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U.S. SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549  

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2011

Commission file number: 000-31176

 

SHELRON GROUP, INC.  

(Exact name of registrant as specified in its charter)

 

Delaware   04-2968425
(State of incorporation)   (I.R.S. Employer Identification No.)

 

39 Broadway, Suite 3010

New York, New York 10006

(Address of principal executive offices)

 

Tel: (516) 620-6794

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

None

 

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

 

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 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o      No  x

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o   Accelerated filer o

Non-accelerated filer o

(Do not check if a smaller reporting company)

  Smaller reporting company x

 

 

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

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently computed second fiscal quarter was $151,515.

 

The number of shares of the issuer’s common stock issued and outstanding as of April 4, 2012 was 328,877,492 shares.

 

Documents Incorporated By Reference:

None

 

 

 
 

 

 

TABLE OF CONTENTS

 

    Page
PART I    
Item 1 Business 1
Item 1A Risk Factors 3
Item 1B Unresolved Staff Comments  3
Item 2 Properties   3
Item 3 Legal Proceedings 3
Item 4 Mine Safety Disclosures 3
     
PART II    
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 4
Item 6 Selected Financial Data 4
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation 5
Item 7A Quantitative and Qualitative Disclosures About Market Risk. 9
Item 8 Financial Statements. 9
Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 9
Item 9A Controls and Procedures 9
Item 9B Other Information 11
     
PART III    
Item 10 Directors, Executive Officers and Corporate Governance 12
Item 11 Executive Compensation 14
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 14
Item 13 Certain Relationships and Related Transactions, and Director Independence 16
Item 14 Principal Accountant Fees and Services 16
     
PART IV    
Item 15 Exhibits, Financial Statement Schedules 17
SIGNATURES   18

 

 
 

 

PART 1

 

ITEM 1. BUSINESS

 

COMPANY OVERVIEW

 

Shelron Group, Inc. (the “Company”, “we”, “our”, or “us”) was 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 developed 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.

 

The Company is currently focused on two sectors, internet and mining. The Company has entered into agreements related to these areas.

We are also considering strategic acquisitions that management believes will enhance our market positioning.

 

 

 OUR STRATEGY

 

The Company is currently focused on two sectors, internet advertising and mineral exploration and development for gold, silver and copper. The Company has entered into the following agreements related to these areas:

 

  ¾ During April 2011, the Company signed a non-binding Memorandum of Understanding (“MOU”) to acquire gold mining rights in Ghana.  The Company is currently conducting due diligence on these mines and if satisfactory we will move to close the transaction.  Until the completion of the due diligence process, the Company will be unable to determine if it will make an offer to acquire these mines and if its offer will be accepted by the sellers.

 

  ¾

During May 2011, the Company entered into an exclusive perpetual worldwide software license. The Company will utilize the software to create an affiliate network for online stores.  The software requires further modifications and the Company expects the software to be available for use during the second quarter of 2012.   The Company agreed to pay $900,000 for such license in cash or in shares of the Company based the average share price on the preceding 30 days before payment. Such payment is scheduled to be made on or about August 12, 2012 and only if the Company achieves $1,250,000 in aggregate revenues from the use of the software prior to the payment date. If the aggregate revenues are below $1,250,000, the Company has a right to terminate the license agreement with no penalty or payment required. The Company is waiting for the completion of certain features of the software and is currently evaluating the existing technical aspects of the software.

 

 

1
 
  ¾

During September 2011, the Company signed a non-binding Memorandum of Understanding with a local Tanzanian company for the acquisition of 51% of the mineral rights of a property in the Geita district of Tanzania. This Memorandum of Understanding has expired by the Company believes that, at its option, it would be able to renew the agreement.

 

 

  ¾

During September 2011, the Company signed a non-binding Memorandum of Understanding with a local Tanzanian company which has the rights to prospect for gold in the Kahama district. This Memorandum of Understanding has expired by the Company believes that, at its option, it would be able to renew the agreement.

 

 

  ¾ During November 2011, the Company started looking into gold exploration opportunities in Chile based on Chile’s potential, and the Company's strategy to explore gold in Africa and in the Americas. The Company is interested in more deals to increase its portfolio and opportunities. The focus of the Company is to adhere to its acquisition criteria and only acquire a prospecting license in Chile that can potentially be developed into proven reserves or productive metal resource mines.

 

PROPRIETARY RIGHTS

 

We seek to protect our proprietary rights through a combination of copyright, trade secret, patent and trademark law, and contractual restrictions, such as confidentiality agreements and proprietary rights agreements. We enter into confidentiality and proprietary rights agreements with our service providers, and generally control access to and distribution of our proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may obtain and use our intellectual property, and we cannot be certain the steps we have taken will prevent misappropriation or confusion among consumers and merchants. If we are unable to procure, protect and enforce our intellectual property rights, then we may not realize the full value of these assets, and our business may suffer.

 

We do not currently have any additional registered trademarks. We do not currently have any patents on our technologies.

 

EMPLOYEES AND CONSULTANTS

 

We currently have one full time employee, who is our President. Our President also currently serves as one of our three Directors.

 

We presently retain professional service providers and consultants, who provide services including, management, financial accounting and administration and public relations services. These service providers and consultants may provide their services to us on a full-time, part-time, or on demand basis.

 

AVAILABLE INFORMATION

 

The public may read and copy any materials we file with the Securities and Exchange Commission ("SEC") at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC's Internet website is located at http://www.sec.gov

 

2
 

 

Item 1A. Risk Factors

 

Not required for Smaller Reporting Companies.

  

Item 1B.   Unresolved Staff Comments

 

None.

 

ITEM 2. PROPERTIES.

 

We do not own any real property.

 

We maintain an office at 39 Broadway, Suite 3010, New York, New York.  No rent is charged for this space.  We believe that our office space in the United States is sufficient to meet our current and anticipated needs.

 

ITEM 3. LEGAL PROCEEDINGS.

 

We are not involved in any pending legal proceedings which we anticipate can result in a material adverse effect on our business or operations.

