UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 
 (Mark
One)
 x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the fiscal year ended December 31, 2009
  OR
 .
  ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 Commission
File Number 000-25991
 
 MANHATTAN
BRIDGE CAPITAL, INC.
 
 New York
                  11-3474831(State
      or other jurisdiction
                  (I.R.S.
      Employerof
      incorporation or organization)
                  Identification
      No.)
 
 192 Lexington Avenue, New
York, NY 10016
 (Address
of Principal Executive Office) (Zip Code)
 
 (212)
489-6800
 (Registrant’s
telephone number, including area code)
 
 Securities
registered pursuant to Section 12(b) of the Act:
 
 Title
      of each class
                Name
      of each exchange
                  on
      which registeredCommon
      Stock, par value $.001 per share
                The
      NASDAQ Capital Market
 
 Securities
registered pursuant to section 12(g) of the Act: NONE
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.     Yes  ̈.        No þ.
  Indicate
by check mark if theregistrant is not required to file
reports pursuant to Section 13 or 15(d) of the Act.Yes ̈.        Noþ.
  Indicate by check mark whether the
registrant (1) has filed all reports to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter earlier period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.    Yesþ.        No ̈.
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to post such files).Yes
 ̈.        No
 ̈.
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K 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.    þ
  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
definition of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Act.
  Large
      accelerated filer     ̈
              Accelerated
      filer     ̈Non-accelerated
      filer   ̈  (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 Exchange Act).    Yes  ̈.        No x
 
 The
aggregate market value of the Registrant’s voting and non-voting common stock
held by non-affiliates of the Registrant on June 30, 2009, computed by reference
to the closing price for such common stock on the NASDAQ Global Market on such
date, was approximately $1,520,915. (For this computation, the Registrant has
excluded the market value of all shares of its common stock reported as
beneficially owned by executive officers and directors of the Registrant and
certain other shareholders; such an exclusion shall not be deemed to constitute
an admission that any such person is an “affiliate” of the
Registrant.)
 
 As of
March 16, 2010 the registrant has a total of 3,324,459 shares of Common Stock
outstanding.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 None.
  
  MANHATTAN
BRIDGE CAPITAL, INC.
 FORM
10-K ANNUAL REPORT
 TABLE
OF CONTENTS
 
 PagePART
      IItem
      1.
                                                            Business
                                                            6Item
      1A.
                                                            Risk
      Factors
                                                            8Item
      1B.
                                                            Unresolved
      Staff Comments
                                                            12Item
      2.
                                                            Properties
                                                            12Item
      3.
                                                            Legal
      Proceedings
                                                            12Item
      4.
                                                            (Removed
      and Reserved)
                                                            12PART
      IIItem
      5.
                                                            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                                            13Item
      6.
                                                            Selected
      Financial Data
                                                            14Item
      7.
                                                            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                            14Item
      7A.
                                                            Quantitative
      and Qualitative Disclosures About Market Risk
                                                            21Item
      8.
                                                            Financial
      Statements and Supplementary Data
                                                            21Item
      9.
                                                            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                                            21Item 9A(T).
                                                            Controls
      and Procedures
                                                            21Item
      9B.
                                                            Other
      Information
                                                            23PART
      IIIItem
      10.
                                                            Directors,
      Executive Officers and Corporate Governance
                                                            24Item
      11.
                                                            Executive
      Compensation
                                                            27Item
      12.
                                                            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholders Matters
                                                            30Item
      13.
                                                            Certain
      Relationships and Related Transactions and Director
      Independence
                                                            31Item
      14.
                                                            Principal
      Accountant Fees and Services
                                                            32PART
      IVItem
      15.
                                                            Exhibits,
      Financial Statement Schedules
                                                            34SIGNATURES
                                                            
