LOCATEPLUS HOLDINGS CORP - FORM 10-Q

Attached files

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EX-31.1 - CEO CERTIFICATION Q3 2010 - LOCATEPLUS HOLDINGS CORP	ceocertq310.htm
EX-31.2 - CFO CERTIFICATION Q3 2010 - LOCATEPLUS HOLDINGS CORP	cfocertq310.htm
EX-32.1 - CEO CFO SOX CERTIFICATION Q3 2010 - LOCATEPLUS HOLDINGS CORP	ceocfosoxq310.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

¨	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 000-49957

LocatePLUS Holdings Corporation

(Exact name of registrant as specified in its charter)


Delaware		04-3332304
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


100 Cummings Center, Suite 235m, Beverly, MA		01915
(Address of principal executive offices)		(Zip Code)

(978) 921-2727

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

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 ¨ (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 Exchange Act.) Yes ¨ No x

The number of shares of Common Stock outstanding at November 12 , 2010 was 49,980,100

The number of shares of Preferred Stock outstanding at November 12, 2010 was 71,400

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		Page

PART I	FINANCIAL INFORMATION

ITEM 1	Financial Statements

	Consolidated condensed balance sheets as of September 30, 2010 (un-audited) and December 31, 2009	1

	Un-audited consolidated condensed statements of operations for the three and nine months ended September 30, 2010 and 2009	2

	Un-audited consolidated condensed statements of cash flows for the nine months ended September 30, 2010 and 2009	3

	Notes to un-audited consolidated condensed financial statements	4

ITEM 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	13

ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	20

ITEM 4	Controls and Procedures	20


PART II	OTHER INFORMATION

ITEM 1	Legal Proceedings	21

ITEM 1A	Risk Factors	21

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	24

ITEM 3	Defaults Upon Senior Securities	25

ITEM 4	Submission of Matters to Vote of Security Holders	25

ITEM 5	Other Information	25

ITEM 6	Exhibits and Reports on Form 8-K	26

	SIGNATURES AND CERTIFICATION	27

* * *

PART I . FINANCIAL INFORMATION

Item 1. Financial Statements


LocatePLUS Holdings Corporation
Consolidated Balance Sheets
	September 30, 2010 (unaudited)			December 31, 2009 (audited)
Assets
Current assets:
Cash and cash equivalents	$	192,666		$	53,546
Accounts receivable, trade-net		836,516			760,933
Prepaid expenses and other current assets		28,185			3,017

Total current assets		1,057,367			817,496

Property and equipment, net		38,018			68,371
Intangible assets, net		998,413			1,022,997
Other assets		357,687			100,468

Total assets	$	2,451,485		$	2,009,332

Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Notes payable	$	767,691		$	148,000
Accounts payable		1,491,266			1,370,805
Accrued expenses		1,237,181			3,992,513
Deferred revenue		365,288			284,360
Convertible debt		3,542,675			3,288,419

Total current liabilities		7,404,101			9,084,097

Long term note payable		2,220,570			0
Long term convertible note payable		43,482			119,565
Shares subject to mandatory redemption		1,785,000			1,800,000

Total liabilities		11,453,153			11,003,662

Commitments and contingencies

Stockholders’ (deficit) equity:
Common stock , $0.01 par value, 50,000,000 authorized,
49,980,100 and 49,993,700 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		499,801			499,937
Additional paid-in capital		41,270,769			39,206,050
Shares pending issuance		0			900,000
Warrants		3,094,436			3,627,194
Accumulated deficit		(53,866,674	)		(53,227,511	)

Total stockholders’ (deficit) equity		(9,001,668	)		(8,994,330	)

Total liabilities, shares subject to mandatory redemption and stockholders’ (deficit) equity	$	2,451,485		$	2,009,332

The accompanying notes are an integral part of these un-audited consolidated financial statements.

See accompanying notes and accountants report

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LocatePLUS Holdings Corporation
Consolidated Statements of Operations

	For the three months ended September 30,						For the nine months ended September 30,
	2010			2009			2010			2009


Revenue		1,940,529			1,831,736			6,014,362			5,426,981
Cost of revenue		689,272			381,081			2,028,237			1,108,442

Gross Profit	$	1,251,257		$	1,450,655		$	3,986,125		$	4,318,539

Operating expenses:
Selling and marketing		122,657			286,169			606,031			886,259
General and administrative		1,054,633			1,132,771			3,649,497			3,678,571
Research and development		0			132			0			29,424

Total operating expenses	$	1,177,290		$	1,419,072		$	4,255,528		$	4,594,254

Operating income (loss)		73,967			31,584			(269,403	)		(275,715	)

Other income (expense):

Interest expense		(41,967	)		(199,249	)		(165,179	)		(400,835	)
Other income		772			440			3,501			3,365
Finance Related Expenses		(7,292	)		0			(208,835	)		0

Net income (loss)	$	25,480		$	(167,225	)	$	(639,916	)	$	(673,185	)

Basic net income (loss) per share	$	0.000		$	(0.003	)	$	(0.012	)	$	(0.016	)

Fully diluted net income (loss) per share	$	0.000		$	(0.003	)	$	(0.012	)	$	(0.016	)

Shares used in computing basic net income (loss) per share		49,983,521			49,808,203			49,962,224			42,595,824

Shares used in computing fully diluted net income (loss) per share		332,920,901			49,808,203			49,962,224			42,595,824

The accompanying notes are an integral part of these un-audited consolidated financial statements.

See accompanying notes and accountants report

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LocatePLUS Holdings Corporation
Consolidated Statements of Cash Flows

	For the nine months ended September 30,			For the nine months ended September 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	(639,916	)	$	(673,184	)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization		54,937			91,782
Provision for doubtful accounts		0			7,000
Interest expense related to warrants issued with debt		57,398			259,651
Services performed in exchange for stock		28,803			0
Acquisition of Goodwill					(850,413	)
Shares pending issuance					900,000

Net changes in operating assets and liabilities:
Accounts receivable		(75,582	)		(222,875	)
Prepaid expenses and other assets		(25,168	)		59,536
Other Assets		(21,400	)		(16,376	)
Accounts payable		120,457			(262,892	)
Accrued expenses		475,059			448,996
Deferred revenue		80,928			52,254

Total Adjustments		695,432			466,663

Net cash provided (used) by operating activities		55,516			(206,521	)

Cash flows from investing activities:
Purchases of property and equipment		0			(40,837	)

Net cash used in investing activities		0			(40,837	)

Cash flows from financing activities:
Repayment of debt		(49,097	)		(78,006	)
Proceeds from issuance of debt		162,500			375,000
Payments of shares subject to mandatory redemption		(15,000	)		0
Financing fees on issuance of debt		(14,799	)		0

Net cash used in financing activities		83,604			296,994

Net increase (decrease) in cash and cash equivalents		139,120			49,636

Cash and equivalents, beginning of period		53,546			92,465

Cash and cash equivalents, end of period	$	192,666		$	142,101

Supplemental disclosures of cash flow information: Noncash financing transactions:
Reclassification of accrued liability		2,750,000			0
Note obtained for ownership rights of equity		278,619			0
Conversion of payable to debt		20,000			0
Payment of obligations with equity		119,939			0
Payment on notes payable with equity		235,500			0

The accompanying notes are an integral part of these un-audited consolidated financial statements.

See accompanying notes and accountants report

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1.	Nature of Business and Basis of Presentation

LocatePLUS Holdings Corporation

LocatePLUS Holdings Corporation, through itself and its wholly-owned subsidiaries LocatePLUS Corporation, Worldwide Information, Inc., Entersect Corporation (aka Certifion Corporation), Dataphant, Inc., and Employment Screening Profiles, Inc. (d/b/a TruBackgrounds) are business-to-business, business-to-government and business-to-consumer providers of public information via our proprietary data integration solutions.

