424B3 1 flo-424b3.txt FLORHAM CONSULTING CORP. FORM 424 (B) (3) PROSPECTUS 65,700 Shares FLORHAM CONSULTING CORP. Common Stock The selling stockholders may offer and sell from time to time up to an aggregate of 65,700 shares of our common stock that they own. For information concerning the selling stockholders and the manner in which they may offer and sell shares of our common stock, see "Selling Stockholders" and "Plan of Distribution" in this prospectus. We will not receive any proceeds from the sale by the selling stockholders of their shares of common stock. We will pay the cost of the preparation of this prospectus, which is estimated at $4,030. Investing in shares of our common stock involves a high degree of risk. You should purchase our common stock only if you can afford to lose your entire investment. See "Risk Factors," which begins on page 7. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The selling stockholders have not engaged any underwriter in connection with the sale of their shares of common stock. Because there is no trading market in our common stock as of the date of this prospectus, the selling stockholders will sell shares at a fixed price of $1.50 per share until a public market develops for the common stock. Once a public market develops for the common stock, the selling stockholders may sell their shares of common stock in the public market based on the market price at the time of sale or at negotiated prices. The selling stockholders may also sell their shares in transactions that are not in the public market in the manner set forth under "Plan of Distribution." The date of this Prospectus is May 1, 2008. The information in this prospectus is not complete any may be changed. The selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell or a solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. You should rely only on the information contained in this prospectus. We have not authorized any dealer, salesperson or other person to provide you with information concerning us, except for the information contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date on the front cover page of this prospectus, regardless when the time of delivery of this prospectus or the sale of any common stock. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. -3- TABLE OF CONTENTS ----------------------------------------------------------------------- ------ Prospectus Summary 5 Risk Factors 7 Forward-Looking Statements 13 Use of Proceeds 13 Selling Stockholders 13 Plan of Distribution 18 Market for Common Stock 19 Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Business 22 Management 25 Principal Stockholders 26 Certain Relationships and Related Transactions 26 Description of Capital Stock 27 Experts 29 Legal Matters 29 How to Get More Information 29 Financial Statements F-1 -4- PROSPECTUS SUMMARY This summary does not contain all of the information that is important to you. You should read the entire prospectus, including the Risk Factors and our consolidated financial statements and related notes appearing elsewhere in this prospectus before making an investment decision. Our Business We are a New York based company established in 2005 to offer Internet professional services. We provide our clients with an integrated set of strategic, creative and technology services that enable them to effect and maximize their Internet business. These services help our clients create and enhance relationships with their customers, staff, business partners and suppliers. Our strategic services include advising clients on developing business models for their Internet activities, identifying opportunities to improve operational efficiencies through online opportunities and planning for the operations and organization necessary to support an online business. Our creative services include developing graphic designs and Web sites for our clients. Our technology services include recommending and installing appropriate hardware and software networks to enable online sales, support and communication. We also manage the hosting of clients' websites in certain cases. As of December 31, 2007, we had performed consulting or other services for five clients. We believe that our business can grow in two ways. The first would be to expand internally by hiring more employees, completing additional consulting design projects, entering into additional consulting agreements and/or partnering with third parties. The second would be through acquisitions or mergers with other entities in our or other businesses. We are a Delaware corporation organized in February 2005. Our address is 64 Beaver Street, Suite 233, New York, New York 10004, telephone: 646/ 206-8280 fax: 646/219-5742. References to "we," "us," "our" and similar words refer to Florham Consulting Corp., Sale of Securities to the Selling Stockholders In March 2007, we sold, in a private placement, 657 units, each unit consisting of 100 shares of common stock, at $1.00 per share, to 96 accredited investors. No brokerage commissions or other compensation was paid to any third party with respect to the units sold in the private placement. The shares sold in the private placement have been registered pursuant to this Registration Statement. -5- The Offering Common Stock Offered: The selling stockholders are offering a total of 65,700 shares of common stock Outstanding Shares of Common Stock: 166,700 shares(1) Use of Proceeds: We will receive no proceeds from the sales of any shares by the selling stockholders. (1) Does not include 925,000 shares of common stock issuable upon exercise of warrants held by certain of our stockholders. Summary Financial Information The following information as at December 31, 2007 and December 31, 2006 has been derived from our audited financial statements, which appear elsewhere in this prospectus. Balance Sheet Information: December 31, 2007 December 31, 2006 ----------------- ----------------- Working capital $ 52,817 $ 17,827 Total assets $ 58,411 $ 29,820 Retained earnings (accumulated deficit) ($ 38,883) ($ 8,173) Stockholders' equity $ 52,817 $17,827 -6- RISK FACTORS An investment in our securities involves a high degree of risk. In determining whether to purchase our securities, you should carefully consider all of the material risks described below, together with the other information contained in this prospectus before making a decision to purchase our securities. You should only purchase our securities if you can afford to suffer the loss of your entire investment. Risks That Relate to Our Business We have a very limited operating history, limited revenues and only minimal assets. We have a very limited operating history and limited revenues to date. We have no significant assets or financial resources. We have had losses and they are likely to continue in the near future. No assurance can be given that we will be able to develop our business organically or through mergers or acquisitions. We need to obtain financing in order to continue our operations. On a prospective basis, we will require both short-term financing for operations and long-term capital to fund our expected growth. We have no existing bank lines of credit and have not established any definitive sources for additional financing. Based on our current operating plan, we have enough cash to meet our anticipated cash requirements for approximately 12 months. We will likely require additional funds if we want to fully implement our business plan and take advantage of evolving market conditions. Additional financing may not be available to us, or if available, then it may not be available upon terms and conditions acceptable to us. If adequate funds are not available, then we may be required to delay, reduce or eliminate product development or marketing programs. Our inability to take advantage of opportunities in the industry because of capital constraints may have a material adverse effect on our business and our prospects. We face intense competition, which could harm our business. Our market is relatively new, intensely competitive, highly fragmented and subject to rapid technological change. We expect competition to intensify and increase over time because: o there are few barriers to entering the Internet professional services market; o our industry is consolidating; and o many of our competitors are forming cooperative relationships. We compete against other Internet professional services firms, as well as a number of different types of companies that are not exclusively in the Internet professional services business. Almost all of our competitors have longer operating histories, greater name recognition, larger established client bases, longer client relationships and significantly greater financial, technical, personnel and marketing resources than we do. Our competitors may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to potential clients, employees and strategic partners. Further, our competitors may perform Internet services that are equal or superior to our services or that achieve greater market acceptance than our services. We have no patented or other proprietary technology that would limit competitors from duplicating our services. We must rely on the skills of our personnel and the quality of our client service. -7- Increased competition is likely to result in price reductions, reduced gross margins additional marketing expenses and loss of market share, any of which would have a material adverse effect on our business, results of operations and financial condition. We cannot assure you that we will be able to compete successfully against existing or future competitors. Our efforts to raise awareness of our corporate identity may not be successful, which may limit our ability to expand our client base and attract acquisition candidates and employees. We believe that building our corporate identity is critical for attracting and expanding our client base and attracting employees. If we do not continue to build our corporate identity, we may not be able to effect our strategy. We also believe that reputation and name recognition will grow in importance as the number of companies competing in the market for Internet professional services increases. Our success will be predicated on providing high quality, reliable and cost-effective services. If clients do not deem our services as meeting their needs, or if we fail to market our services effectively, we will be unsuccessful in maintaining and strengthening our corporate identity. If we do not keep pace with technological changes, our services may become less competitive and our business could suffer. Our market is characterized by rapidly changing technologies, frequent new product and service introductions, and evolving industry standards. If we cannot keep pace with these changes our services could become less competitive and our business could suffer. To achieve our goals, we need to provide services that keep pace with continuing changes in industry standards, information technology and client preferences. We may be unable to develop and introduce new services or enhancements to existing services in a timely manner or in response to changing market conditions or client requirements. This would materially and adversely affect our business, results of operations and financial condition. The market for our services and our revenue growth depend on our current and potential clients accepting and employing the Internet. Since we expect to derive most of our revenues from providing Internet professional services, our future success is dependent on increased use of the Internet as a marketplace. If the Internet develops as a viable marketplace more slowly than expected, our business, results of operations and financial condition could materially suffer. Most of our current or potential clients have limited experience with Internet marketing and may determine that the Internet is not an effective method for expanding their businesses. We cannot assure you that the market for Internet professional services will continue to grow or become sustainable. Governmental regulations regarding the Internet may be enacted which could impede our business. To date, governmental regulations have not materially restricted the use of the Internet by most companies. However, laws and regulations relating to the Internet may change. New laws and regulations, or new interpretations of existing laws and regulations, could impact us directly, by regulating our operations or imposing additional taxes on the services we provide, which could adversely impact our results and operations. These regulations could restrict our ability to provide our services or increase our costs of doing business. In addition, new laws could impact us indirectly by preventing our clients from delivering products and services over the Internet or slowing the growth of the Internet. New laws relating to sales and other taxes, user privacy, pricing controls, consumer protection and international commerce may limit the growth of the Internet as a commercial vehicle. In addition, unfavorable judicial interpretation of existing laws, and the adoption of new laws, regarding liability for libel and defamation and copyright, trademark and patent infringement may extend liability to Web site owners. If these new laws decrease the acceptance of e-commerce and other aspects of the Internet, our clients may be harmed and, as a consequence, our revenue growth and growth in demand for our services would be limited