                                                            36EXHIBITS
                                                            
                                                            37
  
  FORWARD-LOOKING
STATEMENTS
  This
report contains forward-looking statements within the meaning section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”).  Forward-looking statements are typically identified by the
words “believe,” “expect,” “intend,” “estimate” and similar
expressions.  Those statements appear in a number of places in this
report and include statements regarding our intent, belief or current
expectations or those of our directors or officers with respect to, among other
things, trends affecting our financial conditions and results of operations and
our business and growth strategies.  These forward-looking statements
are not guarantees of future performance and involve risks and
uncertainties.  Actual results may differ materially from those
projected, expressed or implied in the forward-looking statements as a result of
various factors (such factors are referred to herein as “Cautionary
Statements”), including but not limited to the following: (i)  the
successful integration of new businesses that we may acquire; (ii) the success
of new operations which we have commenced and of our new business strategy;
(iii) our limited operating history in our new business; (iv) potential
fluctuations in our quarterly operating results; and (v) challenges facing us
relating to our growth.  The accompanying information contained in
this report, including the information set forth under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”, identifies
important factors that could cause such differences.  These
forward-looking statements speak only as of the date of this report, and we
caution potential investors not to place undue reliance on such
statements.  We undertake no obligation to update or revise any
forward-looking statements.  All subsequent written or oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the Cautionary
Statements.
 
 
 
 All
references in this Annual Report to “Manhattan Bridge Capital” “the Company,”
“we,” “us” and “our” refer to Manhattan Bridge Capital, Inc. a New York
corporation founded in 1989 and its consolidated subsidiaries DAG Funding
Solutions, Inc. (“DAG Funding”), formed under the laws of the State of New York
and DAG Interactive, Inc. (“DAG Interactive”) formed under the laws of Delaware
in May 2007 and December 2005, respectively, unless the context otherwise
requires.
  
  PART
I
 
 Item
1.  Business
 
 General
  The
Company provides short term, secured, non–banking, commercial loans, to small
businesses.
  Products
and services
  ▪
Manhattan Bridge Capital and DAG Funding.
  The
Company offers short-term secured commercial loans to small
businesses.  Loans are secured by collateral such as real estate,
receivables, and marketable securities and, generally, accompanied by personal
guarantees from the principals of the businesses.  The loans are
generally for a term of one year. Most of the loans provide for receipt of
interest only during the term of the loan and a balloon payment at the end of
the term. For the years ended December 31, 2009 and 2008 the total amounts of
$7,204,229 and $5,339,756, respectively, have been lent, offset by collections
received from borrowers, under the short term commercial loans in the amount of
$6,289,668 and $4,090,907, respectively. Loans ranging in size from $50,000 to
$1,020,000 were concluded at stated interest rates of 12% to 16%, but often at
higher effective rates based upon points or other up-front fees. The Company
uses its own employees, outside lawyers and other independent professionals to
verify titles and ownership, to file liens and to consummate the
transactions.  Outside appraisers are also employed to assist the
Company’s officials in evaluating the worth of collateral.  To date,
the Company has not experienced any defaults and none of the loans previously
made have been non-collectable, although no assurances can be given that
existing or future loans may not go into default or prove to be non-collectible
in the future.
  At
December 31, 2009, the Company is committed to an additional $1,822,000 in
construction loans that can be drawn by the borrower when certain conditions are
met.
  Growth
strategy
  The
immediate focus of our expansion plans is to increase the volume of our
short-term, secured commercial loans to small businesses.  As we gain
experience in these operations we believe we will be able to do
so.  If we develop a successful track record in our lending
operations, we will seek a warehouse line of credit from a commercial bank
which, if obtained, will enable us to maintain higher outstanding loan balances
to our customers.
  Sales
and Marketing
  The
Company offers its loans primarily through the Company’s officers and
independent loan brokers.  Leads have been generated through a limited
amount of newspaper advertising and direct mail.  A principal source
of new transactions has been repeat business from prior customers and their
referral of new business.
  6
  Government
regulation
  We are
subject to laws and regulations relating to business corporations generally,
such as the Occupational Safety and Health Act, Fair Employment Practices and
minimum wage standards. In addition, we are subject to laws and regulations
imposing various requirements and restrictions, which among other things
establish maximum interest rates, finance charges and charges we can impose for
credit and our right to repossess and sell collateral.
  We
believe that we are in compliance with all laws and regulations affecting our
business and we do not have any material liabilities under these laws and
regulations.  In addition, compliance with all of these laws and
regulations does not have a material adverse effect on our capital expenditures,
earnings, or competitive position.
  Competition
  As a
commercial lender, we face intense competition in our business from numerous
bank and non-bank providers of commercial loans. Our competitors include bank
and institutional commercial lenders in the mortgage lending businesses, such as
lending institutions and non-depository institutions that are able to offer the
same products and services.  Some of these companies are substantially
larger and have more resources than we do. In addition, such larger competitors
may have a larger customer base, operational efficiencies and more versatile
technology platforms than we do. Competitors will continue to increase pressures
on both us and other companies in our industry. Industry competitors have
continuously solicited our customers with varied loan programs and interest rate
strategies. Management believes the competition has put, and will continue to
put pressure on our pricing.
  We
believe that we are able to compete effectively in our current markets. There
can be no assurance, however, that our ability to market products and services
successfully or to obtain adequate returns on our products and services will not
be impacted by the nature of the competition that now exists or may later
develop.
  Website
access to Company’s reports and governance documents
  The
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports are available free of
charge on the Company’s website at www.manhattanbridgecapital.com as soon as
reasonably practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission. Copies of the Company’s
annual report are also available, on the Company’s website. Charters of the
Company’s Audit Committee, Compensation Committee, and Nominating Committee,
along with the Company’s Code of Ethics, are available for viewing on the
Company’s website.
  Intellectual
property
  To
protect our rights to our intellectual property, we rely on a combination of
federal, state and common law trademarks, service marks and trade names,
copyrights and trade secret protection.  We have registered some of
our trademarks and service marks in the United States Patent and Trademark
Office (USPTO) including the following marks relating to our current
business:
  7
  Manhattan
Bridge Capital
  DAG
Funding Solutions
  Nextyellow
  Let the
business do the walking
  Where the
business does the walking
  Where the
business calls you
  The
protective steps we have taken may be inadequate to deter misappropriation of
our proprietary information. These claims, if meritorious, could require us to
license other rights or subject us to damages and, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources on our part.
  On
December 31, 2005, DAG Interactive, our subsidiary, filed a patent application
with the USPTO to secure rights to its software, which matches vendors with
consumers using various networked medias.  We cannot anticipate the
length or the result of the patent application process and we cannot assure that
a patent will be issued.
  Employees
  As of
December 31, 2009, we employed a total of 3 people, including full-time and
executive employees. We believe that our relationships with our employees and
contractors are good.  None of our employees are represented by a
labor union.
  Item
1A. Risk Factors
  We are
exposed to certain risk factors that may affect growth and financial results.
The risks and uncertainties described below are not the only risks and
uncertainties that we face. Additional risks and uncertainties not presently
known to us or that are currently deemed immaterial may also impair our future
business operations.
  Risks
Related to our Business
  We
have generated only limited revenues from our lending operations
 
