Fair Value Measurements
  14




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Accounting for Registration Payment Arrangements
  The Fair Value Option for Financial Assets and
Financial Liabilities,
 NOTE 3  RELATED PARTY TRANSACTIONS
   15




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Investor Relations
   Consulting
  Customer
  NOTE 4  INTANGIBLE ASSETS
    16




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AccumulatedAmortizationUseful
    
    
    Gross
    
    
    as of
    
    
    Unamort.Life
    
    
    Cost
    
    
    March 2007
    
    
    BalanceCustomer contracts & relationships
    
    5 Yrs
    
    $
    737,000
    
    
    $
    147,400
    
    
    $
    589,600Employment contracts
    
    2 Yrs
    
    $
    78,000
    
    
    $
    39,000
    
    
    $
    39,000Licenses
    
    1 Yr
    
    $
    75,000
    
    
    $
    75,000
    
    
    $
    0Continuum customer relationships
    
    5 Yrs
    
    $
    164,000
    
    
    $
    8,100
    
    
    $
    155,900
   Fiscal 2007 - Remaining
    
    
    156,000Fiscal 2008
    
    
    173,000Fiscal 2009
    
    
    163,000Fiscal 2010
    
    
    163,000Fiscal 2011
    
    
    53,000
  17




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NOTE 5  INCOME TAX
  NOTE 6  BARRON FINANCING
   18




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NOTE 7  TIER ONE TRANSACTION
  Allocated to purchase price:
    
    $
    2,971,700Accounts receivable and cash
    
    
    777,800Fixed assets
    
    
    40,200Trademarks
    
    
    90,000Customer contracts & relationships
    
    
    737,000Employment contracts
    
    
    78,000Less liabilities assumed
    
    
    (216,100
    )Total identifiable assets, net
    
    
    1,506,900Remaining balance to goodwill
    
    
    1,464,800
  20




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NOTE 8  CONTINUUM TRANSACTION
     21




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1
 1
  Acquired identifiable assets:Accounts receivable and cash
    
    $
    422,800Fixed assets
    
    $
    132,800Customer relationships
    
    $
    160,900Other
    
    $
    53,900Less liabilities assumed
    
    $
    (95,700
    )Total identifiable assets, net
    
    $
    674,700Minority interest
    
    $
    (231,200
    )Acquisition price
    
    $
    443,500
  22




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NOTE 9  COMMON STOCK TRANSACTIONS
   NOTE 10  STOCK PLAN
    23




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
    
    50,000 warrants for common shares at $0.75 each. These warrants were issued
during 2005 and were fully vested at December 31, 2005.
    
    50,000 warrants for common shares at $1.40 each. These warrants were issued to
consultants to the Company and are fully vested.
    
    The Company issued 100,667 shares of common stock in a private placement dated
October 1, 2005, with accompanying Common Stock Purchase Warrants at the rate of 50% of
the shares purchased. Accordingly 50,333 warrants are outstanding related to this
common stock. The warrants are exercisable at $1.00 with certain incentive discounts
to the exercise price available through December 31, 2009.
    
    The Company issued 466,671 shares of common stock in a private placement dated
January 2, 2006, with accompanying Common Stock Purchase Warrants at the rate of 50% of
the shares purchased. Accordingly 233,336 warrants are outstanding related to this
common stock. The warrants are exercisable at $1.00 with certain incentive discounts
to the exercise price available through March 31, 2010.
  24




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NOTE 11  NOTES PAYABLE
 Credit Lines
        25




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Installment Loans Payable to Tier One Consulting Principals
  NOTE 12  SUBSEQUENT EVENTS
 Barron Litigation
 inter alia
 Consummation of Continuum Acquisition
  Increase
in Line of Credit with Bridge Bank
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NOTE 13  PRIOR PERIOD RESTATEMENT
  For the Three Months EndedMarch 31,
    
    
    Previously
    
    
    Restatement2006 As Restated
    
    
    Reported
    
    
    AdjustmentUnaudited
    
    
    UnauditedRevenue
    
    $
    900,675
    
    
    $
    854,719
    
    
    
    45,956Cost of revenue
    
    
    652,896
    
    
    
    640,309
    
    
    
    12,587Gross profit
    
    
    247,779
    
    
    
    214,410
    
    
    
    33,369Operating expenses
    
    
    570,562
    
    
    
    566,422
    
    
    
    4,140Loss from operations
    
    
    (322,783
    )
    
    
    (352,012
    )
    
    
    29,229Other income (expense)Interest income (expense), net
    
    
    31
    
    
    
    31
    
    
    
    Other income
    
    
    Total other income, net
    
    
    31
    
    
    
    31
    
    
    
    Loss before income tax
    
    
    (322,752
    )
    
    
    (351,981
    )
    
