UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549










Form
10-Q









(Mark
      One)x
            
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarter ended September 30, 2008r
            
            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.


(Exact
name of Registrant as specified in charter)




Nevada
              33-0916900State or other
      jurisdiction of   incorporation or organization
              I.R.S. Employer I.D.
      No.3101 West Coast Highway, Suite
      400, Newport Beach, CA
              92663(Address of
      principal executive offices)
              (Zip
  Code)





Issuer’s
telephone number, including area code:  (949)
273-4000





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.




(1)
Yes x    No r       (2)
Yes  x    No 
r





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 definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.   (Check one):




Large
Accelerated Filer  r                       Accelerated
Filer  r Non-Accelerated
Filer  r                   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 r   No
x





State the
number of shares outstanding of each of the issuer’s classes of common equity
stock, as of the latest practicable date:  AtNovember 14, 2008, there
were 11,134,985 shares of our common stock outstanding.






Table of Contents




Tableof Contents











PagePART
      IItem
      1.
            Financial Statements
            3Item
      2.
            Management’s Discussion and Analysis of Financial Condition and
      Results of Operation
            11Item
      3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            14Item
      4T.
            Controls and Procedures
            14PART
      IIItem
      1.
            Legal Proceedings
            15Item
      2.
            Unregistered Sales of Equity
    Securities
            15Item
      3.
            Defaults Upon Senior
      Securities
            15Item
      6.
            Exhibits
            15SIGNATURES
            16











Table of Contents




PARTI


FINANCIAL
INFORMATION




Item
1.  Financial Statements





Caneum,
      Inc.Condensed
      Consolidated Balance SheetsAs
      of September 30, 2008 and December 31,
2007
  September
      30,
              
              
              December
      31,2008
              
              
              2007UnauditedCURRENT
      ASSETSCash
      and cash equivalents
              
              $
              79,900
              
              
              $
              46,280Accounts
      receivable, net of allowance of $416,903 and $392,157,
      respectively
              
              
              1,253,065
              
              
              
              1,559,352Accounts
      receivable from related parties, net of allowance of
      $155,855
              
              
              47,240
              
              
              
              111,010Prepaid
      assets
              
              
              58,136
              
              
              
              134,764Other
      current assets
              
              
              38,611
              
              
              
              33,202Total
      current assets
              
              
              1,476,952
              
              
              
              1,884,608LONG
      TERM ASSETSProperty
      & equipment, net
              
              
              92,657
              
              
              
              193,843Intangibles,
      net
              
              
              107,821
              
              
              
              643,555Goodwill
              
              
              1,464,805
              
              
              
              1,464,805Other
              
              
              34,515
              
              
              
              32,264TOTAL
      ASSETS
              
              $
              3,176,750
              
              
              $
              4,219,075CURRENT
      LIABILITIESAccounts
      payable
              
              $
              1,975,911
              
              
              $
              1,552,870Accrued
      expenses
              
              
              96,659
              
              
              
              25,975Credit
      lines
              
              
              967,989
              
              
              
              1,231,694Accrued
      payroll and related expenses
              
              
              196,120
              
              
              
              248,287Deferred
      revenue
              
              
              21,989
              
              
              
              22,880Current
      portion of installment loans
              
              
              663,392
              
              
              
              734,974Other
      current liabilities
              
              
              42,161
              
              
              
              90,992Total
      current liabilities
              
              
              3,964,221
              
              
              
              3,907,672LONG
      TERM LIABILITIESCurrent
      portion of installment loan reclassifed to non-current
              
              
              -
              
              
              
              200,000Promissory
      notes - related party
              
              
              890,000
              
              
              
              -Promissory
      notes
              
              
              87,500
              
              
              
              -Installment
      loans, less current portion
              
              
              3,232
              
              
              
              17,894Other
      non current liabilities
              
              
              61,980
              
              
              
              61,058Total
      liabilities
              
              
              5,006,933
              
              
              
              4,186,624SHAREHOLDERS'
      EQUITYPreferred
      stock,  $0.001 par value  20,000,000 shares
      authorized, 0 and 3,332,500shares
      issued and outstanding
              
              
              -
              
              
              
              3,332Common
      stock,  $0.001 par value  100,000,000 shares
      authorized, 11,134,985and
      8,896,368 shares issued and outstanding
              
              
              11,133
              
              
              
              8,895Additional
      paid-in capital
              
              
              9,082,719
              
              
              
              8,708,827Accumulated
      other comprehensive income (loss)
              
              
              (54,431
              )
              
              
              87,416Accumulated
      deficit
              
              
              (10,869,604
              )
              
              
              (8,776,019
              )Total
      shareholders' equity (deficit)
              
              
              (1,830,183
              )
              
              
              32,451TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
              
              $
              3,176,750
              
              
              $
              4,219,075
  Note: The
balance Sheet at December 31, 2007, has been derived from the audited
consolidated financial statements at that date
  See
accompanying notes to unaudited condensed consolidated financial
statements
 
 3
 Table of Contents











Caneum,
      Inc.Condensed
      Consolidated Statements of OperationsAnd
      Comprehensive Income (Loss)For
      the Three and Nine Months Ended September 30, 2008 and
  2007
  Three Months Ended
              
              
              Nine
      Months EndedSept
      30,
              
              
              Sept
      30,
              
              
              Sept
      30,
              
              
              Sept
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Unaudited
              
              
              Unaudited
              
              
              Unaudited
              
              
              UnauditedRevenue
              
              $
              2,644,029
              
              
              $
              3,127,234
              
              
              $
              9,163,437
              
              
              $
              9,118,922Cost
      of revenue
              
              
              2,249,204
              
              
              
              2,604,439
              
              
              
              7,718,700
              
              
              
              7,334,629Gross
      profit
              
              
              394,825
              
              
              
              522,795
              
              
              
              1,444,737
              
              
              
              1,784,293Operating
      expenses
              
              
              852,639
              
              
              
              1,329,297
              
              
              
              3,056,486
              
              
              
              3,627,091Impairment
      loss
              
              
              414,500
              
              
              
              -
              
              
              
              414,500
              
              
              
              -Loss
      from operations
              
              
              (872,314
              )
              
              
              (806,502
              )
              
              
              (2,026,249
              )
              
              
              (1,842,798
              )Other
      income (expense)Interest
      expense, net
              
              
              (62,110
              )
              
              
              (66,535
              )
              
              
              (174,779
              )
              
              
              (170,558
              )Gain
      (loss) on foreign exchange
              
              
              61,265
              
              
              
              (20,396
              )
              
              
              124,411
              
              
              
              (73,444
              )Other
      income (loss)
              
              
              131
              
              
              
              (7,512
              )
              
              
              131
              
              
              
