Workhorse Group Inc. - Annual Report: 2008 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the fiscal year ended December 31, 2008
OR
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number: 333-149036
TITLE
STARTS ONLINE, INC.
(Name
of registrant as specified in its charter)
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Nevada
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26-1394771
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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7007
College Boulevard, Suite 270
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Overland
Park, KS 66211
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913.832.0072
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(Address
of principal executive offices)
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(Registrant’s
telephone number)
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SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:
None
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
None
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 of Section 15(d) of the Act. Yes o No x
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 o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of Registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
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
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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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 o
As of
June 30, 2008, the last business day of the Registrant’s most recently completed
second fiscal quarter, the market value of our common stock held by
non-affiliates was $0, because as of such date none of our common stock was held
by non-affiliates.
The number of shares of the
Registrant’s common stock, $0.001 par value, outstanding as of March 31, 2009,
was 3,300,000. We have no other classes of common
equity.
TABLE OF
CONTENTS
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PART
I
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3
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3
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7
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7
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7
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7
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7
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PART
II
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7
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7
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9
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9
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12
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21
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21
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22
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PART
III
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22
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22
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23
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24
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24
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24
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PART
IV
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25
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25
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26
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2
Title
Starts Online, Inc.
Annual
Report on Form 10-K
For
the Year Ended December 31, 2008
When
used in this Report, the words “anticipate”, expect”, “plan”, “believe”, “seek”,
“estimate” and similar expressions are intended to identify forward-looking
statements. These are statements that relate to future periods and
include, but are not limited to, statements about the features, benefits and
performance of our products , our ability to introduce new product offerings and
increase revenue from existing products, expected expenses including those
related to selling and marketing, product development and general and
administrative, our beliefs regarding the health and growth of the market for
our products, anticipated increase in our customer base, expansion of our
products functionalities, expected revenue levels and sources of revenue,
expected impact, if any, of legal proceedings, the adequacy of liquidity and
capital resource, and expected growth in business. Forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. These risks and
uncertainties include, but are not limited to, market acceptance for our
products, our ability to attract and retain customers for existing and new
products, our ability to control our expenses, our ability to recruit and retain
employees, legislation and government regulation, shifts in technology, global
and local business conditions, our ability to effectively maintain and update
our product and service portfolio, the strength of competitive offerings, the
prices being charged by those competitors and the risks discussed elsewhere
herein. These forward-looking statements speak only as of the date
hereof. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in our expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.
PART
I
Item 1. Business
Company
Overview
Title
Starts Online, Inc. is a corporation, incorporated in the State of Nevada on
November 13, 2007. The Company's principal offices are currently located at 7007
College Boulevard, Suite 270, Overland Park, KS 66211. Our telephone number
there is 913.832.0072. Our fax number is 866.681.3091. All
operations, from administration to product development, take place at this
location. The Company occupies space within a customer facility owned by our
President and Chief Executive Officer, Mark DeFoor, for which it currently pays
no rent. There is no obligation for or guarantee that this
arrangement will continue in the future.
The
Company is in its development stage with no current revenues to
date. The majority of the activities to date have revolved around
defining requirements from residential title abstractors in the Kansas City area
to determine the value proposition of a consolidated title start website
business. In the title insurance business, abstractors are required
to research any and all encumbrances on specific properties which are in the
process of being refinanced or sold. This search is completed by
merging data from a variety of sources, some online and some in log books
physically maintained by local governmental entities and private production
plants. The research results are then compiled into a commitment of
title insurance which is submitted to the entity requesting the
information.
Organizational
Structure
Our
President and Chief Executive Officer, Mark DeFoor, is the only individual
currently participating in the Company’s activities. At present, he
is contributing approximately ten hours per week, without compensation, to
handle the operational business functions including corporate administration and
development responsibility. Melissa Yarnell serves as our corporate
secretary.
At such
time as funds are available and the need exists, we plan to hire employees with
technical expertise. We anticipate the cost of each of these
technical employment positions to be approximately $80,000.00 per year, and we
may choose to compensate these employees with consideration other than cash,
such as shares of common stock or options to purchase shares of common
stock.
Assuming
the availability of funds from this Offering or future sales of products, we
expect to hire employees to fill the following positions:
DBA – Database
Administrator
.Net Systems Developer
Document Management
Specialist
We would
also like to retain commissioned sales representatives or partner with national
insurance underwriters to cross-sell our services. As sales increase,
we will be in a position to add customer service representatives to handle
inbound calls, handle setup, and assist in operational
troubleshooting.
3
Land
Title Registry System and the Role of Title Insurance
In the U.
S. ownership of real property is recorded in land title registry systems
maintained in the counties of each state. The purpose of the land
title registry system is to provide a public source for determining ownership of
property and rights therein. Titles of properties are examined at the
time of transfers for the following purposes:
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·
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To
expertly examine titles and provide curative remedies for title
issues;
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·
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To
disclose all material facts (in writing) to interested parties;
and
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·
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To
actively promote fraud prevention in real estate
transactions.
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Parties
to real estate transactions frequently obtain title insurance which provides
protection against any problems in the chain of title which may arise with
respect to property purchased.
In order
to provide title insurance, title companies must search the chain of ownership
of real property in order to determine that the property qualifies to be
insured.
The title
search process is the process of examining all relevant records to confirm that
the seller is in fact the legal owner of the property and that there are no
liens or other claims outstanding out of the property. A search should discover
any liens attached to the property such as taxes owed, unpaid construction costs
and even missing heirs that could lay claim to the house. A search can also turn
up easements that allow access to the property by utilities companies, such as
power or water. Some searches may go back 50 years.
There are
two types of title insurance:
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·
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Policies
for lenders which protect lenders and are usually issued through a bank
and required by any lender before issuing a loan;
and
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·
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Policies
for owners which protect the owner's
investment.
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Market
Needs
Title
abstractors, also known as title searchers, spend a significant portion of their
time searching paper documents in local county offices or production
plants. Production plants are repositories for real estate property
records where plant members have the ability to view
information. These production plants are expensive to maintain and
are used exclusively by medium or large title agencies and
underwriters. The Company offers to small and large title agencies
and underwriters electronic access to the same information which is available at
production plants. This allows all abstractors the ability to
acquire title starts on a transaction fee basis.
An
electronic central title start repository offers the potential for an enormous
reduction in the time involved in research by abstractors. The online
repository allows the work of an already researched property to be reutilized
for a small transaction fee.
Products
and Services
The
mission of the Company is to provide fast and reliable "title starts" or
searched information to abstractors of small and large title agencies and
underwriters.
The
Company is developing a central repository for title starts and plans to deliver
two categories of products – title starts and a title search template – along
with a tips and tools area via the Company’s website. The
website has the functionality to manage new title search findings based on
unique user identification to facilitate order processing, to offer remote
storage and minimize redundant data entry. Users also have the
ability to shop for existing title starts and utilize innovative search
techniques to expedite their search.
