UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K




(MARK
ONE)




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




For
the fiscal year ended December 31, 2008




OR




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


FOR
THE TRANSITION PERIOD FROM ___________ TO _____________




Commission file number
000-33033




hereUare,
Inc.


(Name of
registrant in its charter)





Delaware
                  
                  02-0575232(State
      or Other Jurisdiction of Incorporation or Organization)
                  
                  (I.R.S.
      Employer Identification
Number)




228 Hamilton Ave.,
3rdfloor


Palo Alto, CA
94301


(Address
of Principal Executive Offices including Zip Code)




(650)
798-5288


(Registrant's
Telephone Number, Including Area Code)




Securities
registered pursuant to Section 12(b) of the Act: None




Securities
registered pursuant to Section 12(g) of the Act:


Common Stock, $0.0001 par
value




(Title of
Class)




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.    ̈
Yes         x
No




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.   ̈
Yes         x
No




Indicate
by check mark whether the registration (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.     xYes ̈No




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.      ̈




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




Large
accelerated filer  ̈                                                                                                                      Accelerated
filer  ̈




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




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




Aggregate
market value of common stock held by non-affiliates at March 31, 2009:  $
123,819,237 (see Note A)




Number of
shares of common stock outstanding at March
31, 2009:34,438,313




DOCUMENTS
INCORPORATED BY REFERENCE:   None





Note A:
Based upon the $9.00 price in the most recent transaction involving the sale of
the Company's common stock as there is no active trading market.




Total
Number of Pages: 65


Exhibit
Index is on Page 62









HEREUARE, 
INC.




2008
ANNUAL REPORT ON FORM 10-K




INDEX




Part
      I.
                      
                      PageItem 1.
                      Business
                      3Item 2.
                      Description
      of Property
                      23Item 3.
                      Legal
      Proceedings
                      23Item 4.
                      Submission
      of Matters to a Vote of Security Holders
                      23Part
      II.Item 5.
                      Market
      for Registrant’s Common Equity, Related Stockholder Matters, and Issuer
      Purchases of Equity Securities
                      24Item 6.
                      Selected
      Financial Data
                      24Item 7.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      25Item 8.
                      Financial
      Statements and Supplementary Data
                      30Item 9.
                      Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure
                      51Item 9A(T).
                      Controls
      and Procedures
                      52Item 9B.
                      Other
      Information
                      53Part
      III.Item 10.
                      Directors,
      Executive Officers and Corporate Governance
                      53Item 11.
                      Executive
      Compensation
                      56Item 12.
                      Security
      Ownership of Certain Beneficial Owners and Management
                      57Item 13.
                      Certain
      Relationships and Related Transactions, and Director
      Independence
                      60Item 14.
                      Principal
      Accounting Fees and Services
                      60Item 15.
                      Exhibits,
      Financial Statement Schedule
                      60Signatures
                      
                      61Exhibits
      Index
                      
                      62Certifications




2




PART
I




Our
disclosure and analysis in this report contains forward-looking statements. When
used in this discussion, the words "believes," "anticipates" and "intends" and
similar expressions are intended to identify forward-looking statements, but the
absence of these words does not necessarily mean that a statement is not forward
looking. Forward-looking statements include, but are not limited to, statements
about our product development, product release, marketing, fundraising and
expansion plans, and our objectives, expectations, intentions, and target
markets, and are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated in these forward-looking
statements for many reasons, including the factors described under "Description
of Business—Risk Factors Affecting Future Performance" and elsewhere in this
report. We undertake no obligation to publicly release any revisions to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of anticipated events.
Readers are urged, however, to review the factors and risks we describe in
reports we file from time to time with the Securities and Exchange Commission,
which may be accessed at the Commission's website at www.sec.gov
..




Item
1. Business.




General




hereUare,
Inc. ("hereUare", "HUA", or "the Company"), formerly known as PeopleNet
International Corporation, is a Delaware corporation headquartered in Santa
Clara, California. hereUare was incorporated on February 5, 1997 under the
original name of American Champion Media, Inc. hereUare was formed by, and had
been a wholly owned subsidiary of Pacific Systems Control Technology, Inc.,
formerly known as American Champion Entertainment, Inc., a Delaware corporation.
The board of directors of Pacific Systems determined that it was in the
stockholders' best interest to separate the two companies and allow them to
operate independently. Through a spin-off transaction on February 8, 2002,
hereUare became an independent entity and Pacific Systems distributed its shares
of hereUare to the stockholders of Pacific Systems as of the record date of
January 16, 2002. The securities of hereUare are not currently traded on any
market.




On
September 22, 2006, the Company acquired hereUare Communications, Inc., a
Delaware corporation, by reverse merger. Details of the acquisition are
available on the Company's Current Report on Form 8-K dated September 22, 2006,
as filed with the SEC on September 28, 2006, as amended by Form 8-K/A filed on
December 8, 2006. On March 26, 2007, the Company changed its name from PeopleNet
International Corporation to hereUare, Inc.




Discontinued
Business




In 2001
and 2002, we licensed and then purchased a safe web browser software for
children. We evaluated this asset at December 31, 2003 and determined that this
asset had been impaired and was of no value, based upon the fair market value of
similar assets.  We recorded an impairment expense equal to the remaining
book value of this asset.




In 2002
we purchased all rights relating to the intellectual property of a business
communication software package. We evaluated this asset at December 31, 2003 and
determined that this asset has been impaired and was of no value, based upon the
fair market value of similar assets. We recorded an impairment expense equal to
the remaining book value of this asset.




3




Business
Overview




hereUare,
Inc. ("hereUare," "HUA," or "the Company") is a diversified technology company
developing Internet software and telecom solutions. The Company's key products
deliver a simple, yet powerful platform, which can be uniquely tailored to
different Internet needs or telecom styles.  The Company's products provide
a unique online platform for users, from individuals, through small & medium
businesses to larger corporate enterprises, with a personalized, all-in-one
web-based solution that aggregates any user's needs, from any location, with the
use of any Internet device. The innovative hereUare platform and accompanying
solutions are a result of seven years of comprehensive research and development
packaged into a portfolio of products, some of which utilize pioneering and
involved patent pending technologies that may drastically enhance a user's
Internet experience.




Different
from many Internet companies, hereUare approaches the online market and wireless
communications with a holistic view that focuses on daily usage patterns. 
hereUare's integrated product suite consists of five primary applications as
described below, and serves five primary Internet revenue segments: a)
Consumers, b) Retailers, c) Advertisers, d) Small & Medium Businesses
("SMBs"), and e) Larger Enterprises.




hereUare
applications:




·
            hereUareEngine, Search - a powerful and
      intelligent search tool that efficiently delivers applicable information
      from the Internet in a simple and precise presentation through its unique
      hereUare patent pending "relevancy search bar".  hereUareEngine is
      capable of searching over 10 billion indexed pages, providing powerful
      information and is designed for all types of users from novice to
      expert.  hereUare had indexed 10 billion pages but discovered
      that a majority of the indexed pages were duplicates or contained SPAM .
      hereUare has developed a methodology to filter pages as they are indexed
      in order to help avoid (but not entirely eliminate) duplicate pages and
      SPAM.  hereUare is the process of indexing pages using this
      filter and thus has not yet achieved its goal of a 10 billion page index
      but plans to do so during 2009, although no assurance of success can be
      given.


·
            hereUareClassifies,
      Classified
      Advertising - our centralized online marketplace for merchandise,
      jobs, real estate, automotive, etc. in local communities around the world
      for the buying and selling of
items.


·
            hereUareMessage, e-Messaging &
      Groupware - a HUA web-based office tool that allows for group
      collaboration through emails, group emails, and shared calendars and
      tasks, using a concentrated common interfaced network and
      database.




Additionally,
HUA has developed and plans to launch “hereUareVoice, VoIP”,
a peer-to-peer Internet voice connection which would use advanced patent-pending
HUA engineered "click-to-call" and "follow-me-everywhere" custom calling
features.  This application’s cost-structure, primarily inter-connects
with telephone and cell phone providers, has made it fiscally unfeasible for HUA
at this time, but the Company plans to launch this application in the
future.




4




Every HUA
application is interconnected through the interchangeable functionalities of
each application. For
example, a user can click a phone number from a website generated from our hereUareEngine search to
order a pizza through our hereUareVoice VoIP,when
released, or conversely click a phone numbr from a user’s hereUareMessage contact list
to place a call.  Both functions are enabled without the requirement
of a user to insert user data or information.  This level of
seamlessness is designed to increase user efficiency, while greatly enhancing
the overall ease-of-use for a user.  hereUare believes there is a
direct correlation between product integration and the success of a business
that relies on the Internet as its point of sale.




Our
Mission




hereUare
is committed to transforming communication between people, markets and
communities who use them. hereUare is dedicated to designing user-friendly
applications and collaborative interactive technology that includes our unique
search, messaging and voice applications to facilitate mobility for online user
convergence across the globe.




The
hereUare team understands the broad global and local connectivity that is
required to conduct business competitively and effectively; as such we pride
ourselves on providing one seamless, easy-to-use platform that limitlessly
expands the communication reach of enterprises, businesses and individuals in
the 21st century.




Through
the intuitive integration of various technology channels, hereUare’s goal is to
place an all-in-one communication solution at the fingertips of its users. It is
our mission to build useful online applications that collaborate with any
device, anywhere, that meet and exceed the far-reaching expectations of our
diverse users.




HUA
Applications and Solutions




As a
daily Web destination, hereUare intends to offer a Product Suite of four key
revenue producing applications.  Providing a valuable sense of the style
that is illustrated in the design of our applications, our desire is to present
a warm and welcoming presence for any community on the Internet today. It is our
intention to continue developing unique applications that provide daily
relevance to any user, anytime whether it applies to our search, VoIP, or
messaging technology. The direction of the Company over the past several years
is to place a premium on quick, easy and efficient online tools that enhance the
online experience for any user.




hereUareEngine
Search




The
hereUareEngine search solution stems from two primary design philosophies: 1) a
"green" search engine that is environmental responsible and 2) a search style
that's easily navigated regardless of the user's experience level.  This
solution offers comprehensive and relevant search results which will eventually
access over 10 billion indexed pages.  The required software that powers
hereUareEngine search uses less hardware than typically used by our competitors
to search indexed pages; hence, the "green" search solution which uses less
energy. This equates to a lower capital requirement and operating cost; one of
the product's key competitive advantages. In addition to the "green" search
engine, hereUare offers a search style that categorizes the keyword search to
allow further refinement without requiring the user to use a sophisticated
Boolean search approach.




5




hereUareEngine
Search features:




·
            Dynamically
      generated graphical indicators of relevant content - HUA provides a unique
      way to indicate the level of relevancy of a search result. This allows the
      user to easily identify the most relevant search data results rather than
      reading a long list of content that is potentially not of interest or
      relevant to the user.


·
            Large
      search library – will consist of over 10 billion indexed pages once HUA
      completes the indexing process.  hereUare had believed it
      already had indexed over 10 billion pages but discovered that a majority
      of the pages were duplications or contained spam and as a result, hereUare
      has less than one billion indexed pages currently.  Our hereUare
      Engine search product requires us to increase the number of indexed pages
      to over 10 billion in order to be effective.  As a result, we
      have developed and implemented some new technologies in order to eliminate
      the page duplications and spam that existed in our prior number of indexed
      pages and we are crawling or spidering the web in order to increase the
      number of indexed pages.  We are not planning to offer our
      hereUare search engine product until after we have indexed close to 10
      billion pages for our hereUare Engine software to search. When complete,
      this will be an entry barrier to any new search engine.  It is
      time-consuming and expensive to build a library of billions of indexed
      pages for a competitive result and there can be no assurance of when hUa
      will have a complete library.


·
            More
      efficient scaling algorithm - requiring significantly less servers
      compared to the competition in the market when indexing the same number of
      pages.  This is achieved through advanced proprietary software and
      indexing algorithms.


·
            High
      relevancy - supports sophisticated search queries allowing nested Boolean
      format for experts, and also supports simple step-by-step searches,
      leading novices through categories to the most relevant information they
      seek.


·
            Search
      query – hereUare Engine query results include all common formats such as
      PDF, Microsoft Word, Power Point, Excel and Postscript
      documents.




hereUareEngine
search engine is supported by an advertisement server which is designed to
provide the Company with a powerful revenue-generating source. With
hereUareEngine acting as the backbone of the HUA product suite, particularly
hereUareClassifies, the Company is poised to offer effective methods for
advertisers to narrowly target their online marketing campaigns across
hereUare's product suite and applications.




hereUareVoice
VoIP




The
hereUareVoice Voice over Internet Protocol (VoIP) telephony solution will offer
a peer-to-peer (P2P) connection, delivering high quality audio while requiring
minimal bandwidth.  The service will work over almost any Internet
connection, even at dial-up access speeds.  The hereUareVoice VoIP service
will be managed through our HUA engineered 'Softphone' a multi-media user
interface that works in association with our VoIP technology.  It serves as
a dialing pad for initiating calls directly from a PC to any receiving device
over the Internet. The Softphone applet is downloaded from the hereUare website
as a stand-alone onscreen phone.




6




For
versatility, the Softphone supports an external phone or headset connected to a
computer for dialing and receiving calls.  The Softphone is designed to be
a multi-media communication portal, which when expanded incorporates and
connects to –hereUareEngine and hereUareMessage.




hereUare
does not intend to charge customers monthly fees or connection charges for
hereUareVoice VoIP, or to require a user contract for VoIP service.  Calls
made between two hereUareVoice connections will be free from anywhere in the
world. For calls made outside of the hereUare community, hereUare will offer one
of the most competitive international rates on the market.  However,
the cost of these inter-connects is prohibitive for the Company at this time and
will remain until the Company has substantial cash on hand.  Yet, the
Company believes that being able to offer such interconnects is essential to the
success of hereUareVoice.  Therefore, the Company does not currently
plan to be offering this product except on a limited basis until after the
Company has raised approximately one million dollars in financing.




Planned
hereUareVoice VoIP Features:




·
            Peer-to-peer
      connection - resulting in low voice
delay.


·
            Direct
      Inward Dialing (DID) - offering maximum privacy by allowing users from
      outside the hereUare network to reach a hereUare VoIP user without the
      need to give out any personal
number.


·
            Follow-me-everywhere
      call forwarding capability - allowing users to direct calls to their land
      or mobile number, even when the computer is not
  online.


·
            Click-to-Call
      - a patent-pending HUA engineered technology that is capable of detecting
      a phone number in a web browser and allowing the hereUareVoice or VoIP
      user to initiate a call by simply clicking on the
  number.




The
company holds an International FCC 214 license and is telecom compliant for all
tariff requirements in the United States.




Click-to-Call
and Pay-per-Call Market Opportunity




Although
the Click-to-Call (CTC) will be a feature built into our hereUareVoice solution,
the application will be powerful enough to stand on its own as a unique online
downloadable browser tool.  hereUare's CTC will take consumers directly to
advertisers and retailers in one step by clicking on the displayed phone number
resulting from a search or an advertisement.  The hereUare patent-pending
CTC technology will immediately connect users to their selected destination from
any web page. This feature will take targeted marketing campaigns to the next
level by providing a convenient way for impulse buyers and advertisers to
achieve immediate satisfaction.




7




The CTC
feature will allow hereUare to be innovative with its business proposal to
advertisers by allowing a "pay-per-call" model.  According to this model,
the advertisers will pay only when a customer initiates a call.  The
billing will be reversed so that the caller does not pay, rather the advertiser
subsidizes the cost of the call. Businesses will greatly benefit from this model
as it minimizes the investment risk for their advertisement dollars and provides
a powerful way to capture their audience.  Consumers will benefit from this
convenience, while at the same time their privacy is protected, because their
home numbers and personal information are shielded.  Businesses are able to
self-manage the tools such that they do their own "auditing" of the efficacy of
the pay-per-call advertising; thus, they improve the return on investment of
their online marketing campaigns. The hereUare CTC model will eliminate the
click fraud experienced by many advertisers.  By including "pay-per-call"
in its service offerings, hereUare expects to be able to increase VoIP and
advertising revenue, plus increase market shares through push and pull
marketing.




