UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington
D.C. 20549





FORM
10-Q




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





For the
quarterly period ended:November 30, 2008





OR





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: 333-143931





Geeks On Call Holdings,
Inc.


(Exact
Name of Registrant as Specified in Its Charter)





Delaware
              20-8097265(State
      or Other Jurisdiction of Incorporation or Organization)
              (I.R.S.
      Employer Identification No.)814
      Kempsville Road
                Suite
      106
                Norfolk,
      VA
              23502(Address
      of Principal Executive Offices)
              (Zip
      code)(757) 466-3448
                (Registrant’s
      Telephone Number, Including Area Code)(Former
      Name, Former Address and Former Fiscal Year, if Changed Since Last
      Report)





Indicate by check mark whether the
registrant: (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. YESxNOo





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





Large
      Accelerated Filero
            Accelerated
      FileroNon-Accelerated
      Filero
            Smaller
      reporting companyx


(Do not
check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YESo   NOx





As of
January 15, 2009, 15,222,589 shares of common stock, $0.001 par value per share,
of the issuer were outstanding.









Forward
Looking Statements




This quarterly
report on Form 10-Q may contain so-called “forward-looking statements,” all of
which are subject to risks and uncertainties. Forward-looking statements can be
identified by the use of words such as “expects,” “plans,” “will,” “forecasts,”
“projects,” “intends,” “estimates,” and other words of similar meaning. One can
identify them by the fact that they do not relate strictly to historical or
current facts. These statements are likely to address our growth strategy,
financial results, ability to raise additional capital and product and
development programs. One must carefully consider any such statement and should
understand that many factors could cause actual results to differ from our
forward looking statements. These factors may include inaccurate assumptions and
a broad variety of other risks and uncertainties, including some that are known
and some that are not. No forward looking statement can be guaranteed and actual
future results may vary materially.




Information regarding market and
industry statistics contained in this quarterly report on Form 10-Q is included
based on information available to us that we believe is accurate. It is
generally based on industry and other publications that are not produced for
purposes of securities offerings or economic analysis. We have not reviewed or
included data from all sources, and cannot assure investors of the accuracy or
completeness of the data included in this quarterly report of Form 10-Q.
Forecasts and other forward-looking information obtained from these sources are
subject to the same qualifications and the additional uncertainties accompanying
any estimates of future market size, revenue and market acceptance of products
and services. We do not assume any obligation to update any forward-looking
statement. As a result, investors should not place undue reliance on these
forward-looking statements.




The
forward-looking statements included in this quarterly report on Form 10-Q are
made only as of the date of this quarterly report on Form 10-Q. We do not
intend, and do not assume any obligation to, update these forward looking
statements, except as required by law.









GEEKS ON CALL HOLDINGS,
INC.





TABLE
OF CONTENTS





PagePART
      I.
                    FINANCIAL
      INFORMATIONItem
      1.
                    Financial
      Statements
                    
                    F-1Condensed
      Consolidated Balance Sheets as of November 30, 2008 (unaudited) and August
      31, 2008
                    
                    F-1Condensed
      Consolidated Statements of Operations for the Three Months Ended November
      30, 2008 and 2007 (unaudited)
                    
                    F-2Condensed
      Consolidated Statements of Stockholders’ Deficit for the Year Ended August
      31, 2008 and Three Months Ended November 30, 2008
    (unaudited)
                    
                    F-3Condensed
      Consolidated Statements of Cash Flows for the Three Months Ended November
      30, 2008 and 2007 (unaudited)
                    
                    F-5Notes
      to Condensed Consolidated Financial Statements (unaudited)
                    
                    F-6Item
      2.
                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                    
                    3Item
      4T.
                    Controls
      and Procedures
                    
                    11PART
      II.
                    OTHER
      INFORMATIONItem
      1.
                    Legal
      Proceedings
                    
                    12Item
      1A.
                    Risk
      Factors
                    
                    12Item
      2.
                    Unregistered
      Sales of Equity Securities and Use of Proceeds
                    
                    12Item
      3
                    Defaults
      upon Senior Securities
                    
                    12Item
      4.
                    Submission
      of Matters to a Vote of Security Holders
                    
                    12Item
      5.
                    Other
      Information
                    
                    12Item
      6.
                    Exhibits
                    
                    13




2




PART I. FINANCIAL
INFORMATION





ITEM 1.  FINANCIAL
STATEMENTS





GEEKS
ON CALL HOLDINGS, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS





November 30,
                    
                    
                    August 31,2008
                    
                    
                    2008(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    54,020
                    
                    
                    $
                    177,499Accounts
      receivable, net of allowance for doubtful accounts of $24,073 and $23,601,
      respectively
                    
                    
                    176,538
                    
                    
                    
                    146,707Notes
      receivable, current portion, net of allowance for doubt accounts of
      $48,320
                    
                    
                    62,561
                    
                    
                    
                    63,429Lease
      receivable, current portion
                    
                    
                    14,488
                    
                    
                    
                    19,119Financing
      costs, net of accumulated amortization of $4,275
                    
                    
                    189,178
                    
                    
                    
                    -Prepaid
      expenses and other current assets
                    
                    
                    437,908
                    
                    
                    
                    344,808Total
      current assets
                    
                    
                    934,693
                    
                    
                    
                    751,562Property
      and equipment, net
                    
                    
                    669,626
                    
                    
                    
                    731,306Other
      assets:Deposits
                    
                    
                    2,034
                    
                    
                    
                    2,034Notes
      receivable, long term portion
                    
                    
                    227,651
                    
                    
                    
                    253,754Customer
      lists, net of accumulated amortization and write off of $83,333
      and  $70,458, respectively
                    
                    
                    75,250
                    
                    
                    
                    84,042Trademarks,
      net of accumulated amortization of $6,928 and $6,689,
      respectively
                    
                    
                    7,406
                    
                    
                    
                    7,644Total
      other assets
                    
                    
                    312,341
                    
                    
                    
                    347,474Total
      Assets
                    
                    $
                    1,916,660
                    
                    
                    $
                    1,830,342LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable and accrued liabilities
                    
                    $
                    2,206,591
                    
                    
                    $
                    2,155,192Line
      of credit
                    
                    
                    400,000
                    
                    
                    
                    200,000Notes
      payable, current portion
                    
                    
                    250,523
                    
                    
                    
                    449,959Notes
      payable, related parties
                    
                    
                    130,000
                    
                    
                    
                    -Obligation
      under capital lease, current portion
                    
                    
                    44,696
                    
                    
                    
                    69,505Deferred
      franchise and initial advertising fees
                    
                    
                    78,477
                    
                    
                    
                    70,026Other
      deferred liabilities, current portion
                    
                    
                    7,525
                    
                    
                    
                    7,525Total
      current liabilities
                    
                    
                    3,117,812
                    
                    
                    
                    2,952,207Long-term
      liabilities:Note
      payable, long term portion
                    
                    
                    75,284
                    
                    
                    
                    88,129Other
      deferred liabilities
                    
                    
                    69,249
                    
                    
                    
                    71,130Total
      liabilities
                    
                    
                    3,262,345
                    
                    
                    
                    3,111,466STOCKHOLDERS'
      DEFICITPreferred
      stock, par value $0.001; authorized 10,000,000 shares, none issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, par value of $0.001; authorized 100,000,000
      shares;  issued and outstanding as of November 30, 2008 and
      August 31, 2008: 15,222,589 and 14,152,500 shares,
      respectively
                    
                    
                    15,223
                    
                    
                    
                    14,153Common
      stock subscription
                    
                    
                    513,401
                    
                    
                    
                    -Additional
      paid-in capital
                    
                    
                    9,702,124
                    
                    
                    
                    9,109,354Accumulated
      deficit
                    
                    
                    (11,576,433
                    )
                    
                    
                    (10,404,631
                    )Total
      stockholders' deficit
                    
                    
                    (1,345,685
                    )
                    
                    
                    (1,281,124
                    )Total
      liabilities and stockholders' deficit
                    
                    $
                    1,916,660
                    
                    
                    $
                    1,830,342


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




F-1




GEEKS
ON CALL HOLDINGS, INC


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)





Three months ended November 30,2008
                    
                    
                    2007REVENUES:Franchise,
      area developer and initial advertising fees
                    
                    $
                    238,135
                    
                    
                    $
                    279,910Royalties
      and advertising fees
                    
                    
                    744,587
                    
                    
                    
                    1,317,201Other
                    
                    
                    12,508
                    
                    
                    
                    7,960Total
      revenue
                    
                    
                    995,230
                    
                    
                    
                    1,605,071OPERATING
      EXPENSES:Selling,
      general and administrative expenses
                    
                    
                    1,745,401
                    
                    
                    
                    978,021Advertising
      expense
                    
                    
                    343,125
                    
                    
                    
                    998,699Depreciation
      and amortization
                    
                    
                    69,856
                    
                    
                    
                    36,386Total
      operating expenses
                    
                    
                    2,158,382
                    
                    
                    
                    2,013,106Loss
      from operations
                    
                    
                    (1,163,152
                    )
                    
                    
                    (408,035
                    )Other
      income (expense):Other
      income
                    
                    
                    5,344
                    
                    
                    
                    -Dividends
      on mandatory redeemable preferred stock
                    
                    
                    -
                    
                    
                    
                    (17,202
                    )Interest
      income (expense), net
                    
                    
                    (13,994
                    )
                    
                    
                    419Net
      loss before provision for income taxes
                    
                    
                    (1,171,802
                    )
                    
                    
                    (424,818
                    )Income
      taxes (benefit)
                    
                    
                    -
                    
                    
                    
                    -NET
      LOSS
                    
                    
                    (1,171,802
                    )
                    
                    
                    (424,818
                    )Preferred
      stock dividend
                    
                    
                    -
                    
                    
                    
                    59,793NET
      LOSS AVAILABLE TO COMMON STOCKHOLDERS
                    
                    $
                    (1,171,802
                    )
                    
                    $
                    (484,611
                    )Loss
      per shares, basic and diluted
                    
                    $
                    (0.08
                    )
                    
                    $
                    (0.22
                    )Weighted
      average number of common shares outstanding, basic and
    diluted
                    
                    
                    14,557,044
                    
                    
                    
                    2,224,710
  The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
  F-2


GEEKS
ON CALL HOLDINGS, INC.


CONDENSED
CONSOLIDATED  STATEMENT OF STOCKHOLDERS' DEFICIT


YEAR
ENDED AUGUST 31, 2008 AND FOR THE THREE MONTHS ENDED NOVEMBER 30,
2008


(unaudited)





Common stock
                
                
                Preferred stock, Class A
                
                
                Preferred stock, Class B
                
                
                Preferred stock, Class CShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Shares
                
                
                AmountBalance,
      August 31, 2007
                
                
                4,707,229
                
                
                $
                4,707
                
                
                
                -
                
                
                
                -
                
                
                
                160,404
                
                
                $
                2,152,417
                
                
                
                119,784
                
                
                $
                741,291Rounding
                
                
                10
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Preferred
      stock dividend
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                49,696
                
                
                
                -
                
                
                
                19,296Common
      stock issued in exchange for conversion of Series B preferred stock and
      accrued dividends on December 14, 2007
                
                
                2,097,756
                
                
                
                2,098
                
                
                
                -
                
                
                
                -
                
                
                
                (160,404
                )
                
                
                (2,202,113
                )
                
                
                -
                
                
                
                -Common
      stock issued in exchange for conversion of Series C preferred
      stock  and accrued dividends on December 14,
2007
                
                
                655,475
                
                
                
                656
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (119,784
                )
                
                
                (760,587
                )Common
      stock issued in exchange for conversion of Series D
      redeemable  preferred stock and accrued dividends on December
      14, 2007
                
                
                552,225
                
                
                
                552
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Cancellation
      of previously issued common stock for services rendered
                
                
                (12,695
                )
                
                
                (13
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Effect
      of reverse merger on December 14, 2007
                
                
                2,150,000
                
                
                
                2,150
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Sale
      of common stock
                
                
                3,800,000
                
                
                
                3,800
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Fair
      value of vested options granted to officers and directors
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock issued in exchange for acquired assets
                
                
                125,000
                
                
                
                125
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock issued in June 2008 in exchange for services
rendered
                
                
                42,500
                
                
                
                43
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock issued in August 2008 in exchange for services
    rendered
                
                
                15,000
                
                
                
                15
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock issued in August 2008 in exchange for reacquired
      franchise
                
                
                20,000
                
                
                
                20
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance,
      August 31, 2008
                
                
                14,152,500
                
                
                
                14,153
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock issued in September 2008 in exchange for services
      rendered
                
                
                15,000
                
                
                
                15
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Sale
      of common stock subscription
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock issued in October 2008 in exchange for services
    rendered
                
                
                21,501
                
                
                
                21
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock issued in conjunction with certain anti-dilution provisions included
      as part of a private sale of common stock
                
                
                970,588
                
                
                
                971
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock issued in settlement with debt
                
                
                63,000
                
                
                
                63
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Fair
      value of warrants issued in connection with issuance of
    debt
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Fair
      value of vested options granted to officers, directors and
      consultants
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance,
      November 30, 2008
                
                
                15,222,589
                
                
                $
                15,223
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -





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




F-3




GEEKS
ON CALL HOLDINGS, INC.


