UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 2003
( ) 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: 0-19471
SEARCHHOUND.COM, INC.
(Exact name of registrant as specified in its charter)
Nevada 91-1942841
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9600 W. Sample Road, Suite 505, Coral Springs, Florida 33065
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 531-1174
12817 Woodson,
Overland Park, Kansas 66209
-------------------------------------------------------------
(Former name or former address, if changed since last report)
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
Joseph I. Emas, Attorney at Law
1224 Washington Avenue
Miami Beach, Florida 33139
Telephone: 305.531.1174
SEARCHHOUND.COM, INC.
---------------------
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Condensed balance sheets at June 30, 2003 and December 31, 2002
Consolidated Condensed statements of operations for the Three Months and Six
Months ended June 30, 2003 and 2002
Consolidated Condensed statements of cash flows for the Six Months ended June
30, 2003 and 2002
Notes to consolidated condensed financial statements June 30, 2003
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
------------
SEARCHHOUND.com, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, 2003 (unaudited) and DECEMBER 31, 2002
June 30, December 31,
2003 2002
(unaudited)
------------ -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3 $ 14,790
------------ -------------
Total current assets 3 14,790
ASSETS HELD FOR SALE - 8,000
-------------
TOTAL ASSETS $ 3 $ 22,790
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accrued wages $ - $ 122,000
Accounts payable 398 -
Accrued interest - 30,635
Note payable-related parties 65,000 316,229
Notes payable - 63,539
------------ -------------
Total current liabilities 65,398 532,403
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value; 50,000,000 shares
authorized; 1,088,159 and 681,946 issued, respectively 1,088 682
Additional paid-in-capital 20,333,254 20,179,029
Accumulated deficit (20,399,737) (20,689,081)
Treasury stock (0 and 243,158 shares, respectively) - (243)
------------ -------------
Total stockholders' equity (deficit) (65,395) (509,613)
------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 3 $ 22,790
============ =============
The accompanying notes ae an integral part of these financial statements.
SEARCHHOUND.com, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(unaudited)
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
2003 2002 2003 2002
----------- ----------- ----------- ----------
Revenues ....................................... $ - $ 15,632 $ - $ 171,846
Operating expenses:
Cost of services provided ...................... 27,025 141,180
General and administrative ..................... 954 296,000 81,679 445,010
Sales and marketing ............................ 316 491
Depreciation and amortization .................. 157,515 313,696
Impairment charges ............................. 244,718 1,048,038
----------- ----------- ----------- ----------
Total operating expenses ....................... 954 725,574 81,679 1,948,415
Operating loss ................................. (954) (709,942) (81,679) (1,776,569)
Other expense-interest expense ................. - (3,168) (3,159) (6,317)
Impairment loss - marketable securities ........ - (68,953) - (68,953)
Gain on settlement of accounts and notes payable 700 - 239,082 -
----------- ----------- ----------- ----------
Income (Loss) from continuing operations
before income taxes ........................... (254) (782,063) 154,244 (1,851,839)
Income taxes ................................... - - - -
----------- ----------- ----------- ----------
Loss from continuing operations ................ (254) (782,063) 154,244 (1,851,839)
Discontinued operations:
Income (Loss) from operations, net .......... - 404,763 - 352,936
Gain from disposal, net ..................... - - 135,100 -
----------- ----------- ----------- ----------
- 404,763 135,100 352,936
----------- ----------- ----------- ----------
Net loss ....................................... $ (254) $ (377,300) $ 289,344 $(1,498,903)
=========== =========== =========== ===========
Basic and diluted net loss per share:
Loss from continuing operations .............. $ - $ (1$71) 0.1 $ (4.14)
Gain (loss) from discontinued operations ..... - 0.89 0.14 0.79
----------- ----------- ----------- ----------
Net earnings loss per share .................... $ - $ (0.82) 0.30 $ (3.35)
=========== =========== =========== ===========
Basic and diluted weighted average
common shares outstanding ...................... 1,088,159 456,553 960,110 447,144
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
SEARCHHOUND.com, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
June 30, 2003
(unaudited)
Additional Stockholders
Common Stock Paid-in Accumulated Treasury Equity
---------------
Shares Amount Capital Deficit Stock (Deficit)
------- ------- ----------- ------------ -------- -----------
Balance, January 1, 2003 .................................... 681,946 $ 682 $ 20,179,029 $(20,689,081) $ (243) $(509,613)
Issuance of treasury stock to settle notes and
accounts payable 48,389 243 48,632
Issuance of common stock to settle notes and accounts payable 156,213 156 31,086 31,242
Issuance of common stock for services rendered .............. 250,000 250 74,750 75,000
Net income .................................................. 289,344 289,344
--------- ------ ------------ ------------ -------- -----------
Balance, June 30, 2003 ...................................... 1,088,159 $1,088 $ 20,333,254 $(20,399,737) $ -- $ (65,395)
========= ====== ============ ============ ======= ===========
The accompanying notes are an integral pat of these financial statements
SEARCHHOUND.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(Unaudited)
Six months ended June 30,
--------------------------------------------
2003 2002
-------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 289,344 $ (1,498,903)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
- 313,696
Goodwill impairment charge - 1,048,039
Impairment loss on marketable securities
