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EX-31.1 - SHELRON GROUP INCv167111_ex31-1.htm
EX-32.1 - SHELRON GROUP INCv167111_ex32-1.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
ACT OF 1934
For the quarterly period ended:
September 30, 2009
   
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
ACT OF 1934
For the transition period from: _____________ to _____________


 SHELRON GROUP, INC.
(Exact name of registrant as specified in its charter)

 
Delaware
000-31176
04-2968425
(State or Other Jurisdiction
(Commission
(I.R.S. Employer
of Incorporation)
File Number)
Identification No.)
 
39 Broadway Avenue, New York, NY 10006
(Address of Principal Executive Office) (Zip Code)
 
(646) 472-5706
(Registrant’s telephone number, including area code)
 
Not Applicable
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. x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 20, 2009, there were 18,477,500 shares of common stock outstanding.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
o Yes              o No

 (Former name, former address and former fiscal year, if changed since last report)


 
 

 


SHELRON GROUP, INC. AND SUBSIDIARY
Table of Contents

 
Page
Part I. FINANCIAL INFORMATION
 
   
Item 1. Financial Statements (Unaudited):
 
   
Condensed Consolidated Balance Sheets at September 30, 2009 and December 31, 2008
2
   
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008
3
   
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008
4
   
Notes to Condensed Consolidated Financial Statements
5
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
9
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk
12
   
Item 4(T). Controls and Procedures
12
   
Part II. OTHER INFORMATION
13
   
Item 1. Legal Proceedings
13
   
Item 1A. Risk Factors
13
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
13
   
Item 3. Defaults upon Senior Securities
13
   
Item 4. Submission of Matters to a Vote of Security Holders
13
   
Item 5. Other Information
13
   
Item 6. Exhibits
13
   
Signatures
14
   
Certifications
 

FORWARD LOOKING STATEMENTS  
This report may include forward-looking statements. Shelron Group, Inc. and subsidiary (the "Company") has based these forward-looking statements on management's current expectations and projections about future events. Forward-looking statements can be identified in this report based upon the usage of such words or phrases as "anticipate," "believe," "estimate," "expect," "intend," "may be," "objective," "plan," "predict," "project," "future," "seek," "will," "would," "will likely result," "will continue" and "will be" and similar words or phrases, or the negative thereof. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Although the Company believes the expectations reflected in its forward-looking statements are based upon reasonable assumptions, it can give no assurance that it will attain these expectations or that any deviations will not be material. Except as otherwise required by the federal securities laws, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this report to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 
 

 

SHELRON GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
September 30, 2009
 
December 31, 2008
 
ASSETS
(unaudited)
     
Current Assets:
 
 
 
 
         
Cash
  $ -     $ 50,183  
Accounts receivable
    4,131       3,324  
Other current assets
    16,715       20,480  
                 
Total Current Assets
    20,846       73,987  
                 
Property and Equipment, net of accumulated depreciation of $219,404 and $210,051, respectively
    5,214       14,414  
                 
Intangible assets, net of amortization of $17,000 and $14,000, respectively
    123,000       126,000  
                 
Other asset
    -       8,178  
                 
Deferred tax asset, net of valuation allowance of $1,843,000 and $1,763,000, respectively
    -       -  
                 
Total Assets
  $ 149,060     $ 222,579  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
               
                 
Current Liabilities:
               
                 
Bank overdraft
  $ 4,388     $ -  
Accounts payable and accrued expenses
    120,775       59,134  
Due to stockholders
    306,162       233,496  
Convertible note payable
    50,000       50,000  
Note payable
    100,000       100,000  
                 
Total Current Liabilities
    581,325       442,630  
                 
Liability for common stock to be issued to officer
    146,330       110,000  
Total Liabilities
    727,655       552,630  
Commitment
               
Stockholders’ Deficiency (post reverse split):
               
                 
Series A convertible preferred stock $.001 par value per share,
               
Authorized 1,000,000 shares;
               
Issued and outstanding 1,000,000 shares
    1,000       1,000  
Common stock, $.001 par value per share
               
Authorized 500,000,000 shares;
               
Issued and outstanding 18,477,500 shares and
               
17,447,492 shares, respectively
    18,477       17,447  
Additional paid-in capital
    5,497,805       5,500,686  
Accumulated deficit
    (6,095,877 )     (5,849,184 )
                 
