PINX:NAKD Naked Brand Group Inc Quarterly Report 10-Q Filing - 1/31/2012

Effective Date 1/31/2012

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

FORM 10-Q

(Mark One)

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2012

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________to ____________

Commission file number 000-52381

SEARCH BY HEADLINES.COM CORP
(Exact name of registrant as specified in its charter)

Nevada 99-0369814
(State or other jurisdiction of incorporation or (IRS Employer Identification No.)
organization)  

3250 Oakland Hills Court, Fairfield, California 94534
(Address of principal executive offices) (zip code)

707.208.6368
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ x ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ x ] No [ ]


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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 9,010,000 common shares issued and outstanding as of March 8, 2012.


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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

These financial statements have been prepared by Search By Headlines.Com Corp. and are unaudited pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with such Securities and Exchange Commission rules and regulations. In the opinion of management, the accompanying statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the results of the interim periods presented. The results for these interim periods are not necessarily indicative of the results for the entire year.


SEARCH BY HEADLINES.COM CORP.

(A Development Stage Company)

FINANCIAL STATEMENTS

 January 31, 2012

(Stated in US Dollars)

(Unaudited)



SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
BALANCE SHEET
January 31, 2012 and July 31, 2011
(Stated in US Dollars)
(Unaudited)

    January 31,     July 31,  
ASSETS   2012     2011  
             
Current            
     Cash and cash equivalents $  975   $  11,717  
     Loan receivable – Note 3   50,142     -  
             
  $  51,117   $  11,717  
             
LIABILITIES              
             
Current            
     Accounts payable $  70,036   $  54,406  
     Advances payable – Note 4   50,000     -  
     Due to related party – Note 5   44,816     47,081  
             
    164,852     101,487  
             
STOCKHOLDERS’ DEFICIENCY              
             
Capital stock – Note 5
     Authorized
          100,000,000 common shares, par value $0.001 per share
     Issued and outstanding
          9,010,000 common shares
 



9,010
   



9,010
 
Additional paid-in capital   54,090     54,090  
Accumulated other comprehensive income (loss)   3,930     (194 )
Deficit accumulated during the development stage   (180,765 )   (152,676 )
             
Total stockholders’ deficiency   (113,735 )   (89,770 )
             
  $  51,117   $  11,717  

SEE ACCOMPANYING NOTES



SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
for the three and six months ended January 31, 2012 and 2011 and
for the period May 17, 2005 (Date of Inception) to January 31, 2012
(Stated in US Dollars)
(Unaudited)

                            May 17,  
                            2005 (Date of
    Three months ended     Six months ended     Inception) to  
    January 31,     January 31,     January 31,  
    2012     2011     2012     2011     2012  
                               
Revenue $  -   $  -   $  -   $  -   $  -  
                               
Expenses                              
     Amortization   -     -     -     -     10,945  
     General and administrative   17,123     11,295     28,230     14,465     171,571  
                               
Loss from operations   (17,123 )   (11,295 )   (28,230 )   (14,465 )   (182,516 )
                               
Interest income   141     -     141     -     1,751  
                               
Net loss   (16,982 )   (11,295 )   (28,089 )   (14,465 )   (180,765 )
                               
Other comprehensive loss:                              
     Foreign currency translation adjustment   917     (1,193 )   4,124     (1,835 )   3,930  
                               
                               
Comprehensive loss $  (16,065 ) $  (12,488 ) $  (23,965 ) $  (16,300 ) $  (176,835 )
                               
Basic and diluted loss per share $  (0.00 ) $  (0.00 ) $  (0.00 ) $  (0.00 )      
                               
Weighted average number of shares outstanding – basic and diluted   9,010,000     9,010,000     9,010,000     9,010,000      

SEE ACCOMPANYING NOTES



SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
for the six months ended January 31, 2012 and 2011 and
for the period May 17, 2005 (Date of Inception) to January 31, 2012
(Stated in US Dollars)
(Unaudited)

