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EX-31.1 - SHELRON GROUP INC | v167111_ex31-1.htm |
EX-32.1 - SHELRON GROUP INC | v167111_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.
10
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.
11
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.
12
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
|
13
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 |
14