Total Stockholders’ Deficiency
    (578,595 )     (330,051 )
                 
    Total Liabilities and Stockholders’ Deficiency
  $ 149,060     $ 222,579  
 
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 
2

 


SHELRON GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
   
Three months
   
Nine months
 
   
ended September 30,
   
ended September 30,
 
   
2009
   
2008
   
2009
   
2008
 
                         
Revenues
  $ 194     $ 1,621     $ 869     $ 45,370  
Operating Expenses:
                               
                                 
Consulting fees
    (9,188     32,488       24,162       67,234  
Employment compensation
    43,105       43,563       129,199       130,939  
Professional fees
    10,681       7,053       30,941       37,772  
Marketing and advertising
    19,990       7,950       (6,083 )     57,471  
Office and general expenses
    2,355       18,243       22,187       57,461  
Rent
    9,499       951       23,303       25,101  
Depreciation and amortization
    1,524       9,329       12,183       28,869  
Bank charges
    2,845       1,166       6,400       3,382  
                                 
Total Operating Expenses
    80,811       120,743       242,292       408,229  
                                 
Loss From Operations
    (80,617 )     (119,122 )     (241,423 )     (362,859 )
                                 
Other Income (Expense):
                               
Interest expense
    (1,750 )           (6,051 )     (4 )
Interest income
    1       85       2       553  
Foreign exchange
    128       587       779       (4,069 )
                                 
Total Other Income (Expense)
    (1,621 )     672       (5,270 )     (3,520 )
                                 
Net Loss
  $ (82,238 )   $ (118,450   (246,693 )   $ (366,379 )
                                 
Basic and diluted net loss per share
  $ (0.00 )   $ (0.01   (0.01 )   $ (0.02 )
                                 
Weighted average number of shares outstanding - basic and diluted
    18,395,082       17,092,164       17,825,624       16,697,705  

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 
3

 

SHELRON GROUP, INC. AND SUBSIDIARY
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 
 
   
Nine months ended September 30,
 
   
2009
   
2008
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
       
 
 
Net loss
  $ (246,693 )   $ (366,379 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    12,183       28,869  
Common stock issued for consulting fees and services
    13,150       27,375  
       Cancellation of common stock issued for consulting fees and services
    (15,000     -  
Changes in operating assets and liabilities:
               
Decrease (increase) in accounts receivable
    (807 )     16,134  
Decrease (increase) in other current assets
    3,765       (10,831 )
Increase (decrease) in accounts payable and accrued expenses
    61,657       (4,200 )
Increase in bank overdraft
    4,388       -  
Increase in due to stockholders
    72,666       90,360  
                 
Net cash used in operating activities
    (94,691 )     (218,672 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Decrease in security deposit
    8,178       14,401  
                 
Net cash provided by investing activities
    8,178       14,401  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
                 
Cash received from officer for common stock to be issued
    36,330       94,000  
Proceeds from issuance of common stock
    -       15,000  
                 
Net cash provided by financing activities
    36,330       109,000  
                 
Net decrease in cash
    (50,183 )     (95,271 )
Cash at the beginning of period
    50,183       131,798  
                 
Cash at the end of period
  $ -     $ 36,527  

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 
4

 

SHELRON GROUP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 1 - THE COMPANY AND ITS OPERATIONS

Shelron Group, Inc. and Subsidiary (the "Company") originally incorporated in the State of Massachusetts in June 1987, under the name "Professional Brushes, Inc." In April 1999, the Company changed its state of incorporation to Delaware by means of a merger with and into a Delaware company and, in connection therewith, changed our name to "PB Acquisition Corp." In May 2000, the Company entered into a share exchange agreement with TTTTickets.com, Inc., a Delaware corporation ("Tickets") incorporated in April 2000 for the purposes of developing and maintaining an internet website for the sale and purchase of event tickets, pursuant to which Tickets became a wholly owned subsidiary of the Company. We also changed our name to "TTTTickets Holding Corp." Thereafter, in November 2001, we entered into a stock purchase and merger agreement with B-Park Communications, Inc., ("B-Park") a Delaware corporation formed in August 2001 for the sole purpose of entering into such agreement. In September 2002, we changed our name to Shelron Group, Inc.

