SB-2/A 1 secondamendsb2.txt AMENDMENT NO. 2 TO FORM SB-2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------------------------------------------------- AMENDMENT NO. 2 TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SearchHelp, Inc. ------------------------------------------------ (Name of Small Business Issuer in Its Charter) -------------------------------------------------------------------------------- Delaware 7380 11-3621755 ------------------------------ ---------------------------- -------------------- (State of Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification No.) 1055 Stewart Avenue, Bethpage, NY 11714 ------------------------------------------------------------------ (Address and Telephone Number of Principal Executive Offices) 1055 Stewart Avenue, Bethpage, NY 11714 ----------------------------------------------- (Address of Principal Place of Business) William Bozsnyak, Chief Executive Officer SearchHelp, Inc. 1055 Stewart Avenue, Bethpage, NY 11714 (516) 922-4765 ---------------------------------------------------------------- (Name, Address and Telephone Number of Agent for Service) Copies to: Stephen Rosenberg, Esq. Ralph A. Siciliano, Esq. Tannenbaum Helpern Syracuse & Hirschtritt LLP 900 Third Avenue, 13th Floor New York, NY 10022 Phone: (212) 508-6700 Facsimile: (212) 371-1084 Placement Agent's Attorney James Schneider, Esq. Adorno & Yoss, P.A. 350 Las Olas Boulevard, Suite 1700 Ft. Lauderdale, FL 33301 Phone: (954) 763-1200 Facsimile: (954) 766-7800 Approximate date of commencement of proposed sale to the public: November ___, 2002 If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [x] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ______________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ______________ If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, checking the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ______________ If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE ======================================================================================================================= Proposed Maximum Amount Of Title Of Each Class Of Dollar Amount Proposed Maximum Aggregate Registration Securities To Be Registered (1) To Be Registered Offering Price Per Unit Offering Price Fee(3) ----------------------------------------------------------------------------------------------------------------------- Units $4,000,000 $.50 per Unit $4,000,000 -- ----------------------------------------------------------------------------------------------------------------------- Common Stock, $.0001 par value $3,840,000 $.48 per Share $3,840,000 $368(3) ----------------------------------------------------------------------------------------------------------------------- Common Stock class A redeemable warrants (2) $80,000 $.01 per Warrant $80,000 -- ----------------------------------------------------------------------------------------------------------------------- Common Stock, $.0001 par value, Issuable on Exercise of class A redeemable $6,000,000 $.75 per Share $6,000,000 $552(3) warrants ----------------------------------------------------------------------------------------------------------------------- Common Stock class B redeemable warrants (2) $80,000 $.01 per Warrant $80,000 -- ----------------------------------------------------------------------------------------------------------------------- Common Stock, $.0001 par value, Issuable on Exercise of class B redeemable $14,000,000 $1.75 per Share $14,000,000 $1,288(3) warrants =======================================================================================================================
(1) This registration statement also covers an indeterminate number of shares of SearchHelp, Inc.'s common stock, par value $.0001 per share, that may be issuable by reason of stock splits, stock dividends or other adjustment provisions of the respective warrants in accordance with Rule 416 under the Securities Act of 1933, as amended. (2) Included in units for the purpose of calculating the registration fee. (3) These fees have previously been paid. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. [Logo Omitted] Prospectus Subject to Completion SEARCHHELP, INC. 8,000,000 UNITS SearchHelp, Inc. is offering 8,000,000 units, $.50 per unit. Each unit consists of one share of common stock, one class A redeemable warrant to purchase a share of common stock at $.75 per share and one class B redeemable warrant to purchase a share of common stock at $1.75 per share. A minimum of 5,000 units must be purchased by each subscriber. The warrants are immediately detachable from the common stock and will be separately tradeable. This offering is highly speculative and involves risks. See "Risk Factors" beginning on page 3. We are offering our units for sale to the public on a "best efforts" basis, with no required minimum amount to be raised. Even if not all, or very few, of the 8,000,000 units are sold we will not refund any payments for the units. The offering of the units will terminate on March 31, 2003 if not earlier terminated by SearchHelp. The offering may be extended at the determination of the placement agent and the company for up to an additional 6 months. In addition to the placement agent's cash compensation, the company has agreed to give the placement agent redeemable warrants to purchase up to 800,000 units at $.985 per unit for a period of 5 years. --------------------------- Robert M. Cohen & Co., Inc. --------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. Price to Placement Proceeds Public Commissions To Issuer ---------------- ---------------- ---------------- Per Unit $.50 $.05 $.45 Total $4,000,000 $400,000 $3,600,000 The date of this prospectus is __________, 2002. TABLE OF CONTENTS PROSPECTUS SUMMARY.............................................................1 RISK FACTORS...................................................................4 NOTE REGARDING FORWARD LOOKING STATEMENTS.....................................13 USE OF PROCEEDS...............................................................14 DIVIDEND POLICY...............................................................17 CAPITALIZATION................................................................17 DILUTION......................................................................18 DESCRIPTION OF BUSINESS.......................................................19 MANAGEMENT....................................................................36 PRINCIPAL STOCKHOLDERS........................................................39 DESCRIPTION OF SECURITIES.....................................................40 PLAN OF DISTRIBUTION..........................................................42 SHARES ELIGIBLE FOR FUTURE SALE...............................................44 LEGAL MATTERS.................................................................45 OFFICE........................................................................45 LITIGATION....................................................................45 EXPERTS.......................................................................46 INVESTOR SUITABILITY STANDARDS APPLICABLE IN CERTAIN STATES...................46 ADDITIONAL INFORMATION........................................................46 FINANCIAL STATEMENTS.........................................................F-1 DECEMBER 31, 2001 AND SEPTEMBER 30, 2002 PROSPECTUS SUMMARY ABOUT SEARCHHELP SearchHelp, Inc. was incorporated in the state of Delaware on September 5, 2001 and is a successor to SH Networks.com, Inc., formerly known as SearchHelp.com, Inc., a New York corporation incorporated on January 29, 2001, and E-Com Marketing Group, Inc., a New York corporation, incorporated on January 29, 1999. We are a start-up company offering a series of products and services, some which are Internet-based and others which are to be sold in retail outlets or through direct distribution, but all of which are intended to serve local communities, their citizens, their local businesses and institutions and their economic well-being. Several of our products and services are currently available and others are in the final stages of development. Because our products and services are almost all directed towards the same potential customers, we expect that our marketing efforts will be efficiently coordinated. OUR WEB SITES In February 2001, we created our own web site, at WWW.SEARCHHELP.COM, which provides a format to allow users to gather information about their local communities and provides a platform to market or display our other products and services. Since that time we have further enhanced and developed our web site to be ready for our other products and services. Our web site will become fully operational upon completion of development of our other products and services. We have also developed a web site template product called "Community Builder." This product was designed for local communities that want an interactive site that will be adaptable to the needs of their community. Our technology allows the community to control the content of their community builder web sites and also to display their content on the SearchHelp web site. The first community builder web site for Central Islip, New York, is currently operational as a beta test site. Based upon the performance to date for Central Islip, we expect that the community builder template will be completed by the end of November 2002 and available at that time for customer use. OUR OTHER PRODUCTS AND SERVICES We intend to assist communities nationwide by offering strategic advice for economic development in problem areas such as unemployment, housing, education and transportation. We recently entered into our first Economic Development Consulting Agreement with the Oyster Bay-East Norwich School District to assist them in developing an Internet Cafe for the community and its schools. SearchHelp is currently assisting the school district in the setting-up of an educational technology program. We offer advertising space on both our own web site and the local community builder web sites to businesses and organizations. This product is completely developed. We have not yet marketed this product. It will be marketed through the community builder product once it is out of the beta test phase which is expected to occur by the end of November 2002. We also have completed development of a classified advertising service for employment and other business opportunities. We have not yet marketed this product. We will begin to offer this product through the community builder template product upon completion of its beta test, expected to occur by the end of November 2002. In addition to these web-based products and services, we are offering two products for parents to better care for their children, S.P.I.K.E and Child Shield. S.P.I.K.E is a software package designed to enable parents to monitor their child's behavior on the Internet. We have an exclusive license for S.P.I.K.E. We are in the process of completing the development of S.P.I.K.E, which will be ready for distribution and sale by the end of January 2003. Child Shield is an emergency response system for missing children. We act as a distributor for Child Shield, which is currently available on our web site. OUR FINANCIAL SITUATION Currently, we have minimal revenues generated from operations. As of September 30, 2002 we have an accumulated deficit of ($759,879). We have incurred $515,000 of debt to assist in our developmental activities. The Company's financial statements were prepared assuming that the Company will continue as a going concern. Our accountants have expressed substantial doubt about our ability to continue as a going concern. If the Company fails to raise at least $2,400,000 in this offering or fails to earn substantial revenues, we will not be able to pay our outstanding obligations and have operating capital for the next year. We will then have to try to make arrangements with our creditors and seek other sources of capital. If we are not successful in those efforts, we may have to cease operations and the investment in the company may be lost. At present, we are totally dependent upon the proceeds of this offering to continue to operate as a going concern. THE OFFERING AND DESCRIPTION OF SECURITIES Our authorized capital stock consists of 100,000,000 shares of common stock, par value $.0001 per share, of which 15,130,000 shares are issued and outstanding. No warrants or units are outstanding. We are offering 8,000,000 units at a price of $.50 per unit. Each unit consists of one share of common stock, one class A redeemable warrant and one class B redeemable warrant. Each class A redeemable warrant gives its holder the right to purchase one share of common stock at $.75. A maximum of 8,000,000 shares of common stock are issuable upon the exercise of the class A redeemable warrants. If our common stock trades for at least 5 consecutive trading days at a price of $1.50 or more, SearchHelp will have the right to call the class A redeemable warrants at a price of $.01 per warrant, unless an investor chooses to exercise the warrant at that time. The class A redeemable warrants are tradeable and are exercisable at any time beginning on the date of this prospectus until 5 years after the date of the prospectus. Each class B redeemable warrant gives its holder the right to purchase one share of common stock at $1.75. A maximum of 8,000,000 shares of common stock are issuable upon the exercise of the class B redeemable warrants. If our common stock trades for at least 5 consecutive trading days at a price of $2.50 or more, SearchHelp will have the right to call the class B redeemable warrants at a price of $.01 per warrant, unless an investor chooses to exercise the warrant at that time. The class B redeemable warrants are tradeable and are exercisable at any time beginning on the date of this prospectus until 7 years after the date of the prospectus. Based on the number of shares of common stock outstanding as of October 15, 2002 and assuming that all 8,000,000 units offered pursuant to this prospectus are sold, a total of 23,535,000 shares of common stock will be 2 outstanding after the offering. This total does not include any shares of common stock issuable upon the exercise of either the class A redeemable warrants or the class B redeemable warrants, but does include 470,000 shares of common stock issuable to our note holders because their notes were not paid in full as of October 15, 2002. We are offering our units on a "best efforts" basis with no required minimum amount to be raised. Even if not all, or very few, of the 8,000,000 units are sold we will not refund any payments for the units. The offering of the units will terminate on March 31, 2003 if not earlier terminated by SearchHelp. The offering may be extended at the determination of the placement agent and the company for up to an additional 6 months. SUMMARY OF FINANCIAL DATA The following tables set forth certain summary financial data for SearchHelp. You should read this information together with the financial statements and the notes to the financial statements appearing elsewhere in this prospectus.
For the Nine Months For the Year Ended Statement of Operations Data: Ended September 30, 2002 December 31, 2001 ----------------------------- ------------------------ ------------------ Revenues $ 1,279 $ 0 Loss from operations $(354,112) $(197,905) Net loss $(457,258) $(221,790) Net loss attributable to stockholders $(457,258) $(221,790) Basic and diluted net loss per share $ (.03) $ (.02) Weighted average shares outstanding used in basic and diluted net loss per share calculation 15,050,310 9,411,273 Balance Sheet Data: September 30, 2002 December 31, 2001 ------------------ ------------------ ----------------- Cash $ 1,598 $ 105,532 Working capital (deficiency) $ (557,254) $(322,161) Total assets $ 446,220 $ 288,550 Total liabilities $1,003,474 $ 431,096 Total stockholders' capital deficiency $ (557,254) $(142,546)
3 RISK FACTORS You should be able to bear a complete loss of your investment. You should carefully consider the following risk factors and other information in this prospectus before deciding to invest in our securities. RISKS RELATING TO OUR STATUS AS A START-UP COMPANY IF WE DO NOT RAISE AT LEAST $2,400,000, WE MAY NOT HAVE SUFFICIENT FUNDS TO CARRY OUT OUR BUSINESS PLAN This is a best efforts offering with no required minimum amount to be raised. Even if very few of the 8,000,000 units are sold, we will not refund any payments made by you for the units. If $2,400,000 is raised, we expect, even if no revenues are earned during the next 12 months, to have sufficient funds to carry out our immediate business plan for that period, including the full implementation of our marketing and sales plan. If less than $2,400,000 is raised, and we do not earn any revenues, our investors will have a significantly greater risk that their entire investment will be lost. If we raise only $975,000, we will have only enough funds to pay the placement agent commissions and offering expenses and pay off our line of credit and our total note holder debt in the amount of $515,000, plus interest. Investors may suffer the entire loss of their investment, simply because we have not raised enough funds to operate our business. Although we intend to pursue various alternatives, we have not made any other arrangements to provide operating capital to continue our business if this offering is not successful. BECAUSE OF OUR CURRENT FINANCIAL POSITION, THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO OPERATE AS A GOING CONCERN We have spent all of the funds which we have raised so far and we have earned less than $13,000 in revenues. As a result, as of September 30, 2002, we have a capital deficiency of ($557,254) and have a working capital deficiency of ($995,926). These conditions raise substantial doubt about our ability to operate as a going concern. Our accountants have discussed this risk in the independent auditors report included in the financial statements contained in this prospective. We are totally dependent upon the proceeds of this offering to continue to operate as a going concern. EVEN IF WE RAISE $2,400,000, WE WILL NEED ADDITIONAL FINANCING TO CONTINUE OUR OPERATIONS Until we obtain revenues from operations, our ability to successfully complete our business plan will depend upon the raising of substantially more than $2,400,000 in this offering or the availability of other investment capital and funding. We expect that we will need an additional $1,600,000 to allow us to expand our business to accomplish most of the plans in this prospectus and to become profitable. If we cannot raise $4,000,000 from this offering, additional financing may not be available on favorable terms, if at all, inasmuch as we may not have an asset or income base which a lender will be willing to use as the basis to provide debt financing to us. Thus, our ability to raise additional equity will be limited by the success of our operations and the requirements of the securities laws. Any additional equity financing will result in dilution to our stockholders and any debt financing will be required to be repaid before any distributions to stockholders can be made either from operations or upon a sale or liquidation. Amounts paid to service debt must be paid, even if we do not 4 have excess cash from operations. If funding is not available when needed, we may be forced to cease operations and abandon our business. WE HAVE $450,000 IN DEBT WHICH WE HAVE NOT PAID WHEN IT WAS DUE AND, IN ADDITION TO OWING THIS MONEY AND THE INTEREST ACCRUING UPON THIS DEBT, WE OWE AN ADDITIONAL $40,000 UNDER A LINE OF CREDIT AND $25,000 IN NOTES THAT ARE NOT YET PAST DUE. IN ADDITION, WE MAY ALSO HAVE TO ISSUE SHARES OF OUR COMMON STOCK TO CERTAIN NOTEHOLDERS In October 2002 we borrowed $25,000 by issuing a promissory note bearing interest at a rate of 10% per annum. No payments have been made on this note. It is due in February 2003 and the interest rate increases to approximately 20% per annum at that time if the note is not paid. In July 2002 we borrowed $50,000 by issuing 2 promissory notes bearing interest at a rate of 10% per annum. No payments have been made on these notes. They were all due in November 2002 and the interest rate increased to approximately 20% per annum at that time since the notes were not paid. In May 2002 we borrowed $75,000 by issuing 3 promissory notes bearing interest at a rate of 10% per annum. No payments have been made on these notes. They were all due in September 2002 and the interest rate increased to approximately 20% per annum at that time since the notes were not paid. Commencing in December 2001 through February 2002, we borrowed an additional $325,000 by issuing promissory notes bearing interest at a rate of 10% per annum. All of these notes are now past due. Although there is no default interest due on these notes, for each month that they remain unpaid, an additional 65,000 shares of our common stock may be purchased by the noteholders for nominal consideration. At October 15, 2002, 5 note holders exercised a portion of their rights and acquired 130,000 shares of the Company's common stock for an aggregate of $1,300. At the date of this prospectus, 470,000 shares were issuable to these noteholders upon their exercise of their rights. All of these obligations are senior in position to our equity holders and interest will continue to accrue until they are paid in full. WE MAY HAVE TO ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK TO NOTEHOLDERS Without sufficient proceeds from this offering, we will not be able to repay the notes and, for each month that the $325,000 of notes past due remain unpaid, there will be substantial dilution to our shareholders. WE MAY NEVER ACHIEVE PROFITABILITY; WE HAVE JUST BEGUN TO OPERATE AND THUS WE HAVE NO HISTORY OF OPERATIONS UPON WHICH AN INVESTOR MAY EVALUATE THIS INVESTMENT Our company's predecessor became operational in February 2000. We have not had significant revenues and our marketing efforts have just begun. As a new business enterprise, we may not achieve our business plan. We have had no operations which will permit an investor to judge our potential for success. WE NEED MARKET ACCEPTANCE FOR OUR PRODUCTS AND SERVICES TO BE SUCCESSFUL AND WE MAY NEVER ACHIEVE THIS ACCEPTANCE 5 The commercial success of our business will depend almost entirely upon developing market awareness of our products and services and upon the acceptance of our products and services by small businesses, public schools, nonprofit organizations, tourism bureaus, chambers of commerce and consumers. Market acceptance will depend upon several factors, particularly the (i) determination by local communities that they need and want to improve their communities and their business climate, (ii) determination by small businesses that they want to improve their business by advertising through the Internet on a local community web site and availing themselves of the business services that we will offer, and (iii) the support of local public schools and other nonprofit agencies to market and participate in the improvement of their local community. A NUMBER OF FACTORS MAY INHIBIT MARKET ACCEPTANCE A number of factors may inhibit market acceptance, including (i) the existence of a locally sponsored web site that performs one or more of the services that we will offer, (ii) our inability to convince local business that they need to pay for the products and services which we will offer, or (iii) failure by consumers to use our web site. AS A START-UP COMPANY, WE MAY BE UNABLE TO ACHIEVE THE STRATEGIC GOALS THAT WE HAVE ESTABLISHED TO BECOME SUCCESSFUL We have established various strategic goals which we believe are necessary for our success. Among these goals are the development of strategic relationships, the further development of our products and services and the use of various techniques to build brand recognition and customer base. We have not yet realized any of these strategic goals and, as a start-up company, we cannot assure the investor that we will ever do so. OUR PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS WILL OWN OVER 52% OF OUR COMMON STOCK, ALLOWING THEM TO CONTROL SEARCHHELP AND TO PREVENT A CHANGE OF CONTROL After this offering, our directors, officers, and other major stockholders will beneficially own collectively over 52% of our outstanding common stock. These stockholders will be able to control the vote on all matters requiring stockholders approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may delay or prevent a change in control even if the change would be beneficial to our stockholders. WE HAVE CONDUCTED NO FORMAL MARKET RESEARCH IN ORDER TO DETERMINE WHETHER OUR PRODUCTS AND SERVICES WILL BE RECEIVED FAVORABLY BY OUR TARGET MARKET We have not conducted, or engaged any other person or entity to conduct, any formal marketing surveys or research regarding the potential for our proposed products and services. Our views concerning the potential for our proposed products and services are personal and are not based upon any empirical data or formal market research. 