UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-Q
 
 (Mark
One)
 
 T
              QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
quarterly period ended June 30, 2008
 
 £
              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from __________ to ___________
 
 Commission
File Number: 333-106247
 
 Remote
Knowledge, Inc.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
                
                74-1664837(State
      or other jurisdiction of incorporation or organization)
                
                (I.R.S.
      Employer Identification
number)
 
 3657
Briarpark Drive, Suite 100, Houston, Texas 77042
 (Address
of Principal Executive offices)      (Zip
Code)
 
 Issuer’s
telephone number: (281) 599-4800
 
 Check
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes £No T
 
 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” and
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 
 Large
      accelerated filer £
                  Accelerated
      filer £Non-accelerated
      filer   £
                  Smaller
      reporting company T(Do
      not check if a smaller reporting
company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £No T.
 
 Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
 Yes £No T.
 
 As of
September 22, 2008, there were 16,800,588 shares of $.01 par value common
stock.
  
 -1-
  RemoteKnowledge, Inc.
 
 INDEX
TO QUARTERLY REPORT ON FORM 10-Q
 
 PagePART
      IItem
      1. Financial Statements
                  3Item
      2. Management’s Discussion and Analysis or Plan of
      Operation
                  10Item
      4. Controls and Procedures
                  14PART
      IIItem
      1. Legal Proceedings
                  15Item
      1A. Risk Factors
                  15Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds
                  15Item
      3. Default Upon Senior Securities
                  15Item
      4. Submission of Matters to a Vote of Security
      Holders
                  15Item
      5. Other Information
                  15Item
      6. Exhibits
                  17
  -2-
 Index
  PART
I — FINANCIAL INFORMATION
 
 Item1. Financial Statements.
 
 Remote
Knowledge, Inc. (the “Company” or “Remote”) completed a financing on August 21,
2008 which will allow the Company to continue operations.  Details of
the financing are included in this filing as a subsequent
event.  Further reference is made to the Form 10-K for the period
ended December 31, 2007, which was filed simultaneous to this
filing.  Updated financial information reflecting the financing will
be reflected in the 3rd quarter
Form 10-Q filing which is planned to be filed in a timely manner by November 19,
2008.  Investors seeking more specific information regarding the
August 21, 2008 financing prior to such filing may contact the
Company.
 
 RemoteKnowledge, Inc.
 (A
Development Stage Enterprise)
 Condensed
Balance Sheet
 
 
 June 30, 2008
                        
                        
                        December 31,

                            2007(unaudited)ASSETSCurrent
      AssetsCash
      and cash equivalents
                        
                        $
                        2,688
                        
                        
                        $
                        1,206Other
      receivables
                        
                        
                        11,089
                        
                        
                        
                        166,303Prepaid
      and other current assets
                        
                        
                        33,952
                        
                        
                        
                        42,836Total
      current assets
                        
                        
                        47,729
                        
                        
                        
                        210,345Property
      and equipment, net
                        
                        
                        119,221
                        
                        
                        
                        195,414Other
      noncurrent assets, net
                        
                        
                        12,510
                        
                        
                        
                        11,703Total
      assets
                        
                        $
                        179,460
                        
                        
                        $
                        417,462LIABILITIES
      AND SHAREHOLDERS’ DEFICITCurrent
      Liabilities:Accounts
      payable — trade
                        
                        $
                        503,127
                        
                        
                        $
                        482,142Accrued
      expenses
                        
                        
                        3,835,248
                        
                        
                        
                        3,316,383Notes
      payable-related party, net of discount of $0 and $4,457,
      respectively
                        
                        
                        3,258,759
                        
                        
                        
                        3,258,802Notes
      payable
                        
                        
                        2,711,617
                        
                        
                        
                        2,122,105Total
      current liabilities
                        
                        
                        10,308,751
                        
                        
                        
                        9,179,432Notes
      payable-related party-long-term, net of discount of $360,111 and $939,894,
      respectively
                        
                        
                        3,584,889
                        
                        
                        
                        3,005,106Total
      liabilities
                        
                        
                        13,893,640
                        
                        
                        
                        12,184,538Shareholders’
      Deficit:Preferred
      stock — series A, $.001 par value; 15,000 shares authorized; 4,274 shares
      issued and outstanding
                        
                        
                        4
                        
                        
                        
                        4Preferred
      stock — series B, $.001 par value; 20,000 shares authorized; 6,204 and
      6,229 shares issued and outstanding, respectively
                        
                        
                        6
                        
                        
                        
                        6Common
      stock, $.001 par value; 150,000,000 shares authorized; 16,800,588 and
      16,767,254 shares issued and outstanding, respectively
                        
                        
                        16,801
                        
                        
                        
                        16,767Additional
      paid-in capital
                        
                        
                        65,348,663
                        
                        
                        
                        65,052,217Subscriptions
      receivable
                        
                        
                        (45,000
                        )
                        
                        
                        (45,000
                        )Accumulated
      deficit
                        
                        
                        (10,234,380
                        )
                        
                        
                        (10,234,380
                        )Deficit
      accumulated during development stage
                        
                        
                        (68,800,274
                        )
                        
                        
                        (66,556,690
                        )Total
      shareholders’ deficit
                        
                        
                        (13,714,180
                        )
                        
                        
                        (11,767,076
                        )Total
      liabilities and shareholders’ deficit
                        
                        $
                        179,460
                        
                        
                        $
                        417,462
 
  The
accompanying notes are an integral part of these financial
statements.
  -3-
 Index
  RemoteKnowledge, Inc.
 (A
Development Stage Enterprise)
 Unaudited
Condensed Statements of Operations
 
 Three-Month
      Periods Ended
                
                
                Six-Month
      Periods Ended
                
                
                Period
      From
                  January
      1, 2001
                  (Inception
      of
                  Development
      Stage)JUNE
      30,
                
                
                JUNE
      30,
                
                
                JUNE
      30,
                
                
                JUNE
      30,
                
                
                to
      JUNE 30,2007
                
                
                2008
                
                
                2007
                
                
                2008
                
                
                2008Revenues
                
                $
                3,116
                
                
                $
                (15,445
                )
                
                $
                6,146
                
                
                $
                (12,329
                )
                
                $
                78,628Cost
      of Goods Sold
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                76,033Gross
      Profit (Loss)
                
                
                3,116
                
                
                
                (15,445
                )
                
                
                6,146
                
                
                
                (12,329
                )
                
                
                2,595Operating Costs and
      Expenses:Advisory
      services
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                4,169,146Research
      and development
                
                
                171,172
                
                
                
                179,926
                
                
                
                432,801
                
                
                
                384,352
                
                
                
                7,429,753Loss
      on impairment of assets
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                2,284,164Professional
      fees
                
                
                78,940
                
                
                
                74,432
                
                
                
                203,949
                
                
                
                91,841
                
                
                
                3,248,216Advertising
      and promotion fees
                
                
                224
                
                
                
                —
                
                
                
                2,354
                
                
                
                —
                
                
                
                1,660,464General
      and administrative expenses
                
                
                659,037
                
                
                
                423,667
                
                
                
                1,420,775
                
                
                
                910,074
                
                
                
                22,584,600Total
      operating costs and expenses
                
                
                909,373
                
                
                
                678,025
                
                
                