The Company develops and markets e-commerce advertising and comparative shopping software products and services. The Company released its initial product, ActiveShopper, in August 2004. ActiveShopper is a free software download that automatically scans, locates and compares prices for an item that a consumer selects at an e-commerce site and is designed to assist consumers to make informed purchase decisions by enabling them to find the items they are looking for, compare products, prices and stores, and buy from among thousands of online merchants.

On October 20, 2008, the Company also effected a one to twenty-five reverse stock split of its shares of common stock, par value $0.001.  All share figures and results in the consolidated financial statements are reflected on a post reverse split basis.

At the present time, the Company does not intend to actively promote its current Activeshopper product but will instead explore new opportunities in the media/internet/high-tech fields.

On December 30, 2008, the Company entered into a license agreement that grants the Company a non-exclusive, perpetual, worldwide right and license to make, have made and utilize software, trademarks and domain names.

The Company has licensed software to run a website, from an existing furniture brand, and will share revenues with the brand. The Company’s version of the site has not yet begun operations. The Company anticipates that once the site is operational, the added revenue stream will increase the cash flow of the Company. Additionally, the Company intends to advertise the new site with affiliated networks and search engines.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation
The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim periods presented. The condensed consolidated financial statements are unaudited and are subject to such year-end adjustments as may be considered appropriate and should be read in conjunction with the historical consolidated financial statements of the Company for the years ended December 31, 2008 and 2007 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The December 31, 2008 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

These condensed consolidated interim financial statements have been prepared in accordance with US Generally Accepted Accounting Principles ("US GAAP") and under the same accounting principles as the financial statements included in the Annual Report on Form 10-K. Certain information and footnote disclosures related thereto normally included in the financial statements prepared in accordance with US GAAP have been omitted in accordance with Rule 8.03 of Regulation S-X.

We have evaluated subsequent events through November 20, 2009, the date of the issuance of the condensed consolidated financial statements.

 
5

 

Consolidation
The accompanying condensed consolidated financial statements include the accounts of Shelron Group Inc. and its wholly-owned subsidiary. All significant inter-company transactions have been eliminated.

Use of Estimates
The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The Company continually evaluates the accounting policies and estimates we use to prepare the consolidated financial statements.  The Company bases its estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.

Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash, receivables, accounts payable and accrued expenses and short-term debt approximate fair value based on the short-term maturity of these instruments.

Reclassifications
Certain prior period amounts have been reclassified to conform to current classifications.

Earnings Per Share
Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share give effect to dilutive convertible securities, options, warrants and other potential common stock outstanding during the period; only in periods in which such effect is dilutive. The following securities have been excluded from the calculation of net loss per share, as their effect would be antidilutive:
 
   
September 30,
   
September 30,
 
   
2009
   
2008
 
Series A convertible preferred stock
      1,000,000         1,000,000  
Convertible note payable
    1,866,197       -  

Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred continuing net losses, and has a working capital deficiency of approximately $560,000 and an accumulated deficit of approximately $6,096,000, which raises substantial doubt about the Company's ability to continue as a going concern.

Management believes that the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms. The Company's continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. The outcome of this uncertainty cannot be assured.

The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve the Company's operating results.

Recently Issued Accounting Standards
Effective July 1, 2009, the FASB's ASC became the single official source of authoritative, nongovernmental generally accepted accounting principles in the United States ("GAAP"). The historical GAAP hierarchy was eliminated and the ASC became the only level of authoritative GAAP, other than guidance issued by the Securities and Exchange Commission. The company’s accounting policies were not affected by the conversion to ASC. However, references to specific accounting standards in the footnotes to our financial statements have been changed to refer to the appropriate section of ASC.

NOTE 3 - INTANGIBLE ASSETS

On April 18, 2005, the Company entered into an agreement with Infospace, Inc. to purchase the rights, title and interest of Infospace, Inc. in the U.S. and foreign trademarks, trade names and service marks for "ActiveShopper" and the domain names activeshopper.com, activeshopper.org, active-shop.com, active-shopper.com, active-shopper.net and active-shopper.org.  The Company made a one-time payment of $40,000 for such marks and domain names. The trademarks and domain names are being amortized on a straight-line basis over ten years.