- 68,954
Gain on sale of assets
- (446,430)
Issuance of common stock for services rendered 75,000 38,250
Bad debt write off
99,890
Gain on settlement of accounts and notes payable (239,082) -
Gain from disposal of discontinued operations (135,100) -
Changes in operating assets and liabilities
(exclusive of effects of acquisitions):
Accounts receivable
- 79,596
Accounts payable 1,098 206,727
Related party accounts receivable - 10,183
Other current liabilities (6,047) 6,318
-------------------- --------------------
Net cash and cash equivalents used in
operating activities (14,787) (73,680)
CASH FLOWS FROM INVESTING ACTIVITIES:
- -
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable
- (5,518)
-------------------- --------------------
Cash used in financing activities
- (5,518)
-------------------- --------------------
Net increase (decrease) in cash and cash equivalents (14,787) (79,198)
Cash and cash equivalents at beginning of period 14,790 102,163
-------------------- --------------------
Cash and cash equivalents at end of period $ 3 $ 22,965
==================== ====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
==================== ====================
Income taxes $ - $ -
==================== ====================
Non-cash investing and financing activities:
Issuance of related party notes payable in payment of
accrued expenses $ - $ 316,206
==================== ====================
Issuance of treasury stock to settle notes and accounts payable $ 48,632 $ 15,000
==================== ====================
Transfer of assets and liabilities related to business disposition
Accounts receivable $ - $ 44,910
==================== ====================
Fixed assets, net $ - $ 37,357
==================== ====================
Notes payable and accrued expenses $ - $ 528,697
==================== ====================
Issuance of common stock to settle notes and accounts payable $ 31,242 $ -
==================== ====================
Note payable-related party issued for wages payable $ - $ -
==================== ====================
The accompanying notes are an integral part of these financial statements.
SEARCHHOUND.com, Inc.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(Unaudited)
1. Basis of presentation
The interim financial statements presented herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. The interim
financial statements should be read in conjunction with the Company's
annual financial statements, notes and accounting policies included in the
Company's annual report on Form 10-KSB for the year ended December 31, 2002
as filed with the SEC. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) which are necessary to
provide a fair presentation of financial position as of June 30, 2003 and
the related operating results and cash flows for the interim period
presented have been made. The results of operations for the period
presented are not necessarily indicative of the results to be expected for
the year.
The Company has operated as a holding company for internet-based
assets/businesses, primarily through the acquisitions of operating
assets/businesses through the issuance of common stock. The Company
acquired multiple businesses during 2000 and 2001 in this manner. During
2002, the Company's Board of Directors changed its strategy due to poor
operating conditions and results in its primary businesses coupled with
difficulties in raising capital through debt and equity sources. The Board
of Directors adopted the new strategy during 2002, which committed to the
disposal of all of its current assets/businesses and to seek a
merger/acquisition transaction with a Company having better financial
resources. As of June 30, 2003, the Company has disposed of all of its
operating assets/businesses and ceased all operating activities. The
accompanying financial statements reflect the businesses sold as
discontinued operations.
The Company's Board of Directors approved a one for sixty-seven share
reverse stock split. The split is for shareholders of record on December
27, 2002 and was effective on December 30, 2002. The accompanying financial
statements reflect this reverse stock split on a retroactive basis.
2. Use of estimates:
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements, as well as the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
3. Notes payable:
June 30, 2003 December 31,
Related parties: (Unaudited) 2002
------------------------------------------------------- ------------- -------------
Note payable $ 10,000 $ 30,000
Note payable 40,000 179,359
Consideration due related to SoloSearch acquisition 15,000 15,000
Note payable 91,870
Total notes payable to related parties $ 65,000 $ 316,229
------------- -------------
Note payable trade creditor $ - $ 63,539
============= =============
The $10,000 note payable-related party represents unsecured loans incurred
for working capital purposes and bears interest at 11.5%. The original
maturity date of the note was September 30, 2001 and is now due on demand.
During January 2003, the Company partially settled this note whereby it
issued 14,621 shares of common stock in consideration for a $20,000
reduction in the principal balance (and related accrued interest). The
settlement of this note payable resulted in a gain of $17,076 based upon
the market value of the common stock at the date issued and was classified
as a gain on settlement of notes and accounts payable in the Statement of
Operations.
The $40,000 note payable represents loans incurred for unpaid wages and
cash advances to the Company. During January 2003, the Company partially
settled this note whereby it issued 181,292 shares of common stock in
consideration for a $173,564 reduction in the principal balance (and
related accrued interest) and the transfer of certain Company assets with a
carrying value of $8,000. The settlement of this note payable resulted in a
gain of $135,100 based upon the market value of the common stock at the
date issued and was classified as gain on disposal of discontinued
operations. The $40,000 note is due on August 15, 2003. If this note is not
paid by this date the note will bear interest at 10% per annum.
