ProText Mobility (TXTM) 10-Q 2008 Q3 Quarterly report

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, 2008
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________ to _____________

Commission file number 001-31590

SearchHelp, Inc.

(Exact name of small business issuer as specified in its charter)

Delaware	11-3621755
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
6800 Jericho Turnpike, Suite 208E,
Syosset, New York	11791
(Address of principal executive offices)	(Zip Code)

Issuer's telephone number, including area code (516) 802-0223

Check 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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x 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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

State the number of shares outstanding of each of the registrant's classes of common equity, as of the latest practicable date.

The outstanding number of the issuer's common stock, par value $.0001, as of November 14, 2008 is 67,951,255 shares.

SEARCHHELP, INC. AND SUBSIDIARIES

INDEX

		Page No.
PART I FINANCIAL INFORMATION
ITEM 1 – Financial Statements:
	Consolidated Balance Sheets as at September 30, 2008 (Unaudited) and
	December 31, 2007	2–3
	Consolidated Statements of Operations
	For the Nine and Three months ended September 30, 2008 (Unaudited) and 2007 (Unaudited – Restated)	4
	Consolidated Statements of Cash Flows
	For the Nine months ended September 30, 2008 (Unaudited) and 2007 (Unaudited – Restated)	5-6
	Notes to Consolidated Financial Statements (Unaudited)	7 -15
ITEM 2 – Management’s Discussion and Analysis or Plan of Operation		16-19
ITEM 3 – Quantitative and Qualitative Disclosure about Market Risk		21
ITEM 4T –Controls and Procedures		22
PART II:
Item 1 – Legal Proceedings		23
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 3 – Defaults upon Senior Securities		23
Item 4 – Submission of Matters to A Vote of Securities Holders		24
Item 5 - Other Information		24
Item 6 – Exhibits		24
Signature Page		24

1

SEARCHHELP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2008		2007
	(Unaudited)		(Audited)
ASSETS
Current assets:
Cash	$	10,857	$	4,821
Accounts receivable less allowance for doubtful accounts of $73,657 and $99,303, respectively		-		89,049
Inventories		-		248,148
Prepaid expenses		11,224		5,409
Total current assets		22,081		347,427
Property and equipment - net		144,939		155,726
Other assets:
Capitalized software costs, less amortization of $14,324 and $0, respectively		52,979		-
Deferred finance costs, less amortization of $330,339 and $262,991, respectively		-		67,348
Security deposit		13,454		13,454
Intangible assets, less amortization of $19,313 and $0, respectively		19,313		-
Total other assets		85,746		80,802
Total assets	$	252,766	$	583,955

See notes to consolidated unaudited financial statements

2

SEARCHHELP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

	September 30,			December 31,
	2008			2007
	(Unaudited)			(Audited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable - bank	$	51,734		$	54,697
Current portion of long term debt and capital leases		52,054			42,788
Current portion of 10% convertible notes payable - net of discount of $0 and $96,567, respectively		768,000			2,059,433
Short term bridge notes payable, net of discount of $25,260 and $0, respectively		734,740			475,000
Subscription payable		80,000			-
Due to executive stockholders		899,544			397,877
Due to affiliates		-			47,907
Accounts payable		481,925			627,162
Accrued expenses		342,424			114,525
Total current liabilities		3,410,421			3,819,389
Other liabilities:
Obligations under capital lease, net of current portion		73,507			95,600
Note payable - equipment, net of current portion		11,878			12,405
Deferred rent		9,568			9,778
Total liabilities		3,505,374			3,937,172
Stockholders' deficit
Preferred stock - $.0001 par value, authorized - 25,000,000 shares - issued and outstanding - 901,237		90			90
Common stock - $.0001 par value, authorized - 250,000,000 shares - issued and outstanding - 67,809,642 and 45,139,182, respectively		6,801			4,517
Additional paid-in capital		16,526,614			13,804,695
Accumulated deficit		(19,786,113	)		(17,162,519	)
Total stockholders' deficit		(3,252,608	)		(3,353,217	)
Total liabilities and stockholders' deficit	$	252,766		$	583,955

See notes to consolidated unaudited financial statements

3

SEARCHHELP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Nine Months Ended  September 30,						For the Three Months Ended September 30,
	2008			2007			2008			2007
	(Unaudited)			(Unaudited-Restated)			(Unaudited)			(Unaudited-Restated)
Revenues
Software, net	$	96,907		$	133,418		$	4,815		$	60,273
Total Revenues		96,907			133,418			4,815			60,273
Cost of Sales
Software		40,109			76,907			3,512			42,571
Write off of Inventory		219,669			-			207,689			-
Total Cost of Sales		259,778			76,907			211,201			42,571
Gross (Loss) Profit		(162,871	)		56,511			(206,386	)		17,702
Operating expenses:
Selling		75,132			266,392			4,297			124,237
Web site costs		81,286			131,684			15,715			48,276
General and administrative		1,911,985			2,221,295			263,496			621,287
Depreciation and amortization		138,241			288,017			98,911			115,863
Total operating expenses		2,206,644			2,907,388			382,419			909,663
Loss from operations		(2,369,515	)		(2,850,877	)		(588,805	)		(891,961	)
Other Expenses
Interest		240,176			810,051			42,409			257,037
Interest - related party		7,647			43,518			2,951			11,827
Other (income)		(61,092	)		(24,871	)		(61,093	)		(327	)
Amortization of deferred financing costs		67,348			133,477			11,868			39,896
Total other expenses		254,079			962,175			(3,868	)		308,433
Net loss	$	(2,623,594	)	$	(3,813,052	)	$	(584,937	)	$	(1,200,394	)
Per share data
Loss per share-basic and diluted	$	(0.04	)	$	(0.10	)	$	(0.01	)	$	(0.03	)
Weighted average number of shares outstanding basic and diluted		62,988,742			38,871,630			66,838,456			39,096,675

See notes to consolidated unaudited financial statements 

4

 SEARCHHELP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended September 30,
	2008			2007
	(Unaudited)			(Unaudited - Restated)
Cash flows from operating activities:
Net loss	$	(2,623,594	)	$	(3,813,052	)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred revenue		-			40,542
Stock and options issued for services		57,300			122,270
Stock issued for debt service		61,587			130,345
Stock issued for legal settlement		165,750			-
Compensatory element of stock options		472,007			550,829
Depreciation		47,100			20,596
Amortization of deferred financing costs		67,348			133,477
Amortization of software development costs		14,324			178,825
Amortization of intangible assets		19,313			48,700
Amortization of beneficial conversion feature		37,074			233,910
Amortization of debt discount		59,493			333,546
Amortization of discount on bridge notes payable		57,503
Gain on extinguishment of loan to affiliate		(47,907	)		-
Write off of inventory		219,669			-
Increase (decrease) in cash flows as a result of changes in asset and liability account balances:
Accounts receivable		114,695			(44,312	)
Allowance for doubtful accounts		(25,646	)		-
Inventories		28,479			11,732
Prepaid expenses and other assets		(5,815	)		(46,670	)
Deferred rent		(210	)		1,005
Accounts payable and accrued expenses		71,131			77,129
Total adjustments		1,413,191			1,791,924
Net cash used in operating activities		(1,210,403	)		(2,021,128	)
Cash flows from investing activities:
Cash received from acquisition of Echometrix		373			-
Equipment purchases		-			(9,192	)
Capitalized software costs		(67,303	)		-
Net cash used in investing activities		(66,930	)		(9,192	)