and our business, results of operations and financial condition would be adversely affected. -8- If we fail to deliver quality services or fulfill client needs, or if our services harm our clients' businesses, we may face additional expenses, losses or negative publicity. Many of our engagements involve projects that are critical to the operations of our clients' businesses. If we cannot complete engagements to our clients' expectations and on a timely basis, we could materially harm our clients' operations. This could damage our reputation, subject us to increased risk of litigation or force us to redesign the project. Any of these events could have a material adverse effect on our business, results of operations and financial condition. Currently we do not carry general liability insurance coverage. The successful assertion of one or more significant claims against us could have a material adverse effect on our business, results of operations and financial condition. We may be subject to liability if our services or solutions for our clients infringe upon the intellectual property rights of others. It is possible that in performing services for our clients, we may inadvertently infringe upon the intellectual property rights of others. In such event, the owner of the intellectual property may commence litigation seeking damages and an injunction against both us and our client, and the client may bring a claim against us. Any infringement litigation would be costly, regardless of whether we ultimately prevail. Even if we prevail, we will incur significant expenses and our reputation would be hurt, which would affect our ability to generate business and the terms on which we would be engaged, if at all. We are dependent upon our management and we need to engage additional skilled personnel. Our success depends in large part on the skills and efforts of our only officer, our president and chief executive officer, David Stahler. The loss of the services of Mr. Stahler could have a material adverse effect on the development and success of our business. Mr. Stahler has an employment agreement with us that requires him to devote such of his working time to our business as we and Mr. Stahler determine is necessary for the performance of his duties under his employment agreement. We have not obtained key man insurance on the life of Mr. Stahler. Our future success will depend in part upon our ability to attract and retain additional qualified management and technical personnel. Competition for such personnel is intense and we will compete for qualified personnel with numerous other employers, almost all of which have significantly greater financial and other resources than we. We may experience increased costs in order to retain and attract skilled employees. Our failure to attract additional personnel or to retain the services of key personnel and independent contractors could have a material adverse effect on our ability to operate profitably. If we make any acquisitions, they may disrupt or have a negative impact on our business. If we make acquisitions, we could have difficulty integrating the acquired companies' personnel and operations with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including, without limitation, the following: o the difficulty of integrating acquired products, services or operations; o the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies; o difficulties in complying with regulations in other countries that relate to our businesses; o difficulties in maintaining uniform standards, controls, procedures and policies; o the potential impairment of relationships with employees and customers as a result of any integration of new management personnel; o the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers; o the effect of any government regulations which relate to the business acquired; o potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether of not successful, resulting from actions of the acquired company prior to our acquisition; -9- o difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities; and o potential expenses under the labor, environmental and other laws of other countries. Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with an acquisition, many of which cannot be presently identified. These risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations. Further, the commencement of business in other countries may be subject to significant risks in areas which we are not able to prepare for in advance. No Dividends. We have not paid any dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. We intend to retain any earnings to finance the growth of our business and we may never pay cash dividends. Risks Concerning our Securities. Because our stock is not currently traded, we cannot predict when or whether an active market for our common stock will develop. Our common stock is not traded on any trading market, and we do not have a significant public float. We may seek to list our common stock on the OTC Bulletin Board. No assurance can be given that such listing will be successful or if our common stock were to trade on the OTC Bulletin Board or the Pink Sheets, we cannot assure you that any significant market for our stock would develop. In the absence of an active trading market, you may have difficulty buying and selling or obtaining market quotations for our stock; the market visibility for our stock may be limited, and the lack of visibility for our common stock may have a depressive effect on the market price for our common stock. Our stock price may be affected by our failure to meet projections and estimates of earnings developed either by us or by independent securities analysts. Our operating results may fall below the expectations of securities analysts and investors as well as our own projections. In this event, the market price of our common stock would likely be materially adversely affected. The registration and sales of common stock being sold pursuant to this prospectus may have a depressive effect upon the market for our common stock. We have a minimal public float, and the shares of common stock being offered by this prospectus constitute a not insignificant portion of the outstanding shares of our common stock. If the selling stockholders sell a significant number of shares of common stock, the market price of our common stock may decline. Because we may be subject to the "penny stock" rules, you may have difficulty in selling our common stock. If a public market develops for our common stock and if our stock price is less than $5.00 per share, our stock may be subject to the SEC's penny stock rules, which impose additional sales practice requirements and restrictions on broker-dealers that sell our stock to persons other than established customers and institutional accredited investors. The application of these rules may affect the ability of broker-dealers to sell our common stock and may affect your ability to sell any common stock you may own. -10- According to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include: o Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; o Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; o "Boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; o Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and o The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. As an issuer of "penny stock' the protection provided by the federal securities laws relating to forward looking statements does not apply to us. Although the federal securities law provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock we will not have the benefit of this safe harbor protection in the event of any based upon a claim that the material provided by us, including this prospectus, contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. The exercise of outstanding warrants may have a dilutive effect on the price of our common stock. To the extent that outstanding warrants are exercised, dilution to our stockholders may occur. Moreover, the terms upon which we will be able to obtain additional equity capital may be adversely affected, since the holders of the outstanding warrants can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than the exercise terms provided by the outstanding options and warrants. Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protections against interested director transactions, conflicts of interest and similar matters. The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the Commission, the New York and American Stock Exchanges and the NASDAQ Stock Market as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges or the NASDAQ Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than necessary, we have not yet adopted all of these measures. As of the date of this prospectus, we are not in compliance with requirements relating to the distribution of annual and interim reports, the holding of stockholders meetings and solicitation of proxies for such meeting and requirements for stockholder approval for certain corporate actions. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations. -11- Reporting requirements may delay or preclude acquisition. Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act") requires companies subject thereto to provide certain information about significant acquisitions including audited financial statements for the company acquired covering one or two years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target companies to prepare such financial statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by us. Acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable. Our officers and directors have limited liability and have indemnity rights which may discourage stockholders from bringing an action against them. Our Certificate of Incorporation provides that we will indemnify our officers and directors against losses sustained or liabilities incurred which arise from any transaction in that officer's or director's respective managerial capacity unless that officer or director violates a duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend, or derived an improper benefit from the transaction. Our Certificate of Incorporation also provides for the indemnification by us of our officers and directors against any losses or liabilities incurred as a result of the manner in which the officers and directors operate our business or conduct our internal affairs, provided that in connection with these activities they act in good faith and in a manner which they reasonably believe to be in, or not opposed to, our best interests of and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations. The existence of these provisions may discourage holders of our Common Stock from bringing an action against management because we may be responsible for paying all costs associated therewith, which could negatively impact the value of our Common Stock. Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results. In addition, current and potential stockholders could lose confidence in our financial reporting, which could have a material adverse effect on our stock price. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Commencing in fiscal 2007, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting for the year ending December 31, 2007 and a report by our independent registered public accounting firm addressing these assessments for the year ending December 31, 2009. During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal control environment could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. Transfers of our securities may be restricted by virtue of state securities "blue sky" laws which prohibit trading absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states. -12- Transfers of our common stock may be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as "blue sky" laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions may prohibit the secondary trading of our common stock. Investors should consider the secondary market for our securities to be a limited one. FORWARD-LOOKING STATEMENTS Statements in this prospectus may be "forward-looking statements." Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this prospectus, including the risks described under "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to demand for our services, our ability to diversify our client base and enter new markets for our services, market and customer acceptance, our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this prospectus. USE OF PROCEEDS We will not receive any proceeds from the sale by the selling stockholders of their common stock. SELLING STOCKHOLDERS The following table sets forth the names of the selling stockholders, the number of shares of common stock owned beneficially by the selling stockholders as of March 31, 2008, the number of shares of our common stock that may be offered by the selling stockholders pursuant to this prospectus and the number of shares owned by the selling stockholders after completion of the offering. Except for David Stahler who will beneficially own 50,000 shares after completion of this offering, no selling stockholder will own more than 1% of our outstanding common stock after the sale of shares owned by such selling stockholder. The table and the other information contained under the captions "Selling Stockholders" and "Plan of Distribution" has been prepared based upon information furnished to us by or on behalf of the selling stockholders.