                May 17  
                2005 (Date of
    Six months ended     Inception) to  
    January 31,     January 31,  
    2012     2011     2012  
                   
Operating Activities                  
     Net loss for the period $  (28,089 ) $  (14,465 ) $  (180,765 )
     Amortization expense   -     -     10,945  
     Changes in operating assets and liablities:                  
           Accounts payable   15,630     20,302     70,036  
                   
Net cash provided by (used in) operating activities   (12,459 )   5,837     (99,784 )
                   
                   
Investing Activities                  
     Website development   -     -     (10,945 )
     Loan receivable   (50,142 )   -     (50,142 )
                   
Net cash used in investment activities   (50,142 )   -     (61,087 )
                   
Financing Activities                  
     Advances   50,000     -     50,000  
     Due to related party   (2,265 )   779     44,816  
     Issuance of common stock for cash   -     -     63,100  
                   
Net cash provided by financing activities   47,735     779     157,916  
                   
Effect of foreign exchange on cash   4,124     (1,835 )   3,930  
                   
Increase (decrease) in cash during the period   (10,742 )   4,781     975  
                   
Cash and cash equivalents, beginning of the period   11,717     649     -  
                   
Cash and cash equivalents, end of the period $  975   $  5,430   $  975  

SEE ACCOMPANYING NOTES



SEARCH BY HEADLINES.COM CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
January 31, 2012
(Stated in US Dollars)
(Unaudited)

Note 1 Interim Reporting

While the information presented in the accompanying interim three months financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. These interim financial statements follow the same accounting policies and methods of their application as the Company’s July 31, 2011 annual financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company’s July 31, 2011 annual financial statements.

Summary of Significant Accounting Policies

The company’s significant accounting policies are summarized in Note 2 of the Company’s Annual Report on Form 10-K for the year ended July 31, 2011. There were no significant changes to these accounting policies during the six months ended January 31, 2012 and the Company does not expect that adoption of other recent accounting pronouncements will have a material impact on its financial statements.

Note 2 Nature of Business and Going Concern

Search by Headlines.com Corp. was incorporated in the State of Nevada on May 17, 2005, with 100,000,000 authorized common shares with a par value of $0.001 per share. During the year ended July 31, 2010, the Company ceased operation of a specialized internet search engine that features news in a format that allows users to search or submit news by headline. As at January 31, 2012, the Company has no business operations.

The Company’s fiscal year-end is July 31.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company does not have sufficient working capital for its planned activity and to service its debt, which raises substantial doubt about its ability to continue as a going concern.

Continuation of the Company as a going concern is dependent upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through short-term loans from directors and additional equity investment, which will enable the Company to continue operations for the coming year.



Search By Headlines.com Corp.
(A Development Stage Company)
Notes to the Financial Statements
January 31, 2012
(Stated in US Dollars)
(Unaudited)
Page 2

Note 3 Loan Receivable

The Company loaned $50,000 to Naked Boxer Brief Clothing Inc. (“Naked”) (borrower) on January 16, 2012. This loan carries an interest rate of 8% per annum, with principal and interest due in full on June 30, 2012.

Note 4 Advances Payable

During the three months ended January 31, 2012, the Company received $50,000 from two unrelated parties. These advances are unsecured, non-interest bearing, and payable on demand.

Note 5 Related Party Transactions

As at January 31, 2012, the Company received advances totalling $44,816 from the directors of the Company. These advances are unsecured, non-interest bearing, and payable on demand.

As at January 31, 2012, directors of the Company own 2,000,000 common shares.