 We have
generated aggregate revenues of approximately $1.8 million from our lending
operations during 2009 and 2008 and there can be no assurance that we can
operate on a scale that would permit us to earn substantial income.
  We
may not be able to maintain or obtain trademark protection for our trademarks,
service marks and domain names, which could impede our efforts to build brand
identity.
  We regard
our intellectual property, particularly our trademarks, service marks and domain
names, as critical to our success. As a result, we rely on a combination of
contractual restrictions and trade secrets to protect our proprietary rights,
know-how, information and technology. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use our intellectual
property without authorization or independently develop similar intellectual
property.
  8
  We have
registered various trademarks relating to DAG Interactive, Inc. as well as filed
a patent application with the USPTO for DAG Interactive.
  Our
facilities are located in New York City, an area that has been and may again be
the target of terrorist acts or other catastrophic events.
  Our
headquarters and business office is located in New York City, an area that has
been and may again be the target of terrorist acts or other catastrophic events.
A terrorist attack or other catastrophic event could cause interruptions or
delays in our business.  Our systems are not fully redundant, and we
do not have backup operating facilities. We currently have no formal disaster
recovery plan or physical space to relocate in an emergency and our business
interruption insurance may not adequately compensate us for losses that may
occur.
  We
face intense competition in our market
  We
operate in a highly competitive environment, and we expect competitive
conditions to continue to intensify as merger activity in the financial services
industry continues to produce larger, better capitalized and more geographically
diverse companies that are capable of offering a wider array of financial
products and services at better prices. In such a competitive environment, we
may lose entire accounts, or may lose account balances, to competing financial
institutions, or find it more costly to maintain our existing customer base.
Customer attrition from any or all of our lending products, together with any
lowering of interest rates or fees that we might implement to retain customers,
could reduce our revenues and therefore our earnings.
  We expect
that competition will continue to grow more intensely with respect to our
products. Some of our competitors may be substantially larger than we are, which
may give those competitors advantages, including a more diversified product and
customer base, the ability to reach out to more customers and potential
customers, operational efficiencies, lower-cost funding, and larger existing
branch networks. These competitors may also consolidate with other financial
institutions in ways that enhance these advantages and intensify our competitive
environment.
  We
may experience increased delinquencies and credit losses
  Like
other lenders, we face the risk that our customers will not repay their loans.
Rising losses or leading indicators of rising losses (higher delinquencies,
non-performing loans, or bankruptcy rates; lower collateral values) may require
us to increase our allowance for loan losses and may degrade our profitability
if we are unable to raise revenue or reduce costs to compensate for higher
losses. The favorable credit environment we have experienced may not continue.
In particular, we face the following risks in this area:
  ·
              Missed
      Payments.  We face the risk that customers will miss
      payments. Loan charge-offs are generally preceded by missed payments or
      other indications of worsening financial condition. Our reported
      delinquency levels measure these trends. Customers may be more likely to
      miss payments in the event of an economic downturn. In addition, we face
      the risk that consumer and commercial customer behavior may change,
      causing a long-term rise in delinquencies and
  charge-offs;
  9
  ·
              Collateral.  We
      face the risk that collateral, when we have it, will be insufficient to
      compensate us for loan losses. When customers default on their loans and
      we have collateral, we attempt to seize it. However, the value of the
      collateral may not be sufficient to compensate us for the amount of the
      unpaid loan and we may be unsuccessful in recovering the remaining balance
      from our customers. Particularly with respect to our commercial lending
      and mortgage activities, decreases in real estate values could adversely
      affect the value of property used as collateral for our loans and
      investments. Thus, the recovery of such property could be insufficient to
      compensate us for the value of these
loans;
  ·
              Estimates of future
      losses.  We face the risk that we may underestimate our
      future losses and fail to hold a loan loss allowance sufficient to account
      for these losses. Incorrect assumptions could lead to material
      underestimates of future losses and inadequate allowance for loan losses.
      In addition, our estimate of future losses impacts the amount of reserves