CONDENSED
CONSOLIDATED  STATEMENT OF STOCKHOLDERS’ DEFICIT


YEAR
ENDED AUGUST 31, 2008 AND FOR THE THREE MONTHS ENDED NOVEMBER 30,
2008


(unaudited)





Common stock to be issued
                
                
                Additional
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Paid in Capital
                
                
                Deficit
                
                
                TotalBalance,
      August 31, 2007
                
                
                -
                
                
                $
                -
                
                
                $
                1,846,446
                
                
                $
                (5,370,659
                )
                
                $
                (625,798
                )Rounding
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Preferred
      stock dividend
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (68,992
                )
                
                
                -Common
      stock issued in exchange for conversion of Series B preferred stock and
      accrued dividends on December 14, 2007
                
                
                -
                
                
                
                -
                
                
                
                2,200,015
                
                
                
                -
                
                
                
                -Common
      stock issued in exchange for conversion of Series C preferred
      stock  and accrued dividends on December 14,
2007
                
                
                -
                
                
                
                -
                
                
                
                759,931
                
                
                
                -
                
                
                
                -Common
      stock issued in exchange for conversion of Series D
      redeemable  preferred stock and accrued dividends on December
      14, 2007
                
                
                -
                
                
                
                -
                
                
                
                620,160
                
                
                
                -
                
                
                
                620,712Cancellation
      of previously issued common stock for services rendered
                
                
                -
                
                
                
                -
                
                
                
                (23,087
                )
                
                
                -
                
                
                
                (23,100
                )Effect
      of reverse merger on December 14, 2007
                
                
                -
                
                
                
                -
                
                
                
                (2,150
                )
                
                
                -
                
                
                
                -Sale
      of common stock
                
                
                -
                
                
                
                -
                
                
                
                3,193,103
                
                
                
                -
                
                
                
                3,196,903Fair
      value of vested options granted to officers and directors
                
                
                -
                
                
                
                -
                
                
                
                264,990
                
                
                
                -
                
                
                
                264,990Common
      stock issued in exchange for acquired assets
                
                
                -
                
                
                
                -
                
                
                
                187,375
                
                
                
                -
                
                
                
                187,500Common
      stock issued in June 2008 in exchange for services
rendered
                
                
                -
                
                
                
                -
                
                
                
                42,456
                
                
                
                -
                
                
                
                42,499Common
      stock issued in August 2008 in exchange for services
    rendered
                
                
                -
                
                
                
                -
                
                
                
                11,535
                
                
                
                
                
                
                
                11,550Common
      stock issued in August 2008 in exchange for reacquired
      franchise
                
                
                -
                
                
                
                -
                
                
                
                8,580
                
                
                
                
                
                
                
                8,600Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (4,964,980
                )
                
                
                (4,964,980
                )Balance,
      August 31, 2008
                
                
                -
                
                
                
                -
                
                
                
                9,109,354
                
                
                
                (10,404,631
                )
                
                
                (1,281,124
                )Common
      stock issued in September 2008 in exchange for services
      rendered
                
                
                -
                
                
                
                -
                
                
                
                10,485
                
                
                
                -
                
                
                
                10,500Sale
      of common stock subscription
                
                
                1,328,174
                
                
                
                513,401
                
                
                
                -
                
                
                
                -
                
                
                
                513,401Common
      stock issued in October 2008 in exchange for services
    rendered
                
                
                -
                
                
                
                -
                
                
                
                7,289
                
                
                
                -
                
                
                
                7,310Common
      stock issued in conjunction with certain anti-dilution provisions included
      as part of a private sale of common stock
                
                
                -
                
                
                
                -
                
                
                
                (971
                )
                
                
                -
                
                
                
                -Common
      stock issued in settlement with debt
                
                
                -
                
                
                
                -
                
                
                
                21,358
                
                
                
                -
                
                
                
                21,421Fair
      value of warrants issued in connection with issuance of
    debt
                
                
                -
                
                
                
                -
                
                
                
                193,453
                
                
                
                
                
                
                
                193,453Fair
      value of vested options granted to officers, directors and
      consultants
                
                
                -
                
                
                
                -
                
                
                
                361,156
                
                
                
                -
                
                
                
                361,156Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,171,802
                )
                
                
                (1,171,802
                )Balance,
      November 30, 2008
                
                
                1,328,174
                
                
                $
                513,401
                
                
                $
                9,702,124
                
                
                $
                (11,576,433
                )
                
                $
                (1,345,685
                )





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




F-4




GEEKS
ON CALL HOLDINGS, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited)





Three Months Ended November 30,2008
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                
                $
                (1,171,802
                )
                
                $
                (424,818
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                
                
                69,856
                
                
                
                36,386Loss
      on disposal of assets
                
                
                855
                
                
                
                -Bad
      debt expense
                
                
                473
                
                
                
                -Amortization
      of financing costs
                
                
                4,275
                
                
                
                -Common
      stock issued in exchange for services rendered
                
                
                17,811
                
                
                
                -Fair
      value of vested options granted to officers directors and
      consultants
                
                
                361,156
                
                
                
                -Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                (30,304
                )
                
                
                (82,092
                )Prepaid
      expenses and other current assets
                
                
                (93,100
                )
                
                
                (23,460
                )Accounts
      payable and accrued liabilities
                
                
                72,818
                
                
                
                478,045Deferred
      franchise fees
                
                
                8,451
                
                
                
                (102,919
                )Deferred
      other liabilities
                
                
                (1,881
                )
                
                
                233Net
      cash used in operating activities
                
                
                (761,392
                )
                
                
                (118,625
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Loans
      to franchisees and others
                
                
                -
                
                
                
                (914
                )Collections
      of loans to franchisees and others
                
                
                31,602
                
                
                
                -Purchase
      of property and equipment
                
                
                -
                
                
                
                (42,329
                )Net
      cash provided by (used in) investing activities
                
                
                31,602
                
                
                
                (43,243
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Repayments
      of capital lease obligation
                
                
                (24,809
                )
                
                
                (13,477
                )Proceeds
      from credit line
                
                
                200,000
                
                
                
                -Proceeds
      from issuance of notes payable, related parties
                
                
                130,000
                
                
                
                -Repayments
      of notes payable
                
                
                (212,281
                )
                
                
                -Proceeds
      from sale of common stock subscription
                
                
                513,401
                
                
                
                -Net
      cash provided by (used in) financing activities
                
                
                606,311
                
                
                
                (13,477
                )Net
      decrease in cash and cash equivalents
                
                
                (123,479
                )
                
                
                (175,345
                )Cash
      and cash equivalents, beginning of period
                
                
                177,499
                
                
                
                280,846Cash
      and cash equivalents, end of period
                
                $
                54,020
                
                
                $
                105,501Supplement
      disclosures of cash flow informationInterest
      paid
                
                $
                17,884
                
                
                $
                6,296Income
      taxes paid
                
                $
                -
                
                
                $
                -Fair
      value of vested options granted to officers, directors and
      consultants
                
                $
                361,156
                
                
                $
                -Fair
      value of warrants issued in connection with issuance of notes payable,
      related parties
                
                $
                193,453
                
                
                $
                -Common
      stock issued in exchange for debt
                
                $
                21,421
                
                
                $
                -
  The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.





F-5




GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





General





The
accompanying unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(the “SEC”).  Certain information and note disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information not misleading.





In the
opinion of management, the unaudited condensed consolidated financial statements
have been prepared on the same basis as the annual consolidated financial
statements and reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the consolidated financial position as
of November 30, 2008 and the results of operations and cash flows for the
periods ended November 30, 2008 and 2007. The financial data and other
information disclosed in the notes to the interim financial statements related
to these periods are unaudited.  The results for the three month
period ended November 30, 2008 is not necessarily indicative of the results to
be expected for any subsequent quarter or the entire year ending August 31,
2009.





These
unaudited condensed consolidated financial statements should be read in
conjunction with our audited consolidated financial statements and the notes
thereto for the year ended August 31, 2008, included in the Company’s annual
report on Form10-K filed with the SEC on December 4, 2008.





The
consolidated financial statements as August 31, 2008 have been derived from the
audited consolidated financial statements at that date but do not include all
disclosures required by the accounting principles generally accepted in the
United States of America.





Business and Basis of
Presentation





The
Company’s operating subsidiary, Geeks On Call America, Inc., was incorporated
under the laws of the State of Virginia on June 11, 2001 and subsequently
reincorporated on December 14, 2007 under the laws of the State of Delaware. The
Company provides quick-response, on-site computer solutions and telephone
technical support (including services, on-going, support and training) primarily
to small to medium business enterprises and residential computer users in the
United States. On-site solutions are provided through a network of independent
franchisees and Company managed operations who are certified IT solutions
providers conducting business under the trade names 1 800 905 GEEK and Geeks On
Call®.





Geeks On
Call Holdings, Inc. was created through a reverse merger process
with   Lightview, Inc , which was incorporated under the laws of
the State of Nevada on December 22, 2006 under the name Lightview, Inc,
(“Lightview”) and formerly operated as a development stage company. On January
23, 2008, Lightview merged with and into Geeks On Call Holdings, Inc., a
newly-formed wholly owned subsidiary of Lightview, for the sole purpose of
reincorporating in the State of Delaware and changing the name of the company.
Thereafter, on February 8, 2008, Geeks On Call America, Inc., Geeks On Call
Holdings, Inc. and Geeks On Call Acquisition Corp, a newly-formed wholly-owned
subsidiary of Geeks On Call Holdings, Inc. (“Acquisition Corp.”), entered into a
merger agreement (the “Merger Agreement”). Upon closing of the merger
transaction contemplated under the Merger Agreement (the “Merger”), Acquisition
Corp. merged with and into Geeks On Call America, Inc., and Geeks On Call
America, Inc., as the surviving corporation, became the sole wholly-owned
operating subsidiary. The consolidated financial statements include the accounts
of Geeks On Call Holdings, Inc., the registrant and Geeks On Call America, Inc.,
the sole wholly-owned operating subsidiary (collectively, the
“Company”).





While the
Company has generated revenues from its franchise operations, the Company has
incurred expenses, and sustained losses. Consequently, its operations are
subject to all risks inherent in the establishment of a new business enterprise.
As of November 30, 2008, the Company has accumulated losses of
$11,576,433.





All
significant intercompany balances and transactions have been eliminated in
consolidation.




F-6




GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Merger and Corporate
Restructure





On
February 8, 2008, the Company consummated a reverse merger by entering into an
Agreement of Merger and Plan of Reorganization (“Reorganization”) with the
stockholders of Geeks On Call America, Inc. (the “Share Exchange”), pursuant to
which the stockholders of Geeks On Call America, Inc. (“Geeks”) exchanged all of
the issued and outstanding capital stock of Geeks for 8,000,000 shares of common
stock of Geeks On Call Holdings, Inc., representing 79% of Geeks On Call
Holdings, Inc.’s (the “Parent”) outstanding capital stock, after the return to
treasury and retirement of 2,866,667 shares of common stock of the Parent held
by certain stockholders of the Parent made concurrently with the share exchange.
Upon consummation of the Reorganization, Geeks became a sole wholly-owned
subsidiary of the Parent (the “Company”).





The
acquisition is accounted for as a “reverse acquisition”, since the stockholders
of Geeks owned a majority of the Parent’s common stock immediately following the
transaction. The combination of the two companies is recorded as a
recapitalization of Geeks pursuant to which Geeks is treated as the surviving
and continuing entity although the Parent is the legal acquirer. Accordingly,
the Company’s historical financial statements are those of Geeks. The Company
did not recognize goodwill or any intangible assets in connection with this
transaction.





All
references to common stock, share and per share amounts have been retroactively
restated to reflect the reverse acquisition as if the transaction had taken
place as of the beginning of the earliest period presented.





The total
consideration paid was $-0- and the significant components of the transaction
are as follows:





Geeks On
Call Holdings, Inc. (Formerly Lightview, Inc.)


Summary
Statement of Financial Position


At
February 8, 2008





Assets:
                
                $
                -0-Liabilities:
                
                $
                -0-Net
      liabilities assumed
                
                $
                -0-Total
      consideration:
                
                $
                -0-





Revenue
Recognition





The
Company accounts for revenue under the guidance provided by SFAS No. 45,
“Accounting for Franchise Fee Revenue (as amended)” and EITF 00-21, “Revenue
Arrangements with Multiple Deliverables”.





Franchise
fee revenue is recognized when (i) all material obligations of the Company to
prepare a franchisee for operations have been substantially completed; and
(ii) all material initial services to be provided by the Company have been
performed, with an appropriate provision for estimated uncollectible amounts.
Obligations to prepare the franchisee for operations are substantially completed
upon the completion by the franchisee of the Company’s training
program.





There are
no other material conditions or commitments or obligations that exist related to
the determination of substantial performance or substantial completion of a
franchise agreement.





F-7


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Area Development
Sales





Area
developer sales, where by the Company sells the rights to develop a territory or
market, are nonrefundable fees recognized as revenue upon signature of an area
development agreement and substantial completion of all of the Company’s
obligations associated with the opening of the first franchise under such
agreement have been met. Substantial completion includes, but is not limited to,
conducting market and trade area analysis, a meeting with the Company’s
executive team, and performing potential franchise background investigation, all
of which are completed prior to the Company’s execution of the area development
agreement and receipt of the corresponding area development fee. As a result,
the Company recognizes this fee in full upon receipt and with the opening of the
first franchise under the area development agreement.





No
additional substantive services are required after the first franchise is opened
under the Area Development Agreement.





Advertising and Royalty
Fees





Initial
advertising fees are recognized when the territory is open and the related
advertising has been performed. Ongoing royalties and advertising fees are
recognized as the franchised territory generates sales and ongoing advertising
is performed.





Repossessed
Franchises





From time
to time the Company may recover franchise rights through repossession, or if a
franchisee fails to open a previously granted franchise. If, for any
reason, the Company refunds the consideration received, the original sale is
canceled, and revenue previously recognized is accounted for as a reduction in
revenue in the period the franchise is repossessed. If franchise rights are
repossessed but no refund is made (a) the transaction is not regarded as a sale
cancellation, (b) no adjustment is made to any previously recognized revenue,
(c) any estimated uncollectible amounts resulting from unpaid receivables is
provided for, and (d) any consideration retained for which revenue was not
previously recognized is reported as revenue.





Deferred Franchise
Fees





The
Company may receive all or part of the initial franchise or advertising fee
prior to the execution of the franchise agreement or the completion of the
earnings process. These amounts are classified as deferred revenue until the fee
qualifies to be recognized as revenue or is refunded.




Use of
Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.





Cash and cash
equivalents





For
purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash and cash equivalents. The Company had $54,020 and $177,499 in cash
and cash equivalents at November 30, 2008 and August 31, 2008,
respectively.





Allowance for doubtful
accounts





The
Company periodically reviews its trade and notes receivables in determining its
allowance for doubtful accounts. As of November 30, 2008 and August 31, 2008
allowance for doubtful accounts balances for trade receivables was $24,073 and
$23,601, respectively. The allowance for doubtful accounts balances for notes
receivable was $48,320 as of November 30, 2008 and August 31,
2008.