Studies
by the Kelsey Group indicate that the response rate for telephone-based ads is
8%, compared with 3% for Pay-per-Click ads.  hereUare's CTC feature has the
potential, if properly positioned and successful, to capture a significant share
of this new emerging market.




hereUareClassifies
Classified Advertising




hereUareClassifies
allows consumers and businesses to buy, sell, advertise, and connect to the
discussion forums based on topics like business, relationships, entertainment,
and shopping. hereUareClassifies provides advertisers with simple uploading for
their listings through the use of pictures and step-by-step descriptions that
allow users to instantly start utilizing the services.




hereUareClassifies
features:




·
            Multiple
      options - from a simple basic service plan to a premium
      package


·
            Self-managed
      listings - with simple step-by-step walkthrough and visual ad
      displays


·
            Priority
      Ranking - options which keep an ad on the top of the category in which it
      is posted to improve response and generate more advertising
      exposure


·
            Differentiating
      capability - allow listings with a variety of font options for ad
      text


·
            Sponsored
      Links - in any category, help businesses stand
  out




While the
main portion of the hereUareClassifies product has been developed, further
testing is required and launch is currently planned during the second quarter of
2009 provided the required testing is successful and the Company raises adequare
financing.




8




hereUareMessage
e-Messaging & Groupware




hereUareMessage
offers a powerful and simple solution for messaging with collaborative
applications for the SMB market and email hosting business.  The
application is a web-based design which provides SMBs with a collaborative tool
to support multiple office locations in a shared-management environment. 
The web-based messaging solution reduces IT overhead for
businesses.




hereUareMessage
provides a user-friendly graphical web-based interface with instant access to
information. Email messages, contacts, appointments and tasks are clearly
arranged and easy to manage from almost any location, anywhere. Users are
provided with a choice to assign tasks, appointments and information as private
and/or public for others to view.




In
addition to providing publicly accessible basic features free of charge that are
comparable to the largest email systems available from market leaders such as
Yahoo and Google, our hereUareMessage system will also provide paid solutions
for more demanding users and SMBs such as private domain names, file sharing,
and calendar sharing.




The
Company believes that hereUareMessage is ready for release and once the Company
raises approximately two hundred thousand dollars, the Company intends to
recruit and retain a sales team and release hereUareMessage.




The
Market for HUA Applications




Based on
the Internet advertising model, Internet Search is the most recognized revenue
generating application.  Search revenue is primarily fueled by targeted ads
and revenue from "pay for Click".  The online classified market continues
to grow as users rapidly migrate to the Internet as their source for news,
research, and commerce. As the number of consumers that visit the Internet
increases, advertisers have followed suit, thus shifting a greater proportion of
their ad dollars to the Internet from the older forms of media. It is estimated
that newspaper classified revenues have fallen by as much as 40% recently in
certain categories.




Messaging,
also referred to as Groupware or Collaborative software, has been widely
accepted by Internet users and is now expanding to serve SMBs.  As virtual
offices are established in dispersed locations to address a global work
environment, the acceptance of a centralized web-based office tool is expected
to create a new category of users for an old application: email. SMBs, too small
to create and maintain their own communication networks, will give new life to
an application that the individual user now expects for free.




VoIP
technology has advanced drastically in recent years as voice quality and call
stability has improved. This trend will lead to greater market opportunities as
individual consumers and businesses accept the technology as a low cost option
to traditional telecom solutions.   This application is in the initial
stages of growth and is expected to continue to expand in worldwide acceptance
as VoIP technology is more readily understood and accepted




9




HUA
Marketing Plan




Our
initial marketing strategy is to market hereUare message to the SMB
market.  This approach focuses on both on direct sales and also
channel development with value-added resellers (VARs) and distributors who will
offer our hereUareMessage messaging product line to SMBs and
enterprises.  If we are able to gain traction with this product, and
if we are able to complete the hereUareClassifies product and index 10 billion
pages for the hereUareSearch product, the Company intends to release these two
products along with hereUareVoice, and thereby market a suite of interrelated
products.




For this
suite, our planned marketing strategy approaches the market from three different
perspectives, with the primary goal of driving adoption of hereUare's
applications. Our first approach would focus on building brand awareness
primarily through online advertising and eyeball acquisition of carefully placed
and strategically located ads and links that draw attention to the hereUare
Search page that will be the Company's landing page. The HUA marketing team has
identified multiple sites as co-branding partners which will host HUA search and
links. As a central destination web page, the HUA landing page is designed to
lead users into the company's other applications.




The
second prong for marketing once our product suite is available would be an
active public relations campaign where the Company and its applications are
promoted through a viral marketing approach that attract interested users
through word of mouth. Active viral marketing or viral advertising refers to
marketing techniques that use pre-existing social networks to produce or
increase in brand awareness, through a self-replicating or viral process using
social connections and word-of-mouth or online Internet dialogue to enhance the
power of online networking. Viral marketing is a unique online phenomenon that
facilitates and encourages people to pass along fresh ideas, concepts and
products, and therefore market a message voluntarily. Viral promotions may take
the form of video clips, interactive games, images, or emails and have proven
very effective in recent years, as proven by the success of YouTube, MySpace and
Facebook. Some data suggest that a satisfied customer tells an average of three
people about a product or service he/she likes, and eleven people about a
product or service which he/she did not like.  Viral marketing is based on
this natural human behavior, and has been very useful to the online community in
promoting ideas, concepts and products.




Our third
approach for marketing once the product suite is available would center around
the establishment of relationships with large communities for positioning HUA as
the default user gateway or portal to the Internet.  As described below,
HUA had identified large communities of Internet users among unique demographic
groups in the USA and in Asia.




10




hereUare
plans to jumpstart the viral marketing effect with identified vertical market
segments and partners. We are attempting to establish relationships with
community groups in the U.S., Vietnam and China. These relationships, if
established, can give us access to user gateways of a large number of users that
play an essential role in the success of our commercial launch for our
hereUareEngine, hereUareVoice, and hereUareMessage applications.  Our goal
is to establish these relationships on the basis of hereUare being the default
user gateway.  We would direct our marketing programs toward a vertical
focus through promotion with sponsorships, radio stations, bulletin board
groups, and community events. These relationships could drive traffic through
HUA products, and the strategy is designed to attract eyeballs to the hereUare
website; this could enable a network effect that stems from self-proliferating
community behavior.




We plan
to employ both online and offline components in our sales-focused
campaign.  Online initiatives will include keyword advertisements, targeted
banner advertisements, email lists, and contextual text links.  Offline
campaigns will focus on direct marketing strategies that will include mailings
and inserts in relevant publications.  Our direct sales team will establish
channels with value-added resellers (VARs) and distributors to expand and
actively reach the enterprise market with our messaging (and eventually VoIP)
solutions.




International
Strategy




Currently,
the Company is not marketing its products outside the United
States.  However, uniquely positioned, hereUare's executive team has
established strong working relationships with the relevant branches of the
governments of Vietnam and China.  These relationships are critical to
entering the Asia market, where economies are projected to continue double digit
growth well into the next decade.  These relationships potentially are a
key competitive advantage for hereUare over competitors who face high barriers
of entry in these markets.




Vietnam
and China have historically had poor telecom infrastructure. The development and
establishment of VoIP as a communication alternative will meet the immediate
needs of many users that cannot afford traditional telecom infrastructure. 
The VoIP solution provides voice connectivity without the extra cost of data
infrastructure, while it provides greater access to telecom products without a
high termination fee.  With a communication infrastructure that is still
under developed in these countries, VoIP is an easy, cost-efficient solution. In
these countries, government approval is vital and necessary for rolling out and
distributing our VoIP product solution. The hereUareMessage e-messaging
application is another cost-effective solution to the communication problems
that continue to exist in these countries.  The hereUare messaging system
includes an email hosting solution that scales from small business to
governmental level usage.  This allows the government the flexibility to
support and control the development of communication tools in regions that lack
investment capital.




hereUare
presently has an office in Vietnam where it undertakes a substantial portion of
its engineering and operations activities.  In doing so in a location
with lower labor and overhead costs, hereUare has been able to reduce the costs
of such activities.




11




Branding
Strategy




The
Internet is a consumer market in which brand recognition is essential to any
viral marketing campaign for the attraction and retention of traffic. 
Therefore, hereUare has carefully studied and selected its brand and domain
name. Extensive focus group studies indicate that the hereUare name suggests and
promotes a central Internet destination that serves all the needs of the
user.  As a brand, the hereUare message delivers the company's mission as a
one-stop destination, where any device can be used, any where, any time.
"hereUare" is easily pronounced and understood by non-English speaking users,
which enhances its acceptance as a global brand. Generally speaking, the
Internet domain name has become a valuable commodity. As a result, it has become
a serious challenge to find a name that will resonate with consumers, while
serving as a company's mission. hereUare has overcome this challenge
successfully, with its easily understood name and products registered and
trademarked.




Online
the company plans to promote its brand through the use of sponsored links and
vertical event sponsorships.  As described in the Market Entry section
above, sponsorship of events in large communities similar to the Christian Life
Center mirrors the viral marketing effect and creates brand awareness. In
partnership or in a syndicated situation, the hereUare logo is to be used
followed by the powered by hereUare tagline.




Intellectual
Property




We rely
on a combination of patent, trademark, copyright, and trade secret laws in the
U.S. and other jurisdictions as well as confidentiality procedures and
contractual provisions to protect our proprietary technology and our brand. We
also enter into confidentiality and invention assignment agreements with our
employees and consultants and confidentiality agreements with other third
parties, and we rigorously control access to our proprietary technology. 
We license our search technology on a non-exclusive royalty-bearing basis; our
license expires, unless renewed by agreement with the licensor, in October 2016.
Trademarks which we own or license include "hereUare".




The
Company has been granted two US patents:




·
            Granted
      February 2006 - method and system for simulating multiple independent
      client devices in a wired or wireless
network;


·
            Granted
      February 2007 - system for distributed network authentication and access
      control.




The
Company has not included the use of the technology covered by these two patents
in its current plans.




We have
U.S. patents pending covering aspects of our hereUareEngine and hereUareVoice
applications, which we cannot be sure will be granted or if they are granted
will be valid and enforceable and of a scope to cover aspects of commercial
importance. We cannot predict whether the failure to obtain these patents or the
invalidation of any patents we obtain would result in the introduction of
competitive products which would adversely affect our future revenues. We
presently intend to pursue any infringement of patents which issue from these
applications either by litigation, arbitration, or negotiation. However, there
can be no assurance that any of our patents will be sufficiently broad in scope
to afford protection from products with comparable characteristics that may be
sold by competitors in the future. There also can be no assurance that the
validity of any patents actually granted will not be challenged.




12




Government
Regulation




Once we
begin to offer our services, we will be subject to a number of foreign and
domestic laws and regulations that affect companies conducting business on the
Internet.  In addition, laws and regulations relating to user privacy,
freedom of expression, content (including gambling and underage sexual
material), advertising, information security and intellectual property rights
are being debated and considered for adoption by many countries throughout the
world.  In the U.S., laws relating to the liability of providers of online
services for activities of their users and other third parties are currently
being tested by a number of claims, which include actions for defamation, libel,
invasion of privacy and other data protection claims, tort, unlawful activity,
copyright or trademark infringement and other theories based on the nature and
content of the materials searched, the ads posted or the content generated by
users. Certain foreign jurisdictions are also testing the liability of providers
of online services for activities of their users and other third parties. Any
court ruling that imposes liability on providers of online services for
activities of their users and other third parties could adversely impact our
business prospects. In addition, because our services may become accessible
worldwide, certain foreign jurisdictions may claim that we are required to
comply with their laws, even where we have no local entity, employees or
infrastructure.




Employees




As of
March 31, 2009, we have four
full-time employees.  In order
to conserve cash, thirteen employees in Vietnam have been put on leave without
pay.  Assuming the Company can raise the necessary financing, the
Company plans to re-hire them, perhaps as early as May 1, 2009, although no
assurance can be given.




Risk
Factors Affecting Future Performance.




We
lack revenue history and currently do not have a proven business model to
generate revenue.   Absent revenue, our business will
fail.




In the
past years, we have concentrated on developing our products and have not
generated significant revenues.  We have only recently begun testing our
products and services on a limited basis and have generated minimal
revenues.  There can be no assurance that as we roll-out our products, we
will be able to generate material revenues from them.  Many of our
services, such as search and VoIP,
have been historically offered free of charge to users, with companies depending
upon advertising to generate revenues.  There can be no assurance that we
will be able to persuade advertisers that it is cost effective for them to pay
us for advertising their products and services.  Even if we are successful
initially in generating advertising revenue, there can be no assurance that we
will be successful long-term.  hereUareMessage has not generated any
revenue to date and is the product from which we plan to receive most of our
revenue in the near-term.  Because we have no experience in selling
hereUareMessage, there can be no assurances that we will be successful in
generating revenue from it.




13




We
have never been and may never become profitable. We will need to be profitable
in order to succeed.




We have
never been profitable. In fact, during both fiscal 2007 and 2008, we were not
even able to operate with a gross profit. There can be no assurance that we will
ever generate a gross profit, much less and operating profit. Even if we achieve
profitability, there can be no assurance that we will be able to sustain
it.




We
expect to incur operating losses for the foreseeable future.




Some of
our products are still in the developmental stage, and prior to completing the
commercialization of our products, we anticipate that we may incur operating
expenses without realizing substantial revenues, for example while indexing 10
billion pages for hereUare Search.  We therefore expect to incur losses
into the foreseeable future.




If
we are unable to manage our projected growth, our prospects may be limited and
our potential for profitability may be adversely affected.




We intend
to expand our sales and marketing, and research and development programs. 
Rapid expansion may strain our managerial, financial and other resources. 
If we are unable to manage our projected growth, our business, operating results
and financial condition could be adversely affected.  Our systems,
procedures, controls and management resources also may not be adequate to
support our future operations.  We will need to continually improve our
operational, financial and other internal systems to manage our growth
effectively, and any failure to do so may lead to inefficiencies and
redundancies and result in reduced prospects for our company.




We
are materially dependent on acceptance of our products in development by our
target markets.  If our products, when commercially ready, are not
accepted, our revenues will be adversely affected and we may not be able to
generate revenue from these markets.




The
target markets for our technologies and products in development will principally
include consumers, retailers, advertisers, small to medium businesses, and
enterprises. If our products in development are not widely accepted by these
markets, we may not be able to generate sales of our products into these
markets.  Technology for the Internet evolve quickly as compared to other
industries, if technology evolves beyond the capabilities of our products, the
market may not accept our products.




14




Our
dependence on new products and enhancements to current products means that we
are dependent upon our research and development team for key components of our
platforms and delivery systems and technical or personnel issues could delay the
launch of our products and reduce acceptance rates of our products.




We depend
on our research and development department for the delivery of components
integral to our systems.  Our reliance on these teams creates risks related
to our potential inability to launch our systems.  Specifically, we depend
or may in the future depend on these teams to write software code to power our
systems or to help implement them, such as indexing ten billion pages for
hereUareSearch.  Any interruption of our technology development could
significantly delay the introduction or update our products and have a material
adverse effect on our revenues, profitability and financial condition. Within
the last year we have abandoned two products: OneBizDirectory (a web-based
yellow pages) and OneUniverse (a social networking platform), in part because of
team issues and in part due to market conditions.  There can be no
assurance that we will be able to continue with our new product
development  and the enhancement of our current products and failure
to do so may requires us to abandon additional products.