  

ITEM 4. MINE SAFETY DISCLOSURES .

 

Not applicable.

 

 

 

3
 

 

PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

The Company's Common Stock is listed on the OTC Bulletin Board under the symbol "SRNG". The following table sets forth the high and low bid information for the Company's Common Stock for each quarterly period during the year ended December 31, 2010 and 2011 as reported by the OTC Bulletin Board. The OTC Bulletin Board quotations reflect inter-dealer prices, are without retail markup, markdown or commission, and may not represent actual transactions.  

 

   High   Low 
           
Calendar Year 2010          
    First Quarter  $0.007   $0.004 
    Second Quarter  $0.027   $0.002 
    Third Quarter  $0.027   $0.003 
    Fourth Quarter  $0.015   $0.002 
Calendar Year 2011          
    First Quarter  $0.025   $0.002 
    Second Quarter  $0.025   $0.003 
    Third Quarter  $0.040   $0.010 
    Fourth Quarter  $0.092   $0.030 

 

HOLDERS

 

At April 4, 2012, there are approximately 377 holders of record of the Company's Common Stock. This does not reflect those shares held beneficially or those shares held in "street" name.

 

DIVIDENDS

 

Holders of Common Stock and Series A Preferred Stock are entitled to dividends, when, as, and if declared by our Board of Directors, out of funds legally available therefore. Except for a stock dividend distribution in August 2003 of 406,357 shares of its Common Stock, we have paid no dividends in any form on the Common Stock or Series A Preferred Stock and do not expect to pay cash dividends in the foreseeable future with respect to the Common Stock or Series A Preferred Stock.

 

It is the present policy of our Board of Directors to retain all earnings to provide funds for our growth. The declaration and payment of dividends in the future will be determined by our Board of Directors based upon our earnings, financial condition, capital requirements and such other factors as our Board of Directors may deem relevant. We are not under any contractual restriction as to our present or future ability to pay dividends.

 

EQUITY COMPENSATION PLAN INFORMATION

 

We do not have any existing option or equity compensation plans.

 

Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers

 

We have not repurchased any shares of our common stock during the fiscal years ended December 31, 2011 and 2010.

 

 Item 6.   Selected Financial Data.

 

Not applicable.

4
 

  

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS

 

FORWARD-LOOKING STATEMENTS

 

The Company or management may make or may have made certain forward-looking statements, orally or in writing, such as those within Management's Discussion and Analysis contained in its various SEC filings. The statements that express the “belief,” “anticipation,” “plans,” “expectations,” “will” and similar expressions are intended to identify forward-looking statements. The Company wishes to ensure that such statements are accompanied by meaningful cautionary statements, so as to ensure to the fullest extent possible the protections of the safe harbor established in the Private Securities Litigation Reform Act of 1995. Such statements are therefore qualified in their entirety by reference to and are accompanied by the following discussion of certain important factors that could cause actual results to differ materially from those described in such forward-looking statements.

 

The Company cautions the reader that this list of factors is not intended to be exhaustive. The Company operates in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such factors, nor can it assess the impact, if any, of such factors on the Company's business or the extent to which any factors may cause actual results to differ materially from those described in any forward-looking statement. None of the Company's forward-looking statements should be relied upon as a prediction of actual results. 

 

The Company faces risks and uncertainties that could render actual events materially different than those described in our forward-looking statements. These risks and uncertainties are described elsewhere in this report.

  

  OVERVIEW

 

Shelron Group, Inc. (the “Company”, “we”, “our”, or “us”) developed 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 mining, media, internet, oil and gas and high-tech fields. We are also considering strategic acquisitions that management believes will enhance our market positioning.

 

During April 2011, we signed a non-binding Memorandum of Understanding (“MOU”) to acquire gold mining rights in Ghana.  We are currently conducting due diligence on these mines and if satisfactory we will move to close the transaction.  Until we complete our due diligence process, we will be unable to determine if we will make an offer to acquire these mines and if our offer will be accepted by the sellers.

 

During May 2011, the Company entered into an exclusive perpetual worldwide software license. The Company will utilize the software to create an affiliate network for online stores. The software requires further modifications. The Company expects the software to be available for use during the second quarter of 2012. The Company agreed to pay $900,000 for such license in cash or in shares of the Company based the average share price on the preceding 30 days before payment. Such payment is scheduled to be made on or about August 12, 2012 and only if the Company achieves $1,250,000 in aggregate revenues from the use of the software prior to the payment date. If the aggregate revenues are below $1,250,000, the Company has a right to terminate the license agreement with no penalty or payment required. The Company is waiting for the completion by the licensor of certain features of the software and is currently evaluating the existing technical aspects of the software.

 

During September 2011, the Company signed a non-binding Memorandum of Understanding with a local Tanzanian company for the acquisition of 51% of the mineral rights of a property in the Geita district of Tanzania. This Memorandum of Understanding has expired by the Company believes that, at its option, it would be able to renew the agreement.

 

During September 2011, the Company signed a non-binding Memorandum of Understanding with a local Tanzanian company which has the rights to prospect for gold in the Kahama district. This Memorandum of Understanding has expired by the Company believes that, at its option, it would be able to renew the agreement.

 

5
 

 

During November 2011, the Company started looking into gold exploration opportunities in Chile based on Chile’s potential, and the Company's strategy to explore gold in Africa and in the Americas. The Company is interested in more deals to increase its portfolio and opportunities. The focus of the company is to adhere to its acquisition criteria and only acquire a prospecting license in Chile that can potentially be developed into proven reserves or productive metal resource mines.

 

We do not participate in, nor have we created, any off-balance sheet special purpose entities or other off-balance sheet financing.

 

Our 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.

 

We have identified the accounting policies below as critical to our business operations and the understanding of our results of operations.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Our 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.

 

Our significant accounting policies are summarized in Note 2 of Notes to Financial Statements. While all these significant accounting policies impact its financial condition and results of operations, the Company views certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the presented in this report.