Concurrent with this transaction, the Company's president also agreed to
accept the issuance of 42,589 shares held in treasury and 47,411 shares of
common stock to settle$72,795 of other wages payable to him. The settlement
of wages payable resulted in a gain of $54,795 based upon the market value
of the common stock at the date issued and was classified as gain on
settlement of notes and accounts payable in the Statement of Operations.
Amounts due to related party in the amount of $15,000 as of December 31,
2002 represents payments due to the previous owners of SoloSearch relating
to the cash consideration portion of the acquisition of SoloSearch. Due to
Searchhound's current working capital deficiencies, the cash consideration
was not paid at closing (July 11, 2000) and the previous owners have
informally agreed to not demand payment or charge interest until cash is
available through the sale of assets or a merger occurs.
The $91,870 note payable is secured by substantially all assets of the
Company, bears a variable interest rate equivalent to prime (6.5% at
December 31, 2002) and was due on demand. During January 2003, the Company
settled this note whereby it issued 80,619 shares of common stock in
consideration for the full and complete settlement of the outstanding
principal balance (and related accrued interest aggregating $33,795). The
settlement of this note payable resulted in a gain of $109,541 based upon
the market value of the common stock at the date issued and was classified
as a gain on settlement of notes and accounts payable in the Statement of
Operations.
The note payable-trade creditor bears interest at a variable rate
equivalent mid-term applicable Federal rate (4.49% at December 31, 2002),
and was due on demand. During January 2003, the Company settled this note
whereby it issued 19,278 shares of common stock held in treasury and 13,562
shares of common stock in consideration for the full and complete
settlement of the outstanding note balance (and related accrued interest).
The settlement of this note payable resulted in a gain of $56,970 based
upon the market value of the common stock at the date issued and was
classified as gain on settlement of notes and accounts payable in the
Statement of Operations.
4. Stockholders' equity
For the six months ended June 30, 2003 the Company issued 406,213 shares
(excluding 243,158 treasury shares issued) of its common stock as follows:
156,213 shares were issued to settle notes and accounts payable of the
Company.
250,000 shares were issued to consultants to the Company in lieu of
cash compensation.
243,158 shares of common stock held in treasury were issued to settle
outstanding notes and accounts payable.
The Company's Board of Directors approved a one for sixty-seven share
reverse stock split. The split is for shareholders of record on December
27, 2002 and was effective on December 30, 2002. The accompanying financial
statements reflect this reverse stock split on a retroactive basis.
On March 3, 2003, the Company filed Amendment No. 3 to its Registration
Statement on Form S-8, which increased the shares available to be issued by
250,000. The Form S-8 Registration Statement provides the Company common
stock for issuance to employees, consultants and Board Members for services
rendered to the Company. The Form S-8 authorizes the issuance of common
stock for services, provides for a grant of incentive stock options,
non-qualified stock options, restricted stock, performance grants and other
types of awards to officers, key employees, board members, consultants and
independent contractors of the Company. During March 2003, the Company
issued 250,000 shares to consultants for administrative, accounting and
public relations services in lieu of cash compensation. The Company charged
$75,000 to operations as a result of the issuance of these shares.
5. Related party transactions:
On January 3, 2003 the Company entered into an asset sale agreement, which
sold the following assets of the Company to Solutions.com, LLC, an entity
controlled by David L. Mullikin:
a. Certain domains including: www.searchhound.com, www.solosearch.com,
www.godado.co.uk, www.freeairmiles.com, and www.moneymessage.com;
b. Customer lists, email names and addresses (for each domain);
c. Software, programming code, intellectual property (for each domain);
d. Certain computer and office equipment.
Mr. Mullikin is a director of SearchHound.com, Inc. and is its acting Chief
Executive Officer. The net book value of the net assets sold to Mr.
Mullikin approximated $8,000 as of the date of sale. Pursuant to the asset
sale agreement the Company agreed to transfer such assets to Mr. Mullikin
in settlement of a portion of the remaining outstanding principal balance
of $179,359 together with all accrued but unpaid interest (as described in
Note 3). The settlement of this note payable resulted in a gain of $135,100
based upon the market value of the common stock at the date issued and was
classified as gain on disposal of discontinued operations in the Statement
of Operations.
Concurrent with this transaction, the Company's president also agreed to
accept the issuance of 42,589 shares held in treasury and 47,411 shares of
common stock to settle wages payable resulted in a gain of $54,795 based
upon the market value of the common stock at the date issued and was
classified as gain on settlement of notes and accounts payable in the
Statement of Operations.
In addition, Mr. Mullikin agreed to cancel the rental payments owed to him
by the Company for its use of web hosting and office space.
6. Going Concern:
In recent years the Company has incurred substantial operating losses, a
working capital deficit and experienced negative cash flows from
operations. Current cash balances and available credit are insufficient to
fund the Company's cash flow needs for the next year. The Company has
ceased all operations and has disposed of all of its operating
assets/businesses at March 31, 2003. Management is currently seeking a
merger and/or acquisition partner that has greater financial resources in
order for the Company to continue operations. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. Management believes that it has reduced ongoing operating expenses
to a level that can be sustained until such time as a suitable
merger/acquisition partner is identified and a transaction is consummated.