Note 6 Subsequent Event

On February 28, 2012, the Company entered into an acquisition agreement (the “Agreement”) with Naked and SBH Acquisition Corp. (“Subco”), the Company’s newly incorporated subsidiary, pursuant to which the Company agreed to acquire all of the issued and outstanding common shares of Naked (each, a “Naked Share”) in exchange for the issuance of 13,500,000 common shares in the capital of the Company (each, a “Share”) to the shareholders of Naked on a pro-rata basis (the “Transaction”). Each warrant (the “Naked Warrants”) to purchase Naked Shares will be converted into warrants entitling the holder to purchase the number of Shares as is equal to the number of Naked Shares issued pursuant to the Naked Warrants multiplied by the exchange ratio of Shares to Naked Shares at a price of $0.75 per Share for a period of two years from the closing date.

To facilitate the Transaction, subject to the approval of the shareholders of Naked, Naked agreed to: (i) continue from the federal jurisdiction of Canada to the jurisdiction of the State of Nevada and (ii) merge with Subco, with Naked remaining as the surviving corporation.

Upon completion of the Transaction, Naked will become a wholly-owned subsidiary of the Company.

The closing of the Agreement is subject to a number of conditions and the acquisition of Naked will be accounted as a reverse acquisition.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report, particularly in the section entitled “Risk Factors” of this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to “common shares” refer to the common shares in our capital stock.

As used in this quarterly report, the terms “we”, “us”, “our” and “Search By Headlines” mean Search By Headlines.com Corp.

Current Business

We have stopped pursuing the use of a news website and are currently seeking new business opportunities with established business entities for the merger with or acquisition of a target business. In certain instances, a target business may wish to become our subsidiary or may wish to contribute assets to us rather than merge. There can be no assurance that we will be able to enter into any definitive agreements.

Any new acquisition or business opportunities that we may acquire will require additional financing. There can be no assurance, however, that we will be able to acquire the financing necessary to enable us to pursue our plan of operation. If our company requires additional financing and we are unable to acquire such funds, our business may fail.

Management of our company believes that there are benefits to being a reporting company with a class of securities quoted on the OTC Bulletin Board, such as (i) the ability to use registered securities to acquire assets or businesses; (ii) increased visibility in the financial community; (iii) the facilitation of borrowing from financial institutions; (iv) potentially improved trading efficiency; (v) potential stockholder liquidity; (vi) potentially greater ease in raising capital subsequent to an acquisition; (vii) potential compensation of key employees through stock options; (viii) potentially enhanced corporate image; and (ix) a presence in the United States capital market.

We may seek a business opportunity with entities who have recently commenced operations, or entities who wish to utilize the public marketplace in order to raise additional capital in order to expand business development activities, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries.


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In implementing a structure for a particular business acquisition or opportunity, we may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another corporation or entity. We may also acquire stock or assets of an existing business. Upon the consummation of a transaction, it is likely that our present management will no longer be in control of our company. In addition, it is likely that our officers and directors will, as part of the terms of the acquisition transaction, resign and be replaced by one or more new officers and directors.

We anticipate that the selection of a business opportunity in which to participate will be complex and without certainty of success. We believe that there are numerous firms in various industries seeking the perceived benefits of being a publicly registered corporation. Business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Business opportunities that we believe are in the best interests of our company may be scarce or we may be unable to obtain the ones that we want. We can provide no assurance that we will be able to locate compatible business opportunities.

Currently, we do not have a source of revenue. We are not able to fund our cash requirements through our current operations. Historically, we have been able to raise a limited amount of capital through private placements of our equity stock, but we are uncertain about our continued ability to raise funds privately. Further, we believe that our company may have difficulties raising capital until we locate a prospective property through which we can pursue our plan of operation. If we are unable to secure adequate capital to continue our acquisition efforts, our shareholders may lose some or all of their investment and our business may fail.

Agreement with Naked Boxer Brief Clothing Inc.

