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 endedApril 30, 2009
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 number333-139209
SEARCH BY HEADLINES.COM CORP.
(Exact name of registrant as specified in its charter)
| Nevada | N/A |
| (State or other jurisdiction of incorporation or | (IRS Employer Identification No.) |
| organization) |
5520 14B Avenue, Delta, BC V4M 2G6
(Address of principal executive offices) (zip code)
(778) 386-3528
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
Yes [ ] No [ ] (does not yet apply to registrant)
– 2 –
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 [ ] | (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
9,010,000 common shares issued and outstanding as of June 15, 2009
– 3 –
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
These financial statements have been prepared by Search By Headlines.Com Corp. without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with such Securities and Exchange Commission rules and regulations. In the opinion of management, the accompanying statements contain all adjustments necessary to present fairly the financial position of our company as of April 30, 2009, and our results of operations and our cash flows for the three month period ended April 30, 2009 and for the period from inception (May 17, 2005) to April 30, 2009. The results for these interim periods are not necessarily indicative of the results for the entire year.
– 4 –
SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
April 30, 2009
(Stated in US Dollars)
(Unaudited)
SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
INTERIM BALANCE SHEET
April 30, 2009 and July 31, 2008
(Stated in US Dollars)
(Unaudited)
| April 30, | July 31, | |||||
| 2009 | 2008 | |||||
| ASSETS | ||||||
| Current | ||||||
| Cash and cash equivalents | $ | 1,077 | $ | 17,693 | ||
| Website – Note 3 | 1,156 | 3,946 | ||||
| $ | 2,233 | $ | 21,639 | |||
| LIABILITIES | ||||||
| Current | ||||||
| Accounts payable | $ | 27,305 | $ | 26,848 | ||
| STOCKHOLDERS’ DEFICIENCY | ||||||
| Capital stock – Note 4 | ||||||
| Authorized | ||||||
| 100,000,000 common shares, par value $0.001 per share | ||||||
| Issued and outstanding | ||||||
| 9,010,000 common shares | 9,010 | 9,010 | ||||
| Additional paid-in capital | 54,090 | 54,090 | ||||
| Comprehensive income | 10,378 | 9,262 | ||||
| Deficit accumulated during the development stage | (98,550 | ) | (77,571 | ) | ||
| Total stockholders’ deficiency | (25,072 | ) | (5,209 | ) | ||
| $ | 2,233 | $ | 21,639 | |||
SEE ACCOMPANYING NOTES
SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
INTERIM STATEMENT OF OPERATIONS
for the three and nine months ended April 30, 2009 and 2008 and
for the period May 17, 2005 (Date of Inception) to April 30, 2009
(Stated in US Dollars)
(Unaudited)
| May 17, | |||||||||||||||
| 2005 (Date of | |||||||||||||||
| Three months ended | Nine months ended | Inception) to | |||||||||||||
| April 30, | April 30, | April 30, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | 2009 | |||||||||||
| Revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
| Expenses | |||||||||||||||
| Amortization | 814 | 992 | 2,553 | 2,816 | 9,552 | ||||||||||
| General and | 4,960 | 4,500 | 18 | 15,355 | 90,608 | ||||||||||
| administrative – Note 4 | |||||||||||||||
| Loss from operations | (5,774 | ) | (5,492 | ) | (20,979 | ) | (18,171 | ) | (100,160 | ) | |||||
| Interest income | - | - | - | - | 1,610 | ||||||||||
| Loss before other | (5,774 | ) | (5,492 | ) | (20,979 | ) | (18,171 | ) | (98,550 | ) | |||||
| Other: | |||||||||||||||
| Foreign currency | (186 | ) | (388 | ) | 1,116 | 821 | 10,378 | ||||||||
| translation adjustment | |||||||||||||||
| Net comprehensive loss for | $ | (5,960 | ) | $ | (5,880 | ) | $ | (19,863 | ) | (17,350 | ) | $ | (88,172 | ) | |
| the period | |||||||||||||||
| Basic and diluted loss per | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||
| share | |||||||||||||||
| Weighted average number of | 9,010,000 | 9,010,000 | 9,010,000 | 9,010,000 | |||||||||||
| shares outstanding | |||||||||||||||
SEE ACCOMPANYING NOTES
SEARCH BYHEADLINES.COMCORP.