              (7,512
              )Total
      other income (expense)
              
              
              (714
              )
              
              
              (94,443
              )
              
              
              (50,237
              )
              
              
              (251,514
              )Minority
      interest
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (80,352
              )Loss
      before income tax
              
              
              (873,028
              )
              
              
              (900,945
              )
              
              
              (2,076,486
              )
              
              
              (2,174,664
              )Income
      tax expense
              
              
              (2,285
              )
              
              
              (18,242
              )
              
              
              (17,099
              )
              
              
              (31,974
              )Net
      loss
              
              $
              (875,313
              )
              
              $
              (919,187
              )
              
              $
              (2,093,585
              )
              
              $
              (2,206,638
              )Basic
      and diluted net loss per common share
              
              $
              (0.09
              )
              
              $
              (0.11
              )
              
              $
              (0.23
              )
              
              $
              (0.27
              )Weighted
      average number of common sharesoutstanding
      used in the calculation
              
              
              9,574,634
              
              
              
              8,234,603
              
              
              
              9,268,886
              
              
              
              8,076,148Net
      loss
              
              $
              (875,313
              )
              
              $
              (919,187
              )
              
              $
              (2,093,585
              )
              
              $
              (2,206,638
              )Comprehensive
      income (loss):Foreign
      currency translation adjustment (Note 2)
              
              
              (108,728
              )
              
              
              23,259
              
              
              
              (141,847
              )
              
              
              93,184Comprehensive
      loss
              
              $
              (984,041
              )
              
              $
              (895,928
              )
              
              $
              (2,235,432
              )
              
              $
              (2,113,454
              )
  See
accompanying notes to unaudited condensed consolidated financial
statements
   4
 Table of Contents
  Caneum,
      Inc.Condensed
      Consolidated Statements of Cash FlowsFor
      the Nine Months Ended September 30, 2008 and
  2007
    For
      the Nine Months EndedSept
      30,
                
                
                Sept
      30,2008
                
                
                2007Unaudited
                
                
                UnauditedCASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (2,093,585
                )
                
                $
                (2,206,638
                )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Stock
      option compensation expense
                
                
                284,811
                
                
                
                435,990Expenses
      paid by common stock issuances or committed issuances
                
                
                463,130
                
                
                
                431,730Interest
      accreted to TierOne installment loans
                
                
                -
                
                
                
                52,548Depreciation
      and amortization
                
                
                69,761
                
                
                
                61,264Amortization
      of acquired intangibles
                
                
                131,603
                
                
                
                172,888Impairment
      of acquired intangibles
                
                
                394,500
                
                
                
                -Impairment
      of property and equipment
                
                
                20,000
                
                
                
                7,512Bad
      debt expense
                
                
                75,698
                
                
                
                40,000Minority
      interest
                
                
                -
                
                
                
                80,352(Increase)
      decrease in:Accounts
      receivable
                
                
                159,669
                
                
                
                (947,824
                )Prepaid
      assets and other current assets
                
                
                55,216
                
                
                
                (108,575
                )Increase
      (decrease) in:Accounts
      payable and accrued expenses
                
                
                521,795
                
                
                
                649,826Accrued
      payroll and related expenses
                
                
                9,638
                
                
                
                170,727Deferred
      revenue
                
                
                (891
                )
                
                
                22,880Other
      current liabilities
                
                
                29,492
                
                
                
                -Net
      cash provided by (used in) operating activities
                
                
                120,837
                
                
                
                (1,137,320
                )CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      paid for acquisition of remaining interest of Continuum
                
                
                -
                
                
                
                (89,286
                )Purchase
      of property & equipment
                
                
                (20,083
                )
                
                
                (71,487
                )Sale
      of property & equipment
                
                
                13,107
                
                
                
                -Net
      cash used in investing activities
                
                
                (6,976
                )
                
                
                (160,773
                )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of promissory notes
                
                
                777,500
                
                
                
                -Payment
      of debt
                
                
                (102,138
                )
                
                
                (650,870
                )Addition
      to debt
                
                
                18,750
                
                
                
                24,225Bank
      overdraft
                
                
                -
                
                
                
                133,958Repurchase
      of common and preferred shares and warrants
                
                
                (500,000
                )
                
                
                -Increase
      (decrease) in credit lines, net
                
                
                (263,705
                )
                
                
                1,525,660Net
      cash provided by (used in) financing activities
                
                
                (69,593
                )
                
                
                1,032,973Effect
      of changes in foreign currency exchange rates on cash
                
                
                (10,648
                )
                
                
                21,013Net
      increase (decrease) in cash and cash equivalents
                
                
                33,620
                
                
                
                (244,107
                )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                
                
                46,280
                
                
                
                335,202CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                
                $
                79,900
                
                
                $
                91,095SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONInterest
      paid
                
                $
                169,817
                
                
                $
                121,306Income
      taxes paid
                
                $
                14,814
                
                
                $
                31,974
  See
accompanying notes to unaudited condensed consolidated financial
statements





5
 Table of Contents








Supplemental
disclosure of non-cash investing and financing activities:





During the nine months ended September
30, 2008, the Company converted $200,000 of installment debt due to the former
Principals of Tier One into $200,000 Promissory Notes due in 2011.





During
the nine months ended September 30, 2008, the Company settled $50,457 of
commission and payroll liabilities from the prior year period by issuance
of 225,807 shares of common stock.





During the nine months ended September
30, 2007, the Company issued 260,761 common shares valued at $135,596 as part of
the consideration given for the acquisition of the remaining 45% Minority
Interest of Continuum Systems, Inc.








NOTE 1 — CORPORATE
HISTORY





Organization





Caneum,
Inc. (the “Company,” “we,” “us,” or “our”) was incorporated in Nevada on March
1, 2000, as Saiph Corporation for the purpose of seeking and consummating a
merger or acquisition with a business entity organized as a private corporation,
partnership, or sole proprietorship.  On March 5, 2003, the Company
filed Amended Articles of Incorporation changing its name to SaiphT
Corporation.  On July 21, 2003, the Company changed its name to
Caneum, Inc.





Caneum,
Inc. is a global provider of business process and information technology
outsourcing services across vertical industries, including technology, energy,
government, transportation, financial services, education and
healthcare.  The Company provides a suite of business strategy and
planning capabilities to assist companies with their outsourcing decisions in
the areas of data, network, product development, product maintenance and
customer support, and fulfills its services in-house, on-shore and off-shore,
depending on the business goals and objectives of its global customers. The
Company is opportunistically pursuing accretive acquisitions within its core
outsourcing service suite in order to broaden its core capabilities, expand its
customer base, and supplement its organic growth.