We have entered into an acquisition agreement (the “Agreement”) with Naked Boxer Brief Clothing Inc. (“Naked”) and SBH Acquisition Corp. (“Subco”), the Company’s subsidiary, pursuant to which we agreed to acquire all of the issued and outstanding common shares of Naked (each, a “Naked Share”) in exchange for the issuance of 13,500,000 common shares in the capital of our company (each, a “Share”) to the shareholders of Naked on a pro-rata basis (the “Transaction”). Each warrant (the “Naked Warrants”) to purchase Naked Shares will be converted into warrants entitling the holder to purchase the number of Shares as is equal to the number of Naked Shares issued pursuant to the Naked Warrants multiplied by the exchange ratio of Shares to Naked Shares at a price of $0.75 per Share for a period of two years from the closing date.

To facilitate the Transaction, subject to the approval of the shareholders of Naked, Naked agreed to: (i) continue from the federal jurisdiction of Canada to the jurisdiction of the State of Nevada (the “Continuance”) and (ii) merge with Subco (the “Merger”), with Naked remaining as the surviving corporation.

Upon completion of the Transaction, Naked will become a wholly-owed subsidiary or our company.

Conditions to Agreement

The Agreement is subject to a number of conditions, including the following conditions:

  • the Continuance and the Merger will have been approved by (i) the shareholders of Naked (the “Naked Shareholders”), and (ii) if applicable, the Naked Shareholders holding a majority of each outstanding class of Naked securities, all in accordance with the terms of the Agreement, the provisions of the Nevada Revised Statutes and the Canadian Business Corporations Act, and the provisions of the Charter Documents of Naked;

  • the board of directors of our company and Naked will have approved the closing of the Transaction;

  • each of Joel Primus and Alex McAulay will have entered into management services or employment agreements with our company or Naked;

  • we will have conducted and completed to our sole satisfaction, acting reasonably, a legal and financial due diligence investigation of Naked;


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  • Naked will have coordinated the preparation and delivery of the financial statements to our company, and the auditors of Naked will have approved the financial statements and any pro forma financial statements required to comply with applicable securities laws, in form and content satisfactory to us, and in accordance with applicable securities laws;

  • from the date of the Agreement, Naked will not have incurred any Liabilities other than those reasonably incurred in connection with the transactions contemplated in the Agreement or those previously disclosed to us;

  • at the closing, Naked’s liabilities, as determined in accordance with GAAP, will not exceed $100,000, excluding certain agreed items;

  • Naked will have conducted and completed, to Naked’s satisfaction, acting reasonably, a legal and financial due diligence investigation of our company; and

  • we will have working capital in the amount of $650,000, after payment of all outstanding our liabilities.

Covenants of the Parties

As part of the Agreement, Naked has agreed to cause Naked Shareholders holding a minimum of 51% of the issued and outstanding Naked Shares to execute and deliver voting agreements pursuant to which such Naked Shareholders will covenant to vote in favour of the Continuance and the Merger. Naked has also agreed to use its commercial best efforts to cause each of the Naked Shareholders to, at or prior to the Closing, enter into a pooling agreement (the “Pooling Agreement”) with an escrow agent (the "Trustee"), pursuant to which such Naked Shareholders will deposit their respective Shares received in exchange for their respective Naked Shares as a result of the Merger with the Trustee until such Shares are released from the Pooling Agreement in accordance with the terms thereof. Each Pooling Agreement will provide, among other things, that 25% of the Shares will be released 90 days after the one year anniversary of the closing date and then 25% each 90 days thereafter. Naked has also agreed to certain negative covenants as set out in the Agreement.

Additional Details of the Agreement

A copy of the Agreement is incorporated by reference as Exhibit 10.6. Please see Exhibit 10.6 for a complete description of the terms of the Agreement.

Results of Operations for the three month period ended January 31, 2012

During the three month period ended January 31, 2012 covered by our unaudited financial statements, we did not generate any revenues. Our loss from operations for the three month period ended January 31, 2012 was $17,123 compared to a loss of $11,295 for the three month period ended January 31, 2011. The increase was due to our general and administrative expenses increasing. General and administrative expenses were $17,123 for the three months ended January 31, 2012, compared to $11,295 for the three months ended January 31, 2011. The increase was due to legal and accounting expenses increasing in 2011.

