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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

———————

FORM 10-Q

———————

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT OF 1934
For the quarterly period ended:
September 30, 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 o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
   
Large accelerated filer o     Accelerated filer o  
Non-accelerated filer o     Smaller reporting company x  
   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No
   
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of June 24, 2014, there were 349,937,492 shares of common stock outstanding.
 
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by
a court. o Yes o   No
                 

 

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

———————

 
 

  

SHELRON GROUP, INC.

Table of Contents

 

     
Part I. FINANCIAL INFORMATION  Page 
     
Item 1. Financial Statements (Unaudited):     
      
Consolidated Balance Sheets at September 30, 2012 and December 31, 2011   2 
      
Consolidated Statements of Operations for the three and nine months ended     
September 30, 2012 and 2011   3 
      
Consolidated Statements of Cash Flows for the nine months ended     
September 30, 2012 and 2011   4 
      
Notes to Unaudited Consolidated Financial Statements   5 
      
Item 2. Management's Discussion and Analysis of Financial Condition     
and Results of Operations   9 
      
Item 3. Quantitative and Qualitative Disclosures About Market Risk   13 
      
Item 4. Controls and Procedures   13 
      
Part II. OTHER INFORMATION   14 
      
Item 1. Legal Proceedings   14 
      
Item 1A. Risk Factors   14 
      
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   14 
      
Item 3. Defaults upon Senior Securities   14 
      
Item 4. Mine Safety Disclosures   14 
      
Item 5. Other Information   14 
      
Item 6. Exhibits   14 
      
Signatures   14 
      
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. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
         
   September 30,   December 31, 
   2012   2011 
   (Unaudited)     
ASSETS          
Current Assets:          
Cash  $1,264   $185 
           
           
Total Current Assets   1,264    185 
           
Software License   900,000    900,000 
           
Total Assets  $901,264   $900,185 
           
LIABILITIES AND STOCKHOLDERS' DEFICIENCY          
           
Current Liabilities:          
Accounts payable and accrued expenses  $101,545   $102,379 
Due to stockholders   454,427    361,464 
Note payable   15,000    - 
Convertible note payable   7,028    7,028 
           
           
Total Current Liabilities   578,000    470,871 
           
Liability for common stock to be issued to officer   205,740    205,740 
Software License Payable   900,000    900,000 
           
Total Liabilities   1,683,740    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 334,677,492 shares and          
328,877,492 shares, respectively   334,677    328,877 
Common stock to be issued,          
3,000,000 shares   12,000    12,000 
Additional paid-in capital   5,624,755    5,529,306 
Stock subscription receivable   (8,000)   - 
Accumulated deficit   (6,746,908)   (6,547,609)
           
Total Stockholders' Deficiency   (782,476)   (676,426)
           
Total Liabilities and Stockholders' Deficiency  $901,264   $900,185 

 

   

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

 

2
 

 

SHELRON GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30,   September 30,   September 30, 
   2012   2011   2012   2011 
                 
Revenues  $-   $-   $-   $- 
                     
Operating Expenses:                    
Consulting fees   2,500    25,500    28,750    29,500 
Employment compensation   39,000    39,000    117,000    117,000 
Professional fees   6,300    5,000    16,300    15,000 
Office and general expenses   7,356    17,044    35,247    17,044 
Bank charges   795    301    1,687    376 
                     
                     
Total Operating Expenses   55,951    86,845    198,984    178,920 
                     
Loss from operations   (55,951)   (86,845)   (198,984)   (178,920)
                     
Other Expense:                    
Interest expense   (105)   (360)   (315)   (5,334)
                     
                     
Net Loss  $(56,056)  $(87,205)  $(199,299)  $(184,254)
                     
Net loss per share:                    
Basic and diluted  $(0.00)  $(0.00)  $(0.00)  $(0.00)
                     
Weighted average shares outstanding                    
Basic and Diluted   336,373,144    299,840,535    334,226,361    127,947,821 

 

 

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

 

3
 

 

SHELRON GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) 

 

   Nine Months Ended 
   September 30,   September 30, 
   2012   2011 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(199,299)  $(184,254)
Adjustments to reconcile net loss to net cash used in operating activities:          
Common stock issued for consulting fees and services   21,250    24,000 
Changes in operating assets and liabilities:          
Increase in other assets          
(Decrease) increase in accounts payable   (834)   15,190 
Increase in due to stockholders   92,963    133,105 
Net cash used in operating activities   (85,920)   (11,959)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Note payable   15,000    - 
Cash received from sale of stock   71,999    25,000 
Net cash provided by financing activities   86,999    25,000 
           