The
existing inventory of title starts is indexed by multiple
categories. This database-driven approach allows users the ability to
search by a number of separate of variables including addresses, names and/or
property legal descriptions. The Company does not store any
nonpublic information such as social security numbers or dates of birth on the
website.
4
Users
play a unique role in the population of the data on the Company
website. As a user places a new title start online, that user can
access one of the existing starts placed by another
user. Users then have the capability of ranking the accuracy and
completeness of another user’s search.
The
Company uses a ranking system for users similar to the ranking system used for
sellers on e-bay. Abstractors will be ranked by their peers as to the
completeness and accuracy of their searches. If the ranking of an
abstractor falls below our pre-determined acceptance level, they will have a
“restricted” ranking which will alert purchasers to the quality of the title
start requested from a “restricted” user.
Startup
and Plan of Operation
The Data
Model (Database back-end which houses the physical data logically for efficient
access) has entered its second stage of development. Tables within
the database have been completed and the relationships between those tables have
been connected to ensure data integrity. We have made arrangements for an
advisory panel of front line abstractors to test the Data Model to test the
primary data components. Such proof of concept at this stage will
allow for a more efficient development phase of version I of the GUI
interface.
The GUI
(Graphical User Interface), the portion of the web application which is viewable
by the public, is complete. Testing on the GUI interface began with a
group of title abstractors who agreed to volunteer their time to participate in
a focus group to ensure the functionality and usability of the
application. Alterations stemming from that focus group began with the
data model and will follow through to the GUI interface. The GUI
design is pending approval of the Data Model with the advisory panel/focus
group. Initially, we launched two separate interfaces. The first was
the information entry screen which gives abstractors at the plant the ability to
upload and utilize a standard process to search title. The second is
a search engine which gives the abstractors the ability to access property
information.
Over
time, we see a third component to the system. This final component
will allow imports from industry standard software through an easy-to-use
interface. This component may need to be non-standard as each import
would require a small amount of mapping to ensure that the load would match our
Data Model. If we are successful in acquiring a large, national
agency or underwriter as a business partner, we will elevate the priority of the
development of this component.
Sales
Strategies
Our most
cost-effective way to generate sales is to direct as many users as possible to
the Company’s website which has been developed in a manner which would allow
screens to be exported to media for distribution. The Company intends to
establish relationships with title abstractors and title searchers for use of
the website.
Technology
/ Platform
The web
real estate of titlestarts.com was developed utilizing the following products
offered remotely by godaddy.com:
Database:
SQLServer
GUI: Microsofts .net
framework
Both
products run on the Microsoft’s Server platform.
Godaddy.com
is also hosting the Company’s email services and storage of
information.
Future
Products and Services
As the
use of the website grows, the repository of information will become increasingly
valuable and, in turn, marketable. Real estate property-related
entities, such as property and casualty insurers, home improvement businesses
and pest control companies, will be able to see what starts have been viewed
and, therefore, ascertain the identity of the properties being
transferred.
We also
see a cross-marketing potential with the American Land Title Association (a
national trade association in the title insurance industry) wherein the website
could provide continuing education to abstractor members who use the
product. The Company website could easily provide an online tutorial
on proper search methods which would promote good practices and which could
potentially reduce claims against agencies and underwriters.
5
Market
Trends
Almost
every insurance agency and underwriter in the title industry is intensely
interested in the developments in and benefits of technological advances in the
industry. These companies are developing brand specific applications
to speed the delivery of title commitments to market. While they are
spending tremendous amount of time and money on these systems, the systems
themselves are not benefiting the front line abstractors.
In our
judgment, the future will bring a consolidation of information across
agencies and underwriters. Such a vehicle does not currently exist,
and the Company hopes to be in a position to offer a central repository of
property information to all abstractors eliminating travel and search time in
many areas.
Market
Growth
Business
in all aspects of the real estate industry has constricted over the past
year. Mortgage applications have declined, and the ability of the
mortgage professionals to place those applications has also
declined. Most mortgage lenders have either closed or tightened the
guild lines associated with placing the loans.
Title
Starts Online, Inc is utilizing this time to create, implement and market
our solution. The Company plans to be in a position to capture
market share when an upswing in the real estate market occurs.
Competition
The title
industry does not currently have a public online resource for title
starts. Information is fragmented between legacy log books within
local county records and company records within a variety of insurance agencies
and underwriters.
Our primary
competition is our customers themselves. As a title insurance
agency searches a property, the “title start” or searched information is saved
within a customer’s file. This record can be either a physical paper
file or an image of the documents stored electronically. If, by
chance, a title company is asked to research the property again, then the old
customer file is opened and the title start will be utilized. In most
cases, customers are not in the position of having multiple searches on the same
property.
Some
title agencies currently have an internal system which will access county
records remotely and import them into their system. This system
requests new searches from the county each time a property is
searched. A system of this type would require data mapping for every
county in the United States which is currently web enabled.
Bankruptcy
or Similar Proceedings
There has
been no bankruptcy, receivership or similar proceeding.
Reorganizations,
Purchase or Sale of Assets
None
Compliance
with Government Regulation
Title
insurance is governed by state law and varies from state to
state. States generally set premiums for title insurance policies,
and under the Real Estate Settlement Procedures Act (“RESPA”), property owners
may choose title insurance carriers. The Company will not be in the
business of offering title insurance and will, therefore, not be subject to
governmental regulation as a title insurer. However, the Company may
be indirectly affected by governmental regulation of title insurance to the
extent such regulation relates to the products and services offered by the
Company. The Company will assess regulations and requirements of the
jurisdictions in which it offers its products and services and may need to
retain outside experts in order to ensure compliance. The Company
does not believe that its current structure will require it to obtain insurance
licenses or other types of licenses, but it is possible that regulations could
be amended to require such licenses in the future.
Subsidiaries
We have
one subsidiary, Title Starts of Kansas City, LLC (“TSKC”), a limited liability
company formed by the Company on September 25, 2008 under the laws of the State
of Missouri.
6
We own
100% of the membership interests in TSKC. We formed TSKC as a vehicle
to enter into website subscriber contracts with title abstractors to utilize the
Company’s website by entering title starts information. To date, TSKC
has not entered into any such website subscriber agreements.
Patents
and Trademarks
We do not
own, either legally or beneficially, any patents or trademarks.
Employees
and Employment Agreements
At
present, we have no employees. Mr. DeFoor, our President, provides
services on a consulting basis. There is no employment agreement between the
Company and our President. We anticipate that we will be conducting
most of our business through agreement with consultants and third parties until
employees are hired.
Reports
to Security Holders
We
provide an annual report that includes audited financial information to our
shareholders. We will make our financial information equally
available to any interested parties or investors through compliance with the
disclosure rules for a small business issuer under the Securities Exchange Act.