Basis
of Presentation





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States, and with the rules and regulations of the Securities and Exchange
Commission related to a quarterly report on Form 10-Q.  Accordingly,
they do not include all the information and disclosures required by accounting
principles generally accepted in the United States for complete financial
statements. The interim financial statements include all adjustments that, in
the opinion of management, are necessary for a fair presentation of the
financial condition and results of operations for the periods
presented.  Except as otherwise disclosed, all such adjustments are of
a normal recurring nature.





Results
for the interim periods are not necessarily indicative of the results for the
entire year.  For more complete financial information, these financial
statements, and notes thereto, should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 2007, included
in Caneum’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission.





NOTE 2 — SIGNIFICANT
ACCOUNTING POLICIES





Consolidation





The
accompanying condensed consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Tier One Consulting, Inc., and the
majority (55%) owned subsidiary, Caneum India Pvt. Ltd., formerly Continuum
Systems Private Limited, an Indian corporation (“Continuum”) acquired on
December 31, 2006.  The remaining 45% of the outstanding stock of
Caneum India was acquired on June 6, 2007, when Continuum became a wholly (100%)
owned subsidiary of the Company.  However one share is held by Suki
Mudan, President of Caneum, Inc., as nominee shareholder but the beneficial
ownership continues to be held by Caneum Asia Pacific Pte
Limited.  This was a requirement for compliance with Indian
regulations which mandate that a company must have a minimum of two (2)
shareholders. Continuum was renamed Caneum India Private Limited (“Caneum
India”).  This acquisition of Caneum India occurred through the
Company’s wholly owned subsidiary, Caneum Asia Pacific PTE LTD. (“Caneum Asia
Pacific”), formed in Singapore on December 21, 2006.  The consolidated
financial statements include 100% of the accounts of Caneum India from June 6,
2007, the date of acquisition of the remaining 45% of the outstanding
stock.  All significant inter-company balances and transactions have
been eliminated upon consolidation.





Revenue
Recognition





The
Company derives its revenue primarily from the sale of
services.  Revenue is recognized as services are performed in
accordance with the provisions of SEC Staff Accounting Bulletin (“SAB”) No. 104,
Revenue
Recognition.  The Company recognizes revenue when there is
persuasive evidence of an arrangement, the services have been rendered, the
sales price is fixed or determinable and collection of the related receivable is
reasonably assured.  The Company records all expense reimbursements
billed to customers as revenue, and related costs as cost of sales, when
incurred, in accordance with Emerging Issues Task Force (“EITF”) 01-14 “Income
Statement Characterization of Reimbursements Received for “Out-of-Pocket”
Expenses.”





6
 Table of Contents




Segment
Reporting





The
Company has determined that it operates and reports as one single
segment.





Foreign
Currency





Our
foreign subsidiary’s functional currency is the Indian Rupee, their local
currency.  Translation of the subsidiary’s assets and liabilities is
at the balance sheet date exchange rate. Translation of shareholders’ equity is
at historical rates. Translation of income and expenses is at the average
exchange rates for the applicable period.  Adjustments from these
translations are reflected in our consolidated balance sheet as a separate
component of shareholders’ equity.





Transactions
gains and losses arising from activities in other than the functional currency
are calculated using average exchanges rates for the applicable period and
reported in our consolidated statement of operations and comprehensive income
(loss) as a non-operating item in each period.





Use
of Estimates





The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  By their nature, estimates are
subject to an inherent degree of uncertainty and, as such, actual results may
differ from those estimates.





Comprehensive
Income





The
Company accounts for comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive
Income. The Company reports the accumulated balance of other
comprehensive income or loss separately in the shareholders’ equity section of
the consolidated balance sheets. The only component of other comprehensive
income is the foreign currency translation adjustment.




Fair
Value of Financial Instruments
 
 The
Company considers the face value amount of cash, accounts receivable, accounts
payable, credit lines and other short-term instruments to be at their fair value
due to their short-term nature. The Company has recorded the final installment
note to the former principals of Tier One and promissory notes payable at face
value plus accrued interest. Their fair values are not determinable as the final
installment note to the former principals of Tier One is in default and the
majority of the promissory notes were issued to related
parties




New
Accounting Pronouncements





In
December 2007, the FASB issued SFAS No. 141R (revised 2007), “Business
Combinations”. SFAS 141R replaces SFAS 141 and establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, including goodwill, the liabilities
assumed and any non-controlling interest in the acquiree. SFAS 141R also
establishes disclosure requirements to enable users of the financial statements
to evaluate the nature and financial effects of the business combination. This
statement is effective for fiscal years beginning after December 15, 2008. This
standard is not expected to have any impact on our financial
statements.





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”. SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the non-controlling interest, changes in a parent’s ownership
interest and the valuation of retained non-controlling equity investments when a
subsidiary is deconsolidated. SFAS 160 also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the non-controlling
owners. This standard is effective for fiscal years beginning after December 15,
2008. This standard is not expected to have any impact on our financial
statements.








In March
2008, the FASB issued SFAS No. 161, “Disclosure about Derivative Instruments and
Hedging Activities, an amendment of SFAS 133”.  This Statement changes
the disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows.  This statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15,
2008.  The Company currently engages in no hedging activities through
use of derivative instruments.





In May
2008, the FASB issued SFAS No.162 “The Hierarchy of General Accepted Accounting
Principals”.  This statement identifies the sources of accounting
principals to be used in the preparation of financial statements of
nongovernment entities that are presented in conformity with generally accepted
accounting principals (GAAP) in the United States (the GAAP Hierarchy). This
standard is not expected to have any impact on our financial
statements.





NOTE 3 - GOING CONCERN
UNCERTAINTY




The
accompanying unaudited condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. For the
nine months ended September 30, 2008, the Company incurred a net loss of
$2,093,585 and for the year ended December 31, 2007 the Company incurred a
net loss of $2,966,415.  As of September 30, 2008, the Company had
negative working capital of $2,487,269 and an accumulated deficit of
$10,869,604. These results and the Company’s reliance on obtaining investment
funding raise substantial doubt about the Company’s ability to continue as a
going concern. However, management is currently exploring merger options which
due to greater synergies and expanded operations could lead to additional
funding allowing the Company to continue operations. The accompanying condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


7
 Table of Contents




NOTE 4 – IMPAIRMENT OF
LONG-LIVED ASSETS




During
the three months ended September 30, 2008, the Company recorded an impairment
charge in the amount of $304,500 for the Tier One customer list  and
$90,000 for the Tier One trade name acquired in the Tier One
acquisition.  The intangible assets were deemed impaired due to
departure of the Tier One executives and several customers.  The fair
value of the remaining customers acquired from Tier One was determined using the
projected discounted cash flow profit from these customers.  The
remaining value of intangible assets, excluding goodwill, as of September 30,
2008 was $107,821.
 
