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:

June 30, 2012

 

¨

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, Suite 3010, New York, NY 10006

(Address of Principal Executive Office) (Zip Code)

 

(516) 620-6794

(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	¨	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	¨		Accelerated filer	¨
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).
	¨	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 June 1, 2014, there were 349,937,500 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.
	¨	Yes	¨	No

 

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

 

 

 

SHELRON GROUP, INC.

Table of Contents

 

	Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets at June 30, 2012 and December 31, 2011	3
Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011	4
Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011	5
Notes to Unaudited Consolidated Financial Statements	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3. Quantitative and Qualitative Disclosures About Market Risk	14
Item 4. Controls and Procedures	14
Part II. OTHER INFORMATION	15
Item 1. Legal Proceedings	15
Item 1A. Risk Factors	15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3. Defaults upon Senior Securities	15
Item 4. Mine Safety Disclosures	15
Item 5. Other Information	15
Item 6. Exhibits	15
Signatures	15
Certifications

 

FORWARD LOOKING STATEMENTS

 

CERTAIN STATEMENTS MADE IN THIS QUARTERLY REPORT ON FORM 10-Q ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY TERMINOLOGY SUCH AS "MAY", "WILL", "SHOULD", "EXPECTS", "INTENDS", "ANTICIPATES", "BELIEVES", "ESTIMATES", "PREDICTS", OR "CONTINUE" OR THE NEGATIVE OF THESE TERMS OR OTHER COMPARABLE TERMINOLOGY. BECAUSE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, THERE ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CANNOT GUARANTEE FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS. MOREOVER, NEITHER THE COMPANY NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THESE FORWARD-LOOKING STATEMENTS. THE COMPANY IS UNDER NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS REPORT TO CONFORM SUCH STATEMENTS TO ACTUAL RESULTS.

 

 

SHELRON GROUP INC.

BALANCE SHEETS

 

		June 30,				December 31,
		2012				2011
						(Audited)
ASSETS
Current Assets:
Cash		$	21,636			$	185
Other receivables
Total Current Assets			21,636				185
Software License			900,000				900,000
Other assets			8,000				-
Total Assets		$	929,636			$	900,185
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and accrued expenses		$	93,940			$	102,379
Due to stockholders			436,349				361,464
Note payable			15,000				-
Convertible note payable			7,028				7,028
Total Current Liabilities			552,317				470,871
Liability for common stock to be issued to officer			205,740				205,740
Software License Payable			900,000				900,000
Total Liabilities			1,658,057				1,576,611
Commitments
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 331,677,492 shares, respectively			331,677				328,877
Common stock to be issued, 4,750,000 and 3,000,000 shares, respectively			29,500				12,000
Additional paid-in capital			5,594,005				5,529,306
Accumulated deficit			(6,684,603	)			(6,547,609	)
Total Stockholders' Deficiency			(728,421	)			(676,426	)
Total Liabilities and Stockholders' Deficiency		$	929,636			$	900,185

 

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

 

 

SHELRON GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2012				2011				2012				2011
Revenues		$	-			$	-			$	-			$	-
Operating Expenses:
Consulting fees			6,250				1,500				20,000				4,000
Employment compensation			39,000				39,000				78,000				78,000
Professional fees			5,000				5,000				10,000				10,000
Office and general expenses			13,813				-				27,891				-
Depreciation and amortization			-				-				-				-
Bank charges			598				36				892				75
Total Operating Expenses			64,661				45,536				136,783				92,075
Loss from operations			(64,661	)			(45,536	)			(136,783	)			(92,075	)
Other Income (Expense):
Interest expense			(105	)			(750	)			(210	)			(1,500	)
Net Loss		$	(64,766	)		$	(46,286	)		$	(136,993	)		$	(93,575	)
Net loss per share:
Basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average shares outstanding
Basic and Diluted			329,913,096				62,433,536				329,398,155				40,576,940

 

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

 

 

SHELRON GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		Six Months Ended
		June 30,				June 30,
		2012				2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(136,993	)		$	(93,575	)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock issued for consulting fees and services			29,500				-
Changes in operating assets and liabilities:
Increase in other assets			(8,000	)			-
(Decrease) increase in accounts payable			(8,439	)			12,050
Increase in due to stockholders			74,885				81,471
Net cash used in operating activities			(49,047	)			(54	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable			15,000				-
Proceeds from issuance of shares			55,498
Net cash provided by financing activities			70,498				-
Net (decrease) increase in cash			21,451				(54	)
Cash at the beginning of the period			185				54
Cash at the end of the period		$	21,636			$	-

 

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

 

 

SHELRON GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - THE COMPANY AND ITS STRATEGY

 

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.