We recorded interest income of $141 for the three month period ended January 31, 2012, compared to $nil for the three month period ended January 31, 2011.

Our net comprehensive loss for the three months ended January 31, 2012 was $16,065, or $0.00 per share, as compared to a net loss of $12,488, or $0.00 per share, for the three months ended January 31, 2011. The increase in comprehensive loss was due to our increased general and administrative expense and a foreign currency adjustment gain of $917 for the three months ended January 31, 2012, compared to a foreign currency loss of $1,193 in the three months ended January 31, 2011.


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Results of Operations for the six month period ended January 31, 2012

During the six month period ended January 31, 2012, covered by our unaudited financial statements, we did not generate any revenues. Our loss from operations for the six month period ended January 31, 2012 was $28,230 compared to a loss of $14,465 for the six month period ended January 31, 2011. The increase in comprehensive loss was due to an increase in our general and administrative expenses. General and administrative expenses were $28,230 for the six months ended January 31, 2012, compared to $14,465 for the six months ended January 31, 2011. Our general and administrative expenses are comprised primarily of legal and accounting fees.

We recorded $141 in interest income for the six month period ended January 31, 2012, compared to $nil for the six month period ended January 31, 2011.

Our comprehensive loss for the six months ended January 31, 2012 was $23,965, or $0.00 per share, as compared to a net comprehensive loss of $16,300, or $0.00 per share, for the six months ended January 31, 2011. The decrease in comprehensive loss was primarily due to the fact that the foreign currency translation loss increased from ($1,835) for the three month period ended January 31, 2011 compared to $4,124 for the three month period ended January 31, 2012.

Liquidity and Capital Resources

Working Capital            
    As at January 31,     As at July 31,  
    2012     2011  
             
Current Assets $ 51,117   $ 11,717  
Current Liabilities $ 164,852   $ 101,487  
Working Capital (Deficit) $ (113,735 ) $ (89,770 )

Cash Flows            
    Six Months     Six Months  
    Ended     Ended  
    January 31, 2012     January 31, 2011  
Cash Flows Provided By/(Used In) Operating Activities $ (12,459 ) $ 5,837  
Cash Flows (Used In)/Provided By Investing Activities $ (50,142 )   nil  
Cash Flows Provided By Financing Activities $ 47,735   $ 779  
Effect of Foreign Exchange on Cash $ 4,124   $ (1,835 )
Net increase (decrease) in Cash During Period $ (10,742 ) $ 4,781  

Operating Activities

Our cash provided by operating activities decreased by $18,296 primarily due to an increase in our net loss from $(14,465) for the six month period ended January 31, 2011 to $(28,089) for the six month period ended January 31, 2012.

Investing Activities

Investing activities used cash of $(50,142) during the six month period ended January 31, 2012, compared to $nil for the six month period ended January 31, 2011 due to the loan of $50,000 advanced to Naked Boxer Brief Clothing Inc. The loan is secured by the assets of Naked Boxer Brief and interest accrues on the principal amount of the loan at a rate of 8% per annum. The principal amount of the loan and all interest accrued thereon is due in full on or prior to June 30, 2012.


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Financing Activities

Financing activities provided cash of $47,735 for the six month period ended January 31, 2012, compared to providing $779 for the six month period ended January 31, 2011. The financing provided during the six month period ended January 31, 2012 was due to an advance of $50,000 from two unrelated parties, which is unsecured, non-interest bearing, and payable on demand.

Effect of Foreign Exchange on Cash

The change in our foreign currency exchange is the result of the United States’ dollar’s increase or decrease against the Canadian dollar during each period. During the six months ended January 31, 2012 the United States dollar increased against the Canadian dollar, which resulted in a foreign exchange gain of $4,124.

Future Operations

Our primary objectives for the next twelve month period are to find and acquire a new business opportunity.

Future Financing

In the long term, to remedy the deficiency in financing for proposed future operations, we intend to raise funds from equity financings. In the short term, we intend to fund future cash shortfalls from loans from directors.