Defects
in our systems could reduce demand for our products and result in delays in
market acceptance and injury to our reputation.




Complex
software systems and technologies used in our products may contain undetected
defects that are subsequently discovered at any point in the lifecycle of our
products.  Defects in our products may result in a loss of sales, delay in
market acceptance, loss of opportunity or other economic loss to our customers,
and injury to our reputation and increased costs to remedy interruptions in our
service or products.




We
depend on our technology and products which incorporate our technology. 
The loss of access to this technology as a result of intellectual property
claims or otherwise would terminate or delay the further development of our
products, injure our reputation or otherwise impair our viability as a
company.




We rely
on technologies that we acquired or developed through our proprietary research
and development efforts.  The loss of these technologies for any reason
would seriously impair our business and future viability.  If we are
required to enter into license agreements with third parties for replacement
technologies, and assuming such licenses are even available to us, we could be
subject to high royalty payments.  In addition, any defects in our
technology or any technology we may license in the future could prevent the
implementation or impair the functionality of our products, delay new product
introductions or injure our reputation and results of
operations.




We
may be unable to adapt or upgrade our technologies and products as the markets
in which we compete evolve, which would leave us at a significant competitive
disadvantage.




The
Internet and online marketplace is rapidly evolving as new technologies are
developed to create unforeseen needs.  We may be unable to adapt or upgrade
our technologies, or otherwise invent and develop new technologies, to meet
theses competitive technologies. If we cannot develop new more sophisticated or
advanced technologies and systems, or interface with newly developed
technologies from our competitors our business could suffer serious harm to its
reputation and could negatively impact our results of operations.




15




We
have few capital resources and will be dependent upon future financing to
generate the cash necessary to operate our business. Should we fail to raise
such financing, we may be forced to cease operations.




As of
December 31, 2008 we had cash of only $6,900 and working capital of ($835,625).
Historically, we relied on funds raised from private sale of our common stock to
accredited investors and were only able to support our small operation and
development of our technology.  Although we are currently seeking
substantial financing to launch our products and services and to pay down our
third party accounts payable and accrued expenses of $482,403 as of December 31,
2008, the loss we incurred during the first quarter of 2009, and our debt to
related parties ($309,070 as of December 31, 2008), there is no assurance that
we will be successful in raising the funds necessary on favorable terms. 
Management remains doubtful whether enough revenues can be generated in the near
term to sustain our operations and intends to seek substantial funding for
introducing and marketing our suite of software products. Otherwise, we will not
be able to introduce them in a large-scale manner and may have to scale down or
cease our operations.  In the event that financing activities cannot
generate adequate funds to launch our marketing efforts, we intend to curtail
our operations until such funds are available. Although the Company continues to
seek financing to support our working capital needs, we have no assurance that
we will be successful in raising the funds required.  In the event that the
Company is not successful in generating sufficient capital resources on terms
acceptable to us, there could be a material adverse effect on our business,
results of operations, liquidity, and financial condition.




We
will need to raise additional capital, which will be dilutive to our current
shareholders.




We will
need to raise additional funds in order to advance our business plan, and to
carry out a full scale commercialization of our products. To the extent we need
to raise additional capital, we may do so in the near future, if conditions in
the markets are favorable.  If and when we achieve initial market
acceptance our technologies and products, we may desire to attempt to accelerate
our growth to take advantage of increasing demand and raise additional capital
at that time as well. Any additional capital could take the form of equity or
debt financing. In addition, any future equity financing will be dilutive to
shareholders.




16




We
face significant competition from large-scale Internet content, product and
service aggregators, principally Google, Microsoft and AOL.




We face
significant competition from companies, principally Google, Microsoft and AOL,
that have aggregated a variety of Internet products, services and content in a
manner similar to ours. These companies are in dominant positions in the
Internet service industry and have well established relationships with online
advertisers. Their strength may adversely affect our ability to execute our
business plan. Their services directly compete with ours, including Internet
search, local search and directories, consumer e-mail service, VoIP, and
advertising solutions. These large-scale competitors and possible additional
entrants have significantly greater operational, strategic, financial, personnel
or other resources than we do, as well as greater brand recognition overall.
These competitors are expected to be continuously more effective than us in
targeting services and advertisements to the specific preferences of their users
thereby giving them a competitive advantage.




We
also face competition from other Internet service companies, including Internet
access providers, device manufacturers offering online services and destination
websites.




Our users
must access our services through Internet access providers, including wireless
providers and providers of cable and broadband Internet access. To the extent
that an access provider or device manufacturer offers online services
competitive with ours, the user may elect to use the services or properties of
that access provider or manufacturer. In addition, the access provider or
manufacturer may make it difficult to access our services by not listing them in
the access provider's or manufacturer's own directory. Such access providers and
manufacturers may prove better able to target services and advertisements to the
preferences of their users.




We also
compete for customers, users and advertisers with many other providers of online
services, including destination websites and social media and networking sites.
Some of these competitors may have more expertise in a particular segment of the
market, and within such segment, have longer operating histories, larger
advertiser or user bases, and more brand recognition or technological features
than we offer.




In the
future, competitors may acquire additional competitive offerings, and if we are
unable to complete strategic acquisitions or investments, our business could be
adversely affected. Further, competitors may consolidate with each other to
become more competitive, and new competitors may enter the market. If our
competitors are more successful than we are in developing compelling products or
attracting and retaining users, advertisers or customers, then we may have
difficulty in executing our business plan.




We
face significant competition from traditional media companies which could limit
our ability to generate advertising revenue.




We also
compete with traditional media companies for advertising. Most advertisers
currently spend only a small portion of their advertising budgets on Internet
advertising. We do not have indication that these traditional advertisers will
allocate some of their advertising budget for our services.




17




Decreases
or delays in advertising spending by advertisers due to general economic
conditions could harm our ability to generate advertising revenue.




Expenditures
by advertisers tend to be cyclical, reflecting overall economic conditions and
budgeting and buying patterns. Since our business plan anticipates significant
activities from advertising, any decreases in or delays in advertising spending
due to general economic conditions could reduce our chances in carrying out our
plan.




We
are, and may in the future be, subject to intellectual property infringement
claims, which are costly to defend, could result in significant damage awards,
and could limit our ability to provide certain content or use certain
technologies in the future.




Internet,
technology, media companies and patent holding companies often possess a
significant number of patents. Further, many of these companies and other
parties are actively developing or purchasing search, indexing, electronic
commerce and other Internet-related technologies, as well as a variety of online
business models and methods. We believe that these parties will continue to take
steps to protect these technologies, including, but not limited to, seeking
patent protection. As a result, disputes regarding the ownership of technologies
and rights associated with online business are likely to continue to arise in
the future.




As we
expand our business and develop new technologies, products and services, we may
become increasingly subject to intellectual property infringement claims. In the
event that there is a determination that we have infringed third-party
proprietary rights such as patents, copyrights, trademark rights, trade secret
rights or other third party rights such as publicity and privacy rights, we
could incur substantial monetary liability, be required to enter into costly
royalty or licensing agreements or be prevented from using the rights, any of
which could require us to change our business practices in the future and limit
our ability to compete effectively. We may also incur substantial expenses in
defending against third-party infringement claims regardless of the merit of
such claims.




If
we are unable to protect our intellectual property, or obtain patents for the
technologies we are currently researching, we may lose a competitive advantage
or incur substantial litigation costs to protect our rights and we be unable to
protect our intellectual property rights.




Our
future success depends in part upon our proprietary technology.  Our
protective measures, including future patents, trademarks and trade secret laws,
may prove inadequate to protect our proprietary rights.  We are in the
process of filing patent applications for our technologies and although we do
not currently foresee issues arising as a result of our pending patents, there
can be no assurance that any of these patents will be issued or that patents
will not be challenged.  Established companies in our industry generally
are aggressive in attempts to block new entrants to their markets, and our
products, if developed and commercialized, may interfere (or may be alleged to
interfere) with the intellectual property rights of these companies.  Our
viability will depend on its products not infringing patents that we expect
would be vigorously prosecuted.  Furthermore, the validity and breadth of
claims in our technology patents involve complex legal and factual questions
and, therefore, are highly uncertain.  Even if we are granted patents
relating to our technology, there can be no assurance that we would be able to
successfully assert our patents against competing products.  Once we
receive a patent, the scope of any patent to which we have or may obtain rights
may not prevent others from developing and selling competing products.  The
validity and breadth of claims covered in technology patents involve complex
legal and factual questions, and the resolution of such claims may be highly
uncertain, lengthy, and expensive.  In addition, any future patents which
we may file may be held invalid upon challenge; others may claim rights in or
ownership of our patents.




18




We
may not be able to enforce or protect our intellectual property rights, which
may harm our ability to compete and adversely affect our business.




Our
ability to enforce our patents, copyrights, software licenses, and other
intellectual property is subject to general litigation risks, as well as
uncertainty as to the enforceability of our intellectual property rights in
various countries. When we seek to enforce our rights, we are often subject to
claims that the intellectual property right is invalid, is otherwise not
enforceable, or is licensed to the party against whom we are asserting a claim.
In addition, our assertion of intellectual property rights often results in the
other party seeking to assert alleged intellectual property rights of its own
against us, which may adversely impact our business in the manner discussed
above. If we are not ultimately successful in defending ourselves against these
claims in litigation, we may not be able to sell a particular product or family
of products, due to an injunction, or we may have to pay material amounts of
damages, which could in turn negatively affect our results of operations. In
addition, governments may adopt regulations or courts may render decisions
requiring compulsory licensing of intellectual property to others, or
governments may require that products meet specified standards that serve to
favor local companies. Our inability to enforce our intellectual property rights
under these circumstances may negatively impact our competitive position and our
business.




If
we are unable to retain our existing senior management and key personnel and
hire new highly skilled personnel, we may not be able to execute our business
plan.




We are
substantially dependent on the continued services of our senior management,
including our chief executive officer, Benedict Van, and our chief technical
officer (name withheld due to privacy purposes). These individuals have acquired
specialized knowledge and skills in the Internet industries and our business
operations. The loss of any of these individuals could harm our business.
Additionally, within the past year, we have experienced a great deal of
turnover.  Our CFO resigned, effective as of December 4, 2008, and our
engineering manager in charge of certain new product development previously
resigned.  Our business is also dependent on our ability to retain,
hire and motivate talented, highly skilled personnel, particularly sales
people.  The competition for such executives and for other highly
skilled personnel can be intense, particularly in the San Francisco Bay
Area, where our corporate headquarters, and the headquarters of several of our
vertical and horizontal competitors, are located. If we do not succeed in
recruiting, retaining and motivating our key employees and in attracting new key
personnel, we may be unable to meet our business plan and as a result, our stock
price may decline.  Because the success of hereUareMessage is highly
dependent on sales personnel, if we do not succeed in recruiting, retaining and
motivating top sales people, the success of our hereUareMessage launch could be
in jeopardy.




19




Our
directors and executive officers may experience conflicts of interest which may
detrimentally affect our business development activities and our results of
operations.




Our
principal executive officers and directors, also serve in capacities at other
companies that may be a direct or indirect conflict to our business.  They
may also be inventors or visionaries of our technologies.  To the extent
that our interests diverge from those of the other companies our executive
officers and directors may become subject to conflicts of interest which could
lead them to make decisions which are not necessarily in the best interests of
our other stockholders.  This could result in material adverse consequences
to our company, its value and the value of your investment in the
Company.




We
operate in intensely competitive industries, and our failure to respond quickly
to technological developments and incorporate new features into our products
could have an adverse effect on our ability to compete.




We
operate in intensely competitive industries that experience rapid technological
developments, changes in industry standards, changes in customer requirements,
and frequent new product introductions and improvements. If we are unable to
respond quickly and successfully to these developments, we may lose our
competitive position, and our products or technologies may become uncompetitive
or obsolete. To compete successfully, we must maintain a successful R&D
effort, develop new products and enhance the synergies between our products, and
improve our existing products and processes at the same pace or ahead of our
competitors. We may not be able to successfully develop and market these new
products, the products we invest in and develop may not be well received by
customers, and products developed and new technologies offered by others may
affect the demand for our products. These types of events could have a variety
of negative effects on our competitive position and our financial results, such
as reducing our revenue, increasing our costs, lowering our gross margin
percentage, and requiring us to recognize impairments of our
assets.




We
may have difficulty scaling and adapting our existing technology architecture to
accommodate increased traffic when we launch our products and
services.




Our
products and services have only been tested on a limited basis. As we launch our
products and services through our marketing campaign, we expect Internet traffic
to our websites to significantly increase over a short time.  We have very
limited experience in handling a heightened traffic level by our hardware and
customer service operations. Our future will depend on our ability to adapt to
rapidly changing technologies, to adapt our products and services to evolving
industry standards and to improve the performance and reliability of our
products and services. Rapid increases in the levels or types of use of our
online properties and services could result in delays or interruptions in our
service.




20




New
technologies could block our advertisements or our search marketing listings,
which would harm our operating results.




Technologies
have been developed and are likely to continue to be developed that can block
the display of our advertisements or our search marketing listings.
Advertisement-blocking technology could have an adverse affect on our ability to
execute our plan to capture revenues.




Our
online operations are subject to security risks and systems
failures.




Security
risks.




Online
security breaches could materially adversely affect our collective businesses,
financial condition, or results of operations. Any well-publicized compromise of
security could deter use of the Internet in general or use of the Internet to
conduct transactions that involve transmitting confidential information or
downloading sensitive materials in particular. In offering online payment
services, we may increasingly rely on technology licensed from third parties to
provide the security and authentication necessary to effect secure transmission
of confidential information, such as consumer credit card numbers. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments could compromise or breach the algorithms that we use to protect
our consumers' transaction data. In addition, experienced programmers or
"hackers" may attempt to misappropriate proprietary information or cause
interruptions in our services which could require us to expend significant
capital and resources to protect against these problems.




Other
system failures.




The
uninterrupted performance of our computer systems is critical to the operations
of our Internet sites. We may have to restrict access to our Internet sites to
solve problems caused by computer viruses or other system failures. Our
customers may become dissatisfied by any systems disruption or failure that
interrupts our ability to provide our content. Repeated system failures could
substantially reduce the attractiveness of our Internet site and/or interfere
with commercial transactions, negatively affecting our ability to generate
revenues. Our Internet sites must, in the future if we grow, accommodate a high
volume of traffic and deliver regularly updated content. Our sites have, on
occasion, experienced slower response times and network failures. These types of
occurrences in the future could cause users to perceive our web sites as not
functioning properly and therefore induce them to frequent Internet sites other
than ours. In addition, our customers depend on their own Internet service
providers for access to our sites. Our revenues could be negatively affected by
outages or other difficulties customers experience in accessing our Internet
sites due to Internet service providers' system disruptions or similar failures
unrelated to our systems.




21




We
may be exposed to liability over privacy concerns.




Despite
the display of our privacy policy on our website, any penetration of our network
security or misappropriation of our customers' personal or credit card
information could subject us to liability. We may be liable for claims based on
unauthorized purchases with credit card information, impersonation or other
similar fraud claims. Claims could also be based on other misuses of personal
information, such as for unauthorized marketing purposes. These claims could
result in litigation, which could divert management's attention from the
operation of our business and result in the imposition of significant damages.
In addition, the Federal Trade Commission and several states have investigated
the use by Internet companies of personal information. In 1998, the U.S.
Congress enacted the Children's Online Privacy Protection Act of 1998. The
Federal Trade Commission recently promulgated final regulations interpreting
this act. We depend upon collecting personal information from our customers and
we believe that the regulations under this act will make it more difficult for
us to collect personal information from some of our customers. Any failure to
comply with this act may make us liable for substantial fines and other
penalties. We could also incur expenses if new regulations regarding the use of
personal information are introduced or if our privacy practices are
investigated.




