PINX:TPNL Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
 
(Mark One)
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2012
 
or
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to __________
 
Commission file number 000-54123
 

3PEA INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)

Nevada
95-4550154
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)

1700 W Horizon Ridge Parkway, Suite 102,
Henderson, Nevada 89012
 (Address of principal executive offices)

(702) 453-2221
 (Issuer’s telephone number, including area code)
_______________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicateby 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 o

Indicateby 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).  x

Indicateby 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 o  Accelerated filer o  Non-accelerated filer o  Smaller reporting company x
  
Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

Statethe number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 35,250,391 shares as of April 26, 2012.


 
 
 
 
 
3PEA INTERNATIONAL, INC.

FORM 10-Q REPORT INDEX

 
  Page
   
PART I. FINANCIAL INFORMATION 3
   
Item 1. Financial Statements. 3
   
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 10
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 14
   
Item 4. Controls and Procedures. 14
   
PART II. OTHER INFORMATION 14
   
Item 1. Legal Proceedings. 14
   
Item 1A. Risk Factors. 14
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 14
   
Item 3. Defaults upon Senior Securities. 14
   
Item 4. Mine Safety Disclosures 14
   
Item 5. Other Information. 14
   
Item 6. Exhibits. 14
   
SIGNATURES 15
    
 
2

 
   
PART I.  FINANCIAL INFORMATION
  
ITEM 1.  FINANCIAL STATEMENTS
  
3PEA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
  
   
March 31, 2012
   
December 31, 2011
 
 
       
(Audited)
 
ASSETS            
             
Current assets
           
Cash
  $ 98,831     $ 63,826  
Cash Restricted
    5,781,683       5,514,661  
Accounts Receivable
    1,304,697       1,250,320  
Prepaid Expenses
    --       3,970  
Total current assets
    7,185,211       6,832,777  
                 
Fixed assets, net
    98,014       88,720  
                 
Intangible and other assets
               
Deposits
    3,551       3,551  
Intangible assets, net
    206,500       171,775  
                 
Total assets
  $ 7,493,276     $ 7,096,823  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
Current liabilities
               
Accounts payable and accrued liabilities
  $ 2,062,593     $ 2,001,047  
Customer card funding
    5,781,683       5,514,661  
Notes payable- related parties
    538,000       538,000  
Convertible note payable
    10,000       10,000  
Notes payable
    1,935,400       1,943,900  
Total current liabilities
    10,327,676       10,007,608  
                 
Long-term liabilities
               
Notes payable, non-current portion
    -       -  
Total long Term liabilities
    -       -  
                 
Total liabilities
    10,327,676       10,007,608  
                 
Commitments and contingencies
    -       -  
                 
Stockholders' deficit
               
Common stock; $0.001 par value; 150,000,000 shares authorized,
35,250,391 and 35,250,391 issued and outstanding
at March 31, 2012 and December 31, 2011, respectively
    35,250       35,250  
Additional paid-in capital
    4,975,686       4,975,686  
Treasury stock at cost, 303,450 shares
    (150,000 )     (150,000 )
Accumulated deficit
    (7,752,714 )     (7,829,104 )
Total 3Pea International, Inc.'s stockholders' deficit
    (2,891,778 )     (2,968,168 )
Noncontrolling interest
    57,378       57,383  
Total stockholders' deficit
    (2,834,400 )     (2,910,785 )
                 
Total liabilities and stockholders' deficit
  $ 7,493,276     $ 7,096,823  
 
 
See accompanying notes to financial statements.
   