    
    29,229Income tax expense
    
    
    800
    
    
    
    800
    
    
    
    Net loss
    
    $
    (323,552
    )
    
    $
    (352,781
    )
    
    $
    29,229Beneficial Conversion Charge upon issuance of
Preferred Shares
    
    
    755,048
    
    
    
    
    
    
    
    755,048Net Loss Attributable to common Stockholders
    
    $
    (1,078,600
    )
    
    $
    (352,781
    )
    
    $
    (725,819
    )Net loss per common share
    
    $
    (0.19
    )
    
    $
    (0.06
    )
    
    $
    (0.13
    )BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
    
    
    5,820,551
    
    
    
    5,820,551
  27




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NOTE
13  PRIOR PERIOD RESTATEMENT (continued)
     28




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Item 2. Managements Discussion and Analysis and Plan of Operation
  Forward-Looking Statements
  Background
   Overview
   29




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
    
    customer support, including call centers and web agents for online and offline
technical, customer and product support;
    
    Human resources, including benefits packages, pre-employment screening, retained and
contingent recruiting and information technology centric staffing;
    
    Sales and marketing, including online web agents, lead generation and distribution
channel expansion;
    
    Investor relations and public relations, including audio transcription and web
development, deployment and maintenance for investor communications; and
    
    Finance and accounting, including data entry and back office processing.
  Critical Accounting Policies
     30




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Results of Operations
 Three Months Ended March 31, 2007, versus the Three Months Ended March 31, 2006
  Cost of Revenue and Gross Profit
   Operating Expenses
   
    
    Stock-based compensation expense and expenses paid by stock
issuance were $335,900 and $144,300 for the quarters ended
March 31, 2007 and 2006, respectively. This represents an
increase of $191,600 of which $143,400 is related to an accrued stock
bonus. The
increase is principally the result of more shares being earned in the current quarter
relative to the comparative prior year period offset by a reduction in
the estimated fair value of options that resulted from current assumptions used in the
Black-Scholes option pricing model.
  31




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
    
    Payroll, (excluding bonus) and related expenses are approximately 35% of our
operating expenses and amounted to $340,800 and $170,200 for the quarters ended March
31, 2007 and 2006, respectively. The increase of $170,600 resulted from increased
staffing. Our full time employees in the United States increased from 3 to 11 when we
acquired TierOne Consulting on March 28, 2006. We also added an additional 110
employees through our acquisition of Continuum Systems upon the acquisition of
Continuum Systems on December 31, 2006.
    
    We determine the cost of being public as including legal and
accounting fees, filing
fees and investor relations. These expenses amounted to $175,600 and $177,900 for the three months ended March 31,
2007 and 2006, respectively. This decrease resulted largely from a reduction in
investor relations expenditures.
    
    Our consolidated operating expenses increased significantly as a result of continued
growth in revenues and our acquisitions of TierOne and Continuum. Additionally, we
expect to incur future non-cash amortization charges as a result of certain intangible
assets that we acquired in connection with the TierOne and Continuum
acquisitions.
 Other Income (Expense)
  Net loss
  Liquidity and Capital Resources
   32




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Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 Accounting for Income Taxes
  33




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Considering the Effects of Prior Year Misstatements when Quantifying Current Year
Misstatements
 Fair Value Measurements
 Accounting for Registration Payment Arrangements
  The Fair Value Option for Financial Assets and
Financial Liabilities,
  34




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Item 3. Controls and Procedures
    35




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
    
    We created the position of Vice President of Finance and Accounting responsible
for day to day accounting activities, financial reporting and assisting Principal
Financial Officer with the preparation of our financial statements.
    
    We are implementing a monthly review and sign-off process on all accrual and
amortization entries by the Vice President of finance and Accounting for the
accounts listed above
    
    We are implementing standard operating procedures and processes for monthly
revenue recognition, expense accruals, Prepayments and stock-based compensation.
    
    We are implementing expense control procedures including analysis of potential
outsourced opportunities including, but not limited to, human resources, marketing,
and accounting.
       36




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Disclosure Controls and Procedures
  PART II
OTHER INFORMATION
 Item 1. Legal Proceedings
 Innofone Litigation
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
    37




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Item 6. Exhibits
  31.1
    
    Rule 13a-14(a) Certification by Principal Executive Officer31.2
    
    Rule 13a-14(a) Certification by Principal Financial Officer32.1
    
    Section 1350 Certification of Principal Executive Officer32.2
    
    Section 1350 Certification of Principal Financial Officer
 SIGNATURES
  Caneum, Inc.Date:  August 21, 2007
    By:

/s/
Suki MudanSuki Mudan, President(Principal Executive Officer)Date:  August 21, 2007
    By:

/s/
Gary AllhusenGary Allhusen, Chief Operating Officer(Principal Financial Officer)  38