Our
management owns or controls a significant number of the outstanding shares of
Common Stock and will continue to have significant ownership of its voting
securities for the foreseeable future.




Our
management, either directly or indirectly through their control of affiliated
companies, own or control approximately 48.01% of our issued and outstanding
capital stock as of December 31, 2008.  See "Security Ownership of Certain
Beneficial Owners and Management."  As a result, these persons would have
the ability, acting as a group, to effectively control our affairs and business,
including the election of directors and subject to certain limitations, approval
or preclusion of fundamental corporate transactions.  This concentration of
ownership may be detrimental to the interest of our minority shareholders in
that it may:




·
            limit
      shareholders' ability to elect or remove
  directors;


·
            delay
      or prevent a change in the control;


·
            impede
      a merger, consolidation, take over or other transaction involving the
      Company; or


·
            discourage
      a potential acquirer from making a tender offer or otherwise attempting to
      obtain control of the Company.




We
do not intend to pay dividends in the foreseeable future.




We have
never paid cash dividends.  We do not anticipate that we would pay cash
dividends in the foreseeable future.  Instead, we intend to retain future
earnings, if any, for reinvestment in its business and/or to fund future
acquisitions.  You should not invest in our securities in the anticipation
of receiving dividends.





22




Item
2. Description of Property.




On June
8, 2006, the Company entered into a 5-year lease agreement with CarrAmerica
Techmart which expires on June 15, 2011. Rent expenses in future periods
pursuant to this lease agreement are shown below. In July 2008, we subleased the
space for the remainder of the lease term to Egenera, Inc. pursuant to a
sublease agreement by which the sublessee pays for all of the future rent
expenses.




Year
                                  
                                  Expense
                                  
                                  
                                  Sub-lease
                                  
                                  
                                  Net
      Expense2008
                                  
                                  $
                                  88,279
                                  
                                  
                                  $
                                  44,715
                                  
                                  
                                  $
                                  43,5632009
                                  
                                  $
                                  90,987
                                  
                                  
                                  $
                                  90,987
                                  
                                  
                                  $
                                  -2010
                                  
                                  $
                                  93,666
                                  
                                  
                                  $
                                  93,666
                                  
                                  
                                  $
                                  -2011
                                  
                                  $
                                  43,458
                                  
                                  
                                  $
                                  43,458
                                  
                                  
                                  $
                                  -




On August
1, 2007, the Company entered into a lease for 530 square meters of office space
in Vietnam with Nguyen Van Tan and Vo Thi Ngoc Lan which expires on August 1,
2012. The lease commences on August 1, 2007 and rent expense is fixed at $4,200
per month. The Company prepaid the rent under this lease for 24 months through
July 31, 2009.




On
January 28, 2008, the Company entered into a 5-year lease agreement, with an
option to purchase, with 1061 Terra Bella Associates, LLC, which expires on
February 28, 2013. Rent expense per this new lease agreement is as
following:




2008:
                      
                      $
                      183,6002009:
                      
                      $
                      283,9002010:
                      
                      $
                      294,1002011:
                      
                      $
                      304,3002012:
                      
                      $
                      314,500Thereafter:
                      
                      $
                      52,700


Due to
the Company’s precarious cash position during and since the fourth quarter of
2008, it has not made rent payments on the Terra Bella lease since 2008 and is
currently in default and in discussion with the landlord about how to handle the
situation.  Until the situation is resolved, the Company is leasing
office space at Hamilton Avenue Palo Alto on a month-to-month basis at a rent of
approximately $300 per month.


Item 3. Legal
Proceedings.




No
lawsuits or proceedings are currently pending against hereUare.




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




Not
applicable.




23




PART
II




Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters, and
Issuer Purchases of Equity Securities.




Market
Information




There is
currently no active market for our securities.




Holders




As of
December 31, 2008 there were 289 holders or record of our common stock. The
number of record holders does not include beneficial owners whose shares are
held in the names of banks, brokers, nominees or other fiduciaries.




Dividends




hereUare
has not declared or paid any cash dividends on its common stock. It intends to
retain any future earnings to finance the growth and development of its
business, and therefore it does not anticipate paying any cash dividends on its
common stock in the future. The board of directors will determine any future
payment of cash dividends depending on the financial condition, results of
operations, capital requirements, general business condition and other relevant
factors. If the Company issues preferred shares, although not currently
anticipated, no dividends may be paid on the outstanding common stock until all
dividends then due on the outstanding preferred stock will have been
paid.




Recent
Sales of Unregistered Securities; Use of Proceeds from Registered
Securities




In the
quarterly period ended December 31, 2008, the Company sold an aggregate of 5,000
shares of $0.0001 par value common stock to one couple in a private placement
exempt from registration under Rule 506 of Regulation D of the Securities Act of
1933. The  shares were sold at $9.00 per share for aggregate proceeds
of $45,000. These shares have not been issued yet. The couple were accredited
investors.




Purchases
of Equity Securities by the Issuer and Affiliated Purchasers




There
were no purchases made by or on behalf of Registrant or any "affiliated
purchaser" (as defined in Exchange Act Rule 10b-18(a)(3)) of shares of
Registrant's $0.0001 par value common stock during the fourth quarter of fiscal
2008.




Item
6. Selected Financial Data.




Not
applicable




24




Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.




The
following section discusses the significant operating changes, business trends,
financial condition, earnings and liquidity that have occurred in the Company's
as of and for the fiscal years ended December 31, 2008 and 2007. This discussion
should be read in conjunction with the Company's consolidated financial
statements and notes appearing elsewhere in this report.




The
following discussion may contain forward-looking statements that are subject to
risks and uncertainties. When used in this discussion, the words "believes,"
"anticipates" and "intends" and similar expressions are intended to identify
forward-looking statements, but the absence of these words does not necessarily
mean that a statement is not forward looking. Forward-looking statements
include, but are not limited to, statements about our product development,
product release, marketing, fundraising and expansion plans, and our objectives,
expectations, intentions, and target markets, and are subject to risks and
uncertainties that could cause actual results to differ materially from those
anticipated in these forward-looking statements for may reasons, including the
factors described under "Description of Business—Risk Factors Affecting Future
Performance" and elsewhere in this report. We undertake no obligation to
publicly release any revisions to these forward-looking statements that may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of anticipated events. Readers are urged, however, to review the
factors and risks we describe in reports we file from time to time with the
Securities and Exchange Commission, which may be accessed at the Commission's
website at www.sec.gov.




Recent
Accounting Pronouncements




In
December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
Consolidated Financial Statements". This Statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling (minority) interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS No. 160 is effective for the Company's fiscal year
beginning October 1, 2009. Management is currently evaluating the effect of this
pronouncement on financial statements.
  In March
2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about 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
The new standard also improves transparency about the location and amounts of
derivative instruments in an entity's financial statements; how derivative
instruments and related hedged items are accounted for under Statement 133; and
how derivative instruments and related hedged items affect its financial
position, financial performance, and cash flows. . It is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. Management is currently evaluating
the effect of this pronouncement on financial statements.


25




In
December 2007, the FASB issued SFAS No. 141(R), "Business Combinations". This
Statement replaces SFAS No. 141, Business Combinations. This Statement retains
the fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement also establishes principles and requirements for how
the acquirer: a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree; b) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase and c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No.
141(R) will apply prospectively to business combinations for which the
acquisition date is on or after Company's fiscal year beginning October 1, 2009.
While the Company has not yet evaluated this statement for the impact, if any,
that SFAS No. 141(R) will have on its consolidated financial statements, the
Company will be required to expense costs related to any acquisitions after
September 30, 2009.
  In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles."  This Statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).  This Statement will not have an
impact on the Company's financial statements.
  In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60."  The
scope of this Statement is limited to financial guarantee insurance (and
reinsurance) contracts, as described in this Statement, issued by enterprises
included within the scope of Statement 60. Accordingly, this Statement does not
apply to financial guarantee contracts issued by enterprises excluded from the
scope of Statement 60 or to some insurance contracts that seem similar to
financial guarantee insurance contracts issued by insurance enterprises (such as
mortgage guaranty insurance or credit insurance on trade receivables). This
Statement also does not apply to financial guarantee insurance contracts that
are derivative instruments included within the scope of FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
will not have an impact on the Company's financial
statements.


26






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




Critical
Accounting Policies




In the
ordinary course of business, the Company has made a number of estimates and
assumptions relating to the reporting of results of operations and financial
condition in the preparation of its financial statements in conformity with
accounting principles generally accepted in the United States of America. Actual
results could differ significantly from those estimates under different
assumptions and conditions. The Company believes that the following discussion
addresses the Company's most critical accounting policies, which are those that
are most important to the portrayal of the Company's financial condition and
results or because their application requires significant management judgment,
are described in the following paragraphs. The Company constantly re-evaluates
these significant factors and makes adjustments where facts and circumstances
dictate. Although historically, actual results have not significantly deviated
from those determined using the necessary estimates inherent in the preparation
of financial statements, future actual results may vary significantly. Estimates
and assumptions include, but are not limited to, customer receivables, long-term
asset lives, contingencies and litigation. The Company has also chosen certain
accounting policies when options were available, including:




·
            The
      intrinsic value method, or APB Opinion No. 25, to account for our common
      stock incentive awards; and


·
            We
      record an allowance for credit losses based on estimates of customers'
      ability to pay. If the financial condition of our customers were to
      deteriorate, additional allowances may be
  required.




27




·
            The
      Company expects to apply the provisions of Statement of Position 97-2 as
      well as SAB 101, to account for the sales of software and related services
      that may be bundled with the software
license.




These
Company's most critical accounting policies are applied consistently for all
years presented and many are described in Note 2 of our financial statements.
Our operating results would be affected if other alternatives were used.
Information about the impact on our operating results is included in the
footnotes to our consolidated financial statements.




Results
of Operation




hereUare,
whose name was changed from PeopleNet International Corporation on March 26,
2007 to hereUare, Inc., was formed in February 1997, under the name American
Champion Media, as a wholly owned subsidiary of Pacific Systems Control
Technology ("PSCT"), formerly known as American Champion Entertainment. Through
a spin-off transaction on February 8, 2002, hereUare became an independent
entity and PSCT distributed its shares of hereUare to the shareholders of PSCT
as of the record date of January 16, 2002. Throughout the year ended December
31, 2008, the Company was primarily developing products and was not generating
material revenues.




Revenues
and Gross Profit (Loss)




During
the year ended December 31, 2008, we only generated sales of $27,737 which was
mainly from the Company's VoIP product. Cost of goods was  $32,485 which
included domestic and international telecom termination charges for testing
purposes, resulted in a gross loss figure of $4,748.  Revenue for the year
ended December 31, 2007, also primarily from the VoIP product, was $35,996 and
cost of goods was $56,776 resulting in a gross loss of
$20,780.




Development
of our Internet software technologies has generally been completed as of year
end 2008, and we plan to attempt to market our hereUare Message e-messaging and
groupware products to small and medium-sized businesses beginning in the second
quarter of 2009.  However, there can be no assurance that we can generate
significant sales from such attempts. We are currently not intending to market
our hereUare Voice VoIP software due to interconnect and other costs until we
are on a more secure financial footing.  Our hereUare Engine search
product requires us to increase the number of indexed pages in order to be
effective as we implemented some new technologies in order to eliminate the page
duplications that existed in our prior number of indexed pages due largely from
spam.  We also are not planning to offer our hereUareEngine search
engine product until after we have indexed close to 10 billion pages for our
hereUare Engine software to search.




Costs
and Expenses




Our
depreciation and amortization expenses were $415,575 and $297,932 for the years
ended December 31, 2008 and 2007.  Most of the increase was due to
equipment purchases during 2008.




28




Our rent
expenses were $402,423 and $278,452 for the years ended December 31, 2008 and
2007.  Of the $402,423 for 2008, $326,782 was for our US locations and
$72,719 was for our Vietnam location.  Of the $278,542 for 2007,
$244,822 was for our US locations and $33,630 was for our Vietnam
location.  The main part of the increased rent in 2008 versus 2007 in
our US locations involved our moving our principal executive offices from the
Techmart in Santa Clara, which had a lower rent, to our larger Mountain View
facility, which has a greater rent, and which also required us to pay double
rent for several months until we could find a subtenant for our Techmart
space.  The increased rent in Vietnam resulted from our occupying our
Vietnam facility for the full year instead of only four months.




Our
payroll expenses were $1,106,375 which reflected a slight increase in
engineering and marketing staff as compared to $956,820 for the previous
year.  For the year ended December 31, 2008, we also incurred professional
fees of $934,741 which included $181,258 for legal, $18,181 for accounting,
$735,302 in consulting fees for software engineering and business consultation,
and $7,514 for agent fees. In the prior year, we had professional fees in the
amount of $700,135 which included $158,041 for legal, $55,486 for accounting,
$336,119 in consulting fees for software engineering and business consultation,
and $120,000 of non-cash compensation for financial advisory
services.  The bulk of the increase in professional fees in 2008
versus 2007 was therefore in consulting fees for software engineering and
business consultation, which increased by $344,944, with most of that increase
being from increased engineering fees.




General
and administrative expenses for the year ended December 31, 2008 were $4,122,645
which included $3,223,391  in non-cash option expenses estimated by
using a Black-Scholes option pricing model, $168,728  for insurance
premiums, $179,450  for travel and entertainment,
$40,168  for advertisement, $46,927 for phone, $66,121  for
broadband services, $59,497  for supplies and $143,498  for
R&D expense.  G&A expenses for the previous year were $1,785,135
which included non-cash option expenses in the amount of $1,192,618, $107,468
for insurance premiums, $207,920 for travel and entertainment, $59,740 for
advertisement, $43,605 for phone, $25,705 for broadband services, $29,680 for
supplies and $24,000 for R&D expense.  Our non-cash option
expenses increased largely because of the expenses associated with options
granted in the second half of  2007 and in 2008 which had increased
expense per option due to the increased sales price to investors of our common
stock.




As a
result of foregoing factors, our net loss was $8,156,861 for the year ended
December 31, 2008, as compared to $4,039,533 for the year ended December 31,
2007. Net loss per share increased to $0.24 in 2007 from $0.12 in 2007, while
weighted average number of shares outstanding increased to 34,340,393 by the end
of the year 2008 from 33,967,404 of a year ago.




Liquidity
and Capital Resources




Net cash
flow for the twelve months ended December 31, 2008 was a negative $698,939.
There was a net inflow of $2,726,028 from financing activities. Cash flow from
operating activities was a negative $2,829,535 on a consolidated basis while net
cash used in investing activities was $597,318.




29




Our
Company has not generated significant revenues from our operations over the last
several years and management remains doubtful that enough revenues can be
generated from operations in the next twelve months to cover the cost of our
operations. In addition, as of December 31, 2008, we had cash of only $6,900 and
working capital of ($835,625).  As a result of our weak cash position,
we are in default of some of our contractual obligations, including our Terra
Bella  Avenue lease.  We will be seeking substantial funding within
the next year to pay down our accounts payable and accrued expenses of $511,472
as of December 31, 2008, the loss we incurred during the first quarter of 2009,
and for introducing and marketing our hereUare Message e-messaging and groupware
software product. Otherwise, we may not be able to survive and will not be able
to introduce such software in a large-scale manner and may have to scale down or
cease our operations.




As a
result of limited capital resources and insignificant revenues from operations,
the Company has relied on the issuance of equity securities in financing
transactions for our operational needs. During fiscal 2008, the Company raised
approximately $2.7 million from the sale of approximately 0.3 million shares
while during fiscal 2007 the Company raised approximately $3.5 million from the
sale of approximately 0.5 million shares. The independent auditor's report on
the Company's December 31, 2008 financial statements included in this report
states that there is substantial doubt about our Company's ability to continue
as a going concern. In the event that financing activities cannot generate
adequate funds to launch our marketing efforts, we intend to curtail our
operations until such funds are available and we may have to cease our
operations entirely. Although the Company continues to seek financing to support
our working capital needs, we have no assurance that we will be successful in
raising the funds required. In the event that the Company is not successful in
generating sufficient capital resources on terms acceptable to us, there could
be a material adverse effect on our business, results of operations, liquidity
and financial condition.