 

6
 

 

 

RESULTS OF OPERATIONS

 

Comparison of the Year Ended December 31, 2011 (the "2011 Period") and the Year Ended December 31, 2010 (the "2010 Period"):

 

Revenues

 

The Company did not have any revenues during the 2011 Period as compared to revenues of $17,690 during the 2010 Period. Beginning in 2010, we did not actively promote our current ActiveShopper product. Instead, we explored new opportunities in the mining, media, internet, oil and gas and high-tech fields and provided consulting services to some of these industries during the 2010 Period. We also considered strategic acquisitions that management believes will enhance our market positioning.

 

Operating Expenses

 

Operating expenses consist of salaries, consulting expenses, professional fees and other expenses associated with the operations of our business. For the 2011 Period, operating expenses were $240,979, an increase of $8,666 or 3.7%, as compared to $232,313 for the 2010 Period. The increase is primarily attributable to increased costs related to the signing of a consulting agreement on July 1, 2011 and the costs associated with the signing of the MOU’s in the 2011 Period as compared to the 2010 Period.

 

Employment Compensation

 

Our sole full-time employee is our Chairman of the Board, Eliron Yaron.  Employment compensation totaled $156,000 for the 2011 and 2010 Periods.

 

Consulting Fees

For the 2011 Period, consulting fees were $34,500, an increase of $1,335 or 4.0% as compared to $33,165 for the 2010 Period.

 

Professional Fees

 

Professional fees consist primarily of legal, accounting and auditing. For the 2011 Period, professional fees were $14,000, a decrease of $26,000 or 65.0% as compared to $40,000 for the 2010 Period.

 

Other Income (Expense)

 

During the 2011 Period, other income (expense) consisted of interest expense of $2,025 and a gain from the write-off of prior years’ accrued liabilities of $13,944. During the 2010 Period, other income (expense) consisted of interest expense of $3,000.

 

 

7
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

To date, we have financed our operations primarily from cash generated through the sale of our Common Stock in private placements as well as from cash earned from our operations.

 

As of December 31, 2011, we had a cash balance of $185 and a working capital deficit of $470,686.

 

Cash used in operating activities was $24,869 for the 2011 Period compared to $43,773 for the 2010 Period. The use of cash from operating activities for the 2011 Period is primarily attributable to the cash needed to fund the loss for the 2011 Period.

 

Cash provided by financing activities in the 2011 Period was $25,000 compared to $43,545 for the 2010 Period. The 2011 Period consisted of cash received by the Company for the sale of shares. The 2010 Period consisted of proceeds received from Eliron Yaron, our President, for investments in the Company’s common stock.

 

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 is currently focused on two sectors, internet and mining.

 

 

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 continuing losses, has cash of $185 and an accumulated deficit of approximately $6.6 million, all of which raises substantial doubt about the Company's ability to continue as a going concern.

 

 

 

 

8
 

 

The Company is currently dependent on its President, Mr. Yaron, to continue to fund the Company. If the Company is unable to grow its affiliate network business or to acquire or develop an operating business the Company will be unable to fund itself. There is no guarantee that Mr. Yaron will continue to fund the Company.

 

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. As of the maturity date the Company did not make any payments in respect of the amounts due.  The non-payment of this amount constituted an Event of Default under the transaction document.  On June 20, 2011, the Company and the note holder entered into an agreement whereby the maturity of the note was extended until December 31, 2011 and the total amount due to the note holder was $62,210 including $12,210 of accrued interest. In addition, in consideration for the waiver of the Event of Default, the Company agreed to reduce the price at which the note holder may convert the principal amount of the loan and interest accrued thereon (or any portion hereof) into shares of the Company’s common stock at $0.001 per share. During 2011, the note holder converted $42,972 of the convertible note payable plus accrued interest into 54,900,000 shares of the Company’s stock. The Company accounted for the modification of the convertible note payable as an extinguishment of debt. The Company deemed the terms of the note modification to be substantially different due to the change in the conversion rate and treated the Convertible Promissory Note as extinguished and exchanged for a new note.  The Company determined that there was no gain or loss on the extinguishment.

 

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 years ended December 31, 2011 and 2010, 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.

 

The accompanying consolidating 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.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

None.

 

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

 

Consulting Agreement dated as of March 1, 2005 between the Company and Hull Services, Inc. See Item 11 for a further discussion of the agreement.

9
 

  

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

ITEM 8. FINANCIAL STATEMENTS

 

The financials statements of our company for the years ended December 31, 2011 and 2010 are attached hereto following the signature page commencing on page F-1.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

Item 9A.  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 December 31, 2011.

  

Management’s Report on Internal Control Over Financial Reporting

 

Our Chief Executive Officer, is responsible to design or supervise a process to be effected by our board of directors that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It is management’s responsibilities to establish and maintain adequate internal controls over the Company’s financial reporting.

 

The policies and procedures include:

 

- Maintenance of records in reasonable detail to accurately and fairly reflect the transactions and dispositions of assets,

 

- Review and authorization by management for all receipts and expenditures,

 

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

 

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

 

Management, with the participation of our Chief Executive Officer, evaluated the effectiveness of our internal controls over financial reporting based upon the framework provided by the Treadway Commission’s Committee of Sponsoring Organizations. The Company’s Chief Executive Officer, who also acts in the capacity of Chief Financial Officer, has concluded that the Company’s internal controls over financial reporting were effective as of the end of the period covered by the Report.

 

 

10
 

 

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 year ended December 31, 2011 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.

 

Item 9B.   Other Information.

 

None.

 

 

11
 

  

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The following table sets forth information concerning our Directors and Executive Officer:

 

Name   Age   Positions and Offices Held

Eliron Yaron

 

  43  

Chairman, Chief Executive Officer, Principal Financial And Accounting Officer, Director and Secretary

 

Issac Maizel   32  

Director

 

Yossi Levi   32   Director

 

Eliron Yaron, age 43, has been the Chairman of our Board of Directors, Principal Executive Officer and Principal Financial and Accounting Officer since company's inception date in August 2001. Prior to joining us, from 1996 through 2001, he was the founder and Chief Executive Officer of Shelron Internet Ltd., a web project oriented company. Prior to that time, since 1993, he has engaged in either founding web related business or working in related technology areas. Eliron Yaron has served on the boards of Internet companies in the US and Israel, and has advised venture capital funds and investment companies on IT and Internet related investments and marketing.

