U.S. SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549


FORM
10-K


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


EXCHANGE
ACT OF 1934





For the
fiscal year ended December 31, 2008


Commission
file number:000-31176





SHELRON GROUP, INC.


(Exact
name of registrant as specified in its charter)





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





29
Broadway


New York, New York
10006


(Address
of principal executive offices)





Tel:
(646) 415-8873


(Registrant’s
telephone number, including area code)





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


None





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


Common
Stock, $0.001 par value





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o     No x





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





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes xNo o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer o
            
            Accelerated
      filer oNon-accelerated
      filero
              (Do
      not check if a smaller reporting company)
            
            Smaller
      reporting company x








Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes oNo x





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently computed second fiscal quarter$375,586.





The
number of shares of the issuer’s common stock issued and outstanding as of March
31, 2009 was 17,447,492 shares (post reverse split).





Documents
Incorporated By Reference:


None





TABLE
OF CONTENTS





PagePART
      IItem
      1
              Business
              1Item
      1A
              Risk
      Factors
              5Item
      1B
              Unresolved
      Staff Comments
              5Item
      2
              Properties
              5Item
      3
              Legal
      Proceedings
              5Item
      4
              Submission
      of Matters to a Vote of Security Holders
              5PART
      IIItem
      5
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              6Item
      6
              Selected
      Financial Data
              7Item
      7
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
              7Item
      7A
              Quantitative
      and Qualitative Disclosures About Market Risk.
              14Item
      8
              Financial
      Statements.
              14Item
      9
              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
              14Item 9A
      (T)
              Controls and
      Procedures
              14Item
      9B
              Other
      Information
              16PART
      IIIItem
      10
              Directors,
      Executive Officers and Corporate Governance
              17Item
      11
              Executive
      Compensation
              19Item
      12
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              19Item
      13
              Certain
      Relationships and Related Transactions, and Director
      Independence
              21Item
      14
              Principal
      Accountant Fees and Services
              21PART
      IVItem
      15
              Exhibits,
      Financial Statement Schedules
              22SIGNATURES
              
              23




FORWARD
LOOKING STATEMENTS





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





PART
1





ITEM
1. BUSINESS





COMPANY
OVERVIEW





Shelron
Group, Inc. is a company that develops and markets e-commerce advertising and
comparative shopping software products and services. We released our initial
product, ActiveShopper, in August 2004. ActiveShopper is a free software
download that automatically scans, locates and compares prices for an item that
a consumer selects at an e-commerce Web site and is designed to assist consumers
in making informed purchase decisions by enabling them to find the items they
are looking for, compare products, prices and stores, and buy from among
thousands of online merchants. We also maintain a comparison shopping Web site
located at: www.activeshopper.com.  We
are also considering strategic acquisitions of synergistic technologies that
management believes will enhance our market positioning.





We have
been engaged in the on-line shopping business since March 2004. Prior to that
time, we were engaged in the field of designing and developing business
applications software. We generate revenues primarily in the form of payments
from online merchants for directing traffic to their websites and managing
merchants advertising campaigns through ActiveShopper.





We were
originally incorporated in the State of Massachusetts in June 1987, under the
name "Professional Brushes, Inc." In April 1999, we changed our state of
incorporation to Delaware by means of a merger with and into a Delaware company
and, in connection therewith, changed our name to "PB Acquisition Corp." In May
2000, we entered into a share exchange agreement with TTTTickets.com, Inc., a
Delaware corporation ("Tickets") incorporated in April 2000 for the purposes of
developing and maintaining an internet website for the sale and purchase of
event tickets, pursuant to which Tickets became a wholly owned subsidiary of our
company. We also changed our name to "TTTTickets Holding Corp." Thereafter, in
November 2001, we entered into a stock purchase and merger agreement with B-Park
Communications, Inc., ("B-Park") a Delaware corporation formed in August 2001
for the sole purpose of entering into such agreement.  In September
2002, we changed our name to "Shelron Group, Inc."





In this
report, the terms "we," "us" and the "Company" refer to Shelron Group, Inc.,
its' predecessors, and subsidiary, unless the context indicates
otherwise.





INDUSTRY
BACKGROUND





When
online shopping emerged in the mid-1990s, there were just a handful of online
retailers, and thus, consumers could easily check the prices of products that
were sold on the Web by going from one store to the other and manually comparing
prices for a product. As e-commerce evolved, more and more online retailers
established businesses and more customers began to shop online and increase
their online spending. With more people and money being spent online in the
years 1998-2000, the simple task of going to a handful of online retailers and
checking the price became an unmanageable task.  At that same time,
the first Internet-based shopping comparison services emerged.





Online
shopping comparison Web sites were established to help consumers manage the task
of shopping online by enabling them to find, compare, and buy products
conveniently and efficiently.  Generally speaking, they gather data
from online retailers, either by accessing merchant’s data feeds or using search
engine technology to “scrap” data off of merchant’s Web sites.  The
existing shopping comparison Web sites all offer quite similar
functionality.  Users search or browse for products that they desire
and then receive information about the product and the merchants that sell it,
including each merchant’s pricing. While these sites may offer extensive
information such as a review of the product, side-by-side comparison of a
product with similar products, etc., the most valued information is each
retailer’s pricing for each particular item they sell.


1





Shopping
comparison Web sites generate their revenue from one or more of the following
revenue streams:





o
            Payments
      from merchants for directing traffic to their sites (Pay Per
      Click);


o
            Payments
      from merchants when a directed customer actually buys a product in the
      merchant’s site (Pay Per Purchase); oro
            Other
      advertising activities on the comparison shopping service
      website.







Pay Per
Click models are more common and the Pay Per Click revenue earned for directing
users to shopping website tends to be high, as these users tend to be
high-probability purchasers.





Over the
years, little has changed in the way comparative shopping services function and
what they offer to their users. We believe ActiveShopper's model, as described
below, may impact the market and shift users to our more comprehensive solution.
ActiveShopper offers simplicity to consumers without providing complex
mechanisms and comparison data, offered by most of shopping comparison services,
thereby protecting consumers better from pseudo-attractive buying offers
received by email and advertising banners.





SHELRON'S
COMPARATIVE SHOPPING PRODUCTS





We offer
consumers a two-pronged approach to comparison shopping online – our
ActiveShopper software product and our ActiveShopper.com Web site.





Our
ActiveShopper software is a free software download that installs an invisible
shopping agent, a comparison shopping toolbar on the user’s Web browser and our
proprietary “Sidebar” product.  All three of these features are
integrated.  Once installed, the ActiveShopper software detects when a
user is visiting the Web site of any online retailer and then automatically
scans, locates and compares prices for the item that the consumer is shopping
for.





Our
ActiveShopper Web site (located at: www.activeshopper.com),
answers the needs of novice and one time users who may prefer the more
traditional comparison shopping Web site experience.  By offering
kinds or products, we attempt to meet the needs of those who may prefer to use a
site, and those who prefer to have the price comparison process done
automatically for them while they are shopping.





ActiveShopper
is comprised of software components we purchased in March 2004 from an
independent and non-affiliated third party software developer for aggregate
consideration of $150,000.





In
November 2004, we released ActiveShopper 1.0 with a newly designed interface and
a broader range of products for comparative shopping. With this release,
ActiveShopper was able to provide comparative shopping information for computers
and their peripherals and for other electronic products, such as televisions and
digital cameras.





In
December 2004, we released ActiveShopper 1.1 which included a free text search
field in the toolbar, allowing ActiveShopper users to search a comparative
shopping database for products that they desire, without having to actually be
in that product's page in an e-store in order to receive the relevant
information.





In
January 2005, we released an enhanced version of the ActiveShopper's Web site,
which included more user functionality and banner displays that serve as an
additional source of revenue.





In March
2005, we released ActiveShopper 1.2 which included an additional advanced
feature of the ActiveShopper Sidebar, a new enhancement that automatically
displays comparative shopping results when users search for information in
leading search engines such as Google, MSN, AOL, and Yahoo.




On
December 30, 2008, the Company entered into a license agreement that grants the
Company a non-exclusive, perpetual, worldwide right and license to make, have
made and utilize software, trademarks and domain names for the sum of
$100,000.




2





Currently,
ActiveShopper's revenues are generated from: (i) ActiveShopper websites’ search
for the United States, United Kingdom, Australia, France and Germany, with the
last two still under testing and (ii) ActiveShopper Sidebar, which automatically
displays comparative shopping results when users search for information in
leading search engines such as Google, MSN, AOL, and Yahoo.





OUR
STRATEGY





By
offering two different approaches to comparison shopping, for two different
classes of users, we attempt to maximize revenue.  However, our goal
is to increase the number of users who download and install our ActiveShopper
toolbar, since we experience a much higher level of what is commonly referred to
as “stickiness” with the toolbar, as compared to a Web site (including our own).
In Internet terminology, "stickiness" refers to the level of potential returning
visitors.





With all
of our products, we are mindful that online consumers tend to return to utilize
services of and Web sites that provide them with accurate information and ease
of use.  Thus, our objective is to enhance ActiveShopper's features
and functionality and increase consumer awareness and usage of both our
ActiveShopper Web site and software product. In addition, we plan to release new
versions of ActiveShopper, targeting new market segments.





To
achieve these objectives, the key elements of our strategy include the
following:





*
Consumer Market Analysis and our Product Features. We will seek to implement
changes to enhance our products' features based on feedback from ActiveShopper
users, our constant current marketing analysis and our know-how. We believe the
enhancing of features and functionality of our products will add to
ActiveShopper's competitiveness and encourage further usage.





*
Marketing ActiveShopper through the Internet. We currently market ActiveShopper
through Internet-based marketing campaigns, which we continuously analyze in
order to identify efficient ways to expand our users' base. Our Internet-based
campaigns and advertising include major first tier search engines such as Google
and Yahoo. During 2005, we entered into agreements for the distribution of
ActiveShopper co-branded and white label clients.





*
Global Market Expansion through Strategic and Collaborative Relationships. We
believe collaboration with leading on-line comparison shopping Web sites is an
avenue for us to increase consumer use of our technology, increase demand for
our services and generate revenues. ActiveShopper's technologies are currently
implemented to analyze web pages in e-commerce sites based in the United States.
We intend to implement ActiveShopper in additional geographic areas, including
markets outside the United States, as part of our expanding
strategy.