Off-Balance
Sheet Arrangements




We have
no off-balance sheet arrangements.




Item
8. Financial Statements and Supplementary Data.




The
financial statements of the Company and the independent registered public
accounting firm's report are filed herewith on pages 31
through 50 of this report.


30
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and Stockholders
 Hereuare
Communications, Inc.
 (formerly
known as PeopleNet International Corporation)
  We have
audited the accompanying balance sheets of Hereuare Communications, Inc.
(formerly known as PeopleNet International Corporation) as of December 31, 2008
and 2007 and the related statements of operations, stockholders' equity, and
cash flows for the years ended
December 31, 2008 and 2007. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
  We
conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Hereuare Communications, Inc. as of
December 31, 2008 and the results of its operations and its cash flows for the
years ended December 31, 2008 and
2007, in conformity with accounting principles generally accepted in the
United States of America.
  The
Company’s financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has deficit accumulated at December 31, 2008 of
$77,205,829 including net losses of $8,156,861 for the year ended December 31,
2008. These factors as discussed in Note 13 to the financial statements, raises
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note 14. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
 
 /s/
Kabani & Company, Inc.
 
 CERTIFIED
PUBLIC ACCOUNTANTS
 
 Los
Angeles, California
 April  10,
2009
 
 31
 
 HEREUARE,
INC. AND SUBSIDIARIES
 (FORMERLY
PEOPLENET INTERNATIONAL CORPORATION)
 CONSOLIDATED
BALANCE SHEETS
 
 DECEMBER
      31,2008
                                    
                                    
                                    2007ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                                    
                                    $
                                    6,900
                                    
                                    
                                    
                                    705,839Account
      receivable
                                    
                                    
                                    106
                                    
                                    
                                    
                                    110Inventory
                                    
                                    
                                    -
                                    
                                    
                                    
                                    21,811Prepaid
      expenses
                                    
                                    
                                    35,301
                                    
                                    
                                    
                                    165,653Related
      party receivable
                                    
                                    
                                    -
                                    
                                    
                                    
                                    11,248Advances
      for software development
                                    
                                    
                                    -
                                    
                                    
                                    
                                    170,000Total
      Current Assets
                                    
                                    
                                    42,307
                                    
                                    
                                    
                                    1,074,661PROPERTY
      AND EQUIPMENT-NET
                                    
                                    
                                    701,289
                                    
                                    
                                    
                                    399,893INTANGIBLE
      ASSETS-NET
                                    
                                    
                                    206,608
                                    
                                    
                                    
                                    326,261DEPOSITS
                                    
                                    
                                    185,293
                                    
                                    
                                    
                                    106,990INVESTMENT
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,000,000Total
      Non-Current Assets
                                    
                                    
                                    1,093,190
                                    
                                    
                                    
                                    1,833,144TOTAL
      ASSETS
                                    
                                    $
                                    1,135,496
                                    
                                    
                                    
                                    2,907,805LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                                    
                                    $
                                    511,472
                                    
                                    
                                    
                                    399,439Deferred
      revenue
                                    
                                    
                                    12,390
                                    
                                    
                                    
                                    247Due
      to related parties
                                    
                                    
                                    309,070
                                    
                                    
                                    
                                    -Shares
      to be issued
                                    
                                    
                                    45,000
                                    
                                    
                                    
                                    -Total
      current liabilities
                                    
                                    
                                    877,932
                                    
                                    
                                    
                                    399,685STOCKHOLDERS'
      EQUITY:Common
      stock, $0.0001 par value;100,000,000
      shares authorized;34,438,313
      shares issued and 34,338,313 shares outstanding  as of December
      31, 2008and 34,239,864 shares issued and outstanding as of December 31,
      2007.
                                    
                                    
                                    3,454
                                    
                                    
                                    
                                    3,424Treasury
      Stock; 100,000 shares
                                    
                                    
                                    (10
                                    )
                                    
                                    
                                    -Additional
      paid in capital
                                    
                                    
                                    77,466,062
                                    
                                    
                                    
                                    71,606,663Subscription
      receivable
                                    
                                    
                                    (8,000
                                    )
                                    
                                    
                                    (53,000
                                    )Accumulated
      deficit
                                    
                                    
                                    (77,205,829
                                    )
                                    
                                    
                                    (69,048,968
                                    )Translation
      Adjustment
                                    
                                    
                                    1,886
                                    
                                    
                                    
                                    -Total
      stockholders' equity
                                    
                                    
                                    257,563
                                    
                                    
                                    
                                    2,508,119TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                    
                                    $
                                    1,135,496
                                    
                                    
                                    
                                    2,907,805
 
 The
accompany notes are an integral part of these consolidated financial
statements
 
 32
  HEREUARE,
INC. AND SUBSIDIARIES
 (FORMERLY
PEOPLENET INTERNATIONAL CORPORATION)
 CONSOLIDATED
STATEMENT OF OPERATIONS
 
 FOR THE YEARS ENDEDDECEMBER 31,2008
                                      
                                      
                                      2007NET
      REVENUE
                                      
                                      $
                                      27,737
                                      
                                      
                                      $
                                      35,996COST
      OF GOODS SOLD
                                      
                                      
                                      32,485
                                      
                                      
                                      
                                      56,776GROSS
      LOSS
                                      
                                      
                                      (4,748
                                      )
                                      
                                      
                                      (20,780
                                      )OPERATING
      EXPENSESDepreciation
      and amortization
                                      
                                      
                                      415,575
                                      
                                      
                                      
                                      297,932Rent
                                      
                                      
                                      402,423
                                      
                                      
                                      
                                      278,452Salaries
      and payroll taxes
                                      
                                      
                                      1,106,375
                                      
                                      
                                      
                                      956,820Professional
      fees
                                      
                                      
                                      934,741
                                      
                                      
                                      
                                      700,135Impairment
      of advance
                                      
                                      
                                      170,000
                                      
                                      
                                      
                                      -Impairment
      of investment
                                      
                                      
                                      1,000,000
                                      
                                      
                                      
                                      -General
      and administrative expenses
                                      
                                      
                                      4,122,645
                                      
                                      
                                      
                                      1,785,135Total
      operating expenses
                                      
                                      
                                      8,151,760
                                      
                                      
                                      
                                      4,018,475LOSS
      FROM OPERATIONS
                                      
                                      
                                      (8,156,508
                                      )
                                      
                                      
                                      (4,039,255
                                      )OTHER
      INCOME (EXPENSE)Other
      expense
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (357
                                      )Interest
      income
                                      
                                      
                                      2,167
                                      
                                      
                                      
                                      1,928Total
      Other Income/(loss)
                                      
                                      
                                      2,167
                                      
                                      
                                      
                                      1,571LOSS
      BEFORE INCOME TAXES
                                      
                                      
                                      (8,154,341
                                      )
                                      
                                      
                                      (4,037,684
                                      )INCOME
      TAX
                                      
                                      
                                      2,520
                                      
                                      
                                      
                                      1,849NET
      LOSS
                                      
                                      
                                      (8,156,861
                                      )
                                      
                                      
                                      (4,039,533
                                      )OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation gain
                                      
                                      
                                      1,886
                                      
                                      
                                      
                                      -NET
      COMPREHENSIVE LOSS
                                      
                                      $
                                      (8,154,975
                                      )
                                      
                                      $
                                      (4,039,533
                                      )*BASIC
      AND DILUTED WEIGHTED AVERAGE NUMBER OFCOMMON
      STOCK OUTSTANDING
                                      
                                      
                                      34,340,393
                                      
                                      
                                      
                                      33,967,404BASIC
      AND DILUTED NET LOSS PER SHARE
                                      
                                      $
                                      (0.24
                                      )
                                      
                                      $
                                      (0.12
                                      )
 
 *Weighted
average number of shares used to compute basis and diluted loss per share is the
same since the effect of dilutive securities is anti-dilutive
 
 The
accompany notes are an integral part of these consolidated financial
statements
 
 33
 
 HEREUARE,
INC. AND SUBSIDIARIES
 (formerly
known as PeopleNet International Corporation)
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 
 Common
      stock
                                  
                                  
                                  Treasury
      stock
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Other
                                  
                                  
                                  
                                  
                                  
                                  TotalNumber of
                                  
                                  
                                  
                                  
                                  
                                  Numberof
                                  
                                  
                                  
                                  
                                  
                                  Additional
                                  
                                  
                                  Subscription
                                  
                                  
                                  comprehensive
                                  
                                  
                                  Accum.
                                  
                                  
                                  stockholders'shares
                                  
                                  
                                  Amount
                                  
                                  
                                  shares
                                  
                                  
                                  Amount
                                  
                                  
                                  paid
      in capital
                                  
                                  
                                  Receivable
                                  
                                  
                                  income
                                  
                                  
                                  deficit
                                  
                                  
                                  equity
      (deficit)Balance
      as of January 01, 2007
                                  
                                  
                                  33,704,668
                                  
                                  
                                  $
                                  3,371
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  66,461,460
                                  
                                  
                                  $
                                  (12,000
                                  )
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  (65,009,435
                                  )
                                  
                                  $
                                  1,443,396Shares
      issued for cash
                                  
                                  
                                  508,195
                                  
                                  
                                  
                                  51
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  3,513,912
                                  
                                  
                                  
                                  (53,000
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,460,963Cash
      received for subscription   receivable from
      2006
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  12,000
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  12,000Shares
      issued for exercise of stock options
                                  
                                  
                                  7,001
                                  
                                  
                                  
                                  1
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  14,001
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  14,002Shares
      issued for services
                                  
                                  
                                  20,000
                                  
                                  
                                  
                                  2
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  119,998
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  120,000Write-off
      of old liability
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  304,673
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  304,673Option
      expenses
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,192,618
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,192,618Net
      loss for the year
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (4,039,533
                                  )
                                  
                                  
                                  (4,039,533
                                  )Balance
      as of December 31, 2007
                                  
                                  
                                  34,239,864
                                  
                                  
                                  
                                  3,424
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  71,606,663
                                  
                                  
                                  
                                  (53,000
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (69,048,968
                                  )
                                  
                                  
                                  2,508,119Shares
      issued for cash
                                  
                                  
                                  298,449
                                  
                                  
                                  
                                  30
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,685,998
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,686,028Cash
      received for subscription  receivable from 2007
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  45,000
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  45,000Purchase
      of treasury shares
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  100,000
                                  
                                  
                                  
                                  (10
                                  )
                                  
                                  
                                  (49,990
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (50,000
                                  )Option
      expenses
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,223,391
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,223,391Foreign
      currency translation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,886
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,886Net
      loss for the year
                                  
                                  
                                  
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (8,156,861
                                  )
                                  
                                  
                                  (8,156,861
                                  )Balance
      as of December 31, 2008
                                  
                                  
                                  34,538,313
                                  
                                  
                                  $
                                  3,454
                                  
                                  
                                  
                                  100,000
                                  
                                  
                                  $
                                  (10
                                  )
                                  
                                  
                                  77,466,062
                                  
                                  
                                  $
                                  (8,000
                                  )
                                  
                                  $
                                  1,886
                                  
                                  
                                  
                                  (77,205,829
                                  )
                                  
                                  $
                                  257,563
 
 The
accompany notes are an integral part of these consolidated financial
statements
 
 34
 
 HEREUARE,
INC. AND SUBSIDIARIES
 (FORMERLY
PEOPLENET INTERNATIONAL CORPORATION)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 FOR
      THE YEARS ENDED DECEMBER 31,2008
                              
                              
                              2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                              
                              $
                              (8,156,861
                              )
                              
                              $
                              (4,039,533
                              )Adjustments
      to reconcile net lossto
      net cash used in operating activities:Depreciation
      and amortization
                              
                              
                              415,575
                              
                              
                              
                              297,932Issuance
      of stock options for compensation
                              
                              
                              3,223,391
                              
                              
                              
                              1,192,618Issuance
      of shares for services
                              
                              
                              -
                              
                              
                              
                              120,000Impairment
      of an investment and advances
                              
                              
                              1,170,000
                              
                              
                              
                              304,673(Increase)
      decrease in current assets:Inventory
                              
                              
                              21,811
                              
                              
                              
                              (21,811
                              )Other
      Assets
                              
                              
                              -
                              
                              
                              
                              (127,829
                              )Prepaid
      expense
                              
                              
                              130,356
                              
                              
                              
                              -Deposits
                              
                              
                              (78,303
                              )
                              
                              
                              (63,345
                              )Advances
                              
                              
                              -
                              
                              
                              
                              87,539Related
      party receivable
                              
                              
                              320,318
                              
                              
                              
                              (10,408
                              )Increase
      (decrease) in current liabilities:Accounts
      payable and accrued expenses
                              
                              
                              112,033
                              
                              
                              
                              (58,875
                              )Deferred
      Revenue
                              
                              
                              12,144
                              
                              
                              
                              (845
                              )Net
      cash used in operating activities
                              
                              
                              (2,829,535
                              )
                              
                              
                              (2,319,884
                              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                              
                              
                              (437,079
                              )
                              
                              
                              (298,251
                              )Purchase
      of software
                              
                              
                              (70,471
                              )
                              
                              
                              (301,309
                              )Leasehold
      Improvement
                              
                              
                              (89,768
                              )
                              
                              
                              -Net
      cash used in investing activities
                              
                              
                              (597,318
                              )
                              
                              
                              (599,560
                              )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from subsciption receivable
                              
                              
                              45,000
                              
                              
                              
                              12,000Proceeds
      from issuance of common stock for cash
                              
                              
                              2,731,028
                              
                              
                              
                              3,474,965Repurchase
      treasury stock
                              
                              
                              (50,000
                              )
                              
                              
                              -Net
      cash  provided by financing activities
                              
                              
                              2,726,028
                              
                              
                              
                              3,486,965EFFECT
      OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
                              
                              
                              1,886
                              
                              
                              
                              -NET
      INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
                              
                              
                              (698,939
                              )
                              
                              
                              567,521CASH
      & CASH EQUIVALENTS, BEGINNING BALANCE
                              
                              
                              705,839
                              
                              
                              
                              138,318CASH
      & CASH EQUIVALENTS, ENDING BALANCE
                              
                              $
                              6,900
                              
                              
                              $
                              705,839SUPPLEMENTAL
      DISCLOSURES:Income
      tax payments
                              
                              $
                              2,520
                              
                              
                              $
                              1,849Interest
      payments
                              
                              $
                              -
                              
                              
                              $
                              -
 
 The
accompany notes are an integral part of these consolidated financial
statements
 
 35
 
 HEREUARE,
INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
  Note
1 - Nature of Operations and Spin-off
 
 Nature of Operations -
hereUare, Inc. (the "Company") was incorporated on February 5, 1997 in the state
of Delaware. The Company focuses on development and sales of communication
software solutions including web-based email and office automation bundle and a
voice over internet protocol telephony product. The Company had been a wholly
owned subsidiary of Pacific Systems Control Technology, Inc. ("PSCT") until
February 8, 2002 when the Company completed its spin-off transaction from PSCT
and became an independent entity.
 
 In
December 2005, the Company formed Completo Communications Corporation
("Completo"), a wholly owned subsidiary, to support voice termination services
within the Company's international VoIP solutions. The operations of Completo
were terminated by the end of the quarterly period ended March 31, 2006 and the
VoIP termination activities were handled within the Company since
then.
 