F-8


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Inventories





Inventories,
totaling $51,109 and $32,402 (net of reserve for obsolete and slow moving
inventory of $15,339) as of November 30, 2008 and  August 31, 2008,
respectively, are stated at the lower of cost (first in, first out) or net
realizable value, and consist primarily of products for sale to franchisees,
business forms, marketing and promotional supplies for sale to the Company’s
franchisees. Inventories are included in prepaid expenses and other current
assets in the accompanying unaudited condensed consolidated balance
sheets.





Property and
Equipment





Property
and equipment are recorded at cost and depreciated over their estimated useful
lives using the straight-line method as follows:





Office
      furniture and equipment
                
                10
      yearsComputer
      equipment
                
                5
      yearsVehicles
                
                5
      yearsSoftware
                
                3
      yearsLeasehold
      improvements
                
                lesser
      of lease terms or 7
years





Expenditures
for repairs and maintenance which do not materially extend the useful lives of
property and equipment are charged to operations. When property or equipment is
sold or otherwise disposed of, the cost and related accumulated depreciation are
removed from the respective accounts with the resulting gain or loss reflected
in operations. Management periodically reviews the carrying value of its
property and equipment for impairment. The property and equipment had not
incurred any impairment loss at November 30, 2008 and August 31,
2008.





Customer
lists





The
Company acquired the rights to provide direct services to customers previously
under a franchisee contract by issuing a note payable for the consideration of
$154,500.





The
Company amortized its intangible asset using the straight-line method over its
estimated period of benefit.  The estimated useful life for the
customer lists is three years. The Company periodically, but at least annually,
evaluates the recoverability of intangible assets and takes into account events
or circumstances that warrant revised estimates of useful lives, or that
impairment indicators are present.





For the
three month period ended November 30, 2008, amortization of $8,792 was charged
to operations.





The
Company’s management performed an evaluation of its intangible assets (customer
lists) at August 31, 2008 for purposes of determining the implied fair value of
the assets. The test indicated that the recorded book value of the customer
lists exceeded its fair value, as determined by calculating a fair value based
upon a discounted cash flows of the projected and assumed fees from the current
binding service agreements and other recurring fees earned from these customer
lists and accordingly recorded an impairment charge of $49,000 to prior year’s
results of operations at August 31, 2008. Considerable management judgment is
necessary to estimate the fair value; these estimates of cash flows are
significantly impacted by estimates of revenues, costs, and other factors. Due
to uncertainties in the estimation process, actual results could differ from
such estimates. There was no impairment charged to operations for the three
month period ended November 30, 2008.





Advertising





The
Company follows the policy of charging the costs of advertising to expense as
incurred. The Company charged to operations $343,125 and $998,699 as advertising
costs for the three month periods ended November 30, 2008 and 2007,
respectively.


F-9


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Impairment of Long-Lived
Assets





The
Company follows Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” (“SFAS No. 144”). SFAS No. 144 requires
that long-lived assets and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Events
relating to recoverability may include significant unfavorable changes in
business conditions, recurring losses, or a forecasted inability to achieve
break-even operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted discounted cash flows.
Should impairment in value be indicated, the carrying value of the long-lived
assets and certain identifiable intangibles will be adjusted, based on estimates
of future discounted cash flows resulting from the use and ultimate disposition
of the asset. SFAS No. 144 also requires assets to be disposed of be reported at
the lower of the carrying amount or the fair value less disposal
costs.





As
described above, the Company’s management performed an evaluation of its
customer lists for purposes of determining the implied fair value of the assets.
The test indicated that the recorded book value of the customer lists exceeded
its fair value, as determined by discounted cash flows and accordingly recorded
an impairment charge of $49,000 to its operations at August 31, 2008. There was
no impairment charges to operations for the three month periods ended November
30, 2008 and 2007.





Stock Based
Compensation





On
December 16, 2004, the FASB issued SFAS No. 123(R) (revised 2004), “Share-Based Payment” which is
a revision of SFAS No. 123, “Accounting for Stock-Based
Compensation”. SFAS No. 123(R) supersedes APB opinion No. 25, “Accounting for Stock Issued to
Employees”, and amends SFAS No. 95, “Statement of Cash Flows”.
Generally, the approach in SFAS No. 123(R) is similar to the approach described
in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro-forma disclosure is no longer
an alternative. The effective date for our application of SFAS No. 123(R) is
September 1, 2006. Management has elected to apply SFAS No. 123(R) commencing on
that date.




As more
fully described in Note 11 below, the Company granted 85,000 and -0- stock
options during the three month periods ended November 30, 2008 and 2007,
respectively to employees and directors of the Company under a non-qualified
employee stock option plan.





As of
November 30, 2008, 2,520,000 employee stock options were outstanding with
300,000 shares vested and exercisable.





As of
November 30, 2008, there were 50,000 shares of non-employee stock options
(consultants) outstanding with 25,000 shares vested and
exercisable.





Segment
reporting





The
Company adopted Statement of Financial Accounting Standards No. 131,
“Disclosures about Segments of an Enterprise and Related Information” ("SFAS
131"). SFAS establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS 131 also establishes standards for related disclosures about
products and services and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial information
is available for evaluation by the chief operating decision maker, or decision
making group, in making decisions how to allocate resources and assess
performance. The information disclosed herein, materially represents all of the
financial information related to the Company's principal operating
segment.




Income
taxes





The
Company follows SFAS No. 109, “Accounting for Income Taxes”
(SFAS No. 109) for recording the provision for income taxes. Deferred tax assets
and liabilities are computed based upon the difference between the financial
statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to
be realized or settled. Deferred income tax expenses or benefits are based on
the changes in the asset or liability during each period. If available evidence
suggests that it is more likely than not that some portion or all of the
deferred tax assets will not be realized, a valuation allowance is required to
reduce the deferred tax assets to the amount that is more likely than not to be
realized. Future changes in such valuation allowance are included in the
provision for deferred income taxes in the period of change. Deferred income
taxes may arise from temporary differences resulting from income and expense
items reported for financial accounting and tax purposes in different periods.
Deferred taxes are classified as current or non-current, depending on the
classification of assets and liabilities to which they relate. Deferred taxes
arising from temporary differences that are not related to an asset or liability
are classified as current or non-current depending on the periods in which the
temporary differences are expected to reverse.


F-10


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Loss per
share





In
accordance with SFAS No. 128, “Earnings per Share”, the
basic loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding.
Diluted loss per share is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding as if the potential common shares had been
issued and if the additional common shares were dilutive. Common equivalent
shares are excluded from the computation of the diluted loss per share as their
effect would be anti-dilutive. There were no common equivalent shares as of
November 30, 2008 and 2007





Reclassifications





Certain
amounts in prior year’s consolidated financial statements and the related notes
have been reclassified to conform to current year presentation. These
reclassifications have no effect on previously reported results of
operations.





Recent accounting
pronouncements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements”.  The objective of SFAS No. 157 is to increase
consistency and comparability in fair value measurements and to expand
disclosures about fair value measurements.  SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements.  SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements and does not
require any new fair value measurements.  The provisions of SFAS No.
157 are effective for fair value measurements made in fiscal years beginning
after November 15, 2007.   In February 2008, the FASB issued
FASB Staff Position (“FSP”) 157-2,“Effective Date of FASB Statement
No. 157” (“FSP 157-2”), which delayed the
effective date of SFAS No. 157 for all non-financial assets and liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis, until fiscal years beginning after November 15,
2008.   The Company has not yet determined the impact that the
implementation of FSP 157-2 will have on its non-financial assets and
liabilities which are not recognized on a recurring basis; however, the Company
does not anticipate the adoption of this standard will have a material impact on
its consolidated financial position, results of operations or cash
flows.





In
December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for Registration Payment
Arrangements” (“FSP 00-19 -2”) which addresses accounting for
registration payment arrangements. FSP 00-19 -2 specifies that the contingent
obligation to make future payments or otherwise transfer consideration under a
registration payment arrangement, whether issued as a separate agreement or
included as a provision of a financial instrument or other agreement, should be
separately recognized and measured in accordance with SFAS No. 5, “Accounting
for Contingencies”. FSP 00-19 -2 further clarifies that a financial instrument
subject to a registration payment arrangement should be accounted for in
accordance with other applicable generally accepted accounting principles
without regard to the contingent obligation to transfer consideration pursuant
to the registration payment arrangement. For registration payment arrangements
and financial instruments subject to those arrangements that were entered into
prior to the issuance of EITF 00-19-2, this guidance shall be effective for
financial statements issued for fiscal years beginning after December 15, 2006
and interim periods within those fiscal years. The Company did not have a
material impact on its consolidated financial position, results of operations or
cash flows.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115” (“SFAS No. 159”).  SFAS No. 159 permits entities to choose
to measure many financial instruments and certain other items at fair
value.  Most of the provisions of SFAS No. 159 apply only to entities
that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments
in Debt and Equity Securities” applies to all entities with
available-for-sale and trading securities.  SFAS No. 159 is effective
as of the beginning of an entity’s first fiscal year that begins after November
15, 2007.  Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provision of SFAS No. 157, “Fair Value
Measurements”.  The adoption of SFAS No. 159 is not expected to
have a material impact on the Company’s consolidated financial position, results
of operations or cash flows.





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
(“SFAS No. 141(R)”), which establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill acquired in a
business combination. SFAS No. 141(R) is effective as of the beginning of the
first fiscal year beginning on or after December 15, 2008. Earlier adoption
is prohibited and the Company is currently evaluating the effect, if any that
the adoption will have on its consolidated financial position, results of
operations or cash flows.


F-11


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Recent accounting
pronouncements (continued)





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in
Consolidated Financial Statements, an amendment of ARB No. 51”
(“SFAS No. 160”), which will change the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity within the consolidated balance sheets.
SFAS No. 160 is effective as of the beginning of the first fiscal year beginning
on or after December 15, 2008. Earlier adoption is prohibited and the
Company is currently evaluating the effect, if any that the adoption will have
on its consolidated financial position, results of operations or cash
flows.





In
June 2007, the Accounting Standards Executive Committee issued Statement of
Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide
Investment Companies and Accounting by Parent Companies and Equity Method
Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1
provides guidance for determining whether an entity is within the scope of the
AICPA Audit and Accounting Guide Investment Companies (the “Audit Guide”). SOP
07-1 was originally determined to be effective for fiscal years beginning on or
after December 15, 2007, however, on February 6, 2008, FASB issued a
final Staff Position indefinitely deferring the effective date and prohibiting
early adoption of SOP 07-1 while addressing implementation issues.





In June
2007, the FASB ratified the consensus in EITF Issue No. 07-3, “Accounting
for Nonrefundable Advance Payments for Goods or Services to be Used in Future
Research and Development Activities” (EITF 07-3), which requires that
nonrefundable advance payments for goods or services that will be used or
rendered for future research and development (R&D) activities be deferred
and amortized over the period that the goods are delivered or the related
services are performed, subject to an assessment of recoverability.
EITF 07-3 will be effective for fiscal years beginning after
December 15, 2007. The Company does not expect that the adoption of
EITF 07-3 will have a material impact on its consolidated financial
position, results of operations or cash flows.





In
December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
“Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1
defines collaborative arrangements and requires collaborators to present the
result of activities for which they act as the principal on a gross basis and
report any payments received from (made to) the other collaborators based on
other applicable authoritative accounting literature, and in the absence of
other applicable authoritative literature, on a reasonable, rational and
consistent accounting policy is to be elected. EITF 07-1 also provides for
disclosures regarding the nature and purpose of the arrangement, the entity’s
rights and obligations, the accounting policy for the arrangement and the income
statement classification and amounts arising from the agreement. EITF 07-1
will be effective for fiscal years beginning after December 15, 2008, which
will be the Company’s fiscal year 2009, and will be applied as a change in
accounting principle retrospectively for all collaborative arrangements existing
as of the effective date. The Company has not yet evaluated the potential impact
of adopting EITF 07-1 on its consolidated financial position, results of
operations or cash flows.





In March
2008, the FASB” issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment to FASB Statement No.
133” (“SFAS No. 161”).  SFAS No. 161 is
intended to improve financial standards for derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance, and cash flows.  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 SFAS No. 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.  It is effective for
financial statements issued for fiscal years beginning after November 15, 2008,
with early adoption encouraged.  The Company is currently evaluating
the impact of SFAS No. 161, if any, will have on its consolidated financial
position, results of operations or cash flows.





In April
2008, the FASB issued FSP No. SFAS No. 142-3,“Determination of the Useful Life of
Intangible Assets”. This FSP amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under SFAS No. 142,“Goodwill and Other Intangible
Assets”.  The Company is required to adopt FSP 142-3 on
September 1, 2009, earlier adoption is prohibited.  The guidance in
FSP 142-3 for determining the useful life of a recognized intangible asset shall
be applied prospectively to intangible assets acquired after adoption, and the
disclosure requirements shall be applied prospectively to all intangible assets
recognized as of, and subsequent to, adoption.  The Company is
currently evaluating the impact of FSP 142-3 on its consolidated financial
position, results of operations or cash flows.





In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS No. 162").  SFAS No.
162 identifies the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles (the GAAP hierarchy).  SFAS No.
162 will become effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to
AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles."  The Company does not
expect the adoption of SFAS No. 162 to have a material effect on its
consolidated financial position, results of operations or cash
flows.


F-12


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Recent accounting
pronouncements (continued)





In May
2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1, "Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)" ("FSP APB 14-1").   FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled
in cash (or other assets) on conversion to separately account for the liability
(debt) and equity (conversion option) components of the instrument in a manner
that reflects the issuer's non-convertible debt borrowing rate.  FSP
APB 14-1 is effective for fiscal years beginning after December 15,
2008 on a retroactive basis. The Company is currently evaluating the
potential impact, if any, of the adoption of FSP APB 14-1 on its
consolidated financial position, results of operations or cash
flows.





In
June 2008, the FASB issued FSP Emerging Issues Task Force
(EITF) No. 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities.” Under the FSP, unvested share-based payment awards that
contain rights to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two-class method of
computing EPS. The FSP is effective for fiscal years beginning after
December 15, 2008, and interim periods within those years. The Company does
not expect the adoption of FSP EITF No. 03-6-1 to have a material effect on
its consolidated financial position, results of operations or cash
flows.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company’s present or future
consolidated financial statements.