Net (decrease) increase in cash   1,079    13,041 
Cash at the beginning of the period   185    54 
           
Cash at the end of the period  $1,264   $13,095 
           
           
Schedule of Non-Cash Activity:          
Issuance of common stock under stock subscription  $8,000   $- 
Payment of Due to Stockholder in the          
Form of Shares of Common Stock  $-   $250,000 
Conversion of Note Payable and Accrued Interest into Shares of Common Stock  $-   $39,900 
Deposit on Software License  $-   $900,000 

 

 

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

 

4
 

  

SHELRON GROUP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - THE COMPANY AND ITS STRATEGY

 

Shelron Group, Inc. (“Shelron”, 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.

 

¾During 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.

 

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 websites.    The Company agreed to pay $900,000 for such license in cash or in shares of the Company based on the average share price on the preceding 30 days before payment. Such payment is scheduled to be made on or about August 2015 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.

 

¾During 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.

 

¾During 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.

 

¾During 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. The Company continues to focus its efforts and search for gold opportunities in Chile.

 

¾During 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 was deferred for two years. After completion of the due diligence Serena Gold determined not to acquire the licenses and canceled the MOU. The Company is currently looking to acquire licenses directly from the Chilean government and plans to raise additional capital to fund any potential acquisitions for these licenses.

 

5
 

  

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying consolidated financial statements, the Company has incurred recurring losses, is dependent on debt and equity financing to fund its operations and has a stockholders’ deficiency, 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 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.

 

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 consolidated financial statements are unaudited and are subject to such year-end adjustments as may be considered appropriate and should be read in conjunction with the historical 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 nine months ended September 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 accounting principles generally accepted in the United States of America ("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.

 

Use of Estimates

 

These consolidated financial statements and accompanying notes have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities and expenses. The Company continually evaluates the accounting policies and estimates used to prepare the consolidated financial statements. The Company bases its estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.

 

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 this account.

 

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.

 

6
 

  

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 gives effect to dilutive convertible securities, options, warrants and other potential Common Stock outstanding during the period, only in periods in which such effect is dilutive.  The following securities have been excluded from the calculation of net loss per share, as their effect would be antidilutive:

 

   September 30,   September 30, 
   2012   2011 
Series A convertible preferred stock   1,000,000    1,000,000 
Convertible note payable   20,180,632    23,687,667 

 

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 – STOCK SUBSCRIPTION RECEIVABLE

 

During the nine months ended September 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 owes the Company $8,000 as of September 30, 2012. The Company recorded the amount receivable from this investor as a stock subscription receivable in the consolidated balance sheet.

 

NOTE 4 - 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 three months ended September 30, 2012 and 2011, consulting services totaled $39,000. For each of the nine months ended September 30, 2012 and 2011, consulting services totaled $117,000.   Such amounts are reflected on the statements of operations as employment compensation.  At September 30, 2012 and December 31, 2011, the Company owed Hull $454,427 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 September 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 September 30, 2012 and December 31, 2011.

 

NOTE 5 – 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 shares 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.

 

7
 

  

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 September 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.

 

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 6 – 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 matured on May 17, 2012. As of September 30, 2012, the Company is in default with respect to the remaining outstanding principal on the note.

 

NOTE 7 – 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 websites. 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 2015 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 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 September 30, 2012, the remaining 3,000,000 shares have not been issued and have been classified as common stock to be issued. The remaining 3,000,000 shares were issued on October 9, 2012.

 

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. On September 18, 2012, the Company issued these shares to the service provider.

 

On January 1, 2012, the Company entered into a one-year 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. On September 18, 2012, the Company issued these shares to the service provider.

 

Stock based compensation amounted to $3,750 and $24,000 for the three months ended September 30, 2012 and 2011, respectively, and $21,250 and $24,000 for the nine months ended September 30, 2012 and 2011, respectively. Stock compensation expense is included in consulting fees on the consolidated statements of operations.

   

NOTE 9 – SUBSEQUENT EVENTS

 

On December 14, 2012 the Company entered into an agreement with an investor to purchase 1,000,000 common shares for $10,000. As of June 24, 2014, those shares have not been issued.

 

During the year ended December 31, 2013 and the period January 1, 2014 through June 24, 2014, the Company raised additional capital and issued 7,775,000 and 4,485,000 common shares, respectively. The money raised is being used to assist the Company to achieve its strategy with respect to its search for potential acquisitions in the mining and energy sectors.