*  Introduce
New Product Applications. We believe in the concept of additional product
applications, example of which is a mobile comparative shopping application,
which we are presently developing.





No
assurance can be provided that we will successfully implement all or any part of
our strategy.





We are
subject to significant business risks and may need to raise additional capital
in order to realize our business plan and effectuate the above
strategy.





MARKETING
PLAN





To date,
our efforts historically have been devoted primarily to the design, development
and testing of ActiveShopper, as well as raising the capital needed to develop
and maintain our business. As a result of capital raises, our development and
testing, as well as, our marketing efforts have significantly increased in scope
and magnitude.





We plan
to continue generating revenue principally from merchants in exchange of
directing traffic to their websites through ActiveShopper.


3





Service
agreements or affiliation agreements with merchants have and may be further
reached directly or through third parties. We currently have agreements with
third parties that are mainly based on a sharing revenue model.





We intend
to seek additional collaborative relationships with other on-line comparison
shopping providers in the United Sates and abroad and other additional forms of
advertising in order to generate additional revenues through ActiveShopper.
However, except as noted above, we presently have a relatively small amount of
revenue generating arrangements and no assurance can be provided that we will in
fact be able to enter into such agreements or arrangements on terms that are
commercially acceptable to us. Our success in concluding any revenue generating
commercial agreements is premised, in part, on the further acceptance of our
products.





PROPRIETARY
RIGHTS





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





On April
18, 2005, we entered into an agreement with Infospace, Inc. to purchase the
rights, title and interest of Infospace, Inc.'s U.S. and foreign trademarks,
trade names and service marks for "ActiveShopper" and the domain names
activeshopper.com, activeshopper.org, active-shop.com, active-shopper.com,
active-shopper.net and active-shopper.org. We made a one-time payment of $40,000
for such trademarks and domain names.





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





COMPETITION





The
market for advertising and comparative shopping software products and services
is highly competitive and we expect competition to intensify in the future. Our
competitors include Web sites such as Shopping.com, Shopzilla, PriceGrabber.com,
and DealTime.com. Many of our competitors have longer operating histories,
greater name recognition and significantly greater financial, technical, and
sales and marketing resources than we have. As a result, these competitors are
able to devote greater resources to the development, promotion, sale and support
of their products. In addition, these entities have large market capitalization
or cash reserves and are in a better position to acquire other companies in
order to gain new technologies or products. Many of our competitors also have
greater brand name recognition, more extensive customer bases, developed
distribution channels and broader product offerings than we do. These companies
can use their broad customer bases and product offerings and adopt aggressive
pricing policies with advertisers to gain market share.


4


EMPLOYEES
AND CONSULTANTS





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





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





AVAILABLE
INFORMATION





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





Item
1A. Risk Factors





Not
required for Smaller Reporting Companies.





Item 1B. Unresolved Staff
Comments





Not
applicable.





ITEM
2. PROPERTIES.





We do not
own any real property.





We
maintain an office at 29 Broadway, New York, New York.  No rent is
charged for this space.  On April 2008, we terminated the lease of an
apartment in New York, NY, from an unaffiliated party for which we had paid
approximately $2,700 per month. In addition, on May 31, 2008, we renewed a lease
agreement of approximately 77 square meters of office space at 22 Raul
Wallenberg Street, Tel Aviv, Israel from an unaffiliated party for approximately
$1,500 per month in addition to certain occupancy and office maintenance
costs.  We believe that our office space in the United States and
Israel is sufficient to meet our current and anticipated needs.





ITEM
3. LEGAL PROCEEDINGS.





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





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





None.


5




PART
II





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





Market
Information





The
Company's Common Stock is listed on the OTC Bulletin Board under the symbol
"SRNG". The following table sets forth the high and low bid information for the
Company's Common Stock for each quarterly period during the year ended December
31, 2008 and 2007 as reported by the OTC Bulletin Board. The OTC Bulletin Board
quotations reflect inter-dealer prices, are without retail markup, markdown or
commission, and may not represent actual transactions.  The prices
shown reflect a one for twenty-five reverse stock split which became effective
on October 20, 2008.




High
                      
                      
                      LowCalendar
      Year 2008 (post reverse split)First
    Quarter
                      
                      $
                      0.100
                      
                      
                      $
                      0.030Second
    Quarter
                      
                      $
                      0.225
                      
                      
                      $
                      0.013Third
    Quarter
                      
                      $
                      0.225
                      
                      
                      $
                      0.018Fourth
    Quarter
                      
                      $
                      0.200
                      
                      
                      $
                      0.010Calendar
      Year 2007 (post reverse split)First
    Quarter
                      
                      $
                      0.600
                      
                      
                      $
                      0.325Second
    Quarter
                      
                      $
                      0.450
                      
                      
                      $
                      0.150Third
    Quarter
                      
                      $
                      0.375
                      
                      
                      $
                      0.125Fourth
    Quarter
                      
                      $
                      0.300
                      
                      
                      $
                      0.050


HOLDERS





At the
date of this filing there are approximately 362 holders of record of the
Company's Common Stock. This does not reflect those shares held beneficially or
those shares held in "street" name.





DIVIDENDS





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





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





EQUITY
COMPENSATION PLAN INFORMATION





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





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




We have
not repurchased any shares of our common stock during the fiscal year ended
December 31, 2008.


6


Item 6. Selected Financial
Data.





Not
applicable.





ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS





FORWARD-LOOKING
STATEMENTS





THE
FOLLOWING DISCUSSION AND EXPOSITIONS SHOULD BE READ IN CONJUNCTION WITH OUR
FINANCIAL STATEMENTS AND THE NOTES RELATED TO THOSE STATEMENTS, AS WELL AS OTHER
FINANCIAL INFORMATION INCLUDED IN THIS ANNUAL REPORT. SOME OF OUR DISCUSSION IS
FORWARD-LOOKING AND INVOLVES RISKS AND UNCERTAINTIES. FOR INFORMATION REGARDING
RISK FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, REFER TO
RISKS ASSOCIATED WITH OUR BUSINESS SECTION OF THIS ANNUAL REPORT.




OVERVIEW





We
develop e-commerce advertising and comparative shopping software products and
services.





We
released our initial product, ActiveShopper, in August 2004. ActiveShopper is a
free software application that automatically scans, locates and compares prices
for an item that a consumer selects at an e-commerce site and is designed to
assist consumers to make informed purchase decisions by enabling them to find
the items they are looking for, compare products, prices and stores, and buy
from among thousands of online merchants.  We also provide similar
comparison shopping services at our www.activeshopper.com
Web site.





We have
been and may continue working on additional versions of ActiveShopper that would
provide additional functionality. We are also considering strategic acquisitions
of synergistic technologies that management believes will enhance our market
positioning.





We have
been engaged in the on-line comparison shopping business since March 2004. Prior
to that time, we were engaged in the field of designing and developing business
applications software.





We
presently generate revenues primarily from merchants in exchange of directing
traffic to their websites through our ActiveShopper software and Web
site.





We
presently generate revenues primarily according to a Pay Per Click advertising
model which compensates us for directing Web users to merchants' websites. We
also implement a Pay Per Sale (Pay Per Purchase) model when a sale derives from
the directing of traffic to a merchant website,





Management
believes revenue growth is tied to increasing software installations of
ActiveShopper. Although ActiveShopper is a free-download software, promoting it
is essential, since there is no assurance that users who download the software
will continue to use it.





In
addition, since revenues are subject to seasonal fluctuations, there can be no
assurance that revenues levels can be sustained and growth is not assured.
Management has reviewed its current marketing efforts and has determined it is
in the best interests of the Company to reduce its online advertising
activities.   Management analyzed the revenue generated from such
advertising and determined that the revenue generated is not profitable. 
Management has determined that the Company has to change its toolbar
distribution strategy and to target distributors who will work with us on a
revenue sharing basis.  As the result of these changes, revenues and
marketing and advertising expenses decreased for the year ended December 31,
2008 versus 2007.





7





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





Our
consolidated financial statements and accompanying notes have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements requires our
management to make estimates, judgments and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses. We continually evaluate
the accounting policies and estimates we use to prepare the consolidated
financial statements. We base our estimates on historical experiences and
assumptions believed to be reasonable under current facts and circumstances.
Actual amounts and results could differ from these estimates made by
management.





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





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





Principles of consolidation -
The accompanying consolidated financial statements include the accounts of
Shelron Group Inc. and its wholly-owned subsidiary (collectively, the
"Company"). All significant inter-company transactions have been
eliminated.




Development Stage Activities and
Operations -From inception through the fourth quarter of 2007, the
Company was in the development stage and has had insignificant
revenues.  Statement of Financial Accounting Standard ("SFAS") No. 7
defines a development stage activity as one in which all efforts are devoted
substantially to establishing a new business and even if planned principal
operations have commenced, revenues are insignificant.  In the fourth
quarter of 2007, management determined that the Company was no longer in the
development stage as the Company generated significant revenues.




Functional Currency -The
majority of Company’s sales are in United States dollars. In addition, the
majority of the Company’s investing and financing activities are in United
States dollars. Accordingly, the Company has determined the United States dollar
as the currency of its primary economic environment and thus, its functional and
reporting currency. Non-dollar transactions and balances have been measured in
United States dollars in accordance with SFAS No. 52 “Foreign Currency
Translation.”  All transaction gains and losses from the measurement
of monetary balance sheet items denominated in non-dollar currencies are
reflected in the statement of operations as financial income or expenses, as
appropriate.





Intangible Assets -Intangible
assets are carried at cost less accumulated amortization. Amortization is
computed on the straight-line method over the estimated useful lives of the
assets. We periodically review the carrying value of our intangible assets to
determine whether impairment may exist under the provisions of SFAS No. 144,
“Accounting for the
Impairment or Disposal of Long-Lived Assets”. We consider
relevant cash flow and profitability information, including estimated future
operating results, trends and other available information, in assessing whether
the carrying value of the intangible assets can be recovered. If it is
determined that the carrying value of the intangible assets will not be
recovered from the undiscounted future cash flows, the carrying value of the
assets would be considered impaired. An impairment charge is measured as any
deficiency in the amount of estimated fair value of the intangible assets over
carrying value.





Revenue Recognition -The
Company's revenue derives from service revenue and the management of advertising
campaigns, both of which are related to ActiveShopper.