However, no assurance can be given that the Company will be successful in
consummating a merger/acquisition transaction or that it will be able to
fund its ongoing operations until a merger/acquisition transaction can be
accomplished. Should management be unsuccessful in consummating a merger
transaction, the Company will likely cease as a going concern. The
financial statements do not include an adjustments that might result from
the outcome of this uncertainty.
Forward-Looking Statements
The following discussion contains, in addition to historical information,
forward-looking statements regarding SearchHound.com, Inc.(the "Company" or
"NIMS"), that involve risks and uncertainties. The Company's actual results
could differ materially. For this purpose, any statements contained in this
Report that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue" or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking statements.
Factors that could cause or contribute to such difference include, but not
limited to, history of operating losses and accumulated deficit; possible need
for additional financing; competition; dependence on management; risks related
to proprietary rights; government regulation; and other factors discussed in
this report and the Company's other filings with the Securities and Exchange
Commission.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Summary Overview and Overall Business Strategy
SearchHound.com, Inc. is the result of the June 1, 2000 merger of Pan
International Gaming, Inc. ("Pan International") and Searchound.com 2000 Ltd.
This transaction was treated as a "reverse merger" for financial accounting and
reporting purposes. Specifically, SearchHound.com 2000, Ltd. was treated as the
acquirer of Pan International due to the fact that the shareholders of
Searchound.com 2000, Ltd. received 70.3% of the total shares outstanding upon
consummation of the merger.
Prior to the reverse merger, the Registrant (PAN International Gaming) spent
considerable effort and specifically during the period January 1, 2000 through
May 31, 2000 pursuing a reverse merger transaction with Searchound.com 2000
Ltd., and the acquisition of SoloSearch.com, Inc.
The "reverse merger" with Searchound.com 2000 Ltd. was consummated on June 1,
2000. In fiscal 2000 and prior to June 1, 2000, Pan International was not
engaged in operating activities and there were no revenues or business
operations. Immediately following the reverse merger with PAN International
Gaming the Company changed its name to SearchHound.com, Inc. effective June 6,
2000.
Searchound.com 2000, Ltd. was formed on April 11, 2000 to affect the purchase of
the intellectual property and website assets representing the Searchound.com
backbone architecture. The shareholders of Searchound.com 2000, Ltd. completed
the purchase of these intangible assets on June 1, 2000 for total cash
consideration of $3,000,000 and simultaneously contributed the assets to
SearchHound.com 2000, Ltd. in exchange for 70.3% of Searchound.com 2000, Ltd.,
common stock.
Effective July 11, 2000, pursuant to a Stock Purchase Agreement dated as of May
4, 2000, SearchHound purchased all of the issued and outstanding capital stock
of SoloSearch.com, Inc., a Missouri corporation ("SoloSearch"), from Cohen
Capital Technologies, L.L.C., Kirk C. Reivich, and October Capital, L.L.C., for
an aggregate of 72,388 shares of restricted common stock and $300,000 cash.
Total consideration paid was $14,699,650 based on the market price of
SearchHound (closing price on May 3, 2000) and the $300,000 cash consideration.
Subsequent to the transaction, SoloSearch became a wholly owned subsidiary of
SearchHound. Founded in 1999, Kansas City-based SoloSearch.com is an intelligent
Internet search and content management tool.
The new management team devoted significant resources to building the management
team, integrating the two businesses, and developing revenue streams during the
periods of July 2000 through September 2000. Operating revenues began in
September 2000. SearchHound.com, Inc. (the "Company" or "SearchHound") operated
an online technology based enterprise business that is a destination for
Webmasters and small business owners who want to make their Website more
accessible to Internet users. SearchHound has its principal offices located in
Overland Park, Kansas and serves as a holding company for various internet-based
businesses.
During 2001, management devoted substantial attention to growing revenues
through acquisitions and in that respect, completed six separate acquisitions
during the year ended December 31, 2001.
During 2002, the Company's Board of Directors changed its strategy due to poor
operating conditions and operating results in its primary businesses coupled
with difficulties in raising capital through debt and equity sources. The Board
of Directors adopted the new strategy during 2002, which committed to the
disposal of all of its current assets/businesses and to seek a
merger/acquisition transaction with a Company having better financial resources.
As of March 31, 2003, the Company has disposed of all of its operating
assets/businesses and ceased all operating activities. The financial statements
reflect the businesses sold as discontinued operations.
The Company consummated the following transactions in order to implement the
Board of Director's committed plan to restructure the Company and seek a merger
candidate:
On May 31, 2002 the Company entered into an asset sale agreement, which sold
certain assets related directly with two of the Company's subsidiary operations
(Mesia.com and SpeakGlobally.com) to Brad Cohen. Mr. Cohen was an officer and
director of SearchHound.com, Inc. prior to the sale. The net book value of the
net assets sold to Mr. Cohen approximated $52,750 as of the date of sale.