 
3

 
    
3PEA INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(UNAUDITED)

   
For the three month ended March 31,
 
   
2012
   
2011
 
             
Revenues
  $ 1,484,592     $ 937,569  
                 
Cost of revenues
    1,221,805       750,987  
                 
Gross profit
    262,787       186,582  
                 
Operating expenses
               
Depreciation and amortization
    16,826       11,695  
Selling, general and administrative
    153,733       152,730  
                 
Total operating expenses
    170,559       164,425  
                 
Income from operations
    92,228       22,157  
                 
Other expense
               
Interest expense
    (15,843 )     (15,799 )
Total other expense
    (15,843 )     (15,799 )
                 
Income before provision for income taxes and noncontrolling interest
    76,385       6,358  
                 
Provision for income taxes
    -       -  
                 
Net income before noncontrolling interest
    76,385       6,358  
                 
Net (loss) attributable to the noncontrolling interest
    (5 )     (84 )
                 
Net income attributable to 3Pea International, Inc.
  $ 76,390     $ 6,442  
                 
Net income per common share - basic
  $ 0.00     $ 0.00  
                 
Weighted average common shares outstanding - basic
    35,250,391       35,247,093  


See accompanying notes to financial statements.
  
 
4

 
   
3PEA INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2012
(UNAUDITED)

   
Stockholders' Deficit Attributable to 3Pea International, Inc.
             
   
Common Stock
   
Additional
   
Treasury
Stock
   
Accumulated
   
Non-
controlling
   
Total
Stockholders'
 
   
Shares
   
Amount
   
Paid-in Capital
   
Amount
   
Deficit
   
Interest
   
Deficit
 
                                           
Balance, December 31, 2011
    35,250,391       35,250       4,975,686       (150,000 )     (7,829,104 )     57,383       (2,910,785 )
                                                         
Net income
    -       -       -       -       76,390       (5 )     76,385  
                                                         
Balance, March 31, 2012
    35,250,391     $ 35,250     $ 4,975,686     $ (150,000 )   $ (7,752,714 )   $ 57,378     $ (2,834,400 )
 
 
See accompanying notes to financial statements.
   
 
5

 
  
3PEA INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(UNAUDITED)

   
For the three months ended March 31,
 
   
2012
   
2011
 
Cash flows from operating activities:
           
Net income
  $ 76,390     $ 6,442  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Change in noncontrolling interest
    (5 )     (84 )
Depreciation and amortization
    16,826       11,695  
Merger expense - stock based
            7,759  
Changes in operating assets and liabilities:
               
Change in restricted cash
    267,022       1,458,135  
Change in prepaid expenses
    3,970       --  
Change in accounts receivable
    (54,377 )     1,582,542  
Change in accounts payable and accrued liabilities
    61,546       (1,533,700 )
Change in customer card funding
    (267,022 )     (1,458,134 )
Net cash provided by operating activities
    104,350       74,655  
                 
Cash flows from investing activities:
               
Purchase of fixed assets
    (25,350 )     -  
Purchase of intangible assets
    (35,495 )     (32,950 )
Net cash used in investing activities
    (60,845 )     (32,950 )
                 
Cash flows from financing activities:
               
Payments on notes payable
    (8,500 )     --  
Net cash used in financing activities
    (8,500 )     --  
                 
Net change in cash
    35,005       41,705  
Cash, beginning of period
    63,826       42,214  
                 
Cash, end of period
  $ 98,831     $ 83,919  

 
See accompanying notes to financial statements.
   
 
6

 
  
3PEA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2012
(UNAUDITED)



1.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2011. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
 
The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations.
 
Operating results for the three months period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

About 3PEA International, Inc.

3PEA International, Inc. is a payment solutions company which currently focuses on providing prepaid debit program management and processing services. 3PEA provides a card processing platform consisting of proprietary systems and innovative software applications. 3PEA develops prepaid card programs for healthcare reimbursement payments, pharmaceutical assistance, corporate and incentive rewards, and are expanding into payroll cards, general purpose re-loadable cards, travel cards, and expense reimbursement cards. 3PEA cards are offered to end users through our relationships with bank issuers.

Principles of consolidation – The consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant intercompany balances and transactions have been eliminated.

Use of estimates - The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.
    
 
7

 
  
1.
DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
 
Restricted cash – restricted cash is a cash account controlled by the Company which funds are received related to the card programs from our customers.  The Company has recorded a corresponding customer card funding liability.