Service
revenue primarily derives from the implementation of partnership agreements
according to which the Company provides a service of directing traffic to
merchants' websites. Service revenue is primarily based on a pay-per-click
model, reported at their net values to the Company, which represent the revenues
the Company is entitled to receive according to the partnership agreements. In
order to recognize service revenue, the following criteria must be met: (i) the
partnership agreement must be signed by the customer, (ii) the signed agreement
must specify the fees to be received for the services, (iii) the service has
been performed and accepted by the customer, (iv) no significant Company
obligations remain and (v) collectability is probable.





Management
of advertising campaign revenues primarily relates to advertising through
ActiveShopper websites. In order to recognize management of advertising
campaigns revenue, the following criteria must be met: (i) an agreement must be
signed by the customer, (ii) the signed agreement must specify the fees to be
received, (iii) consultancy and management have been provided and accepted by
the customer, (iv) no significant Company obligations remain and (v)
collectability is probable.





When the
above stated revenue recognition criteria are not met, the Company records
deferred revenue.




Marketing and Advertising -Marketing and advertising costs are expensed as
incurred.


8


Income Taxes -The
Company uses the liability method to determine its income tax. This method
requires the establishment of a deferred tax asset or liability for the
recognition of future deductible or taxable amounts and operating loss carry
forwards. Deferred tax expense or benefit is recognized as a result of the
changes in the assets and liabilities during the year. Valuation allowances are
established when necessary to reduce a deferred tax asset, if it is more likely
than not that all or a portion of it will not be realized.





In
June 2006, the FASB issued FASB Interpretation No. 48 (“ FIN 48 ”)
“Accounting for Uncertainty in Income Taxes (an interpretation of FASB Statement
No. 109”) which became effective in 2007. This interpretation was issued to
clarify the accounting for uncertainty in the amount of income taxes recognized
in the financial statements by prescribing a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained
upon examination by the taxing authorities. The amount recognized is measured as
the largest amount of benefit that is greater than 50 percent likely of
being realized upon ultimate settlement. The provisions of FIN 48 were adopted
by the Company on January 1, 2007 and had no effect on the Company's
financial statements upon adoption. The Company also evaluated its tax positions
as of December 31, 2008 and 2007 and reached the same
conclusion.





Earnings (loss) per share -Basic earnings (loss) per share is computed by dividing net income (loss)
by the weighted-average number of shares of Common Stock outstanding during the
period. Diluted earnings (loss) per share give effect to dilutive convertible
securities, options, warrants and other potential Common Stock outstanding
during the period, only in periods in which such effect is
dilutive.  The following securities have been excluded from the
calculation of net loss per share, as their effect would be
antidilutive:




2008
                  
                  
                  2007Series
      A convertible preferred stock
                  
                  
                  1,000,000
                  
                  
                  
                  1,000,000Convertible
      note payable
                  
                  
                  448,437
                  
                  
                  
                  —


Stock-based
Compensation  -The
Company accounts for stock-based compensation in accordance with
SFAS No. 123(R), “Share-Based Payment.” Under
SFAS No. 123(R), an entity is required to measure the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award. That cost is recognized on a straight-line
basis over the period during which an employee is required to provide service in
exchange for the award.





Equity
instruments issued to non-employees are recorded at their fair values as
determined in accordance with SFAS No. 123 and Emerging Issues Task Force
96-18, “Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling Goods and
Services.”




9


RESULTS
OF OPERATIONS





Comparison
of the Year Ended December 31, 2008 (the "2008 Period") and the Year Ended
December 31, 2007 (the "2007 Period"):





Revenues
and Major Customers





Revenues
were primarily attributable to the implementation of partnership agreements
pursuant to which we direct traffic to merchants' websites through our
ActiveShopper software and Web site products.  Revenues for the 2008
Period were $45,265, a decrease of $283,979 or 86.3% over revenues for the 2007
Period which were $329,244.  The decrease in revenues is primarily
attributable to the change in the Company's toolbar distribution strategy, and
to the reduction of advertisement activities, as discussed in the Overview
section.





During
the 2008 Period, revenues generated from two customers accounted for
approximately 96% of total revenues accounted for the period, of which one
customer accounted for approximately 95% of total revenues for the
period.  These customers comprise approximately 57% of the Company's
accounts receivables at December 31, 2008, of which one customer accounted for
approximately 51% of our accounts receivable.





Operating
Expenses





Our
operating expenses consist of salaries, consulting expenses, research and
development, marketing and advertising and other expenses associated with the
operations of our business.





For the
2008 Period, our operating expenses were $472,170, a decrease of $370,237 or 44%
as compared to $842,407 for the 2007 Period.  Each component of
operating expenses is shown below:





Consulting
Expenses





For the
2008 Period and 2007 Period, our consulting expenses were $83,428 and $87,599,
respectively. The decrease in consulting expenses of $4,171 or 4.8% in 2008 is
primarily due to the Company's decision to reduce its use of
consultants.





Research
and Development Expenses





Research
and development expenses consist of subcontracting personnel and related
expenses of research and development teams in Israel and abroad. Research and
development expenses decreased to $0 in the 2008 Period from $5,142 in the 2007
Period, a decrease of $5,142 or 100%. The decrease in research and development
activities is primarily attributable to the successful completion of the first
developing phase of ActiveShopper.





Employment
Compensation





Our sole
full time employee is our Chairman of the Board Eliron Yaron.  For the
2008 Period and 2007 Period, employment compensation totaled $174,403 and
$174,460, respectively.





Professional
Fees





Professional
fees consist primarily of legal, accounting and auditing and public and investor
relations fees.  For the 2008 Period and 2007 Period, our professional
fees were $48,051 and $78,204, respectively. The decrease in professional fees
of $30,153 or 38.5% in 2008 is primarily due to lower audit and legal fees
during the 2008 Period.


10





Marketing and
Advertising





Our
marketing and advertising expenses for the 2008 Period and 2007 Period amounted
to $33,521 and $282,721, respectively. The decrease in marketing and advertising
expenses of $249,200 or 88.1% is primarily due to the reduction of promotional
activities, advertising campaigns relating to ActiveShopper.





Rent
Expense





Rent
expense for the 2008 Period and 2007 Period totaled $28,244 and $69,641,
respectively, a decrease of $41,397 or approximately 59.4%.  The
decrease in rent expense is primarily attributable to a sub-lease of a portion
of our offices leased in Tel Aviv and to the termination in April 2008 of an
apartment in NY.





LIQUIDITY
AND CAPITAL RESOURCES





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





As of
December 31, 2008, we had a cash balance of $50,183 and accounts receivable of
$3,324.





Cash used
in operating activities was $271,921 for 2008 compared to $180,933 for 2007. The
increase in the operating cash used is primarily attributable to funding the net
losses in both years.





Cash
provided by investing activities in 2008 was $15,306 and cash used in investing
activities in 2007 was $5,352.  Cash provided by 2008 was primarily
attributable to the decrease of a pledged deposit as a guarantee of the lease
agreement for the offices in Israel.





Cash
provided by financing activities was $175,000 in 2008 as compared to $29,000 in
2007. In 2008 and 2007, the Company received proceeds of $110,000 and $35,000
from Eliron Yaron for investments in the Company’s common stock.In July 2008, the Company
issued 200,000 (post reverse split) shares of common stock to an investor under
a Shares Purchases Agreement and received proceeds of $15,000. In addition, in 2008, the
Company received proceeds of $50,000 for a note payable issued for working
capital purposes.




We
believe our existing cash resources plus our expected revenue will be sufficient
to maintain current operations through December 31, 2009. However, if cash
generated from operations is insufficient to satisfy the Company’s liquidity
requirements, management may seek to restructure the liabilities of the Company
and/or sell additional equity, debt securities and/or obtain a credit facility.
The sale of additional equity or convertible debt securities could result in
additional ownership dilution to our stockholders. The occurrence of
indebtedness would result in an increase in our fixed obligations and could
result in borrowing covenants that would restrict our operations. There can be
no assurance that financing will be available in amounts or on terms acceptable
to us, if at all. If financing is not available when required or is not
available on acceptable terms, we may be unable to develop or enhance our
products or services. In addition, we may be unable to take advantage of
business opportunities or respond to competitive pressures. Any of these events
could have a material and adverse effect on our business, results of operations
and financial condition.


11


Our
current operating plan is based on continuing to promote ActiveShopper
downloads, entering into more partnership agreements and affiliation programs,
adding more categories of product for which ActiveShopper will provide services,
and further expanding ActiveShopper activities outside the USA. As of today, we
are still depending in one main single line of business with limited revenue
generating sources which are subjected to seasonable fluctuations.





Our
relatively low operational costs and cash resources have enabled the
continuation of our activities. Although advertising campaigns required to
promote ActiveShopper and their related budgets may be expended at our
discretion, competition and the need to more aggressively promote ActiveShopper
may require higher budgets than expected and therefore negatively affect our
cash flows.





Our
continuation as a going concern, however, is dependent upon, among other things,
our ability to obtain additional financing when and as needed and to generate
sufficient cash flow to meet our obligations on a timely basis. No assurance can
be given that we will be able to obtain such financing on acceptable terms. Our
independent registered public accounting firm, in their reports on our financial
statements for the year ended December 31, 2008 expressed substantial doubt
about our ability to continue as a going concern. These circumstances could
complicate our ability to raise additional capital. Our financial statements do
not include any adjustments to the carrying amounts of our assets and
liabilities that might result from the outcome of this uncertainty.





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company has incurred losses of $426,701
and $511,448 for the years ended December 31, 2008 and 2007, respectively, and a
working capital deficiency which raises substantial doubt about the Company's
ability to continue as a going concern.





Management
believes that the company will continue to incur losses and negative cash flows
from operating activities for the foreseeable future and will need additional
equity or debt financing to sustain its operations until it can achieve
profitability and positive cash flows, if ever. Management plans to seek
additional debt and/or equity financing for the Company, but cannot assure that
such financing will be available on acceptable terms.  The Company's
continuation as a going concern is dependent upon its ability to ultimately
attain profitable operations, generate sufficient cash flow to meet its
obligations, and obtain additional financing as may be required. The outcome of
this uncertainty cannot be assured.


12





The
accompanying consolidating financial statements do not include any adjustments
that might result from the outcome of this uncertainty. There can be no
assurance that management will be successful in implementing its business plan
or that the successful implementation of such business plan will actually
improve the Company's operating results.





RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS





In
December 2007, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 141(R), "Business Combinations (revised 2007)." SFAS
No. 141(R) applies the acquisition method of accounting for business
combinations established in SFAS No. 141 to all acquisitions where the
acquirer gains a controlling interest, regardless of whether consideration was
exchanged. Consistent with SFAS No. 141, SFAS No. 141(R) requires the
acquirer to fair value the assets and liabilities of the acquiree and record
goodwill on bargain purchases, with main difference the application to all
acquisitions where control is achieved. SFAS No. 141(R) is effective for
financial statements issued for fiscal years beginning after December 15,
2008.  The Company will adopt SFAS No. 141(R) on January 1, 2009;
however, the Company does not anticipate that the adoption will have a material
impact on its financial condition or results of its operations.




In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51." SFAS
No. 160 requires companies with noncontrolling interests to disclose such
interests clearly as a portion of equity but separate from the parent's equity.
The noncontrolling interest's portion of net income must also be clearly
presented on the income statement. SFAS No. 160 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. The
Company will adopt SFAS No. 160 as of January 1, 2009; however, it
does not anticipate that the adoption will have a material impact on its
financial condition or results of its operations.




In
February 2008, the FASB issued FASB Staff Position 157-2, "Effective Date
of FASB Statement No. 157," which delays the effective date of SFAS
No. 157 until January 1, 2009 for all nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).
The Company believes the adoption of the delayed items of SFAS No. 157 will
not have a material impact on its financial statements.


13




In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States (commonly referred to as the
GAAP hierarchy). The statement is effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles. The Company is currently evaluating the
potential impact, if any, the adoption of SFAS No. 162 will have on its
financial position, results of operations, cash flows, and
disclosures.




In
June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities.” This FSP provides that unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend equivalents (whether paid
or unpaid) are participating securities and shall be included in the computation
of earnings per share pursuant to the two-class method. This FSP is effective
for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. Upon adoption, a
company is required to retrospectively adjust its earnings per share data
(including any amounts related to interim periods, summaries of earnings and
selected financial data) to conform with the provisions in this FSP. Early
application of this FSP is prohibited. We have not issued any share-based
payment awards that contain nonforfeitable rights to dividends or dividend
equivalents.




OFF-BALANCE
SHEET ARRANGEMENTS




None.




TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS





Payments
      Due By PeriodContractual
      Obligations :
                
                Total
                
                
                Less
      Than
                  1
      Year
                
                
                1
      – 3
                  Years
                
                
                3
      – 5
                  Years
                
                
                More
      Than
                  5
      yearsOperating
      Lease Obligations
                
                
                25,500
                
                
                
                18,000
                
                
                
                7,500
                
                
                
                —
                
                
                
                —Total
                
                
                25,500
                
                
                
                18,000
                
                
                
                7,500
                
                
                
                —
                
                
                
                —





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





Not
applicable.





ITEM
8. FINANCIAL STATEMENTS





The
financials statements of our company for the years ended December 31, 2008 and
2007 are attached hereto following the signature page commencing on page
F-1.





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





None.





Item
9A (T).  Controls and Procedures.





Evaluation
of Effectiveness of Disclosure Controls and Procedures





Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out a formal evaluation of the effectiveness of the
Company’s disclosure controls and procedures (as defined under Rule 13a-15(e)
under the Exchange Act) as of the end of the period covered by this report. The
Company’s Chief Executive Officer, who also acts in the capacity of Chief
Financial Officer, has concluded that the Company’s disclosure controls and
procedures were ineffective ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, to allow timely decisions
regarding required disclosure. The reasons for this conclusion is stated
below.


14


Our
internal controls over financial reporting are designed by, or under the
supervision of, our Chief Executive Officer, or persons performing similar
functions, and effected by our board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Our
internal control over financial reporting includes those policies and procedures
that:





- Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets.





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





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





This
annual report does not include an attestation report of Shelron’s registered
public accounting firm regarding internal control over financial reporting.
 Management's report was not subject to attestation by Shelron’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit Shelron to provide only management's report in
this annual report.





Management’s
Report on Internal Control Over Financial Reporting





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





The
policies and procedures include:





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





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





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





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





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


15





Changes
in Internal Control Over Financial Reporting





There
have been no changes in our internal control over financial reporting (as
defined in Exchange Act Rule 13a-15(f)) during the year ended December 31, 2008
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.





LIMITATIONS
OF EFFECTIVENESS OF INTERNAL CONTROLS





Management
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will necessarily prevent all fraud and material
errors. An internal control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations on all
internal control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. The design of any system of internal control
is also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Over time, controls may
become inadequate because of changes in circumstances, and/or the degree of
compliance with the policies and procedures may deteriorate. Because of the
inherent limitations in a cost effective internal control system, financial
reporting misstatements due to error or fraud may occur and not be detected on a
timely basis.





Item 9B. Other
Information.





None.


16


PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





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





Name
                  
                  Age
                  
                  Positions
      and Offices HeldEliron
      Yaron
                  
                  41
                  
                  Chairman,
      Chief Executive Officer, Principal Financial And Accounting Officer,
      Director and SecretaryIssac
      Maizel
                  
                  29
                  
                  DirectorYossi
      Levi
                  
                  29
                  
                  Director





Eliron
Yaron, age 41, has been the Chairman of our Board of Directors, Principal
Executive Officer and Principal Financial and Accounting Officer since company's
inception date in August 2001. Prior to joining us, from 1996 through 2001, he
was the founder and Chief Executive Officer of Shelron Internet Ltd., a web
project oriented company. Prior to that time, since 1993, he has engaged in
either founding web related business or working in related technology areas.
Eliron Yaron has served on the boards of Internet companies in the US and
Israel, and has advised venture capital funds and investment companies on IT and
Internet related investments and marketing.





Isaac
Maizel, age 29, has worked since 2001 as a computer network consultant, with an
expertise in large networks implementation.





Yossi
Levi, age 29, worked since 2001 as an E-learning consultant, and as an internet
advertising salesman.





THE
COMMITTEES





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





EXECUTIVE
OFFICERS OF OUR COMPANY





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





CODE
OF ETHICS





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


17





SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE





Section
16(a) of the Exchange Act requires the Company's Executive Officers, Directors
and persons who beneficially own more than 10% of a registered class of the
Company's equity securities to file with the Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Such persons are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms they filed. Based
solely upon a review of (i) Forms 3 and 4 and amendments
thereto  furnished to the Company pursuant to Rule 16a-3(e),
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"),
during the Company's fiscal year ended December 31, 2008, and (ii) Forms 5 and
amendments thereto and/or written representations furnished to us by any
Director, officer or 10% security holder of the Company (collectively "Reporting
Persons") stating that he or she was not required to file a Form 5 during the
Company's fiscal year ended December 31, 2008, it has been determined that all
Officers, Directors and persons who beneficially own more than 10% of a
registered class of the Company's equity securities have met their reporting
obligations set forth in Section 16(a) of the Exchange Act.





Potential
Conflicts of Interest




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




Involvement
in Certain Legal Proceedings





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


18





ITEM
11. EXECUTIVE COMPENSATION





The
Summary Compensation Table below sets forth compensation paid by the Company for
the fiscal years ended December 31, 2008, 2007 and 2006 for services to its
Principal Executive Officer and other Executive Officers who received a total
annual salary and bonus which exceeded $100,000.




SUMMARY
      COMPENSATION TABLENAME
      AND
                          
                          
                          ANNUAL AND
      TOTALPOSITION
                          YEAR
                          
                          COMPENSATIONEliron
      Yaron,Chairman,
      Principal Executive
                          2008
                          
                          $
                          174,403
                          
                          
                          
                          (1
                          )Officer
      and Principal Financial
                          2007
                          
                          $
                          174,460
                          
                          
                          
                          (2
                          )And
      Accounting Officer
                          2006
                          
                          $
                          170,792
                          
                          
                          
                          (3
                          )


(1)Includes $16,035 of compensation paid
by the Company's subsidiary in Israel.


(2)Includes $18,449 of compensation paid
by the Company's subsidiary in Israel.


(3)Includes $17,149 of
compensation paid by the Company's subsidiary in Israel.





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





OPTION
GRANTS IN 2008





None of
the Named Executive Directors were granted any options during the year ended
December 31, 2008.





AGGREGATE
OPTIONS EXERCISED IN 2008 AND 2008 YEAR END VALUES





Not applicable.





EQUITY
COMPENSATION PLAN INFORMATION





Not
applicable.





EXECUTIVE
EMPLOYMENT





In March
2005, we entered into a Consulting Agreement ("Consulting Agreement") with Hull
Services Inc. ("Hull"), a company wholly-owned and controlled by Eliron Yaron,
the Chairman of the Board of Directors and the Principal Executive Officer of
the Company. Pursuant to the terms of this Consulting Agreement, we pay to Hull
$156,000 per annum in installments of $3,000 per week for Mr. Yaron’s services,
in addition to reimbursing all reasonable expenses incurred in connection with
services rendered on behalf of our Company. The compensation accrues and is paid
when funds for such payments are available. As of December 31, 2008, accrued and
outstanding fees to Hull are $188,620. The Consulting Agreement continues in
effect through March 2009 and contains certain customary confidentiality and
non-compete provisions. The Consulting Agreement is renewed automatically for
successive one year periods until either party gives the other a 180-day prior
written notice of its intent to terminate the Consulting Agreement. As of
December 31, 2008, no prior written notice with the intent to terminate the
Consulting Agreement was provided. Therefore, the Consulting Agreement has been
automatically extended until March 2010.





As a
result of a decline in the operations of Postronics, effective October
2008, Hull, Mr. Yaron and Positronic agreed that Shelron Inc would pay Hull all
Israeli compensation (approximately $750 per month) previously paid by
Positronic to Mr. Yaron.





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





The
following table sets forth information as of March 26, 2009, concerning all
persons known by us to own beneficially more than 5% of our Common Stock and
concerning shares beneficially owned by each Director and named Executive
Officer and by all Directors and Executive Officers as a group. Unless expressly
indicated otherwise, each stockholder exercises sole voting and investment power
with respect to the shares beneficially owned.





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


19





The
address of each Executive Officer and Director is 22a Raul Wallenberg Street,
Tel - Aviv, Israel. We have calculated the percentages of shares beneficially
owned based on 17,447,492 shares of Common Stock outstanding at March 26, 2009
(post reverse split).