See notes to consolidated unaudited financial statements

5

SEARCHHELP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

	For the Nine Months Ended September 30,
	2008			2007
	(Unaudited)			(Unaudited - Restated)
Cash flows from financing activities:
Net borrowings from stockholders		513,200			51,227
Payment of due to affiliates		-			(11,314	)
Proceeds from warrants exercised in relation to convertible notes payable		114,796			-
Proceeds from subscription payable		80,000
Payments of convertible notes payable		-			(70,000	)
Proceeds from bridge notes payable		335,000			-
Payments of bridge notes payable		(25,000	)		(190,000	)
Payments of note payable - equipment		(644	)		(2,443	)
Payments under capital lease		(49,020	)		(11,254	)
Payments of notes payable - bank		(2,963	)		-
Proceeds from sale of securities		318,000			2,150,000
Retirement of treasury stock		-			(10,000	)
Net cash provided by financing activities		1,283,369			1,906,216
Net increase (decrease) in cash		6,036			(124,104	)
Cash at beginning of period		4,821			129,435
Cash at end of period	$	10,857		$	5,331
Supplemental Disclosure of cash flow information:
Cash payment made during the period - Interest	$	6,635		$	93,849
	��
Supplemental Schedules of Noncash Investing and Financing Activities:
Bridge notes converted into preferred stock	$	-		$	35,000
Stockholder loans converted to common stock/preferred stock	$	-		$	550,500
Computer equipment under capital lease	$	36,811		$	71,914
Stock issued for acquisition of Company	$	39,000
Warrants issued with convertible notes payable	$	1,388,000		$	20,000
Common stock and options issued for services	$	57,300		$	122,270
Issuance of stock for discount related to bridge note payable	$	-		$	3,870
Debt discount related to issuance of restricted stock	$	64,582		$	-
Warrants issued for debt issuance cost	$	18,182		$	-

See notes to consolidated unaudited financial statements

6

SEARCHHELP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

September 30, 2008

NOTE 1 -PLAN OF ORGANIZATION.

Nature of Business:

SearchHelp, Inc. develops software services committed to real-time online protection and family safety. The Company develops and sells software products that offer parental controls that enable parents, both in home and remotely, to monitor and regulate their child’s computer activities. The Company, through the newly acquired Echometrix division, also offers technology to corporations, within various verticals, to help management analyze real-time, natural language express and measure sentiment and behavior in digital content, such as blogs, forums, emails, instant messaging and mobile text.

Presentation of Financial Statements:

SearchHelp, Inc. is organized as a single reporting unit and believes that it operates as a single business. References in this report to “SearchHelp”, the “Company”, “we”, “us” or “our” refers to SearchHelp Inc. and its consolidated subsidiaries.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, the Company incurred net losses of $2,623,594 and $3,813,052 for the nine months ended September 30, 2008 and 2007, respectively. In addition, the Company has negative working capital of $3,388,340 and an accumulated deficit of $19,786,113 at September 30, 2008.

These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's efforts have been directed towards the development and implementation of a plan to generate sufficient revenues to cover all of its present and future costs and expenses. The plan includes, among other things, implementing numerous online sales campaigns of parental control software, and concentrating on the new Echometrix division. The Company has spent part of 2007 and the first nine months of 2008 developing the Echometrix Technology. The remainder of 2008 will be spent signing beta users and further development for Echometrix version 2.0 which is expected to be completed early in 2009.

If the Company does not generate sufficient revenues from the sales of its products in an amount necessary to meet its cash needs, the Company will need additional financing to continue to operate. As the Company increases sales from its products and services, the Company expects to increase cash flows from operations. The Company has been successful in raising financing from equity and debt transactions. During the nine months ended September 30, 2008, the Company raised approximately $848,000 from the private placement of common stock and warrants, and issuance of debt, and a total of $1,388,000 of the 10% short term promissory notes have been converted into common stock.

The accompanying consolidated financial statements have been prepared, in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Annual report on Form 10-KSB filed on April 15, 2008. The results of the nine months ended September 30, 2008 are not necessarily indicative of the results to be expected for the full year ending December 31, 2008.

7

NOTE 2 - RESTATEMENT OF SEPTEMBER 30, 2007 FINANCIAL RESULTS:

The Company’s consolidated financial statements for the nine months ended September 30, 2007 have been restated to reflect the correction of revenue recognized in error on sales related to a distributor’s contract that contained return rights over and above the Company’s normal policy. The Company initially determined that these sales met FAS 48 and SAB 101 criteria. As a result of an exhaustive review of this particular distributor’s contract, the Company has determined that these sales do not meet the criteria set forth in the pronouncements and therefore revenue from these sales should not be recognized until the right of return expires concurrent with the sale to a third party, similar to a consignment basis. The impact of the restatement was to increase inventories by $25,215, decrease accounts receivable by $237,660, decrease deferred revenue by $95,064, decrease prepaid expenses by $ 10,497, decrease accrued expenses by $10,485, and increase accumulated deficit by $117,393 as of September 30, 2007. The restatement decreases previously reported revenue by $142,596 and decreases cost of goods sold by $ 25,204 for the nine months ended September 30, 2007. The impact on net loss was an increase of $117,393 for the nine months ended September 30, 2007. The restatement decreases previously reported revenue by $87,979 and increases cost of goods sold by $6,513 for the three months ended September 30, 2007. The impact on net loss was a decrease of $94,492 for the three months ended September 30, 2007.