                2,059,879
                
                
                
                1,386,267
                
                
                
                41,376,343Loss
      from Operations
                
                
                (906,257
                )
                
                
                (693,470
                )
                
                
                (2,053,733
                )
                
                
                (1,398,596
                )
                
                
                (41,373,748
                )Other
      Expenses(Income):Interest
      expense
                
                
                524,100
                
                
                
                311,535
                
                
                
                966,803
                
                
                
                887,997
                
                
                
                9,591,041Amortization
      of deferred financing costs
                
                
                (964
                )
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,188,432Interest
      income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (21,919
                )Other
      income
                
                
                (567
                )
                
                
                —
                
                
                
                (567
                )
                
                
                52
                
                
                
                12,750Other
      expense
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (27,420
                )Debt
      forgiveness
                
                
                —
                
                
                
                (43,061
                )
                
                
                —
                
                
                
                (43,061
                )
                
                
                (1,761,228
                )Total
      other expenses
                
                
                522,569
                
                
                
                268,474
                
                
                
                966,236
                
                
                
                844,988
                
                
                
                8,981,656Net
      Loss
                
                $
                (1,428,826
                )
                
                $
                (961,944
                )
                
                $
                (3,019,969
                )
                
                $
                (2,243,584
                )
                
                $
                (50,355,404
                )Effective
      Dividend from Series A Preferred Stock
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (5,554,000
                )Warrants
      Issued Series A Preferred Stock
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (1,291,912
                )Effective
      Dividend from Series B Preferred Stock
                
                
                —
                
                
                
                —
                
                
                
                (100,000
                )
                
                
                —
                
                
                
                (11,598,958
                )Net
      Loss Attributable to Common Shares
                
                $
                (1,428,826
                )
                
                $
                (961,944
                )
                
                $
                (3,119,969
                )
                
                $
                (2,243,584
                )
                
                $
                (68,800,274
                )Net
      Loss Per Share:Basic
      and Diluted
                
                $
                (.09
                )
                
                $
                (.06
                )
                
                $
                (.20
                )
                
                $
                (.13
                )
                
                $
                (7.57
                )Number
      of Shares Used in Calculating Net Loss Per Share:Basic
      and Diluted
                
                
                15,876,158
                
                
                
                16,791,699
                
                
                
                15,612,780
                
                
                
                16,779,476
                
                
                
                9,083,133
 
 
 The
accompanying notes are an integral part of these financial
statements.
  -4-
 Index
  RemoteKnowledge, Inc.
 (A
Development Stage Enterprise)
 Condensed
Statements of Cash Flows
 Unaudited
 
 Six-Month
      Periods Ended June 30
                
                
                Period
      From
                  January
      1, 2001
                  (Inception
      of
                  Development
      Stage)2007
                
                
                2008
                
                
                JUNE
      30, 2008Cash
      Flows From Operating Activities:Net
      loss
                
                $
                (3,019,971
                )
                
                $
                (2,243,584
                )
                
                $
                (50,355,404
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Accretion
      of debt discount and discount related to beneficial conversion of
      convertible debt
                
                
                829,007
                
                
                
                584,240
                
                
                
                7,291,042Depreciation
                
                
                109,337
                
                
                
                83,276
                
                
                
                1,229,087Loss
      on impairment of fixed assets
                
                
                —
                
                
                
                —
                
                
                
                1,564,282Amortization
      of deferred financing costs
                
                
                662
                
                
                
                —
                
                
                
                1,188,432Equity
      issued for services and interest
                
                
                121,193
                
                
                
                296,480
                
                
                
                10,537,404Provision
      for loss on inventory
                
                
                —
                
                
                
                —
                
                
                
                758,918Debt
      forgiveness
                
                
                —
                
                
                
                (30,731
                )
                
                
                (1,748,898
                )Charge
      off of receivables
                
                
                —
                
                
                
                —
                
                
                
                446,414Changes
      in assets and liabilities:Accounts
      receivable
                
                
                660
                
                
                
                —
                
                
                
                —Inventory
                
                
                —
                
                
                
                —
                
                
                
                (836,393
                )Other
      receivables
                
                
                (128,934
                )
                
                
                155,214
                
                
                
                (11,089
                )Prepaid
      and other current assets
                
                
                (8,298
                )
                
                
                8,884
                
                
                
                (1,456
                )Other
      noncurrent assets
                
                
                (49,204
                )
                
                
                (807
                )
                
                
                (12,510
                )Accounts
      payable – trade
                
                
                161,109
                
                
                
                20,985
                
                
                
                1,394,439Accrued
      expenses
                
                
                175,305
                
                
                
                518,865
                
                
                
                3,155,122Related
      party payable
                
                
                —
                
                
                
                —
                
                
                
                399,259Net
      cash used in operating activities
                
                
                (1,809,134
                )
                
                
                (607,178
                )
                
                
                (25,001,351
                )Cash
      Flows From Investing Activities:Additions
      of fixed assets
                
                
                (21,676
                )
                
                
                (7,083
                )
                
                
                (1,041,062
                )Related
      party receivable
                
                
                —
                
                
                
                —
                
                
                
                (300,000
                )Net
      cash used in investing activities
                
                
                (21,676
                )
                
                
                (7,083
                )
                
                
                (1,341,062
                )Cash
      Flows From Financing Activities:Payments
      of notes payable
                
                
                (35,836
                )
                
                
                (65,895
                )
                
                
                (3,521,194
                )Capital
      contributions
                
                
                —
                
                
                
                —
                
                
                
                27,900Proceeds
      from notes payable
                
                
                —
                
                
                
                536,138
                
                
                
                2,036,138Proceeds
      from short term notes payable
                
                
                850,000
                
                
                
                150,000
                
                
                
                4,785,000Proceeds
      from sale of common stock
                
                
                —
                
                
                
                ---
                
                
                
                903,800Proceeds
      from other notes payable
                
                
                42,907
                
                
                
                ---
                
                
                
                3,477,910Net
      proceeds from sale of mandatory redeemable preferred stock
                
                
                —
                
                
                
                ---
                
                
                
                5,040,033Net
      proceeds from sale of series B preferred stock
                
                
                —
                
                
                
                ---
                
                
                
                7,114,073Payment
      of advance from related party
                
                
                —
                
                
                
                (4,500
                )
                
                
                ---Proceeds
      from related party notes payable
                
                
                465,000
                
                
                
                ---
                
                
                
                6,448,333Net
      cash provided by financing activities
                
                
                1,322,071
                
                
                
                615,743
                
                
                
                26,311,993Net
      Change in Cash and Cash Equivalents
                
                
                (508,739
                )
                
                
                1,482
                
                
                
                (30,420
                )Cash
      and Cash Equivalents, beginning of period
                
                
                519,583
                
                
                
                1,206
                
                
                
                33,108Cash
      and Cash Equivalents, end of period
                
                $
                10,844
                
                
                $
                2,688
                
                
                $
                2,688
   The
accompanying notes are an integral part of these financial
statements.
  -5-
 Index
  Remote
Knowledge, Inc.
 (A
Development Stage Enterprise)
 Condensed
Statements of Cash Flows (continued)
 Unaudited
 
 Six-Month
      Periods Ended june 30
                
                
                Period
      From
                  January
      1, 2001
                  (Inception
      of
                  Development
      Stage)2007
                