 During
the three months ended September 30, 2008, the Company recorded an impairment
charge of $20,000 for its property and equipment.  Due to a
significant decrease in personnel and operations, the Company anticipates
liquidation of certain of its property and equipment and has adjusted the
carrying value to the estimated fair value of the property and equipment, less
disposal costs. The remaining book value of property and equipment as of
September 30, 2008 was $92,657.
 
 NOTE 5 — PROMISSORY
NOTES
 
 During
the nine months ended September 30, 2008, the Company  issued $890,000
of Promissory Notes – Related Party. The notes bear interest at 10% per annum
payable quarterly in cash and have a maturity date of March 31, 2011. The
Company has the right to retire the notes for cash or to convert the principal
and any unpaid interest into common shares of the Company at the lesser rate of
a 25% discount to the ten-day average closing price of the common stock
preceding the Maturity Date or $0.50. In the event of a change of control of the
Company prior to the Maturity Date, 150% of the principal amount of the Note and
any unpaid interest will be paid in cash as of the date of the change of
control.
 
 In
addition, during the nine months ended September 30, 2008, the Company issued
$87,500 of additional Promissory Notes to non-related parties. The notes were
sold with the same terms and conditions as the Related Party
notes.





NOTE 6 — RELATED PARTY
TRANSACTIONS





On
January 2, 2007, we entered into an agreement to pay $1,250 per month of the
rent on office space of Curo Capital, LLC, a company controlled by Alan
Knitowski, our Chairman, and Luan Dang, one of our directors.





Customer





Our
Chairman, Alan Knitowski, also serves on the Board of Directors and is an
investor in Vootage, Inc.  We provide Vootage with offshore software
development resources located at our offices in India.  The initial
contract amount, entered into and fully earned during the year ended December
31, 2007, was $237,000 and a subsequent contract for recurring services in the
amount of $45,760 per month was signed in July 2007.  The contract was
reduced to $15,680 per month in March 2008 then terminated in May
2008.   As of September 30, 2008, $165,240 had not been collected
and remained in accounts receivable from related parties.  The Company
has reserved $120,000 against this receivable at September 30,
2008.





Mr.
Knitowski and our Vice Chairman, Mr. Luan Dang, serve on the board and are
investors in Trycera Financial. We provided Trycera Financial with IT services
of which $33,852 remains unpaid and has been fully reserved at September 30,
2008.





NOTE 7 — TIER ONE
TRANSACTION





On March
28, 2006, the Company acquired all of the outstanding stock of Tier One
Consulting, Inc.  The purchase price for the shares of Tier One was
$2,971,700, of which $1,375,000 was paid at closing, $1,375,000 of which was to
be paid in two equal installments of $687,500 on the first and second
anniversary of the closing, and $13,333 which was payable monthly for two
years.  The related installment payables have been recorded at present
value using a discount rate between 11% and 12% and the related discount will be
accreted to interest expense through the payment dates.  The
installment payments are subject to adjustment for certain set-offs for any
post-closing undisclosed liabilities of Tier One, enforcement of indemnification
provisions by Tier One in the acquisition agreement, a decline in the EBIT
calculation in the Tier One audited financial statements for 2005, or any
increase or decrease in the estimated cost of the audit of the Tier One
financial statements for 2005.  The first anniversarypayment was offset by $1,975 and reduced to $685,525. On March 28, 2007,
we renegotiated the first anniversary payment and paid a total of $361,775 to
Messrs Willner and Morris, with the balance of the adjusted first anniversary
payment payable in installments of $10,000 each per month beginning in April,
2007.   In March 2008, we converted $200,000 of the remaining
balance into promissory notes due in 2011 (Note 5) and paid off the remaining
balance of $23,948.  In accordance with SFAS 6, the Company
reclassified the $200,000 converted amount as a non-current liability at
December 31, 2007.  The debt modifications are accounted for on a
prospective basis.





The final
installment of $687,500 initially due March 28, 2008, was refinanced into a
series of thirty-nine monthly installment payments of $20,000 beginning May 15,
2008 and going through July 15, 2011, with a final payment of $10,031 due August
15, 2011. Beginning in July 2008, the Company was unable to continue full
payments and in October 2008 discontinued all payments. The note bears 8%
interest and any remaining balance becomes immediately due upon change of
control of the Company.  The unpaid balance at September 30, 2008 was
$654,892 and the full amount has been recorded as a current
liability.








8
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NOTE 8 — STOCK
PLAN





At
September 30, 2008 a total of 6,638,430 shares of common stock were available
for grant under the Plan and the Company recognized share-based compensation
expense in accordance with SFAS No. 123R, in the amount of $747,941 and $867,720
for the nine months ended September 30, 2008 and 2007,
respectively.





During
the nine months ended September 30, 2008, the Company issued 1,590,000 shares of
restricted stock to members of the Board of Directors and certain other
employees.  The shares have vesting terms of one to four years and
1,050,000 shares would vest immediately upon any change of control and another
400,000 would vest upon a certain merger transaction.





As of
September 30, 2008 there was $202,500 of total unrecognized compensation expense
related to unvested stock options under the plan.  The expense is
expected to be recognized over a weighted average period of 1.4 years. In
addition as of September 30, 2008, there was estimated $272,500 of total
unrecognized compensation expense related to unvested restricted stock under the
plan.  This expense is expected to be recognized over a weighted
average period of 0.9 years. Because of its net operating losses, the Company
did not realize any tax benefits for the tax deductions from share-based payment
arrangements during the nine month period ended September 30, 2008 and
2007.





NOTE 9 — NOTES
PAYABLE





Credit
Lines





On
February 12, 2007, the Company and its wholly owned subsidiary, Tier One
Consulting, Inc. (“Tier One”), (collectively the “Borrower”) entered into a
Business Financing Agreement (the “Credit Agreement”) with Bridge Bank, National
Association (the “Lender”) that provides for an accounts receivable backed
$1,500,000 revolving line of credit (the “Line of Credit”) with an interest rate
of Prime + 2.00%.  The effective date of the Credit Agreement was
January 24, 2007. Effective April 9, 2008 the facility was renewed for an
additional year.  Then in October, the Company determined that it
would not be able to meet certain financial covenants of the agreement and on
October 14, 2008 entered into an amended and restated business financing
agreement (Amended Credit Agreement) with Bridge Bank which provides for an
accounts receivable line of credit rather than a revolving line of
credit.  Under the new agreement, the Company will pay a processing
fee at the time each advance is made on a receivable funded. The credit limit on
the Amended Credit Agreement is $1,200,000 and the amount of each advance shall
be 80% of the receivable, subject to adjustment by the Lender in the rate of
advances.  The Company paid a $15,000 facility fee upon renewal in
April 2008 which was carry over to the amended agreement through March 31, 2009.
Advances made under the Amended Credit Agreement will bear interest at the
greater of the prime rate as published by the Wall Street Journal or an agreed
percentage rate.  Either party may terminate the Amended Credit
Agreement at any time. The balance outstanding as of September 30, 2008 was
$879,143.