Pursuant to the asset sale agreement the Company agreed to transfer such assets
to Mr. Cohen in settlement of the following: 1) an employment agreement with Mr.
Cohen dated September 1, 2000, 2) all accrued but unpaid compensation owed to
Mr. Cohen (approximately $161,430), and 3) a promissory note payable to Cohen
Capital Technologies, LLC in the amount of $285,000 as of the date of sale.
In addition, SearchHound.com, Inc., agreed to pay Mr. Cohen $7,500 in cash, in
exchange for, and in sole consideration and settlement of any other liabilities
of SearcHound.com, Inc. to Mr. Cohen that may exist as of May 31, 2002,
including the liabilities that accrue pursuant to a Promissory Note to Mr. Cohen
with a principle amount of $147,030.41, dated March 20, 2002, and any liability
that may exist pursuant to the Employment Agreement between SearchHound.com,
Inc. and Mr. Cohen dated September 1, 2000. The net effect of the sale of these
assets to Mr. Cohen was a gain of $446,430. Concurrent with the asset sale
agreement with Mr. Cohen, Mr. Cohen tendered his resignation from
SearchHound.com, Inc. and as a member of the Board of Directors.
During 2002, the Board terminated the employment contract of Dave L. Mullikin.
Under the settlement Mr. Mullikin's salary ceased accruing on August 15, 2002
and the severance provision was forgiven. It was replaced with a consulting
agreement between the Company and Mr. Mullikin whereby Mullikin will continue in
his position as acting chief executive officer of the Company. The agreement
calls for Mr. Mullikin to 1) contract outsourced services to maintain selected
ongoing operations of the Company, 2) attempt to sell the assets of the Company
and 3) focus on a merger opportunity for SearchHound. The terms of the
Consulting agreement include the following provisions: Mr. Mullikin agreed to
remain on the Board and Mr. Mullikin would receive a monthly compensation of
$1.00 and health benefits.
As of November 14, 2002, Mr. Mullikin agreed to amend his Consulting Agreement
and extend its term indefinitely, retaining the monthly compensation of $1.00,
but discontinuing the health benefit provision.
On January 3, 2003 the Company entered into an asset sale agreement, which sold
the following assets of the Company to Solutions.com, LLC, an entity controlled
by David L. Mullikin : certain domains, customer lists, email names and
addresses (for each domain) software, programming code, intellectual property
(for each domain) and certain computer and office equipment. At the time of the
asset sale agreement, Mr. Mullikin was a director of SearchHound.com, Inc. and
was its acting Chief Executive Officer. The net book value of the net assets
sold to Mr. Mullikin approximated $8,000 as of the date of sale. Pursuant to the
asset sale agreement the Company agreed to transfer such assets to Mr. Mullikin
in settlement of a portion of the remaining outstanding principal balance owed
by the company to Mr. Mullikin pursuant to a certain Promissory Note dated July
11, 2000 with a principle balance of $179,359 together with all accrued but
unpaid interest. The settlement of this note payable resulted in a gain of
$135,100 based upon the market value of the common stock at the date issued and
was classified as gain on disposal of discontinued operations in the Statement
of Operations during the three months ended March 31, 2003. Concurrent with this
transaction, the Company's president also agreed accept the issuance of 42,589
of shares held in treasury and 47,411 shares of common stock to settle $72,795
of other wages payable to him. The settlement of wages payable resulted in a
gain of $54,795 based upon the market value of the common stock at the date
issued and was classified as gain on settlement of notes and accounts payable in
the Statement of Operations. In addition, Mr. Mullikin agreed to cancel the
rental payments owed to him by the Company for its use of webhosting and office
space.
On January 3, 2003 the Company also entered into an asset sale agreement, which
sold the following assets of the Company to Summit Ridge Technologies Group, LLC
(an unaffiliated entity): earlyBirdDomain.com domain, database for
EarlyBirdDomain.com including all subscribers (active, inactive, and
unsubscribed), and EarlyBirdDomain clients and customers lists. The net book
value of the net assets sold approximated $0 as of the date of sale. Pursuant to
the asset sale agreement the Company agreed to transfer such assets in exchange
for nominal cash consideration.
The Company's Board of Directors approved a one for sixty-seven share reverse
stock split. The split is for shareholders of record on December 27, 2002 and
was effective on December 30, 2002. The financial statements reflect this
reverse stock split on retroactive basis.
During January 2003, the Company partially settled a note payable to a related
party whereby it issued 14,621 shares of common stock in consideration for a
$20,000 reduction in the principal balance (and related accrued interest). The
settlement of this note payable resulted in a gain of $17,076 based upon the
market value of the common stock at the date issued and was classified as gain
on settlement of notes and accounts payable during the three months ended March
31, 2003.
During January 2003, the Company settled a note payable to a related party
whereby it issued 80,619 shares of common stock in consideration for the full
and complete settlement of the outstanding principal balance (and related
accrued interest aggregating $33,795). The settlement of this note payable
resulted in a gain of $109,541 based upon the market value of the common stock
at the date issued and was classified as gain on settlement of notes and
accounts payable in the Statement of Operations during the three months ended
March 31, 2003.