NOTE 3 - SUMMARY OF SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES:

(a) Earnings Per Share:

The Company utilizes Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented separately as it is anti-dilutive. Such securities, shown below, presented on a common share equivalent basis and outstanding as of September 30, 2008 and 2007 have been excluded from the per share computations:

	September 30,
	2008		2007
2004 Stock Plan Options		1,150,000		1,450,000
Non ISO Stock Options		7,369,632		8,169,521
Convertible Preferred Stock		9,012,370		9,012,370
Convertible Notes Payable		5,485,714		7,012,500
Warrants		10,996,084		13,806,684

(b) Recent Accounting Pronouncements:

In October 2008, the FASB issued FASB Staff Position ("FSP") FAS 157-3 Determining the Fair Value of a Financial Asset When Market for That Asset Is Not Active, which clarifies the application of FASB Statement No. 157, Fair Value Measurements, in a market that is not active, it does not require any new fair value measurements. We do not expect FAS 157-3 to have a material impact on the preparation of our consolidated financial statements as the Company does not currently have any investments affected by this guidance.

In June 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") EITF 03-6-1 for Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities. We do not expect EITF 03-6-1 to have a material impact on the preparation of our consolidated financial statements as the Company does not currently issue affected payments.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). FSP APB 14-1 clarifies that convertible debt instruments that may be settled in cash upon either mandatory or optional conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and Debt issued with Stock Purchase Warrants. Additionally, FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We will adopt FSP APB 14-1 beginning in the first quarter of fiscal 2010, and this standard must be applied on a retrospective basis. We are evaluating the impact of the adoption of FSP APB 14-1 will have on our consolidated financial position and results of operations.

8

In May 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally Accepted Accounting Principles. This standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for non-governmental entities. SFAS No. 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission (“SEC”) of the Public Company Accounting Oversight Board’s amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We do not expect SFAS No. 162 to have a material impact on the preparation of our consolidated financial statements.

In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 requires enhanced disclosures regarding an entity's derivative and hedging activities. These enhanced disclosures include information regarding how and why an entity uses derivative instruments; how derivative instruments and related hedge items are accounted for under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", and its related interpretations; and how derivative instruments and related hedge items affect an entity's financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS 161 will not have a material impact on our financial position, results of operations or liquidity since we currently do not enter into derivatives or other hedging instruments.

NOTE 4 - EMPLOYEE STOCK COMPENSATION

The Company’s 2004 Stock Plan (the “Plan”), which is shareholder approved, permits the grant of share options and shares to its employees for up to 1,500,000 shares of Common Stock as stock compensation. All stock options under the 2004 Stock Plan are granted at the fair market value of the Common Stock at the grant date. Employee stock options vest ratably over a three-year period and generally expire 5 years from the grant date.

Accounting for Employee Awards:

Effective January 1, 2006, the Company’s Plan and options granted outside of the Plan are accounted for in accordance with the recognition and measurement provisions of Statement of Financial Accounting Standards ("FAS") No. 123 (revised 2004), Share-Based Payment ("FAS 123(R)"), which replaces FAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and related interpretations. FAS 123 (R) requires compensation costs related to share-based payment transactions, including employee stock options, to be recognized in the financial statements. In addition, the Company adheres to the guidance set forth within SEC Staff Accounting Bulletin ("SAB") No. 107, which provides the Staff's views regarding the interaction between FAS No. 123(R) and certain SEC rules and regulations and provides interpretations with respect to the valuation of share-based payments for public companies.

In adopting FAS 123(R), the Company applied the modified prospective approach to transition. Under the modified prospective approach, the provisions of FAS 123(R) are to be applied to new awards and to outstanding awards modified, repurchased, or cancelled after the required effective date. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered that are outstanding as of the required effective date shall be recognized as the requisite service is rendered on or after the required effective date. The compensation cost for that portion of awards shall be based on the grant-date fair value of those awards as calculated for either recognition or pro-forma disclosures under FAS 123.

As a result of the adoption of FAS 123(R), the Company's results for the nine months ended September 30, 2008 and 2007 include share-based compensation expense totaling approximately $163,000 and $360,000, respectively, which have been included in the general and administrative expenses line item. No income tax benefit has been recognized in the income statement for share-based compensation arrangements as the Company has provided a 100% valuation allowance on its’ net deferred tax asset. 

Stock option compensation expense is the estimated fair value of options granted amortized on a straight-line basis over the requisite service period for the entire portion of the award. The Company has not adjusted the expense by estimated forfeitures, as required by FAS 123(R) for employee options, since the forfeiture rate based upon historical data was determined to be immaterial.

9

The fair value of options at the date of grant is estimated using the Black-Scholes option pricing model. During the nine months ended September 30, 2008 and 2007 the assumptions made in calculating the fair values of options are as follows:

	For the Nine Months Ended
	September 30,
	2008			2007
Expected term (in years)		5			5
Expected volatilty		89.23%-95.46	%		86.26%-89.54	%
Expected dividend yield		0	%		0	%
Risk-free interest rate		3.47%-4.26	%		4.34%-5.26	%

Accounting for Non-employee Awards:

The Company previously accounted for options granted to its non-employee consultants using the fair value cost in accordance with FAS 123 and EITF No. 96-18. The adoption of FAS 123(R) and SAB 107 as of January 1, 2006, had no material impact on the accounting for non-employee awards. The Company continues to utilize the additional guidance set forth in EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees” (“EITF 96-18”).

Stock compensation expense related to non-employee options was approximately $71,000 and $59,000 for nine months ended September 30, 2008 and 2007, respectively. These amounts are included in the Consolidated Statements of Operations within the general and administrative expenses line item.

There were no employee stock options granted during the three months ended September 30, 2008 and 2007. On April 21, 2008, there were 1,500,000 of options granted, 250,000 options to each of the 6 members of the new advisory board. The options vest ratably over a three year period and expire five years from the grant date. The Company utilizes the Black-Scholes calculation to value options granted. As of September 30, 2008, the Company recorded option expense amounting to $12,500 in connection with the options granted to the advisory board members.

The following table represents our stock options exercised, and forfeited during the nine months ended September 30, 2008.

			Weighted		Weighted
			Average		Average
			Exercise		Remaining
	Number		Price		Contractual
Stock Options	of Shares		per Share		Term
Outstanding at January 1, 2008		9,733,157	$	0.36		2.6661
Granted		1,500,000	$	0.15		4.5589
Exercised		-		-
Forfeited/expired		3,570,000		0.31		0.0000
Outstanding at September 30, 2008		7,663,157	$	0.35		2.7339
Exercisable at September 30, 2008		7,156,682	$	0.39		2.1872

As of September 30, 2008, there was $460,061 of unrecognized compensation cost, net of estimated forfeitures, related to nonvested stock options, which is expected to be recognized over a weighted average period of approximately 2 years.

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NOTE 5 - INTANGIBLES

In April of 2008, the Company purchased all of the stock of Echometrix Inc., in exchange for 300,000 shares of the Company’s common stock. The acquisition resulted in $373 of cash, and the difference between the purchase price and the net assets acquired was recorded as an intangible asset, approximately $38,627. The Company is amortizing the intangible over a twelve month period. Total amortization for the nine months ended September 30, 2008 was $19,313. (See Note 1).