LocatePLUS Corporation

LocatePLUS designs and markets web-based investigative search and background screening products for credentialed corporate, government and law enforcement clients. The LocatePLUS flagship products – LocatePLUS Pay-per-click (PPC) and LP Police – empower businesses and government agencies with real-time web and mobile access to a wide range of public and proprietary databases to verify personally identifiable information on the US adult population.

LocatePLUS provides access to information that includes credit header data, telephone numbers, address histories, dates of birth, social security numbers, civil and criminal records, corporation records, real property information and email addresses. The primary markets served are private investigators, law enforcement, government, legal professionals, collections, bail bondsmen and security agencies.

Entersect Corporation

Entersect Corporation (aka Certifion Corporation), is a provider of web-based public information databases that allow investigative professionals to verify the authenticity of a subject’s background. Entersect’s products – Entersect Police Online (EPO), Entersect HR and Entersect Public Records – provide law enforcement and investigative professionals with the tools they need to mitigate risk and prevent illegal activities.

Entersect Police Online delivers telephone and address information to empower police and federal agents to conduct more thorough investigations resulting in swift actions in the field. Entersect HR empowers human resource professionals to make better, more informed decisions based on the verified backgrounds of potential and existing associates. Entersect serves the law enforcement, background screening, pre-employment and investigative communities with information-enabled web applications and services.

Worldwide Information, Inc.

Worldwide Information provides CD-ROM and DVD products for effectively identifying motor vehicle, driver’s license, harbor records and unlisted cell phone records. The company designs and markets specialized CD-based software products containing statewide motor vehicle records that provide identity validation services to law enforcement, law offices and other accredited businesses.

Worldwide’s person search products increase the success rate of identifying or locating critical persons when only a minimal amount of information is available. Unlike web-based search products, Worldwide’s CD/DVD-based software can be accessed from anywhere without the need for an internet connection or phone signal. Worldwide products are useful in solving police cases involving missing persons associated with partial vehicle information.

Dataphant, Inc.

Dataphant is a provider of information on land and mobile phone numbers in the United States. Dataphant leverages a proprietary process to gather and analyze phone numbers from mobile and landline sources and map those numbers to phone owners and addresses.

Dataphant phone information is used by credentialed investigative and law enforcement customers throughout the U.S and Canada. The information is available to all business and consumer markets, but the primary markets for this information remains in the government and law enforcement arena.

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Employment Screening Profiles, Inc. (d/b/a TruBackgrounds)

Employment Screening Profiles, Inc. (d/b/a TruBackgrounds) develops and markets integrated, customized, web-enabled background verification solutions designed to aid in the verification, applicant management and human resource collaboration processes. The company serves large and small businesses with systems and information that enable better decisions and reduced costs via automation of the screening process.

TruBackgrounds products empower clients to reduce risk, cost and workload while improving productivity by delivering accurate, timely nationwide background information right to the desktop. Designed to utilize the latest Internet technologies, TruBackgrounds products are easy-to-use, secure, reliable and industry standards compliant. Solutions are sold to all businesses that are in need of background screening products, including education and employment verification, criminal and civil records, motor vehicle records, SSN verifications, and professional license checks.

Metrigenics, Inc.

Metrigenics was formed to develop new ways to integrate biometrics with data. In March, 2009, management made the decision to suspend funding of this subsidiary which consisted primarily of research and development costs, and is presently exploring strategic options with respect to this entity.

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and notes receivable. The risk with respect to cash and cash equivalents is minimized by the Company’s policies in which such investments are placed only with highly rated financial institutions and in instruments with relatively short maturities. The financial stability of these financial institutions is constantly reviewed by senior management. The notes receivable are placed with unrelated companies that are also reviewed by management. Consequently, the carrying value of cash and cash equivalents, and notes receivable approximates their fair value based on the short-term maturities of these instruments.

Revenue Recognition

The Company provides access to public information such as credit header data, telephone numbers, address histories, dates of birth, full social security numbers, civil and criminal records, corporation records, real property information and email addresses bankruptcies, real estate transactions and motor vehicles and drivers’ licenses. The Company provides this information as an online service through its website, wirelessly to handheld wireless devices, via XML over the Internet, or through licenses of the information on compact disks.

Revenue is recognized upon delivery to the customer of a product or service, provided that no significant obligations remain, evidence of the arrangement exists, the fees are fixed or determinable, and collectability is reasonably assured.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes, as set forth in accounting principles generally accepted in the United States of America. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities at currently enacted tax rates. These temporary differences primarily relate to the accumulating of net operating losses to offset future taxable income as well as tax to book differences between depreciation of fixed assets and amortization of intangible assets and other timing differences in recognition of expenses for tax and book purposes. Valuation allowances are established, if necessary, to reduce a deferred tax asset to the amount that will more likely than not be realized.

The Company recognizes tax benefits from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the tax position. Any tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

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There are no uncertain tax benefits that have been recognized in the accompanying financial statements. Each of the tax years in the three-year period ended December 31, 2009 remains subject to examination by the Internal Revenue Service. The Company’s policy is to recognize interest and penalties related to uncertain tax benefits (if any) in income tax expense. No such interest and penalties have been accrued as of September 30, 2010 or for the year ended December 31, 2009.

A valuation allowance has been recorded for the entire amount of the deferred tax asset which consists of the net operating losses carried forward.

Use of Estimates

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

Advertising Expense

It is the Company’s policy to expense advertising and marketing costs as incurred.

Research and Development

Research and development costs related to both present and future products are expensed as incurred.

Unaudited Interim Financial Statements

The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America. These statements include the accounts of LocatePLUS Holdings Corporation and its subsidiaries. Certain information and footnote disclosures normally included in LocatePLUS Holdings Corporation’s annual consolidated financial statements have been condensed or omitted in accordance with Securities and Exchange Commission rules for interim financial statements. The interim consolidated financial statements reflect, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary to fairly present the financial position as of September 30, 2010, and the results of operations and cash flows for the three months then ended. There were no material unusual charges or credits to operations during the recently completed fiscal quarter. All inter-company accounts and transactions have been eliminated in consolidation. Certain amounts in the 2009 interim financial statements have been reclassified to conform to the 2010 presentation.

The financial statements of the Company have been prepared on a "going concern" basis, which assumes the realization of assets and the liquidation of liabilities in the ordinary course of business. However, such realization of assets and liquidation of liabilities are subject to a significant number of uncertainties. There are a number of factors that have negatively impacted the Company's liquidity, and may impact the Company's ability to function as a going concern. The Company has sustained net losses of $639,916 and $2,845,570 for the fiscal periods ended September 30, 2010 and December 31, 2009, respectively. The Company has an accumulated deficit of $53,866,674, a stockholders' deficit of $9,001,668 and a working capital deficit of $6,346,734 at September 30, 2010. The above factors raise substantial doubt about the Company's ability to continue as a going concern.

The results of operations for the interim periods reported hereon are not necessarily indicative of the results of operations to be expected for the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2009, which are contained in LocatePLUS Holdings Corporation’s Annual Report filed on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010.

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Liquidity and Operations

The financial statements included in this quarterly report have been prepared assuming that the Company will continue as a going concern, and contemplate continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred significant net losses since inception, and has incurred an accumulated deficit of $53,866,674 through September 30, 2010.

2. Property and Equipment

Property and equipment consist of the following at September 30, 2010 and December 31, 2009.