 

On March 29, 2012, the Company created a new subsidiary called Serena Gold, LLC (“Serena Gold”) to acquire and hold gold exploration and production licenses in South America.

 

The Company is currently focused on two sectors, internet and mining as well as strategic acquisitions that management believes will enhance our market positioning.

 

The Company has entered into 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.  This MOU has expired and has been canceled by the Company.

 

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 2014 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.

 

¾

During September 2011, the Company signed a non binding MOU with a local Tanzanian company for the acquisition of 51% of the mineral rights of a property in the Geita district of Tanzania. This MOU has expired and has been canceled by the Company.

 

¾

During September 2011, the Company signed an additional non-binding MOU with a local Tanzanian company which has the rights to prospect for gold in the Kahama district. This MOU has expired and been canceled by the Company.

 

¾

During November 2011, the Company entered into gold exploration in Chile based on Chile’s potential, and the Company's strategy is 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.

 

¾

During April 2012, the Company’s newly formed subsidiary, Serena Gold, signed a binding MOU to acquire six gold exploration licenses on approximately 1,800 acres in Northern Chile. The acquisition of the licenses is subject to the satisfactory completion of due diligence by Serena Gold Payment for the licenses is deferred for two years and the Company plans to raise additional capital to fund the acquisition of these licenses.

 

 

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 $21,636 of cash and an accumulated deficit of approximately $6.7 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.

 

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

 

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include Shelron Group and its subsidiary Serena Gold and 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 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 financial statements of the Company for the years ended December 31, 2011 and 2010 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011. The December 31, 2011 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 six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012.

 

These 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.

 

Fair Value of Financial Instruments

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

 

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:

 

		June 30,				June 30,
		2012				2011
Series A convertible preferred stock			1,000,000				1,000,000
Convertible note payable			19,996,698				2,054,284

 

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 six months ended June 30, 2012 and 2011, consulting services totaled $78,000.   Such amounts are reflected on the statements of operations as employment compensation.  At June 30, 2012 and December 31, 2011, the Company owed Hull $436,349 and $361,464, 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 June 30, 2012 and December 31, 2011, 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 June 30, 2012 and December 31, 2011.

 

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 June 30, 2012, the Company is in default with respect to the remaining outstanding principal on the note of $7,028 plus the accrued interest thereon.

 

NOTE 5 – NOTE PAYABLE

 

The Company received proceeds of $15,000 for an unsecured note payable issued for working capital purposes. There is no interest on this note and the note matures on May 17, 2012. As of June 30, 2012, the Company is in default with respect to the remaining outstanding principal on the note plus the accrued interest thereon.

 

NOTE 6 – 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 2014 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 7 – OTHER ASSETS

 

During the six months ended July 30, 2012, the Company issued 1,600,000 shares to an investor for a sum of $40,000 or $0.025 a share. To date the investor paid $32,000 for these shares and has $8,000 payable to company for the shares. The Company recorded the amount receivable from this investor as other assets in the balance sheet.

 

NOTE 8 – 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 June 30, 2012, the remaining 3,000,000 shares have not been issued and have been classified as common stock to be issued.

 

On January 1, 2012, the Company entered into a four 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 1,000,000 shares of the Company’s Common Stock valued at $10,000 or $0.01 per share. As of June 30, 2012, the shares have not been issued and have been classified as common stock to be issued.

 

On January 1, 2012, the Company entered into a twelve 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 1,500,000 shares of the Company’s Common Stock valued at $15,000 or $0.01 per share. The shares will be issued as follows; 750,000 effective January 1, 2012 and 750,000 effective on July 1, 2012. As of June 30, 2012, the first tranche of 750,000 shares has not been issued and have been classified as common stock to be issued.

 

As discussed above, during 2012, 1,500,000 shares of common stock, valued at $15,000, were issued as consideration to a service provider for marketing, business development and consulting services. The value of the stock issuances was recognized as deferred compensation and is being was amortized over the life of the consulting contract. As of June 30, 2012, the unamortized balance remaining of deferred compensation related to this consulting contract was $7,500. As of December 31, 2011, the unamortized balance remaining of deferred compensation related to the consulting contract issued in 2011 was $0.

 

 

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

 

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, we are currently focused on two sectors, internet and mining as well as strategic acquisitions that management believes will enhance our market positioning. We are also considering strategic acquisitions that management believes will enhance our market positioning.

 

On March 29, 2012, the Company created a new subsidiary called Serena Gold, LLC to acquire and hold gold exploration and production licenses in South America.

 

During April 2011, we signed a non-binding Memorandum of Understanding (“MOU”) to acquire gold mining rights in Ghana.  This MOU has expired and has been canceled by the Company.

 

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 2014 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.

 

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 MOU has expired and has been canceled by the Company.