NOTE
2 - GOING CONCERN MATTERS





The
accompanying unaudited condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As shown
in the accompanying unaudited condensed consolidated financial statements, the
Company incurred a net loss available to common stockholders of $1,171,802 and
$484,611 for the three-month period ended November 30, 2008 and 2007,
respectively. Additionally, the Company has negative cash flows from operations
of $761,392 for the three-month period ended November 30, 2008 and an
accumulated deficit of $11,576,433 as of November 30, 2008. These factors among
others may indicate that the Company may be unable to continue as a going
concern.





The
Company’s continued existence is dependent upon management’s ability to develop
profitable operations and resolve its liquidity problems. The accompanying
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.




The
Company is actively pursuing additional equity financing through discussions
with investment bankers and private investors.





The
Company is pursuing strategic partnership relationships to provide IT services
to National accounts that would drive revenue across their entire
network.  Pilot programs have been launched and are in the planning
stages and may translate into permanent relationships. While management is
confident that this additional line of revenue will ultimately come to fruition,
however, there can be no assurance that the Company will be successful in
its effort to secure these relationships.





NOTE
3 - NOTES RECEIVABLE





Note
receivables are recorded at cost, less allowance for doubtful accounts, if
applicable. Repayment of the notes receivable is dependent on the performance of
the underlying franchisees that collateralize the notes receivable. An
allowance, if applicable, is estimated based on a comparison of amounts due to
the estimated fair value of the underlying franchisee. As of November 30, 2008
and August 31, 2008 allowance for doubtful account balances for notes
receivables was $48,320.





At
November 30, 2008 and August 31, 2008, the notes receivable consist of bridge
loans offered to franchisees during the period which the franchisees are
establishing their permanent financing with third party lenders. The notes
receivable bear interest at a rate of 9% per annum and are recorded at face
value. Interest is recognized over the lives of the notes
receivable.


F-13


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
3 – NOTES RECEIVABLE (Continued)





A summary
of the notes receivable are as follows:




November 30,
                        2008
                      
                      
                      August 31,
                        2008Notes receivable,
      9% per annum, secured by Franchisee
                      
                      $
                      290,212
                      
                      
                      $
                      317,183Less:
      Current portion
                      
                      
                      (62,561
                      )
                      
                      
                      (63,429
                      )Long
      term portion
                      
                      $
                      227,651
                      
                      
                      $
                      253,754





NOTE
4 – LEASE RECEIVABLE





Lease
receivable is recorded at cost, less allowance for doubtful accounts, if
applicable. The Company acquired and leased certain equipment to a franchisee
with a monthly installment receipt of $1,924 over one year. The franchisee
provides a personal guarantee as collateral. The lease receivable bears interest
at a rate of 9% per annum and is recorded at face value. Interest is recognized
over the life of the lease receivable.





A summary
of the notes receivable are as follows:





November 30,
                        2008
                      
                      
                      August 31,
                        2008Lease receivable,
      9% per annum, secured by Franchisee
                      
                      $
                      14,488
                      
                      
                      $
                      19,119Less:
      Current portion
                      
                      
                      (14,488
                      )
                      
                      
                      (
      19,119
                      )Long
      term portion
                      
                      $
                      -
                      
                      
                      $
                      -





NOTE
5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS





Prepaid
expenses and other current assets consist primarily of advance payments for
advertising with various forms of media and saleable promotional supplies or
inventories as follows:





November 30,
                        2008
                      
                      
                      August 31,
                        2008Prepaid expenses
      and other current assets
                      
                      $
                      386,799
                      
                      
                      $
                      312,406Promotional
      supplies and inventories, net of reserve for obsolete and slow moving
      inventory of $15,339 as of  November 30, 2008 and August 31,
      2008
                      
                      
                      51,109
                      
                      
                      
                      32,402$
                      437,908
                      
                      
                      $
                      344,808





F-14


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
6 – PROPERTY AND EQUIPMENT





As of
November 30, 2008 and August 31, 2008, property and equipment was comprised of
the following:





November 30,
                          2008
                        
                        
                        August 31,
                          2008Office furniture
      and equipment
                        
                        $
                        359,718
                        
                        
                        $
                        360,573Computer
      equipment
                        
                        
                        420,155
                        
                        
                        
                        420,155Vehicles
                        
                        
                        77,884
                        
                        
                        
                        77,884Software
                        
                        
                        604,362
                        
                        
                        
                        604,362Leasehold
      improvements
                        
                        
                        51,267
                        
                        
                        
                        51,2671,513,386
                        
                        
                        
                        1,514,241Less:
      accumulated depreciation
                        
                        
                        (843,760
                        )
                        
                        
                        (782,935
                        )$
                        669,626
                        
                        
                        $
                        731,306





For the
three month periods ended November 30, 2008 and 2007, depreciation expense
charged to operations was $60,825 and $36,148, respectively.





NOTE
7 – TRADEMARKS





Trademarks
are recorded at cost and are amortized ratably over 15 years as summarized
below:





November 30,
                        2008
                      
                      
                      August 31,
                        2008Trademarks
                      
                      $
                      14,333
                      
                      
                      $
                      14,333Less
      accumulated amortization
                      
                      
                      (6,927
                      )
                      
                      
                      (6,689
                      )$
                      7,406
                      
                      
                      $
                      7,644





For the
three month periods ended November 30, 2008 and 2007, the amortization expense
charged to operations was $238 and $238, respectively.





NOTE
8 – CUSTOMER LISTS





In March
2008, the Company acquired customer lists for a purchase price of $154,500
payable over three years from the date of purchase (See Note 12).





The
Company has adopted SFAS No. 142, “Goodwill and Other Intangible Assets”,
whereby the Company periodically tests its intangible assets for
impairment.  On an annual basis, and when there is reason to suspect
that their values have been diminished or impaired, these assets are tested for
impairment, and write-downs will be included in the results of
operations.


F-15


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
8 – CUSTOMER LISTS (continued)





Customer
lists are recorded at cost and are amortized ratably over three years as
summarized below:





November 30,
                            2008
                          
                          
                          August 31,
                            2008Customer
      Lists at cost
                          
                          $
                          154,500
                          
                          
                          $
                          154,500Less:Accumulated
      amortization and impairment
                          
                          
                          (79,250
                          )
                          
                          
                          (21,458
                          )Impairment
      charge (see below)
                          
                          
                          -
                          
                          
                          
                          (49,000
                          )$
                          75,250
                          
                          
                          $
                          84,042





For the
three month periods ended November 30, 2008 and 2007, the amortization expense
charged to operations was $8,793 and $-0-, respectively.





At August
31, 2008, the Company’s management performed an evaluation of its intangible
assets (customer lists) for purposes of determining the implied fair value of
the assets. The test indicated that the recorded book value of the customer
lists exceeded its fair value, as determined by calculating a fair value based
upon a discounted cash flows of the projected and assumed fees from the current
binding service agreements and other recurring fees earned from these customer
lists and accordingly recorded an impairment charge of $49,000 to prior year’s
results of operations at August 31, 2008. Considerable management judgment is
necessary to estimate the fair value; these estimates of cash flows are
significantly impacted by estimates of revenues, costs, and other factors. Due
to uncertainties in the estimation process, actual results could differ from
such estimates. There was no impairment charged to operations for the three
month periods ended November 30, 2008 and 2007.





NOTE
9 – FINANCING COSTS





In
November 2008, the Company issued an aggregate of 764,706 warrants in connection
with the issuance of promissory notes to two of its officers.  The
warrants are exercisable for five years at $0.34 per share.  The fair
value of the warrants were determined using the Black-Scholes Option Pricing
Model based on the following assumptions: dividend yield: -0-%, volatility:
150.66%; risk free rate: 2.01%; expected life: 5 years.





The
determined fair value of the warrants of $193,453 is amortized ratably over the
six month term of the promissory notes.








November 30,
                        2008
                      
                      
                      August 31,
                        2008Financing
      costs
                      
                      $
                      193,453
                      
                      
                      $
                      -Less
      accumulated amortization
                      
                      
                      (4,275
                      )
                      
                      
                      -$
                      189,178
                      
                      
                      $
                      -





For the
three month periods ended November 30, 2008 and 2007, the amortization expense
charged to operations was $4,275 and $-0-, respectively.





NOTE
10 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





As of
November 30, 2008 and August 31, 2008, accounts payable and accrued liabilities
are comprised of the following:





November 30,
                        2008
                      
                      
                      August 31,
                        2008Accounts
      payable
                      
                      $
                      1,878,273
                      
                      
                      $
                      1,783,905Accrued
      salaries and expenses
                      
                      
                      323,834
                      
                      
                      
                      365,002Payroll
      taxes payable
                      
                      
                      4,485
                      
                      
                      
                      6,285$
                      2,206,592
                      
                      
                      $
                      2,155,192




F-16


GEEKS
ON CALL HOLDINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION


NOVEMBER
30, 2008


(unaudited)





NOTE
11 - LINE OF CREDIT





In July
2008, the Company established a $400,000 revolving bank line of credit with a
financial institution. This facility is secured by certain assets of the Company
and is personally guaranteed by the Company’s Chief Executive
Officer.





Amounts
advanced pursuant to the line of credit are payable on demand at the discretion
of the lender and will accrue interest at the rate of 5.5% per annum.
Monthly payments of accrued interest, payable in cash, are calculated on the
amount of credit outstanding beginning on August 7, 2008.





As of
November 30, 2008 and August 31, 2008, the Company has outstanding $400,000 and
$200,000, respectively on the existing bank line of credit.





NOTE
12 - NOTES PAYABLE





As of
November 30, 2008 and August 31, 2008, notes payable is comprised of the
following:





November 30,
                        2008
                      
                      
                      August 31,
                        2008Note
      payable, 4.5% per annum with monthly payment of $4,596, due April 2011;
      unsecured
                      
                      $
                      125,807
                      
                      
                      $
                      138,088Note
      payable, prime plus 2% per annum, due September 8, 2008;
      unsecured.
                      
                      
                      -
                      
                      
                      
                      200,000Note
      payable, prime plus 7% per annum, due December 30, 2008;
      unsecured.
                      
                      
                      200,000
                      
                      
                      
                      -Note
      payable, prime plus 2% per annum, due September 18, 2008;
      unsecured
                      
                      
                      -
                      
                      
                      
                      200,000Less:
      current portion
                      
                      
                      (250,523
                      )
                      
                      
                      (449,959
                      )Long
      term portion
                      
                      $
                      75,284
                      
                      
                      $
                      88,129





In March
2008, the Company issued an unsecured note payable of $154,500, due in
thirty-six monthly payments, to acquire the rights and obligations to directly
service customers previously serviced under certain binding service agreements
of a former franchisee. (see Note 8 above)




In June
2008, the Company entered into Short Term Promissory Notes with two private
investment sources in the amount of $200,000 each for the total principle sum of
$400,000, each bearing interest at the prime rate plus two percent, as reported
by the Wall Street Journal. The Notes are payable on demand after ninety days
from the date of the Notes.




In
October 2008, the Company paid the Short Term Promissory Note originally due
September 8, 2008. Additionally, on October 1, 2008 the Company issued a new
Short Term Promissory Note to replace the Note originally due September 18,
2008. The Short Term Promissory Note bears interest at 7% per annum and was due
on December 30, 2008. This short term promissory note has been extended
with the same terms and conditions and is now due on June 30,
2009.





NOTE
13 - NOTES PAYABLE – RELATED PARTY





In
November 2008, the Company issued unsecured promissory notes in the aggregate
principal amount of $130,000 to related parties, (two of the Company’s
officers), due May 26, 2009 with an interest rate of Wall Street Prime plus 4%
(8% as of November 30, 2008), unsecured.





As
described in Note 9, in connection with the issuance of the above related party
promissory notes, the Company issued an aggregate of 764,706 warrants to
purchase the Company’s common stock for five years from the date of issuance at
an exercise price of $0.34 per share.





For the
three month period ended November 30, 2008 and 2007, interest expense of $116
and $-0- was charged to operations, respectively.





NOTE
14 – COMMITMENTS AND CONTINGENCIES





Litigation





The Company is subject to other legal
proceedings and claims, which arise in the ordinary course of its
business.  Although occasional adverse decisions or settlements may
occur, the Company believes that the final disposition of such matters should
not have a material adverse effect on its financial position, results of
operations or liquidity.  In
December 2008 the Company had been served with individual lawsuits from several
franchisees.  The Company intends to vigorously defend against the
claims asserted against it.  Management believes the ultimate outcome of
this matter will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity as described
in Note 18.  F-17


GEEKS
ON CALL HOLDINGS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 NOVEMBER
30, 2008
 (unaudited)
 
 NOTE
15 - STOCKHOLDERS’ EQUITY
 
 Preferred
stock
 
 As of
November 30, 2007, the Company was authorized four classes of preferred stock:
Class A has 200,000 authorized shares; Class B has 167,130 authorized shares;
Class C has 128,870 authorized shares and Class D has 179,860 authorized shares.
All classes have no par value.
 
 On
December 14, 2007, the Company amended and restated its certificate of
incorporation which authorized two classes of stock “Common Stock” and
“Preferred Stock”, respectively. The total number of shares the Company is
authorized to issue as common stock with par value per share is five million
seven hundred thousand (5,700,000) shares. Five million (5,000,000) shares shall
be $0.001 par value Common Stock and seven hundred (700,000) shares shall be
$0.001 par value Preferred stock. The Preferred Stock may be issued from time to
time in one or more classes.
 
 As a
result of the reverse Reorganization on February 8, 2008 as described in Note 1
above, the Company is authorized to issue 10,000,000 of $0.001 par value
preferred stock and 100,000,000 shares of $0.001 par value common
stock.
 
 As of
November 30, 2008 and August 31, 2008, there were no outstanding shares of
preferred stock.
 
 Common
stock
 
 The
Company is authorized to issue 100,000,000 shares of its common stock with a par
value of $.001. As of November 30, 2008 and August 31, 2008, there were
15,222,589 and 14,152,500 shares of common stock issued and
outstanding.
 