	September 30, 2010		December 31, 2009

Equipment	$	4,638,081	$	4,638,081
Vehicles		22,343		22,343
Software		332,587		332,587
Furniture and fixtures		389,783		389,783
Leasehold improvements		624,142		624,142
		6,006,936		6,006,936
Less accumulated depreciation and amortization		5,968,918		5,938,565
Property and equipment, net	$	38,018	$	68,371

3. Intangible Assets

Intangible assets consist of two elements – goodwill and capitalized financing costs.

During the period ended December 31, 2009, the Company acquired goodwill from the acquisition of its wholly-owned subsidiary Employment Screening Profile, Inc. (d/b/a/ TruBackgrounds) through the issuance of Common Stock.

The Company has elected to account for goodwill resulting from the acquisition of assets, in accordance with accounting principles generally accepted in the United States of America, which prohibits the amortization of goodwill since it has an indefinite life. It requires that goodwill be tested for impairment on an annual basis. If goodwill is impaired, an impairment loss will be recognized and charged against earnings in the year in which the goodwill becomes impaired. There was no impairment for the period ended September 30, 2010 or for the year ended December 31, 2009. However, for tax purposes, goodwill is being amortized ratably over a 15-year period.

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Intangible assets consist of the following at September 30, 2010 and December 31, 2009:

	September 30,		December 31,
	2010		2009

Goodwill	$	998,412	$	998,412
Financing costs		221,250		221,250
		1,219,662		1,219,662
Less: accumulated amortization		221,249		196,665
Total	$	998,413	$	1,022,997

4. Other Assets

Other assets consist of the following at September 30, 2010 and December 31, 2009:

	September 30,		December 31,
	2010		2009

Ownership rights of equity	$	241,119	$	0
Security deposits		100,468		100,468
Other		16,100		0

Total	$	357,687	$	100,468

5. Stock Options

The Company accounts for its stock-based compensation in conformity with accounting principles generally accepted in the United States of America which requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. In connection with valuing stock options, the Company utilizes the Black-Scholes model, which requires certain subjective assumptions. The key assumptions include the expected volatility of the Company’s stock, term of the award and expected forfeiture rate. Valuation assumptions are reviewed periodically and, as a result, may lead to a significant change in the expense recognized in connection with share-based payments and may change the valuation assumptions used to value share-based awards granted in future periods.

The assumptions used and the weighted average calculated value of options are as follows for the period ended September 30, 2010 and 2009:

	For the nine months ended
	September 30,
	2010			2009
Expected life	6 years			6 years
Volatility		33	%		33	%
Risk free interest rate		2.53	%		3.31	%
Dividend yields		-			-
Weighted-average fair value of options granted during the period		-			-

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The expected life of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. For 2010 and 2009, expected stock price volatility is based on a combination of historical volatility of the Company’s stock and the one-year implied volatility of its traded options, for the related vesting periods. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The Company has not paid dividends in the past and does not plan to pay any dividends in the near future.

The value of the portion of the award that is ultimately expected to vest, reduced for estimated forfeitures, is recognized as expense on a straight-line basis over the requisite services periods. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

6. Notes Payable

Notes payable consist of the following:

During 2003, the Company issued subordinated promissory notes in the amount of $2.3 million, bearing simple interest ranging from 10% and 12% per annum. In 2007, the terms of these notes were re-negotiated and now bear interest ranging from 19% to 30%. As of September 30, 2010, the balance including interest on these notes of $112,000 remained unpaid and the notes are classified as demand.

On March 20, 2007, the Company a secured convertible debenture to Cornell Capital Partners (now YA Global Investments, L.P.) in the aggregate principal amount of $6,000,000 of which $3,000,000 was advanced immediately. The second installment of $2,000,000 was to be advanced immediately prior to the filing by the Company with the Securities and Exchange Commission (the "Commission") of the Registration Statement. The last installment of $1,000,000 was to be advanced immediately prior to the date the Registration Statement was declared effective by the Commission. The remaining $3,000,000 was not funded due to the Company failing to file the necessary Registration Statement. The Debentures matured on the third anniversary of the date of issuance and are now in default. The holder of the Debentures may convert at any time amounts outstanding under the Debentures into shares of common stock of the Company at a fixed conversion price per share equal to $0.314. Under the Purchase Agreement the debentures are secured by substantially all of the Company's, and its wholly owned subsidiaries’ assets. The Company is engaged in negotiations toward a restructuring of this indebtedness.

Under the Purchase Agreement, we also issued to Cornell Partners (now YA Global Investments, L.P.) five-year warrants in six separate series as follows:

A Warrants to purchase 2,384,814 shares of common stock at $0.314 per share;

B Warrants to purchase 2,186,079 shares of common stock at $0.343 per share;

C Warrants to purchase 2,017,919 shares of common stock at $0.372 per share;

D Warrants to purchase 1,748,863 shares of common stock at $0.429 per share;

E Warrants to purchase 1,499,026 shares of common stock at $0.50 per share;

F Warrants to purchase 1,500,000 shares of common stock at $0.01 per share.

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Simultaneously, with the sale and issuance of the Debentures to YA Global Investments, L.P. as mentioned in the preceding paragraph, the Company entered into a settlement agreement with Dutchess Private Equities Fund, Ltd. for the settlement of a dispute regarding the amount due under debt instruments issued by the Company to Dutchess during 2005 and 2006. Pursuant to the terms of the Settlement, the Company immediately paid a cash amount of $1,500,000 with two additional cash payments in the amount of $300,000 each to be made on the date that (i) the Company filed the Registration Statement (or, if earlier, within 45 days) and (ii) the Registration Statement is

declared effective (or, if earlier, within 145 days), neither of which took place. The Company also issued a Note in the amount of $1,500,000 and agreed to reduce to $0.10 per share the exercise price of the warrants issued to Dutchess. Dutchess terminated its security interest in the Company’s assets upon the Initial Payment.

On December 11, 2007, the Company received a letter dated December 6, 2007 ( the "Notice Letter"), from YA Global Investments, L.P., (formerly known as Cornell Capital Partners, L.P.) notifying the Company of certain Events of Default under the Secured Convertible Debenture dated March 20, 2007 of the Company (the "Debenture"). As a result of this default, the entire note has been re-classified as short term. The Company is engaged in negotiations toward a restructuring of this indebtedness.

On June 1, 2010, the Company agreed to the cancellation of series A- E of the 5-year warrants held by YA Global Investments, L.P to purchase a total of 9,836,701 shares of the Company’s Common Stock. The cancellation was in exchange for 300,000 shares of Common Stock.

On December 30, 2009, all indebtness to Dutchess Private Equities Fund, Ltd. was settled through the issuance of 72,000 shares of Preferred Stock. The 72,000 shares of new Series A Preferred Stock issued to Dutchess have a par value of $1.00 per share and a $25 liquidation preference. The shares are restricted as to resale. The shares pay a dividend of 1% per annum of the par value per share in cash or in Series A Preferred Stock. Holders will have a vote on any matters affecting the Series A Preferred Stock. The shares are convertible at any time into the Company’s Common Stock at 41.66 shares of Common Stock per share of Preferred Stock (fully converted, 3,001,680 shares of Common Stock). The Company can force conversion of Preferred Stock not to exceed 4.99% of total Common Stock outstanding if the 10-day moving average closing price per share of the Company’s Common Stock shall exceed $.50 per share. Holders also have a right to “put” their shares to the Company at $25.00 per share, not to exceed in the aggregate for any calendar quarter: $15,000 through the last 6 months of 2010, $25,000 through the last quarter of 2011 and $35,000 per quarter thereafter. As of September 30, 2010, the Company has satisfied one of three requests to repurchase 600 shares of Preferred Stock and the balance of Preferred shares issued and outstanding to Dutchess is 71,400. The Company is in the process of negotiating a modification of these settlement arrangements.