(A Development Stage Company)
INTERIM STATEMENT OF STOCKHOLDERS’ EQUITY
for the period May 17, 2005 (Date of Inception) to April 30, 2009
(Stated in US Dollars)
(Unaudited )
| Deficit | |||||||||||||||||||
| Common Stock | Accumulated | ||||||||||||||||||
| Additional | During the | ||||||||||||||||||
| Paid-in | Comprehensive | Development | |||||||||||||||||
| Shares | Par Value | Capital | Income | Stage | Total | ||||||||||||||
| Capital stock issued for cash: | |||||||||||||||||||
| August 2005 | - at $0.001 | 3,000,000 | $ | 3,000 | $ | - | $ | - | $ | - | $ | 3,000 | |||||||
| September 2005 | - at $0.01 | 6,010,000 | 6,010 | 54,090 | - | - | 60,100 | ||||||||||||
| Foreign currency translation adjustment | - | - | - | 6,487 | - | 6,487 | |||||||||||||
| Net loss for the year | - | - | - | - | (15,400 | ) | (15,400 | ) | |||||||||||
| Balance, July 31, 2006 | 9,010,000 | 9,010 | 54,090 | 6,487 | (15,400 | ) | 54,187 | ||||||||||||
| Foreign currency translation adjustment | - | - | - | 2,000 | - | 2,000 | |||||||||||||
| Net loss for the year | - | - | - | - | (38,788 | ) | (38,788 | ) | |||||||||||
| Balance, July 31, 2007 | 9,010,000 | 9,010 | 54,090 | 8,487 | (54,188 | ) | 17,399 | ||||||||||||
| Foreign currency translation adjustment | - | - | - | 775 | - | 775 | |||||||||||||
| Net loss for the period | - | - | - | - | (23,383 | ) | (23,383 | ) | |||||||||||
| Balance, July 31, 2008 | 9,010,000 | 9,010 | 54,090 | 9,262 | (77,571 | ) | (5,209 | ) | |||||||||||
| Foreign currency translation adjustment | - | - | - | 1,116 | - | 1,116 | |||||||||||||
| Net loss for the period | - | - | - | - | (20,979 | ) | (20,979 | ) | |||||||||||
| Balance April 30, 2009 | 9,010,000 | $ | 9,010 | $ | 54,090 | $ | 10,378 | $ | (98,550 | ) | $ | (25,072 | ) | ||||||
SEE ACCOMPANYING NOTES
SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
INTERIM STATEMENT OF CASH FLOWS
for the nine months ended April 30, 2009 and 2008 and
for the period May 17, 2005 (Date of Inception) to April 30, 2009
(Stated in US Dollars)
(Unaudited)
| May 17 | |||||||||
| 2005 (Date of | |||||||||
| Nine months ended | Inception) to | ||||||||
| April 30, | April 30, | ||||||||
| 2009 | 2008 | 2009 | |||||||
| Operating Activities | |||||||||
| Net loss for the period | $ | (20,979 | ) | $ | (18,171 | ) | $ | (98,550 | ) |
| Amortization expense | 2,790 | 2,816 | 9,789 | ||||||
| Changes in operating working capital items: | |||||||||
| Accounts payable | 457 | 5,380 | 27,305 | ||||||
| (17,732 | ) | (9,975 | ) | (61,456 | ) | ||||
| Investing Activity | |||||||||
| Website development | - | (4,215 | ) | (10,945 | ) | ||||
| Financing Activity | |||||||||
| Issuance of common stock for cash | - | - | 63,100 | ||||||
| Effect of foreign exchange on cash | 1,116 | 821 | 10,378 | ||||||
| Increase (decrease) in cash during the period | (16,616 | ) | (13,369 | ) | 1,077 | ||||
| Cash and cash equivalents, beginning of the period | 17,693 | 34,311 | - | ||||||
| Cash and cash equivalents, end of the period | $ | 1,077 | $ | 20,942 | $ | 1,077 | |||
SEE ACCOMPANYING NOTES
SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
April 30, 2009
(Stated in US Dollars)
(Unaudited)
| Note 1 | Interim Reporting |
While the information presented in the accompanying interim nine months financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. These interim financial statements follow the same accounting policies and methods of their application as the Company’s July 31, 2008 annual financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company’s July 31, 2008 annual financial statements. | |
| Note 2 | Organization and Nature of Business |
Search by Headlines.com Corp. was incorporated in the State of Nevada on May 17, 2005, with 100,000,000 authorized common shares with a par value of $0.001 per share. The Company provides a specialized internet search engine that features news in a format that allows users to search or submit news by headline. | |
| The Company’s fiscal year end is July 31. | |
| Note 3 | Website |
| April 30, 2009 | ||||||||||
| Accumulated | Net | |||||||||
| Cost | Amortization | Book Value | ||||||||