 In
connection with the Reorganization as described on February 8, 2008; the Company
split its outstanding shares of common stock at a ratio of 1:2.115868. All
references in the consolidated financial statements and notes to consolidated
financial statements, numbers of shares and share amounts have been
retroactively restated to reflect the split.
 
 On December
14, 2007, the Company issued a total of 2,097,756 shares of its common
stock in exchange for 160,404 shares of Class B Preferred stock and accrued
and unpaid dividends.
 
 On
December 14, 2007, the Company issued a total of 655,475 shares of its common
stock is exchange for 119,784 shares of Class C Preferred stock and accrued
and unpaid dividends.
 
 On
December 14, 2007, the Company issued a total of 552,225 shares of its common
stock in exchange for 103,417 shares of Class D Preferred stock and accrued and
unpaid dividends.
 
 On
February 8, 2008, the Company accepted subscriptions for 300 units, consisting
of an aggregate of 3,000,000 shares of the Company’s common stock and five-year
warrants to purchase an aggregate of 1,500,000 shares of the Company’s common
stock at an exercise price of $1.50 per share. The shares and warrants were sold
in connection with the Company’s private placement conducted pursuant to the
terms of a Confidential Private Placement Memorandum, dated October 22, 2007, as
supplemented by Supplement No. 1 dated December 21, 2007, Supplement No. 2 dated
January 16, 2008 and Supplement No. 3 dated January 31, 2008. The gross proceeds
from the closing of the Private Placement amounted to $3,000,000 (net
proceeds of $2,591,400). The Company issued 150,000 shares of its unregistered
common stock and five-year warrants to purchase an aggregate of 240,000 shares
of the Company’s common stock at an exercise price of $1.50 per share to the
placement agent as partial offering costs. These securities issued to the
placement agent were fair valued at $150,000. In addition, the Company has
incurred additional offering costs of $408,600, which were deducted against the
gross proceeds of $3,000,000. The Company has charged the total offering costs
of $558,600 to the additional paid-in capital account in connection with this
Private Placement.
  On
February 21, 2008, the Company accepted subscriptions for 65 units, consisting
of an aggregate of 650,000 shares of the Company’s common stock and five-year
warrants purchasing an aggregate of 325,000 shares of the Company’s common stock
at an exercise price of $1.50 per share. The shares and warrants were sold in
connection with the Company’s private placement conducted pursuant to the terms
of a Confidential Private Placement Memorandum, dated October 22, 2007, as
supplemented by Supplement No. 1 dated December 21, 2007, Supplement No. 2 dated
January 16, 2008 and Supplement No. 3 dated January 31, 2008. The gross proceeds
from the second closing of the Private Placement amounted to $650,000 (net
proceeds of $605,503).
 
 The
Company issued five-year warrants to purchase an aggregate of 52,000 shares of
the Company’s common stock at an exercise price of $1.50 per share to the
placement agent in connection with the Private Placement. The Company has
incurred a total offering cost of $44,497 from this second closing of the
Private Placement, which has been charged against the additional paid-in capital
account.
  F-18
 
 GEEKS ON CALL
HOLDINGS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 NOVEMBER
30, 2008
 (unaudited)
 
 NOTE
15 – STOCKHOLDERS’ EQUITY (continued)
 
 Common stock
(continued)
 
 On April
1, 2008, the Company issued a total of 125,000 shares of its common stock in
exchange for the purchase of software. The Company valued the shares at $1.50
per share for a total of $187,500, which, in combination with the cash payment
of $100,000, represents the fair value of the asset (aggregate of $287,500),
received which did not differ materially from the value of the stock issued and
the cash payment made.
 
 In June
2008, the Company issued a total of 42,500 shares of its common stock in
exchange for services rendered. The Company valued the shares at $1.00 per share
for a total of $42,500, which represents the fair value of the services,
received which did not differ materially from the value of the stock
issued.
 
 On August
22, 2008, the Company issued a total of 15,000 shares of its common stock in
exchange for services rendered. The Company valued the shares at $0.77 per share
for a total of $11,550, which represents the fair value of the services,
received which did not differ materially from the value of the stock
issued.
 
 On August
28, 2008, the Company issued an aggregate of 20,000 shares of its common stock
in exchange for reacquiring an existing franchise territory. The Company valued
the shares at $0.43 per share for a total of $8,600, which represents the fair
value of the franchise territory reacquired that has been charged to the results
of operations, which did not differ materially from the value of the stock
issued.
 
 On
September 3, 2008, the Company issued an aggregate of 15,000 shares of its
common stock in exchange for services rendered. The Company valued the shares at
$0.70 per share for a total of $10,500, which represents the fair value of the
services, received which did not differ materially from the value of the stock
issued.
 
 On
September 30, 2008, in the first traunch of a private placement offering, the
Company sold to accredited investors a total of 24.75 units, consisting of
824,997 shares of its common stock and warrants to purchase 412,495 shares of
its common stock, at an aggregate offering price of $495,000. Each share of
common stock issued was sold as part of a unit that also includes a warrant to
purchase one-half share of common stock exercisable at $0.75 per share, for a
period ending on the fifth anniversary of the issuance of the warrants. The
Company paid the placement agent for the offering of these units, aggregate
placement fees of $49,500. The placement agent also received warrants to
purchase a total of 65,600 shares of the Company’s common stock, exercisable at
$0.75 per share, for a period ending on the fifth anniversary of the final
closing of the offering.
 
 On
October 15, 2008, October 16, 2008 and October 23, 2008, the Company
closed on three additional traunches of a private placement offering (the
“October Private Placement”) in which the Company sold to accredited investors
an aggregate of 8 units, consisting of an aggregate of 444,354 shares of common
stock and warrants to purchase 222,175 shares of the Company’s common stock, for
aggregate proceeds of $160,000. Each share of common stock issued was sold as
part of a unit that also includes a warrant to purchase one-half share of common
stock exercisable at a price between $0.37 and $0.46 per share, for a
period ending on the fifth anniversary of the issuance of the warrants. The
Company paid the placement agent for the offering of these units’ aggregate
placement fees of $16,000. The placement agent also received warrants to
purchase a total of 35,546 shares of the Company’s common stock, exercisable for
a period ending on the fifth anniversary of the final closing of the
offering.
 
 On
October 20, 2008, the Company issued an aggregate of 21,501 shares of its common
stock in exchange for services rendered. The Company valued the shares at $0.34
per share for a total of $7,310, which represents the fair value of the
services, received which did not differ materially from the value of the stock
issued.
 
 On
October 27, 2008, the Company issued an aggregate of 970,588 shares of the
Company’s common stock pursuant to certain anti dilution provisions granted to
investors in the private placement in connection with the Reorganization in
February 2008.
 
 On
November 4, 2008, the Company issued an aggregate of 63,000 shares of its common
stock in exchange for previously incurred debt. The Company valued the shares at
$0.34 per share for a total of $21,420, which represents the fair value of the
incurred debt which did not differ materially from the value of the stock
issued.
 
 On
November 5, 2008, the Company closed a private placement offering in which the
Company sold to accredited investors one unit consisting of 58,823 shares of its
common stock and warrants to purchase 29,411 shares of its common stock, for
aggregate proceeds of $20,000. Each share of common stock issued was sold as
part of a unit that also included a warrant to purchase one-half share of common
stock exercisable at $0.42 per share, for a period ending on the fifth
anniversary of the issuance of the warrants. The Company paid the placement
agent for the offering of this unit aggregate placement fees of $2,000. The
placement agent also received warrants to purchase a total of 4,705 shares of
the Company’s common stock, exercisable at $0.42 per share, for a period ending
on the fifth anniversary of the final closing of the offering.
  F-19
  GEEKS
ON CALL HOLDINGS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 NOVEMBER
30, 2008
 (unaudited)
 
 NOTE
16 – WARRANTS AND OPTIONS
  Warrants
 
 The
following table summarizes the warrants outstanding and exercisable for the
shares of the Company’s common stock issued to officers, investors and placement
agents of the Company. These warrants were issued in lieu of cash compensation
for services performed or financing expenses in connection with the issuance of
promissory notes and the sale of the Company’s common stock. Warrants issued in
connection with the private placement of the Company’s common stock and possess
all of the conditions for equity classification and therefore were classified as
equity.
 
 Warrants Outstanding
                                                
                                                Warrants ExercisableExercise Price
                                                
                                                Number Outstanding
                                                
                                                Weighted Average
                                                  Remaining
                                                  Contractual Life
                                                  (Years)
                                                
                                                Weighted Average
                                                  Exercise Price
                                                
                                                Number Exercisable
                                                
                                                Weighted
                                                  Average Exercise
                                                  Price$
                                                0.34
                                                
                                                3,359,638
                                                
                                                4.52
                                                
                                                $
                                                0.34
                                                
                                                3,359,638
                                                
                                                $
                                                0.343,359,638
                                                
                                                
                                                
                                                
                                                
                                                
                                                3,359,638
  Transactions
involving warrants are summarized as follows:
 
 Number of
                            Shares
                          
                          Weighted
                            Average Price
                            Per ShareBalance,
      August 31, 2007
                          -
                          
                          $
                          -Granted
                          2,117,000
                          
                          
                          0.34*Exercised
                          -
                          
                          
                          -Canceled
      / Forfeited / Expired
                          -
                          
                          
                          -Outstanding
      at August 31, 2008
                          2,117,000
                          
                          $
                          0.34*Granted
                          1,242,638
                          
                          
                          0.34*Exercised
                          -
                          
                          
                          -Canceled
      / Forfeited / Expired
                          -
                          
                          
                          -Outstanding
      at  November 30, 2008
                          3,359,638
                          
                          $
                          0.34
  *Pursuant
to the private placement agreement, certain warrants contain certain
anti-dilutive provisions. As described in Note 15 above, the Company sold common
stock in private placements in September and October 2008. The warrants issued
in conjunction with such the private placements have been reset to an exercise
price of $0.34 per share accordingly.
 
 In
November 2008, the Company issued warrants to purchase an aggregate of 764,706
shares of its common stock in connection with the issuance of promissory notes
to its two officers as described in Note 9 above.  The warrants
are exercisable for five years at $0.34 per share.  The fair value of
the warrants were determined using the Black-Scholes Option Pricing Model based
on the following assumptions: dividend yield: -0-%, volatility: 150.66%; risk
free rate: 2.01%; expected life: 5 years.
 
 Employee Stock
Options
  Effective
September 1, 2006, the Company adopted the fair value recognition provisions of
SFAS No. 123(R), “Share-Based Payment”, using the modified prospective method.
Under this method, the provisions of SFAS No. 123(R) apply to all awards granted
or modified after the date of adoption and all previously granted awards not yet
vested as of the date of adoption. The initial adoption of this standard had no
effect on the Company’s consolidated financial statements as the Company had not
granted any awards prior to February 8, 2008.
  F-20
  GEEKS
ON CALL HOLDINGS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 NOVEMBER
30, 2008
 (unaudited)
 
 NOTE
16 - WARRANTS AND OPTIONS (continued)
 
 Employee Stock Options
(continued)
 
 The
following table summarizes the options outstanding and exercisable for the
shares of the Company's common stock granted to officers, employees and
directors of the Company:
  Options Outstanding
                                            
                                            
                                            Options ExercisableExercise Price
                                            
                                            
                                            Number Outstanding
                                            
                                            
                                            Weighted Average
                                              Remaining
                                              Contractual Life
                                              (Years)
                                            
                                            
                                            Weighted Average
                                              Exercise Price
                                            
                                            
                                            Number Exercisable
                                            
                                            
                                            Weighted
                                              Average Exercise
                                              Price$
                                            1.00
                                            
                                            
                                            
                                            2,285,000
                                            
                                            
                                            
                                            5.19
                                            
                                            
                                            $
                                            1.00
                                            
                                            
                                            
                                            300,000
                                            
                                            
                                            $
                                            1.00$
                                            1.05
                                            
                                            
                                            
                                            85,000
                                            
                                            
                                            
                                            5.80
                                            
                                            
                                            $
                                            1.05
                                            
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            1.05$
                                            1.15
                                            
                                            
                                            
                                            150,000
                                            
                                            
                                            
                                            5.58
                                            
                                            
                                            $
                                            1.15
                                            
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            1.152,520,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            300,000
  Transactions
involving employee stock options are summarized as follows:
  Number of
                              Shares
                            
                            Weighted
                              Average Price
                              Per ShareBalance,
      August 31, 2007
                            
                            -
                            
                            $
                            -Granted
                            
                            2,435,000
                            
                            
                            1.01Exercised
                            
                            -
                            
                            
                            -Canceled
      / Forfeited / Expired
                            
                            -
                            
                            
                            -Outstanding
      at August 31, 2008
                            
                            2,435,000
                            
                            $
                            1.01Granted
                            
                            85,000
                            
                            
                            1.05Exercised
                            
                            -
                            
                            
                            -Canceled
      / Forfeited / Expired
                            
                            -
                            
                            
                            -Outstanding
      at November 30, 2008
                            
                            2,520,000
                            
                            $
                            1.01
 
 On
February 8, 2008, the Board of Directors approved the 2008 Equity Incentive Plan
(the “Plan”) whereby the Plan is intended as an incentive, to retain in the
employ of and as directors, officers, consultants, advisors and employees of the
Company. The Plan provides for the grant of incentive stock options and
nonqualified stock options (collectively, “Options,”) Option price and term are
determined by the Plan Committee at the time of grant. The vesting periods of
the Options are determined by the Plan Committee at the time of grant, however,
in the absence of any Option vesting periods designated by the Plan Committee at
the time of grant, Options vest and become exercisable at one-third of the total
number of shares subject to the grant on each of the first, second and third
anniversaries of the date of grant. The terms of the options are not to exceed
ten years and in the case of an incentive stock option granted to an optionee
who, at time such incentive option is granted, owns more than 10% of the total
combined voting power of all classes of stock of the Company, not to exceed five
years.
 