NOTE 6 - 10% CONVERTIBLE NOTES PAYABLE

During 2005 and 2006, the Company raised capital via a private placement to accredited investors of units (“Units”) consisting of (a) a 10% convertible note and (b) warrants to purchase 10,000 shares of common stock, exercisable at $0.50 per share, for $10,000 per Unit. The convertible notes mature in two years from the date of issue, if not converted earlier, and are convertible at any time at the option of the holder into Common Stock at the conversion rate of $0.40 per share. The Company raised a gross amount of $2,895,000 from the offerings. The Company allocated the proceeds received between the debt and the warrant based upon their relative fair values. The resulting discount is accreted over a two year period, the life of the note, using the effective interest method. If the debt is converted earlier than the maturity date, the unamortized amount will be charged to operations at that time. When comparing the fair value of the notes to the note value there was a beneficial conversion feature. This amount was recorded as a discount to the notes and is accreted over the two year life of the note using the effective interest method. For the nine months ended September 30, 2008 and 2007, an aggregate of $96,567 and $495,898 was charged to interest expense, respectively.

As reflected on the balance sheet at September 30, 2008 and December 31, 2007, the note value, net of discount, was $768,000, and $2,059,433, respectively. As of September 30, 2008, $1,388,000 of principal had been converted into common stock.

Future principal payments under the 10% convertible notes payable as of September 30, 2008 for the next year in the aggregate is:

Year ending	Amount
September 30, 2009	$	768,000

As of September 30, 2008, the Company has failed to repay the outstanding amounts of the convertible notes due on the dates of their maturity.

Upon the occurrence of such an event of default, all the payment obligations under the agreement become immediately due and payable upon written notice to the Company by the holder. Subsequent to September 30, 2008, as a result of this default one noteholder has brought legal action against the Company. The Company has since then converted the related $100,000 note payable and accrued interest into the Company's common stock.

NOTE 7- SHORT TERM BRIDGE NOTES PAYABLE

On October 31, 2006 the Company began a private placement to accredited investors of 10% short term promissory notes. These notes are payable the earlier of one year from the issue date or when the Company raises a certain minimum amount in its next qualified financing as defined. The notes bear an interest rate of 10% per annum, payable at the end of the term and the holders received restricted shares of the Company’s common stock equal to the face value of their note.

During the nine months ended September 30, 2008, the Company raised a gross amount of $335,000 from the sale of promissory notes. As of September 30, 2008, a total of $25,000 of the 10% short term promissory notes have been repaid in cash, and $25,000 of principal was converted into the Company’s common stock. For the nine months ended September 30, 2008, an aggregate of $47,991 was charged to interest expense.

As reflected on the balance sheet at September 30, 2008 and December 31, 2007, the note value, was $734,740 (net of a discount of $25,260) and $475,000, respectively.

NOTE 8 - DUE TO EXECUTIVE STOCKHOLDERS

At September 30, 2008 and December 31, 2007, the Company was indebted to its CEO, William Bozsnyak, in the amounts of $163,719 and $45,719, respectively, for working capital advances made to the Company. For the nine months ended September 30, 2008 and 2007, interest expense was charged in the amounts of $7,647 and $43,518, respectively. At September 30, 2008 and December 31, 2007, $160,100 and $107,792 in accrued interest was due to Mr. Bozsnyak, respectively.

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The Company also owed Mr. Bozsnyak $24,561 as of September 30, 2008 for travel expenses, computer expenses and legal fees incurred on behalf of the Company. Additionally, at September 30, 2008, Brian O’Connor, a shareholder and director, is owed $4,745 for travel expenses incurred on behalf of the Company.

At September 30, 2008 and December 31, 2007, $476,653 and $170,683, respectively, was owed for unpaid salaries and accrued vacation to Mr. Bozsnyak, Mr. Supinsky, Mr. Caruso and Mr. O’Connor. A total of $69,766 was owed to Mr. Bozsnyak at September 30, 2008 as equity compensation per his employment agreement.

At September 30, 2008 and December 31, 2007, the Company owed $10,500 and $4,366 to the chairman of the audit and compensation committees, who is a shareholder.

NOTE 9 - EQUITY TRANSACTIONS.

On January 3, 2008, the Company issued 277,778 shares of the Company’s restricted common stock upon the conversion of $25,000 of the Company’s 10% convertible notes.

On January 3, 2008, the Company issued 25,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $2,250.

On January 3, 2008, the Company issued 1,250,000 shares of the Company’s restricted common stock as bonuses to employees and directors and are valued at $162,500.

On January 3, 2008, the Company issued 150,000 shares of the Company’s restricted common stock to a marketing and promotions company for services to be rendered in 2008. These shares were valued at the fair market value of $0.21, less an approximate 10% discount (to give effect to the lack of liquidity for such shares) or at $0.19 per share. A total of $28,500 was charged to operations with a corresponding credit to additional paid in capital.

On January 8, 2008, the Company issued 666,666 shares of the Company’s restricted common stock upon the conversion of $100,000 of the Company’s 10% convertible notes.

On January 8, 2008, the Company issued 105,811 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $8,466.

On January 10, 2008, the Company issued 25,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $3,000.

On January 11, 2008, the Company issued 7,530,001 shares of the Company’s restricted common stock upon the conversion of $692,000 of the Company’s 10% convertible notes.

On January 11, 2008, the Company issued 692,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $55,360.

On January 15, 2008, the Company issued 208,333 shares of the Company’s restricted common stock upon the conversion of $25,000 of the Company’s 10% convertible notes.

On January 15, 2008, the Company issued 25,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $2,000.

On January 17, 2008, the Company issued 83,333 shares of the Company’s restricted common stock upon the conversion of $12,500 of the Company’s 10% convertible notes.

On January 17, 2008, the Company issued 12,500 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $1,000.

On January 23, 2008, the Company issued 300,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $24,000.

On January 28, 2008, the Company issued 80,000 shares of the Company’s restricted common stock upon the conversion of $12,000 of the Company’s 10% convertible notes.

On January 28, 2008, the Company issued 12,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $960.

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On January 31, 2008, the Company issued 83,333 shares of the Company’s restricted common stock upon the conversion of $12,500 of the Company’s 10% convertible notes.

On January 31, 2008, the Company issued 12,500 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $1,000.

On February 1, 2008, the Company issued 357,143 shares of the Company’s restricted common stock upon the conversion of $50,000 of the Company’s 10% convertible notes.

On February 1, 2008, the Company issued 50,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $4,000.

On February 5, 2008, the Company issued 83,333 shares of the Company’s restricted common stock upon the conversion of $10,000 of the Company’s 10% convertible notes.