      we build to account for those losses. The build or release of reserves
      impacts our current financial
results.
  We
face risk from economic downturns
  Delinquencies
and credit losses in individual and small business loans generally increase
during economic downturns or recessions. Likewise, demand from these borrowers
may decline during an economic downturn or recession. The effects of higher
interest rates, higher energy costs and pressure on housing prices may place
added strain on our customers’ ability to repay their loans.  These
risks may be exacerbated because our loans are concentrated in a single region,
the New York metropolitan area. Continuing decline in general economic
conditions could have a material adverse effect on our financial condition and
results of operations.
  We
Face Risk Related to the Strength and Growth of our
Operations
  Our
ability to grow and compete is dependent on our ability to borrow money to
leverage our loans and to build and manage the cost of an expanded
infrastructure
  Reputational
Risk and Social Factors May Impact our Results
  Our
ability to originate loans is highly dependent upon the perceptions of small
business borrowers and other external perceptions of our business. Adverse
perceptions regarding our reputation in the consumer, commercial and funding
markets could lead to difficulties in generating loans. In addition, adverse
developments or perceptions regarding the practices of our competitors may also
negatively impact our reputation. Finally, negative perceptions regarding the
reputations of third parties with whom we have important relationships, such as
our independent auditors, also may adversely impact our reputation.
  10
  We
May Face Limited Availability of Financing
  Our ability to grow and
compete is dependent on our ability to borrow money to leverage our loans and to
build and manage the cost of an expanded infrastructure.In general, the
amount, type and cost of our funding, including financing from other financial
institutions directly impact our expenses in operating our business and growing
our assets and therefore, can positively or negatively affect our financial
results.
  A number
of factors could make such financing more difficult, more expensive or
unavailable on any terms both domestically and internationally (where funding
transactions may be on terms more or less favorable than in the United States),
including, but not limited to, financial results and losses, specific events
that adversely impact our reputation, specific events that adversely impact the
financial services industry, counter-party availability, interest rate
fluctuations, rating agencies’ actions, and the general state of the U.S. and
world economies. Also, we compete for funding with other lenders, some of which
are publicly traded. Many of these lenders are substantially larger, may have
more capital and other resources.
  Our
growth depends on the continued services of Assaf Ran.
  We depend
on the continued services of Assaf Ran, our founder, president and chief
executive officer.  Mr. Ran supervises all aspects of our business.
Mr. Ran has entered into an employment agreement that is subject to
automatic one-year renewals on June 30th of
every year, unless either party gives a termination notice at least 180 days
prior to this date.  In addition, we have purchased a $500,000 key man
life insurance policy on Mr. Ran.
  Risks
Related to Our Common Stock
  Our
management and other affiliates have significant control of our common stock and
could significantly influence our actions in a manner that conflicts with our
interests and the interests of other shareholders.
  As of
December 31, 2009, our executive officers and directors collectively own
approximately 46.80% of the outstanding shares of our common stock or
beneficially own 54.70% of the outstanding shares of our common stock, assuming
the exercise of options which are currently exercisable or will become
exercisable within 60 days from the filing of this report, held by these
shareholders.  As a result, these shareholders, acting together, will
be able to exercise significant influence over matters requiring approval by our
shareholders, including the election of directors.  Such a
concentration of ownership may have the effect of delaying or preventing a
change in control of us, including transactions in which our shareholders might
otherwise receive a premium for their shares over then current market
prices.
  Our
shareholders may experience substantial dilution as a result of the exercise of
outstanding options to purchase our common stock.
  As of
December 31, 2009, we had outstanding options for 699,000 shares, with exercise
prices range from $0.67 to $4.47 per share.  The exercise of these
options could result in dilution to our existing shareholders and could have a
material adverse effect on our stock price.
  11
  Our
stock price is volatile, and purchasers of our common stock could incur
substantial losses.
  The
market price of our common stock may be influenced by many factors,
including:
  ·
              sales
      of large blocks of our common
stock;
  ·
              sales
      of our common stock by our executive officers, directors and significant
      stockholders and
  ·
              restatements
      of our financial results and/or material weaknesses in our internal
      controls.
 