Name Shares Shares Shares Beneficially Being owned after Owned Sold offering ------------- ------------ ---------- David Stahler 53,600 3,600 50,000 Jay R Fialkoff 7,400 7,400 - Venturetek LP(1) 7,000 7,000 - Esther Stahler(2) 5,200 5,200 - Ruki Renov(3) 5,200 5,200 - Eli Renov 3,600 3,600 - Jamie Stahler 3,600 3,600 - Michael Binnion 2,000 2,000 - -13- Alan Blisko 1,800 1,800 - Jill Blisko 1,800 1,800 - Karen Renov 1,800 1,800 - LDP Family Partnership LP(4) 1,800 1,800 - Nathan Renov 1,800 1,800 - Tova Renov 1,800 1,800 - The Telmarc Group, LLC(5) 1,100 100 1,000 Adam Katz 1,000 1,000 - Joseph Kauderer 1,000 1,000 - Kamy Roditi 1,000 1,000 - Lester Wolff 1,000 1,000 - Martina Kauderer 1,000 1,000 - Ari Renov 500 500 - Avi Stahler 500 500 - Daniel Stahler 500 500 - Kenneth J. Renov 500 500 - Kinder Investments LP(6) 500 500 - Lauretta Lerner 500 500 - Lisa Stahler 500 500 - Martin Lerner 500 500 - Abraham Soudry 200 200 - Deborah Gilman 200 200 - Edmund Depaz 200 200 - Esther Stahler CUST FOR Benji Renov UGMA NY 200 200 - Esther Stahler CUST FOR Emily Renov UGMA NY 200 200 - Gregg Gilman 200 200 - Louis Cattaruzza 200 200 - Natalya Dana 200 200 - Nathan Renov CUST FOR Ilana Renov UGMA NY 200 200 - Tova Katz CUST FOR Aaron Katz UGMA NY 200 200 - Tova Katz CUST FOR Eliezer Katz UGMA NY 200 200 - Tova Katz CUST FOR Malka Katz UGMA NY 200 200 - Tova Katz CUST FOR Naftali Yehuda Katz UGMA NY 200 200 - Vince Vellardita 200 200 - Alex Kofman 100 100 - Alyssa Cohen 100 100 - -14- Andrea Fialkoff 100 100 - Asher S. Levitsky PC defined benefit plan(7) 100 100 - Barbara Katz 100 100 - Bryna Selengut 100 100 - Daniel Family LP(8) 100 100 - David Family LP(9) 100 100 - Deborah Katz 100 100 - Dov Perlysky(10) 100 100 - Elvira Khokhlov 100 100 - Gail Mulvihill 100 100 - Harold Katz 100 100 - Ilan Ventures LLC(11) 100 100 - Irena Kofman 100 100 - Irving Selengut 100 100 - Irving Weisen 100 100 - Jamie Family LP(12) 100 100 - Jane Sherman 100 100 - Jash Group Inc.(13) 100 100 - Jay Greenbaum 100 100 - Larry Binnion 100 100 - Laya Perlysky(14) 100 100 - Leonid Kofman 100 100 - Lisi Family LP(15) 100 100 - Louis Gilman 100 100 - Masha Pruss 100 100 - Pamela Greenbaum 100 100 - Renov Investments LLC(16) 100 100 - Rob Millstone 100 100 - Ruki Renov CUST FOR Akiva Yair Perlysky UGMA NY 100 100 - Ruki Renov CUST FOR Atara Perlysky UGMA NY 100 100 - Ruki Renov CUST FOR Avigail Perlysky UGMA NY 100 100 - Ruki Renov CUST FOR Ayala Perlysky UGMA NY 100 100 - Ruki Renov CUST FOR Eitan Perlysky UGMA NY 100 100 - Ruki Renov CUST FOR Elana Stahler UGMA NY 100 100 - Ruki Renov CUST FOR Eli Stahler UGMA NY 100 100 - Ruki Renov CUST FOR Emily Stahler UGMA NY 100 100 - Ruki Renov CUST FOR Naftali Perlysky UGMA NY 100 100 - Ruki Renov CUST FOR Shira Perlysky UGMA NY 100 100 - Ruki Renov CUST FOR Tova Perlysky UGMA NY 100 100 - -15- Sarah McGarty 100 100 - Sergei Khokhlov 100 100 - Shayna Millstone 100 100 - Shayna Millstone CUST FOR Alexander Millstone UGMA NY 100 100 - Shayna Millstone CUST FOR Eliana Millstone UGMA NY 100 100 - Shayna Millstone CUST FOR Michael Millstone UGMA NY 100 100 - Sheila Gilman 100 100 - Shelley Spindel 100 100 - Shlomo Katz 100 100 - Steve Cohen 100 100 - Steve Sherman 100 100 - Sutton Partners LP(17) 100 100 - Vitaly Pruss 100 100 -
(1) David Selengut, the manager of TaurusMax LLC, which is the general partner of Venturetek LP, has sole voting and dispositive power over the shares beneficially owned by Venturetek. The shares beneficially owned by Venturetek do not include 100 shares of common stock held by Sutton Partners LP whose general partner is also TaurusMax LLC. (2) The shares beneficially owned by Ms. Stahler do not include (i) 100 shares of common stock held by David Family LP, of which Ms. Stahler is general partner, (ii) 100 shares of common stock held by Daniel Family LP, of which Ms. Stahler is general partner, (iii) 100 shares of common stock held by Jamie Family LP, of which Ms. Stahler is general partner, (iv) 100 shares of common stock held by Lisi Family LP, of which Ms. Stahler is general partner and (iv) 400 shares in total held by Ms. Stahler as custodian for her niece and nephew, both minors. (3) The shares beneficially owned by Ms. Renov do not include (i) 100 shares of common stock held by Ilan Ventures LLC, of which Ms. Renov is manager, (ii) 100 shares of common stock held by Renov Investments LLC, of which Ms. Renov is manager, and (iii) 1,100 shares of common stock in total held by Ms. Renov as custodian for 11 of her minor nieces and nephews. (4) Laya Perlysky, as general partner, has voting and dispositive power over the shares beneficially owned by LDP Family Partnership LP. The number of shares beneficially owned by LDP Family Partnership does not include (i) 5,000 shares of common stock owned by Krovim LLC, of which Dov Perlysky, the husband of Laya Perlysky, is the managing member of the manager, (ii) 500 shares of common stock owned by Kinder Investments LP, of which Dov Perlysky is the managing member of the manager, (iii) 100 shares of common stock owned by Dov Perlysky individually and (iv) 100 shares of common stock owned by Ms. Perlysky individually. Ms. Perlysky and LDP Family Partnership disclaim beneficial ownership of the shares held by Krovim LLC, Kinder Investments LP and Dov Perlysky. (5) Dr. Terrence McGarty is the managing member of The Telmarc Group LLC and has sole voting and dispositive power over the shares owned by Telmarc Group. The number of shares beneficially owned by Telmarc Group does not include 100 shares of common stock owned by Dr. McGarty's wife, Sarah McGarty. Dr. McGarty and The Telmarc Group disclaim beneficial ownership of the shares held by Sarah McGarty. (6) Dov Perlysky, the managing member of Nesher LLC, which is the manager of Kinder Investments LP, has sole voting and dispositive power over the shares beneficially owned by Kinder Investments. The shares beneficially owned by Kinder Investments do not include (i) 5,000 shares of common stock held by Krovim LLC, (ii) 1,800 shares of common stock held by LDP Family Partnership LP, of which Laya Perlysky, the wife of Dov Perlysky, is the general partner, (iii) 100 shares of common stock held by Laya Perlysky individually and (iv) 100 shares of common stock owned by Mr. Perlysky individually. Mr. Perlysky, the managing member of Nesher LLC, which is the manager of Krovim LLC and the general partner of Kinder Investments, has sole voting and dispositive power over the shares beneficially owned by Krovim and Kinder Investments. Mr. Perlysky and Kinder Investments disclaim beneficial ownership of the shares held by LDP Family Partnership and Laya Perlysky. -16- (7) Asher Levitsky, trustee of the Asher S. Levitsky PC Defined Benefit Plan, has voting and dispositive power over these shares. (8) Esther Stahler, general partner of Daniel Family LP, has voting and dispositive power over the shares held by Daniel Family LP. The shares beneficially owned by Daniel Family LP do not include (i) 5,200 shares of common stock held by Ms. Stahler individually, (ii) 100 shares of common stock held by David Family LP, of which Ms. Stahler is general partner, (iii) 100 shares of common stock held by Jamie Family LP, of which Ms. Stahler is general partner, (iv) 100 shares of common stock held by Lisi Family LP, of which Ms. Stahler is general partner or (iv) 400 shares in total held by Ms. Stahler as custodian for her niece and nephew, both minors. (9) Esther Stahler, general partner of David Family LP, has voting and dispositive power over the shares held by David Family LP. The shares beneficially owned by David Family LP do not include (i) 5,200 shares of common stock held by Ms. Stahler individually, (ii) 100 shares of common stock held by Daniel Family LP, of which Ms. Stahler is general partner, (iii) 100 shares of common stock held by Jamie Family LP, of which Ms. Stahler is general partner, (iv) 100 shares of common stock held by Lisi Family LP, of which Ms. Stahler is general partner or (iv) 400 shares in total held by Ms. Stahler as custodian for her niece and nephew, both minors. (10) The shares beneficially owned by Mr. Perlysky do not include (i) 5,000 shares of common stock held by Krovim LLC, (ii) 1,800 shares of common stock held by LDP Family Partnership LP, of which Laya Perlysky, the wife of Dov Perlysky, is the general partner, (iii) 100 shares of common stock held by Laya Perlysky and (iv) 500 shares of common stock held by Kinder Investments LP. Mr. Perlysky, the managing member of Nesher LLC, which is the manager of Krovim LLC and general partner of Kinder Investments LP, has sole voting and dispositive power over the shares beneficially owned by Krovim and Kinder Investments. Mr. Perlysky disclaims beneficial ownership of the shares held by LDP Family Partnership and Laya Perlysky. (11) Ruki Renov, manager of Ilan Ventures LLC, has voting and dispositive power over the shares owned by Ilan Ventures. The shares beneficially owned by Ilan Ventures do not include (i) 5,200 shares of common stock owned by Ms. Renov individually, (ii) 100 shares of common stock held by Renov Investments LLC, of which Ms. Renov is manager, and (iii) 1,100 shares of common stock in total held by Ms. Renov as custodian for 11 of her minor nieces and nephews. (12) Esther Stahler, general partner of Jamie Family LP, has voting and dispositive power over the shares held by Jamie Family LP. The shares beneficially owned by Jamie Family LP do not include (i) 5,200 shares of common stock held by Ms. Stahler individually, (ii) 100 shares of common stock held by Daniel Family LP, of which Ms. Stahler is general partner, (iii) 100 shares of common stock held by David Family LP, of which Ms. Stahler is general partner, (iv) 100 shares of common stock held by Lisi Family LP, of which Ms. Stahler is general partner or (iv) 400 shares in total held by Ms. Stahler as custodian for her niece and nephew, both minors. (13) Howard Spindel, senior vice-president of Jash Group Inc., has voting and dispositive power over these shares. (14) The shares beneficially owned by Laya Perlysky do not include (i) 1,800 shares of common stock held by LDP Family Partnership LP, of which Ms. Perlysly is general partner, (ii) 5,000 shares of common stock owned by Krovim LLC, of which Dov Perlysky, the husband of Laya Perlysky, is the managing member of the manager, (iii) 500 shares of common stock owned by Kinder Investments LP, of which Dov Perlysky is the managing member of the manager, and (iv) 100 shares of common stock owned by Dov Perlysky individually. Ms. Perlysky and LDP Family Partnership disclaim beneficial ownership of the shares held by Krovim LLC, Kinder Investments LP and Dov Perlysky. (15) Esther