                
                2008
                
                
                JUNE
      30, 2008Non-Cash
      Transactions:Issuance
      of common stock for related party debt
                
                $
                —
                
                
                $
                —
                
                
                $
                888,832Issuance
      of common stock for debt
                
                $
                —
                
                
                $
                —
                
                
                $
                1,157,114Issuance
      of common stock for assets
                
                $
                —
                
                
                $
                —
                
                
                $
                8,000Conversion
      of accounts payable to notes payable
                
                $
                —
                
                
                $
                —
                
                
                $
                766,484Conversion
      of notes payable and other debt to equity
                
                $
                100,000
                
                
                $
                —
                
                
                $
                4,301,000Contribution
      of capital by shareholders for financing costs
                
                $
                —
                
                
                $
                —
                
                
                $
                1,188,432Issuance
      of common stock (86,710 and 1,694,179 shares, respectively) upon
      conversion of Series A preferred stock
                
                $
                86
                
                
                $
                —
                
                
                $
                1,693Issuance
      of common stock ( 300,002 shares;33,334 shares; and 7,267,338 shares,
      respectively) upon conversion of Series B preferred stock
                
                $
                300
                
                
                $
                34
                
                
                $
                7,268Issuance
      of common stock upon conversion of mandatory redeemable preferred stock
      classified as debt
                
                $
                —
                
                
                $
                —
                
                
                $
                20,000Reclassification
      of mandatorily redeemable preferred stock to equity
                
                $
                —
                
                
                $
                —
                
                
                $
                5,534,000Discount
      related to beneficial conversion of mandatory redeemable Series A
      preferred stock
                
                $
                —
                
                
                $
                —
                
                
                $
                5,554,000Warrants
      issued for release of redemption provision of Series A preferred
      stock
                
                $
                —
                
                
                $
                —
                
                
                $
                1,291,912Discount
      related to beneficial conversion of Series B preferred stock and
      warrants
                
                $
                100,000
                
                
                $
                
                
                
                $
                11,598,958Reclassification
      of demo units from inventory to property and equipment
                
                $
                —
                
                
                $
                —
                
                
                $
                77,475Discount
      related to notes payable
                
                $
                363,750
                
                
                $
                —
                
                
                $
                5,689,347Conversion
      of notes payable into convertible debt
                
                $
                —
                
                
                $
                —
                
                
                $
                375,000Conversion
      of accrued expenses into note payable
                
                $
                —
                
                
                $
                —
                
                
                $
                87,028Issuance
      of common stock (713,333 shares and 893,336 shares, respectively) as
      interest on bridge loans
                
                $
                714
                
                
                $
                —
                
                
                $
                894Issuance
      of common stock (180,557 shares) as default interest on bridge
      loans
                
                $
                —
                
                
                $
                —
                
                
                $
                180Issuance
      of common stock (60,000 shares; 0 shares; and 120,000 shares,
      respectively) associated with restricted stock grant
                
                $
                60
                
                
                $
                —
                
                
                $
                120Total
      noncash transactions
                
                $
                564,910
                
                
                $
                986
                
                
                $
                38,547,737Supplemental Disclosure of Cash
      Flow Information:Cash
      paid for interest
                
                $
                4,407
                
                
                $
                —
                
                
                $
                383,122
 
 The
accompanying notes are an integral part of these financial
statements.
  -6-
 Index
  RemoteKnowledge, Inc.
 (A
Development Stage Enterprise)
 Notes
to the Financial Statements
 June
30, 2008
 (Unaudited)
 
 Note
1 — Basis of Presentation
 
 The
unaudited condensed financial statements have been prepared by the Company
pursuant to the rules and regulations of the United States Securities and
Exchange Commission (the “SEC”). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted
pursuant to such SEC rules and regulations; nevertheless, the Company believes
that the disclosures are adequate to make the information presented not
misleading. The condensed financial statements and notes should be read in
conjunction with financial statements and notes thereto included in the
Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007. In
the opinion of the Company, all adjustments, including normal recurring
adjustments necessary to present fairly, in all material respects, the financial
position of the Company, as of June 30, 2008, and the results of its operations
and cash flows for the period then ended, have been included. The results of
operations for the interim period are not necessarily indicative of the results
for the full year.
 
 Note
2 — Significant Accounting Policies
 
 Share-Based
Compensation – Effective January 1, 2006, the Company adopted the fair
value recognition provisions of Statement of Financial Accounting Standard No.
123(R) “Share-Based
Payment-Revised 2004”(“SFAS 123(R)”).  The stock compensation
expense for the quarter and six month period ended June 30, 2008 amounted to
$152,135 and $144,346, respectively.  For the quarter and six month
period ended June 30, 2008 this expense reduced basic and diluted loss per share
by less than $0.01 and $0.01, respectively, compared to reported basic and
diluted loss per share of $0.06 and $0.13, respectively. The stock compensation
expense for the quarter and six month period ended June 30, 2007 amounted to
$39,171 and $91,218, respectively.  For the quarter and six month
period ended June 30, 2007 this expense reduced basic and diluted loss per share
by less than $0.01 and $0.01, respectively, compared to reported basic and
diluted loss per share of $0.09 and $0.20, respectively. The Company did not
recognize a tax benefit from the stock compensation expense because the Company
considers it more likely than not that the related deferred tax assets, which
have been reduced by a full valuation allowance, will not be
realized.
 
 The
Black-Scholes option-pricing model was used to estimate the option fair values.
The option-pricing model requires a number of assumptions, of which the most
significant are, expected stock price volatility, the expected pre-vesting
forfeiture rate and the expected option term (the amount of time from the grant
date until the options are exercised or expire). Expected volatility was
calculated based upon actual historical stock price movements over the most
recent periods ending June 30, 2008 equal to the expected option term. Expected
pre-vesting forfeitures were estimated based on actual historical pre-vesting
forfeitures over the most recent periods ending June 30, 2008 for the expected
option term. The expected option term was calculated using the “simplified”
method permitted by SAB 107.
 
 The
Company has never had any exercise of stock options. SFAS 123(R) requires tax
benefits resulting from tax deductions in excess of the compensation cost
recognized for those options (“excess tax benefits”) to be classified and
reported as both an operating cash outflow and a financing cash inflow upon
adoption of SFAS 123(R). As a result of the Company’s net operating losses, the
excess tax benefits that would otherwise be available to reduce income taxes
payable have the effect of increasing the Company’s net operating loss carry
forwards. Accordingly, because the Company is not able to realize these excess
tax benefits, such benefits will not be recognized in the condensed statement of
cash flow until such time as benefits can be used.
 
 Note
3 — Notes Payable
 
 From
January 1, 2008 through June 30, 2008, the Company received $686,138 in cash
from non-affiliated parties.  These funds were part of the $800,000
funding closed on August 21, 2008.   See Note 6 – Subsequent
Event for more information.
 