 

Isaac Maizel, age 32, has worked since 2001 as a computer network consultant, with an expertise in large networks implementation.

 

Yossi Levi, age 32, worked since 2001 as an E-learning consultant, and as an internet advertising salesman.

 

THE COMMITTEES

 

The Board of Directors does not have a Compensation, Audit or Nominating Committee, and the usual functions of such committees are currently performed by the Board of Directors. The Directors have determined that at present we do not have an audit committee financial expert. The Directors believe that they are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we have been seeking and continue to seek appropriate individuals to serve on the Board of Directors and the Audit Committee who will meet the requirements necessary to be an independent financial expert.

 

EXECUTIVE OFFICERS OF OUR COMPANY

 

Officers are appointed to serve at the discretion of the Board of Directors. Mr. Eliron Yaron currently serves as our Chairman of the Board and sole Executive Officer.

 

CODE OF ETHICS

 

We adopted a code of ethics that applies to our Principal Executive Officer and Principal Financial and Accounting Officer, and other persons who perform similar functions. A copy of our Code of Ethics is filed as an exhibit to the Annual Report on Form 10-KSB for the year ended December 31, 2003.  Our Code of Ethics is intended to be a codification of the business and ethical principles which guide us, to deter wrongdoing, promote honest and ethical conduct, avoid conflicts of interest, and foster full, fair, accurate, timely and understandable disclosures, compliance with applicable governmental laws, rules and regulations, the prompt internal reporting of violations and accountability for adherence to this Code.

 

 

12
 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires the Company's Executive Officers, Directors and persons who beneficially own more than 10% of a registered class of the Company's equity securities to file with the Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Such persons are required by Commission regulations to furnish the Company with copies of all Section 16(a) forms they filed. Based solely upon a review of (i) Forms 3 and 4 and amendments thereto  furnished to the Company pursuant to Rule 16a-3(e), promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), during the Company's fiscal year ended December 31, 2010, and (ii) Forms 5 and amendments thereto and/or written representations furnished to us by any Director, officer or 10% security holder of the Company (collectively "Reporting Persons") stating that he or she was not required to file a Form 5 during the Company's fiscal year ended December 31, 2011, it has been determined that all Officers, Directors and persons who beneficially own more than 10% of a registered class of the Company's equity securities have met their reporting obligations set forth in Section 16(a) of the Exchange Act.

  

Potential Conflicts of Interest

 

Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the Board established a nominating committee. The Board is of the opinion that such committees are not necessary since the Company has only three directors, and to date, such directors have been performing the functions of such committees. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executive officers or directors.

 

Involvement in Certain Legal Proceedings

 

There are no legal proceedings that have occurred within the past five years concerning our directors, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations.

 

 

13
 

 

 

ITEM 11. EXECUTIVE COMPENSATION

 

The Summary Compensation Table below sets forth compensation paid by the Company for the fiscal years ended December 31, 2010 and 2009 for services to its Principal Executive Officer and other Executive Officers who received a total annual salary and bonus which exceeded $100,000.

 

SUMMARY COMPENSATION TABLE          
NAME AND        ANNUAL AND TOTAL 
POSITION   YEAR    COMPENSATION 
Eliron Yaron,          
Chairman, Principal Executive   2011   $156,000 
Officer and Principal Financial   2010   $156,000 
And Accounting Officer          

 

Mr. Yaron did not receive a bonus or any type of other compensation, not mentioned above, for the two years presented.

 

OPTION GRANTS

 

None of the Named Executive Directors were granted any options during the years ended December 31, 2011 and 2010.

 

AGGREGATE OPTIONS EXERCISED IN 2011 AND 2010 YEAR END VALUES

 

Not applicable.

 

EQUITY COMPENSATION PLAN INFORMATION

 

Not applicable.

 

EXECUTIVE EMPLOYMENT

 

In March 2005, we entered into a Consulting Agreement ("Consulting Agreement") with Hull Services Inc. ("Hull"), a company wholly-owned and controlled by Eliron Yaron, the Chairman of the Board of Directors and the Principal Executive Officer of the Company. Pursuant to the terms of this Consulting Agreement, we pay to Hull $156,000 per annum in installments of $3,000 per week for Mr. Yaron’s services, in addition to reimbursing all reasonable expenses incurred in connection with services rendered on behalf of our Company. The compensation accrues and is paid when funds for such payments are available. As of December 31, 2011, accrued and outstanding fees to Hull are $361,464. The Consulting Agreement continues in effect through March 2012 and contains certain customary confidentiality and non-compete provisions. The Consulting Agreement is renewed automatically for successive one year periods until either party gives the other a 180-day prior written notice of its intent to terminate the Consulting Agreement. As of December 31, 2011, no prior written notice with the intent to terminate the Consulting Agreement was provided. Therefore, the Consulting Agreement has been automatically extended until March 2013.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth information as of April 9, 2012, concerning all persons known by us to own beneficially more than 5% of our Common Stock and concerning shares beneficially owned by each Director and named Executive Officer and by all Directors and Executive Officers as a group. Unless expressly indicated otherwise, each stockholder exercises sole voting and investment power with respect to the shares beneficially owned.

 

In accordance with the rules of the SEC, the table gives effect to the shares of Common Stock that could be issued upon the exercise of outstanding options and common stock purchase warrants within the next 60 days. Unless otherwise noted in the footnotes to the table and subject to community property laws where applicable, the following individuals have sole voting and investment control with respect to the shares beneficially owned by them.

 

14
 

  

 The address of each Executive Officer and Director is 39 Broadway, Suite 3010, New York, NY 10006. We have calculated the percentages of shares beneficially owned based on 328,877,492 shares of Common Stock outstanding at April 3, 2012.