 On
September 22, 2006, the Company acquired 100% of hereUare Communications, Inc.,
a Delaware corporation ("hereUare"). hereUare is an operator of web-based search
engine and other Internet software solutions founded in 2002. Consequently,
hereUare's financial position, results of operations and cash flows subsequent
to the acquisition are included in the accompanying audited consolidated
financial statements.
 
 In August
2007, the Company established a wholly owned subsidiary in Vietnam, hereUare
Communications Company Ltd. Vietnam, in anticipation of engaging in business
activities in that country.  As of December 31, 2008, the subsidiary
in Vietnam has not generated revenue for the Company but has served as an
engineering and operations center.
 
 Note
2 - Summary of Significant Accounting Policies
 
 Basis of Presentation:The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America.
 
 Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, hereUare Communications, Inc. and
hereUare Communications Company Ltd. Vietnam.  All material
inter-company accounts have been eliminated in consolidation.
 
 Use of Estimates, Risks and
Uncertainties - The preparation of financial statements in conformity
with generally accepted accounting principles in the United States ("GAAP")
requires management to make certain 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 revenues and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include the collectibility of
accounts receivable, accounts payable, sales returns and recoverability of
long-term assets.
  36
  Cash and cash equivalents -
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents.
 
 Property and Equipment -
Property and equipment is stated at cost. Depreciation for property and
equipment is computed using the straight-line method over an estimated useful
life of three years for computer equipment and five years for non-electronic
property. Depreciation on leasehold improvements is recorded on the shorter of
the life of improvement or life of lease.
 
 Long-lived assets -Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations for a Disposal of a Segment of a Business." The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal.
 
 Intangible Assets -The
Company evaluates intangible assets for impairment, at least on an annual basis
and whenever events or changes in circumstances indicate that the carrying value
may not be recoverable from its estimated future cash flows. Recoverability of
intangible assets, other long-lived assets and, goodwill is measured by
comparing their net book value to the related projected undiscounted cash flows
from these assets, considering a number of factors including past operating
results, budgets, economic projections, market trends and product development
cycles. If the net book value of the asset exceeds the related undiscounted cash
flows, the asset is considered impaired, and a second test is performed to
measure the amount of impairment loss. As at December 31, 2008 no impairment in
intangible assets is recorded.
 
 Software development costs -The Company has adopted Statement of Position 98-1 ("SOP 98-1")
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", as its accounting policy for internally developed computer
software costs. Under SOP 98-1, computer software costs incurred in the
preliminary development stage are expensed as incurred. Computer software costs
incurred during the application development stage are capitalized and amortized
over the software's estimated useful life.
  Revenue Recognition - Revenue
from certain licensing programs is recorded when license agreement has been
executed, the software has been delivered or shipped, the fee is determined and
the customer is invoiced. The Company has adopted the provisions of Statements
of Position 97-2 and 98-4 and SEC Staff Accounting Bulletin 104. The Company did
not receive any revenue from licensing agreements in the year ended December 31,
2008.
  37
   Research and Development -Expenditures for software development costs during the preliminary stage
and research are expensed as incurred. Such costs are required to be expensed
until the point that technological feasibility is established.
 
 Income Taxes - The Company
utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
 
 Stock-based compensation
–
 
 The
Company adopted SFAS No. 123 (Revised 2004), Share Based Payment(“SFAS
No. 123R”), under the modified-prospective transition method on January 1, 2006.
SFAS No. 123R requires companies to measure and recognize the cost of
employee services received in exchange for an award of equity instruments based
on the grant-date fair value. Share-based compensation recognized under the
modified-prospective transition method of SFAS No. 123R includes share-based
compensation based on the grant-date fair value determined in accordance with
the original provisions of SFAS No. 123, Accounting for Stock-Based
Compensation,for all share-based payments granted prior to and not yet
vested as of January 1, 2006 and share-based compensation based on the
grant-date fair-value determined in accordance with SFAS No. 123R for all
share-based payments granted after January 1, 2006. SFAS No. 123R
eliminates the ability to account for the award of these instruments under the
intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion
No. 25, Accounting for Stock
Issued to Employees, and allowed under the original provisions of SFAS
No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted for our
stock option plans using the intrinsic value method in accordance with the
provisions of APB Opinion No. 25 and related interpretations.
  Basic and diluted net loss per share
-Net loss per share is calculated in accordance with the Statement of
financial accounting standards No. 128 (SFAS No. 128), "Earnings per share".
SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net
loss per share for all periods presented has been restated to reflect the
adoption of SFAS No. 128. Basic net loss per share is based upon the weighted
average number of common shares outstanding. Diluted net loss per share is based
on the assumption that all dilutive convertible shares and stock options were
converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.
  38
   Fair value of financial instruments -Statement of financial accounting standard No. 107, Disclosures about
fair value of financial instruments, requires that the Company disclose
estimated fair values of financial instruments. The carrying amounts reported in
the statements of financial position for assets and liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
  Concentrations of Risk -
Financial instruments which potentially subject the Company to concentrations of
credit risk are cash and accounts receivable. The Company places its cash with
financial institutions deemed by management to be of high credit quality. The
amount on deposit in any one institution that exceeds federally insured limits
is subject to credit risk.
  Recent pronouncements
-
  In
December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
Consolidated Financial Statements". This Statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling (minority) interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS No. 160 is effective for the Company's fiscal year
beginning October 1, 2009. Management is currently evaluating the effect of this
pronouncement on financial statements.
  In March
2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about 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
The new standard also improves transparency about the location and amounts of
derivative instruments in an entity's financial statements; how derivative
instruments and related hedged items are accounted for under Statement 133; and
how derivative instruments and related hedged items affect its financial
position, financial performance, and cash flows. . It is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. Management is currently evaluating
the effect of this pronouncement on financial statements.
  In
December 2007, the FASB issued SFAS No. 141(R), "Business Combinations". This
Statement replaces SFAS No. 141, Business Combinations. This Statement retains
the fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement also establishes principles and requirements for how
the acquirer: a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree; b) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase and c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No.
141(R) will apply prospectively to business combinations for which the
acquisition date is on or after Company's fiscal year beginning October 1, 2009.
While the Company has not yet evaluated this statement for the impact, if any,
that SFAS No. 141(R) will have on its consolidated financial statements, the
Company will be required to expense costs related to any acquisitions after
September 30, 2009.
  39
  In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles."  This Statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).  This Statement will not have an
impact on the Company's financial statements.
  In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60."  The
scope of this Statement is limited to financial guarantee insurance (and
reinsurance) contracts, as described in this Statement, issued by enterprises
included within the scope of Statement 60. Accordingly, this Statement does not
apply to financial guarantee contracts issued by enterprises excluded from the
scope of Statement 60 or to some insurance contracts that seem similar to
financial guarantee insurance contracts issued by insurance enterprises (such as
mortgage guaranty insurance or credit insurance on trade receivables). This
Statement also does not apply to financial guarantee insurance contracts that
are derivative instruments included within the scope of FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
will not have an impact on the Company's financial statements.
  Note
3 - Property and Equipment
  The
property & equipment comprised of the following at December 31:
  2008
                        
                        
                        2007Equipment
                        
                        $
                        934,964
                        
                        
                        $
                        544,896Furniture
                        
                        
                        141,078
                        
                        
                        
                        94,067Leasehold
      improvement
                        
                        
                        89,768
                        
                        
                        
                        -1,165,810
                        
                        
                        
                        638,963Less
      accumulated depreciation
                        
                        
                        (464,522
                        )
                        
                        
                        (239,070
                        )$
                        701,289
                        
                        
                        $
                        399,893
  Depreciation
expense was $255,451 and $156,071 for the years ended December 31, 2008 and
2007, respectively.
  40
  Note
4 - Intangible Assets
  Intangible
assets include software solutions and domain names, and the related accumulated
amortization as of December 31 are  as follows:
  2008
                          
                          
                          2007Software
      solutions
                          
                          $
                          546,912
                          
                          
                          $
                          476,441Domain
      name
                          
                          
                          32,321
                          
                          
                          
                          32,321579,233
                          
                          
                          
                          508,762Less
      accumulated amortization
                          
                          
                          (372,625
                          )
                          
                          
                          (182,501
                          )$
                          206,608
                          
                          
                          $
                          326,261
  Amortization
expense was $185,624 and $141,861 for the years ended December 31, 2008 and
2007, respectively.
  Amortization
expenses of intangible assets over the next two years are as
follows:
  Amortization2009:
                      
                      $
                      165,1272010:
                      
                      $
                      123,846
  Note
5 – Advances
  2008
                    
                    
                    2007Software
      development - messaging
                    
                    
                    -
                    
                    
                    $
                    170,000
  During
the year ended December 31, 2008 the company impaired the advance for the
software as the software development was discontinued and the advance was not
recoverable.
  Note
6 - Deposits
  Deposits
comprised of the following at December 31, 2008:
 
 2008
                        
                        
                        2007Rent
      deposit – Mountain View
                        
                        $
                        114,750
                        
                        
                        $
                        56,990Rent
      deposit – Los Angeles
                        
                        
                        2,189
                        
                        
                        
                        -Rent
      deposit – Vietnam
                        
                        
                        10,000
                        
                        
                        
                        -Attorney
      retainer deposit
                        
                        
                        50,000
                        
                        
                        
                        50,000Others
                        
                        
                        8,354
                        
                        
                        
                        -$
                        185,293
                        
                        
                        $
                        106,990
  41
  Note
7 – Investment
  In 2005,
a subsidiary of the Company, hereUare Communications, Inc., made a cash
investment of $1,000,000 in a company engaged in the internet search engine
business. The Company acquired hereUare Communications, Inc. in September 2006.
The investment represented approximately 10.5% of the search engine company. As
of December 31, 2008, the Company  determined that the value of the
investment was impaired based upon the financial condition of the search engine
company.  The Company determined that the entire investment was impaired as
the Company does not expect recovery of its investment.
  Note
8 - Accounts Payable and Accrued Expenses
  Account
payable and accrued expenses comprised of the following at December
31:
  2008
                          
                          
                          2007Accounts
      payable
                          
                          $
                          378,873
                          
                          
                          $
                          237,573Accrued
      litigation
                          
                          
                          72,000
                          
                          
                          
                          72,000Other
      accrued expenses
                          
                          
                          65,600
                          
                          
                          
                          89,866$
                          511,472
                          
                          
                          $
                          399,439
  Note
9 - Related Party Transactions
  During
the year ended December 31, 2008, the Company received $309,070 from eCapital
Group, Inc., a company owned by the CEO of the Company.  The amounts are
due on demand, interest-free and unsecured as of December 31, 2007.
  42
  Related
party receivables of $11,248 included travel advance of $8,618 to the CEO of the
Company, and $2,630 due from eCapital Group, Inc., a company owned by the CEO of
the Company. The amounts are due on demand, interest free and unsecured as of
December 31, 2007.
  Deferred
revenue as at December 31, 2008 amounted $12,390. The amount was deferred as
part of sale to eCapital, a company controlled by our CEO.
  Note
10 - Income Taxes
  No
provision was made for Federal income tax since the Company has significant net
operating loss carry forward. Through December 31, 2008, the Company incurred
net operating losses for tax purposes of approximately $27,547,000. The net
operating loss carry forward may be used to reduce taxable income through the
year 2028. Net operating loss carry forward for the State of California is
generally available to reduce taxable income through the year 2018. The
availability of the Company's net operating loss carry forward is subject to
limitations if there is a 50% or more change in the ownership of the Company's
stock.
  The
following is a reconciliation of the provision for income taxes at the U.S.
federal income tax rate to the income taxes reflected in the Consolidated
Statements of Operations:
  2008
                              
                              
                              2007The
      United States Tax Rates - Federal
                              
                              
                              -34
                              %
                              
                              
                              -34
                              %State
      tax
                              
                              
                              -6
                              %
                              
                              
                              -6
                              %Vietnam
      Tax Rate
                              
                              
                              -25
                              %
                              
                              
                              -25
                              %Changes
      in valuation allowance
                              
                              
                              65
                              %
                              
                              
                              65
                              %Tax
      expense at actual rate
                              
                              
                              -
                              
                              
                              
                              -
  Income
tax expense consisted of the following:
 
 2008
                                              
                                              
                                              2007Current
      tax expense:The
      United States Federal
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -State
                                              
                                              
                                              2,520
                                              
                                              
                                              
                                              1,849Vietnam
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Total
      Current
                                              
                                              $
                                              2,520
                                              
                                              
                                              $
                                              1,849Deferred
      tax credit:The
      United States Federal
                                              
                                              $
                                              2,695,000
                                              
                                              
                                              $
                                              866,654State
                                              
                                              
                                              449,000
                                              
                                              
                                              
                                              152,939Vietnam
      Deferred Tax
                                              
                                              
                                              65,000
                                              
                                              
                                              
                                              -Total
      deferred tax asset (liabilities)
                                              
                                              $
                                              3,209,000
                                              
                                              
                                              $
                                              1,019,593Less:
      valuation allowance
                                              
                                              
                                              (3,209,000
                                              )
                                              
                                              
                                              (1,019,593
                                              )Net
      deferred tax credit
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Tax
      expense
                                              
                                              $
                                              2,520
                                              
                                              
                                              $
                                              1,849
  43
  The
components of the net deferred tax asset are summarized below:
  2008
                          
                          
                          2007Deferred
      tax asset
                          
                          $
                          10,663,000
                          
                          
                          $
                          7,454,000Valuation
      allowance
                          
                          
                          (10,663,000
                          )
                          
                          
                          (7,454,000
                          )$
                          -
                          
                          
                          $
                          -
  Due to
the uncertainty of future taxable income and limitations related to Section 382
of the Internal Revenue Code, a 100% valuation allowance for the net amount of
the deferred tax assets has been recorded at December 31, 2008 and
2007.
  Note
11 - Commitments and Contingencies
  As a
result of litigation against its prior parent corporation, Pacific Systems
Control Technology ("PSCT"), PSCT and its subsidiaries, including the Company,
entered into a global settlement and mutual release of all claims with a former
PSCT employee. Under the agreement, PSCT and the other former parties to the
litigation, including the Company, agreed to pay to the former employee a total
sum of $100,000 plus interest at the rate of 10% per year, payable in
installments at the rate of $3,000 per month. As of December 31, 2004, the
outstanding balance under the settlement agreement was $72,000. The Company
accrued the $72,000 on its financial statements as of December 31, 2004 in the
event PSCT is unable to fulfill its obligations under the settlement
agreement.
  On June
8, 2006, the Company entered into a 5-year lease agreement with CarrAmerica
Techmart which expires on June 15, 2011. Rent expenses in future periods
pursuant to this lease agreement are shown below. In July 2008, we subleased the
space for the remainder of the lease term to Egenera, Inc. pursuant to a
sublease agreement by which the sublessee pays for all of the future rent
expenses.
  2008:
                    
                    $
                    21,8492009:
                    
                    $
                    90,6282010:
                    
                    $
                    93,3522011:
                    
                    $
                    55,311
  On August
1, 2007, the Company entered into a lease for 530 square meters of office space
in Vietnam with Nguyen Van Tan and Vo Thi Ngoc Lan which expires on August 1,
2012. The lease commences on August 1, 2007 and rent expense is fixed at $4,200
per month. The Company prepaid the rent under this lease for 24 months through
July 31, 2009.
  On
January 28, 2008, the Company entered into a 5-year lease agreement, with an
option to purchase, with 1061 Terra Bella Associates, LLC, which expires on
February 28, 2013. Rent expense per this new lease agreement is as
following:
  2008:
                    
                    $
                    183,6002009:
                    
                    $
                    283,9002010:
                    
                    $
                    294,1002011:
                    
                    $
                    304,3002012:
                    
                    $
                    314,500Thereafter:
                    