During 2009, the Company issued several one-year convertible promissory notes totaling $375,000, bearing simple interest of 8% per annum. The balance of this debt at September 30, 2010 is $250,000.

In November, 2009, the Company repurchased 2,000,000 shares of its Common Stock at $0.125 from an independent investor. This purchase was done in exchange for a two year, 5.5% convertible note in the amount of $250,000. This note is convertible into shares of the Company’s Common Stock at a conversion price of twelve and one half cents ($0.125). All interest payable in relation to this note was prepaid.

As of April 10, 2010, the Company issued to Special Situations Fund III, L.P and Special Situations Private Equity Fund, L.P., a four-year promissory note in the amount of $2,750,000 bearing simple interest of 5% per annum (the "Substitute Note"). The Substitute Note was in substitution for previous existing indebtedness that was in default. The balance of principal and interest due on the Substitute Note at June 30, 2010 was $2,742,901. The Substitute Note was cancelled as of August 23, 2010 in favor of two separate notes, each in the principal amount of $1,375,000, payable separately to each of Special Situations Fund III, L.P and Special Situations Private Equity Fund, L.P. and due in full January 10, 2016. Each note contains an identical revised monthly principal repayment schedule in monthly installments of $7,500, beginning February, 2011, increasing to $10,000 April 10, 2011, $15,000 July 10, 2011 and $25,000 September 10, 2011. Interest is payable on the 10th day of each month at 5% per annum but any interest payment may be deferred until maturity at a 10% per annum rate.

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In 2010, through September 30, the Company purchased equity rights to 2,228,952 shares of its Common Stock at $0.125 per share from independent investors. This purchase was done in the form of two year, 5.5% convertible notes in the amount of $278,619. These notes are convertible into shares of the Company’s Common Stock at a conversion price of twelve and one half cents ($0.125).

Through June 30, 2010, the Company issued several one-year convertible promissory notes totaling $155,500, bearing simple interest of 8% per annum. The balance of this debt at September 30, 2010, is $90,000.

In connection with an offering that closed on August 15, 2005 the Company entered into a Purchase Agreement with certain institutional and accredited investors relating to the private placement of an aggregate of $8,965,000 in convertible term notes. Per the agreement, a registration statement was to be filed registering the underlying shares which was not completed resulting in an additional $2,300,000 in penalty charges. The Company is currently in the process of negotiating with these note holders for a restructuring of this indebtedness and has accrued a charge of $477,000 to cover the anticipated costs.

7. Accrued Expenses

Accrued expenses consist of the following at September 30, 2010 and December 31, 2009


	September 30, 2010		December 31, 2009

Accrued penalties	$	477,400	$	3,233,902
Accrued legal settlements		231,415		292,351
Board of Director fees		186,436		210,049
Accounting fees		62,375		91,000
Payroll		25,316		90,133
Other		254,239		75,078

Total	$	1,237,181	$	3,992,513

8. Legal Proceedings

As a result of a Litigation filed in Essex County Superior Court in Massachusetts on June 17, 2010 in the matter of Dun & Bradstreet v. LocatePLUS Holdings Corporation C.A.NO.ESCV2009-02421-D a judgment was entered for $100,000. This suit involved the balance due for money loaned, services rendered, information services rendered, and goods sold and delivered, plus interest from June 2006. The company is in discussion with the plaintiffs as to the settlement of this litigation.

As a result of a Litigation filed in Dallas County, Texas on May 22, 2009 in the matter of E -Backgroundchecks.com, Inc. (BGC) v. LocatePLUS Holdings Corporation C.A.NO.CC-09-03539-E a judgment for $55,158.75 was entered. The suit involved the failure of LocatePLUS to make payments for services provided by BGC. The company has settled in this judgment and begun the process of paying down the remaining balance.

As a result of the settlement over the Company’s indebtedness to Dutchess Private Equities Fund, Ltd. (”Dutchess”) as of December 31, 2009, Dutchess agreed to place 19,866,461 shares of Common Stock of the Company issued to it by the Company in early 2009 in conversion of indebtedness (the “Dutchess Shares”) into escrow, pending the resolution of ongoing litigation between the Company and its former CEO James Fields (“Fields”) over the Shares. Fields had claimed an ownership interest in the Shares by purchase. Fields renounced his claims to all the Dutchess

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Shares (except for 250,000 Shares retained in the escrow) on May 17, 2010 as part of a settlement of this litigation. The Dutchess Shares are in the process of being re-allocated after being released from escrow in order to satisfy pre-existing obligations.

On November 16, 2009, an execution was obtained against LocatePlus Holdings Corporation in a lawsuit styled Thomas Nolan v. LocatePlus Holdings Corporation, in the Essex County Superior Court in Massachusetts, C.A. No. ESCV2006-02125, in the amount of $160,269. The execution was in connection with a default judgment entered against the Company on January 11, 2007. The default judgment was appealed by the Company on or about April 1, 2009, and the appeal was subsequently dismissed on June 25, 2009. The underlying cause of action

was brought to enforce a default judgment obtained against the Company in Oregon. The Company is actively engaged in settlement discussions with the plaintiff.

On May 7, 2010, Thomas Nolan filed a second complaint styled as, Thomas Nolan v. LocatePlus Holdings Corporation in the Essex Superior Court in Massachusetts, C.A. No. ESCU 2010-00961 seeking to enforce the judgment which he had obtained in the earlier judgment. The Company is actively engaged in settlement discussion with the plaintiff.

There is pending litigation in the matter of Sharon Taylor, et al. v. Biometric Access Company, et al., in the US District Court for the Eastern District of Texas, C.A. No. 2:07-CV-00018. The matter is styled as a class action suit brought by the plaintiff class against a group of defendant companies under the Driver Privacy Protection Act, 18 USC §2721 et seq. The defendants filed a joint Motion to Dismiss which was granted by the Court. The plaintiff class has filed an appeal of the dismissal of the case, which is being vigorously opposed. The likelihood of success of the defendants’ opposition to the appeal is excellent. The potential for loss is negligible.

There is pending litigation in the matter of Sam Wiles, Carol Watkins, Jackson Wills and Sarah Smith, Individually and on behalf of all others Similarly Situated, in the US District Court for the Western District of Missouri, C.A. No. 09-4164-CV-C-NKL. The matter is styled as a class action suit brought by the plaintiff class against the Company, alleging a violation of the Driver Privacy Protection Act, 18 USC §2721, et. seq., and is one of several similar actions brought by the class against a number of companies in the same industry as the Company. The Company is vigorously defending the suit, and believes that its defenses to the plaintiff class’s claims are strong.

On June 7, 2007 Special Situations Fund III, L.P and Special Situations Private Equity Fund, L.P. obtained a judgment in the amount of $1,948,631.18 (including interest and costs) against the Company in the Supreme Court of the State of New York, Index No. 06/6039989, based on amounts owing by the Company under notes issued to the plaintiffs. On October 24, 2007 the plaintiffs obtained a judgment for this amount in the Massachusetts Superior Court, Essex County, Index No. CIV- ESCV2007-01152. On February 6, 2008 the plaintiffs obtained in the same Court an ex-parte trustee process attachment against all assets of the Company held at TD Bank North, Index No CIV-08-268. This litigation has not been dismissed, satisfied or resolved. Upon payment in full of all principal and accrued interest due pursuant to the notes issued on August 23, 2010, Special Situations will execute and file a satisfaction of judgement.