As of
September 30, 2008, the Company maintained a line of credit Wells Fargo
Bank.  Under the terms of the agreement there is no collateral for the
line and the interest rate is variable in nature.  The Company must
pay the finance charge every month.  The balance outstanding on the
line was $88,846 at September 30, 2008, at an interest rate at that time of
7.25%.





NOTE 10 —
LITIGATION





Barron Litigation





On or
about August 17, 2007, the Company filed a complaint against Barron Partners LP
in the United States District Court for the Southern District of New York. The
Complaint alleged that Barron committed numerous material breaches of the Stock
Purchase Agreement it entered into with the Company on or about March 24, 2006,
including by engaging in trading activity in Caneum common stock that violates
the Stock Purchase Agreement. The Complaint seeks, inter alia, damages,
attorneys’ fees, costs, and a declaratory judgment that Barron’s material
breaches of the Stock Purchase Agreement excuse the Company from further
performance under the Stock Purchase Agreement. In a letter dated August 9,
2007, Barron demanded that the Company issue 2,600,000 additional shares of
preferred stock to Barron because the Company did not meet the Adjusted EBITDA
goals provided in the Stock Purchase Agreement for the year ended December 31,
2006 as interpreted by Barron. The Company’s complaint alleged that Barron’s
material breaches of the Stock Purchase Agreement excused the Company from any
obligation to issue additional stock to Barron.





Barron
Partners LP filed an answer to this complaint, denying the allegations in the
Company’s complaint.  Barron also filed a counterclaim alleging breach
of contract for failure to meet the adjusted EBITDA goals, the Company’s failure
to maintain the effectiveness of its registration statement, and its failure to
maintain a quotation for its stock on the OTC Bulletin Board.  Barron
claimed damages in the amount of approximately 2,000,000 shares and an
unspecified cash amount.








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This
litigation was settled out of court on May 19, 2008.  Under the terms
of our settlement agreement with Barron Partners, we paid them $200,000 on June
26, 2008, and they delivered for cancellation a stock certificate representing
330,397 shares of our common stock, a preferred stock certificate representing
3,332,500 shares of our Series A Convertible Preferred Stock, an A Warrant
certificate for 3,640,000 shares, a B Warrant certificate for 2,000,000 shares,
and a C Warrant certificate for 2,000,000 shares, all of which have been
cancelled.  The common shares were returned to the authorized but
unissued shares of the Company.  The Company subsequently made three
payments of $100,000 each to Barron Partners on July 23, 2008, August 21, 2008,
and September 22, 2008, which completed the Company’s obligations under the
settlement agreement.
 
 Innofone
Litigation
 
 The
Company filed an action in the Superior Court of California, County of Orange,
against Innofone, Inc. on or about November 13, 2006, alleging that Innofone
breached its contracts with us by failing to pay approximately
$200,000.  Innofone then filed counterclaims alleging breach of
contract and fraud.  At a hearing on October 31, 2007, brought by the
Company to seek summary judgment in the Innofone case, the Company was
unsuccessful in seeking a summary judgment; the matter was scheduled for trial
on November 29, 2007. On February 11, 2008, the court granted judgment in favor
of the Company against Innofone in the amount of $198,203 and awarded us
prejudgment interest in the amount of $27,122.  The court also
dismissed the cross-complaint previously filed by Innofone against us. There is
no assurance that the Company will be able to collect on this
judgment.
 
 Publishing
Concepts, L.P.
 
 On September 27, 2007, the Company
filed a complaint in the District Court of Dallas County, Texas, against
Publishing Concepts, L.P., doing business as PCI, for failure to pay an invoice
in the amount of $101,734 for services rendered to PCI by the
Company.  On October 22, 2007, PCI filed an answer generally denying
the allegations contained in the Company’s complaint.  It also alleged
affirmative defenses that the Company overcharged PCI for the services due to
the poor quality of the work performed and that therefore, PCI is due credits or
offsets from the fees owed.  The Company intends to pursue this matter
vigorously.




NOTE 11 – FACILITY
LEASE





In
September 2007, the Company relocated into new premises.  The Company
executed two three year leases for approximately 3,400 square feet of office
space located at 3101 West Coast Highway, Suite 400, Newport Beach, California,
with initial monthly average rent of approximately $14,700, escalating by 2% in
years two and three.  In August and September, the Company requested
and was granted 50% rent deferral from the landlord, to be paid at a later
date.  The lease facilities in India are for lease terms expiring
through 2011. Rent expense for our corporate office for the nine months ended
September 30, 2008 and 2007 was $143,387 and $60,399, respectively.





Future
minimum lease commitments for our Newport Beach corporate office
are:





2008                                           $  45,108


2009                                           $181,447


2010                                           $138,365





Rent
expense for our Caneum India offices for the nine months ended September 30,
2008 was $74,975.





Future
minimum lease commitments for our Caneum India offices are:





2008                                           $21,813


2009                                           $63,302


2010                                           $43,229


2011                                           $  6,658





NOTE 12 –SUBSEQUENT
EVENTS





In
October 2008, the Company issued for cash an additional $122,500 of promissory
notes.  The notes are unsecured, bear interest at 10% per annum and
mature March 31, 2011.  At maturity, the Company will have the right
to retire the notes for cash or to convert the principal and any unpaid interest
into common shares of the Company at the lesser of $0.50 per share or a 25%
discount to the ten-day average closing price of the common stock preceding the
maturity date.  In the event of change of control prior to the
maturity date, 150% of the principal amount of the note and any unpaid interest
will be paid in cash as of the date of the change of control.





In
October 2008, the Company refunded to its Chairman $40,000 which he had advanced
until additional funds were obtained from the Company’s promissory note
offering.





In
October 2008, the Company cancelled 287,500 un-vested restricted shares upon
resignation of two employees.





In
October and November 2008, the Company was unable to pay its monthly rent in the
amount of $29,396, which has been deferred until a later date.




10
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Item2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operation
 
 The
discussion and analysis of our financial condition and results of operations
should be read in conjunction with our condensed consolidated financial
statements and notes thereto included in this quarterly report on Form 10-Q (the
“Quarterly Report”) and the audited consolidated financial statements and notes
thereto included in our annual report on Form 10-K for the year ended December
31, 2007 (the “2007 Annual Report”), as filed with the Securities and Exchange
Commission (“SEC”). In addition to historical information, this discussion and
analysis contains forward looking statements that involve risks, uncertainties,
and assumptions. Our actual results may differ materially from those anticipated
in these forward looking statements as a result of certain factors, including
but are not limited to those identified in 2007 Annual Report in the section
entitled “Risk of Foreign Operations” and “Competition”.
 