Name and
      Address of Beneficial OwnerShares
      ofCommon
      Stock
                                      Stock
                                    
                                    Percentage

                                          Ownership
      of

                                            Shares
      of

                                              Common
                                              Stock(1)
                                    
                                    
                                    PreferredShares
      of(2)
                                    
                                    Voting
      Power

                                          of
      Shares of

                                            Preferred
                                            StockExecutive Officers
      andDirectorsEliron
    Yaron
                                    1,367,953
                                    
                                    7.84
                                    %
                                    
                                    1,000,000
                                    
                                    52
                                    %(post
      reversesplit)Issac
    Maizel
                                    0
                                    
                                    
                                    
                                    
                                    0Yossi Levi
                                    0
                                    
                                    
                                    
                                    
                                    0All Executive
      Officers
                                    1,367,953
                                    
                                    7.84
                                    %
                                    
                                    1,000,000
                                    
                                    52
                                    %and Directors as a
      group
                                    (post
      reverse(3
persons)
                                    split)5%
      StockholdersJoseph Corso
      (3)
                                    3,560,000
                                    
                                    20.4
                                    %
                                    
                                    0
                                    
                                    *All Executive
      Officers,
                                    4,927,953
                                    
                                    28.24
                                    %
                                    
                                    1,000,000
                                    
                                    52
                                    %Directors and
      5%
                                    (post
      reverseStockholders as a
      group
                                    split)(2
persons)*
      less than one percent (1%).


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





(2)
Comprised of 1,000,000 shares of Common Stock issuable upon the conversion of
1,000,000 shares of Series A Preferred Stock issued to Hull, a company
wholly-owned and controlled by Mr. Yaron. As the sole Stockholder of Hull, Mr.
Yaron may be deemed a beneficial owner of the shares of Common Stock issuable
upon conversion of the Series A Preferred Stock.





(3)
Derived from a Schedule 13G filed by Joseph Corso on January 4, 2007. The
address of such person is: 15 Ottavio, Promenade, Staten Island, NY 10307,
US.


20


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





In March
2005, we entered into a Consulting Agreement ("Consulting Agreement") with Hull
Services Inc. ("Hull"), a company wholly-owned and controlled by Eliron Yaron,
the Chairman of the Board of Directors and the Principal Executive Officer of
the Company. Pursuant to the terms of this Consulting Agreement, we pay to Hull
$156,000 per annum in installments of $3,000 per week for Mr. Yaron’s services,
in addition to reimbursing all reasonable expenses incurred in connection with
services rendered on behalf of our Company. The compensation accrues and is paid
when funds for such payments are available. As of December 31, 2008, accrued and
outstanding fees to Hull are $188,620. The Consulting Agreement continues in
effect through March 2009 and contains certain customary confidentiality and
non-compete provisions. The Consulting Agreement is renewed automatically for
successive one year periods until either party gives the other a 180-day prior
written notice of its intent to terminate the Consulting Agreement. As of
December 31, 2008, no prior written notice with the intent to terminate the
Consulting Agreement was provided. Therefore, the Consulting Agreement has been
automatically extended until March 2010.





ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





From July
17, 2006 and through the subsequent periods for fiscal year ended December 31,
2008, our principal independent auditor was Rotenberg Meril Solomon Bertiger
& Guttilla, P.C. ("RMSBG"). The following are the services provided and the
amount billed:





AUDIT
FEES





The
aggregate fees billed or to be billed by RMSBG for professional services
rendered for the audit of the Company's annual consolidated financial statements
for the fiscal year ended December 31, 2008 and 2007 and for the review of the
consolidated financial statements included in the Company's Quarterly Reports on
Form 10-Q for the three, six and nine month periods ended March 31, 2008 and
2007, June 30, 2008 and 2007 and September 30, 2008 and 2007 were $36,000 and
$49,800, respectively.





AUDIT
RELATED FEES





Other
than the fees described under the caption "Audit Fees" above, RMSBG did not bill
any fees for services rendered to us during fiscal years 2008 and 2007 for
assurance and related services in connection with the audit or review of our
consolidated financial statements.





TAX
FEES





Fees
billed by RMSBG for tax services rendered during the fiscal years ended December
31, 2008 and 2007 were approximately $1,000 and $1,500,
respectively.





ALL
OTHER FEES





There
were no fees billed by RMSBG for other professional services rendered during the
periods for fiscal years ended December 31, 2008 and 2007,
respectively.





PRE-APPROVAL
OF SERVICES





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


21


PART
IV





Item 15. Exhibits. Financial Statement
Schedules.





Exhibit Number   Description





3.1
            Certificate
      of Incorporation of the Company.
(1)





3.2
            Bylaws
      of the Company. (1)





3.3
            Certificate
      of Amendment of Certificate of
Incorporation.





4.1
            Certificate
      of Designation of the Company.(2)





10.1
            Stock
      Purchase Agreement. (3)





10.2
            Debentures
      dated October 31, 2001. (2)





10.3
            Subscription
      Agreement dated as of January 4, 2005 betweenthe Company and Joseph Corso. (5)





10.4
            Financial
      Advisory Agreement dated as of January 4, 2005between
      the Company and Joseph Corso. (5)





10.5
            Consulting
      Agreement dated as of March 1, 2005 between theCompany
      and Hull Services, Inc. (5)





10.6
            Letter
      Agreement, dated April 24, 2006, by and between JosephCorso
      and Shelron Group, Inc. (6)





10.7
            Extension
      letter, dated May 10, 2005, by Joseph Corso
(6)





10.8
            Extension
      letter, dated June 7, 2005, by Joseph Corso
(6)





14
            Code
      of Ethics. (4)





31
            Certification
      of Principal Executive Officer and PrincipalFinancial
      Officer Pursuant to Section 302(a) of theSarbanes-Oxley
      Act of 2002.





32
            Certification
      of Principal Executive Officer and PrincipalFinancial
      Officer Pursuant to Section 906 of theSarbanes-Oxley
      Act of 2002.





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





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





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





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





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





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


22





SIGNATURES





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




SHELRON GROUP,
      INC.Dated:
      March 31, 2009
            By:
            /s/ Eliron
      YaronEliron
      YaronChairman


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




Signature
              Capacity
              Date/s/
      Eliron Yaron
              Chairman and
      Director
              March 31,
    2009Eliron
      YaronIssac
      Maizel
              Director
              March 31,
    2009Yossi
      Levi
              Director
              March 31,
    2009


.


23


SHELRON
GROUP INC. AND SUBSIDIARY





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS






Report
      of Independent Registered Public Accounting Firm
                F-2Consolidated
      Balance Sheets as of December 31, 2008 and 2007
                F-3Consolidated
      Statements of Operations for the years endedDecember
      31, 2008 and 2007
                F-4Consolidated
      Statements of Stockholders' (Deficiency) Equityfor
      the years ended December 31, 2008 and 2007
                F-5Consolidated
      Statements of Cash Flows for the years endedDecember
      31, 2008 and 2007
                F-6Notes
      to Consolidated Financial Statements
                F-7 -
  F-17




F-1





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Directors and Stockholders of


Shelron
Group, Inc.





We have
audited the accompanying consolidated balance sheets of Shelron Group, Inc. and
Subsidiary (the “Company”) as of December 31, 2008 and 2007, and the
related consolidated statements of operations, changes in stockholders’
(deficiency) equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 2008 and 2007 and the results of its consolidated
operations and cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.





The
accompanying 2008 consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company’s recurring losses from
operations, stockholders' deficiency and working capital deficiency raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans concerning these matters are also described in Note 2. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.







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


Saddle
Brook, New Jersey


March 27,
2009




F-2





SHELRON
GROUP INC. AND SUBSIDIARY


CONSOLIDATED
BALANCE SHEETS





ASSETS


December
      31,
                                    
                                    
                                    December
      31,2008
                                    
                                    
                                    2007Current
      Assets:Cash
                                    
                                    $
                                    50,183
                                    
                                    
                                    $
                                    131,798Accounts
      receivable
                                    
                                    
                                    3,324
                                    
                                    
                                    
                                    19,741Other current
      assets
                                    
                                    
                                    20,480
                                    
                                    
                                    
                                    21,007Total Current
      Assets
                                    
                                    
                                    73,987
                                    
                                    
                                    
                                    172,546Property
      and Equipment, net of accumulated depreciationof $210,051 and $174,699,
      respectively
                                    
                                    
                                    14,414
                                    
                                    
                                    
                                    47,792Intangible
      assets, net of amortization of $14,000 and$10,000,
      respectively
                                    
                                    
                                    126,000
                                    
                                    
                                    
                                    30,000Other
      asset
                                    
                                    
                                    8,178
                                    
                                    
                                    
                                    23,484Deferred
      tax asset, net of valuation allowance of $1,763,000 and$1,619,000,
      respectively
                                    
                                    
                                    --
                                    
                                    
                                    
                                    --Total
    Assets
                                    
                                    $
                                    222,579
                                    
                                    
                                    $
                                    273,822
  LIABILITIES
AND STOCKHOLDERS' (DEFICIENCY) EQUITY
  Current
      Liabilities:Accounts payable and accrued
      expenses
                                    
                                    $
                                    59,134
                                    
                                    
                                    $
                                    105,487Due to
      stockholders
                                    
                                    
                                    233,496
                                    
                                    
                                    
                                    114,685Convertible note
      payable
                                    
                                    
                                    50,000
                                    
                                    
                                    
                                    --Note
    payable
                                    
                                    
                                    100,000
                                    
                                    
                                    
                                    --Total Current
      Liabilities
                                    
                                    
                                    442,630
                                    
                                    
                                    
                                    220,172Liability
      for common stock to be issued to officer
                                    
                                    
                                    110,000
                                    
                                    
                                    
                                    35,000Total
      Liabilities
                                    
                                    
                                    552,630
                                    
                                    
                                    
                                    255,172CommitmentStockholders'
      (Deficiency) Equity (post reverse split):Series A convertible preferred
      stock, $.001 par value, Authorized1,000,000
      shares, Issued and outstanding 1,000,000 shares
                                    
                                    
                                    1,000
                                    
                                    
                                    
                                    1,000Common stock, par value $.001 per
      shareAuthorized 20,000,000
      shares;Issued and outstanding 17,447,492
      and16,427,546 shares,
      respectively
                                    