On September 2, 2010 an Employment Discrimination civil lawsuit was filed against the Company and certain officers, Sonia Bejjani v LocatePlus Holdings Corporation et al, Mass. Superior Court, Essex County, Docket No. ESCV2010-01870-B.. On November 3, 2010 the Company answered denying any liability. To date, a Court appearance has not been scheduled.

On October 14, 2010 the U.S. Securities and Exchange Commission filed a civil action against the Company in the United States District Court for the District of Massachusetts, Securities and Exchange Commission v. LocatePlus Holdings Corporation. The Complaint alleges violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The complaint alleges that the Company filed financial statements for the fiscal years 2005 and 2006 which were false and misleading. The action seeks the entry of a permanent injunction

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prohibiting the Company from engaging in future violations of the cited sections and rules; disgorgement and pre-judgment interest and civil monetary penalties. The Company is in the process of reviewing the complaint and has not yet filed a formal response. The Company, with the full concurrence of its Board of Directors, intends vigorously to oppose this action.

9. Segment Information

The Company operates in a single business segment.

10. Net Income (Loss) Per Share

The computations of basic and diluted income (loss) per common share are based upon the weighted average number of common shares outstanding during the period. The Company’s Common Stock potentially issuable upon the exercise of stock options and warrants are anti-dilutive for the period ending September 30, 2010 and was not included in the computations for the diluted net loss per share.

11. Subsequent Events

None

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of LocatePLUS Holding Corporation should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission, or SEC.

Forward Looking Statements

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended) that involve risks and uncertainties. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These forward-looking statements, such as statements regarding anticipated future revenue, contract percentage completions, capital expenditures, management's plans and objectives and other statements regarding matters that are not historical facts, involve predictions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including those factors set forth in Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009. We urge you to consider those risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

LocatePLUS Holdings Corporation

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Screening Profiles, Inc. (d/b/a TruBackgrounds) are business-to-business, business-to-government and business-to-consumer providers of public information via our proprietary data integration solutions.

LocatePLUS Corporation

Entersect Corporation

Entersect Corporation (aka Certifion Corporation), is a provider of web-based public information databases that allow investigative professionals to verify the authenticity of a subject’s background. Entersect’s product - Entersect Police Online (EPO), Entersect HR and Entersect Public Records provide law enforcement and investigative professionals with the tools they need to mitigate risk and prevent illegal activities.

Worldwide Information, Inc.

Dataphant, Inc.

Employment Screening Profiles, Inc. (d/b/a TruBackgrounds)

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On September 24, 2009 the Company acquired all the stock of Employment Screening Profiles, Inc.(d/b/a Trubackgrounds), a Florida corporation, which is engaged in the business of developing and delivering integrated, customized Web-enabled solutions designed to aid in background verification, applicant management and human resource collaboration processes. Trubackgrounds serves large and small businesses with systems and information designed to enable intelligent decisions and reducing costs through automation. Trubackgrounds will continue to be operated as a wholly-owned subsidiary of the Company and will collaborate in providing enhanced service capability to the Company’s customers.

Our various subsidiaries’ products generally consist primarily of publicly available, and therefore non-proprietary information, our subsidiaries integrate data in our products in a proprietary manner that allows users to access data rapidly and efficiently. Our LocatePLUS Corp. product utilizes proprietary methodologies to link data from different sources associated with a given individual to a single background report, even though the sources of data with respect to a given individual may be incomplete or contain only partial information with respect to that individual.

We have incurred significant net losses since our inception. Our ultimate success is dependent upon our ability to secure additional financing to meet our working capital and ongoing project development needs. To achieve our business objectives, we must raise additional capital, which may consist of future debt or equity offerings. Any such financings may be dilutive to existing investors.

The Company has taken a number of actions to reduce operating expenses, and to improve the salability of its products. The Company's major objective is to increase its order volume. Short and long-term liquidity needs require either significant improvement in operating results and/or the obtaining of additional capital. There can be no assurance that the Company's plans to achieve adequate liquidity will be successful. If the Company's operations continue to deteriorate due to increased competition, or other adverse events, it will be required to obtain additional sources of funds through asset sales, capital market transactions, financing from third parties or a combination thereof. The Company has only recently been able to attain profitability from continuing operations and may not be able to remain profitable on a quarterly or annual basis in the future. Management's initiatives over the last two years, including cost reductions, securing debt financing and restructuring existing debt agreements are designed to improve operating results and liquidity, and to better position the Company to compete under current market conditions. The Company is currently seeking additional accommodations from its existing lenders and it may seek equity infusion from other financial institutions or private investors. The Company's ability to fund its operations is heavily dependent on the growth of its revenues over current levels in order to achieve profitable operations. The Company may be required to further reduce operating costs in order to meet its obligations. If the Company is unable to achieve profitable operations or secure additional sources of capital, substantial doubt would continue about its ability to continue operations. No assurances can be given that management's initiatives will be successful, or that any such additional sources of financing, lender accommodations or equity infusions will be available.

Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated

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Financial Statements included in the Company’s 2009 Annual Report. Note that our preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Our accounting policies that are the most important to the portrayal of our financial condition and results, and which require the highest degree of management judgment relate to revenue recognition and the provision for uncollectible accounts receivable. We estimate the likelihood of customer payment based principally on a customer’s credit history and our general credit experience. To the extent our estimates differ materially from actual results, the timing and amount of revenues recognized or bad debt expense recorded may be materially misstated during a reporting period. Revenue is recognized upon delivery to the customer of a product or service, provided that no significant obligations remain, evidence of the arrangement exists, the fee is fixed or determinable and collectability is reasonably assured.

Our costs of revenue consist primarily of our costs to obtain data and software maintenance expenses, which consist primarily of payroll and related expenses for information technology personnel, Internet access and hosting charges, and expenses relating to Web content and design. We obtain our data from multiple sources and we have entered into various license agreements with related data providers. In the nine months ended September 30, 2010 and 2009, we recorded $2,025,469 and $1,100,199 respectively, in costs related to these agreements. In the event that any of our primary sources of data became unavailable to us, we believe that we would be able to integrate alternate sources of data without significant disruption to our business or operations, as there are currently a number of providers of such data.

Our selling and marketing expenses consist of salaries and commissions paid to sales representatives for the products that we offer, as well as direct and electronic mail advertising campaigns and magazine.

General and administrative expenses consist of payroll and related expenses for non-sales, non-research and development and executive and administrative personnel, facilities expenses, insurance, professional services, travel and other miscellaneous expenses.

Interest expense is primarily attributable to various notes issued through September 30, 2010. As of September 30, 2010, we had gross notes payable (current and long-term) totaling $6,472,418.

We recorded a net loss of $639,916 and $673,185 for the nine months ended September 30, 2010 and 2009 respectively. Our accumulated deficit as of September 30, 2010 was $53,866,674.

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

Revenues. Revenues increased to $1,940,529 for the three months ended September 30, 2010 from $1,831,736 for the three months ended September 30, 2009, an increase of 6%. This increase is attributable to $345,086 in incremental revenues related to our Trubackgrounds’ products, offset by a slight decline in other product revenues.

Cost of revenues. For the three months ended September 30, 2010, cost of revenues was $689,272 as compared to $381,081 for the three months ended September 30, 2009, an increase of 81%. The increase consists of $195,872 in costs associated with the incremental Trubackgrounds revenue, and the remainder is due to costs for additional data services related to expanded product functionality.

Selling and marketing expenses. Selling and marketing expenses for the three months ended September 30, 2010 were $122,657 as compared to $286,169 for the three months ended September 30, 2009, a decrease of 57%. The primary reason for the reduction is due to the elimination of marketing activities that generated less revenue than the cost to acquire that revenue as well as a reduction in personnel.