Revenue and expense recognition – We recognize revenue when (1) there is persuasive evidence of an arrangement existing, (2) delivery has occurred, (3) our price to the buyer is fixed or determinable and (4) collectability of the receivables is reasonably assured. We recognize the costs of these revenues at the time revenue is recognized.  Any fees paid up front are deferred until such time such services have been considered rendered.  As of March 31, 2012 and December 31, 2011, there are no deferred revenues recorded.

We generate the following types of revenues:

 
Administration and usage fees, charged to our prepaid card clients when our programs are created, distributed or reloaded.  Such revenues are recognized when such services are performed.
 
Transaction fees, paid by the applicable networks and passed through by our card issuing banks when our SVCs are used in a purchase or ATM transaction.  Such revenues are recognized when such services are performed.
 
Maintenance, administration, transaction fees, charged to an SVC and not under any multiple element arrangements.  Such revenues are recognized when such services are performed.
 
Program maintenance management fees charged to our clients.  Such revenues are not under any multiple element arrangements and are recognized when such services are performed.
 
Software development and consulting services to our clients.  Such revenues are recognized in accordance with ASC 985-605.

The Company records all revenues on gross basis in accordance with ASC 605-45 since it is the primary obligor and establishes the price in the revenue arrangement.  The Company is currently under no obligation for refunding any fees or has any obligations for disputed claim settlements.

Earnings (loss) per share - Basic earnings (loss) per share exclude any dilutive effects of options, warrants and convertible securities. Basic earnings (loss) per share is computed using the weighted-average number of outstanding common stocks during the applicable period. Diluted earnings per share is computed using the weighted-average number of common and common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive.

2. 
FIXED ASSETS

Fixed assets consist of the following:
  
   
As of
March 31, 2012
   
As of
 December 31, 2011
 
Equipment
  $ 500,205     $ 477,796  
Software
    257,092       257,092  
Furniture and fixtures
    60,921       60,921  
Leasehold equipment
    17,721       14,780  
      835,939       810,589  
Less: accumulated depreciation
    737,925       721,869  
Fixed assets, net
  $ 98,014     $ 88,720  
   
 
8

 
  
3.
INTANGIBLE ASSETS

Intangible assets consist of the following:
   
   
As of
March 31, 2012
   
As of
 December 31, 2011
 
Patents and trademarks
  $ 33,465     $ 33,465  
Platform development
    195,874       160,379  
      229,339       193,844  
Less: accumulated amortization
    (22,839 )     (22,069 )
Intangible assets, net
  $ 206,500     $ 171,775  

Intangible assets are amortized over their useful lives ranging from periods of 5 to 15 years.

4. 
COMMON STOCK

At March 31, 2012, the Company's authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.  On that date, the Company had outstanding 35,250,391 shares of common stock, and no shares of preferred stock.
 
2012 Transactions:  During the three months ended March 31, 2012, the Company issued no shares.
 
2011 Transactions: During the quarter ended March 31, 2011, the Company issued 3,572 shares of common stock to a shareholder of  Wow Technologies, Inc. valued at $0.22 per share.  The shares were valued at the market price of our common stock on the date of issuance.
   
 
9

 
  
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
Disclosure Regarding Forward Looking Statements
 
This Quarterly Report on Form 10-Q includes forward looking statements (“Forward Looking Statements”). All statements other than statements of historical fact included in this report are Forward Looking Statements. In the normal course of its business, the Company, in an effort to help keep its shareholders and the public informed about the Company’s operations, may from time-to-time issue certain statements, either in writing or orally, that contains or may contain Forward-Looking Statements. Although the Company believes that the expectations reflected in such Forward Looking Statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, past and possible future, of acquisitions and projected or anticipated benefits from acquisitions made by or to be made by the Company, or projections involving anticipated revenues, earnings, levels of capital expenditures or other aspects of operating results. All phases of the Company operations are subject to a number of uncertainties, risks and other influences, many of which are outside the control of the Company and any one of which, or a combination of which, could materially affect the results of the Company’s proposed operations and whether Forward Looking Statements made by the Company ultimately prove to be accurate. Such important factors (“Important Factors”) and other factors could cause actual results to differ materially from the Company’s expectations are disclosed in this report. All prior and subsequent written and oral Forward Looking Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Important Factors described below that could cause actual results to differ materially from the Company’s expectations as set forth in any Forward Looking Statement made by or on behalf of the Company.
 