| Website | $ | 10,945 | $ | 9,789 | $ | 1,156 | ||||
| July 31, 2008 | ||||||||||
| Accumulated | Net | |||||||||
| Cost | Amortization | Book Value | ||||||||
| Website | $ | 10,945 | $ | 6,999 | $ | 3,946 | ||||
| Note 4 | Related Party Transactions |
During the nine months ended April 30, 2009, the Company did not have any related party transactions. | |
| As at April 30, 2009, directors of the Company own 3,000,000 common shares. |
– 5 –
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This quarterly report contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report, particularly in the section entitled “Risk Factors” of this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to “common shares” refer to the common shares in our capital stock.
As used in this quarterly report, the terms “we”, “us”, “our” and “Search By Headlines” mean Search By Headlines.Com Corp.
Current Business
SearchbyHeadlines.com features news in a format that users search or submit news by headline. News is broken down by headline under industry sectors, then once again by: Public Company News, Private Company News or Association and Non-Profit News. The site offers free news submission service for public relations and investor relations representatives as well as upgraded services. Upgraded users can submit news releases with up to three different headlines that rotate every four hours.
On SearchbyHeadlines.com, three new rotating headlines expose news to visitors every four hours. Our search feature gives companies and organizations valuable search feedback and data that can be implemented into an overall online marketing strategy.
Search by Headlines allows users to search by keywords or headlines for the most relevant targeted news results. News is broken down by headlines and industry sector so users don’t waste time searching news that isn’t relevant to their topic. To carry out an “advanced search”, a user selects “advanced search”, then inserts the key words or headline he is looking for. The user may also specify the release date, category and industry for which he wants to search. Then, the user clicks on “Search” and the search results are displayed. Search by Headline, Industry Sector and choose from: Public Company News, Private Company News or Association and Non-Profit News.
Search by Headlines focuses its content and search on headlines based on internet usage feedback and data, which suggests that by placing the right headline in a news release, companies can optimize visibility for a more specific, targeted audience. As internet users are exposed to increasing content and content formats, readers tend to read and scan headlines for keywords and phrases, followed by the first paragraph.
Google has over 4,500 news sources updated continuously. Google news editors may choose a site of their own accord or they may evaluate and choose to accept a site upon request by a particular company. In our case, we requested Google to list us as one of their news sources. Google evaluated our website and chose to list it as a
– 6 –
Google news source after we made a few adjustments to our website to meet Google’s criteria and standards. To become a news source for Google, there is no direct cost but we did incur some expenses to make the required changes to our website. For example we adjusted our page naming system and modified our service to ensure that the news would be continuously updated. Google may remove news sources from its index by its own choice or on popular request, which would most likely be the case concerning content that is harmful or unacceptable to the public at large.
Results of Operations for the three month period ended April 30, 2009
Material Changes in Financial Condition
| April 30, 2009 | July 31, 2008 | |||||
| Current Assets | $ | 1,077 | $ | 17,693 | ||
| Current Liabilities | 27,305 | 26,848 | ||||
| Working Capital Deficiency | $ | 26,228 | $ | 9,155 |
Current assets at April 30, 2009 were $1,077 compared to current assets of $17,693 at July 31, 2008. This $16,616 decrease is due to paying ongoing expenses of the Company which decreased cash.