During January 2003, the Company settled a note payable to a trade creditor
whereby it issued 19,278 shares of common stock held in treasury and 13,562
shares of common stock in consideration for the full and complete settlement of
the outstanding note balance (and related accrued interest). The settlement of
this note payable resulted in a gain of $56,970 based upon the market value of
the common stock at the date issued and was classified as gain on settlement of
notes and accounts payable in the Statement of Operations.
On March 3, 2003, the Company filed Amendment No. 3 to its Registration
Statement on Form S-8, which increased the shares available to be issued by
250,000. The Form S-8 Registration Statement provides the Company common stock
for issuance to employees, consultants and Board Members for services rendered
to the Company. During March 2003, the Company issued 250,000 shares to
consultants for administrative, corporate accounting and public relations
services in lieu of cash compensation totaling $75,000. The Company is
attempting to conserve cash resources by issuing stock for these services.
The Company is currently seeking a merger partner and has had discussions with
several candidates but currently has no formal agreements or understandings with
respect to a potential merger transaction. After completing the January 2003
disposal and share issuance transactions, management believes that it has
reduced outstanding debt and ongoing operating costs to a level that will
provide the Company adequate time to pursue and complete a merger transaction
although, there is no assurance that the Company will be able to complete these
plans. Should Management be unsuccessful in consummating a merger transaction,
the Company will likely cease as a going concern.
On July 10, 2003, the Company's sole officer and director, Dave L. Mullikin,
resigned his positions as President, Secretary, Treasurer and sole Director and
appointed Francis O'Donnell as the sole director. Francis O'Donnell, as the sole
member of the Board of Directors of the Company, has approved the change of the
address of the corporate office of the Company from Overland Park, Kansas to
Coral Springs, Florida. Specifically, the address of the Company's principal
executive office changed from 12817 Woodson, Overland Park, Kansas 66209 to 9600
W. Sample Road, Suite 505, Coral Springs, Florida 33065.
The Board of Directors has approved resolutions for the Company's Annual Meeting
of Shareholders, to be held on Friday August 22, 2003, to elect directors of the
Company, ratify the appointment of Jewett, Schwartz & Associates, as the
Company's independent certified public accountants for the fiscal year ending
December 31, 2003, effect a 1-for-4 reverse stock split (pro-rata reduction of
outstanding shares) of the Company's issued and outstanding shares of common
stock and amend the Company's Articles of Incorporation to change the name of
the Company to Coach Industries Group, Inc. (or other such name as may be
available). There is no assurance that the shareholders of the Company will vote
in favor of these resolutions.
SIX MONTHS ENDED JUNE 30, 2003
COMPARED TO SIX MONTHS ENDED JUNE 30, 2002
Gross Revenues and Costs of Operations
--------------------------------------
Gross revenues. Gross revenues decreased from $171,846 for the six month period
ended June 30, 2002 to $-0- for the six month period ended June 30, 2003, a
decrease of $171,846, primarily as a result of the Company disposing of all of
its operating assets/businesses and discontinuing all operating activities.
Costs of services provided. Costs of services provided decreased from $141,180
for the six months ended June 30, 2002 to $-0- for the six months ended June 30,
2003, a decrease of $141,180, primarily as a result of the Company disposing of
all of its operating assets/businesses and discontinuing all operating
activities.
General and administrative expenses. General and administrative expenses
decreased from $445,010 for the six months ended June 30, 2002 to $81,679 for
the six months ended June 30, 2003, a decrease of $363,331, primarily due to
decrease in general and administrative expenses as a result of the Company
disposing of all of its operating assets/businesses and discontinuing all
operating activities and expenditures related to the Company's business plan of
restructuring the Company and seeking a merger candidate.
Sales and marketing costs. Sales and marketing costs decreased from $491. for
the six months ended June 30, 2002 to $-0- for the six months ended June 30,
2003, a decrease of $491., primarily due to the elimination of sales and
marketing costs primarily as a result of the Company disposing of all of its
operating assets/businesses and discontinuing all operating activities.
Depreciation and amortization. Recorded depreciation and amortization expense
decreased from $313,696 for the six months ended June 30, 2002 to $-0- for the
six months ended June 30, 2003, a decrease of $313,696, primarily as a result of
the Company disposing of all of its operating assets/businesses and
discontinuing all operating activities.
Impairment charges. Impairment changes decreased from $1,048,038 for the six
months ended June 30, 2002 to $-0- for the six months ended June 30, 2003, a
decrease of $1,048,038, primarily as a result of the Company disposing of all of
its operating assets/businesses and discontinuing all operating activities.
Gain on settlement of accounts and notes payable. Gain on settlement of accounts
and notes payable as a consequence of the Company disposing of all of its
operating assets/businesses and discontinuing all operating activities was
$239,082 for the six months ended June 30, 2003.