Overview
  
We are a payment solutions company which currently focuses on providing prepaid debit program management and processing services. We provide a card processing platform consisting of proprietary systems and innovative software applications based on the unique needs of our programs. We have extended our processing business capabilities through recent platform expansion. We design and process prepaid programs that run on a customized processing platform through which our customers can define the services they wish to offer cardholders. Through this platform, we provide a variety of services including transaction processing, card creation and fulfillment, cardholder enrollment, value loading, cardholder account management, reporting, integrated voice response, and customer service.
 
We have developed prepaid card programs for healthcare reimbursement payments, pharmaceutical assistance, corporate and incentive rewards, and are expanding into payroll cards, general purpose re-loadable cards, travel cards, and expense reimbursement cards. Our cards are offered to end users through our relationships with bank issuers.
 
Our products and services are aimed at capitalizing on the growing demand for stored value and reloadable ATM/prepaid card financial products in a variety of market niches. Our proprietary platform is scalable and customizable, delivering cost benefits and revenue building opportunities to partners. We manage all aspects of the debit card lifecycle, from managing the card design and approval processes with banking partners and card associations, to production, packaging, distribution, and personalization. We also oversee inventory and security controls, renewals, lost and stolen card management and replacement.
 
Currently, the primary market for our cards is the healthcare reimbursement market, pharmaceutical marketing or drug sampling market, and corporate incentive card market, although we are expanding into other markets for stored value cards, including, pharmacy benefits cards, payment distribution and reimbursement cards and payroll cards. In the fourth quarter of 2011, we completed integration and launch of an incentive reward program targeting donation centers. We anticipate steady growth of these programs over the next twenty four months having launched eight donation centers to date with approximately twenty five donation centers targeted for 2012.
  
 
10

 
 
   
During the fourth quarter of 2011, we certified our newest card processing platform. Our platform expansion related primarily to the design and development of our processing systems and related software applications and card management platform. We expect to continue our practice of investing an appropriate level of resources to maintain, enhance and extend the functionality of our proprietary systems and existing software applications, to develop new and innovative software applications and systems in response to the needs of our customers, and to enhance the capabilities surrounding our infrastructure. In addition, we intend to offer products and services that are compatible with new and emerging delivery channels.
 
As part of our platform expansion development process, we evaluate current and emerging technology for applicability to our existing and future software platform. To this end, we engage with various hardware and software vendors in evaluation of various infrastructure components. Where appropriate, we use third-party technology components in the development of our software applications and service offerings. Third-party software may be used for highly specialized business functions, which we may not be able to develop internally within time and budget constraints. Our principal target markets for processing services include prepaid card issuers, retail and private-label issuers, small third-party processors, and small and mid-size financial institutions in the United States and in emerging international markets.

To date, we have focused on extensive development and limited sales activities in each of our target markets, as well as putting in place the infrastructure and processes to be able to scale the business successfully. Historically, most of the company’s sales have resulted from prospects contacting us based on an online search. However, the company plans to devote more extensive resources to sales and marketing activities in the future.  We sell our products directly to customers in the U.S. but may work with a small number of resellers and third parties in international markets to identify, sell and support targeted opportunities.
 
In order to expand into new markets, we will need to invest additional funds in technology improvements, sales and marketing expenses, and regulatory compliance costs.  We are currently attempting to raise capital in a private placement to enable us to diversify into new market verticals. If we do not raise new capital, we believe that we will still be able to expand into new markets using internally generated funds, but our expansion will be delayed.   We also have a substantial amount of notes payable and delinquent accounts payable from prior operations, which we plan to convert into equity at some point.  If we are unable to convert our debts into equity, we may be forced to use any capital we raise to reduce our indebtedness instead of costs associated with expanding our business, which will slow our rate of expansion.