 Note
4 — Net Loss Per Share
 
 Loss per
share (LPS) is computed by dividing the net loss for the period attributable to
common shares by the weighted-average number of common shares outstanding for
the period. Diluted LPS is based on the weighted-average number of shares of
common stock and common stock equivalents outstanding for the
period.  For the three and six-month periods ended June 30, 2007, and
2008, respectively, common stock equivalents have been excluded from the
calculation of weighted-average shares for purposes of calculating diluted loss
per share, as such inclusion was anti-dilutive.
  -7-
 Index
  note 5 — Quarterly Financial
Data (Unaudited)
 
 The table
below sets forth the unaudited operating results by quarter for the periods
ended March 31, 2007 and 2008 and June 30, 2007 and 2008.
  Three Months EndedMarch 31,
                                      
                                      
                                      June 30,2007:Revenues
                                      
                                      $
                                      3,030
                                      
                                      
                                      $
                                      3,116Gross
      profit
                                      
                                      
                                      3,030
                                      
                                      
                                      
                                      3,116Net
      loss attributable to common shares
                                      
                                      
                                      (1,591,143
                                      )
                                      
                                      
                                      (1,428,826
                                      )Basic
      and diluted loss per share
                                      
                                      $
                                      (.11
                                      )
                                      
                                      $
                                      (.09
                                      )2008:Revenues
                                      
                                      $
                                      3,116
                                      
                                      
                                      $
                                      (15,445
                                      )Gross
      profit
                                      
                                      
                                      3,116
                                      
                                      
                                      
                                      (15,445
                                      )Net
      loss attributable to common shares
                                      
                                      
                                      (1,281,640
                                      )
                                      
                                      
                                      (961,944
                                      )Basic
      and diluted loss per share
                                      
                                      $
                                      (.07
                                      )
                                      
                                      $
                                      (.06
                                      )
 The sum
of the individual quarterly loss per share amounts may not agree with
year-to-date loss per share as each period’s computation is based on the
weighted average number of shares outstanding during the
period.
 
 Note 6 — Subsequent
Event
 
 On August
21, 2008, the Company entered into a credit agreement with SLW International,
LLC, a Delaware limited liability company (“SLWI”), pursuant to which
SLWI  agreed to lend to the Company $800,000 (the “Senior
Loan”).  The Senior Loan was made in accordance with, and secured by,
a note (the “Senior Note”) and security agreement (the “Senior Security
Agreement”) between the Company and SLWI.  This Senior Note was
executed in renewal of a promissory note dated May 30, 2008, executed by the
Company and payable to the order of Muragai LLC, a Delaware limited liability
company and a wholly-owned subsidiary of SLWI (“Muragai”).  The May
30, 2008 note was executed by the Company in renewal of a promissory note dated
February 25, 2008, payable to the order of Muragai in the original principal
amount of $250,000, which prior promissory notes had been assigned to SLWI by
Muragai pursuant to that certain Assignment of Note and Liens dated as of July
30, 2008.  All principal outstanding under the Senior Note pursuant to
the renewal, extension and conversion of the prior notes shall bear interest
retroactive to the date of initial funding and prior to maturity at a rate equal
to the lesser of (i) the maximum, nonusurious rate allowed by law and (ii)
fifteen percent (15%) per annum.
 
 At any
time, SLWI may elect, upon not less than seventy-five (75) days notice to the
Company, at its sole discretion, by written notice to the Company, to convert or
exchange all or any part of the amounts outstanding under the Senior Note and
any accrued and unpaid interest thereon into the Company’s common
stock.  Each $0.04 of the outstanding balance of the Senior Note (the
“Conversion Price”) may be converted into or exchanged for one (1) share of the
Company’s common stock based on 62,500,000 outstanding shares of the Company’s
stock (the “Common Stock”) on a fully diluted basis.  The Conversion
Price shall be subject to adjustment from time to time as provided in the Senior
Note in order to prevent the dilution of SLWI’s right to acquire shares of
Company’s common stock.
 
 On August
21, 2008 (the “Closing Date”), the Company also entered into a Credit Agreement
(the “Credit Agreement”) made between it and a group of accredited investors
represented by Muragai (such group being collectively referred to herein as
(“Lenders”), under which Lenders agree to extend credit to the Company in the
form of a convertible advancing term loan (the “Junior Loan”) in the principal
amount of $4,000,000 (the “Loan Funds”). The Credit Agreement provides for the
Loan Funds to be advanced to the Company in increments following requests by the
Company, as may be made from time to time, up to the total committed Loan
Funds.  The Junior Loan is made in accordance with, and secured by a
note (the “Junior Note”) and security agreement (the “Junior Security
Agreement”) between the Company and Lenders.
  -8-
 Index
  A
mandatory prepayment of the advanced Loan Funds may be required by Lenders after
the Company has achieved a positive cash flow (as defined according to the terms
of the Credit Agreement) for any three consecutive fiscal
quarters.   The total principal advanced, and accrued interest
thereon, under the Credit Agreement is due and payable August 21,
2013.  Interest accrues on any advanced funds at the rate of twelve
percent (12%) per annum or the maximum, nonusurious rate allowed by law,
whichever is lesser.  Accrued and unpaid interest must be paid upon
the payment or prepayment of any advanced Loan Funds; upon a request by Lenders
made after the Company has achieved a positive cash flow for at least one fiscal
quarter, in an amount reasonably determined by Lenders; and on the maturity
date.
 
 At any
time, the Lenders may elect, upon not less than seventy-five (75) days notice to
the Company, at its sole discretion, by written notice to the Company, to
convert or exchange all or any part of the amounts outstanding under the Junior
Loan and any accrued and unpaid interest thereon into the Company’s common
stock.  Each $0.04 of the outstanding balance of the Junior Loan (the
“Conversion Price”) may be converted into or exchanged for one (1) share of the
Company’s common stock based on 62,500,000 outstanding shares of the Company’s
stock (the “Common Stock”) on a fully diluted basis.  The Conversion
Price shall be subject to adjustment from time to time as provided in the Junior
Loan in order to prevent the dilution of the Lenders’ right to acquire shares of
Company’s common stock.
 
 In
connection with the Credit Agreement, the Company issued to Lenders warrants
executable for shares of the Company’s common stock in the aggregate amount of
15,000,000 shares (the “Lender Warrants”).  The Lender Warrants bear
an exercise price of $0.04 per share, and are exercisable for a period of ten
(10) years from the Closing Date.
 
 As a
condition of the Credit Agreement, the Company also entered into settlements
with several creditors, including current and former employees, under which
outstanding debts of the Company will be exchanged for the issuance of common
stock at a price of $0.75 per share.  The Company will issue
approximately 16,000,000 shares of common stock related to these
settlements.  The various settlements include approximately 5,700,000
shares of common stock related to the extinguishment of outstanding bridge loans
in the amount of $2,953,000; approximately 6,900,000 shares of common stock to
settle outstanding note payables in the amount of $4,500,000 including accrued
interest of approximately $1,000,000; approximately 2,400,000 shares of common
stock to settle an additional four debt instruments in the amount of $180,000;
approximately 900,000 shares of common stock to resolve various other
settlements; approximately 400,000 shares of common stock to settle back pay
related to certain current and former employees; and approximately 23,000 shares
of common stock to settle outstanding balances owed to legacy expenses related
to accounts payable.
 