Purchase or Sale of Equipment

We do not anticipate that we will expend any significant amount on equipment over the next 12 months but that may change depending on the type of business that we acquire in the event that we are successful in doing so.

Anticipated Cash Resources

Presently, we have no revenue to meet our operating and capital expenses. Management projects that we will require additional funding to expand our current operations. We have incurred losses since inception and this is likely to continue for an indeterminate amount of time.

Assuming our transaction with Naked does not proceed, management projects that we may require $60,000 to $75,000 in addition to our current cash to fund our operating expenditures for the next twelve month period. Projected working capital requirements for the next twelve month period are broken down as follows:

Estimated Working Capital Expenditures During the Next Twelve Month Period
Operating expenditures  
                   Financing or Funding $10,000-$15,000
                   General and Administrative $10,000-$15,000
                   Legal and Accounting $40,000-$45,000
Total $60,000-$75,000

Financing or funding expenses will include the costs of finder’s fees, bank fees, and all other fees related to our anticipated fund raising efforts, whether it is borrowing money or selling shares of our common stock.

General and administrative expenses will include the fees and travel costs we expect to pay for seeking out business opportunities and negotiating and executing definitive agreements for the new business acquisition.

Legal and accounting expenses will include those required to maintain our status as an OTC Bulletin Board company as well as for the legal and accounting work required for the acquisition of the new business opportunity, including due diligence work by our attorneys.


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Going Concern

Due to our being a development stage company and not having generated revenues, in their Notes to our financial statements for the year ended July 31, 2011, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern.

We have historically incurred losses, and through January 31, 2012 have incurred a cumulative net loss of $180,765 from our inception on May 17, 2005. Because of these historical losses, we will require additional working capital to develop our business operations. We intend to raise additional working capital through private placements, and/or advances from related parties or shareholder loans.

The continuation of our business is dependent upon obtaining further financing, acquiring a new business and achieving a break even or profitable level of operations in that new business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain additional financing through either private placements, and/or bank financing or other loans necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us.

These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Application of Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.

Financial Instruments

The carrying amounts of financial instruments consisting of cash and cash equivalents, accounts payable and due to related party are considered by management to be their estimated fair values due to their short term maturities. Our company is not exposed to significant interest, currency or credit risk arising from its financial instruments.

Website Costs

After technological feasibility is established, direct costs incurred during the application stage of development are capitalized and amortized over the estimated useful life of three years. Fees incurred for website hosting are expensed over the period of the benefit. Costs of operating the website are expensed as incurred.

Income Taxes

Deferred income tax liabilities or assets at the end of each period are determined by applying currently enacted tax rates to temporary differences and loss carry forwards. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.


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Foreign Exchange

Our company’s functional currency is in Canadian dollars as substantially all of our company’s operations are in Canada. Our company used the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (“SEC”).

Assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the period-end and capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period. Translation adjustments from the use of different exchange rates from period to period are included in the comprehensive income account in Stockholder’s Equity, if applicable.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting standards if currently adopted could have a material effect on the accompanying financial statements.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer, principal financial officer and principal accounting officer, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by the quarterly report, being January 31, 2012, our principal executive officer, who is also our principal financial officer, has carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures and our company’s internal control over financial reporting. Based upon that evaluation, our company’s principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting management to material information relating to us required to be included in our periodic SEC filings as at the end of the period covered by this report.

Changes to Internal Control over Financial Reporting

During our most recently completed fiscal quarter ended January 31, 2012 there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

Internal Control over Financial Reporting

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

  (a)

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

     
  (b)

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and,

     
  (c)

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.



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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

Much of the information included in this quarterly report includes or is based upon estimates, projections or other “forward-looking statements”. Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Such estimates, projections or other “forward-looking statements” involve various risks and uncertainties as outlined below. We caution readers of this quarterly report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward-looking statements”. In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.