Stahler, general partner of Lisi Family LP, has voting and dispositive power over the shares held by Lisi Family LP. The shares beneficially owned by Lisi Family LP do not include (i) 5,200 shares of common stock held by Ms. Stahler individually, (ii) 100 shares of common stock held by Daniel Family LP, of which Ms. Stahler is general partner, (iii) 100 shares of common stock held by Jamie Family LP, of which Ms. Stahler is general partner, (iv) 100 shares of common stock held by David Family LP, of which Ms. Stahler is general partner and (iv) 400 shares in total held by Ms. Stahler as custodian for her niece and nephew, both minors. -17- (16) Ruki Renov, manager of Renov Investments LLC, has voting and dispositive power over the shares owned by Renov Investments. The shares beneficially owned by Renov Investments do not include (i) 5,200 shares of common stock owned by Ms. Renov individually, (ii) 100 shares of common stock held by Ilan Ventures LLC, of which Ms. Renov is manager, and (iii) 1,100 shares of common stock in total held by Ms. Renov as custodian for 11 of her minor nieces and nephews. (17) David Selengut, the manager of TaurusMax LLC, which is the general partner of Sutton Partners LP, has sole voting and dispositive power over the shares beneficially owned by Sutton Partners. The shares beneficially owned by Sutton Partners do not include 7,000 shares of common stock held by Venturetek LP. Except for David Stahler and Terrence McGarty, managing member of The Telmarc Group LLC and our former President, none of the selling stockholders has, or within the past three years has had, any position, office or material relationship with us or any of our predecessors or affiliates. PLAN OF DISTRIBUTION The selling stockholders and any of their pledgees, donees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions or by gift. These sales may be made at fixed or negotiated prices. Because there is no trading market in our common stock as of the date of this prospectus, the selling stockholders intend to sell any shares in the public market at a fixed price of $1.50 per share until a public market develops for the common stock. Once a public market develops for the common stock, the selling stockholders may sell their shares of common stock in the public market based on the market price at the time of sale or at negotiated prices. Subject to the foregoing, the selling stockholders may use any one or more of the following methods when selling or otherwise transferring shares: o ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; o block trades in which a broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; o sales to a broker-dealer as principal and the resale by the broker-dealer of the shares for its account; o an exchange distribution in accordance with the rules of the applicable exchange; o privately negotiated transactions, including gifts; o covering short sales made after the date of this prospectus; o pursuant to an arrangement or agreement with a broker-dealer to sell a specified number of such shares at a stipulated price per share; o a combination of any such methods of sale; and o any other method of sale permitted pursuant to applicable law. The selling stockholders may also sell shares pursuant to Rule 144 or Rule 144A under the Securities Act, if available, rather than pursuant to this prospectus. Broker-dealers engaged by the selling stockholders may arrange for other brokers dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. A selling stockholder may from time to time pledge or grant a security interest in some or all of the shares or common stock or warrant owned by them and, if the selling stockholder defaults in the performance of the secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. -18- In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions which may in turn engage in short sales of our common stock in the course of hedging the positions they assume. The selling stockholders may, after the date of this prospectus, also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge their common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. In the event of a transfer by a selling stockholder of the common stock other than a transfer pursuant to this prospectus or Rule 144 of the SEC, we may be required to amend or supplement this prospectus in order to name the transferee as a selling stockholder. The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The selling stockholders have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock. Because the selling stockholders may be deemed to be "underwriters" within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. Federal securities laws, including Regulation M, may restrict the timing of purchases and sales of our common stock by the selling stockholders and any other persons who are involved in the distribution of the shares of common stock pursuant to this prospectus. To our knowledge, none of the selling stockholders have an agreement or understanding with any broker-dealer with respect to the sale of their shares except as set forth below. None of our selling shareholders are broker-dealers. Other than Steven Sherman, Jane Sherman, Jay Greenbaum, Pamela Greenbaum, Steven Cohen, Alyssa Cohen, Robert Millstone, Shayna Millstone and Shayna Millstone as custodian for Alexander Millstone, Eliana Millstone and Michael Millstone, none of our selling stockholders are affiliates of broker-dealers. Selling stockholders who are broker-dealers or affiliates of broker-dealers will be deemed underwriters in connection with their sales. The selling stockholders who are affiliates and employees of broker-dealers purchased their shares in the ordinary course and, at the time of purchasing the securities they had no agreements or understandings, directly or indirectly, with any person to distribute the securities. We are required to pay all fees and expenses incident to the registration of the shares. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. MARKET FOR COMMON STOCK There is no market for our common stock. As of March 31, 2008, we had 114 stockholders of record. At that date, we had 166,700 shares of common stock outstanding, of which 65,700 shares were held by the selling stockholders for sale pursuant to this prospectus. The remaining shares of common stock are eligible for sale pursuant to Rule 144. However, under Rule 144 as recently amended by the SEC, issuers like us are subject to Rule 144(i) and as a result, our shareholders who are not affiliates may use Rule 144 to sell their shares of common stock beginning one year after we have filed with the SEC current "Form 10 information" (as defined in Rule 144(i)) reflecting the fact that we are no longer a company described in Rule 144 (i)(1)(i). Warrants to purchase 925,000 shares of common stock were outstanding as of March 31, 2008. The holders of all of such warrants have registration rights with respect to the underlying shares of common stock. -19- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our results of operations and financial condition should be read in conjunction with our financial statements and the related notes appearing elsewhere in this prospectus. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see "Forward Looking Statements." Overview We are a New York based company established in 2005 to offer Internet professional services. We provide our clients with an integrated set of strategic, creative and technology services that enable them to effect and maximize their Internet business. These services help our clients create and enhance relationships with their customers, staff, business partners and suppliers. Our strategic services include advising clients on developing business models for their Internet activities, identifying opportunities to improve operational efficiencies through online opportunities and planning for the operations and organization necessary to support an online business. Our creative services include developing graphic designs and Web sites for our clients. Our technology services include recommending and installing appropriate hardware and software networks to enable online sales, support and communication. We also manage the hosting of clients' websites in certain cases. Our business has been dependent upon a small number of clients. During the year ended December 31, 2007 we had only 5 clients. We do not believe that our business is seasonal. However, because our business is based on performing services under contracts which relate to specific projects, there may be a lag between the completion of one project and the commencement of the following project. This lag may cause some decline in revenues and a related decline in gross margin. Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States. We believe the following are the critical accounting policies that impact the financial statements, some of which are based on management's best estimates available at the time of preparation. Actual experience may differ from these estimates. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates made by us include the valuation of the deferred tax asset allowance and the allowance for doubtful accounts. Fair Value of Financial Instruments The amounts at which current assets and current liabilities are presented by us approximate their fair value due to their short-term nature. Revenue Recognition We recognize revenue from our Internet consulting agreements as services are provided on a monthly and hourly basis, based on a standardized fee structure. We recognize revenues on web design projects upon completion of the project. Cash received from clients in advance of the completion of a project is recorded as a deposit. -20- Cash and Cash Equivalents Cash equivalents are comprised of certain highly liquid investments with maturity of three months or less when purchased. We maintain our cash in bank deposit accounts, which at times may exceed federally insured limits. We have not experienced any losses to date as a result of this policy. Accounts Receivable Accounts receivable are recorded at their estimated realizable value. An allowance for doubtful accounts is estimated by us through evaluation of significant past due accounts. Accounts are deemed past due when payment has not been received within the stated time period. Our policy is to review individual past due amounts periodically and write off amounts for which all collection efforts are deemed to have been exhausted. As of December 31, 2007, no allowance was deemed necessary. Income Taxes We follow the provisions of Statement of Financial Accounting Standards Board No. 109, "Account for Income Taxes," and Financial Accounting Standards Board Interpretation No. 48 "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109" which require the use of the liability method of accounting for income taxes. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. On January 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" (FIN 48). There was no impact on the Company's consolidated financial position, results of operations or cash flows at December 31, 2007 and for the year then ended as a result of implementing FIN 48. At the adoption date of January 1, 2007 and at December 31, 2007, the Company did not have any unrecognized tax benefits. The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 1, 2007 and December 31, 2007, the Company had no accrued interest or penalties. The Company currently has no federal or state tax examinations in progress nor has it had any federal or state tax examinations since its inception. All of its tax years are subject to federal and state tax examination. Recent Accounting Pronouncements Management does not believe that any recently issued, not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. Results of Operations The following table sets forth our statements of operations for the years ended December 31, 2007 and December 31, 2006:
Year ended Year ended December 31, 2007 December 31, 2006 Consulting Income $14,275 $ 8,000 Cost of revenue $225 $450 Gross Profit $14,050 $ 7,550 Other Income $1,550 $78 Selling, general and administrative costs $46,310 $10,094 (Loss) before income tax expense (benefit) ($30,710) ($2,466) Income tax expense (benefit) -0- -0- Net (loss) ($30,710) ($2,466)
-21- Year Ended December 31, 2007 and Year Ended December 31, 2006. Revenues. Consulting income for 2007 was $14,275 as to compared to $8,000 in 2006. The increase in consulting income is attributable to additional consulting projects completed for new and existing clients. Cost of Revenues; Gross Margin. Cost of revenues was $225 in 2007 compared to $450 in 2006. Selling, General and Administrative Expenses. Our selling, general and administrative expenses were $46,310 in 2007, compared to $10,094 in 2006, due to an increase in legal and accounting expenses. No income tax benefit has been reflected in either period as management has determined that it is more likely than not that the net operating loss carryforwards will not be utilized in the future and, accordingly, the deferred tax asset of $15,281 (as of December 31, 2007) and $3,212 (as of December 31, 2006) has been fully reserved. Net Loss. As a result of foregoing, our net loss increased to ($30,710), or ($0.20) per share (basic and diluted), for the year ended December 31, 2007, as compared with a net loss of ($2,466) or ($0.02) per share (basic and diluted), for the year ended December 31, 2006. Liquidity and Capital Resources Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures. At December 31, 2007, we had working capital of $ 52,817 compared to working capital of $17,827 at December 31, 2006, principally as a result of the closing of our private placement in March, 2007. We raised gross proceeds of $65,700 from the sale of shares of common stock in March 2007. $6,500 were used to pay offering expenses and the balance has been and will be used for working capital purposes. Management believes that based on current levels of operations and anticipated growth, cash flows from operations will be sufficient to fund anticipated expenses for the next 12 months. While uncertainties relating to competition, the industries and geographical regions served by us and other regulatory matters exist within the Internet professional services industry, management is not aware of any trends or events likely to have a material adverse effect on liquidity or its financial statements. To the extent that these factors result in a decline in our revenue, our liquidity may be affected. Off Balance Sheets Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. BUSINESS General We are an Internet professional services firm. We provide our clients with an integrated set of strategic, creative and technology services that enable them to effect and maximize their Internet business. These services help our clients create and enhance relationships with their customers, staff, business partners and suppliers. Our strategic services include advising clients on developing business models for their Internet activities, identifying opportunities to improve operational efficiencies through online opportunities and planning for the operations and organization necessary to support an online business. Our creative services include developing graphic designs and web sites for our clients. Our technology services include recommending and installing appropriate hardware and software networks to enable online sales, support and communication. We also manage the hosting of clients' websites in certain cases. -22- Industry Overview The Internet has become an integral part of many people's lives. The Internet is increasingly being used to find information, communicate and conduct business. The increasing acceptance of the Internet has created significant opportunities for companies that seek to grow and demand increased efficiencies. Many companies are taking advantage of the Internet's opportunities to strengthen customer relationships, improve operational efficiency and spur product innovation. Developing successful Internet businesses that promote interactive relationships requires a special set of capabilities. Developers of these businesses must provide integrated strategy, creative technology and project management services. In addition, developers must have the ability to understand the needs of customers and fulfill them. Further, companies often lack the management and technical infrastructure required to develop and support Internet services. Therefore, companies seeking to do business over the Internet are increasingly engaging Internet professional services firms to provide integrated strategy, creative, technology and project management services. Our Services We provide fully integrated Internet professional services to our clients to enable them to develop and enhance their interactive capabilities. We develop Internet services and strategies that add value to our clients' businesses. The services we can provide include strategic planning, Web site content development, graphic design and computer programming. The following is a description of the aspects of our services: We help clients develop Internet strategies for their businesses. We work closely with our clients to understand and analyze their businesses. We help our clients develop their Internet strategies in the context of their business and marketing goals. Our strategic services include assisting our clients in: o developing Internet strategies to reach new customers less expensively and to better reach existing customers; o improving the efficiency of internal operations; and, o promoting customer loyalty for our clients through effective Internet communication. Internet Commerce and Communication Services We help our clients use the Internet as an effective means of dealing with their customers. We help create Websites for our clients that reflect the entire customer relationship, including: o introducing relevant, customized information, products and services; o demonstrating the benefits of our clients' products and services; and, o permitting customers to efficiently effect transactions with our clients. Creative Services We assist clients in designing websites that are user-friendly and that effectively present our clients' products and services. We work closely with our clients to understand their products and services and the needs of their customers. We advise clients on how they can bring their product and service online. We also offer web site maintenance services, where we manage the hosting of a client's web site. Systems We recommend and install appropriate hardware and software networks that support our clients' Internet strategies. We can also adapt and develop custom software solutions and build add-on components to our clients' existing software applications. Current Contracts As of December 31, 2007, we had performed consulting or design services for five clients. On August 1, 2006, we entered into an agreement with Chocolate Printing Company, Inc. ("CPC") pursuant to which we, among other things, assist CPC in the development of its on-line business strategy. We are paid an advisory fee of $700 per month plus $150 per hour for each hour (in excess of four hours per month) we provide services to CPC during the term of the agreement. -23- Our other four clients have engaged us to complete various graphic design projects and to design, build and manage the hosting of their websites. Growth Strategy We believe that our business can grow in two ways. The first would be to expand internally by hiring more employees, completing additional consulting or design projects entering into additional agreements with clients and/or partnering with third parties. The second would be through acquisitions or mergers with other entities in its or other businesses. On March 12, 2007 we entered into an agreement with Ronny Bergman pursuant to which Mr. Bergman agreed to provide web programming services for our clients on a nonexclusive basis. These services include writing the computer code for a client's website to enable the website to be fully operational on the Internet. Selection of Business Opportunities We anticipate that in the event that we elect to seek a business opportunity, such as a merger or acquisition, the selection of a business opportunity in which to participate will be complex and extremely risky. Management believes (but has not conducted any research to confirm) that being a public corporation will help us find an acquisition candidate for the following reasons; facilitate and improve the terms on which additional equity financing may be sought, provide incentive stock options or similar benefits to key employees, increase the opportunity to use securities for acquisitions, provide liquidity for shareholders, and other factors. Management anticipates that business opportunities may be available in many different industries, both within and without the Internet professional services industry and at various stages of development, all of which make the task of comparative investigation and analysis of such business opportunities difficult and complex. We will have limited capital with which to provide the owners of business entities with any cash or other assets which may be attractive. Management has not conducted market research