6 RISKS RELATING TO OUR OPERATIONS AND PRODUCTS AND SERVICES THE LOSS OF KEY PERSONNEL MAY HARM OUR BUSINESS AND WE WILL NEED TO ATTRACT ADDITIONAL QUALIFIED PERSONNEL We presently have 4 employees, 2 of whom are our management personnel, William Bozsnyak, our Chairman of the Board, Vice President and Treasurer, and Debbie Seaman, our President and Secretary. Any of our officers or employees can resign at any time and the loss of one or more of our key employees could harm our business. We have a $500,000 term life insurance policy on Ms. Seaman and Mr. Bozsnyak with SearchHelp as the beneficiary to protect the company in the event of the death of either Ms. Seaman or Mr. Bozsnyak, but we may nonetheless be unable to hire suitable replacements. We believe that we need to hire 3 additional qualified employees. However, we will have funds available to recruit and pay the new employees only if we raise over $2,400,000 from this offering. If we do not succeed in attracting and retaining new personnel, or retaining our current personnel, our business will suffer. WHILE THERE ARE NO COMPANIES THAT WE KNOW OF THAT HAVE OUR BUSINESS PLAN, THERE ARE COMPANIES THAT PROVIDE OR COULD PROVIDE SOME OF THE SERVICES THAT WE INTEND TO PROVIDE AND WE MAY FACE OTHER COMPETITIVE PRESSURES We will compete for clients, users and advertisers with the following types of competitors: local regional web sites, national web sites providing local information, B-to-B businesses offering small business solutions and local community development agencies. These competitors include DigitalCity.com, Citysearch.com, Everydayoffice.com, local school web sites and local community web sites. On a national level, there are at least 5 competitors who offer some or all of our services. On the local level, there may be no competitors or several. Our national competitors have far greater resources at their disposal and far greater brand recognition. The resources and recognition of our local competitors varies from location to location, but many of them have greater resources and recognition. We have not yet achieved any meaningful market share. There could be other business and web sites with the same business plan and model as ours, of which we are unaware. Effective competition could result in price reductions, reduced margins or loss of market share, any of which could adversely affect our business. We also intend to compete for advertisers with traditional advertising media, such as print, radio and television. If advertisers do not view us or the Internet as an effective advertising medium, they may be reluctant to advertise on our web site. Competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of these potential competitors are likely to enjoy substantial competitive advantages, including larger technical staffs, greater name recognition, larger customer bases, and substantially greater financial, marketing, technical and other resources. Any pricing pressures, reduced margins or loss of market share resulting from increased competition, or our failure to compete effectively, could seriously damage our business. 7 WE EXPECT TO DERIVE A PORTION OF OUR REVENUES FROM ADVERTISING WHICH COULD FAIL TO DEVELOP We expect to derive a portion of our revenues from sponsorships and advertising on the Internet. There are currently no widely accepted standards for the measurement of the effectiveness of Internet advertising, and the industry may need to develop standard measurements to support and promote Internet advertising as a significant advertising medium. If these standards do not develop, existing advertisers may not continue their levels of Internet advertising. Furthermore, advertisers that have traditionally relied upon other advertising media may be reluctant to advertise on the Internet. Our business would be adversely affected if the market for Internet advertising fails to develop or develops more slowly than expected. Different pricing models are used to sell advertising on the Internet and it is difficult to predict which, if any, of the models will emerge as the industry standard. This makes it difficult to project our future advertising rates and revenues. Our advertising revenues could be adversely affected if we are unable to adapt to new forms of Internet advertising. Moreover, software programs that limit or prevent advertising from being delivered to an Internet user's computer are available. Widespread adoption of this software could adversely affect the commercial viability of Internet advertising. A LARGE PORTION OF OUR BUSINESS WILL BE CONDUCTED ON THE INTERNET AND WE MAY BE EXPOSED TO LIABILITIES FOR INFORMATION POSTED ON OUR WEB SITE There is the potential that we might be sued for defamation, negligence, copyright or trademark infringement, personal injury or other matters. In the past, these types of claims have been brought, sometimes successfully, against on-line services. We may also be sued because of the content that is accessible from our web site through links to other web sites or through content and materials that may be posted by members in chat rooms or bulletin boards. We will also offer an e-mail service which may subject us to potential risks such as liabilities or claims resulting from unsolicited e-mail (spamming), lost or misdirected messages, illegal or fraudulent use of e-mail or interruptions or delays in e-mail service. We also intend to enter into agreements with commerce partners and sponsors that will entitle us to receive a share of any revenue they derive from the purchase of goods and services through direct links from our web site to their web sites. Such arrangements may subject us to additional claims, including potential liability to consumers of such products and services, or violation of regulatory requirements, because we will provide access to such products or services even if we do not provide such products or services itself. While we intend our agreements with these parties to provide that we will be indemnified against liability, this indemnification, if available, may not be adequate. Even if we obtain insurance, it may not adequately protect us against these types of claims. WE WILL DEPEND ON THE CONTINUED GROWTH IN USE OF THE INTERNET Our market is new and rapidly evolving. Our business would be adversely affected if Internet usage does not continue to grow, particularly usage by small businesses, public schools, nonprofit organizations, tourism bureaus, chambers of commerce and consumers. A number of factors may inhibit Internet usage, including inadequate network infrastructure, security concerns, inconsistent quality of service, and lack of availability of cost-effective, high-speed service. If Internet usage grows, the Internet infrastructure may not be able to support the demands placed on it by this growth and its performance and reliability may decline. In addition, web sites have experienced 8 interruptions in their service as a result of outages and other delays occurring throughout the Internet network infrastructure. If these outages or delays frequently occur in the future, Internet usage, as well as the usage of our web site, could grow more slowly or decline. WE CONTRACT OUT SOME OF OUR DATA PROCESSING SERVICES AND WE MAY CONTRACT OUT OTHER ASPECTS OF OUR BUSINESS AND FAILURE OF OUR CONTRACTORS TO PERFORM THEIR SERVICES TO US WILL DAMAGE OUR BUSINESS At the date of this prospectus, we outsource approximately 20% of our programming projects, such as the development of the community web site builder, to Benjamin Kolts, doing business as ESP Interactive. ESP Interactive also serves as our server administrator and will serve as our hosting administrator. We also outsource our address and telephone directory service to Acxiom Corporation. We may also outsource other aspects of our business. Failure of our contractors to perform their duties to us may seriously and adversely affect our ability to carry out our business plan. However, we expect that we will be able to secure appropriate replacements since there are other similar suppliers of these products and services. WE COULD EXPERIENCE SYSTEM FAILURES WHICH COULD HARM OUR BUSINESS AND REPUTATION To succeed in our plans, we must be able to operate our network infrastructure. Our operations depend upon our ability to protect our network infrastructure and equipment and keep our information updated and correct. We could experience interruptions in service and partial system failures due to routing problems, hard drive failures, database corruption and other computer failures. Any interruptions could damage our reputation, cause potential clients to no longer use our services, or make it more difficult for us to attract new members. Any of these problems could seriously damage our business. We currently do not have insurance protecting us against such system failures. OUR VARIOUS PRODUCTS AND SERVICES MAY NOT BE SUCCESSFUL AND MAY NOT ACHIEVE MARKET ACCEPTANCE Our community builder web site product is currently in its testing phase. This may not result in a functional product and the product may not achieve market acceptance. Local communities across the United States may not find this product useful or necessary. Our economic development program may not provide the necessary expertise required by local communities and our service may not be cost effective for communities. If we do not retain a large usership base, our online advertising service may not be attractive for potential advertisers. Even if we do retain a large usership base, our pricing may not be attractive. Our product S.P.I.K.E may not work effectively and there may not be a market for the product. Our rights to S.P.I.K.E may terminate even if we are successful in marketing S.P.I.K.E Our product Child Shield may not achieve market acceptance. 9 SearchHelp's calendar product is one of numerous similar calendar products on the Internet. The capabilities of our product may not be sufficiently unique to attract customers. SearchHelp's web site hosting service may not provide an attractive pricing structure. SearchHelp may not be able to maintain uninterrupted service for the web sites it hosts and may have other system failures. SearchHelp's classifieds service may not be sufficiently unique to attract customers. SearchHelp's AutoBroker product may not be effective and may not gain market acceptance. IF WE ACHIEVE MARKET RECOGNITION, AND WE LOSE THE RIGHTS TO OUR TRADEMARKS, WE MAY SUFFER A LOSS OF BUSINESS We use the names SearchHelp, S.P.I.K.E and Child Shield in our business. If these names achieve market recognition and we lose our rights to any of them, we may suffer a material loss of revenue and business. Although United States trademark protection has been filed on these names, other companies may already be using similar marks and may therefore be able to keep us from using one or both of these names. In addition, registration would not be available to a mark which is too generic and has no distinctive meaning. RISKS RELATING TO OUR SECURITIES THE COMMON STOCK THAT WE ARE OFFERING IN THIS PROSPECTUS IS A "PENNY STOCK;" BECAUSE "PENNY STOCK" RULES WILL APPLY, YOU MAY FIND IT DIFFICULT TO SELL THE SHARES YOU PURCHASE IN THIS OFFERING A "penny stock" is a common stock that is not listed on a securities exchange and trades for less than $5.00 a share. Prices often are not available to buyers and sellers and the market may be very limited. Penny stocks in start-up companies are among the riskiest equity investments. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the Securities and Exchange Commission. The document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser's written agreement to the purchase. Many brokers choose not to participate in penny stock transactions. Because of the penny stock rules, there is less trading activity in penny stock and you are likely to have difficulty selling your shares of SearchHelp stock. There is currently no public market for our shares and no market may develop or be sustained after the offering. If a market develops, the market price of our shares may decline below the initial public offering price. The sale of a small number of our units in the offering, or sales to a small number of holders, could result in few SearchHelp shares available for public trading. It would thus be very difficult for an active trading market to develop for SearchHelp shares. 10 The class A redeemable warrants contained in the units may be exercised at any time until December 31, 2005 and the class B redeemable warrants contained in the units may be exercised at any time until December 31, 2007. We intend to keep our registration statement current so long as any of the warrants are outstanding. However, if a current registration statement is not in effect, you will not be able to exercise either of the warrants contained in the units. THERE IS NO PUBLIC MARKET FOR OUR SHARES AND OUR MARKET PRICE MAY BE VOLATILE We intend to list our stock on the Over-The-Counter Bulletin Board. Assuming there is a market for our shares, the market price of the shares may be highly volatile. YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION IN THE PRICE YOU PAY FOR UNITS The initial public offering price per share is substantially higher than the net tangible book value of our common stock as of the date of this prospectus. Therefore, you will incur immediate dilution of approximately $.32 in the net tangible book value per share of common stock from the price per share that you pay for the common stock. This amounts to a dilution of 64%. THERE WILL BE A SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE AND THIS MAY HURT THE MARKET PRICE OF OUR SHARES The market price of our shares could decline as a result of sales, or the perception that such sales could occur, of a large number of shares available in the public market after this offering. Such sales also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Before this offering, as of October 15, 2002, 15,535,000 of our shares were outstanding Some of these shares are subject to certain volume restrictions on transfer and therefore are not freely tradeable in the public market; however, they can be sold under certain circumstances. After this offering, assuming that all units are sold, we will have outstanding 8,000,000 shares freely tradeable in the market. In addition, if all units are sold and all of the class A redeemable warrants, class B redeemable warrants and placement agent warrants are exercised, an additional 18,400,000 shares will be available for sale in the public market. Number of Shares ---------------- Shares outstanding and shares reserved for issuance to note holders prior to the date of this prospectus (subject, in some cases, to volume limitations)................. 15,535,000 Shares sold pursuant to this prospectus.................... 8,000,000 --------- After 12 months from the date of this prospectus (subject, in some cases, to volume limitations and assuming no warrants have been exercised)......................... 23,535,000 Exercise of all class A redeemable warrants and class B redeemable warrants.................................. 16,000,000 ---------- 11 After 12 months from the date of this prospectus (subject, in some cases, to volume limitations and assuming the class A redeemable warrants and the class B redeemable warrants have been exercised)......................... 39,535,000 Exercise of all underwriter warrants....................... 2,400,000 --------- After 12 months from the date of this prospectus (subject, in some cases, to volume limitations and assuming all of the warrants have been exercised).................. 41,935,000 12 NOTE REGARDING FORWARD LOOKING STATEMENTS This prospectus contains forward-looking statements that involve substantial known and unknown risks and uncertainties. In some cases you can identify these statements by forward-looking words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plans," "project," and similar expressions. You should read statements that contain these words carefully because they discuss the development stage in which we are operating; our lack of revenues; our ability to continue as a going concern; our possible need for additional financing; the uncertainty of market acceptance of our product once widely introduced; competition; technological obsolescence; ability to not violate others' rights; dependence on key personnel, as well as other factors detailed in "Risk Factors" above and elsewhere in this prospectus. Before you invest in our company, you should be aware that the occurrence of the events described in these risk factors and elsewhere in this prospectus could have a material adverse effect on our business, results of operations and financial position and, thus, on your investment. 13 USE OF PROCEEDS We have, to date, relied on capital contributions and loans from our management and debt placement offerings to fund operations. Management has determined that, based upon an assumption that we earn no revenues during the 12 month period following the commencement of this offering, we will need $1,030,000 in order to fund our operations for that period, and, thus, given the expenses of the offering and the amounts required to pay outstanding debts and expenses, we will need to raise at least $2,400,000 in this offering to have this $1,030,000 available. If we do earn revenues, we will need less funds from this offering to cover our expenses and, thus, we will have more funds available for business development. We expect to need at least an additional $1,442,500 for the next 12 months' operational expenses and to accomplish additional plans described in this prospectus. Therefore, unless we raise $4,000,000 in this offering, we will need either to raise additional funds or realize revenues from our business activities to meet our cash requirements for the next 2 years. We intend to use the proceeds of this offering as follows: [see chart on next page] 14
If $4,000,000 If $1,000,000 If $2,000,000 If $3,000,000 is raised is raised is raised is raised -------------- --------------- -------------- ------------- 1. Expenses of the offering: (a) Placement agent commissions equal to 10% of the amount raised..................................................... $400,000 $100,000 $200,000 $300,000 (b) Expenses, including legal, accounting, placement agent expenses up to $120,000 and other fees..................... $300,000 $300,000 $300,000 $300,000 2. Repayment of debt............................................... $515,000 $515,000 $515,000 $515,000 3. Interest on debt at 10% per annum (assuming the debt is paid by December 31, 2002)........................................... $62,500 $62,500 $62,500 $62,500 4. Accounts payable and accrued expenses through the date of this prospectus, including payroll expenses and professional service and provider fees............................................... $250,000 $22,500 $250,000 $250,000 5. Operational expenses for the first 12 months after the date of this prospectus, including marketing and payroll expenses and professional service and provider fees.......................... $1,030,000 $0 $672,500 $1,030,000 (a) Databases.................................................. $200,000 $0 $0 $200,000 (b) Advertising and marketing.................................. $220,000 $0 $115,000 $220,000 (c) Programming development.................................... $100,000 $0 $75,000 $100,000 (d) Operating expenses......................................... $510,000 $0 $482,500 $510,000 6. Operational expenses for the next 12 months, including further development of products and services, securing additional management personnel and employees and working capital.......... $1,442,500 $0 $0 $542,500 (a) Databases.................................................. $135,000 $0 $0 $0 (b) Advertising and marketing.................................. $450,000 $0 $0 $0 (c) Programming development.................................... $100,000 $0 $0 $40,000 (d) Operating expenses......................................... $757,500 $0 $0 $502,500 $4,000,000 $1,000,000 $2,000,000 $3,000,000 ========= ========= ========= =========
15 Pending the use of proceeds for the above purposes, we will hold our funds in bank deposit accounts, short term certificates of deposit, U.S. Treasury instruments and money market funds. In the event we do not sell all of the units offered in this offering, the placement agent's commissions will be lower because they are based upon the amount raised, but other offering expenses will not be reduced, nor will debt repayment or accrued expenses. If all of the units are sold, the shares acquired in the offering will represent only 34% of SearchHelp's issued and outstanding shares, subject to further dilution and to substantial restrictions on transfer. If the entire amount of this offering is sold and all of the warrants are exercised, the shares acquired in the offering together with the shares acquired on exercise of the warrants will represent 61% of SearchHelp's issued and outstanding shares, subject to further dilution. If less than $2,400,000 is raised, SearchHelp may not have sufficient funds available to pay its expenses and carry out its immediate business plan. $325,000 of our debt is presently past due. The maturity dates originally ranged from February 4, 2002 to April 14, 2002. The proceeds of our debt financings were used to provide funds for operating the company. 16 DIVIDEND POLICY SearchHelp does not intend to pay any cash dividends with respect to its common stock in the foreseeable future. We intend to retain earnings, if any, for use in the operation of our business and to fund future growth. CAPITALIZATION The following table sets forth the total capitalization of SearchHelp as of September 30, 2002. September 30, 2002 ------------------ Current liabilities $998,947 Long-term Obligations $4,527 Stockholders' capital deficiency: common stock, $.0001 par value, 100,000,000 shares authorized, 15,130,000 shares issued and outstanding: $1,513 Additional paid-in capital $201,112 Deficit accumulated in development stage $(759,879) Total stockholders' capital deficiency $(557,254) Total capitalization $446,220 17 DILUTION SearchHelp's net tangible book value deficiency as of September 30, 2002 was $(974,027), or $(.06) per share of common stock. Net tangible book value per share is equal to the amount of total tangible assets (total assets less intangible assets) less total liabilities, divided by the number of shares of common stock outstanding on September 30, 2002. Assuming the sale of all of the units offered pursuant to this prospectus at a price of $.50 per unit, then, after deducting placement commissions and estimated offering expenses aggregating $700,000 (but without taking into account the shares issuable upon exercise of the warrants), the net tangible book value of our company as of September 30, 2002 would have been $2,707,065, or $.18 per share of common stock. This represents an immediate increase in net tangible book value of $.24 per share to existing stockholders and an immediate dilution in net tangible book value of $.32 per share to new investors. The following table illustrates this per share dilution: Assumed initial public offering price per share $.50 Net tangible book value per share before this offering $(.06) Increase in net tangible book value attributable to new investors $.13 Net tangible book value per share after this offering $.18 Dilution per share to new investors $.32 Percentage dilution 64% The following table summarizes, on a pro forma basis as of September 30, 2002, the total number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders for a share of stock and by new investors purchasing units in this offering:
--------------------------------- ---------------------------- ----------------------------- --------------------- Average Price per Shares Purchased Total Consideration Share --------------------------------- ---------------------------- ----------------------------- --------------------- Number Percent Number Percent --------------------------------- --------------- ------------ ----------------- ----------- --------------------- Existing stockholders 15,130,000 65.4% $202,625 4.8% $.01 ---- --------------------------------- --------------- ------------ ----------------- ----------- --------------------- New investors 8,000,000 34.6% $4,000,000 95.2% $.50 --------- ----- ---------- ----- ---- --------------------------------- --------------- ------------ ----------------- ----------- --------------------- Total 23,130,000 100.0% $4,202,625 100.0% $.18 --------------------------------- --------------- ------------ ----------------- ----------- ---------------------