On February 5, 2008, the Company issued 12,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $960.

On February 12, 2008, the Company issued 71,429 shares of the Company’s restricted common stock upon the conversion of $10,000 of the Company’s 10% convertible notes.

On February 13, 2008, the Company issued 1,158,334 shares of the Company’s restricted common stock upon the conversion of $139,000 of the Company’s 10% convertible notes.

On February 14, 2008, the Company issued 416,667 shares of the Company’s restricted common stock upon the conversion of $50,000 of the Company’s 10% convertible notes.

On February 14, 2008, the Company issued 50,000 shares of the Company’s restricted common stock upon the exercise of warrants issued with the Company’s 10% convertible notes and received net proceeds of $6,000.

On February 19, 2008, the Company issued 276,190 shares of the Company’s restricted common stock upon the conversion of $40,000 of the Company’s 10% convertible notes.

On February 20, 2008, the Company issued 41,667 shares of the Company’s restricted common stock upon the conversion of $5,000 of the Company’s 10% convertible notes.

On February 21, 2008, the Company issued 41,667 shares of the Company’s restricted common stock upon the conversion of $5,000 of the Company’s 10% convertible notes.

On February 28, 2008, the Company, through a private sale, sold 714,286 shares of its common stock at an exercise price of $.14 per share and received net proceeds of $100,000.

On March 10, 2008, the Company, through a private sale, sold 128,571 shares of its common stock at an exercise price of $.14 per share and received net proceeds of $18,000.

On March 14, 2008, the Company, through a private sale, sold an aggregate of 714,286 shares of its common stock at an exercise price of $.14 per share and received net proceeds of $100,000.

On March 20, 2008, the Company issued 416,667 shares of the Company’s restricted common stock upon the conversion of $50,000 of the Company’s 10% convertible notes.

On March 24, 2008, the Company issued 375,000 shares of the Company’s restricted common stock upon the conversion of $45,000 of the Company’s 10% convertible notes.

On March 26, 2008, the Company issued 416,667 shares of the Company’s restricted common stock upon the conversion of $50,000 of the Company’s 10% convertible notes.

On March 31, 2008, the Company issued 83,333 shares of the Company’s restricted common stock upon the conversion of $10,000 of the Company’s 10% convertible notes.

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On April 10, 2008, the Company issued 1,753,847 shares of its common stock pursuant to a cashless warrant exercise, recording a $146,154 charge to stock compensation expense.

On April 17, 2008, the Company issued 50,000 shares of its restricted common stock in connection with the issuance of a $50,000 promissory note.

On May 12, 2008, the Company, through a private sale, sold 142,857 shares of its restricted common stock at a price of $.14 per share and received net proceeds of $20,000.

On May 14, 2008, the Company issued 300,000 shares of its common stock as part of the purchase of Echometrix, Inc. (See Note 5) and recorded the net purchase price as an intangible asset.

On May 20, 2008, the Company, through a private sale, sold 500,000 shares of its restricted common stock at a price of $.14 per share and received net proceeds of $70,000.

On May 28, 2008, the Company, issued 1,275,000 shares of its restricted common stock as part of a legal settlement (See Note 8) and recorded a corresponding charge to the statement of operations of $165,750.

On June 9, 2008, the Company, through a private sale, sold 71,429 shares of its restricted common stock at a price of $.14 per share and received net proceeds of $10,000.

On June 17, 2008, the Company issued 238,675 shares of the Company’s common stock upon the conversion of $25,000 of the Company’s 10% convertible notes and accrued interest of approximately $6,000.

On June 30 2008, the Company, through a private sale, sold 41,429 shares of its restricted common stock at a price of $.14 per share and received net proceeds of $5,800.

On July 11, 2008, the Company issued 70,000 shares of its restricted common stock in connection with the issuance of a $35,000 promissory note.

On July 25, 2008, the Company issued 400,000 shares of its restricted common stock in connection with the issuance of a $200,000 promissory note.

As of September 30, 2008, the Company issued 354,768 shares of the Company’s common stock upon the conversion of $45,000 of the Company’s 10% convertible notes and accrued interest of $388.

As of September 30, 2008 the company issued 201,008 shares of the Company’s restricted common stock as payment in kind for interest due from December 2007 through July 2008 on the Company’s 10% convertible notes.

Warrants:

During 2003, as part of its initial sale of its securities to the public, the Company sold Class A warrants, exercisable for five years, to acquire 2,474,000 common shares at $0.75 per share and Class B warrants, exercisable for seven years, to acquire 2,474,000 common shares at $1.75 per share. As additional compensation to the placement agent who placed the Company’s securities, the agent and its designees received rights to acquire 247,000 units of the Company’s securities for $0.985 each for five years. Each unit is comprised of one share of common stock, a warrant to acquire one share of common stock at $0.985 and another warrant to acquire a common share at $2.285 per share.

On December 31, 2007, we extended the term to exercise the Class A Warrant from December 31, 2007 to December 31, 2008. The exercise price of the Class A Warrant was lowered from $0.985 to $0.17 per share of our common stock, and we reduced the exercise price of our Class B Warrant from $2.285 to $0.17 per share of our common stock. All other terms and conditions of the Warrants remained the same. Warrants to acquire 172,800 shares of the Company’s common stock at $0.30 per share were issued to a placement agent exercisable for five years as part of his compensation for his services in the Company’s private placement of its securities in 2004.

On December 31, 2007, we extended the term to exercise the Class A Warrant from December 31, 2007 to August 31, 2008. The exercise price of the Class A Warrant was lowered from $0.75 to $0.17 per share of our common stock, and we reduced the exercise price of our Class B Warrant from $1.50 to $0.22 per share of our common stock. All other terms and conditions of the Warrants remained the same and became effective on September 11, 2008 when the Company received a Notice of Effectiveness from the Securities and Exchange Commission. As of August 28, 2008, the Company extended the term to exercise the Class A Warrant from August 31, 2008 to March 31, 2009. All other terms and conditions of the Warrants remained the same and became effective on October 8, 2008 when the Company received a Notice of Effectiveness from the Securities and Exchange Commission.

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During 2005 and 2006, the Company raised capital via a private placement to accredited investors of units (“Units”), each Unit consisting of (a) a 10% convertible note with the original principal amount of $10,000 and (b) warrants to purchase 10,000 shares of common stock, exercisable at $0.50 per share, for $10,000 per Unit.

For the nine months ended September 30, 2008, 1,331,811 of warrants were exercised for total proceeds of approximately $109,000.

NOTE 10 - COMMITMENTS AND CONTINGENCIES.