Liabilities at April 30, 2009 were $27,305 as compared to $26,848 at July 31, 2008. The $457 increase is due to incurring additional payables in respect to the ongoing operations of the Company.
Revenue
During the three and nine month period ended April 30, 2009, covered by our unaudited financial statements, we did not generate any revenues. Our loss from operations for the three month period ended April 30, 2009 was $5,960 compared to a loss of $5,880 for the three month period ended April 30, 2008. The increase was due to an increase in general and administrative expenses.
Operating Costs and Expenses
The major components of our revenue and expenses for the three and nine month periods ended April 30, 2009 and April 30, 2008 and from May 17, 2005 (the date of inception) until April 30, 2009 are outlined in the table below:
| May 17, 2005 | |||||||||||||||
| (date of | |||||||||||||||
| Three Months | Nine Months | Inception) to | |||||||||||||
| Ended April 30, | Ended April 30, | July 31, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | 2008 | |||||||||||
| Revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
| Expenses | |||||||||||||||
| Amortization of intangible assets | $ | 814 | $ | 992 | $ | 2,553 | $ | 2,816 | $ | 9,552 | |||||
| General and administrative | $ | 4,960 | $ | 4,500 | $ | 18,426 | $ | 15,355 | $ | 90,608 | |||||
| Loss From Operations | $ | (5,774 | ) | $ | (5,492 | ) | $ | (20,979 | ) | $ | (18,171 | ) | $ | (100,160 | ) |
| Interest Income | $ | - | $ | - | $ | - | $ | - | $ | 1,610 | |||||
| $ | (5,774 | ) | $ | (,5492 | ) | $ | (20,979 | ) | $ | (18,171 | ) | $ | (98,550 | ) | |
| Loss before other | |||||||||||||||
| Other | |||||||||||||||
| Foreign currency translation | |||||||||||||||
| adjustment | $ | (186 | ) | $ | (388 | ) | $ | 1,116 | $ | 821 | $ | 10,378 | |||
| Net comprehensive loss for the period | $ | (5,960 | ) | $ | ($5,880 | ) | $ | (19,863 | ) | $ | ($17,350 | ) | $ | (88,172 | ) |
– 7 –
General and administrative expenses were $4,960 for the three months ended April 30, 2009, compared to $4,500 for the three months ended April 30, 2008. The $460 increase in general and administrative expenses is due to an increase in legal fees incurred.
General and administrative expenses were $18,426 for the nine months ended April 30, 2009, compared to $15,355 for the three months ended April 30, 2008. The $3,071 increase in general and administrative expenses is due to an increase in legal fees incurred.
Amortization of intangible assets were $814 for the three months ended April 30, 2009, compared to $992 for the three months ended April 30, 2008. The $178 decrease in amortization of intangible assets is due to a decrease in the unamortized balance in intangible assets.
Amortization of intangible assets were $2,553 for the nine months ended April 30, 2009, compared to $2,816 for the nine months ended April 30, 2008. The $263 decrease in amortization of intangible assets is due to a decrease in the unamortized balance in intangible assets.
We did not record any interest income for the three and nine month periods ended April 30, 2009 and April 30, 2008.
Our net comprehensive loss for the three months ended April 30, 2009 was $5,960, or $0.00 per share, as compared to a net comprehensive loss of $5,880, or $0.00 per share, for the three months ended April 30, 2008. The $80 increase in comprehensive loss was primarily due to the foreign currency translation adjustment.
Our net comprehensive loss for the nine months ended April 30, 2009 was $19,863, or $0.00 per share, as compared to a net comprehensive loss of $17,350, or $0.00 per share, for the nine months ended April 30, 2008. The $2,513 increase in comprehensive loss was primarily due to the increase in general and administrative expenses.
Presently, our revenue is not sufficient to meet our operating and capital expenses. Management projects that we will require additional funding to expand our current operations. We have incurred losses since inception and this is likely to continue for an indeterminate amount of time.