                                    
                                    17,447
                                    
                                    
                                    
                                    16,428Additional paid-in
      capital
                                    
                                    
                                    5,500,686
                                    
                                    
                                    
                                    5,423,705Accumulated
      deficit
                                    
                                    
                                    (5,849,184
                                    )
                                    
                                    
                                    (5,422,483
                                    )Total Stockholders' (Deficiency)
      Equity
                                    
                                    
                                    (330,051
                                    )
                                    
                                    
                                    18,650Total Liabilities
      andStockholders' (Deficiency)
      Equity
                                    
                                    $
                                    222,579
                                    
                                    
                                    $
                                    273,822





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




F-3


SHELRON
GROUP INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF OPERATIONS


Year
      ended December 31,2008
                                      
                                      
                                      2007Revenues
                                      
                                      $
                                      45,265
                                      
                                      
                                      $
                                      329,244Operating
      Expenses:Consulting
      fees
                                      
                                      
                                      83,428
                                      
                                      
                                      
                                      87,599Research and
      development
                                      
                                      
                                      --
                                      
                                      
                                      
                                      5,142Employment
      compensation
                                      
                                      
                                      174,403
                                      
                                      
                                      
                                      174,460Professional
      fees
                                      
                                      
                                      48,051
                                      
                                      
                                      
                                      78,204Marketing and
      advertising
                                      
                                      
                                      33,521
                                      
                                      
                                      
                                      282,721Office and general
      expenses
                                      
                                      
                                      61,865
                                      
                                      
                                      
                                      100,856Rent
                                      
                                      
                                      28,244
                                      
                                      
                                      
                                      69,641Depreciation and
      amortization
                                      
                                      
                                      38,582
                                      
                                      
                                      
                                      39,087Bank
    charges
                                      
                                      
                                      4,076
                                      
                                      
                                      
                                      4,697Total
      Operating Expenses
                                      
                                      
                                      472,170
                                      
                                      
                                      
                                      842,407Loss
      from operations
                                      
                                      
                                      (426,905
                                      )
                                      
                                      
                                      (513,163
                                      )Other
      Income (Expense):Interest
      expense
                                      
                                      
                                      (389
                                      )
                                      
                                      
                                      (3,223
                                      )Interest
      income
                                      
                                      
                                      593
                                      
                                      
                                      
                                      4,938Total
      Other Income (expense)
                                      
                                      
                                      204
                                      
                                      
                                      
                                      1,715Net
      loss
                                      
                                      $
                                      (426,701
                                      )
                                      
                                      $
                                      (511,448
                                      )Basic
      and diluted net loss per share
                                      
                                      $
                                      (0.03
                                      )
                                      
                                      $
                                      (0.03
                                      )Weighted
      average number ofshares outstanding - basic and
      diluted (post reverse split)
                                      
                                      
                                      16,884,259
                                      
                                      
                                      
                                      16,419,267





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





F-4





SHELRON
GROUP INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' (DEFICIENCY) EQUITY





(all
Common stock figures are post reverse split)




Preferred
      Stock
              
              
              Common
      StockNumber
                of
                Shares
              
              
              Amount
              
              
              Price
      Per
                Share
              
              
              Number
                of
                Shares
              
              
              Amount
              
              
              Additional
                Paid-in
                Capital
              
              
              Accumulated
      Deficit
              
              
              Stockholders'
                (Deficiency)
                EquityBalance
      at December 31, 2006
              
              
              1,000,000
              
              
              $
              1,000
              
              
              
              —
              
              
              
              16,391,575
              
              
              $
              16,392
              
              
              $
              5,410,240
              
              
              $
              (4,911,035
              )
              
              $
              516,597Issuance
      of common stock for consulting fees and services
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              35,971
              
              
              
              36
              
              
              
              13,465
              
              
              
              —
              
              
              
              13,501Net
      loss
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (511,448
              )
              
              
              (511,448
              )Balance
      at December 31, 2007
              
              
              1,000,000
              
              
              $
              1,000
              
              
              
              —
              
              
              
              16,427,546
              
              
              $
              16,428
              
              
              $
              5,423,705
              
              
              $
              (5,422,483
              )
              
              $
              18,650Issuance
      of common stock for capital contributions
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              433,333
              
              
              
              433
              
              
              
              49,567
              
              
              
              —
              
              
              
              50,000Issuance
      of common stock for consulting fees and services
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              586,613
              
              
              
              586
              
              
              
              27,414
              
              
              
              —
              
              
              
              28,000Net
      loss
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (426,701
              )
              
              
              (426,701
              )Balance
      at December 31, 2008
              
              
              1,000,000
              
              
              $
              1,000
              
              
              
              —
              
              
              
              17,447,492
              
              
              $
              17,447
              
              
              $
              5,500,686
              
              
              $
              (5,849,184
              )
              
              $
              (330,051
              )
  The
accompanying notes to these consolidated financial statements are an integral
part of these statements.
  F-5




SHELRON
GROUP INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS




Year
      ended December 31,2008
                          
                          
                          2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                          
                          $
                          (426,701
                          )
                          
                          $
                          (511,448
                          )Adjustments to reconcile net loss to net cash used
      in operating activities:Depreciation and
      amortization
                          
                          
                          38,582
                          
                          
                          
                          39,087Common
      stock issued for consulting fees and services
                          
                          
                          28,000
                          
                          
                          
                          —Changes in operating assets and
      liabilities:Decrease in accounts
      receivable
                          
                          
                          16,417
                          
                          
                          
                          326,792Decrease in other current
      assets
                          
                          
                          527
                          
                          
                          
                          3,812Decrease in accounts payable and
      accrued expenses
                          
                          
                          (47,557
                          )
                          
                          
                          (133,796
                          )Increase in due to
      stockholder
                          
                          
                          118,811
                          
                          
                          
                          94,620Net cash used in operating
      activities
                          
                          
                          (271,921
                          )
                          
                          
                          (180,933
                          )CASH
      FLOWS FROM INVESTING ACTIVITIES:Decrease (increase) of security
      deposit
                          
                          
                          15,306
                          
                          
                          
                          (5,352
                          )Net
      cash provided by (used in) investing activities
                          
                          
                          15,306
                          
                          
                          
                          (5,352
                          )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of common
      stock
                          
                          
                          15,000
                          
                          
                          
                          —Decrease in stock subscriptions
      payable
                          
                          
                          —
                          
                          
                          
                          (6,000
                          )Cash received from officer for
      common stock to be issued
                          
                          
                          110,000
                          
                          
                          
                          35,000Proceeds from notes
      payable
                          
                          
                          50,000
                          
                          
                          
                          —Net cash provided by financing
      activities
                          
                          
                          175,000
                          
                          
                          
                          29,000Net
      decrease in cash
                          
                          
                          (81,615
                          )
                          
                          
                          (157,285
                          )Cash
      at the beginning of year
                          
                          
                          131,798
                          
                          
                          
                          289,083Cash
      at the end of year
                          
                          $
                          50,183
                          
                          
                          $
                          131,798
  SUPPLEMENTAL
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
 Issuance
      of common stock for accrued consulting fees
                        
                        $
                        —
                        
                        
                        $
                        13,501Acquisition
      of software license financed by the issuance of a note
                        
                        $
                        100,000
                        
                        
                        
                        —
 
 The
accompanying notes to these consolidated financial statements are an integral
part of these statements.


F-6


SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
1 - THE COMPANY AND ITS OPERATIONS





In this
report, the terms "we," "us" and the "Company" refer to Shelron Group, Inc. and
its predecessors and subsidiary, unless the context indicates
otherwise.





B-Park
Communications LLC was formed on August 21, 2001. On October 26, 2001, B-Park
Communications LLC changed its name to B-Park Communications Inc. ("B-Park") and
was incorporated in the State of Delaware. B-Park was formed for the sole
purpose of acquiring the controlling interest in TTTTickets Holding Corp.,
("TTTTickets"). TTTTickets was incorporated under the laws of the State of
Massachusetts on June 6, 1987 as Professional Brushes, Inc.





On
November 9, 2001, B-Park, pursuant to a stock purchase agreement, acquired
9,000,000 shares of Common Stock of TTTTickets from the controlling stockholder
for $20,000 which is included in other operating expenses for the period ended
December 31, 2001 on the accompanying consolidated statement of operations.
TTTTickets formed a wholly owned subsidiary, TTTTickets Acquisition Corp., a
Delaware corporation ("Acquisition Corp."). Subsequently, pursuant to an
Agreement of Merger dated November 9, 2001 (the "Merger Agreement"), B-Park was
merged into Acquisition Corp. and Acquisition Corp. became the surviving
corporation. The transaction was effected by the Stockholders of B-Park
exchanging all of the outstanding shares of B-Park for 9,000,000 shares of
Common Stock of TTTTickets. Simultaneously with the closing of the Merger
Agreement, the sole Director of TTTTickets resigned and the Director of B-Park
was appointed the sole member of the Board of Directors of TTTTickets. The Stock
Purchase agreement and subsequent Merger Agreement effected a change in control.
Since TTTTickets was essentially a shell corporation and since the stockholder
of B-Park became a controlling stockholder and the Sole Director (the
"Director"); these transactions were accounted for as a capital transaction
accompanied by a recapitalization. The accounting was similar to a "reverse
acquisition" except that no goodwill was recorded with B-Park being the
accounting acquirer for financial statement purposes. Accordingly, the
consolidated financial statements include the historical results of operations
of B-Park for the period from its inception to December 31, 2002, and for
TTTTickets subsequent to the November 9, 2001 transaction date.





In
September 2002, TTTTickets changed its name to Shelron Group Inc. ("Shelron").
The Company changed its name due to the fact that it no longer operated in the
business of creating a secondary marketplace for individuals to buy and sell
event tickets on the Internet, to which the Company's former name was strongly
associated.





During
2004, the Company identified new business opportunities and diverted its
development efforts and resources from the development of products integrating
independent business applications to unify a variety of enterprise information
and services to the development of business intelligence (BI) software,
advertising and comparative shopping software products and
services.  During the second half of 2004 the Company commenced
marketing its comparative shopping software products and services in the United
States, to further market them worldwide.





On
October 20, 2008, the Company also effected a one to twenty-five reverse stock
split of its shares of common stock, par value $0.001.  All share
figures and results in the consolidated financial statements are
reflected on a post reverse split basis.