We file a Form 10-K annually and a Form 10-Q quarterly. In addition, we will
file Form 8-K and other proxy and information statements from time to time as
required. The public may read and copy any materials that we file with the
Securities and Exchange Commission (the "SEC"), at the SEC's Public Reference
Room at 100 F Street NE, Washington, DC 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
Item 1A. Risk Factors
Not
Applicable.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We do not
currently own any property. We are currently utilizing space within a
customer facility owned by our President and Chief Executive Officer, Mark
DeFoor, for which it pays no rent. We believe the current premises are
sufficient for our needs at this time.
We
currently have no investment policies as they pertain to real estate, real
estate interests or real estate mortgages.
Item 3. Legal Proceedings
We are
not currently involved in any legal proceedings, and we are not aware of any
pending or potential legal actions.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
PART
II
Item 5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
We are in
the process of applying for a trading symbol in order to list our common stock
for quotation on the OTCBB. The OTCBB is a regulated quotation
service that displays real-time quotes, last sale prices and volume information
in over-the-counter (OTC) securities. The OTCBB is not an issuer listing
service, market or exchange. Although the OTCBB does not have any listing
requirements per se, to be eligible for quotation on the OTCBB, issuers must
remain current in their filings with the SEC or applicable regulatory authority.
Market Makers are not permitted to begin quotation of a security whose issuer
does not meet this filing requirement. Securities already quoted on the OTCBB
that become delinquent in their required filings will be removed following a 30
or 60 day grace period if they do not make their required filing during that
time.
7
There is
no public market for our securities. There has been no public trading of our
securities, and, therefore, no high and low bid pricing. As of the date of this
report we have 40 shareholders of record. We have paid no cash dividends and
have no outstanding options.
Penny
Stock Rules
The
Securities and Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system).
Purchasing
a penny stock which the ability to sell the stock. Our shares constitute penny
stock under the Securities and Exchange Act. The shares will remain penny stocks
for the foreseeable future. The classification of penny stock makes it more
difficult for a broker-dealer to sell the stock into a secondary market, which
makes it more difficult for a stockholder to liquidate his or her shares. Any
broker-dealer engaged by the purchaser for the purpose of selling his or her
shares in the Company will be subject to Rules 15g-1 through 15g-10 of the
Securities and Exchange Act. Rather than creating a need to comply with those
rules, some broker-dealers will refuse to attempt to sell penny
stock.
The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure
document, which:
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-
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contains
a description of the nature and level of risk in the market for penny
stock in both public offerings and secondary
trading;
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-
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contains
a description of the broker's or dealer's duties to the customer and of
the rights and remedies available to the customer with respect to a
violation of such duties or other requirements of the Securities Act of
1934, as amended;
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-
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contains
a brief, clear, narrative description of a dealer market, including "bid"
and "ask" price for the penny stock and the significance of the
spread between the bid and ask
price;
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-
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contains
a toll-free telephone number for inquiries on disciplinary
actions;
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-
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defines
significant terms in the disclosure document or in the conduct of trading
penny stocks; and
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-
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contains
such other information and is in such form (including language, type, size
and format) as the Securities and Exchange Commission shall require
by rule or regulation;
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The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, to the customer:
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-
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the
bid and offer quotations for the penny
stock;
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-
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the
compensation of the broker-dealer and its salesperson in the
transaction;
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-
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the
number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market
for such stock; and
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-
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monthly
account statements showing the market value of each penny stock held in
the customer's account.
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In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those 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 acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
their securities.
Transfer
Agent
Our
transfer agent is Empire Stock Transfer, 2470 St. Rose Parkway, Suite 304,
Henderson, NV 89074.
8
(A) Recent
Sales of Unregistered Securities
Other
than the initial subscription for founder’s shares by our President and
director, Mark DeFoor, on November 13, 2007, the Company has not sold any
unregistered securities from inception through the end of its fiscal year on
December 31, 2008. Mr. DeFoor’s initial subscription was for
3,100,000 shares of its common stock for which the Company received
$3,100.
(B) Use
of Proceeds from Registered Securities
On
September 18, 2008, the Company closed its offering of common stock (the
“Offering”) registered on Form S-1/A Pre-Effective Amendment No. 4 to Form SB-2
Registration Statement under the Securities Act of 1933 which was declared
effective on August 11, 2008. In the Offering the Company accepted
subscriptions for 200,000 shares of its common stock at a price of $0.25 per
share from 40 subscribers for gross proceeds of $50,000. The proceeds
of the Offering were used by the Company for the following purposes through
December 31, 2008:
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Formation
Legal Fees
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$ | 1,800.00 | ||
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Registered
Agent Fees, courier costs, EDGAR filing costs
|
1,770.00 | |||
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CUSIP
Bureau
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124.00 | |||
|
Total
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$ | 3,694.00 |
(C) Issuer
Purchases of Equity Securities
None.
Item 6. Selected Consolidated Financial Data
Not
applicable.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The
financial and business analysis below provides information that the Company
believes is relevant to an assessment and understanding of the Company’s
consolidated financial position and results of operations. This
financial and business analysis should be read in conjunction with the
consolidated financial statements and related notes.
Forward-Looking
Statements
When used
in this Report, the words “anticipate”, expect”, “plan”, “believe”, “seek”,
“estimate” and similar expressions are intended to identify forward-looking
statements. These are statements that relate to future periods and
include, but are not limited to, statements about the features, benefits and
performance of our products , our ability to introduce new product offerings and
increase revenue from existing products, expected expenses including those
related to selling and marketing, product development and general and
administrative, our beliefs regarding the health and growth of the market for
our products, anticipated increase in our customer base, expansion of our
products functionalities, expected revenue levels and sources of revenue,
expected impact, if any, of legal proceedings, the adequacy of liquidity and
capital resource, and expected growth in business. Forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. These risks and
uncertainties include, but are not limited to, market acceptance for our
products, our ability to attract and retain customers for existing and new
products, our ability to control our expenses, our ability to recruit and retain
employees, legislation and government regulation, shifts in technology, global
and local business conditions, our ability to effectively maintain and update
our product and service portfolio, the strength of competitive offerings, the
prices being charged by those competitors and the risks discussed elsewhere
herein. These forward-looking statements speak only as of the date
hereof. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in our expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.
Overview
Company
Overview
Title
Starts Online, Inc. is a corporation, incorporated in the State of Nevada on
November 13, 2007. The Company's principal offices are currently located at 7007
College Boulevard, Suite 270, Overland Park, KS 66211. Our telephone number
there is 913.832.0072. Our fax number is 866.681.3091. All
operations, from administration to product development, take place at this
location. The Company occupies space within a customer facility owned by our
President and Chief Executive Officer, Mark DeFoor, for which it currently pays
no rent.
9
The
Company is in the early stage of operations with no current revenues to
date. From inception through August 11, 2008, the date on which the
Company’s securities offering was declared effective by the SEC, the majority of
the Company’s activities revolved around defining requirements from residential
title abstractors in the Kansas City area to determine the value proposition of
a consolidated title start website and beginning the development of the
website. From August 11, 2008 through September 17, 2008, the Company
conducted its securities offering and obtained subscriptions for its
securities. On September 25, 2008, the Company formed a wholly-owned
subsidiary, Title Starts of Kansas City, LLC, a Missouri limited liability
company. During the remainder of the fiscal year, the Company
continued to develop its website and began to identify title searchers and
abstractors with whom it plans to establish, through its subsidiary, contractual
relationships for the use of the Company’s website.