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General and administrative expenses. General and administrative expenses for the three months ended September 30, 2010 were $1,054,633, as compared to $1,132,771 for the three months ended September 30, 2009, a decrease of 7%.

Research and Development expenses. Research and development expenses for the three months ended September 30, 2010 were $0 as compared to $132 for the three months ended September 30, 2009. This decrease is attributable to suspension of development activities

Interest expense. Interest expense decreased to $41,967 for the three months ended September 30, 2010, from $199,249 for the three months ended September 30, 2009, a decrease of 79%. This decrease is attributable to the full amortization of discounts on certain notes payable.

Other income (expense). Other income increased to $772 for the three months ended September 30, 2010, up from $440 for the three months ended September 30, 2009, an increase of 75%. This income is attributable to the collection of certain accounts receivable that have previously been written off.

Financing related expenses. Finance related expenses which amounted to $7,292 in the three months ended September 30, 2010 are attributable to the expenses related to the restructuring of debt during the period and expenses associated with the issuance of new notes.

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

Revenues. Revenues increased to $6,014,362 for the nine months ended September 30, 2010 from $5,426,981 for the nine months ended September 30, 2009, an increase of 11%. This increase is attributable to $912,896 in incremental revenues related to our Trubackgrounds’ products, offset by a slight decline in other product revenues.

Costs of revenues. For the nine months ended September 30, 2010, cost of revenues was $2,028,237 as compared to $1,108,442 for the nine months ended September 30, 2009, an increase of 83%. The increase consists of $457,676 in costs associated with the incremental Trubackgrounds revenue, and the remainder is due to costs for additional data services related to expanded product functionality.

Selling and marketing expenses. Selling and marketing expenses for the nine months ended September 30, 2010 were $606,031 as compared to $886,259 for the nine months ended September 30, 2009, a decrease of 32%. The primary reason for the reduction is due to the elimination of marketing activities that generated less revenue than the cost to acquire that revenue as well as a reduction in personnel.

General and administrative expenses. General and administrative expenses for the nine months ended September 30, 2010 were $3,649,497 as compared to $3,678,571 for the nine months ended September 30, 2009, a decrease of less than 1%.

Research and Development expenses. Research and development expenses for the nine months ended September 30, 2010 were $0 as compared to $29,424 for the three months ended September 30, 2009. This decrease is attributable to suspension of development activities and related personnel reductions.

Interest expense. Interest expense decreased to $165,179 for the nine months ended September 30, 2010, from $400,835 for the nine months ended September 30, 2009, a decrease of 59%. This decrease is attributable to the full amortization of discounts on certain notes payable.

Other income (expense). Other income increased to $3,501 for the nine months ended September 30, 2010, up from other income of $3,365 for the nine months ended September 30, 2009, an increase of 4%. This income is attributable to the collection of certain accounts receivable that have previously been written off.

Financing related expenses. Finance related expenses which amounted to $208,835 in the nine months ended September 30, 2010 are attributable to the expenses related to the restructuring of debt during the period and expenses associated with the issuance of new notes.

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Certain Related Party Transactions

On September 24, 2009 the Company acquired all the stock of Employment Screening Profiles, Inc.(d/b/a Trubackgrounds), a Florida corporation (“Trubackgrounds”), Oldsmar (Tampa) Florida, engaged in the business of developing and delivering integrated, customized Web-enabled solutions designed to aid in background verification, applicant management and human resource collaboration processes. See www.trubackgrounds.com. As part of that acquisition, the Company agreed to provide the seller, Derrick Spatorico, with 9,000,000 shares of Common Stock, to be transferred to him out of an escrow account established to hold shares previously issued to Dutchess Private Equities Fund, Ltd.,(the “Dutchess Shares”) pending the resolution of ongoing litigation as to their ownership.

On September 25, 2009 Mr. Spatorico became a Director of the Company and on February 25, 2010 he became acting President and Chief Executive Officer and Chief Financial Officer.

Mr. Spatorico’s stock was subject to an escrow agreement by the terms of which he is to receive all of the stock out of escrow no later than September 1, 2011. On August 5, 2010 the escrow terminated in settlement of certain pending litigation and the 9,000,000 shares were transferred to a trust established by Mr. Spatorico.

On February 25, 2010, following the resignation of Geoffrey Lee as Interim President and Chief Executive Officer, the Board of Directors appointed Derrick Spatorico to the position of Acting President and Chief Executive Officer. On May 18, 2010, having achieved certain goals, Mr. Spatorico resigned as a Director and as Acting President and Chief Executive Officer of the Company.

At September 30, 2010, the Company has outstanding notes payable totaling $378,000 to Derrick Spatorico.

Liquidity and Capital Resources

As of September 30, 2010, our cash and cash equivalents totaled $192,666.

See “Notes Payable” section beginning on page 8 for a description of outstanding indebtedness.

The Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock”. As of September 30, 2010, the total number of shares which the Company is authorized to issue is 51,000,000 shares, 50,000,000 shares of which are Common Stock (“Common Stock”) and 1,000,000 shares of which are Preferred Stock (the “Preferred Stock”). The Common Stock and Preferred Stock have a par value of $0.01 and $1.00 per share respectively.

As of September 30, 2010, the Company was obligated to reserve an aggregate of 7,500,000 shares of its Common Stock for issuance in satisfaction of outstanding obligations under warrants, debt instruments, and other contracts. The Company had 19,911 shares of authorized and unissued stock available for such issuances.

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Commitments and Contingencies

Operating Leases

We lease office space and equipment under various operating lease agreements which terminate on various dates through 2015. Future minimum payments under our non-cancelable operating leases total $1,709,848.

Contractual Obligations

The following represents the contractual obligation and commercial commitments as of September 30, 2010:

	Total		Less than 1 Year		1-3 Years		3-5 Years

Long-Term Debt including current portion	$	6,472,417	$	4,208,366	$	2,264,051	$	0
Operating Leases		1,709,848		411,292		1,113,048		185,508
License Agreements		6,000		6,000
Total	$	8,188,265	$	4,625,658	$	3,377,099	$	185,508

Recently Issued Accounting Pronouncements

Effective July 16, 2010, per the Dodd-Frank Wall Street Reform and Consumer Protection Act, LocatePLUS is no longer required to meet the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 whereby the Company's management had to report on the operating effectiveness of the Company's internal controls over financial reporting as of December 31, 2010. However, it remains the stated goal of the Company’s management to institute many of the terms, controls and conditions outlined within the Sarbanes-Oxley framework during the next few quarters.

Off-Balance-Sheet Arrangements

The Company has no off-balance-sheet arrangements currently in effect or in effect during the quarter ended September 30, 2010, including but not limited to any guarantee contracts that have the characteristics defined in paragraph 3 of FASB Interpretation No. 45 (November 2002), as amended; any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement, any obligation that could be accounted for as a derivative instrument, or any obligation arising out of a variable interest (as referenced in FASB Interpretation No. 46, as amended).

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We do not invest in or hold securities or other financial market instruments as a regular part of our business. We conduct our business in US dollars. Our market risk is limited to domestic economic and regulatory factors.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure.

Internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer'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 and includes those policies and procedures that:

1.	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

3.	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.