 
6

 

On December 30, 2008, the Company entered into a license agreement that grants the Company a non-exclusive, perpetual, worldwide right and license to make, have made and utilize software, trademarks and domain names for the sum of $100,000.  The asset will be amortized on a straight-line basis over a period of fifteen years only after the license has been implemented.  As of September 30, 2009, the license has not been implemented.

Amortization expense totaled $1,000 and $3,000 for the three and nine months ended September 30, 2009 and 2008, respectively.

NOTE 4 - DUE TO STOCKHOLDERS

Hull Services, Inc. ("Hull")
The Company is controlled by Hull, a company wholly-owned by the Company's Principal Executive Officer/Principal Financial and Accounting officer. In March 2005, the Company entered into a consulting agreement with Hull. Pursuant to the terms of the agreement, Hull receives consulting fees totaling $156,000 per annum in installments of $3,000 per week. Due to Stockholders includes accrued but unpaid consulting fees as well as other loans payable made by Hull.

For the three months ended September 30, 2009 and 2008, consulting services totaled $43,105 and $43,563, respectively.  For the nine months ended September 30, 2009 and 2008, consulting services totaled $129,199 and $130,939, respectively. Such amounts are reflected on the statements of operations as employment compensation. As of September 30, 2009 and December 31, 2008, the Company owed Hull $257,368 and $188,620, respectively.

Eliron Yaron
Mr. Yaron is the Company's Principal Executive Officer/Principal Financial and Accounting Officer. At September 30, 2009 and December 31, 2008, Mr. Yaron was owed $48,794, and $44,876, respectively.

As of September 30, 2009, the Company received proceeds totaling $146,330 from Mr. Yaron for shares of Common Stock to be issued.  The proceeds were received by the Company from February 2008 through June 2009.  As the shares were not issued as of September 30, 2009, the proceeds were not included in stockholders’ deficiency but classified as a liability for common stock to be issued to officer.

NOTE 5 - NOTES PAYABLE

Convertible Note
On October 2, 2008, the Company received proceeds of $50,000 for an unsecured convertible note payable issued for working capital purposes. The note bears interest at 6% per annum and matured on April 18, 2009. The note holder has the option to convert the note and related accrued interest into share of the Company’s Common Stock at equal or lower of (a) 20% below the average of the closing price of the Common Stock for the five trading days prior to the date of the agreement and (b) the average closing price of the Common Stock for the five trading days prior to the date of the conversion notice.

As of the filing of this Quarterly Report on Form 10-Q, the Company has not made any payments in respect of the amounts due.  The non-payment of this amount constitutes an event of default under the transaction document.  However, the pertinent documents provide that any action upon such default can only be initiated by the note holder.  From and after an event of non-payment under the note and for so long as the event of non-payment is continuing, the note will bear interest at a rate of 6% per annum.   The note holder has not initiated an action at this time.

Note Payable
On December 30, 2008, the Company issued a note payable for $100,000 in order to acquire a license to utilize software, trademarks and domain names. The note bears interest at 4% per annum and matures on December 30, 2009.

At September 30, 2009 and December 31, 2008, accrued interest on the notes was $6,000 and $750, respectively. Interest expense on the notes amounted to $1,750 and $0 for the three months ended September 30, 2009 and 2008, respectively.  Interest expense on the notes amounted to $5,250 and $0 for the nine months ended September 30, 2009 and 2008, respectively.

 
7

 

NOTE 6 - STOCKHOLDERS’ DEFICIENCY

Issuance (cancellation) of shares of Common Stock for services rendered
During the nine months ended September 30, 2009, the Company issued 1,150,000 shares of its Common Stock to one service provider in consideration of services rendered totaling $13,150.

During the nine months ended September 30, 2009, the Company cancelled 120,000 shares of its Common Stock that were previously issued to one service provider in consideration of services rendered totaling $15,000 as these services were not provided in accordance with the original consulting services agreement.

During the nine months ended September 30, 2008, the Company issued 569,546 shares of its Common Stock to three service providers in consideration of services rendered totaling $27,375.

 
8

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Shelron Group, Inc. (the "Company", "we", "our", or "us") develops e-commerce advertising and comparative shopping software products and services. At the present time, the Company does not intend to actively promote its current Activeshopper product but will instead explore new opportunities in the media/internet/high-tech fields.