Organizational
Structure
Our
President and Chief Executive Officer is Mark DeFoor. Mr. DeFoor
handles the operational business functions including corporate administration
and development responsibility with respect to the title starts
business. We have no employees.
Basis
of Presentation
Our
financial statements are prepared in accordance with the rules and regulations
of the Securities and Exchange Commission. Certain information and disclosures
in our unaudited condensed consolidated interim financial statements have been
condensed or omitted as permitted by such rules and regulations.
Significant
Accounting Estimates
We review
all significant estimates affecting our consolidated financial statements on a
recurring basis and record the effect of any necessary adjustment prior to their
publication. Uncertainties with respect to such estimates and assumptions are
inherent in the preparation of financial statements; accordingly, it is possible
that actual results could differ from those estimates and changes to estimates
could occur in the near term. The preparation of our financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of the contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Estimates and judgments are
used when accounting for revenue, stock-based compensation, accounts receivable
and allowance for doubtful accounts, impairment of long-lived assets,
depreciation and amortization, deferred income taxes, and contingencies among
others.
Management
has discussed the development and selection of these significant accounting
estimates with our Board of Directors and our Board of Directors has reviewed
our disclosures relating to them.
Results
of Operations
Comparison
of Year Ended December 31, 2008 and Period from November 13, 2007 (Inception) to
December 31, 2008
Revenue
For the
year ended December 31, 2008, for the period from November 13, 2007 (inception)
to December 31, 2007 and for the period from November 13, 2007 (inception) to
December 31, 2008, the Company had no revenue.
Operating
Expenses
Operating
expenses were $24,476 for the year ended December 31, 2008, $1,800 for the
period from November 13, 2007 (inception) through December 31, 2007 and $26,276
for the period from November 13, 2007 (inception) to December 31,
2008.
Our
expenses are categorized as administrative expense and professional services
expense. During the year ended December 31, 2008, we incurred $4,145
in administrative expense and $20,331 in professional service
expense. During the period from November 13, 2007 (inception) through
December 31, 2007, we incurred $0 in administrative expense and $1,800 in
professional service expense. During the period from November 13,
2007 (inception) through December 31, 2008, we incurred $4,145 in administrative
expense and $22,131 in professional service expense.
10
Operating
Loss and Net Loss
Our net
loss for the year ended December 31, 2008 was $24,476, our net loss for the
period from November 13, 2007 (inception) through December 31, 2007 was $1,800
and our net loss for the period from November 13, 2007 (inception) through
December 31, 2008 was $26,276.
Liquidity
and Capital Resources
Management
believes that we will begin receiving revenue in the fourth quarter of 2009.
Based on our anticipated level of revenues, we believe that funds generated from
operations, together with existing cash and cash available from financing
activities completed in 2008, will be sufficient to finance our operations and
planned capital expenditures through the first quarter of 2010.
We will
continue to pursue traffic to our web site and actively seek new
customers. We believe these actions will position us to capitalize on
opportunities as they arise in the industry. However, there can be no assurance
that these actions will be successful. Should volumes and revenues decline to a
level significantly below our current expectations, we would reduce capital
expenditures and implement cost-reduction initiatives which we believe would be
sufficient to ensure that funds generated from operations, together with
existing cash and available borrowings under our credit agreement, would be
sufficient to finance our current operations through the first quarter of
2010.
We had
net cash of $27,585 used in operating activities in the year ended December 31,
2008, net cash of $15,291 provided by operating activities for the period from
November 13, 2007 (inception) to December 31, 2007 and net cash of $12,294 used
in operating activities for the period from November 13, 2007 (inception) to
December 31, 2008.
We had
net cash of $27,657 provided by financing activities during the year ended
December 31, 2008, net cash of $15,291 used in financing activities for the
period from November 13, 2007 (inception) through December 31, 2007 and net cash
of $12,366 provided by financing activities for the period from November 13,
2007 (inception) through December 31, 2008. We ended the year with
cash of $72.
There
were no cash flows from investing activities during any period
reported.
We
believe cash flow from operations will be sufficient to finance our current
operations through the first quarter of 2010. If additional funding is required,
the Company plans to obtain working capital from equity financing from the sale
of our common stock and/or advances from Mark DeFoor, our President and Chief
Executive Officer and sole director.
Off-Balance-Sheet
Arrangements
As of
December 31, 2008, we did not have any significant off-balance-sheet
arrangements, as defined in section 303(a)(4)(ii) of Regulation S-K of
the SEC.
Plan
of Operation
Our plan
of operation for the next 12 months is to continue to develop the operational
process for the Company’s website and to identify title abstractors as potential
website subscribers with whom we, through our subsidiary, could enter into
website subscriber agreements for the purpose of populating the Company’s
website with title starts data. We would require additional funding in order to
proceed with any additional operations outside our present plan of
operation. If additional funding is required, the Company plans to
obtain working capital from equity financing from the sale of our common stock
and/or advances from Mark DeFoor, our President and Chief Executive Officer and
sole director. We do not have any arrangements in place for any
future equity financing or loans.
The
United States and the global business community is experiencing severe
instability in the commercial and investment banking systems which is likely to
continue to have far-reaching effects on the economic activity in the country
for an indeterminable period. The long-term impact on the United States economy
and the Company's operating activities and ability to raise capital cannot be
predicted at this time, but may be substantial.
11
Item 8. Financial Statements
Title
Starts Online, Inc.
As
of December 31, 2008
And
for the Period November 13, 2007 (Inception)
Through
December 31, 2008
|
Page Number
|
|
|
Report
of Independent Registered Public Accounting Firm
|
15
|
|
Consolidated
Balance Sheets
|
16
|
|
Consolidated
Statements of Operations
|
17
|
|
Consolidated
Statement of Changes in Stockholders’ Equity (Deficit)
|
18
|
|
Consolidated
Statements of Cash Flows
|
19
|
|
Notes
to Consolidated Financial Statements
|
20
|
12
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Shareholders
Title
Starts Online, Inc.
Overland
Park, Kansas
We have
audited the accompanying balance sheets of Title Starts Online, Inc. as of
December 31, 2008 and 2007 and the related statements of operations,
changes in stockholders’ equity (deficit) and cash flows for the year ended
December 31, 2008, for the period from November 13, 2007 (inception) to
December 31, 2007 and for the period from November 13, 2007 (inception) to
December 31, 2008. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
financial statements based upon our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. 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 Title Starts Online, Inc. as of
December 31, 2008 and 2007, and the results of its operations and its cash
flows for the year ended December 31, 2008, for the period from November 13,
2007 (inception) to December 31, 2007 and for the period from November 31,
2007 (inception) to December 31, 2008, 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 described in Note 2, the Company has no
business operations and has negative working capital and stockholders’ deficits,
which raise substantial doubt about its ability to continue as a going concern.