and is not aware of statistical data to support the perceived benefits of a business combination for the owners of a target company. The analysis of new business opportunities will be undertaken by, or under the supervision of, our officers and directors, who are not professional business analysts. In analyzing prospective business opportunities, management may consider such matters as the available technical, financial and managerial resources; working capital and other financial requirements; history of operations, if any; prospects for the future; nature of present and expected competition; the quality and experience of management services which may be available and the depth of that management; specific risk factors not now foreseeable but which then may be anticipated to impact the proposed activities of the company after the business combination; the potential for growth or expansion; the potential for profit; the perceived public recognition or acceptance of products, services, or trades; name identification; and other relevant factors. We may acquire a venture which is in its preliminary or development stage, which is already in operation, or in any stage of its business life. It is impossible to predict at this time the status of any business in which we may become engaged, in that such business may need to seek additional capital, may desire to have its shares publicly traded, or may seek other perceived advantages which we may offer. With respect to negotiations with a target company, management expects to focus on the percentage of the company which target company shareholders would acquire in exchange for their shareholdings in the target company. Any merger or acquisition effected by us can be expected to have a significant dilutive effect on the percentage of shares held by our shareholders at such time. Marketing We intend to develop a marketing team which we believe will be crucial to our future growth and success. The marketing team would be engaged full-time to develop our brand and image recognition. We intend to participate in executive seminars, trade shows and market research. In addition, we may make presentations at seminars and advertise our services in the print or other media to improve our visibility. -24- Competition We engage in a highly competitive and fragmented industry. Almost all of our competitors are, on an overall basis, larger than us or are subsidiaries of larger companies, and therefore may possess greater resources than us. Furthermore, because our business does not usually require large amounts of capital, there is relative ease of market entry for a new entrant possessing acceptable professional qualifications. Accordingly, we compete with regional, national, and international firms. Competition for our service is based primarily on reputation, track record, experience, quality of service and price. Properties We have no properties and at this time have no agreements to acquire or lease any properties. We currently use the offices of management at no cost. The amount of office space used by us is insignificant. Management has agreed to continue this arrangement until we require larger space. Management believes that office space will be available at reasonable rents when such space is needed. Intellectual Property Rights We have no proprietary software or products. We rely on non-disclosure agreements with our employees to protect the proprietary software and other proprietary information of our clients. Any unauthorized use or disclosure of this information could harm our business. Personnel We currently employ one individual, David Stahler, our President. Legal Proceedings We are not presently party to any material legal proceeding nor are we aware of any material pending or potential legal proceeding which may be initiated against us. MANAGEMENT Directors and Executive Officers The following table sets forth certain information with respect to our directors and executive officers. Name Age Position David Stahler 23 President, Chief Financial Officer, Secretary and Director Mr. Stahler, 23, has since 2006 provided Internet professional services to our clients and other companies. Such services include designing graphic and advertising materials and providing advice with respect to websites and Internet and other marketing campaigns. Mr. Stahler is also a part-time student at Touro College in New York, New York where he is seeking a B.A. degree in psychology with a minor in finance. Mr. Stahler has also provided mentoring and counseling services to college-age adults. -25- Executive Compensation To date no compensation has been paid to Mr. Stahler. On January 1, 2007 Mr. Stahler entered into an employment agreement (the "Employment Agreement") with us. The Employment Agreement has an initial term of three years and provides that Mr. Stahler will receive compensation of $40,000 per annum once our annualized revenue exceeds $300,000 on a quarterly basis ("Revenue Target"). The Employment Agreement requires Mr. Stahler to devote such of his working time to our business as we and Mr. Stahler determine is necessary for the performance of his duties under the Employment Agreement. Mr. Stahler has agreed to devote all of his business time to our business once we reach the Revenue Target, or earlier, if circumstances require. Compensation Plans We do not have any stock option or compensation plan and have never issued any stock-based compensation. No stock options or restricted stock grants have been issued through the date of this Registration Statement. Compensation of Directors Directors do not receive any direct or indirect compensation for serving in such capacity. We will reimburse directors for all reasonable costs and expenses incurred in connection with attending or participating in meetings of the Board. Committees of the Board The Board does not have an audit, nominating or compensation committee. The selection of nominees for the Board is made by the entire Board. Our sole director is not independent. PRINCIPAL STOCKHOLDERS The following table provides information as to shares of common stock beneficially owned as of March 31, 2008 by: o each director; o each officer named in the summary compensation table; o each person owning of record or known by us, based on information provided to us by the persons named below, to own beneficially at least 5% of our common stock; and o all directors and executive officers as a group. Name Shares of Common Stock Beneficially Owned Percentage (1) David Stahler 53,600 32.2% 64 Beaver Street Suite 233 New York, New York 10004 All officers and directors as a group 53,600 32.2% (1 person) (1) Based on a total of 166,700 shares outstanding as of March 31, 2008. Except as otherwise indicated each person has the sole power to vote and dispose of all shares of common stock listed opposite his name. Each person is deemed to own beneficially shares of common stock which are issuable upon exercise or conversion of currently convertible securities. Currently convertible securities are warrants or options or convertible securities which are exercisable or convertible within 60 days of March 31, 2008. The beneficial ownership of each person named is determined in accordance with the rules of the Securities and Exchange Commission under the Securities Exchange Act of 1934. Under these rules, a person is deemed to beneficially own the total number of shares of common stock which he or she owns plus the number of shares of common stock which are issuable upon exercise of currently exercisable securities. The percentage ownership of each person is the percentage that the number of shares beneficially owned by that person bears to the sum of (a) the outstanding common stock plus (b) the shares of common stock issuable upon exercise or conversion of those currently convertible securities that are owned by that stockholder. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS We use office space provided to us by our President, David Stahler, at no cost to us. The amount of office space used by us is insignificant. The mother of our President is a co-trustee of a trust which owns approximately 18% of the capital stock of Chocolate Printing Company, Inc., one of our clients. -26- DESCRIPTION OF CAPITAL STOCK Our authorized capitalization consists of 2,000,000 shares of preferred stock, par value $.0001 per share, and 10,000,000 shares of common stock, par value $.0001 per share. As of March 31, 2008, 166,700 shares of common stock were outstanding. Our outstanding common stock is held by approximately 114 stockholders of record. Common Stock Holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders and are entitled to share in such dividends as the board of directors, in its discretion, may declare from funds legally available. In the event of liquidation, each outstanding share entitles its holder to participate ratably in the assets remaining after payment of liabilities. Our directors are elected by a plurality vote. Because holders of common stock do not have cumulative voting rights, holders or a single holder of more than 50% of the outstanding shares of common stock present and voting at an annual stockholders meeting at which a quorum is present can elect all of our directors. Our stockholders have no preemptive or other rights to subscribe for or purchase additional shares of any class of stock or of any other securities. All outstanding shares of common stock are, and those issuable upon conversion of the preferred stock and exercise of the warrants will be, upon such conversion or exercise, validly issued, fully paid, and non-assessable. The transfer agent for our common stock is American Stock Transfer & Trust Company. Preferred Stock The board of directors is authorized to issue up to 2,000,000 shares of preferred stock which may be issued in series from time to time with such designations, rights, preferences and limitations as the Board of Directors may declare by resolution. To date no shares of preferred stock have been issued. The rights, preferences and limitations of separate series of preferred stock may differ with respect to such matters as may be determined by the board of directors, including, without limitation, the rate of dividends, method and nature of payment of dividends, terms of redemption, amounts payable on liquidation, sinking fund provisions (if any), conversion rights (if any) and voting rights. The potential exists, therefore, that additional shares of preferred stock might be issued which would grant dividend preferences and liquidation preferences to preferred stockholders over common stockholders. Unless the nature of a particular transaction and