 

                   

 

Name and Address of Beneficial Owner 

Shares of

Common Stock

Stock

 

Percentage

Ownership of

Shares of

Common

Stock

(1 )

   

 

Preferred

Stock

 

Voting Power

of Shares of

Preferred

Stock

 
  Executive Officers and                  
  Directors                  
  Eliron Yaron 251,353,334 (2)  76.4 %   1,000,000 (3)  52 %
                   
                   
  Issac Maizel 0         0      
  Yossi Levi 0         0      
  All Executive Officers 251,353,334  (2) 76.4 %   1,000,000  (3) 52 %
  and Directors as a group                  
  (3 persons)                  
  5% Stockholders                  
None                  
  All Executive Officers,                  
  Directors and 5%                  
  Stockholders as a group 251,353,334  (2) 76.4 %   1,000,000  (3) 52 %
  (5 persons)                  
* less than one percent (1%).                  

 

(1) Percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares of Common Stock issued and outstanding of such person as of such date and the number of unissued shares as to which such person has the right to acquire voting and/or investment power within 60 days, by the total issued and outstanding shares of Common Stock of the Company at such date.

 

(2) Comprised of (a) 250,233,334 shares of Common Stock owned by Mr. Yaron and (b) 1,120,000 shares of Common Stock owned by Hull Services, Inc. (“Hull”) a company wholly-owned and controlled by Mr. Yaron. As the sole Stockholder of Hull, Mr. Yaron may be deemed a beneficial owner of the shares of Common Stock.

 

(3) Comprised of 1,000,000 shares of Common Stock issuable upon the conversion of 1,000,000 shares of Series A Preferred Stock issued to Hull. As the sole Stockholder of Hull, Mr. Yaron may be deemed a beneficial owner of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock. The holder of the Series A Preferred Stock is entitled to vote along with the holders of Common Stock as one class on all matters for which the Stockholders of the Company shall vote. The holder of Series A Preferred Stock is entitled to a vote representing 52% of the total shares entitled to vote by all holders of the then outstanding shares of Common Stock and Series A Preferred Stock combined.

 

 

15
 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

 

In March 2005, we entered into a Consulting Agreement ("Consulting Agreement") with Hull Services Inc. ("Hull"), a company wholly-owned and controlled by Eliron Yaron, the Chairman of the Board of Directors and the Principal Executive Officer of the Company. Pursuant to the terms of this Consulting Agreement, we pay to Hull $156,000 per annum in installments of $3,000 per week for Mr. Yaron’s services, in addition to reimbursing all reasonable expenses incurred in connection with services rendered on behalf of our Company. The compensation accrues and is paid when funds for such payments are available. As of December 31, 2011, accrued and outstanding fees to Hull are $361,464. The Consulting Agreement continues in effect through March 2012 and contains certain customary confidentiality and non-compete provisions. The Consulting Agreement is renewed automatically for successive one year periods until either party gives the other a 180-day prior written notice of its intent to terminate the Consulting Agreement. As of December 31, 2011, no prior written notice with the intent to terminate the Consulting Agreement was provided. Therefore, the Consulting Agreement has been automatically extended until March 2013.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

From July 17, 2006 and through the subsequent periods for fiscal year ended December 31, 2011, our principal independent auditor was Rotenberg Meril Solomon Bertiger & Guttilla, P.C. ("RMSBG"). The following are the services provided and the amount billed:

 

AUDIT FEES

 

The aggregate fees billed or to be billed by RMSBG for professional services rendered for the audit of the Company's annual financial statements for the fiscal year ended December 31, 2011 and 2010 and for the review of the financial statements included in the Company's Quarterly Reports on Form 10-Q were $20,000 and $36,000, respectively.

 

AUDIT RELATED FEES

 

Other than the fees described under the caption "Audit Fees" above, RMSBG did not bill any fees for services rendered to us during fiscal years 2011 and 2010 for assurance and related services in connection with the audit or review of our financial statements.

 

TAX FEES

 

Fees billed by RMSBG for tax services rendered during the fiscal years ended December 31, 2011 and 2010 were approximately $1,000 and $1,000, respectively.

 

ALL OTHER FEES

 

There were no fees billed by RMSBG for other professional services rendered during the periods for fiscal years ended December 31, 2011 and 2010, respectively.

 

PRE-APPROVAL OF SERVICES

 

We do not have an audit committee. Our Board of Directors pre-approves all services, including both audit and non-audit services, provided by our independent accountants. For audit services, each year the independent auditor provides our Board of Directors with an engagement letter outlining the scope of the audit services proposed to be performed during the year, which must be formally accepted by the Board of Directors before the audit commences.  The independent auditor also submits an audit services fee proposal, which also must be approved by the Board of Directors before the audit commences.

 

16
 

 

PART IV

 

Item 15.   Exhibits. Financial Statement Schedules.

 

Exhibit Number      Description

 

3.1 Certificate of Incorporation of the Company. (1)

 

3.2 Bylaws of the Company. (1)

 

3.3 Certificate of Amendment of Certificate of Incorporation.

 

4.1 Certificate of Designation of the Company.(2)

 

10.1 Stock Purchase Agreement. (3)

 

10.2 Consulting Agreement dated as of March 1, 2005 between the Company and Hull Services, Inc. (5)

 

14 Code of Ethics. (4)

 

31  Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

 

32  Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

(1) This exhibit was filed as an exhibit to the Registration statement on Form 10-SB12G filed on October 11, 2000 and is incorporated herein by reference.

 

(2) This exhibit was filed as an exhibit to the Annual Report on Form 10-KSB filed on April 16, 2002 and is incorporated herein by reference.

 

(3) This exhibit was filed as an exhibit to the Current Report on Form 8-K filed on November 16, 2001 and is incorporated herein by reference.

 

(4) This exhibit was filed as an exhibit to the Annual Report on Form 10-KSB filed on May 21, 2004 and is incorporated herein by reference.

 

(5) This exhibit was filed as an exhibit to the Annual Report on Form 10-KSB filed on April 8, 2005 and is incorporated herein by reference.

 

(6) This exhibit was filed as an exhibit to the Current Report on Form 8-K filed on May 8, 2006 and is incorporated herein by reference.