 The
exercise price of the incentive stock options shall not be less than 100%
of the fair market value or the prevailing market price of the stock at the time
of grant provided, however, with respect to an optionee who, at the time such
incentive stock option is granted, owns more than 10% of the total combined
voting power of all classes of stock of the Company, the exercise price shall
not be less than 110% of the fair market value per share of Stock on the grant
date. The exercise price of the nonqualified options shall not be less than 100%
of the fair market value on the grant date. The Company has reserved 3,000,000
shares of its common stock under the Incentive Options plan.
  F-21
 
 GEEKS
ON CALL HOLDINGS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 NOVEMBER
30, 2008
 (unaudited)
 
 NOTE
16 - WARRANTS AND OPTIONS (continued)
 
 Employee Stock Options
(continued)
 
 On
February 8, 2008, the Company granted options to purchase an aggregate of
2,275,000 shares of its common stock to officers, directors and employees at
$1.00 per share over the next six years vested as follows; options to purchase
300,000 shares of common stock vested immediately and the remaining 1,975,000
options vest as to 20% on each anniversary of the date of grant. The fair value,
determined using the Black Scholes Option Pricing Model, of the vested portion
of the options of $325,926 was recorded as stock compensation expense for the
three month period ended November 30, 2008. The following assumptions were
utilized: Dividend yield: -0-%, volatility: 124.86%; risk free rate: 2.60%;
expected life: 6 years.
 
 On
February 29, 2008, the Company granted 10,000 options to an employee to purchase
its common stock at $1.00 per share over the next six years vesting 20% at each
anniversary. The fair value, determined using the Black Scholes Option Pricing
Model, of the vested portion of the options of $3,700 was recorded as stock
compensation expense for the three month period ended November 30, 2008. The
following assumptions were utilized: Dividend yield: -0-%, volatility: 124.86%;
risk free rate: 2.50%; expected life: 6 years.
 
 On July
1, 2008, the Company granted 150,000 options to an officer to purchase its
common stock at $1.15 per share over the next six years vesting 20% at each
anniversary. The fair value, determined using the Black Scholes Option Pricing
Model, of the vested portion of the options of $13,460 was recorded as stock
compensation expense for the three month period ended November 30, 2008. The
following assumptions were utilized: Dividend yield: -0-%, volatility: 148.04%;
risk free rate: 3.33%; expected life: 6 years.
 
 On
September 18, 2008, the Company granted 85,000 options to an employee to
purchase its common stock at $1.05 per share over the next six years vesting 20%
at each anniversary. The fair value, determined using the Black Scholes Option
Pricing Model, of the vested portion of the options of $2,597 was recorded as
stock compensation expense for the three month period ended November 30, 2008.
The following assumptions were utilized: Dividend yield: -0-%, volatility:
144.50%; risk free rate: 2.59%; expected life: 6 years.
 
 Non - Employee Stock
Options
 
 The
following table summarizes the options outstanding and exercisable for the
shares of the Company's common stock granted to non employees of the
Company:
 
 Options Outstanding
                            
                            Options ExercisableExercise Price
                            
                            Number Outstanding
                            
                            Weighted Average
                              Remaining
                              Contractual Life
                              (Years)
                            
                            Weighted Average
                              Exercise Price
                            
                            Number Exercisable
                            
                            Weighted
                              Average Exercise
                              Price$
                            1.50
                            
                            50,000
                            
                            5.52
                            
                            $
                            1.50
                            
                            25,000
                            
                            $
                            1.50
  F-22
 
 GEEKS
ON CALL HOLDINGS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 NOVEMBER
30, 2008
 (unaudited)
 
 NOTE
16 - WARRANTS AND OPTIONS (continued)
 
 Non Employee Stock Options
(continued)
 
 Transactions
involving non employee stock options are summarized as follows:
  Number of
                                      Shares
                                    
                                    Weighted
                                      Average Price
                                      Per ShareBalance,
      August 31, 2007
                                    
                                    -
                                    
                                    $
                                    -Granted
                                    
                                    50,000
                                    
                                    
                                    1.50Exercised
                                    
                                    -
                                    
                                    
                                    -Canceled
      / Forfeited / Expired
                                    
                                    -
                                    
                                    
                                    -Outstanding
      at August 31, 2008
                                    
                                    50,000
                                    
                                    $
                                    1.50Granted
                                    
                                    -
                                    
                                    
                                    -Exercised
                                    
                                    -
                                    
                                    
                                    -Canceled
      / Forfeited / Expired
                                    
                                    -
                                    
                                    
                                    -Outstanding
      at November 30, 2008
                                    
                                    50,000
                                    
                                    $
                                    1.50
 
 On June
9, 2008, the Company granted 50,000 options with a six year term to consultants
to purchase its common stock at $1.50 per share 50% of these options vest 90
days after issuance and 50% of these options vest 180 days after issuance. The
fair value, determined using the Black Scholes Option Pricing Model, of the
vested portion of the options of $15,474 was recorded as stock compensation
expense for the three month period ended November 30, 2008. The following
assumptions were utilized: dividend yield: -0-%, volatility: 144.50%; risk free
rate: 2.59%; expected remaining life: 5.75 years.
 
 NOTE
17 - RELATED PARTY TRANSACTIONS
 
 As of
November 30, 2008 and August 31, 2008, certain employees owed the Company $28
and $48, respectively, for travel and other advances. These advances have been
included in the accompanying consolidated balance sheets under the caption,
prepaid expenses and other current assets. Subsequent to November 30, 2008, all
advances have been repaid.
 
 In
October 2007, the Company entered into an exclusive private label/marketing
agreement (the “Agreement”) with Telkonet, Inc. (a major supplier of the
Company) for products under the trade name Geek Link System. Pursuant to the
Agreement, the Company was to resale these private labeled products to customers
through the Company’s existing network of franchisees. In addition, the Company,
Telkonet, Inc. and certain stockholders of the Company entered into an agreement
whereby Telkonet, Inc. acquired 2,454,500 shares of the Company’s common stock
from these existing stockholders, which in effect transferred 39.6% ownership in
the Company to Telkonet, Inc. by these stockholders. Telkonet Inc.’s ownership
of the Company decreased to 16.13% as of November 30, 2008.
 
 On
February 8, 2008, we entered into a consulting agreement with Douglas
Glenn, a member of our board of directors. The term of the agreement is two
years. Mr. Glenn receives an annual consulting fee of $50,000, which is payable
in monthly installments. In the event we undergo a change of control, the
aggregate balance of consulting fee will become immediately due and
payable.
  Mr.
Glenn also received, immediately upon the consummation of the Merger,
150,000 options with a six year term. Twenty percent of the options will vest on
each of the first five anniversaries of the date of grant. The
options have an exercise price of $1.00 per share.
 
 On
November 26, 2008, the Company issued an aggregate of $130,000 in promissory
notes to related parties, (two of the Company’s officers), due May 26, 2009 with
an interest rate of Wall Street Prime plus 4% (8% as of November 30, 2008),
unsecured.
 
 As
described in Note 9, in connection with the issuance of the above related
parties promissory notes, the Company issued an aggregate of 764,706 warrants to
purchase the Company’s common stock for five years from the date of issuance at
an exercise price of $0.34 per share.
  F-23
 
 GEEKS
ON CALL HOLDINGS, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 NOVEMBER
30, 2008
 (unaudited)
 
 NOTE
18 – SUBSEQUENT EVENTS
 
 In
December 2008 the Company had been served with individual lawsuits from several
franchisees.  All of the suits were filed by the counsel for a
recently formed franchise association.  The suits, all substantially
identical, claim that the Company is responsible for a financial downturn
allegedly experienced by the Plaintiffs. The Company intends to vigorously
defend against the claims asserted against it.  Management believes the
ultimate outcome of this matter will not have a material adverse effect on the
Company's consolidated financial position, results of operations or
liquidity.
  F-24
 
 Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operation
  The
following discussion and analysis should be read in conjunction with our
condensed consolidated financial statements and related notes appearing
elsewhere in this quarterly report on Form 10-Q. 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 not limited to those set forth under
"Risk Factors" in our annual report on Form 10-K filed with the SEC on December
4, 2008.
 
 Management's
discussion and analysis of financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates and assumptions,
including, but not limited to, those related to revenue recognition, allowance
for doubtful accounts, income taxes, goodwill and other intangible assets, and
contingencies and litigation. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates and
assumptions.
  Company
Overview
  Our
operating subsidiary, Geeks On Call America, Inc., was formed in June 2001 and
provides quick-response, on-site computer solutions and remote/telephone
technical support (including services, on-going support and
training)  to residential customers, small to medium sized businesses
and national accounts across the United States. On-site solutions are provided
through a network of independent franchised service providers, as well as
Company managed technicians, conducting business under the trade names
“1-800-905-GEEK,” “Geeks On Call” and “CallTheGeeks.com.” We provide telephone
& remote technical support under the “CallTheGeeks.com” brand in conjunction
with our onsite services. Our on-site support services include troubleshooting,
maintaining, upgrading and networking computers, and service programs, designed
to establish a long-term relationship with the customer. Additionally, we
provide training and consulting to computer users at their home or business
location. Our concept is to bring state-of-the-art technology products and
computer solutions directly to end users at their locations and eliminate the
inconvenience of traveling to a traditional retailer or depot service center.
Through a combination of on-site services and remote/telephone technical
support, we can now develop relationships with consumers, small to medium size
businesses as well as National accounts who need support anywhere at
anytime.
  Corporate
History
  The
Company’s operating subsidiary, Geeks On Call America, Inc., was incorporated
under the laws of the State of Virginia on June 11, 2001 and subsequently
reincorporated on December 14, 2007 under the laws of the State of Delaware. The
Company provides quick-response, on-site computer solutions and telephone
technical support (including services, on-going, support and training) primarily
to small to medium business enterprises and residential computer users in the
United States. On-site solutions are provided through a network of independent
franchisees and Company managed operations who are certified IT solutions
providers conducting business under the trade names 1 800 905 GEEK and Geeks On
Call®.
 
 Geeks On
Call Holdings, Inc. was created through a reverse merger process
with   Lightview, Inc , which was incorporated under the laws of
the State of Nevada on December 22, 2006 under the name Lightview, Inc,
(“Lightview”) and formerly operated as a development stage company. On January
23, 2008, Lightview merged with and into Geeks On Call Holdings, Inc., a
newly-formed wholly owned subsidiary of Lightview, for the sole purpose of
reincorporating in the State of Delaware and changing the name of the company.
Thereafter, on February 8, 2008, Geeks On Call America, Inc., Geeks On Call
Holdings, Inc. and Geeks On Call Acquisition Corp, a newly-formed wholly-owned
subsidiary of Geeks On Call Holdings, Inc. (“Acquisition Corp.”), entered into a
merger agreement (the “Merger Agreement”). Upon closing of the merger
transaction contemplated under the Merger Agreement, Acquisition Corp. merged
with and into Geeks On Call America, Inc., and Geeks On Call America, Inc., as
the surviving corporation, became the sole wholly-owned operating subsidiary.
The consolidated financial statements include the accounts of Geeks On Call
Holdings, Inc., the registrant and Geeks On Call America, Inc., the sole
wholly-owned operating subsidiary (collectively, the
“Company”).
  3
 
 Results
of Operations
  Our
revenues are derived primarily from royalties and advertising fees earned from
operating franchises and fees earned from the sales of franchise
territories. Fees from the sale of franchises are recognized in income in the
period that substantially all services and conditions relating to the sale under
our franchise agreement have been performed, typically the period in which the
franchisee has completed and passed our training class.
  Three
Months Ended November 30, 2008 compared to Three Months Ended November 30,
2007
  Revenue
  The
following table summarizes our revenues for the three months ended November 30,
2008 and November 30, 2007:
 
 Three months endedNovember 30,
                        2008
                      
                      
                      November 30,
                        2007Total Revenue
                      
                      $
                      995,230
                      
                      
                      $
                      1,605,071
  For the
three months ended November 30, 2008, revenue decreased by 38%, as compared to
the same period in 2007. This decrease in revenue in the amount of $609,841 was
primarily attributable to a reduction in 17 franchise owners and their 65
respective franchised territories, their corresponding advertising and royalty
revenues, a reduction in the granting of new franchises, and the implementation
of the Reboot Plan explained below. To maintain our overall level of quality, we
have re-acquired marginally performing franchise operations and either
re-franchised the territories or provides the support work from our corporate
location internally transitioned to a company owned territory, and have added
technical support staff to provide improved response times. The Company, in
conjunction with their Franchise Advisory Council, created a program for the
GOCA franchisees (the “Reboot Plan”) designed to reduce the regular advertising
fees paid into the advertising fund by franchise partners. The rationale for the
reduction is to focus more of the franchise owner’s resources locally on local
advertising and public relations campaigns. The net result of the Reboot Plan is
a reduction in advertising fees paid by the franchisees to GOCA corporate. In
the Reboot Plan, advertising fees will be scaled back over a 12 month period..
The first reduction took place in September 2008. The second reduction will take
place in the fees collected in the first full week of April 2009. The final
reduction will take place in September of 2009. The net effect of the plan
will reflect a reduction in overall advertising revenues but will be offset by a
proportionate reduction in advertising spending.
  Operating
Loss
  The
following table summarizes our operating loss for the three months ended
November 30, 2008 and November 30, 2007:
  Three
      months endedNovember
      30,
                        2008
                      
                      
                      November
      30,
                        2007Operating income
      (loss)
                      
                      $
                      (1,163,152
                      )
                      
                      $
                      (408,035
                      )
  Operating
expenses, which consist of selling, general and administrative expenses,
advertising and depreciation and amortization totaled $2,158,382 for the three
months ended November 30, 2008, as compared to $2,013,106 for the three months
ended November 30, 2007, representing a increase of approximately 7%. Our
operating loss for the three months ended November 30, 2008 was $1,163,152
as compared to an operating loss of $408,035 for the three months ended November
30, 2007, representing an increase in operating loss of approximately 185%. Our
operating loss increased due to increased selling, general and administrative
expenses as explained below in addition to our drop in revenue detailed
above.
  4
 
 Selling,
General and Administrative Expenses
  The
following table summarizes our selling, general and administrative expenses for
the three months ended November 30, 2008 and November 30, 2007:
 
 Three months endedNovember
      30,
                        2008
                      
                      
                      November
      30,
                        2007Selling, general and
      administrative expenses
                      
                      $
                      1,745,401
                      
                      
                      $
                      978,021
  For the
three months ended November 30, 2008, selling, general and administrative
expenses were $1,745,401 as compared to $978,021 for the three months ended
November 30, 2007, an increase of $767,380, or 78%. The increase in selling,
general and administrative expenses of $767,380 are mainly attributable to these
four areas and other direct and/or indirect overhead expenses.
 