 In
connection with the change of certain executives' positions within the Company
and significant changes in personnel, the Company agreed to cancel all
outstanding options.  In connection with the financing transaction, the
Company agreed to pay to Muragai, an arrangement fee in the amount of $50,000 on
the Closing Date.
  -9-
 Index
  Item2. Management’s Discussion and Analysis or Plan of
Operations
 
 The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and related notes, and the
other financial information included in this quarterly report, and in our Annual
Report on Form 10-KSB for the year ended December 31, 2007. In addition to
the discussion provided herein, further analysis of annual financial statements
can be found in, and investors should review, our Annual Report on Form 10-KSB
for the year ended December 31, 2007.  With respect to this
discussion, the terms “Remote Knowledge,” “Company”, “we,” “us,” and “our” refer
to Remote Knowledge, Inc.
 
 Risk
Factors
 
 For a
detailed discussion of the risk factors that should be understood by any
investor contemplating investment in our stock, please refer to the section
entitled, “Risk Factors” in our 2007 Form 10-KSB.
 
 Forward-Looking
Statements
 
 Except
for historical information contained herein, this Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Statements that are not statements of historical fact may be deemed
to be forward-looking statements. Such statements reflect the current views and
assumptions of the Company and are not guarantees of future performance. These
statements are subject to various risks and uncertainties. The Company’s actual
results could differ materially from those anticipated in these forward-looking
statements as a result of the risk factors described in this Form 10-Q. The
Company expressly disclaims any obligation to release publicly any updates or
revisions to any forward-looking statement to reflect any changes in
expectations, or any change in events or circumstances on which those statements
are based, unless otherwise required by law.
 
 Such
Forward-Looking statements are not guarantees of future performance and actual
results could differ materially from those expressed or implied in such
statements as a result of certain factors, including those set forth in “Plan of
Operation,” and elsewhere in this report. All statements, other than statements
of historical facts, included in this report that address activities, events or
developments that we expect, believe, intend or anticipate may occur in the
future, including the following matters, are forward looking
statements:
 
 •
              timing
      of products and new product
releases,
 •
              research
      and development expenditures, including the timing, amount and nature
      thereof,
 •
              estimates
      of additional capital requirements,
 •
              sales
      projections,
 •
              repayment
      of debt,
 •
              business
      strategies,
 •
              product
      pricing and demand, and
 •
              expansion
      and growth of business operations.
 
 These
statements are based on certain assumptions and analyses made by us in light of
our experience and our perception of historical trends, current conditions and
expected future developments as well as other factors we believe are appropriate
in the circumstances. These forward-looking statements are subject to risks and
uncertainties, including those associated with:
 
 •
              the
      availability of additional financing on favorable
    conditions,
 •
              general
      economic, market and business
conditions,
 •
              the
      success of our engineering efforts,
 •
              our
      ability to protect our intellectual
property,
 •
              business
      opportunities that may be presented to and pursued by
  us,
 •
              changes
      in laws or regulations, and
 •
              successful
      exploitation of our market
opportunities.
 
 Significant
factors that could prevent us from achieving our stated goals
include:
 
 •
              our
      inability to obtain financing for research and development, manufacturing,
      and marketing expenditures,
 •
              our
      inability to compete against existing or future
    competitors,
 •
              a
      substantial increase in the cost of our
  products,
 •
              declines
      in the market prices for our products,
and
 •
              adverse
      changes in our target markets.
  -10-
 Index
  The
cautionary statements contained or referred to in this report should be
considered in connection with any subsequent written or oral forward-looking
statements that may be issued by us or persons acting on our
behalf.
 
 Description of Business and
Plan of Operation
 
 Remote
Knowledge, Inc., a Houston, Texas based company, develops, delivers and supports
proprietary communications and data-management products.  Our platform
development strategy proposes combining our proprietary technologies (hardware
design, embedded firmware, software and ongoing software applications) with
off-the-shelf communications services to create a product platform with the
ability to provide high-speed internet, voice, e-mail, text messaging, and
entertainment and content applications. In addition, our solutions will allow
for two-way data transfer as well as customized remote monitoring and control of
vessels shipboard systems. The initial result of this strategy has been the
creation of our high speed communication platform which we call “GEO
Mobile”.
 
 In the
near term, we plan to focus efforts on completing development of our product and
service offerings and preparing our GEO Mobile technology for market
introduction. We expect that our GEO Mobile platform will be available for
purchase by leisure boat consumers in the second quarter of 2009.
 
 Recent
Financing
 
 On August
21, 2008, the Company entered into a credit agreement with SLW International,
LLC, a Delaware limited liability company (“SLWI”), pursuant to which
SLWI  agreed to lend to the Company $800,000 (the “Senior
Loan”).  The Senior Loan was made in accordance with, and secured by,
a note (the “Senior Note”) and security agreement (the “Senior Security
Agreement”) between the Company and SLWI.  This Senior Note was
executed in renewal of a promissory note dated May 30, 2008, executed by the
Company and payable to the order of Muragai LLC, a Delaware limited liability
company and a wholly-owned subsidiary of SLWI (“Muragai”).  The May
30, 2008 note was executed by the Company in renewal of a promissory note dated
February 25, 2008, payable to the order of Muragai in the original principal
amount of $250,000, which prior promissory notes had been assigned to SLWI by
Muragai pursuant to that certain Assignment of Note and Liens dated as of July
30, 2008.  All principal outstanding under the Senior Note pursuant to
the renewal, extension and conversion of the prior notes shall bear interest
retroactive to the date of initial funding and prior to maturity at a rate equal
to the lesser of (i) the maximum, nonusurious rate allowed by law and (ii)
fifteen percent (15%) per annum.
 
 At any
time, SLWI may elect, upon not less than seventy-five (75) days notice to the
Company, at its sole discretion, by written notice to the Company, to convert or
exchange all or any part of the amounts outstanding under the Senior Note and
any accrued and unpaid interest thereon into the Company’s common
stock.  Each $0.04 of the outstanding balance of the Senior Note (the
“Conversion Price”) may be converted into or exchanged for one (1) share of the
Company’s common stock based on 62,500,000 outstanding shares of the Company’s
stock (the “Common Stock”) on a fully diluted basis.  The Conversion
Price shall be subject to adjustment from time to time as provided in the Senior
Note in order to prevent the dilution of SLWI’s right to acquire shares of
Company’s common stock.
 
 On August
21, 2008 (the “Closing Date”), the Company also entered into a Credit Agreement
(the “Credit Agreement”) made between it and a group of accredited investors
represented by Muragai (such group being collectively referred to herein as
(“Lenders”), under which Lenders agree to extend credit to the Company in the
form of a convertible advancing term loan (the “Junior Loan”) in the principal
amount of $4,000,000 (the “Loan Funds”). The Credit Agreement provides for the
Loan Funds to be advanced to the Company in increments following requests by the
Company, as may be made from time to time, up to the total committed Loan
Funds.  The Junior Loan is made in accordance with, and secured by a
note (the “Junior Note”) and security agreement (the “Junior Security
Agreement”) between the Company and Lenders.
 