18 DESCRIPTION OF BUSINESS BACKGROUND SearchHelp, Inc. was incorporated in the state of Delaware on September 5, 2001 and is a successor to SH Networks.com, Inc., formerly known as SearchHelp.com, Inc., a New York corporation incorporated on January 29, 2001, and E-Com Marketing Group, Inc., a New York corporation, incorporated on January 29, 1999. We are a start-up company and we have developed and acquired a series of products and services, some which are Internet-based and others which are to be sold in retail outlets or through direct distribution, but all of which are intended to serve local communities, their citizens, their local businesses and institutions and their economic well-being. Several of our products and services are currently available and others are in the final stages of development. Because our products and services are almost all directed towards the same potential customers, we expect that our marketing efforts will be efficiently coordinated. OUR WEB SITES. In February 2001, we created our own web site, at WWW.SEARCHHELP.COM, which provides a format to allow users to gather information about their local communities and provides a platform to market or display our other products and services. Since that time we have further enhanced and developed our web site to be ready for our other products and services. Our web site will become fully operational upon completion of development of our other products and services. We have also developed a web site template product called "Community Builder." This product was designed for local communities that have a need for an interactive site that will be adaptable to the needs of their community. Our technology allows the community to control the content of their community builder web sites and also to display their content on the SearchHelp web site. Our first community builder web site for Central Islip, New York, is currently operational as a beta test site. Based upon the performance to date for Central Islip, we expect that development of the community builder template will be completed by the end of November 2002. OUR OTHER PRODUCTS AND SERVICES. We intend to assist communities nationwide by offering strategic advice for economic development in problem areas such as unemployment, housing, education and transportation. We recently entered into our first Economic Development Consulting Agreement with the Oyster Bay-East Norwich School District to assist them in developing an Internet Cafe for the community and the school and SearchHelp is currently assisting the school district in the setting-up of an educational technology program. We offer advertising space on both our own web site and the local community builder web sites to businesses and organizations. This product is completely developed. We have not yet marketed this product. It will be marketed through the community builder product once it is out of the beta test phase which is expected to occur by the end of November 2002. We also have completed development of a classified advertising service for employment and other business opportunities. We have not yet marketed this product. We will begin to offer this product through the community builder template product upon completion of its beta test, expected to occur by the end of November 2002. 19 In addition to these web-based products and services, we are offering two products for parents to better care for their children, S.P.I.K.E and Child Shield. S.P.I.K.E is a software package designed to enable parents to monitor their child's behavior on the Internet. We have an exclusive license for S.P.I.K.E. We are in the process developing S.P.I.K.E, which will be ready for distribution and sale by the end of January 2003. Child Shield is an emergency response system for missing children. We act as a distributor for Child Shield, which is currently available on our web site. We have also developed other products and services described later in this section. In addition to marketing our products and services through conventional channels, we have developed what we believe is an innovative approach to utilizing relationships with schools and other not-for-profit organizations to generate interest and to share in our revenues for products and services sold utilizing their resources. RECENT FINANCING TRANSACTIONS. In October 2002, we raised $25,000 for operations by issuing a promissory note bearing interest at 10% per annum, plus an approximate 10% penalty interest if not paid when due. This note, together with accrued interest, is due February 2003 and otherwise is identical in other respects with the July 2002 notes. In July 2002, we raised $50,000 for operations by issuing 2 promissory notes each bearing interest at 10% per annum, plus an approximate 10% penalty interest if not paid when due. These notes, together with accrued interest, were due in November 2002 and otherwise are identical. In May 2002, we raised $75,000 for operations by issuing 3 promissory notes, each bearing interest at 10% per annum, plus an approximate 10% penalty interest if not paid when due. These notes, together with accrued interest, were due in September 2002 and are identical in other respects with the July 2002 notes. Commencing in December 2001 through February 2002, we raised an additional $325,000 of operating capital by issuing 13 $25,000 promissory notes, each bearing interest at 10% per annum. Each of the 13 notes is payable in full on the 60th day following its issuance. Each note holder has the right to acquire 10,000 shares of common stock at a price of $.01 per share if his or her note is not repaid in full, together with accrued interest, on the due date and an additional 5,000 shares of common stock at a price of $.01 per share for each month thereafter that the note is not repaid in full. As of October 15, 2002, none of these notes were repaid and, as a result, these note holders were then entitled to purchase 470,000 shares of common stock for an aggregate price of $4,700. Prior to October 15, 2002, an aggregate of 130,000 shares of common stock has been purchased by note holders for $1,300. In September 2001 and October 2001, we raised $50,000 for operations by issuing promissory notes bearing interest at 10% per annum. These notes, together with accrued interest, were repaid in full in February 2002. SearchHelp incurred $67,180 in fiscal year 2001, $39,936 in fiscal year 2000 and $45,650 in the nine months ended September 30, 2002 on software development and, if this offering is successful, we expect to incur an additional $113,000 in fiscal year 2003 and $100,000 in fiscal year 2004. 20 EMPLOYEES We currently have 4 full-time professional, technical, and support personnel. We anticipate hiring 3 additional full-time employees in the next year, provided that we raise sufficient funds in this offering to enable us do so. PRODUCT AND SERVICES THE FOLLOWING ARE OUR PRODUCTS AND SERVICES: A. THESE PRODUCTS AND SERVICES ARE EITHER IN THEIR FINAL STAGE OF DEVELOPMENT OR IN THEIR FINAL TESTING STAGE. THE LAUNCH OF THESE PRODUCTS AND SERVICES WILL OCCUR ONCE TESTING IS COMPLETED: 1. "COMMUNITY BUILDER" TEMPLATE WEB SITE The community builder template product will be completed by the end of November 2002. The Community Builder Template is a web site template software package that we have developed which we will use as a prototype web site for each of the communities that hire us to build their web site. It is a templated web site because the engine for the technology that drives the web sites is the same for all communities. The software has been built as a template which will allow us to customize a web site for each community. We will offer a number of choices in terms of design and color scheme. Our programmers will do the programming in-house at SearchHelp and SearchHelp will host the Community Builder Template web sites on our servers. Our technology allows local towns and communities to control the content for their own community builder web site and to display their content on the SearchHelp web site. Communities can promote SearchHelp products and services and receive a share in our revenues from the sales generated. We will link the community web sites to our SearchHelp web site and thereby allow users of either web site to have access to the content from their communities web site and on SearchHelp's web site. The product is flexible in that it can also be offered to smaller populations such as nonprofit organizations or chambers of commerce. Central Islip, New York, which is located in Suffolk County on Long Island is our prototype community. It is the first community that is using this product. We designed and donated the Community Builder Template web site to the town of Central Islip (WWW.CENTRALISLIP.ORG) to serve as our first beta test web site. This site has been in beta testing since June 2002. The template involves extensive programming which connects directly to the SearchHelp database in order to duplicate events and information on both web sites. The beta test for Central Islip will be completed by the end of November 2002. At the conclusion of this beta test, we intend to market the Community Template Builder product to other communities. Future community web sites will be developed and hosted by SearchHelp for a fee. We will offer all communities SearchHelp's products and services and return 20% of all revenues derived from that site to that particular community. The community builder template is built as a modular system. This allows for reduced costs for future community sites. The community will be charged a one-time fee of approximately $2,000 to $3,000 for the development of a unique web site look for their community and a monthly hosting fee of approximately $50 to $100. By building the community template as a modular system, we can easily 21 create a unique community design for each customer and integrate the new look with the technology that drives the back-end module. This provides an affordable and interactive product for the community while helping to maximize SearchHelp's profit. Because we have not yet begun a broad marketing campaign for this product, at this time we can not determine whether it will be successful. Many local communities may already have a web site. However, we anticipate that lower income and working class communities will seek our Economic Development services and they will be less likely to have a web site. The Community Builder Template web site is therefore directly linked and marketed with our Economic Development program. In order to effectively offer professional Economic Development services to such communities, we formed a partnership with the National Economic Development Advisors, LLC to run our Economic Development program for three years. They will act as a consultant in connection with our program. We will pay National Economic Development Advisors 55% of any profits generated as a result of consulting with nonprofit organizations. We recently entered into our first consulting agreement with Oyster Bay East Norwich School District to assist the district with establishing an educational technology program for its students. 2. SECURED PERSONAL INFORMATION KEYED ELECTRONIC SOFTWARE (S.P.I.K.E.) S.P.I.K.E. is a software product that SearchHelp is in the process of developing. We anticipate that we will launch and sell to the product in the retail market by the end of January 2003. SearchHelp does not own the technology. SearchHelp has an exclusive license agreement with eDocusign, Inc. SearchHelp owns the trademark on the name S.P.I.K.E and owns the trademark on the look and feel of the character known as S.P.I.K.E. SearchHelp will manufacture, market and distribute S.P.I.K.E in the retail market. The retail price for S.P.I.K.E. is expected to be $49.99. This software package is designed to enable parents to monitor their child's behavior on the Internet. It is expected to block and filter out inappropriate web sites on AOL, Netscape and Internet Explorer. Key words will be used to block sites, similar to blocking channels for family viewing on cable television. S.P.I.K.E has its own custom browser and custom permission security levels for all users which allows parents to control the Internet access levels for different age users by providing a password. The application will also monitor children's Internet communications. It will highlight the use of inappropriate language, log the screen names of the individuals with whom children are instant messaging, and filter potentially inappropriate personal discussions through the use of artificial intelligence. Artificial intelligence is a feature that is unique to this software product. S.P.I.K.E. will have a library of phrases and words that make up its artificial intelligence internal database. Artificial intelligence is used because many child predators meet a child/teenager online in a chat room and then continue the discussion using Instant Messaging for a more personal one-to-one conversation. S.P.I.K.E not only provides parents with a log of all Instant Messaging discussions, but it will also alert parents if their child is Instant Messaging with someone who is using inappropriate language or asking them more than two personal questions. Through the use of artificial intelligence S.P.I.K.E. may prevent more children from becoming tragic victims of on-line predators. 22 Additionally, depending on the age of the child being monitored and the reasons for the monitoring, the administrator of S.P.I.K.E. can set up the program to run "behind the scenes" so the user is not aware that they are being monitored. S.P.I.K.E. will also lock important folders, files and applications on the computer and not allow access unless the user has been given permission. This feature is useful when there are multiple users sharing one computer. Even though there are currently a number of on-line monitoring products in the marketplace, our product has many unique features. For example, S.P.I.K.E offers a separate friendly browser for young children and utilizes artificial intelligence to determine potential on-line predators. Additionally, the locking and unlocking of files on S.P.I.K.E. is simple to use and not subject to hackers because of the specific encryption that was used in developing the product. 3. SOFTWARE We have developed a software application called the "AutoBroker." This product was recently completed and will be tested by local used car dealerships. Testing should be completed by the end of November 2002 and we expect the product then to be available for marketing. The product will be available as a download from the SearchHelp web site and through the Community Builder template product. This product provides auto dealers the ability to upload their existing auto inventory into the AutoBroker application. From the application the dealers can automatically add their inventory to SearchHelp's auto classifieds section, thus giving their business additional exposure for their inventory. In addition, the application provides the business with tracking, updating and printing capabilities for their inventory. We believe that this type of software currently is not available, nor does any classified site offer an easy, fast or cost effective way to upload or update large auto inventories from a personal computer to a classified site. The AutoBroker offers the smaller new and used dealers an opportunity to gain exposure at an affordable price. Major dealers keep track of their inventory either through in-house systems or through outsourcing with physical inventory scanning. As an added benefit and for additional exposure, larger dealers will place their inventory on the AutoTrader web site (WWW.AUTOTRADER.COM), a well-known fee-based classified web site. Smaller dealers often cannot afford these services. Smaller dealers may not have their own web site or the opportunity to display their inventory on the automakers' main sites. With some minor additional programming, the AutoBroker application can even incorporate auto dealers' inventory with their existing web site. The price for this service is yet to be determined. If the product proves to be useful to auto dealerships, then we will further develop the product line to include other sales oriented industries such as marine sales, employment and real estate. In addition, we will seek to license this application to other classified sites for a monthly or yearly fee. B. THE FOLLOWING PRODUCTS AND SERVICES ARE COMPLETED, TESTED AND READY FOR DISTRIBUTION: 4. CHILD SHIELD We entered in to a distribution agreement with Protect-A-Child America, a distributor of Child Shield, in May 2002. Pursuant to the terms of the agreement, SearchHelp will market the Child Shield product. We recently presented Child Shield at the National PTA Convention in Texas. As of October 2002, we began marketing Child Shield through a mail campaign directed towards a 23 group of PTAs that attended the 2002 National PTA Conference. We anticipate earning revenue from Child Shield by the end of December 2002. Child Shield kits are sold through distributors who independently market and sell the product. SearchHelp is an independent distributor of Child Shield and does not own or manufacture the product. Child Shield has 2 components: (1) to reduce the number of lost, missing, abducted, and runaway children in America by our child safety program which provides parents with simple, easy-to-follow educational materials that will provide their children with important knowledge that can help to prevent such a tragedy, and (2) to offer victim parents and law enforcement agencies an all-inclusive source for immediate assistance in distributing information that is vital to the recovery effort of a missing child. If a Child Shield registered child should ever become missing, the Child Shield product is designed to act immediately by providing both local and far-reaching assistance to the child's family and to the police agency handling the investigation. The emergency response component is based on parents sending a videotape and a photo of their child to register the child's video and photo with Child Shield. In the event of a missing child, the Child Shield emergency response will work together with local law enforcement officials and use the video and picture to help find the child. There are some states and local counties throughout the country that are developing their own emergency response networks. However, in the case of those few areas, Child Shield could function as an adjunct to the services they are offering, since Child Shield has a unique videotape duplicating system. The current price is $34.95. As a distributor, SearchHelp is compensated as follows: $5 for each of the first 499 unit sales; $10 for each of the next 500 unit sales; $12.50 for each of the next 1,500 unit sales; and $15 for every sale above 2,500 units. To date we have not made any sales on this product. Our first mailing was sent to a small target audience of 300 PTA members in September 2002. We followed up with another mailing in October 2002. 5. ECONOMIC DEVELOPMENT PROGRAM The Economic Development Program is fully designed, but has not generated revenues because we have just started this program 2 months ago. We cannot predict when we will receive revenues from this program. We intend to assist communities nationwide through our partnership with National Economic Development Advisors, LLC by offering strategic advice for economic development in problem areas such as unemployment, housing, education and transportation. National will act as a consultant in connection with our program for a three year period. We will pay National Economic Development Advisors 55% of any profits generated as a result of consulting with nonprofit organizations. Through our program, we will offer guidance to communities seeking funding sources and grant opportunities. We will also help create not-for-profit organizations (if none exist) in these communities to implement our strategic plan. Fees will either be at a fixed rate, starting at $5,000, or will be calculated on a time and materials basis, depending upon the economic development needs of the community. 24 SearchHelp recently entered into an Economic Development Consulting Agreement with the Oyster Bay-East Norwich School District to assist them in developing an Internet Cafe for the community and the schools and SearchHelp is currently assisting the school district in the setting-up of an educational technology program. There are local economic development offices in various states that provide economic development services to local communities in need. Our services are unique from local economic development offices because local economic development offices are usually understaffed or the staff is not fully informed about available grants opportunities for the local community. Economic development is a specialized area where communities needing this service frequently use outside experts. 6. WEB SITE HOSTING We recently completed and began marketing this product. Since September 2002 we have signed up 80 web site hosting customers. Our revenues have averaged between $450 to $500 per month. We offer three basic plans: Value Plan for $13.95 per month, Standard Plan for $19.95 per month and an E-Commerce Plan for $44.95 per month. Web hosting is a service that is widely available by various providers. However, our approach of marketing this product to local small business through our community builder web site product, our chamber of commerce program and our reseller program differentiates us from our competition. To assist in our marketing efforts, SearchHelp will offer chambers of commerce, resellers and local townships a small economic incentive for each sale. C. THE FOLLOWING PRODUCTS AND SERVICES ARE COMPLETED, TESTED BUT NOT READY FOR DISTRIBUTION. THE LAUNCH OF THESE PRODUCTS AND SERVICES ARE BASED ON THE COMPLETION AND LAUNCH OF THE COMMUNITY BUILDER TEMPLATE PRODUCT WHICH IS IN ITS FINAL STAGE OF TESTING: 7. CLASSIFIED ADVERTISEMENTS This product is currently complete. To date, we have not marketed this product. We will start to offer this product through our Community Builder Template product once the beta testing is completed for that product which is scheduled to conclude at the end of November 2002. In addition, we will promote these products further once we begin to receive funds from this offering. Users of the classified advertisements can list items they have for sale according to specific categories. All entries run for 30 days. The user is prompted to renew within 5 days of the ad expiring. Images can be uploaded to help sell an item. Through February 2003, we will offer this service free of charge. Starting in March 2003, we will institute charges of $10 for the first 30 days and an additional $5 after the initial 30 day period for up to 60 additional days. We will offer unlimited listing for autos for $199 per 60 days or $999 a year to used car dealers. Categories include real estate, autos, computers, home merchandise, pets, marine, job/career listings and business opportunities. SearchHelp will launch a new feature to the job/career listings when we launch the Community Builder Template product. This job/career listings product will enable employers to list job openings and job seekers to post their resume and job qualifications. The new feature will search the database and match up the job seekers with the employers. Both parties will have the flexibility to set specific criteria. For example the job seeker could provide information regarding the type of job wanted, salary range, location, benefits, skill summary. The employer can specify the experience needed for the job, 25 degrees, job title, location, requirements needed. This program will also allow the employer to keep track of job postings with an easy to use tracking system. Employers or agencies will be able to post up to two job openings for 30 days at a cost of $79. Renewals will cost $29 for each additional 30 day period. Companies can post 5 to 12 job openings for $199 for 30 days and $79 for each additional 30 day period. Companies or agencies can buy access for an unlimited amount of job postings for 1, 3, 6 and 12 month periods for $249, $498, $949 and $1,850 respectively. This new feature will be marketed directly to employment agencies, which usually work for many employers at one time. We will target used car dealers for our auto classifieds and local real estate companies for the real estate section of our classifieds. Currently, there are regional sites, most of which allow users to search their databases for job opportunities, autos, real estate, pets and home merchandise that were posted. Our service will provide more features than regional sites and local newspapers. Also, there are sites such as WWW.CAREERBUILDER.COM, WWW.MONSTER.COM and WWW.HOTJOBS.COM that specialize in job opportunities nationwide. Many search firms use these specialized sites to post job openings they represent for their large clients. The employment section of our classifieds will have many, if not all, of the same features as these companies mentioned above. The significant difference is that the cost of our service will be lower. Also, we intend that these services will be marketed from local chambers of commerce, townships and our economic development program to their local business community, thus enhancing the penetration of these services. 