Management projects that we may require $100,000 to $125,000 in addition to our current cash to fund our operating expenditures for the next twelve month period. Projected expenditures for the next twelve month period, are broken down as follows:
| Estimated Expenditures During the Next Twelve Month Period | |
| Operating expenditures | |
| Marketing | $10,000-$15,000 |
| General and Administrative | $35,000-$40,000 |
| Legal and Accounting | $35,000-$40,000 |
| Website development costs | $20,000-$30,000 |
| Total | $100,000-$125,000 |
Liquidity and Capital Resources
Working Capital
| As at April, 2009 | As at July 31, 2008 | |||||
| Current Assets | $ | 1,077 | $ | 17,693 | ||
| Current Liabilities | $ | 27,305 | $ | 26,848 | ||
| Working Capital (Deficiency) | $ | (26,228 | ) | $ | (9,155 | ) |
– 8 –
Cash Flows
| Nine Months | Nine Months | |||||
| Ended | Ended | |||||
| April 30, 2009 | April, 2008 | |||||
| Cash Flows (Used In)/Provided By Operating Activities | $ | (17,732 | ) | $ | (9,975 | ) |
| Cash Flows from Financing Activities | $ | - | $ | - | ||
| Cash Flows (Used In) Investing Activities | $ | - | $ | (4,215 | ) | |
| Net Increase (decrease) in Cash During Period | $ | (16,616 | ) | $ | (13,369 | ) |
Our operating activities used cash of $17,035 for the nine month period ended April 30, 2009. The cash used during the period primarily was due to payment of general and administrative expenses.
Investing Activities
Investing activities used cash of $Nil for the nine month period ended April 30, 2009, compared to $4,215 for the nine month period ended April 30, 2008. This $4,215 increase in cash used in investing activities was the result of not incurring website development costs during the nine month period ended April 30, 2009.
Financing Activities
Financing activities provided cash of $Nil for the nine month period ended April 30, 2009, which was the same as for the nine month period ended April 30, 2008.
Future Operations
Our primary objectives for the next twelve month period include the further development of our website and expansion of our marketplace. We intend on expanding our market-share by:
| 1. | Marketing our company’s news submission fees and multiple advertising packages; and, | |
| 2. | Adding additional distribution partners. |
Revenue Processing
Sales may be processed either by cheque or through PayPal. PayPal is computer software that facilitates electronic payments over the internet in exchange for a transaction fee. The transaction fees we pay to PayPal are 3.5% of the sales amount. We plan to establish a policy on additional charges to customers for using PayPal or discounts for paying by cheque or wire to cover these costs.
Our “User Agreement” with PayPal is a contract between our company and PayPal and relates to our use of the PayPal payment service and the services provided to us by PayPal. Sales through PayPal are transferred periodically to our operating bank account.
Marketing
The following is our marketing plan for the next twelve month period, which is expected to cost approximately $10,000 to $15,000. The costs will not be passed on to our customers:
| 1. | Website development to incorporate new and unique tools to benefit all aspects of our growing business. | |
| 2. | Our company has built a customer prospect database of potentially 2,000 public relations firms that may potentially use our news distribution services. We plan to contact many of these prospective clients or target our advertising to the type of prospective client that we find are in the website. None of these public relations firms have yet become our customers. |
– 9 –
| 3. | Our company may attend or sponsor industry trade shows for Search Engine Optimization related businesses and or Internet Marketing Trade Shows. |
General and Administration
General and administration costs include administration costs, office, legal and accounting and miscellaneous expenses. Management estimates that, over the next twelve months, these costs will be between $2,900 per month to $3,300 per month based on previous costs and possible expansion of our administration over the next twelve month period. Our company is currently operated by Joe Loeppky as our president, secretary and treasurer. We anticipate that we will periodically hire independent contractors to execute our marketing, sales, and business development functions. In the next twelve month period, we plan to hire independent contractors to assist in business development with an emphasis on marketing. We may choose to compensate such persons with consideration other than cash, such as shares of our common stock or options to purchase shares of our common stock.