F-7





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





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





Basis
of Presentation and Principles of Consolidation





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





The
accompanying consolidated financial statements include the accounts of Shelron
and its wholly owned subsidiary (collectively, the "Company"). All significant
inter company transactions have been eliminated.





Reclassifications


Certain
reclassifications have been made to prior year statements to conform to the
current year presentation. These reclassifications have no impact on period
reported net income or cash flow.





Development
Stage Activities and Operations


From
inception through the fourth quarter of 2007, the Company was in the development
stage and has had insignificant revenues.  Statement of Financial
Accounting Standard ("SFAS") No. 7 defines a development stage activity as one
in which all efforts are devoted substantially to establishing a new business
and even if planned principal operations have commenced, revenues are
insignificant.  In the fourth quarter of 2007, management determined
that the Company was no longer in the development stage as the Company generated
significant revenues.





Use
of Estimates


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





Functional
Currency


The
majority of Company’s sales are in United States dollars. In addition, the
majority of the Company’s investing and financing activities are in United
States dollars. Accordingly, the Company has determined the United States dollar
as the currency of its primary economic environment and thus, its functional and
reporting currency. Non-dollar transactions and balances have been measured in
United States dollars in accordance with SFAS No. 52 “Foreign Currency
Translation.”  All transaction gains and losses from the measurement
of monetary balance sheet items denominated in non-dollar currencies are
reflected in the statement of operations as financial income or expenses, as
appropriate.





Cash


The
Company maintains cash in bank accounts which may, at times, exceed federally
insured limits. The Company has not experienced any loss on these
accounts.


F-8





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Fair
Value of Financial Instruments


Substantially
all of the Company's financial instruments, consisting primarily of cash
equivalents, accounts receivable, accounts payable and accrued expenses, other
current liabilities and convertible debentures, are carried at, or approximate,
fair value because of their short-term nature or because they carry market rates
of interest.





Accounts
Receivable


Accounts
receivable are reported at their outstanding unpaid principal balances reduced
by an allowance for doubtful accounts. The Company estimates doubtful accounts
based on historical bad debts, factors related to specific customers' ability to
pay, and current economic trends. The Company writes off accounts receivable
against the allowance when a balance is determined to be
uncollectible.  At December 31, 2008 and 2007, management considered
accounts receivable to be fully collectible; accordingly, no allowance for
doubtful accounts was provided for.





Property
and Equipment


Depreciation
of property and equipment is provided for by the straight-line method over the
estimated useful lives of the related assets. Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable.





Intangible
Assets


Intangible
assets are carried at cost less accumulated amortization. Amortization is
computed on the straight-line method over the estimated useful lives
of the assets. We periodically review the carrying value of our intangible
assets to determine whether impairment may exist under the provisions of SFAS
No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets”. We consider
relevant cash flow and profitability information, including estimated future
operating results, trends and other available information, in assessing whether
the carrying value of the intangible assets can be recovered. If it is
determined that the carrying value of the intangible assets will not be
recovered from the undiscounted future cash flows, the carrying value of the
assets would be considered impaired. An impairment charge is measured as any
deficiency in the amount of estimated fair value of the intangible assets over
carrying value.





Revenue
Recognition


The
Company's revenue derives from service revenue and the management of advertising
campaigns, both of which are related to ActiveShopper.





Service
revenue primarily derives from the implementation of partnership agreements
according to which the Company provides a service of directing traffic to
merchants' websites. Service revenue is primarily based on a pay-per-click
model, reported at their net values to the Company, which represent the revenues
the Company is entitled to receive according to the partnership agreements. In
order to recognize service revenue, the following criteria must be met: (i) the
partnership agreement must be signed by the customer, (ii) the signed agreement
must specify the fees to be received for the services, (iii) the service has
been performed and accepted by the customer, (iv) no significant Company
obligations remain and (v) collectability is probable.





Management
of advertising campaign revenues primarily relates to advertising through
ActiveShopper websites. In order to recognize management of advertising
campaigns revenue, the following criteria must be met: (i) an agreement must be
signed by the customer, (ii) the signed agreement must specify the fees to be
received, (iii) consultancy and management have been provided and accepted by
the customer, (iv) no significant Company obligations remain and (v)
collectability is probable.


F-9





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





When the
above stated revenue recognition criteria are not met, the Company records
deferred revenue.





Research
and Development


Costs
incurred in connection with the research and development of the Company's
products are expensed as incurred.





Marketing
and Advertising


Marketing
and advertising costs are expensed as incurred.





Income
Taxes


The
Company uses the liability method to determine its income tax. This method
requires the establishment of a deferred tax asset or liability for the
recognition of future deductible or taxable amounts and operating loss carry
forwards. Deferred tax expense or benefit is recognized as a result of the
changes in the assets and liabilities during the year. Valuation allowances are
established when necessary to reduce a deferred tax asset, if it is more likely
than not that all or a portion of it will not be realized.




In
June 2006, the FASB issued FASB Interpretation No. 48 (“ FIN 48 ”)
“Accounting for Uncertainty in Income Taxes (an interpretation of FASB Statement
No. 109”) which became effective in 2007. This interpretation was issued to
clarify the accounting for uncertainty in the amount of income taxes recognized
in the financial statements by prescribing a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained
upon examination by the taxing authorities. The amount recognized is measured as
the largest amount of benefit that is greater than 50 percent likely of
being realized upon ultimate settlement. The provisions of FIN 48 were adopted
by the Company on January 1, 2007 and had no effect on the Company's
financial statements upon adoption. The Company also evaluated its tax positions
as of December 31, 2008 and 2007 and reached the same
conclusion.





Earnings
(loss) per share


Basic
earnings (loss) per share is computed by dividing net income (loss) by the
weighted-average number of shares of Common Stock outstanding during the period.
Diluted earnings (loss) per share give effect to dilutive convertible
securities, options, warrants and other potential Common Stock outstanding
during the period, only in periods in which such effect is
dilutive.  The following securities have been excluded from the
calculation of net loss per share, as their effect would be
antidilutive:


2008
                    
                    
                    2007Series
      A convertible preferred stock
                    
                    
                    1,000,000
                    
                    
                    
                    1,000,000Convertible
      note payable
                    
                    
                    448,437
                    
                    
                    
                    —


Stock-based
Compensation


The
Company accounts for stock-based compensation in accordance with
SFAS No. 123(R), “Share-Based Payment.” Under
SFAS No. 123(R), an entity is required to measure the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award. That cost is recognized on a straight-line
basis over the period during which an employee is required to provide service in
exchange for the award.




F-10





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Equity instruments issued to non-employees are
recorded at their fair values as determined in accordance with SFAS No. 123
and Emerging Issues Task Force 96-18, “Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling
Goods and Services.”




Fair
Value Measurements


Effective
January 1, 2008, the Company adopted SFAS 157, “Fair Value Measurements,”
for all financial instruments and non-financial instruments accounted for at
fair value on a recurring basis. SFAS 157 establishes a new framework for
measuring fair value and expands related disclosures. Broadly, the SFAS 157
framework requires fair value to be determined based on the exchange price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants. SFAS 157 establishes market or
observable inputs as the preferred source of values, followed by unobservable
inputs or assumptions based on hypothetical transactions in the absence of
market inputs.




·     
      Level 1, is defined as observable inputs being quoted prices in active
      markets for identical assets;




·     
      Level 2, is defined as observable inputs including quoted prices for
      similar assets; and




·     
      Level 3, is defined as unobservable inputs in which little or no market
      data exists, therefore requiring assumptions based on the best information
      available.




The
adoption of SFAS 157 did not any impact on the Company's financial position or
results of operations.





Going
Concern


The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company has incurred losses of $426,701
and $511,448 for the years ended December 31, 2008 and 2007, and a working
capital deficiency which raises substantial doubt about the Company's ability to
continue as a going concern.





Management
believes that the company will continue to incur losses and negative cash flows
from operating activities for the foreseeable future and will need additional
equity or debt financing to sustain its operations until it can achieve
profitability and positive cash flows, if ever. Management plans to seek
additional debt and/or equity financing for the Company, but cannot assure that
such financing will be available on acceptable terms.  The Company's
continuation as a going concern is dependent upon its ability to ultimately
attain profitable operations, generate sufficient cash flow to meet its
obligations, and obtain additional financing as may be required. The outcome of
this uncertainty cannot be assured.





The
accompanying consolidating financial statements do not include any adjustments
that might result from the outcome of this uncertainty. There can be no
assurance that management will be successful in implementing its business plan
or that the successful implementation of such business plan will actually
improve the Company's operating results.




F-11





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS





In
December 2007, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 141(R), "Business Combinations (revised 2007)." SFAS
No. 141(R) applies the acquisition method of accounting for business
combinations established in SFAS No. 141 to all acquisitions where the
acquirer gains a controlling interest, regardless of whether consideration was
exchanged. Consistent with SFAS No. 141, SFAS No. 141(R) requires the
acquirer to fair value the assets and liabilities of the acquiree and record
goodwill on bargain purchases, with main difference the application to all
acquisitions where control is achieved. SFAS No. 141(R) is effective for
financial statements issued for fiscal years beginning after December 15,
2008.  The Company will adopt SFAS No. 141(R) on January 1, 2009;
however, the Company does not anticipate that the adoption will have a material
impact on its financial condition or results of its operations.




In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51." SFAS
No. 160 requires companies with noncontrolling interests to disclose such
interests clearly as a portion of equity but separate from the parent's equity.
The noncontrolling interest's portion of net income must also be clearly
presented on the income statement. SFAS No. 160 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. The
Company will adopt SFAS No. 160 as of January 1, 2009; however, it
does not anticipate that the adoption will have a material impact on its
financial condition or results of its operations.




In
February 2008, the FASB issued FASB Staff Position 157-2, "Effective Date
of FASB Statement No. 157," which delays the effective date of SFAS
No. 157 until January 1, 2009 for all nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).
The Company believes the adoption of the delayed items of SFAS No. 157 will
not have a material impact on its financial statements.




In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States (commonly referred to as the
GAAP hierarchy). The statement is effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles. The Company is currently evaluating the
potential impact, if any, the adoption of SFAS No. 162 will have on its
financial position, results of operations, cash flows, and
disclosures.