8. ONLINE ADVERTISING ON WWW.SEARCHHELP.COM. We have developed a range of advertising opportunities for our web site. All these advertising products have been created. To date, we have not marketed these products. We will start to offer these products through the Community Builder Template product once the beta testing is completed for that product which is scheduled to conclude by the end of November 2002. In addition, we will promote these products further once we begin to receive funds from this offering. a) Run-of-the-site display and banner ads - These are ads that display throughout the site. Prices range from $75 to $300 per month. b) Run-of-the-site roll down banner ad - This type of ad enlarges from a 468x60 pixel ad to a 468x370 ad. It enlarges by rolling down similarly to a movie screen when a user rolls over the banner ad with their mouse. Prices will range from $125 to $320 per month. c) Industry targeted sponsor ads - These ads are customized and can resemble newspaper ads. There are eight industry categories from which to choose and they are constantly visible for the entire length of the ad. The price for this service will be $150 per month or $240 for 3 continuous months. d) Pop-up billboard ads - These ads appear every time a viewer visits the site. The price for this service starts at $80 per month. e) Menus On-line - We will offer restaurants the ability to include their menu with their business listing. Restaurants will be able to fax, upload or mail them to us. There will be 4 different programs to choose from. Packages range in price from $90 to $240 per year. 26 f) On-line Coupons - We intend to offer merchants the ability to post coupons to their business listing, the coupon section and the local web site section (if the merchant has a web site) for one price. The coupon is expected to be able to be changed as often as the merchant would like. Our streamlined creation tool allows the merchant to create a coupon from scratch or upload an existing coupon. Prices start at $39 per month. g) Industry targeted sponsor links - These are text links that reside on the same category-specific pages as the sponsor ads. The links are constantly visible and direct viewers to the sponsor's site or ad. They are expected to be an inexpensive form of creating strong name recognition within a community. The price for this service is $50 per month. Online advertising is available on most web sites, however, it is usually expensive or too broad in its scope of coverage for small businesses. On our web site and community template site, the advertising is locally targeted and has been priced so that it is affordable for small business. These products will be marketed from local chambers of commerce, townships and our economic development program directly to their local business community. Product penetration should be deeper with this approach since the chambers and townships already have a relationship with their local business community. 9. PDA COMPATIBLE CORPORATE CALENDAR This product is developed and completed. To date we have not marketed this product. It will initially be marketed on our web site and on the local Community Builder Template web sites once that product is launched, which is scheduled to be by the end of November 2002. We will further promote this product as we receive funds from this offering. Our PDA compatible virtual calendar product is located on WWW.SEARCHHELP.COM. Businesses can sign up for the product directly on the web site and then gain access to their corporate calendar by a user name and password security. The technology was built into the SearchHelp web site. It is not downloaded from our web site nor is it a software application that is sold separately. This PDA offers businesses a calendar application where they can add their corporate logo and incorporate their company colors and style. Employees will have password protected access to a corporate branded calendar from any location where there is Internet access. They will be able to schedule meetings, send reminders, access their contact list, e-mail and a to-do-list, and synchronize the calendar with their hand held devices. The price for the product will be based on the number of users per company using the service, but will start at $7.95 per month for up to two users and plans that accommodate more then to 30 users for $59.95 per month. Many of the large national portals, such as Yahoo, AOL and Netscape offer free PDA compatible calendars for individual users, however these portals do not offer a corporate branded PDA calendars like ours which allows for businesses to customize their calendar. INITIAL PLAN OF OPERATION Management has determined that, based upon an assumption that we earn no revenues during the 12 month period following the commencement of this offering, we will need $1,030,000 in order to fund our operations for that period, and, thus, given the expenses of the offering and the amounts required to pay outstanding debts and expenses, we will need to raise at least $2,400,000 27 in this offering to have this $1,030,000 available. If we do earn revenues, we will need less funds from this offering to cover our expenses and, thus, we will have more funds available for business development. We expect to need at least an additional $1,442,500 for the second 12 months' operational expenses and to accomplish additional plans described in this prospectus. Therefore, unless we raise $4,000,000 in this offering, we will need either to raise additional funds or realize revenues from our business activities to meet our cash requirements for the next 2 years. It is important to note, if we fail to raise at least $2,400,000 in this offering or fail to earn substantial revenues, we will not be able to pay our obligations and have operating capital for the next year. We will then have to try to make arrangements with our creditors and seek other sources of capital. If we are not successful in those efforts, we may have to cease operations and the investment in the Company may be lost. At present, we are totally dependent upon the proceeds of this offering to continue to operate as a going concern. In the first 12 months of operation, the company's main goal will be to maximize revenue quickly by marketing Child Shield, S.P.I.K.E., the Community Builder web sites, and our Economic Development Program. Child Shield will be available directly from SearchHelp and S.P.I.K.E. will be available in retail stores. We will gain exposure for both products by marketing to schools and organizations. We plan to attend PTA conventions and structure fundraising programs for all interested schools and organizations around these 2 products. Fundraising programs offer additional benefits because schools and organizations will be promoting our products to their families as they seek to have a successful fundraiser. S.P.I.K.E. will also gain added exposure, as it will be offered in retail stores. Currently, there are plans to attend 4 to 5 Parent-Teacher Association (PTA) conventions during 2003. We intend to offer our web-based products and services, which include hosting, PDA office calendars, software applications, classifieds and eight different advertising products to local businesses starting with the New York State region. We will market to these businesses through the Community Builder site in their area. Community Builder sites are designed pre-loaded with all of our web-based products and services and will be marketed to local Chambers of Commerce, Town Halls, Civic Associations and other types of community membership organizations. We intend to have marketing materials on the Community Builder site for each community to promote the benefits of its new web site and to promote our products and services. The company will return 20% of the revenue generated by these sites to the individual communities that purchase the site. The company will also return a total of 5% of the revenue generated from the site to their local school(s). Our Economic Development Program is in its beginning stages and our team is now starting to contact a few individuals from different communities around the country that have expressed interest in our economic development services. We anticipate attending state conferences for Mayors and speaking with other town officials to assist in promoting this program throughout the next 12 months. Depending upon the amount raised in this offering, we will allocate $40,000 of the advertising and marketing budget to attend conferences and conventions, $30,000 for direct response mailings, $65,000 for advertising in print media and $30,000 for co-op advertising with retail chains carrying the S.P.I.K.E. product. We believe that focusing our efforts on these groups and marketing through them will be effective in targeting and reaching the maximum 28 number of customers that would be most interested in the company's products and services. This strategy will enable the company to stay within its marketing and advertising budget during the first 12 months of operation. We started development on a software application known as the "AutoBroker" on or about the end of April 2002 and completed development in July 2002. The AutoBroker software will be tested by and marketed to used car dealers by the end of November 2002. Once testing is complete, AutoBroker will be available to download from the SearchHelp web site. The price for this service is yet to be determined. To date we have spent $8,500 on research and development for the AutoBroker and $30,000 on research and development for S.P.I.K.E. PLANS FOR SUPPLEMENTAL FINANCING We expect to raise at least $2,400,000 in this offering so that we will be able to pay all of the offering expenses, pay all of our outstanding debt plus interest and our payables, and have sufficient operating capital for our first year of operations. Of course, we may not raise that amount and, therefore, we may not have funds from this offering sufficient to carry out our operating plan. If we do not raise sufficient funds from this offering to carry out our plan, we intend to carry out the following steps to allow us to continue to operate and to enable us to reach the point where we begin to generate revenues and, perhaps, have sufficient revenues to cover our operating expenses: 1. Our principals, who have previously provided operating capital to the company, will provide certain additional capital, although not more than $50,000. 2. We will negotiate with all of the holders of our existing debt to seek to extend the time for payment for at least one year, with only interest, not principal, payable during that time. Although we have not yet had formal discussions with any debt holder, we have had informal discussions with certain key holders as well as the placement agent for most of our debt placement and preliminary indications are favorable. Of course, there is no assurance that all, or most, of our debt will thus be extended. 3. We will approach the payees of our trade payables and seek to extend the time for payment of all of our payables. Again, we have had no formal discussions to this end, but preliminary discussions have again been favorable. 4. We will seek additional private debt capital and, perhaps, private equity capital, to provide funds for operations. We have had informal discussions with our placement agent and we will not have formal discussions until the public offering has terminated. Management believes that all of these steps, if taken together, will provide the company with the operating capital and the time necessary to enable the company to carry out the key elements of its business plan, at least to the point of actively marketing S.P.I.K.E. and Child Shield and operational launching of our own web site and the community builder web site. We would likely delay the launching of our other products and services until our revenues were sufficient to enable us to do so. 29 SUMMARY OF OUR SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES The Securities and Exchange Commission recently issued " Financial Reporting Release No. 60 "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies provide additional disclosure, discussion and commentary on those accounting policies considered most critical to its business and financial reporting requirements. FRR 60 considers an accounting policy to be critical if it is important to the Company's financial condition and results of operations, and requires significant judgment and estimates on the part of management in the application of the policy. For a summary of the Company's significant accounting policies, including the critical accounting policies discussed below, please refer to the accompanying notes to the financial statements. Accounting for revenues requires management's judgment as to the nature, timing and extent of recording and recognizing revenues when earned under its various programs. Revenues generated under a time value contract requires management's judgment as to when revenues are earned and the related costs are incurred throughout the life of the contract. Income from membership fees, advertising income and web site services will be earned on a pro rata basis while income from the Company's product lines will be recognized when shipped. The Company assesses potential impairment of its long-lived assets, which include its property and equipment and its identifiable intangibles such as software development costs and deferred charges under the guidance of SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". The Company must continually determine if a permanent impairment of its long-lived assets has occurred and write down the assets to their fair values and charge current operations for the measured impairment. The Company has issued, and may continue to issue, its common stock for services. In September 2001 the Company's legal counsel accepted 100,000 shares of common stock as payment for $9,000 in general legal services rendered ($.09 per share). Subsequent to that date, the Company has issued common stock and rights to purchase common stock, such as in connection with the Lifetyme, Inc. agreement. The Company has issued stock rights to noteholders as additional interest in addition to the notes stated 10% interest. The cost associated with these transactions was based on an intrinsic fair value of $.09 per share which is the same value placed on the legal services transaction. It is the Company's judgment that, since the Company's common stock is not publicly traded and that it is not widely held, the best determination of fair value of the stock is the latest transaction which was measured at arms length. Absent a current public market for the Company's common stock, the Company believes its stated fair value assigned to these transactions to be reasonable. MARKETING In order to attract schools as marketing partners for our products and services, we will offer public and private schools an online interactive calendar. We have a database of schools throughout the country that we will target. The full-page calendar displays school meetings and activities, newsletter information and it links to school web sites. The calendar can also be emailed by the school to the students' families in a text format. An authorized person is required to sign up the school for the program. Information is added to the calendar from a secure, password protected system. 30 Our company will also attend and participate in mayoral conferences, legislative conferences and other trade shows seeking to inform elected officials of our economic development program for their hometown communities and to reach non-profit organizations and small businesses. SearchHelp has been represented at PTA conferences throughout the country in order to directly reach schools nationwide to secure their marketing assistance. In June 2001 and April 2002, we were an exhibitor at the Baltimore National PTA conference and at the Nassau County District PTA conference, respectively. In May 2002, we were represented at the California state PTA conference and we were an exhibitor at the San Antonio, Texas National PTA conference in June 2002. We have been well received by conference attendees as they view our company's products and services as positive and supportive of schools and communities. SearchHelp has also advertised in a national school-related publication known as The Fundraising and Edutainment Guide. We intend to continue exhibiting at school related conferences. We have two different marketing plans depending on the amount of money raised in this offering. In both plans, we will focus our marketing expenditures on targeted groups which include chambers of commerce, municipal authorities (economic development), tourism bureaus, public schools and nonprofit organizations. We have compiled our target list. With a $220,000 advertising and marketing budget, we will have the resources to contact a controlled number in each group through major trade shows, e-mail and 6 mailings within a 12-month period. As we gain success, we expect to leverage these gains to expand our reach. The traditional marketing media of print, radio and local cable TV will be used in select cases where it is economical. With a $450,000 advertising and marketing budget, we intend to increase the controlled group by about 10% and increase the number of mailing campaigns to these groups. Our aim would be to continue to focus on a controlled number of targets within each group and we would hire a marketing manager for each group. These managers will not only have marketing experience, but also have experience with the specific community groups that they are targeting. We intend to have a reseller program which will be comprised of independent graphic artists and web designers, as well as other businesses that have relationships with small business communities across the United States. These resellers will be paid a commission for all their business accounts within the SearchHelp network. They will be able to maintain their accounts within a private on-line office specifically designed to create a seamless process from signing up and implementing business to maintaining and tracking every facet of their business. We plan to market to resellers through printed publications and web sites that are frequented by web designers. This marketing effort will take place during the first 12 months of operation after completion of this offering. TECHNOLOGY SearchHelp's computer system is currently built on Microsoft's Windows 2000 Server technology. Each rack-mounted server contains Dual Intel PIII CPU's with at least 512mbs of RAM. The database system contains redundant servers working together to deliver high quality performance. The storage is housed on an external RAID array system that allows multiple servers to share the data all at one time. Management believes this technology provides a more stable environment and eliminates downtime due to hardware failure. 31 The connection to the Internet is provided by 3 major fiber optic carriers from 3 separate sources. This setup not only provides redundancy in connections, but also load balancing if traffic increases dramatically in a short period of time. Electric power is provided by 2 energy companies on 2 separate grids. All servers in the data center go through a massive "UPS" (battery) system that are fed by the 2 power grids and large backup generators. WEB SITE Our web site was created by William Bozsnyak and Debbie Seaman, our founders and 2 of our 4 full-time employees. We also utilize the services of 2 independent contractors who designed and maintain our web site and develop our computer programming. The web site runs from our servers in two locations. The main server is located in a data center in Commack, New York. A back-up server and development server are located in our office in Bethpage, New York. Our web site was designed around local communities connected by a customized national network. In addition to our community and business based web site programs, we provide for the consumer a place to find regional information and entertainment. We also offer users the ability to check their personal e-mail, as well as classifieds, event listings, personal calendar and personal folder. To add quality content, increase traffic and hold down advertising costs, we intend to form strategic alliances to develop content and make barter marketing arrangements with various local media companies, community organizations, banks, credit card companies, local school districts, national associations, tourism bureaus and chambers of commerce. In addition, we intend to work with other on-line entities that wish to enhance and extend their brand, obtain additional traffic, generate new revenues, offer benefits and/or provide localized information services. A wireless web presence for SearchHelp content is also planned, as this will allow our "on the go" viewers uninterrupted access. We also intend to offer multilingual content, reaching out to the growing population of non-English speaking Internet users and thus increasing viewership. MATERIAL AGREEMENTS We have entered into the 6 material agreements described below. 1. On November 26, 2001, we entered into an Internet Advertising Agreement with Lifetyme, Inc., a Delaware corporation that sells nonprescription vitamins. Lifetyme expects to advertise on our web site and in certain of our marketing materials in order to increase its brand recognition and to increase sales. Lifetyme will pay us an advertising fee which will be determined on a per project basis. The initial term of the agreement is 18 months but we have the right to extend the term for an additional 18 months. Upon execution of the Agreement, we granted Lifetyme the right to purchase 500,000 shares of common stock for a purchase price of $.001 per share, a total of $500 which was then the fair value of the underlying securities. Lifetyme assigned this right to certain of its shareholders who exercised the right immediately. If we extend the term of the Agreement, Lifetyme and/or its shareholders will have the right to purchase up to an additional 500,000 shares 32 of our common stock for a purchase price of $.001 per share, a total of $500. If we extend the agreement, the excess of the fair value of the securities issued over the $500 purchase price, if any, will be charged to operations. Because Lifetyme is still a development stage company, the arrangements between us may never go into effect. In addition, as our company and Lifetyme further develop, our arrangements may change. 2. On December 20, 2001, we entered into a teaming agreement with National Economic Development Advisors, LLC, a New York limited liability company. National is expert in community development and serves as a consultant to not-for-profit organizations. We engaged National for 3 years as a consultant in connection with our community development program and will pay National 55% of any net profits generated as a result of National's services. Martin R. Cantor and Noel C. Bonillia, the principals of National, are both members of our Advisory Board. 3. On December 15, 2001, we entered into a software development and rights transfer agreement with Benjamin Kolts, an independent consultant. Mr. Kolts assists us in web site programming, applications and design. We pay Mr. Kolts an hourly fee of $25. Mr. Kolts does business as ESP Interactive. 