Management’s plan in regard to this matter is also discussed in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
/s/ Schumacher & Associates, Inc.
|
Schumacher &
Associates, Inc.
|
|
March
28, 2009
|
|
Denver,
Colorado
|
13
TITLE
STARTS ONLINE, INC.
(A
Development Stage Company)
Consolidated
Balance Sheets
|
December
31, 2008
|
December
31, 2007
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS
|
||||||||
|
Cash
|
$ | 72 | $ | — | ||||
|
Escrow
account with attorney
|
46,306 | — | ||||||
|
Stock
subscriptions receivable
|
— | 3,100 | ||||||
|
TOTAL
CURRENT ASSETS
|
46,378 | 3,100 | ||||||
|
Deferred
offering costs
|
15,291 | |||||||
|
TOTAL
ASSETS
|
$ | 46,378 | $ | 18,391 | ||||
|
LIABILITIES
& STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
|
LIABILITIES
|
||||||||
|
Accounts
payable
|
$ | 60,288 | $ | 17,091 | ||||
|
Advances
payable, related party
|
5,500 | — | ||||||
|
Total
Current Liabilities
|
65,788 | 17,091 | ||||||
|
Commitments
and contingencies (Notes 1,2,3,4,5 and 6)
|
||||||||
|
Stockholders'
Equity (Deficit)
|
||||||||
|
75,000,000
Preferred Stock authorized at $0.001
per share, none issued
|
||||||||
|
425,000,000 shares
Common Stock authorized
at $0.001/par
value
|
||||||||
|
3,300,000
and 3,1000,000 shares issued and outstanding at December 31,
2008 and 2007 respectively.
|
3,300 | 3,100 | ||||||
|
Additional
Paid-in Capital
|
3,566 | — | ||||||
|
Deficit
accumulated during development stage
|
(26,276 | ) | (1,800 | ) | ||||
|
Total
Stockholders' Equity (Deficit)
|
(19,410 | ) | 1,300 | |||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$ | 46,378 | $ | 18,391 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
14
TITLE
STARTS ONLINE, INC.
(A
Development Stage Company)
Consolidated
Statements of Operations
|
For
the Period
|
For
the Period
|
|||||||||||
|
|
November
13, 2007
|
November
13, 2007
|
||||||||||
|
|
(Inception)
|
(Inception)
|
||||||||||
|
Year
Ending
|
Through
|
Through
|
||||||||||
|
December
31, 2008
|
December
31, 2007
|
December
31, 2008
|
||||||||||
| Revenues | $ | — | $ | — | $ | — | ||||||
|
Operating
Expense
|
||||||||||||
|
Administrative
Expense
|
4,145 | — | 4,145 | |||||||||
|
Professional
Services
|
20,331 | 1,800 | 22,131 | |||||||||
| 24,476 | 1,800 | 26,276 | ||||||||||
|
Net
loss
|
$ | (24,476 | ) | $ | (1,800 | ) | $ | (26,276 | ) | |||
|
Basic
earnings per share
|
$ | (0.01 | ) |
$Nil
|
$ | (0.01 | ) | |||||
|
Weighted
average number of common shares outstanding
|
3,165,479 | 3,100,000 | 3,150,242 | |||||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
15
TITLE
STARTS ONLINE, INC.
(A
Development Stage Company)
Consolidated
Statement of Changes in Stockholders' Equity (Deficit)
For the
Period from November 13, 2007 (Inception) to December 31, 2008
|
Deficit
|
||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||
|
Common
|
Additional
|
During
|
||||||||||||||||||
|
Common
|
Stock
|
Paid-in
|
Development
|
|||||||||||||||||
|
Stock
|
Amount
|
Capital
|
Stage
|
Total
|
||||||||||||||||
|
Stock
issued for cash December 1, 2007
|
||||||||||||||||||||
|
at
par value of $0.001 per share
|
3,100,000 | $ | 3,100 | $ | ¾ | $ | ¾ | $ | 3,100 | |||||||||||
|
Net
(loss) for the year 2007
|
¾ | ¾ | ¾ | (1,800 | ) | (1,800 | ) | |||||||||||||
|
Balance
December 31, 2007
|
3,100,000 | 3,100 | ¾ | (1,800 | ) | 1,300 | ||||||||||||||
|
Stock
issued for cash September 30, 2008 at
|
||||||||||||||||||||
|
$0.25
per share, less offering costs of $46,234
|
200,000 | 200 | 3,566 | ¾ | 3,766 | |||||||||||||||
|
Net
(loss) for the year 2008
|
¾ | ¾ | ¾ | (24,476 | ) | (24,476 | ) | |||||||||||||
|
Balance
December 31, 2008
|
3,300,000 | $ | 3,300 | $ | 3,566 | $ | (26,276 | ) | $ | (19,410 | ) | |||||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
16
TITLE
STARTS ONLINE, INC.
(A
Development Stage Company)
Consolidated
Statements of Cash Flows
|
For
the Period
|
For
the Period
|
|||||||||||
|
November
13,2007
|
November
13, 2007
|
|||||||||||
|
|
(Inception)
|
(Inception)
|
||||||||||
|
Year Ending
|
Through
|
Through
|
||||||||||
|
December
31, 2008
|
December
31, 2007
|
December
31, 2008
|
||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
|
Net
(loss)
|
$ | (24,476 | ) | $ | (1,800 | ) | $ | (26,276 | ) | |||
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
||||||||||||
|
(Increase)
in escrow account
|
(46,306 | ) | ¾ | (46,306 | ) | |||||||
|
Increase
in accounts payable
|
43,197 | 17,091 | 60,288 | |||||||||
|
Net
cash provided by (used in) operating activities
|
(27,585 | ) | 15,291 | (12,294 | ) | |||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
¾ | ¾ | ¾ | |||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Advance
from related party
|
5,500 | ¾ | 5,500 | |||||||||
|
Issuance
of Common Stock
|
53,100 | ¾ | 53,100 | |||||||||
|
Offering
costs
|
(30,943 | ) | (15,291 | ) | (46,234 | ) | ||||||
|
Net
cash provided by (used in) financing activities
|
27,657 | (15,291 | ) | 12,366 | ||||||||
|
Net
increase in cash
|
72 | ¾ | 72 | |||||||||
|
Cash
at beginning of period
|
¾ | ¾ | — | |||||||||
|
Cash
at end of period
|
$ | 72 | $ | ¾ | $ | 72 | ||||||
|
Supplemental
Cash Flow Disclosures:
|
||||||||||||
|
Cash
paid during period for interest
|
$ | — | $ | — | $ | — | ||||||
|
Cash
paid during period for taxes
|
$ | — | $ | — | $ | — | ||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
17
TITLE
STARTS ONLINE, INC.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
December
31, 2008
1)
ORGANIZATION AND BUSINESS OPERATIONS
Title
Starts Online, Inc. (the "Company") was incorporated in the State of Nevada on
November 13, 2007. On September 25, 2008 the Company formed a wholly-owned
subsidiary, Title Starts of Kansas City, LLC. The Company is a Development Stage
Company as defined by Statement of Financial Accounting Standards ("SFAS") No.