Gain from disposal of assets. Gain on disposal of assets as a consequence of the
Company disposing of all of its operating assets/businesses and discontinuing
all operating activities was $135,100 for the six months ended June 30, 2003.
Net Income (Loss). Net loss decreased from a net loss of ($1,498,903) for the
six months ended June 30, 2002 to net income of $289,344 for the six months
ended June 30, 2003, primarily due to the Company reducing its expenses as a
consequence of disposing of all of its operating assets/businesses and
discontinuing all operating activities and realizing a gain on settlement of
accounts and notes payable and a gain on disposal of assets.
THREE MONTHS ENDED JUNE 30, 2003
COMPARED TO THREE MONTHS ENDED JUNE 30, 2002
Gross revenues. Gross revenues decreased from $15,632 for the three month period
ended June 30, 2002 to $-0- for the three month period ended June 30, 2003, a
decrease of $171,846, primarily as a result of the Company disposing of all of
its operating assets/businesses and discontinuing all operating activities.
Costs of services provided. Costs of services provided decreased from $27,025
for the three months ended June 30, 2002 to $-0- for the three months ended June
30, 2003, a decrease of $27,025, primarily as a result of the Company disposing
of all of its operating assets/businesses and discontinuing all operating
activities.
General and administrative expenses. General and administrative expenses
decreased from $296,000 for the three months ended June 30, 2002 to $954. for
the three months ended June 30, 2003, a decrease of $295,046, primarily due to
decrease in general and administrative expenses as a result of the Company
disposing of all of its operating assets/businesses and discontinuing all
operating activities and expenditures related to the Company's business plan of
restructuring the Company and seeking a merger candidate.
Sales and marketing costs. Sales and marketing costs decreased from $316. for
the three months ended June 30, 2002 to $-0- for the three months ended June 30,
2003, a decrease of $316., primarily due to the elimination of sales and
marketing costs primarily as a result of the Company disposing of all of its
operating assets/businesses and discontinuing all operating activities.
Depreciation and amortization. Recorded depreciation and amortization expense
decreased from $157,515 for the three months ended June 30, 2002 to $-0- for the
three months ended June 30, 2003, a decrease of $157,515, primarily as a result
of the Company disposing of all of its operating assets/businesses and
discontinuing all operating activities.
Impairment charges. Impairment changes decreased from $244,718 for the three
months ended June 30, 2002 to $-0- for the three months ended June 30, 2003, a
decrease of $244,718, primarily as a result of the Company disposing of all of
its operating assets/businesses and discontinuing all operating activities.
Gain on settlement of accounts and notes payable. Gain on settlement of accounts
and notes payable as a consequence of the Company disposing of all of its
operating assets/businesses and discontinuing all operating activities was $700.
for the three months ended June 30, 2003.
Net Loss. Net loss decreased from a net loss of ($377,300) for the three months
ended June 30, 2002 to net loss of ($254) for the three months ended June 30,
2003, primarily due to the Company reducing its expenses as a consequence of
disposing of all of its operating assets/businesses and discontinuing all
operating activities and realizing a gain on settlement of accounts and notes
payable.
Liquidity and Capital Resources
-------------------------------
Liquidity and Capital Resources. We have historically satisfied our cash
requirements primarily through private placements of restricted stock and the
issuance of debt securities.
Current Assets
--------------
Cash and cash equivalents. Cash and cash equivalents decreased from $14,790 at
December 31, 2002 to $3.00 at June 30, 2003, a decrease of $14,787, primarily as
a result of the Company disposing of all of its operating assets/businesses and
discontinuing all operating activities.
Total current assets. Total current assets decreased from $22,790 at December
31, 2002 to $3.00 at June 30, 2003, a decrease of $22,787, primarily as a result
of the Company disposing of all of its operating assets/businesses and
discontinuing all operating activities.
Liabilities
-----------
Accrued wages. Accrued wages decreased from $122,000 at December 31, 2002 to
$-0- at June 30, 2003, a decrease of $122,000, primarily as a result of the
Company disposing of all of its operating assets/businesses and discontinuing
all operating activities as of and settling all outstanding employment agreement
obligations.
Accounts Payable. Accounts payable increased from -0- at December 31, 2002 to
$398. at June 30, 2003, an increase of $398, primarily as a result of remaining
costs incurred in connection with the ceassation of operating activities.
Accrued interest. Accrued interest decreased from $30,635 at December 31, 2002
to $-0- at June 30, 2003, a decrease of $30,635, primarily as a result of the
Company disposing of all of its operating assets/businesses and discontinuing
all operating activities as of March 31, 2003 and settling all outstanding
employment agreement obligations.
Notes payable-related parties. Notes payable-related parties decreased from
$316,229 at December 31, 2002 to $65,000 at June 30, 2003, a decrease of
$251,229, primarily as a result of restructuring the remaining liabilities due
to certain related parties.
Notes payable. Notes payable decreased from $63,539 at December 31, 2002 to $-0-
at June 30, 2003, a decrease of $63,539, primarily as a result of reaching
various settlements with certain note holders.