4. On December 26, 2001, we entered into a one year data products license agreement with Acxiom Corporation, an Arkansas corporation, to provide our web site with a telephone directory for use by our customers. We pay Acxiom a monthly fee of $6,500. The agreement will automatically renew for additional one-year periods. To date we have not paid any monthly fees since the data base that Acxiom will provide us is not yet complete. 5. On May 14 , 2002, we entered into a 3-year marketing agreement with Protect-a-Child America. Protect-a-Child America is a registered agent for Child Shield USA which sells Child Shield kits through distributors who independently market and sell the product. SearchHelp is now a distributor of Child Shield. Child Shield has 2 components: (1) to reduce the number of lost, missing, abducted, and runaway children in America by our child safety program which provides parents with simple, easy-to-follow educational materials that will provide their children with important knowledge that can help to prevent such a tragedy, and (2) to offer victim parents and law enforcement agencies an all inclusive source for immediate assistance in distributing information that is vital to the recovery effort of a missing child. If a Child Shield registered child should ever become missing, the Child Shield product is designed to act immediately by providing both local and far-reaching assistance to the child's family and to the police agency handling the investigation. Pursuant to the terms of the agreement, SearchHelp will market the Child Shield product. SearchHelp is compensated as follows: $5 for each of the first 499 unit sales; $10 for each of the next 500 unit sales; $12.50 for each of the next 1,500 unit sales; and $15 for every sale above 2,500 units. Renewals of Membership will be deemed to be a sale of a Unit for purposes of determining SearchHelp's commission. The agreement will automatically renew for additional one-year periods. 6. On June 6, 2002, we entered into a 5-year License and Distribution Agreement with eDocusign, Inc., a Delaware corporation, to be the exclusive licensee to manufacture, package, promote, advertise, market and sell the Secure Personal Information Keyed Electronically (S.P.I.K.E.) in the United States through December 31, 2003 and the non-exclusive licensee thereafter for the term of the agreement. Under the agreement, we will pay eDocusign $50,000 within 45 33 days after the close of this offering and $4.00 for each S.P.I.K.E. product we sell. The agreement does not have any renewal terms. 7. On August 7, 2002 we entered into a production agreement with Twiz Studios, Inc. to create and animate character scenarios for S.P.I.K.E. Under the agreement we will pay Twiz a total of $9,600 in 3 installments. We paid Twiz the first installment of $3,200 as a deposit toward the project. We will pay Twiz the second installment when a certain portion of the project is complete and the balance upon full completion of the project which is targeted for November 15, 2002. However, this agreement has been terminated. We are working with another animator to provide SearchHelp the services that Twiz was to provide. 8. On October 18, 2002 we entered into a consulting agreement with the Oyster Bay East Norwich School District to assist in organizing and creating a special purpose company to perform not-for-profit technology training services for the education of its students. Under the agreement, the school district will pay us a consulting fee of $5,000, which is subject to receipt by the school district of the necessary funding. PUBLIC SERVICE We intend to help local communities by assisting them in promoting the attractions and benefits within the communities by working with all of their existing resources, including nonprofit organizations and local public schools. We expect to provide nonprofit organizations with resources to better reach their targeted population locally and nationwide through our online services and to allow them to add and edit information at their own convenience from a secure password protected environment. We expect that they will be able to contact and work with elected officials through our web site, as well as post issues and solutions affecting their organizations, such as fund raising efforts, new programs and volunteer recruitment. To our knowledge, SearchHelp is the only web site offering this umbrella of services to nonprofit groups. We will also work closely with local school systems by providing them with a school calendar program. Both public and private schools will be able to add and edit information in a secure password protected environment which can be accessed by authorized individuals from the school. Our calendar program is intended to allow schools to post school events and other school related content to assist them in reaching their larger communities. Schools should also be able to e-mail a text version of their calendar to their students' families. We believe that by building up the local nonprofit organizations and local schools in a community, the community can improve its business and increase its vitality. Local and national nonprofit organizations also need a comprehensive and centralized on-line location where they can inform the public and market their programs. SearchHelp intends to provide this service to these groups and, in so doing, will generate exposure for both the nonprofit organization and the SearchHelp brand name. In turn, the organizations will list the SearchHelp web site. The Internet via SearchHelp may become a vehicle for increasing community awareness and support. 34 COMPETITION Our competition on the Internet comes from three areas. The first is other small business solutions providers. The second is major nationwide portals, such as CitySearch, Yahoo and AOL. The third is the hundreds of local web sites around the country which are dedicated solely to an individual city or region. The nationwide portals concentrate mainly on major cities and large suburban population centers. The information they provide is generic for small businesses or communities that are unable to do business with these nationwide portals since it is too expensive to advertise on their web site and their web sites lack the small local community nature. The local or regional web sites throughout the country provide good local information, but have many limitations. The local sites are typically poorly publicized and have a narrow focus providing content only on one localized region. Viewers may have to exit the site to locate information about other areas or simply to find movie schedules, financial content, sports or other generic content. Like their nationwide portal counterparts, many of these regional sites have a prohibitive cost structure. One of the major reasons both portal types are cost prohibitive for small business and communities is the expense associated with having a sales force. Our non-Internet competition are local offices of economic development across the country and other companies offering small business solution products that are similar to our services and product line. The majority of local offices of economic development are considered to be understaffed and they are largely unable to meet the needs of their communities. Throughout the country there are companies offering products to small businesses. We intend to provide products and services that are affordable and practical. SearchHelp also has its web site as an Internet feature for additional marketing exposure that non-Internet based businesses cannot provide. SearchHelp has both Internet and non-Internet capabilities and our web site combines aspects of both the nationwide portal and the localized web site community. We will allow viewers to surf from region to region with ease and will offer local content, as well as generic information. We expect to be able to manage our overhead, due to our community-based programs and other distribution channels, while also keeping our products and services within the average budgets of small businesses in the United States. 35 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS We have a board of directors comprised of 4 members. Each director holds office until the next annual stockholders meeting or until a successor is duly elected or appointed. The members of our board of directors and our executive officers are: Name Age Position ---- --- -------- William Bozsnyak 42 Director, Chief Executive Officer, Chief Financial Officer, Chairman of the Board, Vice President and Treasurer Debbie Seaman 44 Director, President and Secretary Joel San Antonio 49 Director Joseph P. Carrizzo 45 Director WILLIAM BOZSNYAK William Bozsnyak has been a Director, the Chief Executive Officer, Treasurer and Chairman of the Board of the company since the company's inception in January 2001 and has been the Chief Financial Officer and Vice President since September 2002. Mr. Bozsnyak was the President of the Company until September 2002. In 1982, he joined the investment firm of J.P. Morgan Securities Inc. where he became a vice president in the Institutional Fixed Income Sales Department. In 1993, Mr. Bozsnyak left Morgan to join UBS Securities Inc. (Union Bank of Switzerland). He served as a vice president within the Global Fixed Income Department, where he was relationship manager and sold U.S. fixed income securities to major institutional U.S. firms. In 1998, Mr. Bozsnyak left the financial services business to create a local portal that focused on small businesses whose needs were not being met on a national level. This portal ultimately became the company. Mr. Bozsnyak graduated in 1982 from the New York Institute of Technology with a B.S. degree in Business Administration and a minor in Finance. DEBBIE SEAMAN Debbie Seaman has been a Director and the Secretary of the company since the company's inception in January 2001 and has been the President since September 2002. Ms. Seaman was the Vice President of the Company until September 2002. Ms. Seaman has over 20 years of professional experience in both profit and nonprofit industries and has worked for numerous nonprofit organizations such as the National Multiple Sclerosis Society, Nassau/Suffolk Law Services, NYS Youth Bureaus, Surrogate's Court and North Shore Child & Family Guidance Center. Ms. Seaman's responsibilities included department administration, policy/program development, community project organizing, public speaking, grant writing and clinical practice. Ms. Seaman has been a self-employed independent consultant since 1987. As a business consultant, Ms. Seaman has worked as a strategist to increase the value of a company as a whole, while also helping management and staff in fostering improved performance and cooperation. She was a personal life coach and business strategist for small and medium sized companies in industries such as, construction, law, marketing, publishing, politics and travel. Ms. Seaman received her Masters degree in Social Work from Virginia Commonwealth 36 University in 1981. In 2000, Ms. Seaman was awarded the Outstanding Community Leadership Award from the National Multiple Sclerosis Society, Long Island Chapter. JOEL SAN ANTONIO Joel San Antonio has been a Director of SearchHelp since September 2001. Mr. San Antonio began his career as co-founder of a business in the women's fashion industry. In 1983, Mr. San Antonio and his partner exited the fashion industry and founded Warrantech Corporation, a third party administrator of service contracts and extended warranty programs. The company went public in 1984 and, in September 1997, was recognized by Fortune Magazine as one of the "100 Fastest Growing Companies in America." Today, Mr. San Antonio serves as Chairman of the Board and Chief Executive Officer of Warrantech Corporation and each of its operating subsidiaries. In addition, he was a founder of Corniche Group, Inc., a provider of insurance products and services, and served as a director from May 1998 through September 1999. Since December 1999, Mr. San Antonio has also served as the Chairman of the Board of MedStrong International Corporation, a public company that transports medical records over the Internet. Mr. San Antonio is a member of the Southwestern Connecticut Area Commerce and Industry Association and the Young Presidents' Organization, Inc. A recipient of many industry awards, he was a national finalist in Ernst & Young's 1998 "Entrepreneur of the Year" program. He is also involved in a variety of philanthropic and charitable activities and is a member of the Metropolitan Museum of Art and the Stamford Theater for the Performing Arts. JOSEPH P. CARRIZZO Joseph P. Carrizzo has been a Director of SearchHelp since September 2001. Mr. Carrizzo began his career with Lehman Brothers in 1983. While working there for twelve years in the corporate bond department, he became Lehman's senior level medium term note trader. In 1995, he left Lehman to become an independent distributor of personal care and anti-aging products. His business now includes the distribution of technology and telecom services and on-line products. RONALD GLIME Ronald Glime was the Chief Financial Officer of SearchHelp from September 2001 until September 2002. EXECUTIVE COMPENSATION Long-term Compensation Awards ----------------------------- Securities Underlying Options ($) --------------------------------- Annual Compensation ------------------- Name Salary($) Bonus($) ---- --------- -------- William Bozsnyak 0 0 0 Debbie Seaman 0(1) 0 0 (1) Commencing on October 1, 2001, Ms. Seaman has been receiving $500 per month for child care. 37 EMPLOYMENT AGREEMENTS In March 2000, William Bozsnyak entered into a 3-year employment agreement with E-Com Marketing Group, Inc., a predecessor company, pursuant to which Mr. Bozsnyak became Chief Executive Officer, President and Treasurer of SearchHelp. The agreement provides for a base salary of $80,000, which will commence upon the completion of this offering with gross proceeds of at least $2,400,000, with a minimum annual 5% increase. In March 2000, Debbie Seaman entered into a 3-year employment agreement with E-Com Marketing Group, Inc., a predecessor company, pursuant to which Ms. Seaman became Vice President and Secretary of SearchHelp. The agreement, as amended, provides for a base salary of $70,000, which will commence upon the completion of this offering with gross proceeds of at least $2,400,000, with a minimum annual 5% increase and a salary of $36,000 during the period which will commence upon the company raising in excess of $1,000,000 in this offering until the completion of this offering. Each employment agreement will be automatically extended each year unless notice is received by either the employee or us. Both Mr. Bozsnyak and Ms. Seaman will receive incentive bonuses to be determined prior to the commencement of each year if they satisfy the criteria for such bonuses as determined by the company's compensation committee. If and when the company establishes a stock option plan, each of them will be granted options to purchase up to $200,000 worth of shares of common stock at a price equal to the midpoint between the bid and ask price of a share of common stock on the date of the grant. CERTAIN TRANSACTIONS On December 4, 2001, SearchHelp borrowed $25,000 from Ronald Glime, its then Chief Financial Officer. Pursuant to the promissory note issued to Mr. Glime, we agreed to repay the note, plus interest at a rate of 10% per annum, by February 4, 2002. Mr. Glime has the right to purchase 10,000 shares of our common stock at a price of $.01 per share if his note, and accrued interest, is not repaid in full when due, and to purchase an additional 5,000 shares of common stock at a price of $.01 per share for each month thereafter that the note, with accrued interest, is not repaid in full. As of October 15, 2002, Mr. Glime was not repaid and he purchased 20,000 shares of common stock for $200. At October 15, 2002, Mr. Glime has additional purchase rights to acquire 30,000 shares of our common stock for an aggregate of $300. The Company has a $50,000 revolving line of credit with HSBC Bank USA. As of October 15, 2002, $39,450 of the credit line has been utilized. The company's officers, William Bozsnyak and Debbie Seaman, personally guaranteed this debt. Their guarantee is collateralized by marketable securities owned by Mr. Bozsnyak which had a fair market value of approximately $33,000 as of October 15, 2002. On December 1, 2000 the company entered into a lease with Briarcliffe Foundation, Inc. Mr. Bozsnyak personally guaranteed the rent payments due under the lease. Mr. Bozsnyak has advanced $71,951, and Ms. Seaman has advanced $14,820, to the company. These loans do not bear interest and Mr. Bozsnyak and Ms. Seaman do not expect them to be repaid until the company has enough cash to operate for a period of 18 months. 38 PRINCIPAL STOCKHOLDERS The following table sets forth certain information with respect to the beneficial ownership of our common stock as of October 15, 2002, by: * Each person (or group of affiliated persons) who is known by SearchHelp to beneficially own 5% or more of our common stock * Each director of SearchHelp * Each of the named executive officers of SearchHelp * All directors and executive officers of SearchHelp as a group Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to shares. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all shares beneficially owned. The number and percentage of shares beneficially owned prior to this offering are based on 15,130,000 shares of common stock issued and outstanding as of October 15, 2002, plus 470,000 shares of common stock issuable since our debt has not been repaid as of October 15, 2002. The number and percentage of shares beneficially owned after this offering are based on the 15,130,000, plus the 8,000,000 sold in this offer plus 470,000 additional shares of common stock issuable if the debt has not been repaid by October 15, 2002.
Shares Beneficially Owned Shares Beneficially Owned Prior After the Sale of the Maximum to this Offering of this Offering ------------------------------------------------------------------- Name and Address of Beneficial Owner Number Percent Number Percent ------------------------------------ ------ ------- ------ ------- William Bozsnyak (1) 3,457,685 22.25% 3,457,685 14.69% Debbie Seaman (2) 3,119,225 20.07% 3,119,225 13.25% Joel San Antonio (3) 5,500,000 35.40% 5,500,000 23.36% Joseph Carrizzo (4) 250,000 1.6% 250,000 1.06% All current directors and executive officers of 12,326,910 79.34% 12,326,910 52.37% SearchHelp as a group (4 persons)
(1) Mr. Bozsnyak's address is c/o SearchHelp, Inc., 1055 Stewart Avenue, Bethpage, NY 11714. (2) Ms. Seaman's address is c/o SearchHelp, Inc., 1055 Stewart Avenue, Bethpage, NY 11714. (3) Mr. San Antonio's address is c/o Warrantech Corporation, One Canterbury Green, Stamford, CT 06901. (4) Mr. Carrizzo's address is 35 Marie Drive, Huntington, New York, 11743. 39 DESCRIPTION OF SECURITIES COMMON STOCK Our authorized capital stock consists of 100,000,000 shares of common stock, par value $.0001 per share. There are currently 15,130,000 shares issued and outstanding. Each holder is entitled to one vote for each share held on all matters to be voted upon by the stockholders. The shares of common stock do not have cumulative voting rights, which means that holders of more than 50% of the shares of common stock voting for the election of directors can elect all the directors and, therefore, our present stockholders can elect all of the directors even after this offering. The holders of common stock are entitled to receive a pro-rata share of dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for the payment of dividends. However, we presently intend to reinvest any earnings instead of paying cash dividends. In the event of our liquidation, dissolution, or winding up, the holders of common stock are entitled to share pro-rata in all assets remaining after payment of our liabilities. Shares of common stock have no preemptive, conversion, or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. UNIT WARRANTS There are currently no warrants outstanding. Two types of warrants are being offered pursuant to this prospectus. Each class A redeemable warrant gives its holder the right to purchase one share of common stock for $.75. The class A redeemable warrants will be exercisable at any time after the date of this prospectus until December 31, 2007. A maximum of 8,000,000 shares of common stock are issuable upon the exercise of the class A redeemable warrants. If our common stock trades for at least 5 consecutive trading days at a price of $1.50 or more per share, we will have the right to call the class A redeemable warrants at a price of $.01 per class A redeemable warrant unless an investor chooses to exercise his or her class A redeemable warrant at that time. Each class B redeemable warrant purchase in this offering gives its holder the right to purchase one share of common stock for $1.75. The class B redeemable warrants will be exercisable at any time after the date of this prospectus until December 31, 2009. If our common stock trades at least 5 consecutive trading days at a price of $2.50 or more per share, we will have the right to call the class B redeemable warrants at a price of $.01 per class B redeemable warrant unless an investor chooses to exercise his or her class B redeemable warrant at that time. NOTES In October 2002, we raised $25,000 for operations by issuing one promissory note bearing interest at 10% per annum, plus an approximate 10% penalty interest if not paid when due. This note, together with accrued interest, is due February 2003 and otherwise is identical in other respects with the July 2002 notes. In July 2002, we raised $50,000 for operations by issuing 2 promissory notes bearing interest at 10% per annum, plus an approximate 10% penalty interest if not paid when due. These notes, together with accrued interest, were due in November 2002 and otherwise are identical. 40 In May 2002, we raised $75,000 for operations by issuing 3 promissory notes bearing interest at 10% per annum, plus an approximate 10% penalty interest if not paid when due. These notes, together with accrued interest, were due in September 2002 and are identical in other respects with the July 2002 notes. Commencing in December 2001 through February 2002, we raised an additional $325,000 of operating capital by issuing $25,000 promissory notes bearing interest at 10% per annum. Each of the 13 notes is payable in full on the 60th day following its issuance. Each noteholder has the right to acquire 10,000 shares of common stock at a price of $.01 per share if his or her note is not paid in full, together with accrued interest, on the due date and an additional 5,000 shares of common stock at a price of $.01 per share for each month thereafter that the note, with interest, is not repaid in full. As of October 15, 2002, none of these notes were repaid and, as a result, the noteholders were then entitled to purchase 470,000 shares of common stock for an aggregate price of $4,700. Prior to October 15, 2002, an aggregate of 130,000 shares of common stock has been purchased by noteholders for $1,300. In September 2001 and October 2001, we raised $50,000 for operations by issuing promissory notes bearing interest at 10% per annum. These notes, together with accrued interest, were paid in full in February 2002. 