                    $
                    52,700
  44
  Note
12 - Acquisition of hereUare Communications, Inc.
  On August
25, 2006, the Company entered into an Agreement and Plan of Merger (the
"Agreement"), with hereUare Communications, Inc., a privately-held Delaware
corporation ("hereUare"). The transaction closed on September 22, 2006 and
pursuant to terms of the Agreement, the Company effectively acquired hereUare as
a wholly owned subsidiary of the Company.  hereUare is an operator of
web-based search engine and other Internet software solutions founded in
2002.  As a result, the assets and liabilities of hereUare as of December
31, 2006 have been included in the consolidated financial statements of this
annual report.
  The
consideration paid by the Company for 100% of the outstanding shares (15,985,500
shares) of hereUare prior to the transaction, consisted of a total of 15,985,500
shares of newly issued common stock of the Company.
  The
acquisition price was determined at $31,971,000 which is determined by the
number of shares of the Company's stock issued at $2 per share, the then fair
market value of the shares as evidenced by the sale of the Company's shares to
investors immediately prior to the closing of the acquisition. The amount of
acquisition price in excess of the net equity value of hereUare on the
acquisition date is recorded on the consolidated balance sheet as a deemed
dividend of $30,809,799 because the major shareholder and CEO of hereUare was
also a major stockholder and CEO of the Company at the time of the
acquisition.
  The
purchase price allocation is as follows:
  Cash
                                
                                $
                                474,851Prepaid
      expenses
                                
                                
                                34,251Property,
      plant & equipment
                                
                                
                                33,326Intangible
      asset
                                
                                
                                4,368Investment
                                
                                
                                1,000,000Deposit
                                
                                
                                1,994Total
      assets
                                
                                
                                1,548,791Less:Accounts
      payable and accruals
                                
                                
                                30,360Due
      to related parties
                                
                                
                                357,230Total
      liabilities
                                
                                
                                387,590Total
      acquisition cost
                                
                                $
                                1,161,201CostTotal
      investment
                                
                                $
                                31,971,000Total
      acquisition cost
                                
                                
                                1,161,201Deemed
      dividend
                                
                                $
                                30,809,799
  45
  The
following is the proforma combined financial information of the Company and
hereUare, for the annual period ended December 31, 2006, assuming the
transaction had been consummated at the beginning of the fiscal year of
2006:
  Proforma(unaudited)2006Statement
      of Operations:Revenues
                                
                                $
                                42,810Cost
      of sales
                                
                                
                                77,952Gross
      profit (Loss)
                                
                                
                                (35,142
                                )Operating
      expenses
                                
                                
                                13,542,787Loss
      from operations
                                
                                
                                (13,577,929
                                )Other
      income
                                
                                
                                5,177Loss
      before income taxes
                                
                                
                                (13,572,752
                                )Provision
      for income taxes
                                
                                
                                800Net
      loss
                                
                                $
                                (13,573,552
                                )Basic
      & diluted weighted average number of common stock
      outstanding
                                
                                
                                33,274,978Basic
      & diluted loss /share
                                
                                $
                                (0.41
                                )
  Note
13 - Common Stock / Options
  Common
Stock
  2008
  During
the year ended December 31, 2008, the Company issued the 298,449 shares of
common stock for $2,686,028 in cash at the price of $9 per share, and
repurchased 100,000 shares for $50,000 into treasury stock. Shares to be issued
amounted to $45,000 as at December 31, 2008.
  2007
  During
the year ended December 31, 2007, the Company issued the following amounts of
common stock:
  501,862
      shares
              
              For
      cash6,333
      shares
              
              For
      stock subscription receivable7,001
      shares
              
              For
      exercise of stock options20,000
      shares
              
              For
      services
  46
  Stock
Options
  On
February 1, 2007, the Company granted a total of 287,000 options with an
exercise of $6.00 per share to 5 employees and 1 consultant, and these options
expire in 5 years. These options vest over four years per the schedule of 25%
after one year of service and monthly thereafter over the next 36 months at the
rate of 2.083%.
  Between
August 13 and October 1, 2007, the Company granted a total of 758,000 options
with an exercise of $6.00 per share to 8 employees and 3 consultants, and these
options expire in 5 years. These options vest over four years per the schedule
of 25% after one year of service and monthly thereafter over the next 36 months
at the rate of 2.083%.
  On August
13, 2007, the Company granted a total of 144,000 options with an exercise price
of $6.00 per share to 3 non-employee directors for their services on the Audit
Committee and the Compensation Committee of the Board, and these options expire
in 5 years.  These options vests over three years on a monthly basis at the
rate of 2.778%.
  Between
October 18 and December 14, 2007, the Company granted a total of 140,000 options
with an exercise of $9.00 per share to 2 consultants, and these options expire
in 5 years. These options vest over four years per the schedule of 25% after one
year of service and monthly thereafter over the next 36 months at the rate of
2.083%.
  On June
25, 2007, the Board of Directors approved the extension of expiration of 350,000
options which would expire on December 31, 2007, for another 2 years to
December 31, 2009.
  On
December 17, 2007, the Board of Directors approved the extension of expiration
of 75,000 options which would expire on November 18, 2007, for another 3 years
to November 18, 2010.
  Between
January 22 and March 17, 2008, the Company granted a total of 560,000 options
with an exercise price of $9.00 per share to 3 employees and 1 consultant. These
options expire in 5 years and vest between one to four years.
  Between
May 19 and June 23, 2008, the Company granted a total of 55,000 options with an
exercise price of $9.00 per share to 2 employees. These options expire in 5
years and vest between one to four years.
  On
September 2, 2008, the Company granted a total of 200,000 options with an
exercise price of $9.00 per share to 3 employees.  These options expire in
5 years and vest over 4 years.
  Due to
the termination of employees and contractors, the number of options that expired
within the year ended December 31, 2008 was 2,868,000 shares.
  The
following summary presents the incentive and non-qualified options under the
plan granted, exercised, expired and outstanding at December 31,
2008:
 
 WeightedAverage
                            
                            
                            AggregateExercise
                            
                            
                            IntrinsicUnder
      Plan
                            
                            
                            Price
                            
                            
                            ValueBalance,
      December 31, 2007
                            
                            
                            7,436,999
                            
                            
                            
                            1.86
                            
                            
                            $
                            13,832,818Granted
                            
                            
                            815,000
                            
                            
                            
                            9.00Lapsed
                            
                            
                            2,868,000
                            
                            
                            
                            5.42Exercised
                            
                            
                            0
                            
                            
                            
                            -Balance,
      December 31, 2008
                            
                            
                            5,383,999
                            
                            
                            
                            0.97
                            
                            
                            $
                            5,222,479
 
 47
  The
following summary presents the weighted average exercise prices, number of
options outstanding and exercisable, and the remaining contractual lives of the
Company's stock options at December 31, 2008:
  OptionsOutstanding
                                            
                                            
                                            
                                            Options ExercisableWeightedAverage
                                            
                                            Weighted
                                            
                                            
                                            
                                            WeightedRemaining
                                            
                                            Average
                                            
                                            
                                            
                                            AverageNumber
                                            
                                            Contractual
                                            
                                            Exercise
                                            
                                            Number
                                            
                                            ExerciseOutstanding
                                            
                                            Life
                                            
                                            Price
                                            
                                            Exercisable
                                            
                                            PriceOptions
                                            
                                            
                                            5,383,999
                                            
                                            
                                            0.97
                                            
                                            $
                                            0.97
                                            
                                            
                                            5,137,103
                                            
                                            $
                                            0.79
  Prior to
January1, 2006, the Company measured stock compensation expense using the
intrinsic value method of accounting in accordance with Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations (APB No. 25).
  The
Company adopted SFAS No. 123-R effective January 1, 2006 using the modified
prospective method. Under this transition method, stock compensation expense
recognized in the annual periods ended December 31, 2008 and 2007 include
compensation expense for all stock-based compensation awards vested during the
annual periods ended December 31, 2008 and 2007, based on the grant-date fair
value estimated in accordance with the provisions of SFAS No.
123-R.
  Methods of estimating fair
value
  Under
both SFAS No. 123-R and under the fair value method of accounting under
SFAS No. 123 (i.e., SFAS No. 123 Pro Forma), the fair value of stock
options is determined using the Black-Scholes model.
  Significant assumptions used to
estimate fair value
  The
weighted-average assumptions used in estimating the fair value of stock options
granted were as follows:
  The fair
value of options granted in 2008 was estimated at grant date using a
Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rates between 2.20% and 3.62%; dividend yield of
0%; expected weighted average option life of 5 years; and volatility based on an
average of the volatilities of two other companies in the same industry, since
the Company's stock is not traded on any public market. The fair market value of
the shares was taken as the fair market price of sale of the Company's shares to
investors immediately prior to the grant of options.
  48
  Under
SFAS No. 123-R, the Company's expected volatility assumption is based on the
historical volatility of the two companies in the similar industry.
  Warrants
  In a
settlement with three shareholders in December 2006, the Company granted a
three-year warrant to purchase 750,000 shares of the Company's stock at $6 per
share. The non-cash expense of the warrant, calculated by a Black-Scholes model,
in the amount of $1,238,303 was recorded in the Company's financial statements
for the year ended December 31, 2006.
  There
were no warrants granted in the years ended December 31, 2008 and
2007.
  The
following summary presents the warrants granted, exercised, expired and
outstanding at December 31, 2008:
  WeightedAverage
                          
                          
                          AggregateExercise
                          
                          
                          IntrinsicPrice
                          
                          
                          ValueBalance,
      December 31, 2007
                          
                          
                          750,000
                          
                          
                          $
                          6.00
                          
                          
                          $
                          -Granted
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Exercised
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Balance,
      December 31, 2008
                          
                          
                          750,000
                          
                          
                          $
                          6.00
                          
                          
                          $
                          -
  The
following summary presents the weighted average exercise prices, number of
warrants outstanding and exercisable, and the remaining contractual lives of the
Company's warrants at December 31, 2008:
  WarrantsOutstanding
                
                
                
                Warrants
      ExercisableWeightedAverage
                
                Weighted
                
                
                
                WeightedRemaining
                
                Average
                
                
                
                AverageNumber
                
                Contractual
                
                Exercise
                
                Number
                
                ExerciseOutstanding
                
                Life
                
                Price
                
                Exercisable
                
                PriceWarrants
                
                
                750,000
                
                
                0.97
                
                $
                6.00
                
                
                750,000
                
                $
                6.00
  Note
14 - Going concern
  The
Company's consolidated financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has an accumulated deficit of $75,205,829 at
December 31, 2008. The Company incurred a net loss of $8,156,861 and $4,039,533
for the years ended December 31, 2008 and 2007, respectively, and as of December
31, 2008, had cash of only $6,900 and working capital of ($835,625). In view of
the matters described above, recoverability of a major portion of the recorded
asset amounts shown in the accompanying balance sheets is dependent upon
continued operations of the Company, which in turn is dependent upon the
Company's ability to raise additional capital, obtain financing and to succeed
in its future operations. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
  49
  Management's
plans and the ongoing operations of the Company are expected to require
additional working capital in the next twelve months. However, there can be no
assurance that sufficient capital could be raised at acceptable terms due to
current investment climate.
  50


Item
9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure.




Not
applicable.




51




Item
9A(T). Controls and Procedures




(a)
Disclosure Controls and Procedures.




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




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




Evaluation of Disclosure Controls
and Procedures. Our principal executive and financial officer has
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as defined in Exchange Act Rules 13a-14(c) as of
December 31, 2008, and has determined that they are reasonably effective, taking
into account the totality of the circumstances, including the limitations
described above.




(b)
Internal Control over Financial Reporting.




Our
management is responsible for establishing and maintaining adequate internal
control over our financial reporting, which is designed to provide reasonable
assurance regarding the reliability of our financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. Internal control over financial
reporting includes those policies and procedures that: (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of our assets; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. generally accepted accounting
principles, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.




52




Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, assessed the effectiveness of our internal control over
financial reporting as of December 31, 2008. In making this assessment we
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control - Integrated
Framework.




Based on
the assessment using those criteria, management concluded that, as of
December 31, 2008, our internal control over financial reporting is
effective. Our assessment takes into consideration that we currently have little
or no revenue and inventory so that the impact of revenue recognition and
inventory write-down policies and controls has not been material to our
financial reporting. We currently maintain our books using QuickBooks and we
intend to switch as our business grows.




This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities Exchange
Commission that permit us to provide only management's report on internal
control over financial reporting in this annual report.




There
were no significant changes in the Company's internal control over financial
reporting that occurred during the Company's fiscal 2008 fourth quarter ended
December 31, 2008, that have materially affected, or are reasonably likely to
materially affect, such control.




Item
9B. Other Information.




None.




PART
III




Item
10. Directors, Executive Officers and Corporate Governance




Our
directors, executive officers and key employees and their respective ages and
positions are set forth below. Biographical information for each of those
persons is also presented below. Our executive officers are appointed by our
Board of Directors and serve at its discretion.




MANAGEMENT




Directors
and Executive Officers




The
following table sets forth, as of March 31, 2009, the names and ages of all of
our directors and executive officers and all positions and offices held. All
directors hold office until such director's successor is elected and qualified.
Each officer serves at the pleasure of the board and may be removed at any time
by a vote of a majority of the authorized directors.  It is anticipated
that each of the remaining directors and executive officers will continue in his
position, although there is no understanding or arrangement to that effect.
However, any of the above directors or executive officers could resign and any
of the officers could be replaced or removed by the Board of Directors at any
time. There are no family relationships among any directors or executive
officers of the Company.




53




Name
              Age
              Position
      with the CompanyBenedict
      Van
              48
              Chief
      Executive Officer, Chief Financial Officer, and Chairman of the Board of
      DirectorsJames
      McCargo
              57
              DirectorDavid
      A. Brewer
              56
              Director




The board
of directors has appointed committees of the board comprising a compensation
committee and an audit committee. The members of both committees are the
Company's independent directors, Messrs. Brewer and McCargo.




Business
Experience




The
following summarizes the occupation and business experience during the past five
years for our officers and directors.




Benedict Van. Since 2002, Mr.
Van has served as Chairman of the Board of Directors, CEO and CFO of
hereUare, Inc. Mr. Van has over 22 years of success and experience as a tech
visionary, with a specialty in building and restructuring high tech related
companies. In 1996, he founded eCapital Group, an investment firm specialized in
nurturing high tech, biotech, and energy ventures through their development
stages. Portfolio investments for eCapital Group have included hereUare
Communications, eCity, Inc., 3E Systems, Inc., hereUare, Inc., 3Net
Communications Corporation, PeopleWeb Communications, Inc., BenSys Corporation,
and Doles Networks Corporation. Prior to eCapital, he founded in 1985 Crownland
Group of Companies and served as CEO of the international conglomerate that
engaged in venture capital investments in telecom, electronics, and medical
devises. Crownland invested successfully into Biocompatible, Inc., and Cardio
Genesis (formerly Eclipse Surgical Technology, Inc.). Mr. Van received his
Doctorate of Business Administration from University of the
Pacific.




James McCargo. Mr. McCargo has
served as a member of our Board of Directors since November 2004. Mr. McCargo
served as President and CEO of Omega Designs, and was the principal founder of
InterArt Designs. Before founding InterArt, Mr. McCargo spent over 20 years
involved in the computer and high-tech industry, including positions with
Fairchild Semiconductors, Hunt Chemical, and 3M Corporation. Mr. McCargo served
as a Trustee for the University of the Pacific, and was the Vice Chairman of the
Board of Regents for the University of the Pacific. Mr. McCargo holds a
Bachelor's of Arts degree in pre-law from University of the
Pacific.