Other Expenses
We also incur expenses unrelated to the sales operations including legal expenses. We expect our ongoing legal expenses to be approximately $2,000 per month.
In management’s opinion, we need to achieve the following events or milestones in the next twelve month period in order for us to continue to develop our business:
| 1. | We must continue to develop new customers. New customers have been generated by cold-calls, email lists, web- site hits on our website www.searchbyheadlines.com and most importantly, by referrals from current customers; and, | |
| 2. | We must increase the orders made by our existing customers. This will be accomplished by customer satisfaction with the performance and pricing of the existing packages. |
Purchase or Sale of Equipment
We do not anticipate that we will expend any significant amount on equipment for our present or future operations.
Going Concern
Due to our being a development stage company and not having generated revenues, in their Notes to our financial statements for the year ended July 31, 2008, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern.
We have historically incurred losses, and through April 30, 2009 have incurred a net comprehensive loss of $88,172 from our inception. Because of these historical losses, we will require additional working capital to develop our business operations. We intend to raise additional working capital through private placements, and/or advances from related parties or shareholder loans.
The continuation of our business is dependent upon obtaining further financing and achieving a break even or profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placements, and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available we may not increase our operations.
– 10 –
These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Application of Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.
Foreign Currency Translation
The financial statements of our company are stated in United States dollars although we earn substantially all of our revenues in Canadian currency. The financial statements of our company are translated to United States dollars under the current rate method in accordance with SFAS No. 52 “Foreign Currency Translation”. Under the current rate method, all assets and liabilities are translated at the current rate, while stockholders’ equity accounts are translated at the appropriate historical rate. The translation of all currencies into United States dollars is included solely for your convenience. Such translation should not be construed as a representation that our foreign currencies can be converted into United States dollars at that rate or any other rate. The revenues and expenses that occur evenly over the period are translated at the weighted-average rate for the period. The cumulative translation adjustments balance is reported as a component of accumulated other comprehensive income.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting standards if currently adopted could have a material effect on the accompanying financial statements.
Risk Factors
An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this quarterly report in evaluating our company and its business before purchasing shares of our company’s common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.
Risks Related to our Business
We have had no revenues from operations and if we are not able to obtain further financing or generate significant revenues from operations we may be forced to scale back or cease operations or our business operations may fail.
To date we have not generated any income from our operations and we have been dependant on sales of our equity securities to meet the majority of our cash requirements. From our date of inception on May 17, 2005 to April 30, 2009, we generated no revenues. As at April 30, 2009, we had working capital deficiency of $26,228. We estimate that we will require approximately $100,000 to $125,000 to carry out our business plan for the next twelve months. Because we cannot anticipate when, if ever, we will be able to generate significant revenues from sales, we will need to raise additional funds to continue to develop our website to respond to competitive pressures, to sign agreements with advertisers or to respond to unanticipated requirements or expenses. If we are unable to generate significant revenues from operations or obtain financing, then we will not be able to maintain our operations.
– 11 –
We have only commenced our business operations in May, 2005 and we have a limited operating history. If we cannot successfully manage the risks normally faced by start-up companies, we may not achieve profitable operations and ultimately our business may fail.
We have a limited operating history. Our operating activities since our incorporation on May 17, 2005 have consisted primarily of developing our website, followed by structuring of our marketing efforts and company systems. Our prospects are subject to the risks and expenses encountered by start up companies, such as uncertainties regarding our level of future revenues and our inability to budget expenses and manage growth accordingly and our inability to access sources of financing when required and at rates favorable to us. Our limited operating history and the highly competitive nature of the internet news industry make it difficult or impossible to predict future results of our operations. We may not establish a clientele that will make us profitable, which may result in the loss of some or all of your investment in our common stock.
The fact that we have not generated any revenues since our incorporation raises substantial doubt about our ability to continue as a going concern.