41 PLAN OF DISTRIBUTION We have entered into a placement agreement with Robert M. Cohen & Co., Inc., a securities broker-dealer who is a member of the National Association of Securities Dealers, Inc. The subscription amount of $.50 per unit must be paid by check made payable to "SearchHelp International Company Escrow Account" or by wire transfer. Funds will be collected and deposited into an escrow account at HSBC Bank USA and will be paid over to the company at periodic closings, expected to occur once every 2 weeks. The purpose of the escrow is simply to facilitate the closing process. The release of funds from escrow is not dependent upon our raising any specific amounts in this offering. Certificates for shares and warrants subscribed for will be issued as soon as practicable after each closing. The placement agent will sell the units to the public on SearchHelp's behalf on a "best efforts" basis, with no required minimum. Therefore, if we do not raise enough money to continue our business we will not return your investment to you. We will pay the placement agent a commission of 10% of the proceeds of all the units placed by the placement agent and non-accountable expenses of 3% of the proceeds of all the units placed by the placement agent. The placement agent will also receive warrants to purchase units. The price of the units has been determined solely by us and does not bear any direct relationship to our assets, operations, book value or other established criteria of value. No one has agreed to buy any of our units and there is no assurance that any sales will be made. We have the right to accept or reject any subscriptions for units in whole or in part. Upon the effective date of this prospectus, SearchHelp has agreed to give the placement agent warrants to purchase up to 800,000 units at $.985 per unit for 5 years, which means the placement agent will receive one placement agent warrant to purchase one unit for every 10 units sold by the placement agent. Upon the exercise of a warrant and the payment of the exercise price, the placement agent will acquire one share of common stock and a class A redeemable warrant to purchase one share of common stock exercisable at $.985 per share for 5 years and a class B redeemable warrant to purchase one share of common stock exercisable at $2.285 per share for 5 years. The redeemable warrant and underlying securities are restricted from sale, transfer, assignment or hypothecation for a period of one year from the date of this prospectus, except for transfers to officers and partners of the placement agent. The placement agent will be subject to the same call provisions contained in the class A redeemable warrant and the class B redeemable warrant. The placement agent's warrants and the underlying shares of common stock will not be registered at this time. The placement agent will have certain piggyback rights to cause the registration of these securities if SearchHelp effects a registration of its securities on or before December 31, 2007. The placement agent does not have demand registration rights. The placement agreement provides that SearchHelp will indemnify the placement agent against certain liabilities under the Securities Act of 1933, as amended, or will contribute to payments that the placement agent may be required to make in respect thereof. The placement agreement provides that we will cause each of our officers and directors and certain others to enter into a "lock-up" agreement not to sell, pledge, hypothecate, transfer, or otherwise dispose of any shares of common stock owned by them, for a period of 12 months from the effective date of this prospectus without the prior written consent of the placement agent. The 42 shares subject to the lock-up consist of a minimum of 15,000,000 shares owned or to be owned by current stockholders and the holders of the notes. The placement agent does not intend to sell any of the units to accounts for which it exercises discretionary authority. The placement agent has no right to designate or nominate a member of our board of directors. 43 SHARES ELIGIBLE FOR FUTURE SALE Prior to this offering, there has not been any public market for our common stock, and no prediction can be made as to the effect, if any, that market sales of shares of common stock or the availability of shares of common stock for sale will have on the market price of the common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of the common stock and could impair our future ability to raise capital through the sale of equity securities. See "Risk Factors." There will be a significant number of shares eligible for future sale and this may hurt the market price of our shares." Upon the closing of this offering, and assuming all the units are sold, we will have an aggregate of approximately 23,130,000 shares of common stock outstanding. Additionally, there will be approximately 470,000 shares of common stock issuable to our note holders since their notes are not going to be paid in full as of the effective date of this prospectus. Of the outstanding shares, the 8,000,000 shares sold in this offering will be freely tradable, except that any shares held by officers, directors or persons who hold 10% of our shares of common stock may only be sold in compliance with the limitations described below. The remaining 15,130,000 shares of common stock, plus the 470,000 shares issuable to the note holders, will be deemed "restricted securities" as defined under Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 promulgated under the Securities Act, which rules are summarized below. Subject to the lock-up agreements described below and the provisions of Rules 144, 144(k) and 701, additional shares will be available for sale in the public market as follows: Number of Shares --------- Shares outstanding and shares reserved for issuance to note holders prior to the date of this prospectus (subject, in some cases, to volume limitations).................. 15,535,000 Shares sold pursuant to this prospectus..................... 8,000,000 --------- After 12 months from the date of this prospectus (subject, in some cases, to volume limitations and assuming no warrants have been exercised).............. 23,535,000 Exercise of all class A redeemable warrants and class B redeemable warrants.................................... 16,000,000 ---------- After 12 months from the date of this prospectus (subject, in some cases, to volume limitations and assuming the class A redeemable warrants and the class B redeemable warrants have been exercised)............................................. 39,535,000 Exercise of all underwriter warrants........................ 2,400,000 --------- After 12 months from the date of this prospectus (subject, in some cases, to volume limitations and assuming all of the warrants have been exercised)............................................. 41,535,000 ========== In general, under Rule 144, as currently in effect, a person (or persons whose shares are required to be aggregated), including an affiliate, who has beneficially owned shares for at least one year is entitled to sell, within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading volume in the common stock 44 during the four calendar weeks preceding the date on which notice of such sale is filed, subject to certain restrictions. In addition, a person who is not deemed to have been an officer, director or person who hold 10% of our shares of common stock at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years would be entitled to sell such shares under Rule 144(k) without regard to the requirements described above. To the extent that shares were acquired from an affiliate, such person's holding period for the purpose of effecting a sale under Rule 144 commences on the date of transfer from the affiliate. SearchHelp's directors and officers and certain stockholders who hold shares in the aggregate have agreed that they will not offer, sell or agree to sell, directly or indirectly, or otherwise dispose of any shares of common stock without the prior written consent of the placement agent for a period of 12 months from the date of this prospectus. Please see "Plan of Distribution." In addition, we may issue shares of common stock in connection with any acquisition of another company if the terms of such issuance provide that such common stock shall not be resold prior to the expiration of the 12 months referenced in the preceding sentence. See "Risk Factors--There will be a significant number of shares eligible for future sale and this may hurt the market price of our shares." LEGAL MATTERS The validity of the shares of common stock offered hereby will be passed upon for SearchHelp by Tannenbaum Helpern Syracuse & Hirschtritt LLP, 900 Third Avenue, New York, New York 10022. Tannenbaum Helpern Syracuse & Hirschtritt LLP owns 100,000 shares of our common stock. Certain legal matters in connection with this offering will be passed upon by for the placement agent by Adorno & Yoss, P.A., 350 Las Olas Boulevard, Suite 1700, Ft. Lauderdale, FL 33301. OFFICE We are leasing an executive office located at 1055 Stewart Avenue, Suite 12, Bethpage, New York 11714. The original term of the lease was 1 year which began on December 1, 2000 and was extended for one year. The rent for the premises is $1,082 per month or $12,984 per year. We provided the landlord with a security deposit of $2,155. LITIGATION We are not a party to any litigation and we have no knowledge of any pending or threatened litigation against us. 45 EXPERTS The financial statements of SearchHelp, Inc. as of December 31, 2001 included in this prospectus have been audited by Weinick Sanders Leventhal & Co., LLP independent certified public accountants, as set forth in their report of such financial statements, and are included in this prospectus in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. INVESTOR SUITABILITY STANDARDS APPLICABLE IN CERTAIN STATES California and Oregon - Each investor must have either (i) a liquid net worth of not less than $75,000 and a gross annual income of not less than $50,000 or (ii) a liquid net worth of $150,000 and the amount each investor is investing in our company does not exceed 10% of the investor's net worth. For purposes of this paragraph, the meaning of "liquid net worth" excludes home, home furnishings and automobiles. ADDITIONAL INFORMATION We have filed with the Securities and Exchange Commission a Registration Statement on Form SB-2 (including the exhibits, schedules and amendments thereto) under the Securities Act with respect to the shares of common stock to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. For further information regarding our company and the shares of common stock to be sold in this offering, please refer to the registration statement. Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract, agreement or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. You may read and copy all or any portion of the registration statement or any other information that we file at the Securities and Exchange Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the Securities and Exchange Commission. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our Securities and Exchange Commission filings, including the Registration Statement, are also available to you on the Securities and Exchange Commission's Web site (HTTP://WWW.SEC.GOV). As a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, will file periodic reports, proxy statements and other information with the Securities and Exchange Commission. Upon approval of the common stock for the quotation on the Nasdaq over the counter market, such reports, proxy and information statements and other information may also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. 46 SEARCHHELP, INC. (A Development Stage Company) I N D E X Page No. -------- INDEPENDENT AUDITORS' REPORT............................................ F-2 FINANCIAL STATEMENTS: Balance Sheet as at December 31, 2001............................... F-3 Balance Sheet as at September 30, 2002 (Unaudited).................. F-4 Statements of Operations For the Period from January 29, 1999 (Inception) to December 31, 1999, For the Years Ended December 31, 2000 and 2001 and Cumulative from January 29, 1999 (Inception) to December 31, 2001................................. F-5 For the Nine Months Ended September 30, 2002 and 2001 and Cumulative from January 29, 1999 (Inception) to September 30, 2002 (Unaudited).................... F-6 Statements of Stockholders' Capital Deficiency For the Period from January 29, 1999 (Inception) to December 31, 1999 and For the Years Ended December 31, 2000 and 2001................... F-7 For the Nine Months Ended September 30, 2002 (Unaudited)......... F-8 Statements of Cash Flows For the Period from January 29, 1999 (Inception) to December 31, 1999, For the Years Ended December 31, 2000 and 2001 and Cumulative from January 29, 1999 (Inception) to December 31, 2001............................ F-9 - F-10 For the Nine Months Ended September 30, 2002 and 2001 and Cumulative from January 29, 1999 (Inception) to September 30, 2002 (Unaudited).................... F-11 Notes to Financial Statements ................................. F-12 - F-26 F-1 [Logo Omitted] WEINICK SANDERS LEVENTHAL & CO., LLP 1515 BROADWAY NEW YORK, N.Y. 10036-5788 --------------- -------------------------------------- ------------------------- CERTIFIED PUBLIC ACCOUNTANTS 212-869-3333 ---------------------------- FAX 212-764-3060 WWW.WSLCO.COM INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders SearchHelp, Inc. We have audited the accompanying balance sheet of SearchHelp, Inc. (A Development Stage Company) as at December 31, 2001 and the related statements of operations, stockholders' capital deficiency and cash flows for the period from January 29, 1999 (inception) to December 31, 1999, years ended December 31, 2000 and 2001 and cumulative from January 29, 1999 (inception) to December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SearchHelp, Inc. (A Development Stage Company) as at December 31, 2001 and the results of its operations and its cash flows for the period from January 29, 1999 (inception) to December 31, 1999, years ended December 31, 2000 and 2001 and cumulative from January 29, 1999 (inception) to December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 1 to the financial statements, the Company has a working capital deficiency of $322,161 and a stockholders' capital deficiency of $142,546 at December 31, 2001 and as a development stage company has incurred losses since inception. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plan regarding those matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As discussed in Note 14 to the financial statements, certain errors in accounting for compensatory elements in the issuance of the Company's common stock for the year ended December 31, 2001 were made. Accordingly, the financial statements at December 31, 2001 and for the year then ended and cumulative from January 1, 1999 through December 31, 2001 have been restated (and adjustments have been made to assets, additional paid-in-capital and retained earnings as of January 1, 2002) to correct the errors. /s/ WEINICK SANDERS LEVENTHAL & CO., LLP New York, N. Y. March 15, 2002 F-2 SEARCHHELP, INC. (A Development Stage Company) BALANCE SHEET DECEMBER 31, 2001 (Restated) A S S E T S -----------
Current assets: Cash $105,532 Prepaid insurance 3,403 -------- Total current assets $108,935 Property and equipment - at cost, less accumulated depreciation 9,556 Other assets: Software development costs, less accumulated amortization of $65,168 88,854 Deferred promotional incentives, less accumulated amortization of $2,950 41,550 Deferred finance costs, less accumulated amortization of $15,000 12,500 Deferred registration costs 25,000 Security deposit 2,155 -------- Total other assets 170,059 ------- $ 288,550 LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY ------------------------------------------------ Current liabilities: Note payable - bank $ 39,450 Notes payable - other 275,000 Due to stockholders 86,771 Accounts payable and accrued expenses 29,875 -------- Total current liabilities $431,096 Commitments and contingencies - Stockholders' capital deficiency: Common stock - $.0001 par value Authorized - 100,000,000 shares Issued and outstanding - 15,000,000 shares 1,500 Additional paid-in capital 165,025 Deficit accumulated in the development stage ( 302,621) Stock subscriptions receivable ( 6,450) --------- Total stockholders' capital deficiency ( 142,546) $288,550
F-3 SEARCHHELP, INC. (A Development Stage Company) BALANCE SHEET SEPTEMBER 30, 2002 (Unaudited) A S S E T S -----------
Current assets: Cash $ 598 Accounts receivable 1,279 Prepaid insurance 1,144 ---------- Total current assets $3,021 Property and equipment - at cost, less accumulated depreciation 24,271 Other assets: Software development costs, less accumulated amortization of $108,688 90,984 Deferred finance costs, less accumulated amortization of $46,667 3,333 Deferred license costs, less accumulated amortization of $3,332 46,668 Deferred registration costs 275,788 Security deposit 2,155 ---------- Total other assets 418,928 ---------- $446,220 LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY ------------------------------------------------ Current liabilities: Note payable - bank $ 39,450 Notes payable - other 450,000 Current portion of long-term debt 8,425 Due to stockholders 86,771 Accounts payable and accrued expenses 414,301 ---------- Total current liabilities $998,947 Long-term debt, less current portion 4,527 Commitments and contingencies - Stockholders' capital deficiency: Common stock - $.0001 par value Authorized - 100,000,000 shares Issued and outstanding - 15,130,000 shares 1,513 Additional paid-in capital 201,112 Deficit accumulated in the development stage ( 759,879) ---------- Total stockholders' capital deficiency ( 557,254) ---------- $ 446,220 ==========
F-4 SEARCHHELP, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS
For the Period From Cumulative From January 29, 1999 January 29, 1999 (Inception) to For the Year Ended For the Year Ended (Inception) to December 31, 1999 December 31, 2000 December 31, 2001 December 31, 2001 --------------------- ------------------- ------------------- ------------------ (Restated) (Restated) Revenues $ 8,929 $ 2,766 $ - $ 11,695 -------- -------- -------- -------- Operating expenses: Selling 189 1,523 12,807 14,519 Web site costs - - 52,841 52,841 General and administrative 23,270 31,722 92,910 147,902 Depreciation and amortization 8,296 23,156 39,347 70,799 -------- -------- -------- -------- Total operating expenses 31,755 56,401 197,905 286,061 -------- -------- -------- -------- Loss from operations ( 22,826) ( 53,635) ( 197,905) ( 274,366) -------- -------- -------- -------- Other expenses: Interest 1,230 3,140 8,885 13,255 Amortization of deferred finance costs - - 15,000 15,000 -------- -------- -------- -------- Total other expenses 1,230 3,140 23,885 28,255 -------- -------- -------- -------- Net loss ($24,056) ($56,775) ($221,790) ($302,621) ========= ========= ========== ========== Per share data: Net loss per share - basic and diluted ($ - ) ($.01) ($ .02) ========= ========= ========== Weighted average number of shares outstanding 6,616,910 6,616,910 9,411,273 ========= ========= ==========
See notes to financial statements. F-5 SEARCHHELP, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS
For the Nine Months Ended Cumulative from September 30, January 29, 1999 --------------------------------- (Inception) to 2002 2001 September 30, 2002 -------------- ------------- ------------------ (Unaudited) (Unaudited) (Unaudited) (Restated) Revenues $ 1,279 $ - $ 12,974 -------------- ------------- ------------- Operating expenses: Selling 37,659 15,943 52,178 Website costs 71,615 20,025 124,456 Software development 27,315 - 27,315 General and administrative 127,259 90,099 275,161 Depreciation and amortization 91,543 24,818 162,342 -------------- ------------- ------------- Total operating expenses 355,391 150,885 641,452 -------------- ------------- ------------- Loss from operations ( 354,112) ( 150,885) ( 628,478) -------------- ------------- ------------- Other expenses: Interest 36,679 4,354 49,934 Compensatory element of note holders purchase rights 34,800 - 34,800 Amortization of deferred finance costs 31,667 - 46,667 -------------- ------------- ------------- Total other expenses 103,146 4,354 131,401 -------------- ------------- ------------- Net loss ($457,258) ($155,239) ($759,879) ============== ============= ============= Per share data: Loss per share basic and diluted ($.03) ($.02) ============== ============= Weighted average number of shares outstanding 15,050,310 6,626,434 ============== =============
See notes to financial statements. F-6 SEARCHHELP, INC. (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' CAPITAL DEFICIENCY FOR THE PERIODS FROM JANUARY 29, 1999 (INCEPTION) TO DECEMBER 31, 2001
Accumulated Total Common Stock Additional in the Stock Stockholders' --------------------- Paid-in Development Subscriptions Capital Shares Amount Capital Stage Receivable Deficiency ------- ---------- ---------- ----------- ------------- ------------ (Restated) (Restated) (Restated) Common stock issued to founders 6,616,910 $ 662 $ 1,338 $ - $ - $ 2,000 Net loss for the period from January 29, 1999 (inception) to December 31, 1999 - - - ( 24,056) - ( 24,056) ----------- ------- --------- ---------- -------- ---------- Balance at December 31, 1999 6,616,910 662 1,338 ( 24,056) - ( 22,056) Net loss for the year ended December 31, 2000 - - - ( 56,775) - ( 56,775) ----------- ------- --------- ---------- -------- ---------- Balance at December 31, 2000 6,616,910 662 1,338 ( 80,831) - ( 78,831) Loans converted to common stock 1,123,090 112 103,963 - - 104,075 Common stock subscribed 7,160,000 716 6,234 - ( 6,450) 500 Common stock issued for services rendered 100,000 10 8,990 - - 9,000 Promotional incentives with respect to exercise of stock purchase rights - - 44,500 - - 44,500 Net loss for the year ended December 31 ,2001 - - - ( 221,790) - (221,790) ----------- ------- --------- ---------- -------- ---------- Balance at December 31, 2001 15,000,000 $ 1,500 $165,025 ($302,621) ($6,450) ($142,546) =========== ======= ========= ========== ======== ==========
F-7 SEARCHHELP, INC. (A Development Stage Company) STATEMENT OF STOCKHOLDERS' CAPITAL DEFICIENCY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (Unaudited)
Deficit Accumulated Total Common Stock Additional in the Stock Stockholders' ------------------ Paid-in Development Subscriptions Capital Shares Amount Capital Stage Receivable Deficiency ------- ------- ----------- ------------ ------------- ------------ (Restated) (Restated) (Restated) Balance at December 31, 2001 15,000,000 $1,500 $165,025 ($302,621) ($6,450) ($142,546) Proceeds from exercise of noteholders purchase rights 130,000 13 1,287 - - 1,300 Payment of subscriptions - - - - 6,450 6,450 Compensatory element of noteholders purchase rights - - 34,800 - - 34,800 Net loss for the nine months ended September 30, 2002 - - - ( 457,258) - ( 457,258) ------------ --------- ---------- ---------- -------- ---------- Balance at September 30, 2002 15,130,000 $ 1,513 $ 201,112 ($759,879) $ - ($557,254) ============ ========= ========== ========== ======== ==========
See notes to financial statements. F-8 SEARCHHELP, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS
For the Period From Cumulative From January 29, 1999 January 29, 1999 (Inception) to For the Year Ended For the Year Ended (Inception) to December 31, 1999 December 31, 2000 December 31, 2001 December 31, 2001 ------------------- ------------------ ------------------- ----------------- (Restated) (Restated) Cash flows from operating activities: Net loss ($24,056) ($56,775) ($221,790) ($302,621) --------- --------- ---------- ---------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 478 864 1,339 2,681 Amortization of deferred finance costs - - 15,000 15,000 Amortization of software development costs 7,818 22,292 35,058 65,168 Amortization of deferred promotional incentives - - 2,950 2,950 Common stock issued for legal fees - - 9,000 9,000 Increase (decrease) in cash flows as a result of changes in asset and liability account balances: Prepaid insurance - - ( 3,403) ( 3,403) Security deposit - ( 1,079) ( 1,076) ( 2,155) Accounts payable and accrued expenses 9,535 42,835 ( 23,319) 29,051 --------- --------- ---------- ---------- Total adjustments 17,831 64,912 35,549 118,292 --------- --------- ---------- ---------- Net cash provided by (used in) operating activities ( 6,225) 8,137 ( 186,241) ( 184,329) --------- --------- ---------- ---------- Cash flows from investing activities: Equipment purchased ( 652) ( 1,572) ( 6,380) ( 8,604) Software development costs ( 46,906) ( 39,936) ( 67,180) ( 154,022) --------- --------- ---------- ---------- Net cash used in investing activities ( 47,558) ( 41,508) ( 73,560) ( 162,626) --------- --------- ---------- ---------- Cash flows from financing activities: Stockholder loans 53,314 42,436 ( 8,979) 86,771 Note payable - bank - - 39,450 39,450 Proceeds from notes payable - other - - 275,000 275,000 Loans payable - - 104,075 104,075 Equipment loans - ( 1,182) ( 1,627) ( 2,809) Sale of common stock 2,000 - 500 2,500 Deferred finance costs - - ( 27,500) ( 27,500) Deferred registration costs - - ( 25,000) ( 25,000) --------- --------- ---------- ---------- Net cash provided by financing activities 55,314 41,254 355,919 452,487 --------- --------- ---------- ---------- Net increase in cash 1,531 7,883 96,118 105,532 Cash at beginning of period - 1,531 9,414 - --------- --------- ---------- ---------- Cash at end of period $ 1,531 $ 9,414 $105,532 $105,532 ========= ========= ========== ==========
See notes to financial statements. F-9 SEARCHHELP, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (Continued)