54




David A. Brewer. Mr. Brewer
has served as a member of our Board of Directors since February 2006. Mr. Brewer
is the Managing Partner of Aragon Ventures, a Menlo Park, California venture
capital firm specializing in early stage, high technology companies. He serves
on the boards of directors of Notify Technology Corp., Cuica Technologies, Inc.,
FirstStone Incubators LLC, and PriaVision, Inc.  He currently serves as an
officer, director or advisor to two other investment companies.  Mr. Brewer
is also the Chairman of End Poverty Foundation, a nonprofit organization
dedicated to the eradication of poverty through empowerment of entrepreneurs in
developing countries, and a board member of the SEEP Network.  Before
forming Aragon Ventures in 1998, Mr. Brewer was a co-founder and the initial
President of Inktomi Corporation, an Internet infrastructure software company
which was subsequently acquired by Yahoo, Inc.  In his over thirty years in
high technology start-ups, he also served as president or chief financial
officer in several early stage companies, including Explore Technologies
(electronic educational toys), eFax.com, formerly JetFax, (advanced fax
technology products), Monogram Software (consumer financial software), Telebit
(high speed modems and other data communications equipment) and Packet
Technologies (two-way interactive cable television communication systems). 
Mr. Brewer holds a Bachelor's of Science degree in business from the University
of California, Berkeley, and a Juris Doctor from the University of San
Francisco.






Section
16(a) Beneficial Ownership Reporting Compliance




Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's
directors, executive officers and beneficial owners of more than 10% of the
Company's common stock to file with the Securities and Exchange Commission (SEC)
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company.  The Company typically files
these reports on behalf of its directors and officers, based on information
provided by them.  The Company believes, based on its review of Forms 3, 4,
5, if any, and periodic written representations from reporting persons, that all
other officers, directors and holders of more than 10% of the Company's common
stock complied with all Section 16(a) filing requirements for the 2008 fiscal
year.




Code
of Ethics




The
Company adopted, on June 25, 2007, a code of business conduct and ethics that
applies to its executive officers as it institutionalizes corporate governance
procedures. Our code of business conduct and ethics can be found on our website:
hereUare.com


55





Audit
Committee Financial Expert




The board
of directors has determined that independent director David A. Brewer qualifies
as a financial expert and he serves as the chairperson of the board's audit
committee.




Item
11. Executive Compensation




The
following table sets forth the compensation paid by the Company to its officers
and directors for services rendered during the periods indicated. No other
executive officer received compensation in excess of $100,000 during the
specified periods.





Name
                                                                      Position
                                                                      Year
                                                                      
                                                                      Salary
                                                                      
                                                                      Directors
                                                                        Fees Earned
                                                                        or Paid in
                                                                        Cash
                                                                      Option Awards
                                                                        (1)
                                                                      Other
                                                                        Compensation
                                                                      
                                                                      TotalBenedict
                                                                      Chief
      Executive
      Officer
      & Chief
                                                                      2008
                                                                      
                                                                      $
                                                                      80,000
                                                                      (2)
                                                                      None
                                                                      None
                                                                      None
                                                                      
                                                                      $
                                                                      80,000Van
                                                                      Financial
      Officer (4) & Chairman ofthe
      Board & Director
                                                                      2007
                                                                      
                                                                      $
                                                                      120,000
                                                                      
                                                                      None
                                                                      None
                                                                      None
                                                                      
                                                                      $
                                                                      120,000Anthony
      K .
                                                                      Chief
      Financial Officer & Secretary
                                                                      2008
                                                                      
                                                                      $
                                                                      100,000
                                                                      
                                                                      None
                                                                      None
                                                                      None
                                                                      
                                                                      $
                                                                      100,000Chan
      (3)
                                                                      &
      Director2007
                                                                      
                                                                      $
                                                                      120,000
                                                                      
                                                                      None
                                                                      None
                                                                      None
                                                                      
                                                                      $
                                                                      120,000James
      McCargo
                                                                      Director
                                                                      2008
                                                                      
                                                                      None
                                                                      
                                                                      None
                                                                      None
                                                                      $10,000
                                                                      
                                                                      $
                                                                      10,000David
      A. Brewer
                                                                      Director
                                                                      2008
                                                                      
                                                                      None
                                                                      
                                                                      None
                                                                      None
                                                                      None
                                                                      
                                                                      NoneGregory
      B. Pelling (4)
                                                                      Director
                                                                      2008
                                                                      
                                                                      None
                                                                      
                                                                      None
                                                                      None
                                                                      None
                                                                      
                                                                      None




(1)
As of December 31, 2008, Mr. McCargo held 422,000 options, Mr. Brewer held
304,000 options and Mr. Pelling held 298,000 options.




(2)  Salary
through August
2008, after which time Mr. Van did not receive compensation and served at no
charge to the Company.




(3)  Resigned
as Chief Financial Officer and member of the Board of Directors as of December
4, 2008.  Mr. Van has assumed the responsibilities of the Chief
Financial Officer until an appropriate successor is appointed.




(4)  Resigned
as a member of the Board of Directors as of February 27, 2009.





56





Our
executive officers currently receive a base salary, which is less than market,
and no bonus.  The bulk of their compensation is long-term equity
appreciation which aligns their interests with those of our stockholders. 
As we hire additional executive officers as our business expands, they will
likely receive market compensation packages, including base salary, bonus, and
option grants.  Mr. Van does not have an employment contract.




Our
outside directors currently receive no directors fees but instead receive an
option grant upon their joining the board.  On June 25, 2007, our board
appointed our three independent directors (Brewer, McCargo and Pelling) to the
audit committee and the compensation committee. For their services on such
committees of the board over the next three years, the three independent
directors were granted a total of 144,000 options that vest over a 36-month
period and are exercisable at $6.00 per share.  No option grants were
made to the directors in 2008.  The options described in this paragraph
represent all options granted to our directors in fiscal years 2007 and
2008.




The
following table shows certain information with respect to unexercised options
held on December 31, 2008, by the named executive officers:





Name
                  
                  Number of
                    securities
                    underlying
                    unexercised options
                    Exercisable
                  
                  
                  Number of securities
                    underlying
                    unexercised options
                    Unexercisable
                  
                  
                  Option
                    Exercise Price
                  
                  Option
                    Expiration DateBenedict
      Van, Chief Executive Officer, Chairman of the Board, and
      Director
                  
                  
                  2,699,999
                  
                  
                  
                  0
                  
                  
                  $
                  0.08
                  
                  5/18/2009Anthony
      K. Chan, Chief Financial Officer and Director
                  
                  
                  600,000
                  
                  
                  
                  0
                  
                  
                  $
                  0.08
                  
                  5/18/2009




Item
12. Security Ownership of Certain Beneficial Owners and Management




The
following table sets forth, as of March 31, 2009, certain information with
respect to stock ownership of:




·
            all
      persons known by us to be beneficial owners of 5% or more of our
      outstanding shares of $0.0001 par value Common
  Stock;


·
            each
      director and officer; and


·
            all
      directors and officers as a group.




The table
assumes a total of 34,438,313 shares of common stock outstanding. In calculating
the number of shares of common stock beneficially owned by a person or group and
the percentage ownership of that person or group, we deemed outstanding shares
subject to options or warrants held by that person or group that are currently
exercisable or exercisable within 60 days of March 31, 2009. We did not deem
these shares outstanding, however, for the purpose of computing the percentage
ownership of any other person or group.





57




Name and Address of Beneficial Owner (6)
                
                Number of Shares of
                  Common Stock (7)
                
                
                Percentage of
                  Common Stock
                  Ownership*ECapital
      Group, Inc. (1)
                
                
                13,769,886
                
                
                
                39.98
                %PeopleWeb
      Communications, Inc. (1)
                
                
                3,060,229
                
                
                
                8.89
                %Adel
      M. Ali
                
                
                3,260,000
                
                
                
                9.47
                %Benedict
      Van (director and executive officer) (1)
                
                
                2,886,358
                (2)
                
                
                7.78
                %Anthony
      K. Chan (director and executive officer)
                
                
                249,146
                
                
                
                *James
      McCargo (director)
                
                
                392,833
                (3)
                
                
                1.13
                %David
      A. Brewer (director)
                
                
                391,500
                (4)
                
                
                1.13
                %Gregory
      B. Pelling (director)
                
                
                0
                
                
                
                *All
      Directors and Officers as a group (5 persons)
                
                
                3,919,837
                (5)
                
                
                10.38
                %




* Less
than 1%




(1) Mr.
Van is also the controlling person of eCapital Group, Inc. ("eCapital"), and
through eCapital he also controls  PeopleWeb Communications, Inc.
("PeopleWeb"). Mr. Van disclaims beneficial ownership of the Company shares
owned by eCapital and PeopleWeb. His pecuniary interest in the Company's shares,
based on his percent ownership of such entities would be approximately
12,385,000 and 1,826,000 shares, respectively. Mr. Van is the sole director of
eCapital and the sole director of PeopleWeb. Including his pecuniary interest in
such entities and his options described in Note (2) below, Mr. Van would
beneficially own 17,097,358 shares which is 46.07%.




(2)
Includes 2,699,999 shares issuable upon exercise of options exercisable within
sixty days of March 31, 2009.




(3)
Includes 392,833 shares issuable upon exercise of options exercisable within
sixty days of March 31, 2009.




(4)
Includes 266,500 shares issuable upon exercise of options exercisable within
sixty days of March 31, 2009.




(5)
Includes 3,359,332 shares issuable upon exercise of options exercisable within
sixty days of March 31, 2009. This total excludes shares of ECapital Group, Inc.
and PeopleWeb Communications which Mr. Van may be deemed to beneficially own per
note (1). Including his pecuniary interest in such entities, officer and
directors as a group would beneficially own 18,130,837 shares which is
48.01%.




(6) The
address for the directors and executive officers, and for Mr. Ali, is c/o
hereUare, Inc., 228 Hamilton Ave.,
3rdfloor, Palo Alto, CA
94301.




The address for ECapital Group is 575 Middlefield Rd.,
Palo Alto, CA 94031.




The address for PeopleWeb Communications is 575
Middlefield Rd., Palo Alto, CA 94031.





58




(7) To
the Company's knowledge, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws, where
applicable, and the information contained in the footnotes to this
table.




Securities
Authorized for Issuance under Equity Compensation Plans




As of
December 31, 2008, the table below provides the indicated information with
respect to compensation plans.







(c)Number ofsecurities remaining
                
                
                (a)available for
                
                
                Number of
                
                
                (b)future issuance
                
                
                securities to
                
                
                Weightedunder equity
                
                
                be issued upon
                
                
                average exercisecompensation
                
                
                exercise of
                
                
                price ofplans(excluding
                
                
                outstanding
                
                
                outstandingsecurities reflected
                
                
                options, warrants
                
                
                options, warrantsPlan Category
                
                in column(a))
                
                
                and rights
                
                
                and rightsEquity
      compensation plans approved by security holders
                
                
                -
                
                
                
                -
                
                
                
                -Equity
      compensation plans not approved by security holders
                
                
                13,616,001
                
                
                
                5,383,999
                
                
                $
                0.97





59




Item
13. Certain Relationships and Related Transactions, and Director
Independence.




Using the
standard for independence promulgated by The Nasdaq Stock Market, Inc., each of
Messrs. McCargo, Brewer and Pelling are independent.  Each of Messrs.
Benedict Van and Anthony Chan are not independent.




Item
14. Principal Accounting Fees and Services.




During
the years ended December 31, 2008 and 2007, the following audit fees were paid
to Kabani & Company, Inc.. There were no tax or other fees paid.




Description
      of Services
                  
                  2008
                  
                  
                  2007Audit
      Fees
                  
                  $
                  45,500
                  
                  
                  $
                  45,500Audit-Related
      Fees
                  
                  
                  -
                  
                  
                  
                  -Tax
      Fees
                  
                  
                  -
                  
                  
                  
                  -All
      Other Fees
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  45,500
                  
                  
                  $
                  45,500




The audit
fees for 2008 were pre-approved by the audit committee.




Item
15. Exhibits, Financial Statement Schedule.




(a)
Exhibits and Index of Exhibits.




See Index
to Exhibits on page 62 of this Form 10-K.





60




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) 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.




Dated:
April 15, 2009




hereUare,
Inc.


By:
                /s/ Benedict
Van


Benedict
Van


Chairman
of the Board and Chief Executive Officer


(Principal
Executive Officer)




POWER
OF ATTORNEY




KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Benedict Van as his attorney-in-fact, with the power of
substitution, for him in any and all capacities, to sign this report on Form
10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.




In
accordance with the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.




Signature
                
                Title
                
                DateBy: /s/ Benedict Van
                
                Chief
      Executive Officer (Principal Executive Officer),
                
                April
      15, 2009Benedict
      Van
                
                ChiefFinancial Officer and Chairman of the Board of
      DirectorsBy: /s/ James McCargo *
                
                Member
      of the Board of Directors
                
                April
      15, 2009James
      McCargoBy: /s/ David A. Brewer *
                
                Member
      of the Board of Directors
                
                April
      15, 2009David
      A. Brewer*
      By BenedictVan,
attorney-in-fact





61




INDEX
TO EXHIBITS




(a)
Exhibits Incorporated by Reference




Exhibit
      No.
                                                  
                                                  Exhibit
      Description3.1(1)
                                                  
                                                  Certificate
      of Incorporation, as amended on July 24, 20013.1(5)
                                                  
                                                  Certificate
      of Ownership and Merger of PeopleNet Name Change Subsidiary, Inc. with and
      into PeopleNet International Corporation3.2(1)
                                                  
                                                  By-laws4.1(1)
                                                  
                                                  2001
      Stock Option Plan4.2(1)
                                                  
                                                  2001
      Non-Employee Director Stock Option Plan4.3(1)
                                                  
                                                  2001
      Stock Incentive Plan10.1(1)
                                                  
                                                  Agreement
      between American Champion Media & American Champion Entertainment
      dated as of July 10, 200110.2(1)
                                                  
                                                  Agreement
      among ACEI, American Champion Media, ECapital Group & Anthony Chan,
      dated as of June 20, 200110.3(1)
                                                  
                                                  Agreement
      between American Champion Media & World Channel dated as of December
      27, 200010.4(1)
                                                  
                                                  Agreement
      between American Champion Media & Brighter Child Interactive dated as
      of September 30, 199910.5(1)
                                                  
                                                  Agreement
      between American Champion Media & Prestige Toys Corp dated as of
      October 13, 199910.6(2)
                                                  
                                                  Agreement
      - Sale of Assets between ECapital Group & PeopleNet International
      dated March 21, 200210.7(2)
                                                  
                                                  Agreement
      - Sale of Assets between PeopleNet Corporation & PeopleNet
      International dated March 21, 200210.8(3)
                                                  
                                                  Lease
      Agreement with CarrAmerica Techmart, LLC10.9(4)
                                                  
                                                  Agreement
      and Plan of Merger with hereUare Communications, Inc., dated August 25,
      200610.10(6)
                                                  
                                                  Lease
      Agreement with 1061 Terra Bella Associates, LLC21.0
      (6)
                                                  
                                                  Subsidiaries
      of the
registrant




1. Filed
as an exhibit to the Company's Form 10-SB/A dated as of December 3,
2001


2. Filed
as an exhibit to the Company's Form 8-K dated as of March 21, 2002, and filed on
April 4, 2002


3. Filed
as Exhibit 10.8 to the Company's quarterly Report on Form 10-QSB filed on August
14, 2006




62




4. Filed
as Exhibit 10.9 to the Company's Form 8-K dated as of August 25, 2006, and filed
on August 31, 2006


5. Filed
as Exhibit 3 to the Company's Form 8-K dated as of March 26, 2007, and filed on
March 29, 2007


6. Filed
as an exhibit to the Company’s Form 10-KSB for the period ending December 31,
2007.




(b)
Exhibits Filed Herewith




24.0
Power of Attorney - see Page 61


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


32.0
Section 1350 Certification




63