Results of Operations
 
Three Months ended March 31, 2012 and 2011
 
Revenues for the three months ended March 31, 2012 were $1,484,592, an increase of $547,023 compared to the same period in the prior year, when revenues were $937,569. The increase in revenue is due to increased processing and the launch of eight donation centers utilizing a new incentive rewards programs during the first quarter which we believe will contribute to an increase in overall revenues for 2012.  Our pharmaceutical marketing cards continue to make up a majority of our revenues and will continue to do so for the next 24 months. Over the longer term, we expect our revenues to trend upward as the economy improves and as we roll out additional debit card products utilizing our processing platform.
   
 
11

 
  
Cost of revenues for the three months ended March 31, 2012 were $1,221,805, an increase of $470,818 compared to the same period in the prior year, when cost of revenues were $750,987. Cost of revenues constituted approximately 82% and 80% of total revenues in 2012 and 2011, respectively.  Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, card production costs, customer service and program management expenses, application integration setup and sales expense.
 
Our revenues and cost of revenues from our pharmaceutical marketing cards, which is our primary line of business, fluctuate widely due to a variety of factors beyond our control.  The pharmaceutical companies often do not distribute the debit cards via their pharmaceutical sales representatives to various end points for distribution until days, weeks or months after it creates a program, often with little advance warning to us. We also experience dramatic usage swings based on collateral marketing efforts by the pharmaceutical companies, such as print, web, radio and television advertising campaigns that run in association with one of our card programs. Constant variations in program start and stop dates, variations in program timelines which range anywhere between six and thirty six months, and variations in program characteristics such as the monetary value of the load, all contribute to provide dramatic swings in the revenue generated from the programs.  As a result, our revenues and cost of revenues do not correlate neatly to the number of cards in circulation or even the number of programs that are active at any given time.
 
Gross profit for the three months ended March 31, 2012 was $262,787, an increase of $76,205 compared to the same period in the prior year, when gross profit was $186,582. Our overall gross profit percentage approximated 18% and 20% during the fiscal years 2012 and 2011 which is consistent with our overall expectations.
 
Selling, general and administrative expenses for the three months ended March 31, 2012 were $153,733, a decrease of $1,003 compared to the same period in the prior year, when selling, general and administrative expenses were $152,730.  The nominal increase is consistent with our overall expectations.
 
In the three months ended March 31, 2012, we recorded operating income of $92,228, as compared to operating income of $22,157 in the same period in the prior year, an improvement of $70,071.
 
Other income (expense) for the three months ended March 31, 2012 was ($15,843), an increase in net other income (expense) of $44 compared to the same period in the prior year when other income (expense) was ($15,799).  The overall increase in net other income (expense) in 2012 is consistent with our overall debt.  
 
Our net income for the three months ended March 31, 2012 was $76,385, an increase of $70,027 compared to the same period in the prior year, when we recorded a net income of $6,358.  The increase in our net income is attributable to the aforementioned factors.
 
Liquidity and Sources of Capital
 
The following table sets forth the major sources and uses of cash for the three months ended March 31, 2012 and 2011:
 
   
Three months ended March 31,
 
   
2012
   
2011
 
Net cash provided by (used) in operating activities
  $ 104,350     $ 74,655  
Net cash provided by (used) in investing activities
    (60,845 )     (32,950 )
Net cash provided by (used) in financing activities
    (8,500 )     --  
Net (decrease) increase in unrestricted cash and cash equivalents
    35,005       41,705  
    
 
12

 
  
Comparison of Three months ended March 31, 2012 and 2011
 
During the three months ended March 31, 2012 and 2011, we financed our operations primarily through internally generated funds.
 