Risks Associated with our Company

The Agreement with Naked may not close for reasons beyond our control.

As discussed above, we have entered into the Agreement with Naked whereby we would acquire all of the issued and outstanding common shares of Naked. There are a number of risks and uncertainties associated with this acquisition. For example, the Agreement may not complete within the time frame or manner currently anticipated or at all, as a result of several factors, including, among other things, the failure by one of the parties to satisfy the closing conditions in the Agreement, several of which are beyond our control. Further, we have loaned Naked $50,000, which they may be unable to pay back if the Agreement does not close. If the Agreement does not close and if we are unable to obtain a business opportunity that we believe is in the best interests of our company, we may never recommence operations and will go out of business.

Business opportunities that we believe are in the best interests of our company may be scarce or we may be unable to obtain the ones that we want. If we are unable to obtain a business opportunity that we believe is in the best interests of our company, we may never recommence operations and will go out of business. If we go out of business, investors will lose their entire investment in our company.

We are, and will continue to be, an insignificant participant in the number of companies seeking a suitable business opportunity or business combination. A large number of established and well-financed entities, including venture capital firms, are actively seeking suitable business opportunities or business combinations which may also be desirable target candidates for us. Virtually all such entities have significantly greater financial resources, technical expertise and managerial capabilities than we do. We are, consequently, at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. We will also compete with numerous other small public companies seeking suitable business opportunities or business combinations. If we are unable to obtain a business opportunity that we believe is in the best interests of our company, we may never recommence operations and will go out of business. If we go out of business, investors will lose their entire investment in our company.


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The worldwide economic downturn may reduce our ability to obtain the financing necessary to continue our business and may reduce the number of viable businesses that we may wish to acquire. If we cannot raise the funds that we need or find a suitable business to acquire, we will go out of business and investors will lose their entire investment in our company.

Since 2008, there has been a downturn in general worldwide economic conditions due to many factors, including the effects of the subprime lending and general credit market crises, volatile but generally declining energy costs, slower economic activity, decreased consumer confidence and commodity prices, reduced corporate profits and capital spending, adverse business conditions, increased unemployment and liquidity concerns. In addition, these economic effects, including the resulting recession in various countries and slowing of the global economy, will likely result in decreased business opportunities as potential target companies face increased financial hardship. Tightening credit and liquidity issues will also result in increased difficulties for our company to raise capital for our continued operations and to consummate a business opportunity with a viable business. We may not be able to raise money through the sale of our equity securities or through borrowing funds on terms we find acceptable. If we cannot raise the funds that we need or find a suitable business to acquire, we will go out of business. If we go out of business, investors will lose their entire investment in our company.

We have had negative cash flows from operations and if we are not able to obtain further financing, our business operations may fail.

We had cash and cash equivalents in the amount of $975, a loan receivable of $50,142 and a working capital deficit of $113,735 as of January 31, 2012. We anticipate that we will require additional financing while we are seeking a suitable business opportunity or business combination. Further, we anticipate that we will not have sufficient capital to fund our ongoing operations for the next twelve months. We may be required to raise additional financing for a particular business combination or business opportunity. We would likely secure any additional financing necessary through a private placement of our common shares.

There can be no assurance that, if required, any such financing will be available upon terms and conditions acceptable to us, if at all. Our inability to obtain additional financing in a sufficient amount when needed and upon terms and conditions acceptable to us could have a material adverse effect upon our company. We will require further funds to finance the development of any business opportunity that we acquire. There can be no assurance that such funds will be available or available on terms satisfactory to us. If additional funds are raised by issuing equity securities, further dilution to existing or future shareholders is likely to result. If adequate funds are not available on acceptable terms when needed, we may be required to delay, scale back or eliminate the development of any business opportunity that we acquire. Inadequate funding could also impair our ability to compete in the marketplace, which may result in the dissolution of our company.

A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations. If we cannot raise the funds that we require, we will go out of business and investors will lose their entire investment in our company.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.