We released our initial product, ActiveShopper, in August 2004. ActiveShopper is a free software download that automatically scans, locates and compares prices for an item that a consumer selects at an e-commerce Web site and is designed to assist consumers in making informed purchase decisions by enabling them to find the items they are looking for, compare products, prices and stores, and buy from among thousands of online merchants.

We have been engaged in the on-line shopping business since March 2004. Prior to that time, we were engaged in the field of designing and developing business applications software.

We generate revenues primarily from merchants for directing traffic to their websites and managing merchants advertising campaigns through ActiveShopper.

We presently generate revenues primarily according to pay-per-click models resulting from directing traffic to merchants’ websites. We also generate revenues according to pay-per-sale (pay-per-purchase) model which pay us a commission on any sale resulting from the directing of traffic to a merchant website. We also generate revenue from consulting and management of advertising campaigns through ActiveShopper.

In 2008, the Company licensed software to run a website, from an existing furniture brand, and will share revenues with the brand. The Company’s version of the site has not yet begun operations. The Company anticipates that once the site is operational the added revenue stream will increase the cash flow of the Company. Additionally, the Company intends to advertise the new site with affiliated networks and search engines.

Critical accounting policies and estimates:

The Company's financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 
9

 

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2009 (the "2009 Period") and the three months ended September 30, 2008 (the "2008 Period"):

Revenues
Revenues are from our ActiveShopper software. The decrease in revenues is attributable to the change in the Company’s strategy, as discussed in the Overview section. 

Operating Expenses
Operating expenses consist of salaries, consulting expenses, research and development, marketing and advertising and other expenses associated with the operations of our business. For the 2009 Period, operating expenses were $80,811, a decrease of 33.1%, as compared to $120,743 for the 2008 Period. See the discussion relating to the various operating expenses below.

Consulting Expenses
For the 2009 Period, consulting fees were $(9,188) as compared to $32,488 for the 2008 Period. The decrease was primarily due to a cancellation of issuance of shares to a consultant during the 2009 Period, a reduction of the controller fee in 2009 period and a cost of fund raise and PR consultants in 2008 period.

Employment Compensation
Our sole full-time employee is our Chairman of the Board, Eliron Yaron.  For the 2009 Period and 2008 Period, employment compensation totaled $43,105 and $43,563, respectively.

Professional Fees
Professional fees consist primarily of legal, accounting and auditing. For the 2009 Period, professional fees were $10,681, an increase of 51.4% as compared to $7,053 for the 2008 Period. The increase in professional fees is primarily due to lower audit and legal fees during the 2008 Period.

Marketing and advertising
For the 2009 Period, marketing and advertising expenses were $19,990, an increase of 151.4% as compared to $7,950 for the 2008 Period. The increase in marketing and advertising expenses is primarily due to the cancellation of most of an advertisement reimbursement in 2009 Period, which had been originally recorded in the six months period ended June 30, 2009.

Rent Expense
For the 2009 Period, rent expense was $9,499, an increase of 898.8% as compared to $951 for the 2008 Period. The increase in rent expense is primarily attributable to a termination of sub-lease of our offices leased in Tel Aviv during the 2009 Period.

Comparison of the nine months ended September 30, 2009 (the "2009 Period") and the nine months ended September 30, 2008 (the "2008 Period"):

Revenues
Revenues are from our ActiveShopper software. The decrease in revenues is attributable to the change in the Company’s strategy, as discussed in the Overview section. 

Operating Expenses
Operating expenses consist of salaries, consulting expenses, research and development, marketing and advertising and other expenses associated with the operations of our business. For the 2009 Period, operating expenses were $242,292, a decrease of 40.6%, as compared to $408,229 for the 2008 Period. See the discussion relating to the various operating expenses below.

Consulting Expenses
For the 2009 Period, consulting fees were $24,162, a decrease of 64.1% as compared to $67,234 for the 2008 Period. The decrease was primarily due to the Company's decision to reduce the service by its consultants and the cancellation of grant of shares to a service provider.

 
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Employment Compensation
Our sole full-time employee is our Chairman of the Board, Eliron Yaron.  For the 2009 Period and 2008 Period, employment compensation totaled $129,199 and $130,939, respectively.