Operating activities provided $104,350 of cash in 2012, as compared to $74,655 of cash in the same period in the prior year. Major non-cash items that affected our cash flow from operations in 2012 were non-cash charges of $16,826 for depreciation and amortization. Our operating assets and liabilities provided $11,139 of cash, most of which resulted from an increase in our accrual for accounts payable of $61,546, offset by an increase in accounts receivable of $54,377 and a decrease in prepaid expenses of $3,970. Major non-cash items that affected our cash flow from operations in 2011 were non-cash charges of $11,695 for depreciation and amortization.  Our operating assets and liabilities provided $48,843 of cash, which resulted from an increase in collections from accounts receivable of $1,582,542 offset by a decrease in accounts payable of $1,533,700.
 
Investing activities used $60,845 of cash in 2012, as compared to $32,950 of cash used in 2011, all of which primarily related to the enhancement of the processing platform used in our business.
 
Financing activities used $8,500 of cash in 2012 as compared to $-0- of cash in 2011. In 2012, our use of cash from financing activities consisted of the repayment of certain loans.
 
Sources of Financing
 
In both 2012 and 2011, our operations were focused on developing our pharmaceutical debit card, which were financed largely from notes issued in 2008.  In 2009, revenues from our pharmaceutical debit card reached the point that we were able to operate at a breakeven level from operations.   
 
We believe that our available cash on hand at March 31, 2012 of $98,831 and revenues anticipated for the remainder of 2012 will be sufficient to sustain our operations for the next twelve months, provided that we are not required to pay any material amount of our delinquent accounts payable, accrued interest or our current notes payable. We plan to request that some of our creditors convert their debt into equity to improve our financial position.  We are also seeking to raise additional capital during the next twelve months through an equity offering to high net worth and institutional investors. However, at this time we do not have an agreement with a broker-dealer to raise money for us and we do not have commitments from any investors.  There is no assurance we will be able to obtain additional capital, or obtain the capital on acceptable terms and conditions.  We plan to use the proceeds to finance our entry into other markets for our debit cards, and to repay indebtedness.  Our failure to obtain new capital will delay our entry into new markets, but will not jeopardize our ability to remain in business.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
 
Critical Accounting Estimates
 
Our significant accounting policies are described in Note 1 of Notes to Financial Statements. At this time, we are not required to make any material estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue, and expenses.  
 
Any estimates we make will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates.
  
 
13

 
  
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
Because the Company is a smaller reporting company, it is not required to provide the information called for by this Item.
 
ITEM 4.  CONTROLS AND PROCEDURES.
 
Evaluation of Disclosure Controls and Procedures
 
Our chief executive officer and chief financial officer are responsible for establishing and maintaining our disclosure controls and procedures.  Disclosure controls and procedures means controls and other procedures that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in those reports is accumulated and communicated to the our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of March 31, 2012 .  Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of the evaluation date, such controls and procedures were effective.
 
Changes in internal controls
 
There were no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
PART II.  OTHER INFORMATION.
 
ITEM 1.  LEGAL PROCEEDINGS.
 
None.
 
ITEM 1A.  RISK FACTORS.
 
Not applicable.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
 
During the three months ended March 31, 2012, no securities were issued.
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.
 
None.
 
ITEM 4.  MINE SAFETY DISCLOSURES
 
None.
 
ITEM 5.  OTHER INFORMATION.
 
None.
 
ITEM 6.  EXHIBITS.
 
31.1
Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.2
Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
 
14

 
  
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.
 
   
 
3PEA INTERNATIONAL, INC.
   
Date: May 14, 2012
/s/ Mark Newcomer
 
By: Mark Newcomer, Chief Executive Officer
(principal executive officer)
   
   
Date: May 14, 2012
/s/ Arthur De Joya
 
By: Arthur De Joya, Chief Financial Officer
(principal financial and accounting officer)


 
 
 
 
 
15

PINX:TPNL Quarterly Report 10-Q Filling

PINX:TPNL Stock - Get Quarterly Report SEC Filing of PINX:TPNL stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

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PINX:TPNL Quarterly Report 10-Q Filing - 3/31/2012
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