 

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 MOU has expired and has been canceled by the Company.

 

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.

 

During April 2012, the Company’s newly formed subsidiary, Serena Gold, LLC, signed a binding MOU to acquire six gold exploration licenses on approximately 1,800 acres in Northern Chile. The acquisition of the licenses is subject to the satisfactory completion of due diligence by Serena Gold. Payment for the licenses is deferred for two years and the Company plans to raise additional capital to fund the acquisition of these licenses.

 

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.

 

RESULTS OF OPERATIONS

 

Comparison of the three months ended June 30, 2012 (the "2012 Period") and the three months ended June 30, 2011 (the "2011 Period"):

 

Revenues

 

The Company did not have any revenues for the three months ended June 30, 2012 and 2011. We are exploring 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.

 

Operating Expenses

Operating expenses consist of salaries, consulting expenses, professional fees and other expenses associated with the operations of our business. For the 2012 Period, operating expenses were $64,661, an increase of $19,125 or 42.0%, as compared to $45,536 for the 2011 Period. The increase is primarily attributable to increased costs related to the creation of our subsidiary Serena Gold and the expenses related to the MOU’s that were signed in the 2011 and 2012 Periods.

 

Employment Compensation

Our sole full-time employee is our Chairman of the Board, Eliron Yaron.  Employment compensation totaled $39,000 for the 2012 and 2011 Periods.

 

Consulting Fees

Consulting fees consist primarily of outsourced consulting services. Consulting fees were $6,250 for the 2012 Period, an increase of $4,750 as compared to $1,500 for the 2011 Period as a result of the consulting agreements signed in the 2012 Period.

 

Professional Fees

Professional fees consist primarily of legal, accounting and auditing. Professional fees totaled $5,000 for the 2012 and 2011 Periods.

 

Office and General Expenses

Office and general expenses consist primarily of computer maintenance, marketing materials, website design, travel, rent, corporate fees and telephone expenses. Office and general expenses totaled $13,813 for the 2012 Period and compared to $0 for the 2011 Period.

 

 

Comparison of the six months ended June 30, 2012 (the "2012 Period") and the six months ended June 30, 2011 (the "2011 Period"):

 

Revenues

 

The Company did not have any revenues for the six months ended June 30, 2012 and 2011. We are exploring 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.

 

Operating Expenses

Operating expenses consist of salaries, consulting expenses, professional fees and other expenses associated with the operations of our business. For the 2012 Period, operating expenses were $136,783, an increase of $44,708 or 448.6%, as compared to $92,075 for the 2011 Period. The increase is primarily attributable to increased costs related to the creation of our subsidiary Serena Gold and the expenses related to the MOU’s that were signed in the 2011 and 2012 Periods.

 

Employment Compensation

Our sole full-time employee is our Chairman of the Board, Eliron Yaron.  Employment compensation totaled $78,000 for the 2012 and 2011 Periods.

 

Consulting Fees

Consulting fees consist primarily of outsourced consulting services. Consulting fees were $20,000 for the 2012 Period, an increase of 16,000 or 400.0% as compared to $4,000 for the 2011 Period. This increase is attributable to the consulting agreements signed in the 2012 Period.

 

Professional Fees

Professional fees consist primarily of legal, accounting and auditing. Professional fees totaled $10,000 for the 2012 and 2011 Periods.

 

Office and General Expenses

Office and general expenses consist primarily of computer maintenance, marketing materials, website design, travel, rent, corporate fees and telephone expenses. Office and general expenses totaled $27,891 for the 2012 Period as compared to $0 for the 2011 Period.

 

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 June 30, 2012, we had cash of $21,636 and a working capital deficit of $530,681.

 

Cash used in operating activities was $49,047 for the 2012 Period compared to $54 for the 2011 Period. The increase in cash used in operating activities for the 2012 Period is primarily attributable to the cash needed to fund the loss for the 2012 Period.

 

Cash provided by financing activities in the 2012 Period was $70,498 compared to $0 for the 2011 Period. The 2012 Period consisted of the proceeds from the issuance of shares related to investments in the Company and from an unsecured non-interest bearing note issued by the Company for working capital purposes. The Note matured on May 17, 2012. As of June 30, 2012, the Company is in default with respect to the remaining outstanding principal on the note plus the accrued interest thereon.

 

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 $21,636 and an accumulated deficit of approximately $6.7 million, all of which raises substantial doubt about the Company's ability to continue as a going concern.

 

 

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.

 

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 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.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required for Smaller Reporting Companies.

 

ITEM 4. 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 June 30, 2012.

 

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 six months ended June 30, 2012 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.

 

 

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. MINING SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

Not Applicable.

 

ITEM 6. 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

 

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 Accounting Officer		June 1, 2014
Eliron Yaron