 A
mandatory prepayment of the advanced Loan Funds may be required by Lenders after
the Company has achieved a positive cash flow (as defined according to the terms
of the Credit Agreement) for any three consecutive fiscal
quarters.   The total principal advanced, and accrued interest
thereon, under the Credit Agreement is due and payable August 21,
2013.  Interest accrues on any advanced funds at the rate of twelve
percent (12%) per annum or the maximum, nonusurious rate allowed by law,
whichever is lesser.  Accrued and unpaid interest must be paid upon
the payment or prepayment of any advanced Loan Funds; upon a request by Lenders
made after the Company has achieved a positive cash flow for at least one fiscal
quarter, in an amount reasonably determined by Lenders; and on the maturity
date.
  -11-
 Index
  At any
time, the Lenders may elect, upon not less than seventy-five (75) days notice to
the Company, at its sole discretion, by written notice to the Company, to
convert or exchange all or any part of the amounts outstanding under the Junior
Loan and any accrued and unpaid interest thereon into the Company’s common
stock.  Each $0.04 of the outstanding balance of the Junior Loan (the
“Conversion Price”) may be converted into or exchanged for one (1) share of the
Company’s common stock based on 62,500,000 outstanding shares of the Company’s
stock (the “Common Stock”) on a fully diluted basis.  The Conversion
Price shall be subject to adjustment from time to time as provided in the Junior
Loan in order to prevent the dilution of the Lenders’ right to acquire shares of
Company’s common stock.
 
 In
connection with the Credit Agreement, the Company issued to Lenders warrants
executable for shares of the Company’s common stock in the aggregate amount of
15,000,000 shares (the “Lender Warrants”).  The Lender Warrants bear
an exercise price of $0.04 per share, and are exercisable for a period of ten
(10) years from the Closing Date.
 
 As a
condition of the Credit Agreement, the Company also entered into settlements
with several creditors, including current and former employees, under which
outstanding debts of the Company will be exchanged for the issuance of common
stock at a price of $0.75 per share.  The Company will issue
approximately 16,000,000 shares of common stock related to these
settlements.  The various settlements include approximately 5,700,000
shares of common stock related to the extinguishment of outstanding bridge loans
in the amount of $2,953,000; approximately 6,900,000 shares of common stock to
settle outstanding note payables in the amount of $4,500,000 including accrued
interest of approximately $1,000,000; approximately 2,400,000 shares of common
stock to settle an additional four debt instruments in the amount of $180,000;
approximately 900,000 shares of common stock to resolve various other
settlements; approximately 400,000 shares of common stock to settle back pay
related to certain current and former employees; and approximately 23,000 shares
of common stock to settle outstanding balances owed to legacy expenses related
to accounts payable.
 
 In
connection with the financing transaction, the Company agreed to pay to Muragai,
an arrangement fee in the amount of $50,000 on the Closing Date.
 
 This
financing enables the Company to fund its operations and product development
through the end of 2008.  It will also enable the Company to continue
its fund raising efforts.  The Company’s ability to raise additional
capital will be dependent upon the success of development efforts, the potential
acceptance of its products and services in the market and ability of management
to execute a marketing and business development plan.
 
 The
following table provides the capitalization of the Company subsequent to
completion of all of the transactions associated with these recent
developments:
 
 Description
                
                Common
      Stock
                
                
                Series
      A Preferred (1)
                
                
                Series
      B Preferred (1)
                
                
                Warrants
                
                
                Convertible
      Debt (1)
                
                
                Restricted
      Stock and OptionsOutstanding
      prior to recent financing
                
                
                16,800,588
                
                
                
                5,698,667
                
                
                
                8,272,000
                
                
                
                48,315,817
                
                
                
                3,970,000
                
                
                
                9,165,000Execution
      of Senior Loan of $800,000
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                15,000,000
                
                
                
                20,000,000
                
                
                
                -Execution
      of Junior Loan of $4,000,000
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                100,000,000
                
                
                
                -Settlement
      with creditors (2)
                
                
                15,560,649
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (3,970,000
                )
                
                
                -Cancellation
      of warrants and option grants
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (32,569,520
                )
                
                
                -
                
                
                
                (9,165,000
                )Issuance
      of options to management
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,500,000Issuance
      of warrants to directors
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,550,000
                
                
                
                -
                
                
                
                -Outstanding
      post transaction (3)
                
                
                32,361,237
                
                
                
                5,698,667
                
                
                
                8,272,000
                
                
                
                32,296,297
                
                
                
                120,000,000
                
                
                
                2,500,000
 
 (1)
              Amount
      as converted into common stock
 (2)
              Settlement
      transactions have not been completed and shares have not been issued by
      the transfer agent.  The data included in this table reflects
      current agreements and obligations entered into in connection with this
      financing.  Final amounts may change upon final
      negotiation.
 (3)
              Total
      shares of common stock on an as converted basis is
      201,128,202.  Data regarding capitalization reflect anticipated
      totals subsequent to satisfaction of agreements calling for issuance of
      securities.  These amounts are subject to adjustments made in
      connection with final distribution.  Terms of such settlements
      and other issuances are described in greater depth in the section entitled
      Recent Developments, above.
  -12-
 Index
  Liquidity and Capital
Resources
 
 Recent
turmoil in the financial markets may cause significant disruptions in the
ability to raise additional capital to fund the Company’s operations in the near
term.  In addition, an anticipated downturn in the global economy may
cause less demand for our products and services.  As a result of the
recent financing (see “Recent Financing” below), the Company believes it has
sufficient capital to fund its operations through the end of
2008.  The Company believes it will have a product in the later stages
of development at that point.  Assuming the product is deemed
successful and marketable, the Company will seek additional capital to fund
efforts in preparation for market introduction and revenue stage in
2009.  The Company believes it will need an additional $7 million to
fund remaining development and market introduction and provide necessary working
capital.  While the Company may experience short periods of positive
cash flow, sustainable positive cash flow is not anticipated until
2011.  The Company may seek additional funds through equity financing,
debt financing or other sources, which may result in substantial dilution of the
equity ownership of our shares.  There can be no assurance that
additional financing will be available to us when needed or, if available, that
it can be obtained on commercially reasonable terms.
 
 Our
auditors included an explanatory paragraph in their opinion on our financial
statements for the year ended December 31, 2007 to state that our losses,
working capital deficit and shareholders’ deficit at December 31, 2007 raised
substantial doubt about our ability to continue as a going concern. Our ability
to continue as a going concern is dependent upon receiving the additional
capital and achieving profitable operations through the manufacture and sale of
our product. We cannot assure you that we will be able to obtain additional
capital or that sales of our product will generate significant
profits.
 
 As of
June 30, 2008, we had a cash balance of $2,688 and negative working capital of
$10,261,022.  We maintained minimal operations during the first eight
months of 2008, until we received the additional funds discussed in “Recent
Financing” above.  Our projected cash “burn rate” is approximately
$250,000 per month. Before we experience significant revenue, if at all, we
expect to need about $7 million of additional cash.  From January 1,
2008 through June 30, 2008, we have expended approximately
$600,000.
 
 Results of
Operations
 
 We have
had minimal revenues to date, and our expenses have consisted primarily of
research and development, sales and marketing and general and administrative
expenses, resulting in an operating loss since January 1, 2001 as a development
stage company through June 30, 2008 of $41,373,748.
 
 Research
and development costs have been expensed as incurred. Research and development
costs did not change significantly for the three month period June 30, 2008
compared to the same period in 2007.  For the six month period ended
June 30, 2008 as compared with the same period in 2007, decreased $48,449, due
to the of reduction of personnel as result of lack of capital
resources.  In the last half of 2007 and early 2008 we had a reduction
of 3 employees in the research and development department.
 