 Forward-Looking
Statements
 
 This
report contains certain forward-looking statements and information that are
based on assumptions made by management and on information currently
available.  When used in this report, the words “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” and similar expressions, as
they relate to our company or its management, are intended to identify
forward-looking statements.  These statements reflect management’s
current view of our company concerning future events and are subject to certain
risks, uncertainties and assumptions, including among many others the following:
changes in the information technology industry; changes in out-sourcing and
off-shore operations; a general economic downturn; a further downturn in the
securities markets; our early phase of operations; reliance on foreign suppliers
and contractors; the inability to locate suitable acquisition targets; and other
risks and uncertainties.  Should any of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described in this report as anticipated,
estimated or expected.
 Background





We have
two wholly owned operating subsidiaries, Tier One Consulting, Inc., which
operates from our Newport Beach, California, offices, and Caneum India Private
Limited, formerly Continuum Systems Private Limited, which operates from our
offices located in Gurgaon, Delhi, India, and is owned by our wholly owned
holding company formed and located in Singapore, Caneum Asia Pacific Pte.
Ltd.





Overview





We are a
global provider of business process and information technology outsourcing
services across vertical industries, including technology, energy, government,
transportation, financial services, education and healthcare. We provide a suite
of business strategies and planning capabilities to assist companies with their
outsourcing decisions in the areas of data, network, product development,
product maintenance and customer support, and fulfill our services in-house,
on-shore and off-shore, depending on the business goals and objectives of our
global customers. In parallel, we are opportunistically pursuing accretive
acquisitions within our core outsourcing service suite in order to broaden our
core capabilities, expand our customer base and supplement our organic
growth.





We offer
our customers business process outsourcing (BPO) services and information
technology outsourcing (ITO) services. BPO services are comprised of the
following:





•
            
            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.





ITO
services are comprised of the following: Information Technology Enterprise
Software Services, including architecting, integrating, deploying, migrating and
maintaining front-end Sales Force Automation (SFA), back-end Enterprise Resource
Planning (ERP), case management, expert system and enterprise application
software packages; Information Technology Infrastructure Services, including
systems administration, database administration, web development, network
optimization, infrastructure audits and system architecture; and Product
Development, including hardware, firmware and software coding, development and
maintenance for existing product lines and next generation product
prototyping.





Results
of Operations





Three and Nine months ended
September 30, 2008, versus the Three and Nine months ended September 30,
2007





Revenue





Revenue
was $2,644,029 and $3,127,234 for the three months ended September 30, 2008 and
2007, respectively, representing a decrease of $483,205, or approximately 15%,
compared to the same period in the prior year (the “comparable prior year
period”). An increasing proportion of our revenue came from our largest
customer, DIRECTV, which accounted for almost 54% of our total revenue for the
three months ended September 30, 2008. For the prior year period DIRECTV
accounted for approximately 29% of our total revenue. Expanded operations at
DIRECTV were offset by reduced revenue at other customers such as Los Angeles
Unified School District which accounted for 10% of our revenue in the prior year
period and loss of customers such as Countrywide which accounted for 6% of our
revenue in the prior year period.  Beginning in the fourth quarter of
2008, we are expecting significant revenue reduction due to economic conditions
as well as loss of business development personnel.







11
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Revenue
was $9,163,437 and $9,118,922 for the nine months ended September 30, 2008 and
2007, respectively, representing an increase of $44,515, or less than 1%
compared to the comparable prior year period. Over 47% of our total revenue for
the nine months ended September 30, 2008 was due to expanded operations at our
largest customer, DIRECTV, this compares to DIRECTV contributing 22% of our
total revenue during the prior year period.  Expanded operations at
DIRECTV were offset by reduced revenue at other customers such as Los Angeles
Unified School District which accounted for 12% of our revenue in the prior year
period and loss of customers such as Keane which accounted for 7% of our revenue
in the prior year period. Beginning in the fourth quarter of 2008, we are
expecting significant revenue reduction due to economic conditions as well as
loss of business development personnel.
  Cost of
Revenue and Gross Profit
 
 Cost of
revenue was $2,249,409 and $2,604,439 for the three months ended September 30,
2008 and 2007, respectively, representing a decrease of $355,236, or 14%. The
decrease was due to decreased revenue as discussed above. Beginning in the
fourth quarter of 2008, we are expecting significant cost of revenue reduction
due to the revenue reduction previously discussed.




Cost of
revenue was $7,718,700 and $7,334,629 for the nine months ended September 30,
2008 and 2007, respectively, representing an increase of $384,071, or 5%. The
increase was primarily due to decreased margins as discussed below. Beginning in
the fourth quarter of 2008, we are expecting significant cost of revenue
reduction due to the revenue reduction previously discussed.





Our gross
margin percentages were 15% and 17% for the three months ended September 30,
2008 and 2007, respectively. The decrease in the gross margin percentages was
the result of three factors: higher commission payments to recruiters, a lower
proportion of permanent placements (which are typically much higher margins) and
a decline in margins at one of our key clients, DIRECTV. Beginning in the fourth
quarter of 2008, we are expecting significant gross profit reduction due to the
revenue reduction previously discussed. However, we may see slight margin
percentage improvement due to lower commission payments.





Our gross
margin percentages were 16% and 20% for the nine months ended September 30, 2008
and 2007, respectively. The decrease in the gross margin percentages was the
result of three factors: higher commission payments to recruiters, a lower
proportion of permanent placements (which are typically much higher margins) and
a decline in the volume of high margin business with one of our key clients,
DIRECTV. Beginning in the fourth quarter of 2008, we are expecting significant
gross profit reduction due to the revenue reduction previously discussed.
However, we may see slight margin percentage improvement due to lower commission
payments.





Operating
Expenses





Operating
expenses were $852,639 and $1,329,297 for the three months ended September 30,
2008 and 2007, respectively, representing a decrease of $476,658 or 36%. A
significant factor for the decrease was U.S. payroll and professional services,
as described below offset by higher office rent of $36,071. Beginning in the
fourth quarter of 2008, we are expecting significant operating expense reduction
due to loss of personnel as well as other cost savings measures.