 The stock
markets in general and the markets for real estate in particular, have
experienced extreme volatility that has often been unrelated to the operating
performance of particular companies. These broad market fluctuations may
adversely affect the trading price of our common stock. In the past, class
action litigation has often been instituted against companies whose securities
have experienced periods of volatility in market price. Any such litigation
brought against us could result in substantial costs, which would hurt our
financial condition and results of operations, divert management’s attention and
resources.
  Our
common stock has a limited trading market, which could limit your ability to
resell your shares of common stock at or above your purchase price.
  Our
common stock is quoted on the Nasdaq Capital Market and currently has a limited
trading market.  We cannot assure you that an active trading market
will develop or, if developed, will be maintained.  As a result, our
shareholders may find it difficult to dispose of shares of our common stock and,
as a result, may suffer a loss of all or a substantial portion of their
investment.
  Item 1B.
Unresolved Staff Comments
 
 None.
  Item
2.Properties
  Our
executive and principal operating office is located in New York, New
York.  We use this space for all of our operations.  This
space is occupied under a lease that expires June 30, 2011.  The
current monthly rent is $5,811 including electricity.  We believe this
facility is adequate to meet our requirements at our current level of business
activity.
  Item
3.  Legal Proceedings
  None.
  Item
4.  (Removed and Reserved)
  12
  PART
II
 
 Item
5.  Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
  (a)           Market
Information
  Our
Common Stock is traded on the NASDAQ Capital Market under the symbol
“LOAN”.
  The high
and low sales prices for our common stock as reported by the NASDAQ Capital
Market for the quarterly periods during 2009 and 2008 were as
follows:
  High
                          
                          
                          Low2008First
      Quarter
                          
                          $
                          1.28
                          
                          
                          $
                          0.86Second
      Quarter
                          
                          $
                          1.04
                          
                          
                          $
                          0.8Third
      Quarter
                          
                          $
                          1.1
                          
                          
                          $
                          0.01Fourth
      Quarter
                          
                          $
                          0.98
                          
                          
                          $
                          0.522009First
      Quarter
                          
                          $
                          0.79
                          
                          
                          $
                          0.55Second
      Quarter
                          
                          $
                          1.09
                          
                          
                          $
                          0.54Third
      Quarter
                          
                          $
                          1.05
                          
                          
                          $
                          0.8Fourth
      Quarter
                          
                          $
                          1.22
                          
                          
                          $
                          0.95
 
 On
March 9, 2010, the last reported sale price of our common stock on the
NASDAQ Capital Market was $1.42 per share.
  (b)           Holders
  As of
March 9, 2010, the approximate number of record holders of our Common Stock was
16. The number of holders does not include individuals or entities who
beneficially own shares but whose shares, which are held of record by a broker
or clearing agency, but does include each such broker or clearing agency as one
recordholder. American Stock Transfer & Trust Company serves as
transfer agent for our shares of common stock.
  (c)           Dividends
  In 2009
and 2008, we did not declare a dividend. At this point, we have no plans to pay
dividends.
  13
  (d)
              Issuer
      Purchases of Equity Securities
  Issuer Purchases of Equity
Securities in 2009
 Total Number of
                        Shares (or Units)
                        Purchased
                      