We have not generated any revenues since our inception on May 17, 2005. Since we are still in the early stages of operating our company and because of the lack of operating history at April 30, 2009, we will, in all likelihood, continue to incur operating expenses without significant revenues until our website gains significant popularity. Between May 17, 2005 and April 30, 2009, we raised $63,100 through the sale of shares of our common stock. We estimate our average monthly operating expenses, not including one time expenses in marketing and in completing construction of our website, to be approximately $7,500 per month. We will not be able to expand our operations beyond current levels without generating significant revenues from our current operations or obtaining further financing. Our primary source of funds has been the sale of our common stock. We cannot assure that we will be able to generate enough interest in our website. If we cannot attract a significant customer base, we will not be able to generate any significant revenues or income. In addition, if we are unable to establish and generate material revenues, or obtain adequate future financing, our business will fail and you may lose some or all of your investment in our common stock.
We will need to raise additional funds in the near future. If we are not able to obtain future financing when required, we might be forced to scale back or cease operations or discontinue our business.
We do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing when such funding is required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our product selection and our business model. Furthermore, there is no assurance that we will not incur further debt in the future, that we will have sufficient funds to repay our future indebtedness or that we will not default on our future debts, thereby jeopardizing our business viability. Finally, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to maintain our operations, which might result in the loss of some or all of your investment in our common stock.
Our company anticipates that the funds that were raised from private placements by way of 31 subscription agreements entered into between May 17, 2005 and April 30, 2009 will not be sufficient to satisfy our cash requirements for the next twelve month period. Also, there is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:
| 1. | we incur unexpected costs in developing and marketing our website; | |
| 2. | we incur delays and additional expenses as a result of technology failure; | |
| 3. | we are unable to create a substantial market for our website; or | |
| 4. | we incur any significant unanticipated expenses. |
The occurrence of any of the aforementioned events could prevent us from pursuing our business plan, expanding our business operations and ultimately achieving a profitable level of such operations.
– 12 –
We will depend almost exclusively on outside capital to pay for the continued development and marketing of our products. Such outside capital may include the sale of additional stock, shareholder advances and/or commercial borrowing. There can be no assurance that capital will continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us will result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Two of our directors and officers are engaged in other business activities and accordingly may not devote sufficient time to our business affairs, which may affect our ability to conduct operations and generate revenues.
Two of our directors and officers are involved in other business activities. Joe Loeppky, our president, secretary, treasurer and director spends approximately 30 hours per month, or 15%, of his business time on the management of our company and Peter Hornstein, director, spends approximately 15 hours per month, or 7%, of his business time on the management of our company. As a result of their other business endeavors, Mr. Loeppky and Mr. Hornstein may not be able to devote sufficient time to our business affairs, which may negatively affect our ability to conduct our ongoing operations and our ability to generate revenues. In addition, the management of our company may be periodically interrupted or delayed as a result of other business interests.
All of our assets and all of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.
All of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them.
If we are unable to protect our internet domain name, our efforts to increase public recognition of our brand may be impaired.
We currently hold the internet domain names “SEARCH BY HEADLINES.com” and “SEARCH BY HEADLINES.ca”. The acquisition and maintenance of domain names generally is regulated by governmental agencies and their designees. The regulation of domain names in Canada and in foreign countries is subject to change. As a result, we may be unable to acquire or maintain relevant domain names in all countries in which we intend to conduct business. This could impair our efforts to build brand recognition and to increase traffic to our website and sales. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. Therefore, we may be unable to prevent third parties from acquiring domain names that are similar to our domain names, and infringing upon or otherwise decreasing the value of any future trademarks or other proprietary rights that we may develop. We may need to bring legal claims to enforce or protect such intellectual property rights. Any litigation, whether successful or unsuccessful, could result in substantial costs and diversions of resources. Any claims, by or against us, could be time consuming and costly to defend or litigate, divert our attention and resources and result in the loss of goodwill associated with our trade names.
If our operations are disrupted by technological or other problems, we may lose audience members and not be able to generate revenues from the sale of advertising on our website. The establishment and maintenance of our website services business will be essential to the success of the business.