Pursuant to Rules 13a-15 and 15d-15 we are required to carry out an evaluation of the effectiveness, as of September 30, 2010, of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) and internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

Following evaluations performed by our management at the start of the 2010 third quarter, we have begun to introduce new processes and procedures designed to improve our financial and disclosure controls. A new accounting team has been hired including a Chief Financial Officer. Other changes include an immediate increase in management oversight and additional segregation of duties allocated to the new team members. While we are confident that they address the perceived weaknesses and will be increasingly effective, these recent initiatives have not yet changed our opinion that as of the end of the reporting period there continue to be identified matters that would constitute material weaknesses (as such term is defined under the Public Company Accounting Oversight Board Auditing Standard No. 2) in our internal controls over financial reporting. Management has concluded that because such material weaknesses likely existed at that time and may persist, internal controls over financial reporting are not yet completely effective.

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Changes In Internal Control Over Financial Reporting

During the nine months ended September 30, 2010, we have taken specific actions to remediate the reportable conditions and material weaknesses that existed during the period ended December 31, 2009, including the devotion of additional resources to the quarterly closing process, and realignment of certain financial responsibilities to achieve stronger segregation of financial duties, and the engagement of a full time Chief Financial Officer. We intend to continue to further strengthen our controls and procedures regarding the closing process during the remainder of 2010.

There were no changes in our internal controls over financial reporting that occurred during the nine month ended September 30, 2010, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Please see summary provided under "Legal Proceedings" in Part I.

Item 1. A. Risk Factors

The Company operates in a rapidly changing economic and technological environment that presents numerous risks, many of which are driven by factors that the Company cannot control or predict. The following discussion, as well as the "Critical Accounting Policies and Estimates" discussion in Item 2 Management Discussion and Analysis of this Report on Form 10-Q highlights some of these risks.

You should carefully consider the risks described below before buying shares of the Company's common stock, as well as other information provided to you in this document, including information in the section of this document entitled "Forward Looking Statements". An investment in the Company's common stock is highly speculative. The risks and uncertainties described below are not the only risks the Company faces. Additional risks and uncertainties

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not currently known to the Company, or that the Company currently deems immaterial, may impair the Company's business operations. If any of the adverse events described in this Item 1A actually occur, the Company's business, results of operations and financial condition could be materially adversely affected, the trading price of the Company's common stock could decline, and you might lose all or part of your investment.

THE COMPANY HAS A HISTORY OF OPERATING LOSSES, AND IF THE COMPANY CONTINUES TO INCUR OPERATING LOSSES, IT MAY BE UNABLE TO CONTINUE OPERATIONS.

The Company had a net loss of $639,916 for the nine months ended September 30, 2010. The Company had an accumulated deficit of $53,866,674 and a net stockholders' deficit of $9,001,668 and had negative working capital as of September 30, 2010. If the Company continues to incur operating losses and fails to become a profitable company, it may be unable to continue its operations. The extent of the Company's future losses and the timing of its potential profitability are highly uncertain. The Company's future growth and profitability depends solely on its ability to successfully market its products. The Company must continue to enhance the features and functionality of its products to meet customer requirements and competitive demands. In addition, the failure of future product enhancements to operate as expected could delay or prevent future sales of its products. If future customers do not adopt, purchase and successfully deploy the Company's products and its planned product enhancements, the Company's revenues could be adversely impacted.

OUR AUDITORS HAVE SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN, AND IF THE COMPANY IS UNABLE TO GENERATE INCREASED BUSINESS VOLUME OR OBTAIN ADDITIONAL FINANCING, THE COMPANY MAY BE REQUIRED TO CEASE OR CURTAIL ITS OPERATIONS.

In their report prepared in conjunction with the Company's December 31, 2009 financial statements, the Company's auditors included an explanatory paragraph stating that, because the Company had incurred recurring net losses, an accumulated deficit and minimal working capital as of December 31, 2009, there is substantial doubt about the Company's ability to continue as a going concern.

THE COMPANY'S OPERATING RESULTS FLUCTUATE AND ARE DIFFICULT TO PREDICT, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.

The Company's revenues in any particular period may be lower than revenues in a preceding or comparable period. Factors contributing to fluctuations, some of which are beyond the Company's control, include:

·	fluctuations in its customers' businesses;

·	timing and market acceptance of new products or enhancements introduced by the Company or its

competitors;

·	timing and level of expenditures for sales, marketing and product

development; changes in the prices of the Company's or its competitors' products; and

·	general industry trends.

·	fluctuations in overall economic activity

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In addition, the Company has historically operated with no significant backlog. Any significant deferral of orders for its products would cause a shortfall in revenues for any given fiscal period. As a result, the Company's revenues

may vary significantly from quarter to quarter. If the Company's quarterly revenue or operating results fall below the expectations of investors or public market, its stock price could be adversely impacted.

THE COMPANY MAY BE UNABLE TO OBTAIN THE CAPITAL NECESSARY TO FUND ITS OPERATIONS.

The Company has a need to raise additional capital through debt or equity financing to fund operations. As of September 30, 2010, the Company had $192,666 in cash available to fund its operations, and had a working capital deficit of $6,346,734. In 2010, it will need to raise additional capital or obtain additional debt financing in order to be able to fund its operations. The Company may not get funding when it needs it or on favorable terms. In addition, the amount of capital that a firm such as the Company is able to raise often depends on variables that are beyond its control, such as the share price of its stock and its trading volume. As a result, the Company may not be able to secure financing on terms attractive to it, or at all. If the Company is able to consummate a financing arrangement, the amount raised may not be sufficient to meet its future needs and may be highly dilutive. If the Company cannot raise adequate funds to satisfy its capital requirements, it may have to scale-back or eliminate operations.

THE COMPANY HAS A HISTORY OF LOSSES, AND SUCH LOSSES MAY CONTINUE IN THE FUTURE IF THE COMPANY IS UNABLE TO SECURE SUFFICIENT BUSINESS TO COVER ITS OVERHEAD AND OPERATING EXPENSES.

The Company has not been profitable and will continue to generate losses, and potentially require additional external funding, until sales of its products can be increased to sufficient levels for the Company to generate a profit and positive cash flow, of which there can be no assurance that such levels can be attained.

THE COMPANY OPERATES IN HIGHLY COMPETITIVE INDUSTRIES WITH MANY PARTICIPANTS.

The Company operates in a highly competitive environment, competing on the basis of product offerings, quality, service and pricing. Competition is particularly intense and is increasing. The Company has a number of existing competitors, some of which are very large, with significantly greater technological and financial resources, brand recognition, and established relationships with the major customers in each market. In addition, new competitors may enter the industry as a result of shifts in technology. The Company does not offer any assurances that it will be able to compete successfully against existing or future competitors.

THE COMPANY MAY BE UNABLE TO ATTRACT AND RETAIN HIGHLY QUALIFIED PERSONNEL.

The Company's future success is dependent on its ability to attract and retain talented personnel. There is intense competition for qualified personnel, and the Company may not be able to attract and retain qualified personnel necessary for the development and introduction of new products or to replace qualified personnel that may leave its employ. Part of the Company's compensation program includes stock options and stock grants. If the Company's stock price continues to perform poorly it may adversely affect its ability to retain or attract key employees.

THE COMPANY’S DATA MAY BECOME OUT OF DATE OR INACCESSIBLE

The Company depends for its success on access to a continuous supply of accurate and timely data. Data sources may become too expensive or providers may become unable to provide accessibility for a variety of physical, technical or legal reasons. Inability to supply timely and accurate data can cause a rapid deterioration in the Company’s customer base or force it to discount its services to the point where they cannot produce an operating profit.

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THE COMPANY MAY BE SUBJECT TO INTELLECTUAL PROPERTY LITIGATION AND INFRINGEMENT CLAIMS, WHICH COULD CAUSE IT TO INCUR SIGNIFICANT EXPENSES OR PREVENT THE COMPANY FROM SELLING ITS PRODUCTS.