The major
components of our operating expenses are as follows:





·
            Stock-Based
      Compensation expense and Expenses Paid by Stock Issuance were $214,007 and
      $251,505 for the three months ended September 30, 2008 and 2007,
      respectively. This represents a decrease of $37,498 and is due to
      increased use of restricted stock compensation rather than stock option
      compensation.·
            U.S.
      Payroll and Related Expenses, (excluding stock based) amounted to $258,665
      and $412,415 for the three months ended September 30, 2008 and 2007,
      respectively. The decrease of $153,750 resulted from the departure of
      three senior executives in April and May 2008.·
            U.S.
      Professional Services, including legal, auditing and other consulting
      services amounted to $65,885 and $321,754 during the three months ended
      September 30, 2008 and 2007 respectively. The decrease of $255,869 was
      primarily attributable to the prior year period including excess audit and
      accounting costs due to restatement of 2006 quarterly reports and legal
      fees associated with litigation.·
            Most
      expenses of our wholly-owned India subsidiary are a direct cost of revenue
      and are recoded as such.  Operating expenses of our India
      subsidiary, excluding depreciation and amortization, were $120,306 and
      $54,275 for the three months ended September 30, 2008 and 2007,
      respectively.





Operating
expenses were $3,056,486 and $3,627,091 for the nine months ended September 30,
2008 and 2007, respectively, representing a decrease of $570,605 or 16%.
Significant factors for the decrease are described below, and are offset by
higher office rent expense of $98,988. Beginning in the fourth quarter of 2008,
we are expecting significant operating expense reduction due to loss of personal
as well as other cost savings measures.




The major
components of our operating expenses are as follows:





·
            Stock-Based
      Compensation expense and Expenses Paid by Stock Issuance were $747,941 and
      $867,720 for the nine months ended September 30, 2008 and 2007,
      respectively. This represents a decrease of $119,779 and principally
      results from the lower value of our stock used as incentives for
      services.·
            U.S.
      Payroll and Related Expenses, (excluding stock based) amounted to $985,084
      and $1,101,766 for the nine months ended September 30, 2008 and 2007,
      respectively. The decrease of $116,682 or 11% resulted from the departure
      of three senior executives in April and May 2008.·
            U.S.
      Professional Services, including legal, auditing and other consulting
      services amounted to $497,406 and $739,904 for the nine months ended
      September 30, 2008 and 2007 respectively. The decrease of $242,498 was
      primarily attributable to the prior year’s excess accounting and auditing
      costs associated with restatement of our 2006 quarterly
      results.·
            Most
      expenses of our wholly-owned India subsidiary are a direct cost of revenue
      and are recoded as such.  Operating expenses of our India
      subsidiary, excluding depreciation and amortization, were $334,638 and
      $170,230 for the nine months ended September 30, 2008 and 2007,
      respectively.





Impairment
loss





For the
three and nine months ended September 30, 2008 we recorded $394,500 of
impairment charges related to customer list and the trade name acquired with the
acquisition of Tier One and $20,000 impairment of property and equipment
anticipated to be liquidated.  The intangible assets were deemed
impaired due to departure of the Tier One executives and several
customers.  The fair value of the remaining customers acquired with
the acquisition of Tier One was determined using the projected discounted cash
flow profit from these customers.





12
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Other
Income (Expense)





For the
three months ended September 30, 2008 we recorded other expense, net of $714
compared to other expense, net of $94,443 for the three months ended September
30, 2007.  The decrease in other expense resulted from $61,265 of
foreign exchange gain during the current year period versus $20,396 of foreign
exchange loss during the prior year period. The foreign exchange gain and loss
is due to our wholly owned subsidiary transacting business in currencies other
than their functional currency.  Net interest expense decreased $4,425
from the prior year period primarily due decreased debt on our Bridge Bank line
of credit offset by interest expense associated with our promissory note
offering.





Other
expense, net was $50,237 and $251,514 for the nine months ended September 30,
2008 and 2007, respectively. The decrease in other expense was primarily the
result of $124,411 of foreign exchange gain in the current year period versus
$73,444 of foreign exchange loss in the prior year period.  Net
interest expense increased $4,221 from the prior year period due to interest
expense associated with our promissory note offering as well as nine months of
borrowings on our Bridge Bank line of credit compared to only seven months of
borrowings in the prior year period.





Net
loss





We
incurred a net loss of $875,313 and $919,187 for the three months ended
September 30, 2008 and 2007, respectively. We are expecting a net loss reduction
in the fourth quarter due to cost savings measures.





We
incurred a net loss of $2,093,585 and $2,206,638 for the nine months ended
September 30, 2008 and 2007, respectively. We are expecting a net loss reduction
in the fourth quarter due to cost savings measures.





Liquidity
and Capital Resources





Cash and
cash equivalents were $79,900 and $91,095 as of September 30, 2008 and 2007,
respectively.





Net cash
provided by operations was $120,837 for the nine months ended September 30, 2008
and was primarily due to extension of payables, as well as timely collection of
accounts receivable.  This compares to $1,137,320 used in operations
for the nine months ended September 30, 2007. The greater amount of cash used in
operations during the prior year period was primarily due to slow collection of
accounts receivable offset by extension of payables.





Net cash
used in investing activities was $6,976 and $160,773 for the nine months ended
September 30, 2008 and 2007, respectively.  The prior year period
included $89,300 of acquisition expenditures for the remaining 45% Interest of
Continuum.





Net cash
used in financing activities was $69,593 for the nine months ended September 30,
2008 compared to net cash provided by financing activities of $1,032,973 for the
nine months ended September 30, 2007.  During the current year period
we repurchased from Barron Partners all outstanding convertible Preferred
Shares, 330,397 common shares, and warrants for $500,000.  Following
the repurchase, all of the shares and warrants were retired.  The
funds for the repurchase were obtained by issuing for cash our promissory
notes.  For the nine months ended September 30, 2008 we raised
$777,500 from the issuance of promissory notes. The current year also includes
reduction in notes payable to the prior Tier One shareholders as well as some
reduction in our Bridge Bank line of credit.  The prior year period
included $1,525,660 of net advances from our lines of credit, offset by
principal payments of $561,606 to the prior Tier One shareholders and a $50,000
payment to a prior shareholder of Continuum Systems (now wholly owned as Caneum
India).


13
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In March
2008, in conjunction with our promissory note offering, we converted $200,000 of
the Tier One principal balance into promissory notes due in 2011.  The
remaining balance of $23,948 for the first installment on the Tier One
acquisition debt was also paid off in March 2008.  The final
installment of $687,500 initially due March 28, 2008, was refinanced into a
series of thirty-nine monthly installment payments of $20,000 beginning May 15,
2008 and going through July 15, 2011, with a final payment of $10,031 due August
15, 2011.  Beginning in July 2008, we were unable to continue full
payments and in October 2008 discontinued payments. The note bears 8% interest
and any remaining balance becomes immediately due upon change of control of the
Company. The unpaid balance at September 30, 2008 was $654,892 and the full
amount has been recorded as a current liability.