Our systems could be overwhelmed or could fail for any number of reasons. We currently promote our products through the internet, and rely on the use of email to send distributors and wholesalers information regarding our products. We may not be able to expand our on-line marketing efforts, and may suffer obstacles in marketing on-line should the following circumstances occur:
| 1. | a power or telecommunications failure; |
– 13 –
| 2. | human error; or | |
| 3. | a fire, flood or other natural disaster. |
Additionally, our computer systems and those of the third parties on which we depend may be vulnerable to damage or interruption due to sabotage, computer viruses or other criminal activities or security breaches.
The computer servers which house our incoming email and our website are provided through Web Strike Solutions, a non-related, Dallas based company. If the systems of this company slow down significantly or fail even for a short time, our customers would suffer delays in data access. These delays could damage our reputation and cause customers to choose other news sources. We currently do not have any property and business interruption insurance to compensate us for any losses we may incur. If any of these circumstances occur, then our ongoing operations may be harmed to the extent that we will be unable to sell our products through our website, and/or promote via email and, as a result, you may lose some or all of your investment in our common stock.
Because our officers, directors and principal shareholders control a large percentage of our common stock, such insiders have the ability to influence matters affecting our shareholders.
Our officers and directors, in the aggregate, beneficially own 33.3% of the issued and outstanding shares of our common stock. As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our officers, directors and principal shareholders control such shares, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.
Because we do not have sufficient insurance to cover our business losses, we might have uninsured losses, increasing the possibility that you would lose your investment.
We may incur uninsured liabilities and losses as a result of the conduct of our business. We do not currently maintain any comprehensive liability or property insurance. Even if we obtain such insurance in the future, we may not carry sufficient insurance coverage to satisfy potential claims. We do not carry any business interruption insurance. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.
Because we can issue additional common shares, purchasers of our common stock may incur immediate dilution and may experience further dilution.
We are authorized to issue up to 100,000,000 common shares, of which 9,010,000 are issued and outstanding. Our board of directors has the authority to cause our company to issue additional shares of common stock without the consent of any of our shareholders. Consequently, our shareholders may experience more dilution in their ownership of our company in the future.
Risks Associated with our Common Stock
Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny
– 14 –
stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
Financial Industry Regulatory Authority sales practice requirements may also limit a stockholder’s ability to buy and sell our shares of common stock.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. Financial Industry Regulatory Authority requirements make it more difficult for broker-dealers to recommend that their customers buy our shares of common stock, which may limit your ability to buy and sell our shares of common stock and have an adverse effect on the market for its shares.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 4T. Controls and Procedures.
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer, principal financial officer and principal accounting officer, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by the quarterly report, being April 30, 2009, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures and our company’s internal control over financial reporting. This evaluation was carried out by our principal executive officer, principal financial officer and principal accounting officer. Based upon that evaluation, our company’s principal executive officer, principal financial officer and principal accounting officer concluded that our disclosure controls and procedures are effective in timely alerting management to material information relating to us required to be included in our periodic SEC filings as at the end of the period covered by this report.
Internal Control over Financial Reporting
During our most recently completed fiscal quarter ended April 30, 2009 there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
– 15 –
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our
board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| (a) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| (b) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and, |
| (c) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors
Not Applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
– 16 –
Item 6. Exhibits.
| Exhibit | Description |
| Number | |
| 3.1 | Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB- 2, filed on December 8, 2006) |
| 3.2 | Bylaws (incorporated by reference from our Registration Statement on Form SB-2, filed on December 8, 2006) |
| 10.1 | Form of Subscription Agreement (incorporated by reference from our Registration Statement on Form SB-2, filed on December 8, 2006) |
| 10.2 | Agreement with Web Strike (incorporated by reference from our Registration Statement on Form SB-2, filed on December 8, 2006) |
| |
| 31.1* | Section 302 Certification under Sarbanes-Oxley Act of 2002 of Joe Loeppky |
| |
| 32.1* | Section 906 Certification under Sarbanes-Oxley Act of 2002 of Joe Loeppky |
* Filed herewith
– 17 –
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.
SEARCH BY HEADLINES.COM CORP.
By:/s/Joe Loeppky
Joe Loeppky President, Secretary, Treasurer and Director
(Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer)
Dated: June 15, 2009