Professional Fees
Professional fees consist primarily of legal, accounting and auditing. For the 2009 Period, professional fees were $30,941, a decrease of 18.1% as compared to $37,772 for the 2008 Period. The decrease in professional fees is primarily due to lower audit and legal fees during the 2009 Period.

Marketing and advertising
For the 2009 Period, marketing and advertising reimbursement expenses, net were $(6,083). For the 2008 Period, marketing and advertising expenses were $57,471. The reimbursement in 2009 is due to the reversal of charges incurred in previous years.

Rent Expense
For the 2009 Period, rent expense was $23,303, a decrease of 7.2% as compared to $25,101 for the 2008 Period. The decrease in rent expense is primarily attributable to a sub-lease of a portion of our offices leased in Tel Aviv and to the termination in April 2008 of an office in New York.

LIQUIDITY AND CAPITAL RESOURCES

To date we have financed our operations primarily from cash generated though the sale of our common stock in private placements as well as from cash from our operations.
 
As of September 30, 2009, we had a cash balance of $0 and accounts receivable of $4,131.

Cash used in operating activities was $94,691 for the nine months ended September 30, 2009 as compared to $218,672 for the nine months ended September 30, 2008. The decrease in the operating cash used for the 2009 Period is primarily attributable to the cash needed to fund the loss for the 2009 Period.

Cash provided by investing activities was $8,178 for the 2009 Period as compared to cash provided by investing activities of $14,401 for the 2008 Period.  The cash provided by for the 2009 Period is primarily attributable to a realization of the secured deposit in exchange of a bank guarantee for the office lease agreement of the subsidiary in Israel.
 
Cash provided by financing activities in the 2009 Period was $36,330 compared to $109,000 for the 2008 Period. In the 2009 Period and 2008 Period, the Company received proceeds of $36,330 and $109,000 from Eliron Yaron for investments in the Company’s common stock.

At the present time, the Company does not intend to actively promote its current Activeshopper product but will instead explore new opportunities in the media/internet/high-tech fields.

The focus of the Company’s efforts is to acquire or develop an operating business. Despite limited active operations at this time, management intends to continue in business and has no intentions to liquidate the Company. The Company has considered various business alternatives including the possible acquisition of an existing business. The Company does not contemplate limiting the scope of its search to any particular industry but we focus in the media and ecommerce business. Management has considered the risk of possible opportunities as well as their potential rewards. Management has invested time evaluating proposals for possible acquisitions or combinations; however, at this time, none of these opportunities have been pursued. The Company’s primary continuing expected expenses are comprised primarily of employment compensation and professional fees.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred losses of $246,693 for the nine months ended September 30, 2009 and a working capital deficiency of $560,479 as of September 30, 2009, which raises substantial doubt about the Company’s ability to continue as a going concern.

 
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Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. The Company’s continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. The outcome of this uncertainty cannot be assured. Our independent registered public accounting firm, in their reports on our financial statements for the year ended December 31, 2008, expressed substantial doubt about our ability to continue as a going concern. These circumstances could complicate our ability to raise additional capital. Our financial statements do not include any adjustments to the carrying amounts of our assets and liabilities that might result from the outcome of this uncertainty.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for Smaller Reporting Companies.

ITEM 4(T). CONTROLS AND PROCEDURES

Evaluation of Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer, who also acts as our Chief Financial Officer, the Company evaluated the effectiveness of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The evaluation considered the procedures designed to provide assurance to ensure that information required to be disclosed by us in the reports filed or submitted by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures were effective at that reasonable assurance level, as of September 30, 2009.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the nine months ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

LIMITATIONS OF EFFECTIVENESS OF INTERNAL CONTROLS

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of internal control is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, and/or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis.

 
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Part II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDING

We are not a party to any material legal proceeding.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

ITEM 5. OTHER INFORMATION

Not Applicable.

ITEM 6. EXHIBITS

Exhibits  

Exhibit
Number
 
 
Description
31.1
 
PEO and PFO certifications required under Section 302 of the Sarbanes-Oxley Act of 2002
32.1
 
PEO and PFO certifications required under Section 906 of the Sarbanes-Oxley Act of 2002

 
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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.

Signature
 
Capacity
Date
/s/ Eliron Yaron
 
Chief Executive Officer, President and Principal Financial
November 20, 2009
Eliron Yaron
  Accounting Officer  

 
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