For the Period From Cumulative From January 29, 1999 January 29, 1999 (Inception) to For the Year Ended For the Year Ended (Inception) to December 31, 1999 December 31, 2000 December 31, 2001 December 31, 2001 ----------------- ----------------- ----------------- ----------------- (Restated) (Restated) Supplemental Disclosures of Cash Flow Information: Cash payments made during the period for: Interest $1,230 $3,140 $ 6,166 $ 10,536 ------ ------ -------- -------- Supplemental Schedules of Noncash Investing and Financing Activities: Asset acquired for debt $3,633 $ - $ - $ 3,633 ------ ------ -------- -------- Deferred promotional incentives acquired through exercise of common stock purchase rights $ - $ - $ 44,500 $ 44,500 ------ ------ -------- -------- Common stock issued for legal fees $ - $ - $ 9,000 $ 9,000 ------ ------ -------- -------- Loans converted to common stock $ - $ - $104,575 $104,575 ------ ------ -------- -------- For the Nine Months Ended Cumulative From September 30, January 29, 1999 ----------------------------------- (Inception) to 2002 2001 September 30, 2002 ------------- ------------- ------------------ (Unaudited) (Unaudited) (Unaudited) (Restated) Supplemental Disclosures of Cash Flow Information: Cash payments made during the period for: Interest $10,670 $ 4,354 $ 21,206 ------------- ------------- ------------------ Supplemental Schedules of Noncash Investing and Financing Activities: Assets acquired for debt $15,656 $ - $ 19,289 ------------- ------------- ------------------ Deferred promotional incentives acquired through exercise of common stock purchase rights $ - $ - $ 44,500 ------------- ------------- ------------------ Common stock issued for legal fees $ - $ - $ 9,000 ------------- ------------- ------------------ Loans converted to common stock $ - $ - $104,575 ------------- ------------- ------------------ Deferred license costs $50,000 $ - $ 50,000 ------------- ------------- ------------------
See notes to financial statements. F-10 SEARCHHELP, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS
For the Nine Months Ended Cumulative from September 30, January 29, 1999 -------------------------------- (Inception) to 2002 2001 September 30, 2002 ------------ ------------ ------------------ (Unaudited) (Unaudited) (Unaudited) (Restated) Cash flows from operating activities: Net loss ($457,258) ($155,239) ($759,879) ------------ ------------ ------------------ Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Compensatory element of noteholders purchase rights 34,800 - 34,800 Depreciation 3,141 1,348 5,822 Amortization of deferred finance costs 31,667 - 46,667 Amortization of software development costs 43,520 23,470 108,688 Amortization of deferred promotional incentives 41,550 - 44,500 Amortization of deferred license costs 3,332 - 3,332 Common stock issued for legal fees - 9,000 9,000 Increase (decrease) in cash flows as a result of changes in asset and liability account balances: Accounts receivable ( 1,279) - ( 1,279) Prepaid insurance 2,259 - ( 1,144) Security deposit - - ( 2,155) Accounts payable and accrued expenses 384,426 27,749 413,477 ------------ ------------ ------------------ Total adjustments 543,416 61,567 661,708 ------------ ------------ ------------------ Net cash provided by (used in) operating activities 86,158 ( 93,672) ( 98,171) ------------ ------------ ------------------ Cash flows from investing activities: Equipment purchased ( 2,200) ( 6,380) ( 10,804) Software development costs ( 45,650) ( 23,770) (199,672) ------------ ------------ ------------------ Net cash used in investing activities ( 47,850) ( 30,150) (210,476) ------------ ------------ ------------------ Cash flows from financing activities: Stockholder loans - 500 86,771 Notes payable - bank - 19,427 39,450 Proceeds from notes payable - other 175,000 25,000 450,000 Loans payable - 93,750 104,075 Equipment loans ( 2,704) ( 1,157) ( 5,513) Sale of common stock 1,300 - 3,800 Deferred finance costs ( 22,500) ( 2,627) ( 50,000) Deferred registration costs ( 250,788) ( 5,294) (275,788) Deferred license costs ( 50,000) - ( 50,000) Proceeds from stock subscriptions receivable 6,450 - 6,450 ------------ ------------ ------------------ Net cash provided by (used in) financing activities ( 143,242) 129,599 309,245 ------------ ------------ ------------------ Net increase (decrease) in cash ( 104,934) 5,777 598 Cash at beginning of period 105,532 9,287 - ------------ ------------ ------------------ Cash at end of period $ 598 $15,064 $ 598 ============ ============ ==================
See notes to financial statements. F-11 SEARCHHELP, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (INFORMATION RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 IS (UNAUDITED) AND AS AT DECEMBER 31, 2001, FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001 AND FOR THE PERIOD FROM JANUARY 29, 1999 (INCEPTION) TO DECEMBER 31, 2001 NOTE 1 - PLAN OF ORGANIZATION: (a) Organization and Presentation of Financial Statements: SearchHelp, Inc. (the "Company") was incorporated in the State of Delaware on September 5, 2001 at which time the founding shareholders subscribed for 6,660,000 shares of the Company's common stock for an aggregate of $6,450. The stock subscriptions were paid in January and February 2002. The Company is a successor to SH Networks.com, Inc., ("SHN"), formerly known as SearchHelp.com, Inc., a New York corporation formed on January 29, 1999. SHN merged into the Company on September 5, 2001 in a transaction in which the shareholders of SHN exchanged all of the capital stock in SHN for 6,616,910 common shares of the Company. The merger was accounted for as a recapitalization. Certain creditors of SHN simultaneously converted their debt of $104,075 into 1,123,090 shares of the Company's common stock ($.09 per share). Since its inception through December 31, 2001, the Company and its predecessor have not generated any significant revenues and have not carried on any significant operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company has a working capital deficiency of $322,161 and stockholders' capital deficiency of $142,546 at December 31, 2001. Additionally, at September 30, 2002 the Company had a working capital deficiency of $995,926 and a stockholders' capital deficiency of $557,254. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's efforts have been directed towards the development and implementation of a plan to generate sufficient revenues to cover all of its present and future costs and expenses. The plan provides services and solutions for small businesses, local institutions and individuals in small communities throughout the United States of America, with a local focus. Management has also entered into an agreement with a placement agent to offer for sale to the public, on a best efforts basis, the Company's securities for up to $4,000,000 before offering costs. F-12 NOTE 1 - PLAN OF ORGANIZATION: (Continued) (a) Organization and Presentation of Financial Statements: (Continued) Since the Company has not generated significant revenues and management does not anticipate the Company will generate sufficiently substantial revenues from the sale of its products in an amount necessary to meet its cash needs for the next twelve months, the proceeds before offering costs from the sale of the Company's securities must be a minimum of $2,400,000 in order for the Company to complete the anticipated portion of its business plan and continue to remain in business for the next twelve months. Even if the Company is successful in receiving the $2,400,000 from the offering, management believes the Company will need additional financing to continue operating. If the Company does not raise sufficient funds from this offering to carry out its plan, it intends to perform the following steps to allow the Company to continue to operate and to enable it to reach the point where it begins to generate revenues and, perhaps, have sufficient revenues to cover its operating expenses: 1. The Company's principal investors who have previously provided operating capital to the Company, will provide certain additional capital, although not more than $50,000. 2. Management will negotiate with all of the holders of the Company's existing debt to seek to extend the time for payment for at least one year, with only interest, not principal, payable during that time. Although the Company has not yet had formal discussions with any debt holder, management has had informal discussions with certain key holders as well as the placement agent for most of the Company's debt placement and preliminary indications are favorable. Of course, there is no assurance that all, or most, of the Company's debt will thus be extended. 3. Management will approach the payees of the Company's trade payables and seek to extend the time for payment of all of its payables. Again, management has had no formal discussions to this end, but preliminary discussions have again been favorable. 4. Management will seek additional private debt capital and, perhaps, private equity capital, to provide funds for operations. Management has had informal discussions with the Company's placement agent and will not have formal discussions until the public offering has terminated. Management believes that all of these steps, if taken together, will provide the Company with the operating capital and the time necessary to enable the Company to carry out the key elements to its business plan, at least to the point of actively marketing S.P.I.K.E. and Child Shield and operational launching of its own web site and the community builder web site. Management would likely delay the launching of the Company's other products and services until its revenues were sufficient to enable it to do so. F-13 NOTE 1 - PLAN OF ORGANIZATION: (Continued) (a) Organization and Presentation of Financial Statements: (Continued) The financial statements as at September 30, 2002 and for the nine months ended September 30, 2002 and 2001 have not been audited. In the opinion of management, these unaudited interim financial statements reflect all adjustments and accruals, consisting only of normal recurring adjustments and accruals, necessary to present fairly the financial position of the Company as at September 30, 2002 and the results of its operations, changes in stockholders' equity and cash flows for the nine months ended September 30, 2002 and 2001. The results for the nine months ended September 30, 2002 and 2001 are not necessarily indicative of the results to be expected for the full year. (b) Principal Business Activity: The Company intends to provide small businesses with an on-line forum to enhance their business and increase their revenues through business applications such as customized web site, advertising and other products and services. The Company also intends to assist in marketing and improvement of local communities through fee based community development services. In addition, the Company intends to provide access to educational assistance and access to other products and services tailored to and for local communities. The Company started development of software products intended for sale to the public. One of these products is ready for market testing prior to commencing initial sales anticipated to begin the fourth quarter of 2002 and another should be ready for sale to customers in the first half of 2003. The implementation of these plans, according to management, is dependent on the successful proposed public offering of the Company's common stock. NOTE 2 - SUMMARY OF SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES: (a) Basis of Presentation: The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. (b) Revenue Recognition: Through September 30, 2002, the Company did not have significant revenues and is in the development stage. Upon the completion of its Web site, the Company will recognize revenues, if any, in accordance with accounting principles generally accepted in the United States of America. Income from contracts for advertising income, web site services and solutions will be earned on a pro-rata basis throughout the life of the related contract. Revenues in the form of sales and commissions from the on line sale of products, if any, will be recognized at the date of shipment. The Company intends to donate 20% of revenues it derives from each local community organization that purchases a community builder website to a community service organization of its choice. F-14 NOTE 2 - SUMMARY OF SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES: (Continued) (c) Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. (d) Depreciation and Amortization: Depreciation of property and equipment is provided by the straight-line method, over the estimated useful lives of the related assets ranging from five to seven years. Significant improvements are capitalized; maintenance and repairs are charged to income. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss, if any, is reflected in income. Costs associated the development of software that is not intended for sale are capitalized. Costs incurred in the securing of financing and for promotional incentives are also capitalized. Amortization of software development costs, finance costs and promotional incentives is provided by the straight-line method, over estimated useful lives of three years, sixty days and eighteen months, respectively. (e) Earnings Per Share: The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is based on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented as it is anti-dilutive. (f) Stock Based Compensation: The Company elected to use the intrinsic value method to account for future options granted to employees for the purchase of common stock as per Accounting Principles Board Opinion No.25 "Accounting for Stock Issued to Employees". The Company will disclose the pro forma effect of accounting for stock options under the fair value method. For transactions in which goods and services are the consideration received for the issuance of common stock, the accounting shall be the fair value of the common stock issued or the fair value of the consideration received whichever is more reliably measurable at the date the options are issued. F-15 NOTE 2 - SUMMARY OF SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES: (Continued) (g) Software Research and Development Costs: Research and development costs are expensed as incurred. Software development costs are subject to capitalization beginning when a product's technological feasibility has been established and ending when a product is available for release to customers. The Company intends to release its products as soon as possible after technological feasibility has been established. As a result, costs subsequent to achieving technological feasibility should not be significant and all software development costs will be expensed. Commencing in April 2002, the Company incurred software research and development costs of $27,315 which were charged to operations in connection with the initial development phase of two products. (h) Advertising Costs. 1. The Company expenses ordinary advertising and promotion costs as incurred. The Company incurred no advertising and promotion costs prior to January 1, 2001. Advertising and promotion costs were $10,377 for the year ended December 31, 2001 and for the nine months ended September 30, 2002 and 2001 were $32,854 and $13,366, respectively. 2. The Company amortizes promotional incentives under an eighteen month advertising agreement with Lifetyme, Inc. Amortization costs charged to operations under the agreement were $2,950 for the year ended December 31, 2001 and for the nine months ended September 30, 2002 and 2001 were $41,550 and $-0-, respectively. At September 30, 2002, these promotional incentives have been fully amortized because management determined they have no future benefit to the Company. (i) Recently Issued Accounting Pronouncements: In June 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Assets". Under these new standards, all acquisitions subsequent to June 30, 2001 must be accounted for under the purchase method of accounting, and purchased goodwill is no longer amortized over its useful life. Rather, goodwill will be subject to a periodic impairment test based upon its fair value. In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143). SFAS 143 establishes accounting standards for recognition and measurement of a liability for the costs of asset retirement obligations. Under SFAS 143, the costs of retiring an asset will be recorded as a liability when the retirement obligation arises, and will be amortized to expense over the life of the asset. F-16 NOTE 2 - SUMMARY OF SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES: (Continued) (i) Recently Issued Accounting Pronouncements: (Continued) In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This pronouncement addresses financial accounting for the impairment or disposal of long-lived assets and discontinued operations. The Company believes the adoption of these pronouncements will not have a material impact on the Company NOTE 3 - PROPERTY AND EQUIPMENT. Property and equipment consist of: December 31, September 30, 2001 2002 ------------ ------------- (Unaudited) Computers $11,434 $29,290 Furniture and fixtures 803 803 ------------ ------------- 12,237 30,093 Less: Accumulated depreciation 2,681 5,822 ------------ ------------- $ 9,556 $24,271 ============ ============= Depreciation expense charged to operations was $1,339, $864 and $478, respectively, in the years ended December 31, 2001 and 2000 and for the period from inception to December 31, 1999. Depreciation expense was $3,141 and $1,348 in the nine months ended September 30, 2002 and 2001, respectively. NOTE 4 - INTANGIBLE ASSETS. In accordance with American Institute of Certified Public Accountants Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Attained for Internal Use", the Company capitalized costs of $46,906, $39,936, and $67,180 for fiscal years ended December 31, 1999, 2000 and 2001, respectively. These costs consisting of amounts paid to independent consultants related to the implementation and enhancement of its propriety relational database and interactive operating software. During the nine months ended September 30, 2002, the Company capitalized $45,650 of these costs. The Company is amortizing these costs over their estimated useful lives of the three years. Amortization charged to operations in fiscal 1999, 2000 and 2001 was $7,818, $22,292 and $35,058, respectively, and $43,250 and $23,470 was charged to operations in the nine months ended September 30, 2002 and 2001. F-17 NOTE 4 - INTANGIBLE ASSETS. (Continued) In connection with the December 31, 2001 private placement of the Company's notes, the placement agent has received a fee of $27,500 through December 31, 2001 and an additional $20,000 for the nine months ended September 30, 2002. The fee is being charged to operations as addtional interest over the 60 day term of the notes. The amount of amortization charged to operations in fiscal 2001 was $15,000 and $31,667 in the nine months ended September 30, 2002. In November, 2001 the Company capitalized $44,500 in promotional incentives upon a vendor exercising stock purchase rights in accordance with provisions contained in an advertising agreement which expires in April, 2003. The Company had been amortizing the costs over the agreement period of eighteen months. At September 30, 2002, these promotional incentives have been fully amortized because management determined they have no future benefit to the Company. NOTE 5 - NOTES PAYABLE - BANK. The Company has a $50,000 revolving line of credit with a bank. Interest on borrowings is charged at 2.25% above the bank's prevailing prime rate, which was 7.0% at December 31, 2001 and September 30, 2002. At December 31, 2001 and September 30, 2002, $39,450 of the line has been utilized. The debt is guaranteed by the President and CEO of the Company and is collateralized by marketable securities owned by the Company's president with a fair market value of approximately $33,000 at December 31, 2001 and September 30, 2002. NOTE 6 - NOTES PAYABLE - OTHER. (a) During December 2001, the Company initiated a private placement offering to raise capital in order to fund the creation of its web site. The offering consisted of thirteen $25,000 notes bearing interest at 10% per annum payable in sixty (60) days from issuance. If the notes were not repaid in full on their due date, then each note holder has the right to purchase 10,000 shares of the Company's common stock at $.01 per share and then 5,000 shares at the end of each additional thirty (30) day period the notes remain outstanding. The variance between the purchase right's exercise price per share and the fair value of the securities acquired will be charged to operations as additional interest. Additionally, the placement agent was to be paid ten (10%) percent of the proceeds of the offering, plus out-of-pocket expenses. Amortization of deferred financing costs is charged to operations over the sixty (60) day term of the notes. F-18 NOTE 6 - NOTES PAYABLE - OTHER. (Continued) (a) At December 31, 2001, the Company had sold nine notes one of which was to its former CFO. In January and February 2002, the remaining four notes were sold at par value. Interest expense on these notes amounted to $1,199 at December 31, 2001 and $24,533 for the nine months ended September 30, 2002. A placement agent fee of $17,500 was paid and $5,000 accrued through December 31, 2001 and $10,000 at September 30, 2002, respectively, is reflected on the accompanying balance sheet as deferred financing costs. Interest of $199 and $24,533 was charged to operations in fiscal 2001 and the nine months ended September 30, 2002. During the nine months ended September 30, 2002, additional interest charged to operations for the excess of the fair value of the notes holders purchase rights received over their exercise price was $34,800. The fair value of the purchase rights was determined by management at $.09 per share which was the per share amount certain creditors in September 2001 accepted in settlement of obligations payable to them. During the nine months ended September 30, 2002 the note holders exercised rights to acquire an aggregate 130,000 common shares for $1,300 including the Company's former CFO exercised rights to acquire 20,000 common shares for $200. At September 30, 2002, the note holders were entitled to receive purchase rights to acquire 435,000 common shares in the aggregate of $4,350 of which the Company's former CFO has rights to acquire an additional 15,000 shares for an aggregate of $150. For each successive 30 day period each note remains outstanding, the note holder is entitled to receive rights to purchase up to an additional 5,000 shares of common stock at the purchases price of $.01 per share. Management does not anticipate repaying the notes prior to December 2002, at which time the note holders will have purchase rights to an aggregate of 650,000 shares of the Company's common stock at $0.01 per share. (b) Included in the caption "Notes Payable - Other" are bridge loans in the amount of $50,000, received in September and October 2001, bearing interest at 10% per annum which were paid in February 2002. Included in the caption "Notes Payable - Other" are bridge loans in the amount of $75,000 received during May 2002 bearing interest at 10% per annum. The notes were due in September 2002 and the interest rate increased to approximately 20% at that time. Included in the caption "Notes Payable - Other" are bridge loans in the amount of $50,000 received during July 2002 bearing interest at 10% per annum. The notes were due in November 2002 and the interest rate increased to approximately 20% at that time. F-19 NOTE 7 - LOAN PAYABLE - EQUIPMENT. December 31, September 30, 2001 2002 ------------ ------------- (Unaudited) Obligation under equipment financed, payable in monthly installments of $158 through February 28, 2002, and $495 through March 16,2005 including interest at 23% and 13%, respectively, and collateralized by the equipment. The liability at December 31, 2001 of $824 is included in accounts payable and accrued expenses. $824 $12,952 Less: Current portion 824 8,425 ------------ ------------- $ - $ 4,527 ============ ============= NOTE 8 - DUE TO STOCKHOLDERS. At December 31, 2001 and September 30, 2002, the Company was indebted to the Vice President and current CFO of the Company in the amount of $71,951 and to its President in the amount of $14,820 for cash working capital advances made to the Company. These advances are non-interest bearing. Both of the officers do not expect repayment of these advances until the Company has sufficient cash flow to sustain operations for eighteen (18) months. NOTE 9 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES. Accounts payable and accrued expenses consist of the following at: December 31, September 30, 2001 2002 ------------ ------------- (Unaudited) Professional fees $ 9,737 $241,032 Deferred license fee - 50,000 Placement agent fee 5,000 - Interest on notes payable 2,719 28,728 Directory fees - 26,000 Payroll taxes 3,348 - Consultants - 11,550 Sundry operating expenses 9,071 56,991 ------------ ------------- $29,875 $414,301 ============ ============= F-20 NOTE 10 - INCOME TAXES. At December 31, 2001, the Company had a net operating loss carryforward amounting to approximately $88,000 available to reduce future taxable income, which expires in the year 2021. Management is unable to determine if the utilization of the future tax benefit is more likely than not and accordingly, the asset has been fully reserved. A reconciliation of the actual tax provision to the expected statutory rate is as follows:
For the Period From For the Nine Months Ended January 29, 1999 September 30, (Inception) to For the Year Ended For the Year Ended ----------------------------------------- December 31, 1999 December 31, 2000 December 31, 2001 2002 2001 ----------------- ----------------- ----------------- ------------------- ------------------- (Restated) (Unaudited) (Unaudited) Loss before income taxes ($24,100) ($56,800) ($221,800) $457,300 ($155,200) ========= ========= ========== ======== ========== Expected statutory tax benefit ( 8,200) (34.0%) ( 19,300) (34.0%) ( 75,400) (34.0%) ( 155,500)(34.0%) ( 52,800) (34.0%) Tax benefit attributable to loss utilized by "S" Corporation stockholders 8,200 34.0% 19,300 34.0% 37,600 17.0% - 36,200 (23.0%) Non deductible expenses, primarily amortization - - 6,700 3.0% 1,200 0.3% - Net operating loss valuation reserve - - 31,100 14.0% 154,300 33.7% 16,600 11.0% --------- --------- ------- - -------- -------- Total tax benefit $ - $ - $ - $ - $ - ========= ========= ======= ======== ========
On September 5, 2001, the founding shareholders subscribed for 6,660,000 common shares for an aggregate of $6,450. The subscriptions were paid in January, February and July 2002 and are reflected as stock subscriptions receivable in the financial statements as at December 31, 2001. NOTE 11 - COMMON STOCK. On September 5, 2001, the shareholders of SH Networks.com, Inc. (SHN) and the Company agreed to merge SHN into the Company. The SHN shareholders received 6,616,910 shares of the Company's common stock in exchange for all of the outstanding capital stock of SHN. At the date of the merger, SHN's liabilities exceeded its assets by $131,461. Simultaneously with the merger, certain creditors agreed to exchange $104,075 in debts for 1,123,090 shares of the Company's common stock ($.09 per share). September 5, 2001, counsel for the Company accepted 100,000 shares of the Company's common stock as partial payment for services rendered. The fair value of the services rendered and the shares at date of issuance was $9,000 ($.09 per share). On November 26, 2001, the individual assignees of an advertising agreement exercised the purchase right contained in the agreement to acquire 500,000 shares of the Company's common stock for $500. The fair value for the securities issued as determined by both parties was $45,000 ($.09 per share) on the date of issuance. F-21 NOTE 11 - COMMON STOCK. (Continued) Commencing in February 2002 through September 2002, four note holders exercised their purchase rights and acquired 130,000 common shares for $1,300 in cash. The variance between the fair value of the common shares issued of $65,500 and the cash proceeds received was charged to operations as additional interest expense. The fair value per share used to determine the interest charge was the proposed initial per share selling price of its securities to the public. NOTE 12 - COMMITMENTS AND CONTINGENICES. (a) Initial Sale of the Company's Securities to the Public. The Company entered into a agreement with a placement agent to offer for sale to the public on a best efforts basis up to 8,000,000 units (each consisting of one share of common stock, one warrant to purchase one share of common stock at a price of $.75 per share) and a warrant to purchase one common share at $1.75 at $0.50 per unit. The placement agent is to receive 10% of the gross proceeds from the offering plus certain warrants and reimbursements of expenses. The placement agent's warrants to be issued are 10% of the units sold to the public for up to 800,000 units at $.75 per unit. Upon the exercise of a warrant by the placement agent, the placement agent shall receive a share of the Company's common stock, a warrant to acquire a share of common stock at $.75 and a warrant to acquire a common share at $1.75 each. Management and the placement agent consider the placement agent warrants to be additional compensation for the agent's services in the offering. If these warrants are exercised in whole or in part, any excess of the fair value of the securities issued over the warrant exercise price will be reflected as cost of raising capital and not a charge to operations. (b) Stock Purchase Rights. Certain notes payable include a default penalty that entitles the holder to purchase (i) 10,000 shares of the Company's common stock for $.01 per share if the note is not repaid on its original due date and (ii) 5,000 shares of the Company's common stock for $.01 per share for each thirty day period the note remains unpaid past its original due date. Through September 30, 2002, the note holders exercised rights to acquire 130,000 common shares and are entitled to exercise purchase rights to acquire an additional 435,000 common shares at $.01 each. F-22 NOTE 12 - COMMITMENTS AND CONTINGENICES. (Continued) (b) Stock Purchase Rights: (Continued) The variance between the purchase right price and the actual fair value of the shares on the dates the note holders exercised a portion of their rights was charged to operations as additional interest. The variance between the fair value of the outstanding purchase rights at September 30, 2002 and the proceeds from their assumed exercise has also been charged to operations. The fair value used to determine the additional interest charge was determined on each date the holders were entitled to additional rights. The fair value used by management to determine the additional interest charge was the last known third party transaction which occurred in September 2001 at a per share price of $.09. If the Company is successful in its sale of its securities to the public and the note holders purchase the common shares through the exercise of the purchase rights they own as at September 30, 2002, the excess of the fair value of the securities the note holders would receive and the purchase amount would be approximately $217,000, which is in accordance with the provisions of Financial Accounting Standards Board Opinion NO. 123 "Accounting for Stock Based Compensation. (c) License and Distribution Agreement. In June 2002, the Company entered into a 5 year license agreement to be the exclusive licensee through December 31,2003 and a non-exclusive licensee thereafter to manufacture, package, promote, advertise, market and sell a software package designed to assist parents to monitor their child's on-line behavior. The Company will pay the licensor $50,000 from the proceeds of its initial public offering, if any, and a royalty of $4 for each product sold. At September 30, 2002, the unamortized portion of the deferred license fee is $46,668 and the liability of $50,000 is included in accounts payable and accrued expenses. (d) Lease: The Company is obligated under an operating lease for its office, which expires on December 1, 2002 at an annual rent of $12,960. (e) Internet Advertising Agreement. The Company entered into an Internet Advertising Agreement with Lifetyme, Inc., a development stage company. The agreement anticipates that Lifetyme will advertise on the Company's web site and in certain of the Company's marketing materials for which Lifetyme will pay the Company a fee to be determined on a per project basis. The original term of the agreement is for 18 months with the Company having the option to extend the agreement for an additional 18 months. F-23 NOTE 12 - COMMITMENTS AND CONTINGENICES. (Continued) (e) Internet Advertising Agreement: (Continued) At the inception of the agreement, the Company granted Lifetyme, Inc. a right to purchase 500,000 shares of the Company's common stock for $500 cash. This right was assigned to certain shareholders of Lifetyme, Inc. who exercised the right. At the time of the exercise of the common stock purchase right the deemed fair value of the Company's common stock was $.09 per share which was the fair value of the stock the last time the Company's common stock was sold (which was for services rendered to the Company). The difference between the $500 price paid by Lifetyme, Inc. upon exercise of the purchase right and the intrinsic fair value of the Company's common stock ($.09) was $44,500 which is classified in the financial statements as deferred promotional incentives and is being amortized over the life of the advertising agreement (18 months) in accordance with the provisions of EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". If and when the Company does extend the agreement, the variance between the fair value of the shares exercisable under the purchase right and the purchase price of $500 cash (currently $44,500) will be capitalized and amortized over the life of the agreement (18 months). This measurement date, which is the exercise date, is in accordance with the provisions of EITF 98-16. (f) Employment Agreements: In March 2000, William Bozsnyak entered into a 3-year employment agreement with E-Com Marketing Group, Inc., a predecessor company, pursuant to which Mr. Bozsnyak became Chief Executive Officer, President and Treasurer of SearchHelp. The agreement provides for a base salary of $80,000, which will commence upon the completion of this offering with gross proceeds of at least $2,400,000, with a minimum annual 5% increase. In March 2000, Debbie Seaman entered into a 3-year employment agreement with E-Com Marketing Group, Inc., a predecessor company, pursuant to which Ms. Seaman became Vice President and Secretary of SearchHelp. The agreement, as amended, provides for a base salary of $70,000, which will commence upon the completion of this offering with gross proceeds of a least $2,400,000, with a minimum annual 5% increase and a salary of $36,000, during the period which will commence upon the Company raising in excess of $1,000,000 in this offering until the completion of this offering. Each employment agreement will be automatically extended each year unless notice is received by either the employee or us. Both Mr. Bozsnyak and Ms. Seaman will receive incentive bonuses to be determined prior to the commencement of each year if they satisfy the criteria for such bonuses as determined by the Company's compensation committee. If and when the Company establishes a stock option plan, each of them will be granted options to purchase up to $200,000 worth of shares of common stock at a price equal to the midpoint between the bid and ask price of a share of common stock on the date of the grant. NOTE 13 - SUBSEQUENT EVENTS. In October 2002, the Company issued a 10% interest bearing note in the amount $25,000. The note is due in February 2003 and contains a $200 penalty clause at that time if the note is not paid. F-24 NOTE 14 - RESTATEMENT: The accompanying financial statements included in the September 30, 2002 Form 10-SB have been restated to give effect to certain comments by the Securities and Exchange Commission regarding certain errors in accounting for compensatory elements in the issuance of the Company's common stock in the Company's filing of Amendment 2 to Form 10SB as follows:
As at December 31, 2001 ----------------------- As Original Difference As Restated Filed Restated ----------- ----------- ----------- A S S E T S ----------- Current assets: Cash $105,532 $105,532 $ - Prepaid insurance 3,403 3,403 - ----------- ----------- ----------- Total current assets 108,935 108,935 - ----------- ----------- ----------- Property and equipment - net 9,556 9,556 - ----------- ----------- ----------- Other assets: Software development costs - net 88,854 88,854 - (a) Deferred promotional incentives - net 41,550 - 41,550 Deferred financing costs - net 12,500 12,500 - Deferred license costs - - - (b) Deferred registration costs 25,000 25,100 ( 100) Security deposit 2,155 2,155 - ----------- ----------- ----------- Total other assets 170,059 128,609 41,450 ----------- ----------- ----------- $288,550 $247,100 $41,450 ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY ------------------------------------------------ Current liabilities: Cash overdraft $ - $ - $ - Note payable - bank 39,450 39,450 - Notes payable - other 275,000 275,000 - Current portion of long-term debt - - - Due to stockholders 86,771 86,771 - Accounts payable and accrued expenses 29,875 29,875 - ----------- ----------- ----------- Long-term debt, less current portion 431,096 431,096 - ----------- ----------- ----------- Commitments and contingencies - - - Stockholders' capital deficiency: Common stock 1,500 1,500 - (a) Additional paid-in capital 165,025 111,625 53,400 (c) Deficit accumulated in the development space ( 302,621) ( 290,671) ( 11,950) Stock subscriptions receivable ( 6,450) ( 6,450) - ----------- ----------- ----------- Total stockholders' capital deficiency ( 142,546) ( 183,996) 41,450 ----------- ----------- ----------- $288,550 $247,100 $41,450 ----------- ----------- -----------
(a) Effect of recording deferred promotional incentives arising from exercise of common stock rights at fair value. (b) Effect of reclassification of operational legal fees to current expense. (c) Effect of expensing legal fees at fair value in exchange for common stock; amortization of deferred promotional incentives. F-25 NOTE 14 - RESTATEMENT: (Continued)
Cumulative from January 29, 1999 For the Year Ended December 31, 2001 (Inception) to December 31, 2001 ------------------------------------------- ------------------------------------------- As Originally Difference As Originally Difference Restated Filed Restated Restated Filed Restated ------------ ------------- ------------- ------------ ------------- ------------- Revenues: $ - $ - $ - $ 11,695 $ 11,695 $ - Operating expenses: Selling 12,807 12,807 - 14,519 14,519 - Web-site costs 52,841 52,841 - 52,841 52,841 - Software development - - - - - - (b)(e)General and administrative 92,910 83,910 9,000 147,902 138,902 9,000 (a)(d)Depreciation and amortization 39,347 36,397 2,950 70,799 67,849 2,950 ------------ ------------- ------------- ------------ ------------- ------------- Total operating expenses 197,905 185,955 11,950 286,061 274,111 11,950 ------------ ------------- ------------- ------------ ------------- ------------- Loss from operations ( 197,905) ( 185,955) ( 11,950) ( 274,366) ( 262,416) ( 11,950) ------------ ------------- ------------- ------------ ------------- ------------- Other expenses: Interest 8,885 8,885 - 13,255 13,255 - Noteholders compensatory element of purchase rights - - - - - - Amortization of deferred finance costs 15,000 15,000 - 15,000 15,000 - ------------ ------------- ------------- ------------ ------------- ------------- Total other expenses 23,885 23,885 - 28,255 28,255 - ------------ ------------- ------------- ------------ ------------- ------------- Net loss ($221,790) ($209,840) ($11,950) ($302,621) ($290,671) ($11,950) ============ ============= ============= ============ ============= ------------- Per share data: Net loss per share - basic and diluted $.20 $.20 ============ ============= Weighted average number of shares outstanding 9,411,273 9,411,273 ============ =============
(d) Effect of amortization of deferred promotional incentives. (e) Effect of recording legal fees paid for by issuance of common stock at fair value. F-26 Part II. Information Not Required in the Prospectus Item 24: Indemnification of Directors and Officers Our Certificate of Incorporation (the "Certificate") provides that, except to the extent prohibited by the Delaware General Corporation Law, as amended (the "DGCL"), the Registrant's directors shall not be personally liable to the Registrant or its stockholders for monetary damages for any breach of fiduciary duty as directors of the Registrant. Under the DGCL, the directors have a fiduciary duty to the Registrant which is not eliminated by this provision of the Certificate and, in appropriate circumstances, equitable remedies such as injunctive or other forms of nonmonetary relief will remain available. In addition, each director will continue to be subject to liability under the DGCL for breach of the director's duty of loyalty to the Registrant, for acts or omissions which are found by a court of competent jurisdiction to be not in good faith or involving intentional misconduct, for knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are prohibited by the DGCL. This provision also does not affect the directors' responsibilities under any other laws, such as the Federal securities laws or state or Federal environmental laws. The Registrant has applied for liability insurance for its officers and directors. Section 145 of the DGCL empowers a corporation to indemnify its directors and officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers, provided that this provision shall not eliminate or limit the liability of a director: (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. The DGCL provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation's bylaws, any agreement, a vote of stockholders or otherwise. The Certificate eliminates the personal liability of directors to the fullest extent permitted by Section 102(b)(7) of the DGCL and provides that the Registrant may fully indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that such person is or was a director or officer of the Registrant, or is or was serving at the request of the Registrant as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding. At present, there is no pending litigation or proceeding involving any director, officer, employee or agent as to which indemnification will be required or permitted under the Certificate. The Registrant is not aware of any threatened litigation or proceeding that may result in a claim for such indemnification. 47 Item 25: Other Expenses of Issuance and Distribution. Exclusive of the placement compensation, our estimated expenses in connection with the issuance and distribution of the securities being registered are: Securities and exchange commission filing fee $ 2,208 Accounting fees and expenses $ 40,000 Legal fees and expenses $ 100,000 Placement agent legal fees paid by issuer $ 20,000 Transfer agent and escrow agent fees $ 20,000 Printing, mailing and engraving expenses $ 40,000 Blue Sky and NASD filings expenses $ 20,000 Miscellaneous $ 57,792 --------- Total $ 300,000 Item 26: Recent Sales of Unregistered Securities. Pursuant to board action on September 5, 2000, the registrant issued an aggregate of 14,400,000 shares of common stock in the past three years (a total of 33 persons, 23 of whom were accredited). Such shares were issued in three categories as follows: (i) 6,660,000 shares of common stock priced at $.001 per share, in a private placement to principals of SearchHelp and their designees, and certain other persons for a total of $6,950, (ii) 6,616,910 shares of common stock to the shareholders of SH Networks.com, Inc. (SHN) in connection with the merger of SHN into SearchHelp on September 5, 2001, and (iii) 1,123,090 shares of common stock to certain creditors of SHN in exchange for $104,075 of indebtedness owed to them. The following are the ten non-accredited investors who acquired shares in these issuances: Debbie Seaman, Judy Sweeney, Martin R. Cantor, Jason Paul Butler, Benjamin Kolts, Lila Roberts, Shellie Wright, Jesse Andrews, Jake Andrews and Colton Quade. On November 26, 2001, we issued 500,000 of our common shares to Lifetyme, Inc. pursuant to an Internet Advertising Agreement for $500 in cash which was the then fair market value of the securities. No placement agent was involved and no commissions were earned or paid. The shares were issued as they were paid for in reliance of the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder, since all of the stockholders of Lifetyme, Inc. were accredited and the offering was conducted as a private offering. On September 5, 2000, we issued 100,000 of our common shares to our securities counsel as payment for $9,000 in legal fees for structuring and consultative services. Between December 1, 2001 and February 14, 2002 promissory notes were issued to 13 accredited investors at $25,000 each for a total of $325,000. Robert M. Cohen & Co., Inc. was the placement agent and received commissions totaling $32,500. If we do not pay back the note holders in full within 60 days of issuance (and we have not), the note holders may purchase up to 5,000 shares per month of our common stock at $.01 per share for each additional month the note remains unpaid. As of October 15, 2002, 130,000 shares have been purchased by the note holders. Additionally, there will be approximately 470,000 shares of common stock issuable to our note holders since their notes are not going to be paid in full as of the effective date of this prospectus. If the notes are not repaid before December 31, 2002, an additional 585,000 shares may be so purchased by the noteholders. The shares purchased and to be purchased by the noteholders are and will be issued in reliance of the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder, since all of the note holders are accredited and the offering was conducted as a private offering. 48 Item 27: Index to Exhibits (1) (a) Form of Placement Agreement(2) (b) Form of Placement Agent's Warrant(1) (c) Form Placement Agent Registration Rights Agreement (2) (2) (a) Articles of Incorporation, as amended(2) (b) By Laws(2) (3) (a) Form of Common Stock Purchase Class A redeemable Warrant, exercise price $.75(2) (b) Form of Common Stock Purchase Class B redeemable Warrant, exercise price $1.75(2) (c) Form of Stock Certificate(2) (4) Form Subscription Agreement(2) (6) (a) William Bozsnyak Employment Agreement(2) (b) Debbie Seaman Employment Agreement(2) (c) Agreement of Lease(2) (d) Extension of Agreement of Lease(2) (e) Internet Advertising Agreement(2) (f) Software Development with Benjamin Kolts (2) (g) Agreement with Acxiom Corporation(2) (h) Teaming Agreement(2) (i) Specimen Promissory Note for Loan with Equity(2) (j) Specimen Promissory Note for Loan without Equity(2) (k) Form Lock-Up Agreement(2) (l) Form Escrow Agreement(2) (m) Warrant Agreement(2) (n) Agreement with Protect-a-Child America(2) (o) Agreement with Edocusign, Inc. (2) (p) Agreement with Twiz Studios, Inc. (2) (q) Consulting Agreement with Oyster Bay East Norwich School District (1) (10)(a) Consent of Weinick Sanders Leventhal & Co., LLP(1) (b) Consent of Tannenbaum Helpern Syracuse & Hirschtritt LLP (included in Exhibit 11)(1) (11)Opinion re: Legality(1) ---------------- (1) Filed herein (2) Filed previously 49 Item 28: Undertakings A. Registrant hereby undertakes: a. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (1) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (2) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (3) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. b. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. c. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The small business issuer will provide to the placement agent at the closing specified in the placement agent agreement certificates in such denominations and registered in such names as required by the placement agent to permit prompt delivery to each purchaser. C. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 50 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for the filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Bethpage, state of New York, on November 11, 2002. SearchHelp, Inc. By:/s/ William Bozsnyak ------------------------------- Name: William Bozsnyak Title: Chief Executive Officer, Chief Financial Officer, Vice President, Treasurer and Director This offering statement has been signed by the following persons in the capacities and on the dates indicated. By: /s/ Debbie Seaman Date: November 11, 2002 -------------------- ------------------ Name: Debbie Seaman Title: President, Secretary, Director By: /s/ Joel San Antonio Date: November 11, 2002 -------------------- ------------------ Name: Joel San Antonio Title: Director By: /s/ Joseph Carrizzo Date: November 11, 2002 -------------------- ------------------ Name: Joseph Carrizzo Title: Director 51