Total Current Liabilities. Total current liabilities decreased from $532,403 at
December 31, 2002 to $65,398 at June 30, 2003, a decrease of $466,645, primarily
as a result of the company disposing of all of its operating assets/businesses
and discontinuing all operating activities and settling all outstanding
employment agreement obligations and reducing its notes payable-related parties
and notes payable.
In recent years the Company has incurred substantial operating losses, a working
capital deficit and experienced negative cash flows from operations. Current
cash balances and available credit are insufficient to fund the Company's cash
flow needs for the next year. The Company has ceased all operations and has
disposed of all of its operating assets/businesses and has not commenced any new
operations at June 30, 2003. Management is currently seeking a merger and/or
acquisition partner that has greater financial resources in order for the
Company to continue operations. These factors raise substantial doubt about the
ability of the Company to continue as a going concern. Management believes that
it has reduced ongoing operating expenses to a level that can be sustained until
such time as a suitable merger/acquisition partner is identified and a
transaction is consummated. However, no assurance can be given that the Company
will be successful in consummating a merger/acquisition transaction or that it
will be able to fund its ongoing operations until a merger/acquisition
transaction can be accomplished. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The Company is currently seeking a merger partner and has had discussions with
several candidates but has reached no formal agreement or understandings with
respect to a potential merger transaction. After completing the January 2003
disposal and share issuance transactions, management believes that it has
reduced outstanding debt and ongoing operating costs to a level that will
provide the Company adequate time to pursue and complete a merger transaction
although, there is no assurance that the Company will be able to complete these
plans. Should management be unsuccessful in consummating a merger transaction,
the Company will likely cease as a going concern.
The Company has historically issued stock in lieu of cash compensation, which
has helped reduce the Company's cash needs. Management will try to maintain the
Company in its current operating form through the issuance of common stock to
consultants for the Company's ongoing administrative and reporting duties.
ACCOUNTING POLICIES SUBJECT TO ESTIMATION AND JUDGMENT
Management's Discussion and Analysis of Financial Condition and Results of
Operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. When preparing our financial statements, we make estimates and
judgments that affect the reported amounts on our balance sheets and income
statements, and our related disclosure about contingent assets and liabilities.
We continually evaluate our estimates, including those related to revenue,
allowance for doubtful accounts, reserves for income taxes, and litigation. We
base our estimates on historical experience and on various other assumptions,
which we believe to be reasonable in order to form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily ascertained from other sources. Actual results may deviate from these
estimates if alternative assumptions or condition are used.
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer have concluded, based on an evaluation
conducted within 90 days prior to the filing date of this Quarterly Report on
Form 10-QSB, that the Company's disclosure controls and procedures have
functioned effectively so as to provide those officers the information necessary
whether:
(i) this Quarterly Report on Form 10-QSB contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this Quarterly Report on Form
10-QSB, and
(ii) the financial statements, and other financial information included in this
Quarterly Report on Form 10- QSB, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this Quarterly Report on Form 10-QSB.
There have been no significant changes in the Company's internal controls or in
other factors since the date of the Chief Executive Officer's evaluation that
could significantly affect these internal controls, including any corrective
actions with regards to significant deficiencies and material weaknesses.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
99.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of
2002 and pursuant to Rule 13a-14 under the Securities Exchange
Act of 1934
99.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of
2002 and pursuant to Rule 13a-14 under the Securities Exchange
Act of 1934
B. Reports on Form 8-K
On May 19, 2003, the Board of Directors of SearchHound.com, Inc. (the
"Company"), was notified by Pickett, Chaney & McMullen LLP, the Company's
independent auditor, that it would decline to stand for reelection as the
Company's independent auditor for the year ending December 31, 2003.
On July 10, 2003, the Company's sole officer and director, Dave L.
Mullikin, resigned his positions as President, Secretary, Treasurer and sole
Director and appointed Francis O'Donnell as the sole director.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934 the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SEARCHHOUND.com, INC.
August 14, 2003 /s/ Francis O'Donnell
Francis O'Donnell,
Acting President and Chairman of the Board of
Directors
(PRINCIPAL EXECUTIVE OFFICER)
August 14, 2003 /s/ Francis O'Donnell
Francis O'Donnell,
Acting Chief Financial Officer
(PRINCIPAL ACCOUNTING OFFICER)
Annex A
CERTIFICATIONS*
I, Francis O'Donnell, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the period ended
June 30, 2003, of SearchHound.com, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to me by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report my conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. I have disclosed, based on our most recent evaluation, to the Registrants
auditors and the audit committee of Registrants board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls; and
6. I have indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
/s/ Francis O'Donnell
Francis O'Donnell
Chief Executive Officer
Date: August 14, 2003
CERTIFICATIONS*
I, Francis O'Donnell, Acting Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the period ended
June 30, 2003, of SearchHound.com, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to me by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report my conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. I have disclosed, based on our most recent evaluation, to the Registrants
auditors and the audit committee of Registrants board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls; and
6. I have indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
/s/ Francis O'Donnell
Francis O'Donnell
Acting Chief Financial Officer
Date: August 14, 2003