 Professional
fees did not change significantly for the three month period June 30, 2008
compared to the same period in 2007.  For the six month period ended
June 30, 2008 as compared to the same period in 2007, professional fees
decreased $112,108 to $91,841,. This reduction is primarily the result of a
decrease in expenses associated with public company reporting, as we did not
complete the 2007 audit and quarterly filings until the fourth quarter of
2008.
 
 General
and administrative expenses for the three months ended June 30, 2008 as compared
to the same period in 2007 decreased $235,370 to $423,669. The decrease is
mainly attributable to a decrease in personnel and public company
costs.  For the six months ended June 30, 2008 as compared to the same
period in 2007, general and administrative expenses decreased $510,701 from
$1,420,775 to $910,074.   The reduction consists of an
approximate $450,000 decrease related to payroll and related expenses; an
approximate $70,000 reduction in travel expenses; an approximate $50,000
reduction in insurance expenses; an approximate $60,000 reduction related to
public company costs; and approximate $80,000 of other reductions offset by an
approximate $200,000 increase in stock-based compensation expense.
 
 Interest
expense for the three months and the six months ended June 30 2008 decreased
$212,565 and $78,806, respectively, as compared to the same period in
2007.  The decrease primarily reflects the debt discount associated
with the common stock issued with short term funding.
 
 Debt
forgiveness income was $43,061 for the three and six month periods ended June
30, 2008 as compared to no such income for the same periods in 2007 as we wrote
off old accounts payable amounts and settled various outstanding amounts in
2008.
  -13-
 Index
  Contractual
Commitments
 
 There
have been no material changes to the Company’s contractual commitments during
the second quarter. Please see Note 6 to the accompanying financial
statements for more information concerning the Company’s new financing
arrangement completed in August 2008. Refer to the Company’s Annual Report on
Form 10-KSB for December 31, 2007 for a complete discussion of its lease
obligations. Except for the commitments arising from its operating leases
arrangements, as of June 30, 2008, the Company did not have any off-balance
sheet arrangements that are reasonably likely to have a material effect on our
financial statements.
 
 Item4T. Controls and Procedures.
 
 Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the issuer’s management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. As noted
below, we concluded that our disclosure controls and procedures were not
effective, as of the end of the period covered by this report, in ensuring that
material information that we are required to disclose in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC rules and forms. We believe that we
will have effective internal controls to meet this requirement prior to the
filing of our annual report for the year ended December 31, 2008.
 
 Management’s
Annual Report on Internal Control over Financial Reporting
 
 (a)
Evaluation of disclosure controls and procedures. Our management is responsible
for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act as a
process designed by, or under the supervision of, a company’s principal
executive and principal financial officers and effected by a company’s board of
directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. Our 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 consolidated financial
statements in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and 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
consolidated financial statements.
 
 We are
committed to maintaining disclosure controls and procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit to the Securities and Exchange Commission under the Exchange Act,
is recorded, processed, summarized and reported within the time periods
specified by the Securities and Exchange Commission’s rules and forms, and that
information is accumulated and communicated to our management, including our
chief executive officer and principal accounting officer, as appropriate, to
allow timely decisions regarding required disclosure.
  Management
concluded that its internal controls over financial reporting were not effective
in 2007 due to a lack of qualified accounting and financial reporting personnel.
This material weakness continued to exist to the date of this filing. The
Company has engaged outside consultants to address this material weakness and to
further enhance and improve its internal control environment. The Company
expects to have effective controls in place by the end of 2008.
 (b)
Changes in internal control over financial reporting. There were no changes in
our internal control over financial reporting during the first six months of
2008 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. On March 31, 2008, our
Chief Financial Officer resigned from the Company.  Because of
significant capital constraints, we have not hired a
replacement.
  -14-
 Index
  PART
II — OTHER INFORMATION
 
 Item1. Legal
Proceedings — None
 
 On
October 22, 2003, we settled litigation with our former chief executive officer,
Dan Goodhall. The settlement resulted in all litigation being dismissed with
prejudice relating to the Harris County, Texas Judicial District Case No.
202-09577. The settlement required that commencing on December 15, 2003; we must
repurchase the 125,000 shares of stock issued to Mr. Goodhall during the term of
his employment, including payments for estimated tax liability for a combined
total of $498,500, which payments were to be made periodically until September
15, 2004. We were unable to meet payment obligations and on several occasions
the settlement terms were revised, which permitted Mr. Goodhall to retain his
common shares. As of December 31, 2007, the unpaid amount was $95,731 in the
form of a note payable due March, 2007.  This liability was settled as
part of the August 2008 funding agreement.
 
 On
October 27, 2003, Lockheed Martin, Inc. filed suit in the 55th Judicial District
in Harris County, Texas to collect on a promissory note issued by us to Lockheed
Martin in the principal amount of $480,484 plus interest for a total due through
August 31, 2003 of $502,542. This promissory note is secured by a lien against
all of the computer equipment purchased from Lockheed under our Engineering and
Development Agreement with Lockheed Martin. Lockheed Martin owns all of the
technology developed by them until this note is paid in full. On June 30, 2004,
the parties agreed to settle the litigation with us paying $12,500 of the
accrued interest, and Lockheed Martin agreeing to extend the note with 6%
interest until June 30, 2005. At that date, the note was extended with a monthly
payment schedule which was not always met. Subsequently, the note has been
extended several times and is currently due June 30, 2007. The balance on the
note at December 31, 2007 was $380,068. The lien on the computer equipment has
been released as this liability was settled as part of the August 2008 funding
agreement.
 
 On
October 12, 2004, Oracle Corporation filed suit in Superior Court of California,
County of Santa Clara, seeking $270,475 for payment of software allegedly
delivered to us in August of 2002. We filed a defense stating we had never
received the software. The litigation was settled on March 21, 2005 by our
agreeing to make 24 monthly payments of $9,000 each. We have not always made
these payments timely and are currently in arrears. The balance outstanding
under the settlement at December 31, 2007 was $117,475.  This
liability was settled as part of the August 2008 funding agreement.
 
 Item1A.  Risk Factors.
 
 There are
no material changes to the risk factors discussed in our Annual Report on Form
10-KSB for the year ended December 31, 2007, during the first six months of 2008
and investors are encouraged to review those risk factors in detail before
making any investment in the Company’s securities.
 
 Item2. Unregistered Sales of Equity Securities and Use of
Proceeds.
 
 No sales
of equity securities were completed during the first six months of
2008.  Please see Note 5 – Subsequent Event for details of the recent
financing and related securities sold in connection with the same..
 
 Item3. Default Upon Senior Securities.
 
 During
the reporting period, the Company defaulted on issuance of equity shares
distributable as default interest on outstanding bridge loans.  The
Company was to distribute 676,668 common shares valued at $146,611 as default
interest for unpaid principal on outstanding obligations
totaling$2,045,000.  By settlement, default interest stopped accruing
as of April 11, 2008.  Unpaid principal and default interest were
settled in connection with the Company’s recent financing described
herein.
 
 Item4. Submission of Matters to a Vote of Security
Holders.
 