Legal Proceedings 

Joseph Carrizzo

During the first quarter of 2007, Joseph Carrizzo resigned as the Company’s President and a director. The Company attempted to negotiate the terms of a separation agreement with Mr. Carrizzo. On March 20, 2007, the Company received a letter from Mr. Carrizzo in which he formally advised the Company that he was terminating his employment as a result of the Company’s alleged material breach of his employment agreement. The Company contends that Mr. Carrizzo voluntarily terminated his employment with the Company.

On May 22, 2008, a settlement agreement was reached between the Company and Mr. Carrizzo, whereby the Company has agreed to pay Mr. Carrizzo $150,000 and issue 1,275,000 of the Company’s restricted common shares in full and complete settlement of all monetary and non-monetary claims by Mr. Carrizzo. Mr. Carrizzo turned in and the Company terminated 3,270,000 options as part of the settlement. A cash payment of $10,000 was made immediately upon execution of the settlement agreement and $5,000 per month commencing thirty days after the initial payment is due until the full amount is paid. If the Company raises $500,000 in additional equity financing in a single transaction, a one time accelerated payment of $20,000 is to be made to Mr. Carrizzo. If the Company raises an additional $500,000 in a single transaction, an additional $20,000 accelerated payment is to be made. The common shares payment was delivered in two stock certificates on May 28, 2008. The first 625,000 shares issued are restricted until such time as when the Company files a registration statement that is declared effective by the SEC. The second payment of 650,000 common shares are subject to the first stipulation and have an additional legend that prohibits their resale prior to March 1, 2009.

Charles Davis

On May 23, 2008, the Company responded to a letter dated May 22, 2008 from Mr. Davis' attorney and sent a notification to return property and intellectual property belonging to the Company from the former Chief Technology Officer, Charles Davis. Mr. Davis claims independent rights to use technology owned and developed by SearchHelp, Inc and Echometrix. The Company maintains that Mr. Davis has no independent rights, is in violation of his confidentiality obligations and has demanded all records, software and data owned by SearchHelp, Inc and subsidiaries to be returned to the Company immediately. Mr. Davis was arrested for stealing the Company property, and is due in court on or about November 30, 2008.

NOTE 11 - SUBSEQUENT EVENTS.

On October 16, 2008, the Company, through a private sale, issued 200,000 shares of its restricted common stock in connection with a promissory note issued for $100,000, due on February 16, 2009.

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Item 2. Management's Discussion and Analysis.

The following is a discussion of our results of operations and current financial position. This discussion should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this report, as well as our audited consolidated financial statements and related notes included in our Annual Report on Form 10-KSB for the year ended December 31, 2007.

As used in this quarterly report on Form 10-Q, references to the “Company,” “we,” “us,” “our” or similar terms include SearchHelp, Inc. and its consolidated subsidiaries.

Forward Looking Statements

Except for the historical information contained herein, the matters discussed below or elsewhere in this quarterly report may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. We make such forward-looking statements under the provisions of the "safe harbor" section of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the Company's views and assumptions based on information currently available to management. Such views and assumptions are based on, among other things, the Company's operating and financial performance over recent years and its expectations about its business for the current and future fiscal years. 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 be correct. Such statements are subject to certain risks, uncertainties and assumptions, including, but not limited to, (a) the Company's ability to secure necessary capital in order to continue to operate (b) the Company's ability to complete and sell its products and services, (c) the Company's ability to achieve levels of sales sufficient to cover operating expenses, (d) prevailing economic conditions which may significantly deteriorate, thereby reducing the demand for the Company's products and services, (e) regulatory or legal changes affecting the Company's business and (f) the effectiveness of the Company's relationships in the parental control and monitoring software and services, and imaging products business.

General

The Company's business consists principally of the development, sale and distribution of parental control and monitoring software and services and imaging products.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, the Company incurred net losses of $2,623,594 and $3,813,052 for the nine months ended September 30, 2008 and 2007, respectively. In addition, the Company has negative working capital of $3,388,340 and an accumulated deficit of $19,786,113 at September 30, 2008. 

These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's efforts have been directed towards the development and implementation of a plan to generate sufficient revenues to cover all of its present and future costs and expenses. The plan includes, among other things, focusing on on-line sales of the parental control software, and concentrating on the new Echometrix division.

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The Company has been successful in raising financing from equity and debt transactions. During the nine months ended September 30, 2008, the Company raised approximately $848,000 from the private placement of common stock and warrants, and issuance of debt. A total of $1,388,000 of the 10% short term promissory notes have been converted into the Company’s Common Stock.

The Company announced that on May 29, 2008, BioNeutral Laboratories Corporation announced successful completion of residual-activity testing of Ygiene(TM) Anti-Mold Formulation. These test results show that Ygiene Anti-Mold formulation totally eliminated all mold within 15 seconds. In addition to these outstanding time-to-kill results, Ygiene Anti-Mold also prevents the reoccurring growth of mold when extremely high levels of mold spores are inoculated onto surfaces that have been treated with Ygiene. On February 3, 2004, SearchHelp entered into a Participation Agreement with BioNeutral Laboratories. Per the agreement, SearchHelp will receive an interest equal to 5% of the gross revenue from the sale of the Ygiene for a term of approximately 5 1/2 years once royalty period begins. No revenue has been recorded to date, and the value of the license was written off as of December 31, 2007.

During the nine month period ending September 30, 2008, the Company focused on three primary operating priorities:

· Product Design and Delivery. We continue to improve and enhance the functionality of our Sentry software. On February 1, 2008 the Company released the latest version of its Sentry Product which was totally rebuilt during 2007. With the new rebuilt Sentry product, our technical staff has identified several new products and services that the Company plans to launch during 2008. These new products will broaden the Company’s product line and customer base.

We repackaged the new Sentry product and created additional products versions, each having a different price point. We are reintroducing the Sentry product to non-consignment retailers. In addition, the Company will launch numerous online sales campaigns for back to school through the end of this fiscal year. The Company has not, up until this point, concentrated resources to online sales. Management believes that its new online campaign scheduled to start in late August will show an improvement in sales.

The Company recently announced its intent to commercialize its Echometrix technology developed by the Company that it believes could provide advertisers and marketers the ability to analyze natural language expression and sentiment in real-time of digital content, such as blogs, emails, and uniquely instant messaging and mobile text messaging. This automated ability to ascertain emotional context in digital content has widespread uses and implications in the evolving marketing and media landscape.

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The Company also recently announced the formation of an advisory board for the Echometrix division, with six industry experts that will be instrumental to validate the new technology, as well as assist in identifying various channels to commercialize this product. The Company spent part of 2007 and the first six months of 2008 developing the Echometrix Technology. The remainder of 2008 will be spent signing beta users and prepare for Echometrix version 2.0 which is expected to be completed early in 2009. At that time, the Company believes that Echometrix will be in a position to generate significant revenue.