7. The Company plans to offer an online repository of title starts for
abstractors.
On August
11, 2008, the Company received a Notice of Effectiveness from the U.S.
Securities and Exchange Commission. On September 18, 2008, the Company closed
the public offering in which it accepted subscriptions for an aggregate of
200,000 shares of its common stock.
2)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies is presented to assist in
understanding the Company's financial statements. The financial
statements and notes are representations of management who is
responsible for
their integrity and objectivity. These accounting policies conform
to generally accepted accounting principles in
the United States of America and have
been consistently applied in the preparation of the
financial statements.
a)
Basis of Presentation
The
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company has no business operations and
has negative working capital and stockholders’ deficits. These conditions raise
substantial doubt about the ability of the Company to continue as a going
concern.
In view
of these matters, continuation as a going concern is dependent upon the
continued operations of the Company, which in turn is dependent upon the
Company's ability to meet its financial requirements, raise additional capital,
and the success of its future operations. The financial statements do not
include any adjustments to the amount and classification of assets and
liabilities that may be necessary should the Company not continue as a going
concern.
The
Company completed a public offering and raised $50,000 less offering costs of
$46,234 as described in Note 6. Management believes that the proceeds from the
public offering, the Company’s anticipated revenue and the minimal costs of
operation provide an opportunity for the Company to continue as a going
concern. If additional funding is required, the Company plans to
obtain working capital from either equity financing from the sale of our common
stock and/or advances from our President.
b)
Cash and Cash Equivalents
The
Company considers all highly liquid instruments with a maturity of three months
or less at the time of issuance to be cash equivalents.
c)
Use of Estimates and Assumptions
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts or revenues and expenses during the
reporting period. Actual results could differ from those estimates.
d) Fair Value of Financial Instruments
SFAS 107,
"Disclosures About Fair Value of Financial Instruments," requires disclosure of
fair value information about financial instruments. Fair value estimates
discussed herein are based upon certain market assumptions and pertinent
information available to management as of December 31, 2008.
The
respective carrying value of certain on-balance-sheet financial instruments
approximates their fair values. These financial instruments include cash, escrow
account, stock subscriptions receivable, accounts payable, and advances payable
related party. Fair values were assumed to approximate carrying values for these
financial instruments since they are short term in nature and their carrying
amounts approximate fair value, or they are receivable or payable on
demand.
18
TITLE
STARTS ONLINE, INC.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
December
31, 2008
e)
Revenue Recognition
The
Company has not generated any revenues since entering the development
stage. It is the Company's policy that revenues will be recognized in
accordance with SEC Staff Bulletin (SAB) No. 104, "Revenue Recognition". Under
SAB 104, product revenues (or service revenues) are recognized when persuasive
evidence of an arrangement exists, delivery has occurred (or service has been
performed), the sales price is fixed and determinable, and collectability is
reasonably assured.
f) Income Taxes
Income
taxes are accounted for under the assets and liabilities method. Deferred tax
assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. A valuation allowance is
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
g) Basic
and Diluted Net Loss per Share
The
Company computes net loss per share in accordance with SFAS No. 128, "Earnings
per Share". SFAS No. 128 requires presentation of both basic and diluted per
share (EPS) on the face of the income statement. Basic EPS is computed by
dividing net loss available to common shareholders (numerator) by the weighted
average number of shares outstanding (denominator) during the period. Diluted
earnings per share is not shown for periods in which the Company incurs a loss
because it would be anti-dilutive. At December 31, 2008, the Company
had no stock equivalents that were anti-dilutive and excluded in the earnings
per share computation.
h)
Development Stage Company
Based on
the Company's business plan, it is a development stage company since planned
principal operations have not yet commenced. Accordingly, the Company presents
its financial statements in conformity with the accounting principles generally
accepted in the United States of America that apply to developing enterprises.
As a development stage enterprise, the Company discloses its retained earnings
(or deficit accumulated) during the development stage and the cumulative
statements of operations and cash flows from commencement of development stage
to the current balance sheet date. The development stage began on November 13,
2007, when the Company was organized.
i)
Concentrations
The
Company is not currently a party to any financial instruments that potentially
subject it to concentrations of credit risk.
j)
Recent Pronouncements
There
were various accounting standards and interpretations issued during 2008 and
2007, none of which are expected to have a material impact on the Company's
financial position, operations, or cash flows.
k) Principles
of Consolidation
The
consolidated financial statements include the accounts of both Title Starts
Online, Inc. and its subsidiary Title Starts of Kansas City, LLC. All
inter-company accounts have been eliminated in the consolidation.
3)
CAPITAL STOCK
Preferred Stock. The Company
has authorized 75,000,000 shares of preferred stock with a par value of $.001
per share. These shares may be issued in series with such rights and preferences
as may be determined by the Board of Directors. The Company has not issued any
preferred shares.
Common Stock. The Company has
authorized 425,000,000 shares of common stock with a par value of $.001 per
share. As of December 31, 2008, there were 3,300,000 shares issued and
outstanding.
19
TITLE
STARTS ONLINE, INC.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
December
31, 2008
On
November 13, 2007, (inception), the Company issued 3,100,000 shares of common
stock to a director of the Company at $.001 per share, for a total of $3,100 in
stock subscriptions receivable. Subsequent to December 31, 2007, the Company
collected the remaining balance of the stock subscriptions
receivable.
On
September 18, 2008, the Company issued 200,000 shares of common stock to forty
individuals at $0.25 per share for a total $50,000 in stock subscriptions
receivable. The $50,000 is being held in an escrow account with the Company's
attorney. Offering costs totaling $46,234 related to the offering have been
offset to the proceeds. Included in accounts payable at December 31,
2008, is $58,044 payable to the attorney holding the escrow
account.
4)
INCOME TAXES
Deferred
income taxes arise from temporary timing differences in the recognition of
income and expenses for financial reporting and tax purposes. The Company's
deferred tax assets consist entirely of the benefit form operating loss (NOL)
carry forwards. The net operating loss carry forward, if not used, will expire
in various years through 2028, and is severely restricted as per the Internal
Revenue code, if there is a change in ownership. The Company's deferred tax
assets are offset by a valuation allowance due to the uncertainty of the
realization of the net operating loss carry forwards. Net operating loss carry
forwards may be further limited by other provisions of the tax
laws.