Intellectual property litigation can be costly and time-consuming and can divert the attention of management and key personnel from other business issues. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. A successful claim by a third party of patent or other intellectual

property infringement by the Company could compel it to enter into costly royalty or license agreements or force it to pay significant damages and could even require it to stop selling certain products.

CHANGES IN ACCOUNTING MAY AFFECT THE COMPANY'S REPORTED EARNINGS AND OPERATING INCOME.

U. S. generally accepted accounting principles and accompanying accounting pronouncements, implementation guidelines, and interpretations for many aspects of the Company's business, such as revenue recognition, accounting for investments, and treatment of goodwill or amortizable intangible assets, are highly complex and involve subjective judgments. Changes in these rules or their interpretation or changes in the Company's products or business could significantly change the Company's reported earnings and operating income and could add significant volatility to those measures, without a comparable underlying change in cash flow from operations. See “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" of this report.

ACQUISITIONS AND JOINT VENTURES MAY HAVE AN ADVERSE EFFECT ON THE COMPANY'S

BUSINESS.

The Company may make acquisitions or enter into joint ventures as part of its long-term business strategy. Any such transaction involves significant challenges and risks including that the transaction does not advance the Company's business strategy, that the Company doesn't realize a satisfactory return on the investment it makes, or that the Company may experience difficulty in the integration of new employees, business systems, and technology, or diversion of management's attention from its other business activities. These factors could adversely affect the Company's operating results or financial condition.

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

On March 20, 2007, we issued a secured convertible debenture to Cornell Capital Partners (now YA Global Investments, L.P.) in the aggregate principal amount of $6,000,000 of which $3,000,000 was advanced immediately. The second installment of $2,000,000 was to be advanced immediately prior to the filing by the Company with the Securities and Exchange Commission (the "Commission") of the Registration Statement. The last installment of $1,000,000 was to be advanced immediately prior to the date the Registration Statement was declared effective by the Commission. The remaining $3,000,000 was not funded due to the Company failing to file the necessary Registration Statement. The Debentures matured on the third anniversary of the date of issuance and are now in default. The holder of the Debentures may convert at any time amounts outstanding under the Debentures into shares of common stock of the Company at a fixed conversion price per share equal to $0.314. Under the Purchase Agreement the debentures are secured by substantially all of the Company's, and its wholly owned subsidiaries’ assets. The Company is engaged in negotiations toward a restructuring of this indebtedness.

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Under the Purchase Agreement, we also issued to Cornell Partners (now YA Global Investments, L.P.) five-year warrants in six separate series as follows:

A Warrants to purchase 2,384,814 shares of common stock at $0.314 per share;

B Warrants to purchase 2,186,079 shares of common stock at $0.343 per share;

C Warrants to purchase 2,017,919 shares of common stock at $0.372 per share;

D Warrants to purchase 1,748,863 shares of common stock at $0.429 per share;

E Warrants to purchase 1,499,026 shares of common stock at $0.50 per share;

F Warrants to purchase 1,500,000 shares of common stock at $0.01 per share.

Company filed the Registration Statement (or, if earlier, within 45 days) and (ii) the Registration Statement is declared effective (or, if earlier, within 145 days), neither of which took place. The Company also issued a Note in the amount of $1,500,000 and agreed to reduce to $0.10 per share the exercise price of the warrants issued to Dutchess. Dutchess terminated its security interest in the Company’s assets upon the Initial Payment.

On June 1, 2010, the Company agreed to the cancellation of a series of 5-year warrants held by YA Global Investments, L.P to purchase a total of 9,836,701 shares of the Company’s Common Stock. The cancellation was in exchange for 300,000 shares of Common Stock.

Item 3. Defaults Upon Senior Securities

On December 11, 2007, we received a letter dated December 6, 2007 ( the "Notice Letter"), YA Global Investments, L.P., (formerly known as Cornell Capital Partners, L.P.) notifying the Company of certain Events of Default under the Secured Convertible Debenture dated March 20, 2007 of the Company (the "Debenture"). The Company is engaged in negotiations toward a restructuring of this indebtedness.

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

On December 15, 2009, the Company filed a definitive proxy statement asking shareholders for their written consent (a) to increase our authorized shares by adding a new authorization of Preferred Shares and (b) to authorize action by our officers to carry out the foregoing tasks. The purpose of this authorization was to successfully complete an agreed-upon exchange of approximately $1,817,828 of Convertible Debentures owned by Dutchess Private Equities Fund, Ltd. into 72,000 shares of new Series A Preferred Shares.

On December 29, 2009 the Company obtained the consent of a majority of the record holders of its Common Stock to the foregoing actions.

Item 5. Other Information.

None.

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Item 6. Exhibits and Reports on Form 8-K.

Exhibits

31.1	Certification of Interim Chief Executive and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1	Certification of Interim Chief Executive and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Reports on Form 8-K

On February 26, 2010, we filed a Form 8-K and reported under item 5.02 the resignation of Geoffrey Lee as Interim President and Chief Executive Officer. Mr. Lee resumed his previous position as President of Entersect, a wholly owned subsidiary of LocatePlus Holdings. Following the resignation of Mr. Lee, the Board of Directors appointed current Board member, Derrick Spatorico to the position of Acting President and Chief Executive Officer.

On June 1, 2010, we filed a Form 8-K and reported under item 5.02 that the Board of Directors, on May 28, 2010 had accepted the voluntary resignation of Derrick Spatorico as Director and Acting President, Chief Executive Officer, and Treasurer. Additionally reported was the resignation of Bart Valdez from the Board of Directors.

On June 1, 2010, we filed a Form 8-K and reported under item 8.01 that effective May 6, 2010, the Company agreed to the cancellation of a series of 5-year warrants held by YA Global Investments, L.P to purchase a total of 9,836,701 shares of the Company’s Common Stock. The cancellation was in exchange for 300,000 shares of Common Stock.

On July 14, 2010, we filed a Form 8-K and reported under item 5.02 that at a meeting of the Board of Directors held on July 8, 2010, the Board voted to appoint Ronald Lifton as President and Chief Executive Officer. Additionally, the Board appointed Brian McHugh to the position of Chief Financial Officer and Treasurer and Kenneth Kaiser to Executive Vice President and Chief Risk Officer.

On August 31, 2010, we filed a Form 8-K and reported under item 5.02 that at a meeting of the Board of Directors held on August 30, 2010, the Board voted to extend an offer for the position of Director to Anthony Spatorico and Ronald Lifton to occupy the two vacant positions on the Board of Directors. On August 30, 2010, both Mr. Spatorico and Mr. Lifton accepted this offer.

On October 15, 2010, we filed a Form 8-K and reported under item 8.01 that on October 14, 2010 the U.S. Securities and Exchange Commission filed a civil action against the company in the United States District Court for the District of Massachusetts, Securities and Exchange Commission v. LocatePlus Holdings Corporation. The Complaint alleges violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The complaint alleges that the Company filed financial statements for the fiscal years 2005 and 2006 which were false and misleading. The action seeks the entry of a permanent injunction prohibiting it from engaging in future violations of the cited sections and rules; disgorgement and pre-judgment interest and civil monetary penalties. The Company is in the process of reviewing the complaint and has not yet filed a formal response.

* * *

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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LOCATEPLUS HOLDINGS CORPORATION

(Registrant)

SIGNATURE	TITLE	DATE
/s/ Ronald Lifton	President and Chief Executive Officer	November 12, 2010
Ronald Lifton
/s/ Brian McHugh	Chief Financial Officer and Treasurer	November 12, 2010
Brian McHugh

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LOCATEPLUS HOLDINGS CORP Reports

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