 

8
 

 

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

 

OVERVIEW

 

Shelron Group, Inc. (the “Company”, “we”, “our”, or “us”) 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 formed a new subsidiary called Serena Gold, LLC (“Serena Gold”) to acquire and hold gold exploration and production licenses in South America.

 

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

 

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 websites. 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 2015 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 executed 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.

 

During September 2011, the Company executed 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.

 

During November 2011, the Company started investigating 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 Company continues to focus its efforts and search for gold opportunities in Chile.

 

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 was deferred for two years. After completion of the due diligence Serena Gold determined not to acquire the licenses and canceled the MOU. The Company is currently looking to acquire licenses directly from the Chilean government and plans to raise additional capital to fund any potential acquisitions for these licenses.

 

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

 

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

 

9
 

  

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 (“US GAAP”). US 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 US 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 Unaudited Consolidated 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 September 30, 2012 (the "2012 Period") and the three months ended September 30, 2011 (the "2011 Period"):

 

Revenues

 

The Company did not have any revenues for the three months ended September 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 $65,951, a decrease of $20,894 or 24.1%, as compared to $86,845 for the 2011 Period. The decrease is primarily attributable to decreased costs related to consulting fees and office expenses in the 2012 Period as compared to the 2011 Period.

 

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 $12,500 for the 2012 Period, a decrease of $13,000 or 51.0% as compared to $25,500 for the 2011 Period.

 

Professional Fees

 

Professional fees consist primarily of legal, accounting and auditing. Professional fees totaled $6,300 for the 2012 Period an increase of $1,300 or 26.0% as compared to $5,000 for the 2011 Period.

 

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 $7,356 for the 2012 Period a decrease of $9,688 or 56.8% as compared to $17,044 for the 2011 Period.

 

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Comparison of the nine months ended September 30, 2012 (the "2012 Period") and the nine months ended September 30, 2011 (the "2011 Period"):

 

Revenues

 

The Company did not have any revenues for the nine months ended September 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 $198,984, an increase of $20,064 or 11.2%, as compared to $178,920 for the 2011 Period. The increase is primarily attributable to increased office and general expenses in the 2012 Period as compared to the 2011 Period.

 

Employment Compensation

 

Our sole full-time employee is our Chairman of the Board, Eliron Yaron.  Employment compensation totaled $117,000 for the 2012 and 2011 Periods.

 

Consulting Fees

 

Consulting fees consist primarily of outsourced consulting services. Consulting fees were $28,750 for the 2012 Period, a decrease of $750 or 25% as compared to $29,500 for the 2011 Period.

 

Professional Fees

 

Professional fees consist primarily of legal, accounting and auditing. Professional fees totaled $16,300 for the 2012 Period and increase of $1,300 or 8.7% as compared to $15,000 for the 2011 Period.

 

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 $35,247 for the 2012 Period an increase of $18,203 or 106.8% as compared to $17,044 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 September 30, 2012, we had cash of $1,264 and a working capital deficit of $576,736.

 

Cash used in operating activities was $85,920 for the 2012 Period compared to $11,959 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 $86,999 compared to $25,000 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 September 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. During the year ended December 31, 2013 and the period January 1, 2014 through June 24, 2014, the Company raised additional capital and issued 7,775,000 and 4,485,000 common shares, respectively. The money raised will be used to assist the Company to achieve its strategy with respect to its search for potential acquisitions in the mining and energy sectors.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying unaudited consolidated financial statements, the Company has incurred recurring losses, is dependent on debt and equity financing to fund its operations and has 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.

 

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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 unaudited 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.

 

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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 September 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 nine months ended September 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.

 

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Part II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDING

 

We are not a party to any material legal proceeding.

 

ITEM 1A. RISK FACTORS

 

Not applicable.

 

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

 

On September 18, 2012, the Company issued 1,000,000 shares of its common stock to a service provider under the terms of a four-month agreement for marketing, business development and consulting services.

 

On September 18, 2012, the Company issued 1,500,000 shares of its common stock to a service provider under the terms of a one-year agreement for marketing, business development and consulting services.

 

The foregoing securities were issued in a private placement transaction pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, without general solicitation or advertising of any kind and without payment of brokerage commissions to any person.

 

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

 

101.INS

XBRL Instance Document 

   

101.SCH

XBRL Taxonomy Extension Schema Document

   

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document 

   

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document 

   

101.LAB

XBRL Taxonomy Extension Label Linkbase Document 

   

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

    

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

Eliron Yaron

Chief Executive Officer, President and Principal Financial Accounting Officer   June 27, 2014

 

 

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