The
Company's deferred tax assets, valuation allowance, and change in valuation
allowance are as follows:
|
Period Ending:
|
Estimated
NOL
Carry-
Forward
|
NOL
Expires
|
Estimated
Tax
Benefit
from
NOL
|
Valuation
Allowance
|
Change
in
Valuation
Allowance
|
Net
Tax
Benefit
|
|||||||||
|
December
31, 2007
|
1,800
|
2027
|
270
|
(270)
|
|
(270)
|
|
¾
|
|||||||
|
December
31, 2008
|
24,476
|
2028
|
3,671
|
(3,671)
|
|
(3,671)
|
|
¾
|
|||||||
Income
taxes at the statutory rate are reconciled to the Company's actual income taxes
as follows:
|
Income
tax
|
(15.00)
|
%
|
||
|
Deferred
income
|
15.00
|
%
|
||
|
Actual
tax rate
|
0
|
%
|
5)
RELATED PARTY TRANSACTIONS
The
Company uses the offices of its President for its minimal office facility needs
for no consideration. No provision for these costs has been provided since it
has been determined that they are immaterial.
The
Company's President has advanced $5,500 to the Company during the year ended
December 31, 2008. The advances are uncollateralized, bear no interest, and are
due on demand.
6)
DEFERRED OFFERING COSTS
As of
December 31, 2007 and December 31, 2008, the Company had incurred $15,291 and
$46,234, respectively, in costs related to a public offering of its securities.
The offering was completed in September 2008, and the costs were offset to the
proceeds.
20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
Item 9A. Controls and Procedures
As of the
end of the period covered by this Annual Report, our sole officer and director
performed an evaluation of the effectiveness of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
Based on the evaluation and the identification of the material weaknesses in
internal control over financial reporting described below, our sole officer and
director concluded that, as of December 31, 2008, the Company's disclosure
controls and procedures were not effective.
Management's
Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act. Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements in accordance with
GAAP. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projection of any evaluation of effectiveness to future periods is subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Mark
DeFoor, our President and sole director has conducted an assessment of our
internal control over financial reporting as of December 31,
2008. Management's assessment of internal control over financial
reporting was conducted using the criteria in
Internal Control over Financial Reporting - Guidance for Smaller Public
Companies issued by the Committee of
Sponsoring Organizations of the Treadway Commission
("COSO").
A
material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such
that there is a reasonable possibility that a
material misstatement of
the Company's annual or interim
financial statements will not be prevented or detected on
a timely basis. In connection
with management's assessment of our internal control over
financial reporting as required under Section 404 of
the Sarbanes-Oxley Act of 2002, we
identified the following material weaknesses in
our internal control over financial reporting as of
December 31, 2008:
1. The
Company has not established adequate financial reporting monitoring activities
to mitigate the risk of management override, specifically because there are no
employees and only one officer and director with management functions and
therefore there is lack of segregation of duties. In addition, the
Company has installed accounting software that does not prevent erroneous or
unauthorized changes to previous reporting periods and does not provide an
adequate audit trail of entries made in the accounting
software. However, although our controls are not effective, these
significant weaknesses did not result in any material misstatements in our
financial statements.
2. In
addition, there is insufficient oversight of accounting principles
implementation and insufficient oversight of external audit
functions.
3. There
is a strong reliance on the external auditors to review and adjust the annual
and quarterly financial statements, to monitor new accounting principles, and to
ensure compliance with GAAP and SEC disclosure requirements.
4. There
is a strong reliance on the external attorneys to review and edit the annual and
quarterly filings and to ensure compliance with SEC disclosure
requirements.
Because
of the material weaknesses noted above, management has concluded that we did not
maintain effective internal control over financial reporting as of December 31,
2008, based on Internal Control over Financial Reporting - Guidance for Smaller
Public Companies issued by COSO.
Remediation
of Material Weaknesses in Internal Control over Financial Reporting
As a
small business, without a viable business and revenues, the Company does not
have the resources to install a dedicated staff with deep expertise in all
facets of SEC disclosure and GAAP compliance. As is the case with
many small businesses, the Company will continue to work with its external
auditors and attorneys as it relates to new accounting principles and changes to
SEC disclosure requirements. The Company has found that this approach worked
well in the past and believes it to be the most cost effective solution
available for the foreseeable future.
21
The
Company will conduct a review of existing sign-off and review procedures as well
as document control protocols for critical accounting
spreadsheets. The Company will also increase management's review of
key financial documents and records.
As a
small business, the Company does not have the resources to fund sufficient staff
to ensure a complete segregation of responsibilities within the accounting
function. However, Company management does review, and will increase
the review of, financial statements on a monthly basis, and the Company's
external auditor conducts reviews on a quarterly basis. These
actions, in addition to the improvements identified above, will minimize any
risk of a potential material misstatement occurring.
This
Annual Report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to
temporary rules of the SEC that permit the Company to provide only management's
report in this annual report.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting during the
fourth quarter ended December 31, 2008 that
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. Other Information
None.
PART
III
Item 10. Directors and Executive Officers
The
officers and director of the Company are as follows:
|
Name
and Address
|
Age
|
Position
|
Date
Elected
|
Term
Expires
|
|
Mark
DeFoor
7007
College Boulevard, Suite 270
Overland
Park, KS 66211
|
38
|
President,
Chief Executive Officer, Treasurer and Director
|
December
1, 2008
|
December
1, 2009
|
|
Melissa
Yarnell
7007
College Boulevard, Suite 270
Overland
Park, KS 66211
|
41
|
Secretary
|
December
1, 2008
|
December
1, 2009
|
Directors
are elected to serve until the next annual meeting of stockholders and until
their successors have been elected and qualified. Officers are appointed to
serve until the meeting of the board of directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
Mark
DeFoor currently devotes approximately ten hours per week to Company matters. If
circumstances warrant in the future, Mr. DeFoor intends to devote as much time
as is necessary to manage the affairs of the Company.
Our
officers and director have not been the subject of any order, judgment, or
decree of any court of competent jurisdiction, or any regulatory agency
permanently or temporarily enjoining, barring, suspending or otherwise limiting
them from acting as an investment advisor, underwriter, broker or dealer in the
securities industry, or as an affiliated person, director or employee of an
investment company, bank, savings and loan association, or insurance company or
from engaging in or continuing any conduct or practice in connection with any
such activity or in connection with the purchase or sale of any
securities.
Our
officers and director have not been convicted in any criminal proceeding
(excluding traffic violations) and are not the subject of a criminal proceedings
which are currently pending.
Resumes
Mark
DeFoor, the primary founder of the Company, is also a Director, President and
Chief Executive Officer. Mr. DeFoor earned a Bachelor’s of Business
Administration (1993) and a Master’s of Business Administration (1995) from the
University of Missouri at Kansas City. Mr. DeFoor’s previous
experience includes the development of the National Association of Insurance
Commissions Central Repository of Producer Agents as well as the operation,
purchase and sale of several title insurance companies.