applicable statute require such approval, the board of directors has the authority to issue shares of preferred stock without stockholder approval. The issuance of preferred stock may have the effect of delaying or preventing a change in control without any further action by stockholders. Warrants As of March 31, 2008 warrants to purchase 925,000 shares of common stock at an exercise price of $0.05 per share were outstanding. The holders thereof have cashless exercise rights. These warrants are exercisable until June 30, 2016, provided that the warrants are not exercisable prior to June 30, 2009 unless there is a "Change in Control" (as defined in the warrants) in us, in which event the warrants will be exercisable at any time after seventy (70) days following such Change in Control and until June 30, 2016. Delaware Law Provisions We are subject to the provisions of Section 203 of the Delaware General Corporation Law statute. Section 203 prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within the prior three years did own, 15% or more of the corporation's voting stock. Our certificate of incorporation contains certain provisions permitted under Delaware General Corporation Law relating to the liability of directors. The provisions eliminate a director's liability for monetary damages for a breach of fiduciary duty, except in certain circumstances where such liability may not be eliminated under applicable law. Further, our certificate of incorporation contains provisions to indemnify our directors and officers to the fullest extent permitted by Delaware General Corporation Law. -27- Penny-Stock Rules The SEC has adopted regulations which generally define a "penny stock" to be any equity security that has a market price (as defined) of less than $5.00 per share, subject to certain exceptions, and is not listed on the a registered stock exchange or the NASDAQ Stock Market (although the $5.00 per share requirement may apply to NASDAQ listed securities) or has net tangible assets in excess of $2,000,000, if the issuer has been in continuous operation for at least three years, or $5,000,000, if the issuer has been in continuous operation for less than three years; or has average revenue of at least $6,000,000 for the last three years. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the "penny stock" rules may restrict the ability of broker-dealers to sell our securities and may affect your ability to sell our securities in the secondary market and the price at which you can sell our common stock. According to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include: o Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; o Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; o "Boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; o Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and o The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. Purchasers of penny stocks may have certain legal remedies available to them in the event the obligations of the broker-dealer from whom the penny stock was purchased violates or fails to comply with the above obligations or in the event that other state or federal securities laws are violated in connection with the purchase and sale of such securities. Such rights include the right to rescind the purchase of such securities and recover the purchase price paid for them. -28- Because our stock is a "penny stock" we do not have the safe harbor protection under federal securities laws with respect to forward-looking statement. EXPERTS The financial statements for the years ended December 31, 2006 and December 31, 2007 included in this prospectus to the extent and for the periods indicated in its report, have been audited by Raich Ende Malter & Co., LLP, independent registered public accountants, and are included herein in reliance upon the authority of such firm as an expert in accounting and auditing in giving such report. LEGAL MATTERS The validity of the shares of common stock offered through this prospectus was passed on by Ellenoff Grossman & Schole LLP. David Selengut, a member of such firm, beneficially owns 7,100 shares of our Common Stock. HOW TO GET MORE INFORMATION We file annual, quarterly and periodic reports, proxy statements and other information with the Securities and Exchange Commission using the Commission's EDGAR system. You are able to inspect these documents and copy information from them at the Commission's public reference room at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The Commission maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site is http://www.sec.gov. We have filed a registration statement with the Commission relating to the offering of the shares. The registration statement contains information which is not included in this prospectus. You may inspect or copy the registration statement at the Commission's public reference facilities or its website. You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with any information that is different. -29- INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F-1 Balance Sheets as of December 31, 2007 and December 31, 2006 F-2 Statements of Operations for the Years ended December 31, 2007 and December 31, 2006 F-3 Statement of Changes in Stockholders' Equity for the Years ended December 31, 2007 and December 31, 2006 F-4 Statements of Cash Flows for the Years ended December F-5 31, 2007 and December 31, 2006 Notes to Financial Statements F-6 -30- FLORHAM CONSULTING CORP. FINANCIAL STATEMENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Florham Consulting Corp. New York, New York We have audited the accompanying balance sheets of Florham Consulting Corp. as of December 31, 2007 and 2006, and the related statements of operations, changes in stockholders' equity and cash flows for the years ended December 31, 2007 and December 31, 2006. 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 standards of the Public Company Accounting Oversight Board (United States). Those standards that we plan and perform the audits 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 auditing 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 Florham Consulting Corp. as of December 31, 2007 and 2006, and the results of its operations and its cash flows for the years ended December 31, 2007 and December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. /s/ Raich Ende Malter & Co. LLP New York, New York March 24, 2008 F-1 Florham Consulting Corp. Balance Sheets As of December 31, ---------------------- 2007 2006 ------------- ------------- ASSETS CURRENT ASSETS CASH $ 52,061 $ 29,120 ACCOUNTS RECEIVABLE 6,350 700 ---------------- --------------- TOTAL ASSETS $ 58,411 $ 29,820 =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES ACCRUED LIABILITIES $ 5,594 $ 11,993 ---------------- --------------- STOCKHOLDERS' EQUITY PREFERRED STOCK $0.0001 PAR VALUE, AUTHORIZED 2,000,000 SHARES, ISSUED-NONE - - COMMON STOCK $0.0001 PAR VALUE, AUTHORIZED 10,000,000 SHARES, ISSUED & OUTSTANDING 101,000 AND 166,700 SHARES as of December 31, 2006 and 2007 RESPECTIVELY 17 10 ADDITIONAL PAID IN CAPITAL 91,683 25,990 ACCUMULATED DEFICIT (38,883) (8,173) ---------------- ------------- TOTAL STOCKHOLDERS' EQUITY 52,817 17,827 ---------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,411 $ 29,820 ================ ============== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-2 Florham Consulting Corp. Statements of Operations For the Year Ended For the Year Ended December 31, 2007 December 31, 2006 ------------------------ ----------------- CONSULTING REVENUES $ 14,275 $ 8,000 COST OF SERVICES 225 450 ---------------- ---------------- GROSS PROFIT $ 14,050 $ 7,550 GENERAL & ADMINISTRATIVE EXPENSES 46,310 10,094 OTHER INCOME 1,550 78 ----------------- ---------------- NET (LOSS) $ (30,710) $ (2,466) ----------------- ---------------- ----------------- ---------------- (LOSS) PER COMMON SHARE BASIC AND DILUTED $ (0.20) $ (0.02) ----------------- ---------------- ----------------- ---------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED 151,040 101,000 ---------------- ---------------- ---------------- ---------------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-3 Florham Consulting Corp. Statements of Changes in Stockholders' Equity
COMMON ADDITIONAL STOCK TOTAL PREFERRED COMMON COMMON PAID-IN SUBSCRIPTION ACCUMULATED STOCKHOLDERS' STOCK STOCK STOCK WARRANTS CAPITAL RECEIVABLE DEFICIT EQUITY -------- ------- -------------- ----------- --------------- ---------- ----------- Shares Amount Shares Amount Shares ------ ------ ------ ------ ------ BALANCE- January 1, 2006 - - 101,000 10 925,000 25,990 (20,000) (5,707) 293 PROCEEDS FROM COMMON STOCK SUBSCRIPTION RECEIVABLE 20,000 20,000 NET (LOSS) (2,466) (2,466) BALANCE- December 31, 2006 - $- 101,000 $10 925,000 $25,990 - $(8,173) $17,827 PROCEEDS FROM SALE OF COMMON STOCK 65,700 7 65,693 65,700 NET (LOSS) (30,710) (30,710) ------------------------------------------------------------------------------------------------------------ BALANCE - - -$- 166,700 $17 925,000 $ 91,683 - $(38,883) $52,817 DECEMBER 31, 2007 --- --- -------- ----- --------- --------- -------- ---------- --------- --- --- -------- ----- --------- --------- -------- ---------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-4 Florham Consulting Corp. Statements of Cash Flow For the Year Ended For the Year Ended, December 31, 2007 December 31, 2006 ------------------ ----------------- CASH FLOWS FROM OPERATING ACTIVITIES NET (LOSS) $ (30,710) $ (2,466) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Changes in asset and liability balances: Accounts receivable (5,650) (700) Accrued liabilities (6,399) 7,984 --------------- -------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $(42,759) $ 4,818 --------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock 65,700 0 Proceeds from stock subscription receivable 0 20,000 --------------- -------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 65,700 20,000 --------------- -------------- NET INCREASE IN CASH $22,941 $ 24,818 CASH -- beginning of period $29,120 $ 4,302 --------------- -------------- CASH -- end of period $52,061 $ 29,120 ---------------- -------------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-5 FLORHAM CONSULTING CORP. NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Florham Consulting Corp. (the "Company") was organized under the laws of the State of Delaware on February 9, 2005 to offer consulting and web design services. In 2005 the Company was a development stage enterprise. In 2006, the Company entered into its first Internet consulting agreement and since then, has completed web design and project work for another four clients. The Company's clients are currently located in New York. On June 28, 2006, the Company was recapitalized as follows: All outstanding shares and warrants were exchanged, for no additional consideration, for an aggregate of 101,000 shares of common stock and warrants to purchase 925,000 shares of common stock. The accompanying financial statements reflect the recapitalization as if it had occurred at inception. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates made by management include the valuation of the deferred tax asset allowance and the allowance for doubtful accounts. Fair Value of Financial Instruments The amounts at which current assets and current liabilities are presented approximate their fair value due to their short-term nature. Cash and Cash Equivalents Cash equivalents are comprised of certain highly liquid investments with maturity of three months or less when purchased. We maintain our cash in bank deposit accounts, which at times may exceed federally insured limits. We have not experienced any losses to date as a result of this policy. Revenue Recognition The Company recognizes revenue from its Internet consulting agreements as services are provided on a monthly and hourly basis, based on a standardized fee structure. The Company recognizes revenues on web design projects upon completion of the project. Cash received from clients in advance of the completion of a project is recorded as a deposit. Accounts Receivable Accounts receivable are recorded at their estimated realizable value. An allowance for doubtful accounts is estimated by management through evaluation of significant past due accounts. Accounts are deemed past due when payment has not been received within the stated time period. The Company's policy is to review individual past due amounts periodically and write off amounts for which all collection efforts are deemed to have been exhausted. As of December 31, 2007 no allowance is deemed necessary. Income Taxes The Company follows the provisions of Statement of Financial Accounting Standards Board No. 109, "Accounting for Income Taxes," which requires the use of the liability method of accounting for income taxes. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. On January 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" (FIN 48). There was no impact on the Company's consolidated financial position, results of operations or cash flows at December 31, 2007 and for the year then ended as a result of implementing FIN 48. At the adoption date of January 1, 2007 and at December 31, 2007, the Company did not have any unrecognized tax benefits. The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 1, 2007 and December 31, 2007, the Company had no accrued interest or penalties. The Company currently has no federal or state tax examinations in progress nor has it had any federal or state tax examinations since its inception. All of its tax years are subject to federal and state tax examination. F-6 Loss Per Common Share The Company has adopted Statement of Financial Accounting Standards No. 128, Earnings Per Share, which modified the calculation of earnings per share ("EPS"). This statement replaced the previous presentation of primary and fully diluted EPS to basic and diluted EPS. Basic EPS is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS includes the dilution of common stock equivalents, and is computed similarly to fully diluted EPS pursuant to Accounting Principles Board (APB) Opinion 15. Basic loss per common share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding. Stock warrants have not been included in the calculation of diluted loss per share, as the effect would have been antidilutive. Accordingly, basic and dilutive loss per share are the same for the Company. Loss Per Share For the For the Year Ended Year Ended December 31, 2007 December 31, 2006 Basic and diluted $(0.20) $ (0.02) Recent Accounting Pronouncements In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," that defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements. Prior to this Statement, there were different definitions of fair value and limited guidance for applying those definitions in GAAP. Moreover, that guidance was dispersed among many accounting pronouncements that require fair value measurements. Differences in that guidance created inconsistencies that added to the complexity in applying GAAP. The changes to current practice resulting from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Statement 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect the adoption of SFAS 157 to have an effect on its financial statements. In February 2007, the FASB issued Statement of Financial Standards No. 159 ("FAS 159"), The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial instruments and certain other items at fair value which are not currently required to be measured at fair value. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect the adoption of FAS 159 to have an effect on its financial statements. In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which replaces SFAS No. 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company does not expect the adoption of SFAS No. 141R to have an effect on its financial statements. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent's equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company does not expect the adoption of SFAS No. 160 to have an effect on its financial statements. F-7 In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133. SFAS No. 161 gives financial statement users better information about the reporting entity's hedges by providing for qualitative disclosures about the objectives and strategies for using derivatives, quantative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. The standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged, but not required. We do not anticipate the adoption of SFAS No. 161 will have a material effect on the Company's financial statements. Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. NOTE B - INCOME TAXES Deferred tax assets and liabilities are determined using enacted tax rates for the effects of net operating losses and temporary differences between the book and tax bases of assets and liabilities. Certain judgments are made relating to recoverability of deferred tax assets, uses of tax loss carry forwards, level of expected taxable income and available tax planning strategies. At December 31, 2007 and 2006, the Company had net operating loss carryforwards of $38,883 and 8,173, respectively, available to reduce future taxable income expiring through 2027. Management has determined that it is more likely than not that the net operating loss carryforwards will not be realized in the future and, accordingly, the deferred tax asset of $15,281 and $3,212 has been fully reserved as of December 31, 2007 and 2006, respectively. The Company's valuation allowance increased by $12,069 during 2007. A reconciliation of the statutory income tax effective rate to the actual provision shown in the financial statements is as follows:
For the year ended For the Year ended December 31, 2007 December 31, 2006 ------------------ ---------------------- (Loss) before income taxes ($30,710) ($2,466) ---------- ------- ---------- ------- Computed tax benefit at statutory rate: Federal ($10,441) (34%) ($838) (34%) State, Net of Federal Tax Effect (1,628) (5.3%) (131) (5.3%) Surtax Exemption 5,835 19% 469 19% Net Operating Loss Valuation allowance $ 6,234 20.3% $ 500 20.3% ------- ------- -------- ------ Total tax benefit $-- --% $ -- --% ------- ------- -------- ------- ------- ------- -------- -------
NOTE C - CAPITAL TRANSACTIONS The Company is authorized to issue 10,000,000 shares of $0.0001 par value common stock. F-8 On February 11, 2005, the Company issued to its founders 200,000 shares of common stock and 800,000 warrants in exchange for $1,000. On March 16, 2005, 25,000 shares of common stock were sold for $1.00 per share. In connection with this sale, the Company received cash of $5,000 in 2005 and a note receivable for $20,000 (the "Subscription Receivable"). On June 28, 2006, the Company was recapitalized as follows: All outstanding shares and warrants were exchanged, for no additional consideration, for an aggregate of 101,000 shares of common stock and warrants to purchase 925,000 shares of common stock at $0.05 per share. The holders of the warrants have cashless exercise rights. These warrants are exercisable until June 30, 2016, provided that the warrants are not exercisable prior to June 30, 2009 unless there is a "Change in Control" (as defined in the warrants) in the Company, in which event the warrants will be exercisable at any time after seventy (70) days following such Change in Control and until June 30, 2016. On September 28, 2006, the Subscription Receivable was satisfied by the receipt of $20,000 in cash. On March 29, 2007, the Company completed a private placement of 65,700 shares of common stock at $1.00 per share. The Company is authorized to issue 2,000,000 shares of $0.0001 par value preferred stock with designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors of the Company. No shares have been issued. NOTE D - RELATED PARTY TRANSACTIONS The Company utilizes the office space provided by its president at no cost to the Company. The amount of office space utilized by the Company is considered insignificant. On January 1, 2007, the Company entered into a three year employment agreement with its president, which shall be extended from year to year after the initial term. The president shall not be entitled to any cash compensation from the Company for his services until the Company's annualized revenues exceed $300,000 on a quarterly basis. At such time, the president shall be entitled to receive a salary of $40,000 per annum. The mother of the Company's president is a co-trustee of a trust which owns approximately 18% of the capital stock of Chocolate Printing Company, Inc., one of the Company's clients. NOTE E - CONCENTRATION OF RISKS The Company's cash balances are maintained in a high quality bank checking account. Management deems all its accounts receivables to be fully collectible, and, as such, does not maintain any allowances for uncollectible receivables. One client accounted for 59% and 44% of the Company's consulting revenues for the years ended December 31, 2007 and 2006, respectively, and accounted for 99% and 100% of the Company's accounts receivable as of December 31, 2007 and 2006, respectively. A second client accounted for 32% and 0% of the Company's consulting revenues for the years ended December 31, 2007 and 2006, respectively. F-9