· Raising Awareness in the Marketplace. We began a concerted effort to increase advertising and promotion in order to foster awareness of the Sentry product line in the marketplace. The Company has been pursuing OEM relationships, radio and television ads, infomercial and other promotional videos, increasing product give-aways, and increasing the level of direct mail and Internet advertising.

· Addressing the Company's liquidity and capital needs. Since inception, the Company has not generated any significant cash flows from operations. Therefore, the Company has funded its operations by issuing notes and by selling common stock and preferred stock. Management has determined that the Company will require additional capital in order to fully exploit the market for its products and services. During the nine months ended September 30, 2008, the Company raised approximately $848,000 from the private placement of common stock and warrants, and issuance of debt. A total of $1,388,000 of the 10% short term promissory notes have been converted into the Company’s Common Stock. See - Liquidity and Capital Resources.

Results of Operations

Comparison of the Results for the Three Months Ended September 30, 2008 and 2007

During the third quarter of 2008, the Company had revenues of $4,815, net of discounts, from sales of software products.  The cost of these sales totaled $3,512. The Company also wrote off inventory of the older version of the Sentry products in the three months ended September 30, 2008 totaling $207,689. This resulted in a loss on gross margin of $206,386.  The Company’s net loss was $584,937 of which $599,001 was the loss from operations.

Revenue for the three months ended September 30, 2008 and 2007 was $4,815 and $60,273, respectively, a decrease of $55,458 and is reflective of the Company’s focus to on-line sales in the current period, compared to various distribution channels for its software product line in the comparative prior period.

The Company’s compensation costs increased for the three months ended September 30, 2008 from the comparable period of the prior year. Compensation costs (which include salaries, taxes and benefits and share-based compensation), included in general and administrative expenses, totaled $163,171 and $331,808 for the three months ended September 30, 2008 and 2007, respectively, an decrease of $168,647 which is primarily attributable to the fewer employees in the current period. In addition, there was a decrease in professional fees (primarily legal fees) of approximately $86,000 from the three months ended September 30, 2008 compared to the three months ended September 30, 2007. The remaining decrease was attributable to the Company’s overall effort to reduce costs.

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Depreciation and amortization expense decreased by $16,952 for the three months ended September 30, 2008 from the comparable period of the prior year. The decrease in depreciation and amortization reflects the Company’s write off of intangible assets at December 31, 2007.

Interest expense (including related party interest) for the three months ended September 30, 2008 and 2007 was $45,360 and $268,865, respectively, a decrease of $223,505. This decrease in interest expense is a result of the decrease in the aggregate total of convertible notes and bridge notes outstanding due to noteholders converting debt into Company stock. Convertible notes outstanding totaled $768,000 and $2,855,000 at September 30, 2008 and 2007, respectively. Included in interest expense is the recognition of amortization expense on the beneficial conversion feature of the convertible notes and the discount related to the value of the warrants which totaled approximately $2,000 and $172,000 for the three months ended September 30, 2008 and 2007, respectively, a decrease of $170,000.

Comparison of the Results for the Nine Months Ended September 30, 2008 and 2007

During the nine months ended September 30, 2008, the Company had revenues of $96,907, net of discounts, from sales of software products.  The cost of these sales totaled $40,109.  The Company wrote off inventory of the older versions of the Sentry Products, totaling $219,669. Gross margin was a loss of $162,871.  The Company’s net loss was $2,623,594, of which $2,379,711 was the loss from operations.

Revenue for the nine months ended September 30, 2008 and 2007 was $96,907 and $133,418, respectively, a decrease of $36,511 and is reflective of the shift in focus to on-line sales and selective distributors in the current period, compared to the various sales channels in the same period in the prior year. Gross profit decreased as a direct result of the write off of inventory.

The Company’s compensation costs increased for the nine months ended September 30, 2008 from the comparable period of the prior year. Compensation costs (which include salaries, taxes and benefits and share-based compensation), included in general and administrative expenses, totaled $1,337,414 and $1,208,459 for the nine months ended September 30, 2008 and 2007, respectively, an increase of $128,955. This increase is directly attributable to the legal settlement of $315,750 with the Company’s former President, offset by a decrease in other salaries and compensation of $186,795. Offsetting the compensation increase is a decrease in professional fees, (primarily legal, and consulting) of approximately $217,000 from the nine months ended September 30, 2008 compared to the prior nine months ended September 30, 2007. This was a result of the company’s defense of several legal proceedings in 2007. The remaining decrease is a result of the Company’s overall effort to reduce costs.

Depreciation and amortization expense decreased by $149,776, for the nine months ended September 30, 2008 from the comparable period of the prior year. The decrease in depreciation and amortization reflects the Company’s write off of intangible assets at December 31, 2007, and the decrease of amortization of deferred financing costs due to lower carrying values in the nine months ended September 30, 2008 compared to the same period in the prior year.

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Interest expense (including related party interest) for the nine months ended September 30, 2008 and 2007 was $247,823 and $853,569, respectively, a decrease of $605,746. This decrease in interest expense is a result of the decrease in the aggregate total of convertible notes and bridge notes outstanding due to noteholders converting debt into Company stock. Convertible notes outstanding totaled $768,000 and $2,855,000 at September 30, 2008 and 2007, respectively. Included in interest expense is the recognition of amortization expense on the beneficial conversion feature of the convertible notes and the discount related to the value of the warrants which totaled approximately $97,000 and $496,000 for the nine months ended September 30, 2008 and 2007, respectively, a decrease of $229,000. Additionally, included in interest expense, for the nine months ended September 30, 2007, is approximately $72,000 for amortization of the discount related to the Company’s 10% short term promissory notes.

Liquidity and Capital Resources

The Company's liquidity and capital needs relate primarily to working capital and other general corporate requirements. To date, the Company has funded its operations with stockholder loans and by issuing notes and by the sale of common and preferred stock.

Since inception, the Company has not generated any significant cash flows from operations. At September 30, 2008, the Company had cash and cash equivalents of $10,857 and a working capital deficiency of $3,388,340. Net cash used in operating activities for the nine months ended September 30, 2008 was $1,210,403. If the Company does not generate sufficient revenues from the sales of its products in an amount necessary to meet its cash needs, the Company would need additional financing to continue to operate. As the Company increases sales from its products and services, the Company expects to increase cash flows from operations.

Net cash used in investing activities for the nine months ended September 30, 2008 was $66,930 and is attributable to costs related to capitalized software development.

Net cash provided from financing activities was $1,283,369 for the nine months ended September 30, 2008. Cash flow from financing activities was primarily derived from the sale of the Company’s common stock warrants, and issuance of debt approximating $848,000.