 

17
 

   

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SHELRON GROUP, INC.  
       
Dated: April 16, 2012 By: /s/ Eliron Yaron  
    Eliron Yaron  
    Chairman  
       

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following person on behalf of the Company and in the capacities and on the date indicated.

 

Signature       Capacity            Date  
/s/ Eliron Yaron       Chairman and Director          April 16, 2012  
       
Eliron Yaron      
Issac Maizel       Director           April 16, 2012  
Yossi Levi       Director           April 16, 2012  


.

 

18
 

 

 

SHELRON GROUP INC.

 

INDEX TO FINANCIAL STATEMENTS

 

 

Report of Independent Registered Public Accounting Firm      F-2
Balance Sheets as of December 31, 2011 and 2010      F-3
Statements of Operations for the years ended  
December 31, 2011 and 2010      F-4
Statements of Stockholders' Deficiency  
for the years ended December 31, 2011 and 2010      F-5
Statements of Cash Flows for the years ended  
December 31, 2011 and 2010      F-6
Notes to Financial Statements      F-7

 

F-1
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Directors and Stockholders of

Shelron Group, Inc.

 

We have audited the accompanying balance sheets of Shelron Group, Inc. (the “Company”) as of December 31, 2011 and 2010, and the related statements of operations, changes in stockholders’ deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 the Company as of December 31, 2011 and 2010 and the results of its operations and cash flows for the years then ended, 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 discussed in Note 1 to the financial statements, the Company’s recurring losses from operations, stockholders' deficiency and working capital deficiency raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ Rotenberg Meril Solomon Bertiger & Guttilla, P.C.

Saddle Brook, New Jersey

April 16, 2012

 

 

F-2
 

  

SHELRON GROUP INC.

BALANCE SHEETS

 

   December 31,   December 31, 
   2011   2010 
           
ASSETS          
           
Current Assets:          
  Cash  $185   $54 
           
           
Total Current Assets   185    54 
           
Software License   900,000    - 
           
           
Total Assets  $900,185   $54 
           
LIABILITIES AND STOCKHOLDERS' DEFICIENCY          
           
Current Liabilities:          
  Accounts payable and accrued expenses  $102,379   $104,986 
  Due to stockholders   361,464    440,594 
  Convertible note payable   7,028    50,000 
           
           
Total Current Liabilities   470,871    595,580 
           
Liability for common stock to be issued to officer   205,740    205,740 
Software License Payable   900,000      
           
Total Liabilities   1,576,611    801,320 
           
Commitment          
           
Stockholders' Deficiency:          
  Series A convertible preferred stock $0.001 par value          
      per share, Authorized 1,000,000 shares;          
      Issued and outstanding 1,000,000 shares   1,000    1,000 
  Common stock, par value $0.001 par value per share          
      Authorized 500,000,000 shares;          
      Issued and outstanding 328,877,492 shares and          
      18,477,492 shares, respectively   328,877    18,477 
  Common stock to be issued, 3,000,000 shares   12,000    - 
Additional paid-in capital   5,529,306    5,497,806 
Accumulated deficit   (6,547,609)   (6,318,549)
           
Total Stockholders' Deficiency   (676,426)   (801,266)
           
Total Liabilities and Stockholders' Deficiency  $900,185   $54 

 

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

 

F-3
 

 

SHELRON GROUP INC.

STATEMENTS OF OPERATIONS

 

 

   Year Ended 
   December 31,   December 31, 
   2011   2010 
         
Revenues  $-   $17,690 
           
Operating Expenses:          
  Consulting fees   34,500    33,165 
  Employment compensation   156,000    156,000 
  Professional fees   14,000    40,000 
  Office and general expenses   35,876    855 
  Depreciation and amortization   -    263 
  Bank charges   603    1,135 
  Bad debt expense   -    895 
           
           
Total Operating Expenses   240,979    232,313 
           
Loss from operations   (240,979)   (214,623)
           
Other Income (Expense):          
  Interest expense   (2,025)   (3,000)
  Other income   13,944    - 
           
           
Net Loss  $(229,060)  $(217,623)
           
           
Net loss per share:          
  Basic and diluted  $0.00   $(0.01)
           
Weighted average shares outstanding          
  Basic and Diluted   174,590,369    18,477,492 

 

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

 

 

F-4
 

 

 

SHELRON GROUP INC.

STATEMENTS OF STOCKHOLDERS' DEFICIENCY

 

   Preferred Stock     Common Stock                  
   Number       Number       Common   Additional       Total 
   of       of       Stock to   Paid-in   Accumulated   Stockholders' 
   Shares   Amount   Shares   Amount   be Issued   Capital   Deficit   Deficiency 
                                         
Balance at December 31, 2009   1,000,000   $1,000    18,477,492   $18,477   $-   $5,497,806   $(6,100,926)  $(583,643)
                                         
                                         
Net loss   -    -    -    -    -    -   (217,623)   (217,623)
                                         
Balance at December 31, 2010   1,000,000    1,000    18,477,492    18,477    -    5,497,806    (6,318,549)   (801,266)
                                         
Issuance of Common Stock                                        
for debt of Hull   -    -    250,000,000    250,000    -    -    -    250,000 
                                         
Issuance of Common Stock   -    -    2,500,000    2,500    -    22,500    -    25,000 
                                         
Issuance of Common Stock   -    -    3,000,000    3,000    -    9,000    -    12,000 
for consulting fees and services                                      
                                         
Common Stock to be issued                                        
for consulting fees and services   -    -    -    -    12,000    -    -    12,000 
                                        
Issuance of Common Stock                                        
for conversion on Note Payable   -    -    54,900,000    54,900    -    -    -    54,900 
                                         
Net loss   -    -    -    -    -    -   (229,060)   (229,060)
                                         
Balance at December 31, 2011   1,000,000   $1,000    328,877,492   $328,877   $12,000   $5,529,306   $(6,547,609)  $(676,426)

 

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

 

F-5
 

 

 

SHELRON GROUP INC.