 Costs associated with
meeting the requirements of being a public company
 
 We have
incurred significant costs relating to maintaining our compliance to be a public
company including professional fees relative to the preparation and completion
of the reporting and filing requirements. During the quarter ended November 30,
2008, we incurred approximately $63,304 in connection with meeting the legal and
accounting reporting obligations of becoming a public company. We did not incur
similar costs during the quarter ended November 30, 2007.
 
 Increased
staffing
 
 We
incurred approximately $226,310 during the three months ended November 30, 2008
in connection with support personnel costs as compared to $-0- during the
previous year’s quarterly period. During the three months ended November 30,
2008 we employed approximately 17 support staff as compared to -0- during the
previous year’s comparable period, or an addition of 17 employees. We have added
the additional technical support staff to service customers of our Company owned
territories. Additionally, as discussed above, we intend to expand our corporate
services to a wider range of customers which include the Small to Medium Sized
Business Market and National accounts as well as to our existing and future
franchise operations.
 
 Investor and, Public
Relations
 
 We
incurred approximately $71,079 in costs relating to investor relations, public
relations and marketing of our newly trading public entity during the three
month period ended November 30, 2008 as compared to $-0- during the same period
in the prior year.
 
 Stock based
compensation
 
 We incurred a non cash expense for the
vesting options previously issued to officers, employees and consultants of
$361,156 for the three month period ended November 30, 2008 and compared to $-0-
for the same period last year.
 
 Advertising
  The
following table summarizes our advertising expense for the three months ended
November 30, 2008 and November 30, 2007:
 
 Three months endedNovember
      30,
                        2008
                      
                      
                      November
      30,
                        2007Advertising expense
                      
                      $
                      343,125
                      
                      
                      $
                      998,699
  Our
advertising expenses for the three months ended November 30, 2008, were $343,125
compared to $998,699 for the three months ended November 30, 2007. The decrease
in advertising expense was directly related to a reduction in the number of
active operating franchises, costs associated with a national pilot program, and
in September 2008 the Company, in conjunction with their Franchise Advisory
Council, created a program for the Company’s franchisees (the Reboot Plan”)
designed to reduce the regular advertising fees paid into the advertising fund
by franchise partners. The rationale for the reduction is to focus more of the
franchise owner’s resources locally on local advertising and public relations
campaigns. The net result of the Reboot Plan is a reduction in advertising fees
paid by the franchisees to the Company. In the Reboot Plan, advertising fees
will be scaled back over a 12 month period.. The first reduction took place in
September 2008. The second reduction will take place in the fees collected in
the first full week of April 2009. The final reduction will take place in
September of 2009. The net effect of the Reboot Plan will reflect a
reduction in overall advertising revenues and a proportionate reduction in our
overall advertising spending
  5





Costs associated with
national pilot program





During
this reporting period the Company was participating in a pilot program with
Sam’s Club, the membership warehouse subsidiary of Wal-Mart Stores, Inc. The
pilot was conducted in 20 Sam’s Clubs located throughout the Baltimore,
Washington, D.C. and Virginia areas where The Company provided on-site
residential and small business service and support to Sam’s Club members in the
participating markets. The Company incurred expenses related to marketing and
sales collateral materials, which were required for all 20 Sam’s Clubs. The
Company added one full time employee to facilitate the relationship with Sam’s
Club and the franchise partners.





Depreciation
and Amortization




The
following table summarizes our depreciation and amortization for the three
months ended November 30, 2008 and November 30, 2007:




Three months endedNovember
      30,
                    2008
                  
                  
                  November
      30,
                    2007Depreciation and amortization
                  
                  $
                  69,856
                  
                  
                  $
                  36,386





Depreciation
and amortization increased by $33,470 for the three months ended November 30,
2008 compared to the three months ended November 30, 2007. The increase is
attributed to the increase in depreciable assets.




Liquidity
and Capital Resources


Net Cash Used in Operating
Activities




The
following table summarizes our net cash used in operating activities for the
three months ended November 30, 2008 and November 30, 2007:




Three
      months endedNovember
      30,
                    2008
                  
                  
                  November
      30,
                    2007Net
      cash used in operating activities
                  
                  $
                  761,392
                  
                  
                  $
                  118,625




Cash
utilized in operating activities was $761,392 for the three months ended
November 30, 2008, as compared to $118,625 for the three months ended November
30, 2007. The increase was primarily due to the costs associated with filing
requirements to be a public company, investor relations, and the hiring of
additional staff and consultants.





Net Cash Used in and Provided by
Investing Activities




The
following table summarizes our net cash used in and provided by investing
activities for the three months ended November 30, 2008 and November 30,
2007:





Three
      Months EndedNovember
      30,
                    2008
                  
                  
                  November
      30,
                    2007Net cash (used
      in) and provided by investing activities
                  
                  $
                  31,602
                  
                  
                  $
                  (43,243
                  )




Net cash
provided in investing activities totaled $31,602 for the three months ended
November 30, 2008 as compared to net cash used in investing activities of
$43,243 for the three months ended November 30, 2007. The difference in
cash provided in investing activities was mainly attributable from collections
of loan payments from franchisees and others.


6


Net Cash Used in and Provided by
Financing Activities




The
following table summarizes our net cash used in and provided by financing
activities for the three months ended November 30, 2008 and November 30,
2007:





Three
      Months EndedNovember
      30, 2008
                  
                  
                  November
      30, 2007Net
      cash (used in) and provided by financing activities
                  
                  $
                  606,311
                  
                  
                  $
                  (13,477
                  )




Net
cash provided by financing activities totaled $606,311 for the three
months ended November 30, 2008, as compared to cash used in financing activities
of $13,477 for the three months ended November 30, 2007. The reason for the
increase was primarily attributable to the proceeds from the sale of common
stock in connection with certain private placements of our common stock,
proceeds from issuance of two new notes payable to related parties
and proceeds from our line of credit.




The
accompanying financial statements have been prepared assuming that we will
continue as a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of
business.  However, our ability to continue as a going
concern will be dependent upon our ability to generate sufficient cash flow
from operations to meet our obligations on a timely basis, to obtain additional
financing, and ultimately attain profitability.




Our
liquidity needs consist of our working capital requirements and indebtedness
payments. Historically, we have financed our operations through the sale of
equity and convertible debt as well as borrowings from various credit
sources.




As of
November 30, 2008, we had a working capital deficit of $2,183,119 as compared to
a working capital deficit of $2,200,645 at August 31, 2008. For the three months
ended November 30, 2008, we generated a net cash flow deficit from operating
activities of $761,392 consisting primarily of year to date losses of
$1,171,802, adjusted primarily for stock based compensation of $378,967,
increase of operating assets and liabilities, net of $38,413, and depreciation
and amortization of $69,856. Cash provided by investing activities totaled
$31,602, consisting of loan payments received from franchisees and others of
$31,602. Cash provided by financing activities for the three months ended
November 30, 2008 totaled $606,311 consisting of $513,401of proceeds from the
sale of common stock subscriptions, proceeds from issuance of notes payable and
line of credit in the amount of $330,000, less repayments of previously incurred
debt of $237,090.





While we
have raised capital to meet our working capital and financing needs in the past,
we have recently reduced our operational overhead to the point where we generate
sufficient monthly recurring revenue to conduct our normal business operations.
We continue to seek additional financing in order to fund the expansion and
infrastructure of our operations on a National level and to eliminate existing
short term financial indebtedness. Exploitation of potential revenue sources
will be financed primarily through available working capital, the sale of
securities and convertible debt, exercise of outstanding warrants, issuance of
notes payable and other debt or a combination thereof, depending upon the
transaction size, market conditions and other factors.





However,
if during that period or thereafter, we are not successful in generating
sufficient working capital from operations or in raising sufficient capital
resources, on terms acceptable to us, this could have a material adverse effect
on our business, results of operations liquidity and financial
condition





On
September 30, 2008, in the first traunch of a private placement offering, we
sold to accredited investors a total of 24.75 units, consisting of 824,997
shares of common stock and warrants to purchase 412,495 shares of common stock,
at an aggregate offering price of $495,000. Each share of common stock issued
was sold as part of a unit that also includes a warrant to purchase one-half
share of common stock exercisable at $0.75 per share, for a period ending on the
fifth anniversary of the issuance of the warrants. We paid the placement agent
for the offering of these units’ aggregate placement fees of $49,500. The
placement agent also received warrants to purchase a total of 65,600 shares of
common stock, exercisable at $0.75 per share, for a period ending on the fifth
anniversary of the final closing of the offering.





On
October 15, 2008, October 16, 2008 and October 23, 2008, we closed on three
additional traunches of a private placement offering (the “October Private
Placement”) in which we sold to accredited investors a total of 8 units of the
October Private Placement, consisting of 444,354 shares of common stock and
warrants to purchase 222,175 shares of common stock, at an aggregate offering
price of $160,000. Each share of common stock issued was sold as part of a unit
that also includes a warrant to purchase one-half share of common stock
exercisable at a price between $0.37 and $0.46 per share, for a period
ending on the fifth anniversary of the issuance of the warrants. We paid the
placement agent for the offering of these units’ aggregate placement fees of
$16,000. The placement agent also received warrants to purchase a total of
35,546 shares of common stock, exercisable for a period ending on the fifth
anniversary of the final closing of the offering.


7


On
November 5, 2008, we closed on an additional traunch of a private placement
offering (the “November Private Placement”) in which we sold to accredited
investors a total of 1 unit of the November Private Placement, consisting of
58,823 shares of common stock and warrants to purchase 29,411 shares of common
stock, at an aggregate offering price of $20,000. Each share of common stock
issued was sold as part of a unit that also includes a warrant to purchase
one-half share of common stock exercisable at $0.42 per share, for a period
ending on the fifth anniversary of the issuance of the warrants. The Company
paid the placement agent for the offering of these units’ aggregate placement
fees of $2,000. The placement agent also received warrants to purchase a total
of 4,705 shares of common stock, exercisable at $0.42 per share, for a period
ending on the fifth anniversary of the final closing of the
offering.




No
assurance can be given that any source of additional cash will be available to
us. If no source of additional cash is available to us, we may have to
significantly reduce the scope of our operations or possibly seek court
protection from creditors or cease business operations
altogether.


Off-Balance Sheet
Arrangements
 
 Since our inception we have not engaged
in any off-balance sheet arrangements, including the use or structured finance,
special purpose entities or variable interest entities.


Critical Accounting Policies and
Estimates


The SEC has issued Financial Reporting
Release No. 60, "Cautionary Advice
Regarding Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies
provide additional disclosure and commentary on their most critical accounting
policies. In FRR 60, the SEC has defined the most critical accounting policies
as the ones that are most important to the portrayal of a company's financial
condition and operating results, and require management to make its most
difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Based on this definition,
our most critical accounting policies include: (a) use of estimates in the
preparation of financial statements; (b) stock-based compensation arrangements;
(c) revenue recognition; and (d) long-lived assets. The methods, estimates and
judgments we use in applying these most critical accounting policies have a
significant impact on the results we report in our consolidated financial
statements.   Use of Estimates in the Preparation of
Consolidated Financial Statements
 
 The preparation of the consolidated
financial statements included in this annual report requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate these estimates, including those
related to revenue recognition and concentration of credit risk. We base our
estimates on historical experience and on various other assumptions that is
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
 
 Stock-Based Compensation
Arrangements
 
 We intend to issue shares of common
stock to various individuals and entities for management, legal, consulting and
marketing services. These issuances will be valued at the fair market value of
the service provided and the number of shares issued is determined, based upon
the open market closing price of common stock as of the date of each respective
transaction. These transactions will be reflected as a component of selling,
general and administrative expenses in the accompanying statement of
operations.


Revenue
Recognition




The
Company accounts for revenue under the guidance provided by SFAS No. 45,
“Accounting for Franchise Fee Revenue (as amended)” and EITF 00-21, “Revenue
Arrangements with Multiple Deliverables”.





Franchise
fee revenue is recognized when (i) all material obligations of the Company to
prepare the franchisee for operations have been substantially
completed; and (ii) all material initial services to be provided by the
Company have been performed, with an appropriate provision for estimated
uncollectible amounts. Obligations to prepare the franchisee for operations are
substantially completed upon the completion by the franchisee of the Company’s
training program.





There are
no other material conditions or commitments or obligations that exist related to
the determination of substantial performance or substantial completion of the
franchise agreement.




Area Development
Sales





Area
developer sales, wherein the Company sells the rights to develop a territory or
market, are nonrefundable fees recognized as revenue upon signature of the Area
Development Agreement and substantial completion of all of the Company’s
obligations associated with the opening of the first franchise under the
agreement have been met. Substantial completion includes, but is not limited to,
conducting market and trade area analysis, a meeting with the Company’s
Executive Team, and performing potential franchise background investigation, all
of which are completed prior to our execution of the Area Development Agreement
and receipt of the corresponding area development fee. As a result, the Company
recognizes this fee in full upon receipt and with the opening of the first
franchise under the Area Development Agreement.





No
additional substantive services required after the first franchise is opened
under the Area Development Agreement.





Advertising and Royalty
Fees





Initial
advertising fees are recognized when the territory is open and the related
advertising has been performed. Ongoing royalties and advertising fees are
recognized currently as the franchised territory generates sales and ongoing
advertising is performed.





Repossessed
Franchises





From time
to time the Company may recover franchise rights through repossession if a
franchisee decides not to open a franchise. If, for any reason, the Company
refunds the consideration received, the original sale is canceled, and revenue
previously recognized is accounted for as a reduction in revenue in the period
the franchise is repossessed. If franchise rights are repossessed but no refund
is made (a) the transaction is not regarded as a sale cancellation, (b) no
adjustment is made to any previously recognized revenue, (c) any estimated
uncollectible amounts resulting from unpaid receivables is provided for, and (d)
any consideration retained for which revenue was not previously recognized is
reported as revenue.