During 2005 and 2006, the Company raised capital via a private placement to accredited investors of units (“Units”) consisting of (a) a 10% convertible note and (b) warrants to purchase 10,000 shares of common stock, exercisable at $0.50 per share, for a purchase price of $10,000 per Unit. The convertible notes mature in two years from the date of issue, if not converted earlier. The Notes are currently convertible at any time at the option of the holder into Common Stock at the conversion rate of $0.40 per share. As of September 30, 2008, the Company raised a gross amount of $2,895,000 from the offerings. As of September 30, 2008, $2,127,000 principal amount of the 10% convertible notes was converted into common stock or repaid.

Additionally, on October 31, 2006 the Company began a private placement to accredited investors of 10% short term promissory notes. These notes are payable the earlier of one year from the issue date or when the Company raises $1,000,000 in its next qualified financing as defined. The notes bear an interest rate of 10% per annum, payable at the end of the term and the holders also received restricted shares of the Company’s Common Stock equal to the face value of their note. As of September 30, 2008, the Company has raised a total gross amount of $1,070,000, from these notes. As of September 30, 2008, a total of $310,000 of the 10% short term promissory notes have been repaid or converted into common stock.

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During the nine months ended September 30, 2008, the Company sold an aggregate of 2,321,579 shares of its restricted common stock at a price of $.14 per share, receiving proceeds totaling $318,000.

While the Company has been successful in raising financing from equity and debt transactions as mentioned above, we are dependent on improved operating results and raising additional funds over the next twelve month period. There are no assurances that we will be able to raise additional funding. In the event that we are unable to generate sufficient cash flow or receive proceeds from offerings of debt or equity securities, the Company may be forced to curtail or cease its activities.

Research and Development

Research and development costs are generally expensed as incurred. In accordance with the provisions of SFAS No. 86, "Accounting for the costs of computer software to be sold or otherwise marketed", software development costs are subject to capitalization beginning when a product's technological feasibility has been established and ending when a product is available for release to customers. For the nine months ended September 30, 2008, the Company capitalized approximately $67,000 of software development costs. At December 31, 2007 the Company wrote off approximately $271,000 of unamortized prior software development costs. Software development costs are amortized on a straight line basis over the estimated useful life of three years. Amortization expense for the nine months ended September 30, 2008 and 2007 was $14,324 and $178,825, respectively.

The Company continually strives to enhance and improve the functionality of its software products. As such all new programming must be tested, even if it is only a small component of a larger existing element of the software, before being released to the public. Testing is an ongoing process and generally occurs in three areas. First, upgrades and enhancements are done on a continual basis to prolong the lifecycle of the products and as new enhancements and upgrades are completed, each item must be tested for performance and function. Testing is also performed to assure that new components do not adversely affect existing software. Finally, as with all software, testing must assure compatibility with all third party software, new operating systems and new hardware platforms.

Other Accounting Policies:

Refer to the Annual Report on Form 10-KSB for the year ended December 31, 2007 filed with SEC for a listing of all such accounting principles.

Item 3. Market Risk

Internet technology, software applications and related infrastructure are rapidly evolving. Our ability to compete depends on the continuing development of our technologies and products. There is no assurance that the Company will be able to keep pace with technological advances or that our products will not become obsolete. If that happens, our business, prospects, results of operations and financial condition will be materially adversely affected.

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There is no assurance that the Company’s intent to commercialize its sentiment analysis technology will scale and there can be no assurance that others might not already have this technology or enter this market and gain significant market share.

Item 4T. Controls and Procedures.

Internal Controls

(a) Evaluation of Disclosure Controls and Procedures. The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of September 30, 2008 and have concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported with the time periods specified in the Commission's rules and forms.

(b) Changes in Internal Controls. There were no significant changes in our internal controls over financial reporting that occurred during the three month period ended September 30, 2008, that have materially affected, or are reasonably like to materially affect, our internal controls over financial reporting.

The Company's management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that the Company's disclosure controls or the Company's internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and may not be detected. We will conduct periodic evaluations of our internal controls to enhance, where necessary, our procedures and controls.

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PART II

Item 1. Legal Proceedings.

Joseph Carrizzo

During the first quarter of 2007, Joseph Carrizzo resigned as the Company’s President and a director. The Company attempted to negotiate the terms of a separation agreement with Mr. Carrizzo. On March 20, 2007, the Company received a letter from Mr. Carrizzo in which he formally advised the Company that he was terminating his employment as a result of the Company’s alleged material breach of his employment agreement. The Company contends that Mr. Carrizzo voluntarily terminated his employment with the Company.

On May 22, 2008, a settlement agreement was reached between the Company and Mr. Carrizzo, whereby the Company has agreed to pay Mr. Carrizzo $150,000 and issue 1,275,000 of the Company’s restricted common shares in full and complete settlement of all monetary and non-monetary claims by Mr. Carrizzo. Mr. Carrizzo turned in and the Company terminated 3,270,000 options as part of the settlement A cash payment of $10,000 was made immediately upon execution of the settlement agreement and $5,000 per month commencing thirty days after the initial payment is due until the full amount is paid. If the Company raises $500,000 in additional equity financing, in a single transaction, a one time accelerated payment of $20,000 is to be made to Mr. Carrizzo. If the Company raises an additional $500,000 in a single transaction, an additional $20,000 accelerated payment is to be made. The common shares payment was delivered in two stock certificates on May 28, 2008. The first 625,000 shares issued are restricted until such time as when the Company files a registration statement that is declared effective by the SEC. The second payment of 650,000 common shares are subject to the first stipulation and have an additional legend that prohibits their resale prior to March 1, 2009.

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

On April 17, 2008, the Company, through a private sale, issued 50,000 shares of its restricted common stock as a result of a promissory note issued for net proceeds of $50,000.

On May 12, 2008, the Company, through a private sale, sold 142,857 shares of its restricted common stock at a price of $.14 per share and received net proceeds of $20,000.

On May 20, 2008, the Company, through a private sale, sold 500,000 shares of its restricted common stock at a price of $.14 per share and received net proceeds of $70,000.

On June 9, 2008, the Company, through a private sale, sold 71,429 shares of its restricted common stock at a price of $.14 per share and received net proceeds of $10,000.

The above shares of common stock were issued pursuant to the exemption from registration under Section 4(2) of the Securities Act.

Item 3. Defaults upon Senior Securities.

NONE

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

NONE

Item 5. Other Information.

NONE

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

(a) Exhibits

31.1Certification of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

31.2 Certification of and Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

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

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SearchHelp, Inc.

(Registrant)

By:	/s/ Erica Zalbert
	Erica Zalbert, Chief Financial Officer

Date: November 14, 2008

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