STATEMENTS OF CASH FLOWS

 

   Year Ended 
   December 31,   December 31, 
   2011   2010 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(229,060)  $(217,623)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   -    263 
Common stock issued/to be issued for consulting fees and services   24,000    - 
Allowance for doubtful accounts   -    895 
Gain on write-off of accrued expenses   (13,944)   - 
Changes in operating assets and liabilities:          
Increase in accounts payable   23,265    23,250 
Increase in due to stockholders   170,870    149,442 
Net cash used in operating activities   (24,869)   (43,773)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Cash received for sale of stock   25,000    - 
Cash received from officer for common stock to be issued   -    43,545 
Net cash provided by financing activities   25,000    43,545 
           
Net (decrease) increase in cash   131    (228)
Cash at the beginning of the period   54    282 
           
Cash at the end of the period  $185   $54 
           
           
Schedule of Non-Cash Activity:          
Payment of Due to Stockholder in the          
Form of Shares of Common Stock  $250,000   $- 
Conversion of Note Payable into Shares of Common Stock  $54,900      
Deposit on Software License  $900,000   $- 

 

 

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

 

F-6
 

 

SHELRON GROUP INC.

NOTES TO FINANCIAL STATEMENTS

December 31, 2011 and 2010

 

NOTE 1 - THE COMPANY AND ITS OPERATIONS

 

Shelron Group, Inc. (the "Company") was 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 is currently focused on two sectors, internet and mining. The Company has entered into the following agreements related to these areas:

 

¾During April 2011, the Company signed a non-binding Memorandum of Understanding (“MOU”) to acquire gold mining rights in Ghana.  The Company is currently conducting due diligence on these mines and if satisfactory we will move to close the transaction.  Until the completion of the due diligence process, the Company will be unable to determine if it will make an offer to acquire these mines and if its offer will be accepted by the sellers.

 

¾During May 2011, the Company entered into an exclusive perpetual worldwide software license. The Company will utilize the software to create an affiliate network for online stores. The software requires further modifications and the Company expects the software to be available for use during the second quarter of 2012. See Note 5 below.

  

  ¾

During September 2011, the Company signed a non-binding Memorandum of Understanding with a local Tanzanian company for the acquisition of 51% of the mineral rights of a property in the Geita district of Tanzania. This Memorandum of Understanding has expired by the Company believes that, at its option, it would be able to renew the agreement. 

 

  ¾

During September 2011, the Company signed a non-binding Memorandum of Understanding with a local Tanzanian company which has the rights to prospect for gold in the Kahama district. This Memorandum of Understanding has expired by the Company believes that, at its option, it would be able to renew the agreement. 

  

¾During November 2011, the Company started looking into gold exploration opportunities in Chile based on Chile’s potential, and the Company's strategy to explore gold in Africa and in the Americas. The Company is interested in more deals to increase its portfolio and opportunities. The focus of the company is to adhere to its acquisition criteria and only acquire a prospecting license in Chile that can potentially be developed into proven reserves or productive metal resource mines.

 

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 continuing losses, has $185 of cash and an accumulated deficit of approximately $6.6 million, all of 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 Company is currently dependent on its President to continue to fund the Company. If the Company is unable to acquire or develop an operating business the Company will be unable to fund itself. There is no guarantee that our President will continue to fund the Company.

 

F-7
 

 

The accompanying 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.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

The following accounting policies have been identified as critical to the Company's business operations and the understanding of its results of operations.

 

Basis of Presentation

 

The Company’s financial statements are prepared in conformity with US generally accepted accounting principles ("GAAP").

 

Use of Estimates

 

These financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 used to prepare the 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.

 

Concentration of Credit Risk

 

The Company maintains cash in one bank account which is fully insured by the Federal Deposit Insurance Corporation. The Company has not experienced any loss on these accounts.

 

Fair Value of Financial Instruments

 

The carrying amounts reported in the balance sheet for cash, accounts payable and accrued expenses, due to stockholders and convertible note payable approximate fair value based on the short-term maturity of these instruments.

 

Income Taxes

 

The Company accounts for income taxes under the provisions of FASB ASC 740, “Income Taxes.” This pronouncement requires recognition of deferred tax assets and liabilities for the estimated future tax consequences of events 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 the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period in which the enactment rate changes. Deferred tax assets and liabilities are reduced through the establishment of a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.

 

The Company accounts for uncertainties in income taxes under the provisions of FASB ASC 740-10-05, “Accounting for Uncertainties in Income Taxes” The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

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Loss per share

Basic loss per share is computed by dividing net loss by the weighted-average number of shares of Common Stock outstanding during the period. Diluted 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:

 

   2011   2010 
           
Series A convertible preferred stock   1,000,000    1,000,000 
Convertible note payable   19,859,687    2,001,174 

 

Recently Issued Accounting Standards

 

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

 

Subsequent Events

 

The Company has evaluated subsequent events through the date of the filing.

 

 

NOTE 3 - DUE TO STOCKHOLDERS AND RELATED PARTIES

 

Hull Services, Inc. ("Hull")

 

The Company is controlled by Hull, a company wholly-owned by Eliron Yaron, 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 stockholder represents accrued but unpaid consulting as well as other loans payable made by Hull.

 

For each of the years ended December 31, 2011 and 2010, consulting services totaled $156,000.  Such amounts are reflected on the statements of operations as employment compensation.  On June 15, 2011, the Company issued 250,000,000 shares to Mr. Yaron as partial payment of the debt it owes to Hull. The Company valued the shares at $250,000 and recorded a reduction in the amount of debt it owes to Hull. At December 31, 2011 and 2010, the Company owed Hull $361,464 and $440,594, respectively.

 

Liability for Common Stock to be issued to officer

 

The Company has received proceeds for shares of Common Stock to be issued to Mr. Yaron, the Company's Principal Executive Officer/Principal Financial and Accounting Officer. As the shares were not issued as of December 31, 2011 and 2010, the proceeds were not included in stockholders’ deficiency but classified as a liability for common stock to be issued to officer. The liability totaled $205,740 as of December 31, 2011 and 2010.