Deferred Franchise
Fees





The
Company may receive all or part of the initial franchise or advertising fee
prior to the execution of the franchise agreement of completion of the earnings
process. These amounts are classified as deferred revenue until the fee
qualifies to be recognized as revenue or is refunded.


8


Long-lived Assets
 
 Long-lived assets to be held and used
are analyzed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. We evaluate at each
balance sheet date whether events and circumstances have occurred that indicate
possible impairment. If there are indications of impairment, we use future
undiscounted cash flows of the related asset or asset grouping over the
remaining life in measuring whether the assets are recoverable. In the event
such cash flows are not expected to be sufficient to recover the recorded asset
values, the assets are written down to their estimated fair value. Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair
value of asset less the cost to sell.




Recent accounting
pronouncements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements”.  The objective of SFAS No. 157 is to increase
consistency and comparability in fair value measurements and to expand
disclosures about fair value measurements.  SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements.  SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements and does not
require any new fair value measurements.  The provisions of SFAS No.
157 are effective for fair value measurements made in fiscal years beginning
after November 15, 2007.   In February 2008, the FASB issued
FASB Staff Position (“FSP”) 157-2,“Effective Date of FASB Statement
No. 157” (“FSP 157-2”), which delayed the
effective date of SFAS No. 157 for all non-financial assets and liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis, until fiscal years beginning after November 15,
2008.   The Company has not yet determined the impact that the
implementation of FSP 157-2 will have on our non-financial assets and
liabilities which are not recognized on a recurring basis; however, we do not
anticipate the adoption of this standard will have a material impact on its
consolidated financial position, results of operations or cash
flows.





In
December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for Registration Payment
Arrangements” (“FSP 00-19 -2”) which addresses accounting for
registration payment arrangements. FSP 00-19 -2 specifies that the contingent
obligation to make future payments or otherwise transfer consideration under a
registration payment arrangement, whether issued as a separate agreement or
included as a provision of a financial instrument or other agreement, should be
separately recognized and measured in accordance with SFAS No. 5, “Accounting
for Contingencies”. FSP 00-19 -2 further clarifies that a financial instrument
subject to a registration payment arrangement should be accounted for in
accordance with other applicable generally accepted accounting principles
without regard to the contingent obligation to transfer consideration pursuant
to the registration payment arrangement. For registration payment arrangements
and financial instruments subject to those arrangements that were entered into
prior to the issuance of EITF 00-19-2, this guidance shall be effective for
financial statements issued for fiscal years beginning after December 15, 2006
and interim periods within those fiscal years. The Company did not have a
material impact on its consolidated financial position, results of operations or
cash flows.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115” (“SFAS No. 159”).  SFAS No. 159 permits entities to choose
to measure many financial instruments and certain other items at fair
value.  Most of the provisions of SFAS No. 159 apply only to entities
that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments
in Debt and Equity Securities” applies to all entities with
available-for-sale and trading securities.  SFAS No. 159 is effective
as of the beginning of an entity’s first fiscal year that begins after November
15, 2007.  Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provision of SFAS No. 157, “Fair Value
Measurements”.  The adoption of SFAS No. 159 is not expected to
have a material impact on the Company’s consolidated financial position, results
of operations or cash flows.





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
(“SFAS No. 141(R)”), which establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill acquired in a
business combination. SFAS No. 141(R) is effective as of the beginning of the
first fiscal year beginning on or after December 15, 2008. Earlier adoption
is prohibited and the Company is currently evaluating the effect, if any that
the adoption will have on its consolidated financial position, results of
operations or cash flows.


9


In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in
Consolidated Financial Statements, an amendment of ARB No. 51”
(“SFAS No. 160”), which will change the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity within the consolidated balance sheets.
SFAS No. 160 is effective as of the beginning of the first fiscal year beginning
on or after December 15, 2008. Earlier adoption is prohibited and the
Company is currently evaluating the effect, if any that the adoption will have
on its consolidated financial position, results of operations or cash
flows.





In
June 2007, the Accounting Standards Executive Committee issued Statement of
Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide
Investment Companies and Accounting by Parent Companies and Equity Method
Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1
provides guidance for determining whether an entity is within the scope of the
AICPA Audit and Accounting Guide Investment Companies (the “Audit Guide”). SOP
07-1 was originally determined to be effective for fiscal years beginning on or
after December 15, 2007, however, on February 6, 2008, FASB issued a
final Staff Position indefinitely deferring the effective date and prohibiting
early adoption of SOP 07-1 while addressing implementation issues.





In June
2007, the FASB ratified the consensus in EITF Issue No. 07-3, “Accounting
for Nonrefundable Advance Payments for Goods or Services to be Used in Future
Research and Development Activities” (EITF 07-3), which requires that
nonrefundable advance payments for goods or services that will be used or
rendered for future research and development (R&D) activities be deferred
and amortized over the period that the goods are delivered or the related
services are performed, subject to an assessment of recoverability.
EITF 07-3 will be effective for fiscal years beginning after
December 15, 2007. The Company does not expect that the adoption of
EITF 07-3 will have a material impact on its consolidated financial
position, results of operations or cash flows.





In
December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
“Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1
defines collaborative arrangements and requires collaborators to present the
result of activities for which they act as the principal on a gross basis and
report any payments received from (made to) the other collaborators based on
other applicable authoritative accounting literature, and in the absence of
other applicable authoritative literature, on a reasonable, rational and
consistent accounting policy is to be elected. EITF 07-1 also provides for
disclosures regarding the nature and purpose of the arrangement, the entity’s
rights and obligations, the accounting policy for the arrangement and the income
statement classification and amounts arising from the agreement. EITF 07-1
will be effective for fiscal years beginning after December 15, 2008, which
will be the Company’s fiscal year 2009, and will be applied as a change in
accounting principle retrospectively for all collaborative arrangements existing
as of the effective date. The Company has not yet evaluated the potential impact
of adopting EITF 07-1 on its consolidated financial position, results of
operations or cash flows.





In March
2008, the FASB” issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment to FASB Statement No.
133” (“SFAS No. 161”).  SFAS No. 161 is
intended to improve financial standards for derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance, and cash flows.  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 SFAS No. 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.  It is effective for
financial statements issued for fiscal years beginning after November 15, 2008,
with early adoption encouraged.  The Company is currently evaluating
the impact of SFAS No. 161, if any, will have on its consolidated financial
position, results of operations or cash flows.





In April
2008, the FASB issued FSP No. SFAS No. 142-3,“Determination of the Useful Life of
Intangible Assets”. This FSP amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under SFAS No. 142,“Goodwill and Other Intangible
Assets”.  The Company is required to adopt FSP 142-3 on
September 1, 2009, earlier adoption is prohibited.  The guidance in
FSP 142-3 for determining the useful life of a recognized intangible asset shall
be applied prospectively to intangible assets acquired after adoption, and the
disclosure requirements shall be applied prospectively to all intangible assets
recognized as of, and subsequent to, adoption.  The Company is
currently evaluating the impact of FSP 142-3 on its consolidated financial
position, results of operations or cash flows.





In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS No. 162").  SFAS No.
162 identifies the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles (the GAAP hierarchy).  SFAS No.
162 will become effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to
AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles."  The Company does not
expect the adoption of SFAS No. 162 to have a material effect on its
consolidated financial position, results of operations or cash
flows.





In May
2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1, "Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)" ("FSP APB 14-1").   FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled
in cash (or other assets) on conversion to separately account for the liability
(debt) and equity (conversion option) components of the instrument in a manner
that reflects the issuer's non-convertible debt borrowing rate.  FSP
APB 14-1 is effective for fiscal years beginning after December 15,
2008 on a retroactive basis. The Company is currently evaluating the
potential impact, if any, of the adoption of FSP APB 14-1 on its
consolidated financial position, results of operations or cash
flows.


10


In
June 2008, the FASB issued FSP Emerging Issues Task Force
(EITF) No. 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities.” Under the FSP, unvested share-based payment awards that
contain rights to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two-class method of
computing EPS. The FSP is effective for fiscal years beginning after
December 15, 2008, and interim periods within those years. The Company does
not expect the adoption of FSP EITF No. 03-6-1 to have a material effect on
its consolidated financial position, results of  operations or cash
flows.


Going Concern
Matters
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As shown
in the accompanying unaudited condensed consolidated financial statements, the
Company incurred a net loss available to common stockholders of $1,171,802 and
$484,611 for the three-month period ended November 30, 2008 and 2007,
respectively. Additionally, the Company has negative cash flows from operations
of $761,392 for the three-month period ended November 30, 2008 and an
accumulated deficit of $11,576,433 as of November 30, 2008. These factors among
others may indicate that the Company may be unable to continue as a going
concern.
 
 The
Company’s continued existence is dependent upon management’s ability to develop
profitable operations and resolve its liquidity problems. The accompanying
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
  The
Company is actively pursuing additional equity financing through discussions
with investment bankers and private investors.
 
 The
Company is pursuing strategic partnership relationships to provide IT services
to National accounts that would drive revenue across their entire
network.  Pilot programs have been launched and are in the planning
stages and may translate into permanent relationships. While management is
confident that this additional line of revenue will ultimately come to fruition,
however, there can be no assurance that the Company will be successful in its
effort to secure these relationships.




Item
4T. Controls and Procedures





Evaluation of Disclosure
Controls and Procedures





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under the Exchange
Act is accumulated and communicated to our management, including our principal
executive and financial officers, as appropriate to allow timely decisions
regarding required disclosure.





Our
management, under the supervision and with the participation of our Chief
Executive Officer, Mr. Richard T. Cole, our Executive VP and Chief Operating
Officer, Mr. Richard G. Artese and our Vice-President of Finance, Mr. Keith W.
Wesp, carried out an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) of the Exchange Act) as of November 30, 2008. Based on our internal
evaluation, our Chief Executive Officer, Chief Operating Officer and
Vice-President of Finance concluded that our disclosure controls and procedures
were effective as of November 30, 2008.





Limitations on Effectiveness
of Controls and Procedures





Our
management, including our Chief Executive Officer, Chief Operating Officer and
Vice-President of Finance, does not expect that our disclosure controls and
procedures or our internal controls will prevent all errors and all fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include, but are not limited to, the
realities that judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of
future events and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.





Changes in Internal Control
over Financial Reporting





During
our year end reporting management conducted an  evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as
of August 30, 2008. Based upon that evaluation  of our internal
control over financial reporting as described below under “Management’s Report
on Internal Control over Financial Reporting,” the Chief Executive Officer,
Chief Operating Officer and Vice-President of Finance concluded that our
disclosure controls and procedures were ineffective as of the year end report
due to insufficient resources within the finance department. Management has
rectified the identified problems by recruiting and hiring additional financial
and accounting personnel to prepare and analyze financial information in a
timely manner and to allow review and on-going monitoring and enhancement of our
controls.


11




PART
II


OTHER
INFORMATION




Item
1. Legal Proceedings




The
Company is subject to legal proceedings and claims, which arise in the ordinary
course of its business.  Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters should not have a material adverse effect on its financial position,
results of operations or liquidity.





Item
1A. Risk Factors





None.





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





On
September 30, 2008, in the first traunch of a private placement offering, we
sold to accredited investors a total of 24.75 units, consisting of 824,997
shares of common stock and warrants to purchase 412,495 shares of common stock,
at an aggregate offering price of $495,000. Each share of common stock issued
was sold as part of a unit that also includes a warrant to purchase one-half
share of common stock exercisable at $0.75 per share, for a period ending on the
fifth anniversary of the issuance of the warrants. We paid the placement agent
for the offering of these units’ aggregate placement fees of $49,500. The
placement agent also received warrants to purchase a total of 65,600 shares of
common stock, exercisable at $0.75 per share, for a period ending on the fifth
anniversary of the final closing of the offering.





On
October 15, 2008, October 16, 2008 and October 23, 2008, we closed on three
additional traunches of a private placement offering (the “October Private
Placement”) in which we sold to accredited investors a total of 8 units of the
October Private Placement, consisting of 444,354 shares of common stock and
warrants to purchase 222,175 shares of common stock, at an aggregate offering
price of $160,000. Each share of common stock issued was sold as part of a unit
that also includes a warrant to purchase one-half share of common stock
exercisable at a price between $0.37 and $0.46 per share, for a period
ending on the fifth anniversary of the issuance of the warrants. We paid the
placement agent for the offering of these units’ aggregate placement fees of
$16,000. The placement agent also received warrants to purchase a total of
35,546 shares of common stock, exercisable for a period ending on the fifth
anniversary of the final closing of the offering.





On
November 5, 2008, we closed on an additional traunch of a private placement
offering in which we sold to accredited investors a total of 1 unit of the
November Private Placement, consisting of 58,823 shares of common stock and
warrants to purchase 29,411 shares of common stock, at an aggregate offering
price of $20,000. Each share of common stock issued was sold as part of a unit
that also includes a warrant to purchase one-half share of common stock
exercisable at $0.42 per share, for a period ending on the fifth anniversary of
the issuance of the warrants. The Company paid the placement agent for the
offering of these units’ aggregate placement fees of $2,000. The placement agent
also received warrants to purchase a total of 4,705 shares of common stock,
exercisable at $0.42 per share, for a period ending on the fifth anniversary of
the final closing of the offering.





In
November 26, 2008, we issued warrants to purchase an aggregate of 764,706 shares
of common stock in connection with the issuance of promissory notes to two of
its officers.  The warrants are exercisable for five years at $0.34
per share.





Item 3. Defaults Upon Senior
Securities





None





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





None





Item
5. Other Information





None


12


Item
6. Exhibits




Exhibit No.
                  
                  Description31.1*
                  
                  Section
      302 Certification by the Principal Executive Officer31.2*
                  
                  Section
      302 Certification by the Principal Financial Officer32.1*
                  
                  Section
      906 Certification by the Principal Executive Officer and the Principal
      Financial Officer





* Filed
herewith





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 thereunto
duly authorized.




GEEKS
      ON CALL HOLDINGS, INC.Date: January
      16, 2009
                  By:
                  /s/ Richard
      T. ColeRichard
      T. ColeChief
      Executive Officer(Principal
      Executive Officer)Date: January
      16, 2009
                  By:
                  /s/ Keith
      W. WespKeith
      WespVice-President
      of Finance(Principal
      Financial
Officer)


13