We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.

We have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies


- 14 -

seeking to acquire or establish a new business opportunity. Some of these risks and uncertainties relate to our ability to identify, secure and complete an acquisition of a suitable business opportunity.

We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition. In addition, our operating results are dependent to a large degree upon factors outside of our control. There are no assurances that we will be successful in addressing these risks, and failure to do so may adversely affect our business.

It is unlikely that we will generate any or significant revenues while we seek a suitable business opportunity. Our short and long-term prospects depend upon our ability to select and secure a suitable business opportunity. In order for us to make a profit, we will need to successfully acquire a new business opportunity in order to generate revenues in an amount sufficient to cover any and all future costs and expenses in connection with any such business opportunity. Even if we become profitable, we may not sustain or increase our profits on a quarterly or annual basis in the future.

We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until we complete a business combination or acquire a business opportunity. This may result in our company incurring a net operating loss which will increase continuously until we complete a business combination or acquire a business opportunity that can generate revenues that result in a net profit to us. There is no assurance that we will identify a suitable business opportunity or complete a business combination.

We do not have any targets for a business combination or other transaction and we have no minimum standards for a business combination.

We have no arrangement, agreement, or understanding with respect to acquiring a business opportunity or engaging in a business combination with any private entity. There can be no assurance that we will successfully identify and evaluate suitable business opportunities or conclude a business combination. There is no assurance that we will be able to negotiate the acquisition of a business opportunity or a business combination on terms favorable to us. We have not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which we will require a target business opportunity to have achieved, and without which we would not consider a business combination in any form with such business opportunity. Accordingly, we may enter into a business combination with a business opportunity having no significant operating history, losses, limited or no potential for earnings, limited assets, negative net worth or other negative characteristics.

Risks Associated with our Common Stock

Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may


- 15 -

have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

Financial Industry Regulatory Authority sales practice requirements may also limit a stockholder’s ability to buy and sell our shares of common stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. Financial Industry Regulatory Authority requirements make it more difficult for broker-dealers to recommend that their customers buy our shares of common stock, which may limit your ability to buy and sell our shares of common stock and have an adverse effect on the market for its shares.

Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.

Our common stock currently trades on a limited basis on the OTC Bulletin Board. Trading of our stock through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Description
Number  
   
3.1 Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB- 2, filed on December 8, 2006)


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3.2 Bylaws (incorporated by reference from our Registration Statement on Form SB-2, filed on December 8, 2006)
   
10.1 Form of Subscription Agreement (incorporated by reference from our Registration Statement on Form SB-2, filed on December 8, 2006)
   
10.2 Agreement with Web Strike (incorporated by reference from our Registration Statement on Form SB-2, filed on December 8, 2006)
   
10.3 Bridge Loan Agreement with Naked Boxer Brief Clothing Inc. (incorporated by reference from our Current Report on Form 8-K filed on January 17,, 2012)
   
10.4 General Security Agreement with Naked Boxer Brief Clothing Inc. (incorporated by reference from our Current Report on Form 8-K filed on January 17, 2012)
   
10.5 Share Purchase Agreement with Naked Boxer Brief Clothing Inc. (incorporated by reference from our Current Report on Form 8-K filed on March 1, 2012)
   
31.1* Section 302 Certification under Sarbanes-Oxley Act of 2002
   
32.1* Section 906 Certification under Sarbanes-Oxley Act of 2002

* Filed herewith


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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SEARCH BY HEADLINES.COM CORP.

By: /s/ James P. Geiskopf  
James P. Geiskopf  
President, Secretary, Treasurer and Director  
(Principal Executive Officer, Principal Financial Officer and  
Principal Accounting Officer)  
Dated: March 12, 2012  


PINX:NAKD Naked Brand Group Inc Quarterly Report 10-Q Filling

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PINX:NAKD Naked Brand Group Inc Quarterly Report 10-Q Filing - 1/31/2012
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