 

 

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NOTE 4 – CONVERTIBLE NOTE PAYABLE

 

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 maturity date the Company did not make any payments in respect of the amounts due.  The non-payment of this amount constituted an Event of Default under the transaction document.  On June 20, 2011, the Company and the note holder entered into an agreement whereby the maturity of the note was extended until December 31, 2011 and the total amount due to the note holder was $62,210 including $12,210 of accrued interest. In addition, in consideration for the waiver of the Event of Default, the Company agreed to reduce the price at which the note holder may convert the principal amount of the loan and interest accrued thereon (or any portion hereof) into shares of the Company’s common stock at $0.001 per share. During 2011, the note holder converted $42,972 of the convertible note payable and accrued interest into 54,900,000 shares of the Company’s stock. As of December 31, 2011, the Company is in default with respect to the remaining outstanding principal on the note of $7,028 plus the accrued interest thereon.

 

The Company accounted for the modification of the convertible note payable as an extinguishment of debt in accordance with FASB ASC 470-50-40 “Accounting for Modifications and Extinguishments in Debt” The Company deemed the terms of the note modification  to be substantially different  due to the change in the conversion rate and treated the Convertible Promissory Note as extinguished and exchanged for  a  new note.  The Company determined that there was no gain or loss on the extinguishment.

 

NOTE 5 – DEPOSIT ON SOFTWARE LICENSE

 

On May 25, 2011, the Company entered into an exclusive perpetual worldwide software license. The Company will utilize the software to create an affiliate network for online stores. The software requires further modifications. The Company expects the software to be available for use during the second quarter of 2012. The Company agreed to pay $900,000 for such license in cash or in shares of the Company based the average share price on the preceding 30 days before payment. Such payment is scheduled to be made on or about August 12, 2012 and only if the Company achieves $1,250,000 in aggregate revenues from the use of the software prior to the payment date. If the aggregate revenues are below $1,250,000, the Company has a right to terminate the license agreement with no penalty or payment required. The Company is waiting for the completion of certain features of the software and is currently evaluating the existing technical aspects of the software.

 

NOTE 6 – STOCK COMPENSATION EXPENSE

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC Topic 505. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by ASC Topic 505.

 

On July 1 2011, the Company entered into a three-month agreement with a service provider to provide marketing, business development and consulting services. In consideration of the services provided, the Company agreed to issue 6,000,000 shares of the Company’s Common Stock valued at $24,000 or $0.004 per share. On November 14, 2011, the Company issued 3,000,000 of the shares. As of December 31, 2011, the remaining 3,000,000 shares have not been issued and have been classified as common stock to be issued.

 

 

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NOTE 7 - STOCKHOLDERS' DEFICIENCY

 

Convertible Preferred Stock

 

On November 8, 2001, the Company filed a Certificate of Designation with the State of Delaware authorizing the issuance of one series of Preferred Stock (the "Series A Preferred Stock") consisting of 1,000,000 shares. All 1,000,000 shares of Series A Preferred Stock were issued to Hull. The holder of the Series A Preferred Stock is entitled to vote along with the holders of Common Stock as one class on all matters for which the Stockholders of the Company shall vote. The holder of Series A Preferred Stock is entitled to a vote representing 52% of the total shares entitled to vote by all holders of the then outstanding shares of Common Stock and Series A Preferred Stock combined. Each share of the Series A Preferred Stock is convertible at the option of the holder into one share of Common Stock upon not less than 15 days and not more than 30 days notice to the Company. In addition, if all or substantially all of the Company's assets or all of the outstanding shares of the Company are sold, the shares of Series A Preferred Stock automatically convert to Common Stock. The Series A Preferred Stock has a liquidation preference of $0.001 per share.

 

NOTE 8 – REVENUE AND MAJOR CUSTOMERS

 

The Company did not have any revenues during the year ended December 31, 2011.  

 

 

During the year ended December 31, 2010, revenues totaled $17,690. The revenues in the 2010 Period resulted from consulting services performed by the Company for a company in the oil and gas industry and advertising campaigns.  As discussed above, during 2010, we did not actively promote our current ActiveShopper product. Instead, we explored new opportunities in the mining, media, internet, oil and gas and high-tech fields and provided consulting services to some of these industries during the 2010 Period. We also considered strategic acquisitions that management believes will enhance our market positioning.

 

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NOTE 10 - INCOME TAXES

 

 

Net loss for the years ended December 31, 2011 and 2010 are 229,060 and 217,623, respectively:

 

At December 31, 2011, the Company had available approximately $6.3 million of net operating loss carry forwards for federal income tax purposes which expire in the fiscal years 2021 through 2031.  In addition, the Company has available approximately $511,000 of capital loss carry forwards that expire in fiscal year 2014.

 

 

Significant components of the Company’s deferred tax assets at December 31, 2011 and 2010 are as follows:

 

   2011   2010 
           
Net operating loss carryforwards  $2,137,293   $1,893,992 
Capital loss carryforwards   173,582    - 
Stock based compensation   46,308    106,080 
Intangible assets   4,760    - 
           
Total deferred tax assets   2,361,943    2,000,072 
Valuation allowance   (2,361,943)   (2,000,072)
           
Net deferred tax assets  $   $ 

 

A valuation allowance has been established equal to the full amount of the deferred tax assets as the Company is not assured at December 31, 2011 and 2010 that it is more than likely than not that these benefits will be realized.

 

The change in valuation allowance for the years ended December 31, 2011 was an increase of approximately $362.000. The increase in the valuation allowance was the result of increases in the above stated items.

 

At December 31, 2011 and 2010, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. We recognize interest and penalties related to uncertain tax positions in general and administrative expense. As of December 31, 2011 and 2010, we have not recorded any provisions for accrued interest and penalties related to uncertain tax positions.

 

The Company files federal income tax returns subject to statutes of limitations. The 2008 through 2011 tax years generally remain subject to examination by federal tax authorities

 

NOTE 11 - COMMITMENT

 

We maintain an office at 39 Broadway, New York, New York.  No rent is charged for this space.  

 

 

 

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