 None
 
 Item5. Other Information
 
 On August
21, 2008, the following Company Directors tendered their resignation: D. Henry
Houston and William H. Moody.  Mr Houston had previously resigned as
the Company’s Chief Financial Officer on March 31, 2008. On August 21, 2008, Mr.
Farid Nagji, Mr. Ricardo A. Gijon, and Mr. L. Byron Way were elected to the
board of directors, filling existing vacancies.  Subsequently, the
following Company directors tendered their resignation: Randy Bayne; Richard C.
Webb; and Steve Phelps.
  -15-
 Index
  In
connection with the change of certain executives’ positions within the Company,
the Company agreed to grant restricted shares of the Company’s common stock
under the Company’s Omnibus Stock Incentive Compensation Plan 2006 to the
persons, and in the amounts, as follows:
 
 C. Gregory Peters -
1,000,000 shares of common stock with a value $0.04 per share.
 Randy Bayne - 1,000,000
shares of common stock with a value of $0.04 per share.
 Mark Van Eman -
500,000 shares of common stock with a value of $0.04 per share.
 
 The
aforementioned grants vest contingent and upon the Company reaching certain
product development and sales benchmarks, and subject to certain terms and
conditions to be deemed appropriate by the chairman of the board.
 
 The
Company agreed to grant warrants to purchase restricted shares of the Company’s
common stock to its directors as follows:
 
 Farid Nagji - 500,000
shares of common stock at the purchase price of $0.04 per share.
 Ricardo A. Gijon -
350,000 shares of common stock at the purchase price of $0.04 per
share.
 L. Byron Way -
350,000 shares of common stock at the purchase price of $0.04 per
share.
 Dan Granader - 350,000
shares of common stock at the purchase price $0.04 per share.
 
 Amendments
to Bylaws
 
 On August
21, 2008, the Company’s Board of Directors voted to amend the Company’s Bylaws
to change the number of directors of the Company from nine (9) to five
(5).
 
 Timely
Filing of Reports on Form 10-Q and Form 10-K to the Securities and Exchange
Commission
 
 Prior to
the filing of this Form 10-Q (and the Form 10-K for the year ended December 31,
2007 that was filed simultaneous to this filing), the Company had not filed its
financial reports with the Securities and  Exchange Commission since
the report for the quarterly period ended June 30, 2007.  This filing
and the Form 10-K filing were filed to provide updated financial information
through June 30, 2008.  Because the Company did not file a Form 10-Q
for the period ended March 31, 2008, it has provided quarterly information in
Footnote 5 – Quarterly Financial Data (Unaudited).  The Company
expects  to file its Form 10-Q for the quarterly period ended
September 30, 2008 on or before November 19, 2008.
  -16-
 Index
  Item6. Exhibits.
 
 The
following exhibits are described and furnished as part of this
report:
 
 Exhibit No.
                            
                            Description3.1
                            
                            Amended
      and Restated Certificate of Incorporation (incorporated by reference to
      Exhibit 3 to the Company’s quarterly report on Form 10-QSB filed with the
      Commission on November 13, 2006 (File No. 333-106247))3.2
                            
                            Remote
      Knowledge, Inc. Bylaws (Incorporated by reference to Exhibit 3.4 to the
      Company’s Registration Statement on Form SB-2/A filed with the Commission
      on October 27, 2003 (File No. 333-106247))3.3
                            
                            Certificate
      of Merger of Varitek Industries, Inc. and Remote Knowledge, Inc.
      (Incorporated by reference to Exhibit 3.5 to the Company’s Registration
      Statement on Form SB-2/A filed with the Commission on October 27, 2003
      (File No. 333-106247))4.1
                            
                            Warrant
      to purchase 22,500 shares issued to Orrin H. Swayze on March 21, 2002
      (Incorporated by reference to Exhibit 4.1 to the Company’s Registration
      Statement on Form SB-2 filed with the Commission on June 18, 2003 (File
      No. 333-106247))4.2
                            
                            Amended
      and Restated Warrant to purchase 553,400 shares issued to Sanders Morris
      Harris, Inc. on December 5, 2002 (Incorporated by reference to Exhibit 4.2
      to the Company’s Registration Statement on Form SB-2 filed with the
      Commission on June 18, 2003 (File No. 333-106247))4.3
                            
                            Warrant
      to purchase 1,500,000 shares issued to SMH Varitek LLC on November 27,
      2002 (Incorporated by reference to Exhibit 4.3 to the Company’s
      Registration Statement on Form SB-2 filed with the Commission on June 18,
      2003 (File No. 333-106247))4.4
                            
                            Form
      of warrant issued to noteholders on January 31, 2003 (Incorporated by
      reference to Exhibit 4.4 to the Company’s Registration Statement on Form
      SB-2 filed with the Commission on June 18, 2003 (File No.
      333-106247))4.5
                            
                            Form
      of warrant issued to noteholders on April 16, 2003 (Incorporated by
      reference to Exhibit 4.5 to the Company’s Registration Statement on Form
      SB-2 filed with the Commission on June 18, 2003 (File No.
      333-106247))4.6
                            
                            Series
      B Preferred Stock Designation (Incorporated by reference to Exhibit 10.1
      to the Company’s Current Report on Form 8-K filed with the Commission on
      April 5, 2004 (File No. 333-106247))4.7
                            
                            Form
      of Warrant issued in connection with Issuance of Series B Preferred Stock
      on March 30, 2004 Designation (Incorporated by reference to Exhibit 10.2
      to the Company’s Current Report on Form 8-K filed with the Commission on
      April 5, 2004 (File No. 333-106247))10.2
                            
                            Senior
      Convertible Note Dated August 21, 2008 between the Company and
      SLW International, LLC (Incorporated
      by reference to the Company's Current Report on Form 8-K filed with the
      Commission on August 27, 2008 (File No.
  333-106427))31.1A
                            
                            Certification
      required by Section 302 of the Sarbanes-Oxley Act of 2002
  *31.1B
                            
                            Certification
      required by Section 302 of the Sarbanes-Oxley Act of 2002
  *32
                            
                            Certification
      required by Section 906 of the Sarbanes-Oxley Act of 2002
  *
 
 * Filed
herewith
 
 Note:  All
documents associated with the recent financing completed on August 21, 2008 have
not been filed as Exhibits to this filing.  Such documents will be
filed as Exhibits with the quarterly filing for the period ended September 30,
2008.  Information regarding these activities can be obtained by
contacting the Company.
  -17-
 Index
  SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 Remote
      Knowledge, Inc.By:
                    /s/
      Randy
      S. BayneRandy
      S. BayneFormer
      Chief Executive OfficerDate:
      October 21, 2008
                    
                    By:
                    /s/
      C.
      Gregory PetersC.
      Gregory PetersChief
      Executive
Officer




Note




SEC
instructions to Form 10-Q require the signature of the registrant's Principal
Financial Officer or Principal Accounting Officer.  Registrant does
not have a Principal Financial Officer or Principal Accounting Officer at this
time and there is no other person performing similar
functions.  Registrant's Controller is not performing such functions
and has declined to sign this Form 10-Q.  The Chairman of the Audit
Committee has discussed this matter with the Controller and has been informed
that the decision not to sign was based on the Controller's belief that such
responsibility was beyond the historical scope of his duties and was not based
on any known misstatements or deficiencies in the filing.


-18-