In August
2008, we initiated a Services Agreement, whereby certain of our vendor
liabilities are managed and paid by an outside company for a small mark up
charge.  As of September 30, 2008 total amount due to this vendor was
$217,781 including mark up charges of $16,180.





Our
current cash position is very limited placing great constraint on our
operations.  Without additional funding, we will not be able to
continue operations beyond the foreseeable future.





Off-Balance
Sheet Arrangements





During
the nine months ended September 30, 2008, we did not engage in any off-balance
sheet arrangements.





Recent
Accounting Pronouncements





Refer to Note 2 to the unaudited
condensed consolidated financial statements for a discussion of the impact of
recent accounting pronouncements.





Item3.  Quantitative and Qualitative Disclosures About
Market Risk





As a
smaller reporting company, we have elected not to provide the information
required by this item.




Item4T.  Controls and Procedures





Disclosure
Controls and Procedures





Upon our
initial evaluation, our senior management identified several material weaknesses
in our disclosure controls and procedures and internal control over financial
reporting. We continue to investigate these weaknesses further and continue to
apply compensating procedures and processes, as necessary and within the
constraints of our financial means, to ensure the reliability of our financial
reporting and are evaluating and intend to adopt measures designed to remediate
any weaknesses.





Our
controls and procedures are inadequate to ensure that information required to be
disclosed in reports filed under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the specified
time periods. Our disclosure controls and procedures are not designed to
reasonably assure that such information is accumulated and communicated to our
management, including the Chief Executive Officer, as appropriate to allow
timely decisions regarding required disclosure. Based on an initial assessment
that has not been completed yet, management has determined that the Company’s
disclosure controls as of September 30, 2008, were ineffective.





Changes
in Internal Control Over Financial Reporting





There
were no changes in our internal control over financial reporting which were
identified in connection with the evaluation that occurred during the last
quarter ended September 30, 2008, which materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.






14
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PART
II


OTHER
INFORMATION




Item1.  Legal Proceedings





Barron Litigation





Under the
terms of our settlement agreement with Barron Partners, we paid them $200,000 on
June 26, 2008, and they delivered for cancellation a stock certificate
representing 330,397 shares of our common stock, a preferred stock certificate
representing 3,332,500 shares of our Series A Convertible Preferred Stock, an A
Warrant certificate for 3,640,000 shares, a B Warrant certificate for 2,000,000
shares, and a C Warrant certificate for 2,000,000 shares, all of which have been
cancelled.  The common shares were returned to the authorized but
unissued shares of the company.  The Company subsequently made three
payments of $100,000 each to Barron Partners on July 23, 2008, August 21, 2008,
and September 22, 2008, which completed the Company’s obligations under the
settlement agreement.




Item2.  Unregistered Sales of Equity
Securities





(a)           In
February 2008, we commenced our offering of 10% promissory notes to raise a
maximum of $1,000,000 (the “Note Offering”).  The promissory notes are
payable March 31, 2011 in cash or, at the option of the Company, in shares of
common stock at a 25% discount to the ten-day average closing price of
the common stock preceding such date, or $0.50 per share whichever is
less.  During the six months ended June 30, 2008, the Company issued
notes in the principal amount of $700,000 in the Note Offering, which were
reported in the Company’s quarterly report on Form 10-Q for the quarter ended
June 30, 2008.  During the quarter ended September 30, 2008, we
issued additional notes in the principal aggregate amount of $277,500 to the
following persons:





Name
            Investment
      Date
            
            Investment
      AmountKnitowski
      Family Trust
            7/21/08
            
            
            100,000Curo
      Capital Appreciation Fund I LLC
            8/19/08
            
            
            100,000Hans
      Erickson
            8/29/08
            
            
            12,500Curo
      Capital Appreciation Fund I LLC
            9/19/08
            
            
            50,000Avtar
      Singh Ranshi
            9/24/08
            
            
            15,000TOTAL
            
            
            $
            277,500





These
notes were issued without registration under the Securities Act by reason of the
exemption from registration afforded by the provisions of Section 4(6) and/or
Section 4(2) thereof, and Rule 506 promulgated thereunder, as a transaction by
an issuer not involving any public offering.  Each Investor was an
accredited investor at the time of the sale and delivered appropriate investment
representations with respect to this issuance and consented to the imposition of
restrictive legends upon the promissory representing the loans.  Each
investor also represented that he had not entered into the transaction with us
as a result of or subsequent to any advertisement, article, notice, or other
communication published in any newspaper, magazine, or similar media or
broadcast on television or radio, or presented at any seminar or
meeting.  Each investor was afforded the opportunity to ask questions
of our management and to receive answers concerning the terms and conditions of
the transaction.  No underwriting discounts or commissions were paid
in connection with the sale of the notes.





(b)           In
May 2008, the Company settled its litigation with Barron
Partners.  Under the terms of the settlement agreement, the Company
paid Barron Partners a total of $500,000.  In return Barron Partners
delivered for cancellation a stock certificate representing 330,397 shares of
the Company’s common stock, the sole class of equity securities that is
registered by the Company pursuant to section 12 of the Exchange Act, a
preferred stock certificate representing 3,332,500 shares of our Series A
Convertible Preferred Stock, an A Warrant certificate for 3,640,000 shares, a B
Warrant certificate for 2,000,000 shares, and a C Warrant certificate for
2,000,000 shares.  The common shares were returned to the transfer
agent during the quarter ended September 30, 2008, and
cancelled.  These common shares were returned to the authorized but
unissued shares of the Company.





Item3.  Defaults Upon Senior Securities





On March
28, 2006, the Company acquired all of the outstanding stock of Tier One
Consulting, Inc.  The final purchase price installment of $687,500
initially due March 28, 2008, was refinanced in May 2008, into a series of
thirty-nine monthly installment payments of $20,000 beginning May 15, 2008 and
going through July 15, 2011, with a final payment of $10,031 due August 15,
2011. Beginning in July 2008, the Company was unable to continue full payments
and in October 2008 discontinued all payments. The note bears 8% interest and
any remaining balance becomes immediately due upon change of control of the
Company.  The unpaid balance at September 30, 2008, was
$654,892.




Item6.  Exhibits





The
following exhibits are included as part of this report:





10.1
            Amended
      and Restated Business Financing Agreement dated October 14, 2008, with
      Bridge Bank, National Association31.1
            Rule 13a-14(a) Certification by Principal Executive
      Officer31.2
            Rule 13a-14(a) Certification by Principal Financial
      Officer32
            Section 1350 Certification of Principal Executive and
      Financial Officer








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SIGNATURES





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 hereunto
duly authorized.






Caneum,
      Inc.November
      19, 2008
              By:
              /s/ Suki
      MudanSuki
      MudanPresident
      (Principal Executive and Financial Officer)












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