In
June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities.” This FSP provides that unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend equivalents (whether paid
or unpaid) are participating securities and shall be included in the computation
of earnings per share pursuant to the two-class method. This FSP is effective
for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. Upon adoption, a
company is required to retrospectively adjust its earnings per share data
(including any amounts related to interim periods, summaries of earnings and
selected financial data) to conform with the provisions in this FSP. Early
application of this FSP is prohibited. We have not issued any share-based
payment awards that contain nonforfeitable rights to dividends or dividend
equivalents.


F-12


SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
3 - PROPERTY AND EQUIPMENT Property
      and equipment, at cost, at December 31, 2008 and 2007 consists of:
      December 31,
 
 2008
                                    
                                    
                                    
                                    2007
                                    
                                    useful
      lifeSoftware
                                    
                                    $
                                    150,000
                                    
                                    
                                    $
                                    150,000
                                    
                                    5
      yearsOffice
      Equipment
                                    
                                    
                                    25,842
                                    
                                    
                                    
                                    24,725
                                    
                                    3-7
      yearsComputer
      Equipment
                                    
                                    
                                    25,045
                                    
                                    
                                    
                                    24,360
                                    
                                    3
      yearsFurniture
      and fixtures
                                    
                                    
                                    23,578
                                    
                                    
                                    
                                    23,406
                                    
                                    5-10
      years224,465
                                    
                                    
                                    
                                    222,491Less
      - accumulated depreciation and
      amortization210,051
                                    
                                    
                                    
                                    174,699$
                                    14,414
                                    
                                    
                                    $
                                    47,792




Depreciation
and amortization amounted to $38,582 and $39,087 for the years ended December
31, 2008 and 2007, respectively.





NOTE
4 - INTANGIBLE ASSETS





On April
18, 2005, the Company entered into an agreement with Infospace, Inc. to purchase
the rights, title and interest of Infospace, Inc. in the U.S. and foreign
trademarks, trade names and service marks for "ActiveShopper" and the domain
names activeshopper.com, activeshopper.org, active-shop.com, active-shopper.com,
active-shopper.net and active-shopper.org. The Company made a one-time payment
of $40,000.  The asset is being amortized on a straight-line basis
over a period of ten years.





On
December 30, 2008, the Company entered into a license agreement that grants the
Company a non-exclusive, perpetual, worldwide right and license to make, have
made and utilize software, trademarks and domain names for the sum of
$100,000. The asset is being amortized on a straight-line basis over a
period of fifteen years.





Amortization
totaled $4,000 and $4,000 for the years ended December 31, 2008 and 2007,
respectively.  Amortization for the next five years and thereafter is
expected to be as follows:  $10,667 for the years 2009 through 2013
and $72,665 thereafter.





NOTE
5 - DUE TO STOCKHOLDERS AND RELATED PARTIES





Hull Services, Inc.
("Hull")


The
Company is controlled by Hull, a company wholly-owned by the Company's Principal
Executive Officer/Principal Financial and Accounting officer.  In
March 2005, the Company entered into a consulting agreement with
Hull.  Pursuant to the terms of the agreement, Hull receives
consulting fees totaling $156,000 per annum in installments of $3,000 per
week.  Due to stockholder represents accrued but unpaid consulting as
well as other loans payable made by Hull.


F-13





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
5 - DUE TO STOCKHOLDERS AND RELATED PARTIES (Continued)





For each
of the years ended December 31, 2008 and 2007, consulting services totaled
$158,368 and $156,000, respectively.  Such amounts are reflected on
the statements of operations as employment compensation.  At December
31, 2008 and 2007, the Company owed Hull $188,620 and $83,615,
respectively.





Eliron
Yaron


Mr. Yaron
is the Company's Principal Executive Officer/Principal Financial and Accounting
Officer.  At December 31, 2008 and 2007, Mr. Yaron was owed $44,876
and $31,070, respectively.





Issuance of shares of Common
Stock to officer


In 2008,
the Company received proceeds totaling $110,000 from Mr. Yaron for shares of
Common Stock to be issued in 2009. In May
2008, the Company issued 233,333 (post reverse split) shares of its Common Stock
to Eliron Yaron at $0.15 per share for gross proceeds of $35,000.  The
proceeds were received by the Company in December 2007.  As the shares
were not issued until May 2008, such proceeds were not included in stockholders'
equity as of December 31, 2007.





NOTE
6 – NOTES PAYABLE





Convertible
Note
 On
October 2, 2008, the Company received proceeds of $50,000 for a unsecured
convertible note payable issued for working capital purposes.  The
note bears interest at 6% per annum and matures on April 18,
2009.  The note holder has the option to convert the note and related
accrued interest into share of the Company’s Common Stock ($.001 par value) at
equal or lower of (a) 20% below the average of the closing price of the Common
Stock for the five trading days prior to the date of the agreement and (b) the
average closing price of the Common Stock for the five trading days prior to the
date of the conversion notice.  The option expires on April 18,
2009.




Note
Payable
 On
December 30, 2008, the Company issued a note payable for $100,000 in order to
acquire a license to utilize software, trademarks and domain
names.  The note bears interest at 4% per annum and matures on
December 30, 2009.




NOTE
7 - STOCKHOLDERS' (DEFICENCY) EQUITY





Convertible
Preferred Stock


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





F-14





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
7 - STOCKHOLDERS' EQUITY (Continued)





Issuance
of shares of Common Stock
 In May
2008, the Company issued 233,333 (post reverse split) shares of its common stock
to Eliron Yaron at $0.15 per share for gross proceeds of $35,000.  The
proceeds were received by the Company in December 2007.
 
 On July
1, 2008, the Company issued 200,000 (post reverse split) shares of common stock
to an investor under a Shares Purchases Agreement for proceeds totaling
$15,000.





Issuance
of shares of Common Stock for services received


During
the year ended December 31, 2008, the Company issued 586,613 (post reverse
split) shares of its Common Stock to three service providers in consideration of
services rendered totaling $28,000.





During
the year ended December 31, 2007, the Company issued 35,971 (post reverse split)
shares of its Common Stock to one service provider in consideration of services
rendered totaling $13,501.





Subsequent
to December 31, 2008, the Company issued 50,000 (post reverse split) shares of
Common Stock to one service provider in consideration of services rendered
totaling $1,250.





NOTE
8 – STOCK BASED COMPENSATION





The
Company did not grant any options in 2008 or 2007.





F-15





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
9 – REVENUE AND MAJOR CUSTOMERS





During
the years ended December 31, 2008 and 2007, revenues in the amount of $45,265
and $329,244 were generated from the implementation of partnership agreements
according to which traffic is directed to merchants' websites through
ActiveShopper.





During
the year ended December 31, 2008, revenues generated from two customers
accounted for approximately 96% of total revenues, of which one customer
accounted for approximately 95% of total revenues.  These customers
comprise approximately 57% of the Company's accounts receivables at December 31,
2008, of which one customer accounted for approximately 51% of accounts
receivable.





During
the year ended December 31, 2007, revenues generated from two customers
accounted for approximately 97% of total revenues, of which one customer
accounted for approximately 94% of total revenues.  These customers
comprise approximately 85% of the Company's accounts receivables at December 31,
2007, of which one customer accounted for approximately 84% of accounts
receivable.





Revenues
were earned in the following countries:




2008
                      
                      
                      
                      2007United
      States
                      
                      $
                      44,223
                      
                      
                      $
                      317,234United
      Kingdom
                      
                      
                      243
                      
                      
                      
                      10,868Others
                      
                      
                      799
                      
                      
                      
                      1,142Total
                      
                      $
                      45,265
                      
                      
                      $
                      329,244


NOTE
10 - INCOME TAXES





The
Company files its tax returns in the United States while its subsidiary files
tax returns in Israel.





The
deferred income tax assets at December 31, 2008 and 2007 relate to temporary
differences between the financial statement carrying amounts and their tax
basis.  Assets that give rise to the deferred tax assets are as
follows at December 31:




2008
                      
                      
                      2007Net
      operating loss carry forwards
                      
                      $
                      1,763,000
                      
                      
                      $
                      1,619,000Valuation
      allowance
                      
                      
                      (1,763,000
                      )
                      
                      
                      (1,619,000
                      )Net
      income tax assets
                      
                      $
                      -
                      
                      
                      $
                      -


A
valuation allowance has been established equal to the full amount of the
deferred tax assets as the Company is not assured at December 31, 2008 and 2007
that it is more likely than not that these benefits will be
realized.





The
change in valuation allowance for the years ended December 31, 2008 and 2007 was
an increase of $144,000 and $22,000, respectively, due to increases in net
operating loss carry forwards.


F-16





SHELRON
GROUP INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





NOTE
10 - INCOME TAXES (Continued)





At
December 31, 2008, the Company has unused United States federal net operating
loss carry forwards of approximately $5,849,184 expiring between 2021 and 2028
and unused Israel net operating loss carry forwards of approximately $96,000.
The Israeli net operating loss carryforwards do not expire.




The
provisions of FIN 48 were adopted by the Company on January 1, 2007 and had
no effect on the Company's financial position, cash flows or results of
operations upon adoption, as the Company did not have any unrecognized tax
benefits. The Company also evaluated its tax positions as of December 31,
2008 and 2007 and reached the same conclusion.




The
Company does not currently expect any significant changes to unrecognized tax
benefits during the fiscal year ended December 31, 2009. The Company's
practice is to recognize interest and/or penalties related to income tax matters
in income tax expense. As of December 31, 2008 and 2007, the Company had no
accrued interest or penalties. In certain cases, the Company's uncertain tax
positions are related to tax years that remain subject to examination by the
relevant tax authorities. The Company files U.S. and state income tax returns in
jurisdictions with varying statutes of limitations. The 2005 through 2008 tax
years generally remain subject to examination by federal and most state tax
authorities.




NOTE
11 -  COMMITMENT





On May
31, 2008, the Company renewed its lease agreement for an approximately 77 square
meters of office space at 22 a Raul Wallenberg Street, Tel Aviv, Israel from an
unaffiliated party for approximately $1,500 per month in addition to certain
occupancy and office maintenance costs.   The lease expires in
May 2010, with an extension option for one more year.





Future
minimum lease payments for the office in Israel are as follows:


2009
                          
                          $
                          18,0002010
                          
                          
                          7,500Total
                          
                          $
                          25,500


Rent
expense for the years ended December 31, 2008 and 2007 totaled $28,244 and
$69,641, respectively.





F-17