22
Melissa
Yarnell, the Secretary of the Company, attended Kansas City Kansas Community
College and has been in the title insurance business since 1990. From
1990 to 1994 Mrs. Yarnell served as an Escrow Closer at ATI/American Land Title
Agency and from 1994 to 2003 served as Escrow Manager of Nations Title Agency,
Inc. Mrs. Yarnell is currently the Vice President of Escrow Services
for Capital Title Agency, Inc. in Kansas City, MO.
Code
of Ethics
We do not
currently have a code of ethics, because we have only limited business
operations with two officers, one of whom is our sole director, we believe a
code of ethics would have limited utility. We intend to adopt such a code of
ethics as our business operations expand and we have more directors, officers
and employees.
Item 11. Executive Compensation
The
following summary compensation table sets out details of compensation paid to
(a) our principal executive officer; (b) each of our two most highly compensated
executive officers who served as executive officers during the fiscal year ended
December 31, 2008; and (c) up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual was not
serving as our executive officer at the end of the fiscal year ended December
31, 2008, except that no disclosure is provided for any named executive officer,
other than our principal executive officer, whose total compensation did not
exceed $100,000 for the fiscal year ended December 31, 2008:
|
Summary
Compensation Table
|
|||||||||||||||||||||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary$
|
Bonus$
|
Stock
Awards$
|
Option
Awards$
|
Non-Equity
Incentive Plan Compensation$
|
Change
in Pension Value and Nonqualified Deferred
Compensation
Earnings$
|
All
Other Compensation$
|
Totals$
|
||||||||||||||||||||||||
|
Mark
DeFoor
President,
Chief Executive Officer, Treasurer and Director
|
2008
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
We have
not entered into any employment agreement or consulting agreement with our
current directors and executive officers. There are no arrangements or plans in
which we provide pension, retirement or similar benefits for directors or
executive officers. Our directors and executive officers may receive stock
options at the discretion of our board of directors in the future. We do not
have any material bonus or profit sharing plans pursuant to which cash or
non-cash compensation is or may be paid to our directors or executive officers,
except that stock options may be granted at the discretion of our board of
directors from time to time. We have no plans or arrangements in respect of
remuneration received or that may be received by our executive officers to
compensate such officers in the event of termination of employment (as a result
of resignation, retirement, change of control) or a change of responsibilities
following a change of control.
Outstanding
Equity Awards at Fiscal Year-End
As at
December 31, 2008, we had not adopted any equity compensation plan and no stock,
options, or other equity securities were awarded to our executive
officers.
Aggregated
Options Exercised in the Year Ended December 31, 2008 and Year End Option
Values
There
were no stock options exercised during the year ended December 31,
2008.
Repricing
of Options/SARS
We did
not reprice any options previously granted during the year ended December 31,
2008.
Director
Compensation
Directors
of our Company may be paid for their expenses incurred in attending each meeting
of the directors. In addition to expenses, directors may be paid a sum for
attending each meeting of the directors or may receive a stated salary as
director. No payment precludes any director from serving our Company in any
other capacity and being compensated for such service. Members of special or
standing committees may be allowed similar reimbursement and compensation for
attending committee meetings. During the year ended December 31, 2008, we did
not pay any compensation or grant any stock options to our
directors.
23
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The
following table sets forth, as of December 31, 2008, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each of our current directors and executive officers. Each person
has sole voting and investment power with respect to the shares of common
stock. Beneficial ownership consists of a direct interest in the
shares of common stock, except as otherwise indicated.
|
Name
and Address of Beneficial Owner
|
Amount
of Beneficial Ownership
|
Percentage of Class1
|
||||||
|
Mark
DeFoor
7007
College Boulevard, Suite 270
Overland
Park, KS 66211
|
3,105,000 | 94.1 | % | |||||
|
Melissa
Yarnell
7007
College Boulevard, Suite 270
Overland
Park, KS 66211
|
5,000 | * | ||||||
|
All
Officers and Directors as a group
|
3,110,000 | 94.24 | % | |||||
*Less
than 1%
1Under
Rule 13d-3, a beneficial owner of a security includes any person who, directly
or indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares: (i) voting power, which includes the power to vote,
or to direct the voting of shares; and (ii) investment power, which includes the
power to dispose or direct the disposition of shares. Certain shares
may be deemed to be beneficially owned by more than one person (if, for example,
persons share the power to vote or the power to dispose of the
shares). In addition, shares are deemed to be beneficially owned by a
person if the person has the right to acquire the shares (for example, upon
exercise of an option) within 60 days of the date as of which the information is
provided. In computing the percentage ownership of any person, the
amount of shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of these
acquisition rights. As a result, the percentage of outstanding shares
of any person as shown in this table does not necessarily reflect the person’s
actual ownership or voting power with respect to the number of shares of common
stock actually outstanding on December 31, 2008. As of December 31,
2008, there were 3,300,000 shares of our Company’s common stock issued and
outstanding.
Equity
Plan Compensation Information
Our
Company does not currently have a stock option plan or other form of equity
plan.
Item 13. Certain Relationships and Related Transactions
None.
Corporate
Governance
We
currently act with a single director, Mark DeFoor. Mr. DeFoor is not
independent as defined in Item 7(d)(3)(iv) of Schedule 14A under the Exchange
Act.
We do not
have a standing audit, compensation or nominating committee, but our entire
board of directors acts in such capacities. We believe that our board
of directors is capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial
reporting. The board of directors of our Company does not believe
that it is necessary to have a standing audit, compensation or nominating
committee because we believe that the functions of such committees can be
adequately performed by the board of directors. In addition, we
believe that retaining one or more directors who would qualify as independent in
accordance with Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act would be
overly costly and burdensome and is not warranted in our circumstances given the
early stages of our development and the fact that we have not generated any
revenues from operations to date.
Item 14. Principal Accounting Fees and Services
The total
fees charged to the Company for audit and review services by Schumacher &
Associates, Inc., the Company's independent registered public accounting firm,
were $6,500 during the year ended December 31, 2008. The Company incurred no
fees for tax or other services for the year ended December 31,
2008.
The
current policy of the sole director, acting as the audit committee, is to
approve the appointment of the principal auditing firm and any permissible
audit-related services. The audit and audit-related fees were not approved by
specific Board action in 2008.
24
PART
IV
Item 15. Exhibits and Financial Statement Schedules
The
Company’s financial statements filed as part of this report are listed in the
Table of Contents and provided in response to Item 8.
Exhibits
required by Item 601 of Regulation S-K:
|
No.
|
Description
|
|
3.1
|
Articles
of Incorporation of the Company1
|
|
3.2
|
Bylaws
of the Company1
|
1Incorporated
herein by reference from the Company’s Registration Statement on Form SB-2 filed
with the Securities and Exchange Commission on February 4, 2008.
25
Signatures
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
TITLE STARTS ONLINE,
INC.
|
|
|
(Registrant)
|
|
|
Date:
March 30, 2009
|
/s/
Mark DeFoor
|
|
Mark
DeFoor
|
|
|
President
and Chief Executive Officer
|
|
|
(Sole
Director and Principal Executive, Financial
and
Accounting Officer)
|
|
26