                      
                      Average Price
                        Paid per Share
                        (orUnit)
                      
                      
                      Total Number of
                        Shares (or Units)
                        Purchased as Part
                        ofPublicly
                        AnnouncedPlans
                        or Programs
                      
                      
                      Maximum Number
                        (or Approximate
                        Dollar Value) of
                        Shares (or Units)thatMay Yet Be
                        Purchased Under
                        thePlans or
                        Programs10/22/09
      -10/31/09 (1)
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      100,00011/1/
      09 – 11/30/09
                      
                      
                      1,200
                      
                      
                      $
                      1.03
                      
                      
                      
                      1,200
                      
                      
                      
                      98,80012/1/
      09 – 12/31/09
                      
                      
                      101
                      
                      
                      $
                      0.99
                      
                      
                      
                      101
                      
                      
                      
                      98,699Total
      in 2009
                      
                      
                      1,301
                      
                      
                      $
                      1.02
                      
                      
                      
                      1,301
                      
                      
                      
                      98,699
  (1)
              On
      October 22, 2009, the Board of Directors of the Company authorized a stock
      repurchase program. The program authorizes the Company to purchase up to
      100,000 common shares of the Company within the next 12
      months.
  Item
6.  Selected Financial Data
  The
Company is a “smaller reporting company” as defined by Regulation S-K and as
such, is not providing the information contained in this item pursuant to
Regulation S-K.
  Item
7.  Management’s Discussion and Analysis of
Financial Condition and Results of Operations
  The
following management’s discussion and analysis of financial condition and
results of operations should be read in conjunction with our audited
consolidated financial statements and notes thereto contained elsewhere in this
report.  This discussion contains forward-looking statements based on
current expectations that involve risks and uncertainties.  Actual
results and the timing of certain events may differ significantly from those
projected in such forward-looking statements.
  Overview
  The
Company offers short-term secured commercial loans to small
businesses.  Loans are secured by collateral such as real estate,
receivables, and marketable securities and, generally, accompanied by personal
guarantees from the principals of the businesses.  The loans are
generally for a term of one year. Most of the loans provide for receipt of
interest only during the term of the loan and a balloon payment at the end of
the term. For the years ended December 31, 2009 and 2008 the total amounts of
$7,204,229 and $5,339,756, respectively, have been lent, offset by collections
received from borrowers, under the short term commercial loans in the amount of
$6,289,668 and $4,090,907, respectively. Loans ranging in size from $50,000 to
$1,020,000 were concluded at stated interest rates of 12% to 16%, but often at
higher effective rates based upon points or other up-front fees.
  14
  The
Company uses its own employees, outside lawyers and other independent
professionals to verify titles and ownership, to file liens and to consummate
the transactions. Outside appraisers are also employed to assist the Company’s
officials in evaluating the worth of collateral.
  To date,
the Company has not experienced any defaults and none of the loans previously
made have been non-collectable, although no assurances can be given that
existing or future loans may not go into default or prove to be non-collectable
in the future.
  At
December 31, 2009, the Company was committed to an additional $1,822,000 in
construction loans that can be drawn by the borrower when certain conditions are
met.
  On April
20, 2006, the Company sold its remaining directories business for (i) $291,667
paid in cash at closing; (ii) a promissory note in the amount of $613,333
payable in 24 consecutive monthly installments of $25,556 each bearing interest,
at 5% per annum; and (iii) the Buyer’s assumption of liabilities relating to the
directories business.  The Company has been recording gains on the
2006 sale of the directories business under the installment method in proportion
to the payments received. Therefore the Company has recorded gains on this sale
in the amount of $0 and $72,917 for the years ended December 31, 2009 and 2008,
respectively.
  Critical
Accounting Policies and Use of Estimates
  The
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States (“GAAP”). On
July 1, 2009, the Financial Accounting Standards Board (“FASB”) released
the authoritative version of its new Accounting Standards Codification (“ASC”)
as the single source for GAAP, which replaces all previous GAAP accounting
standards. While not intended to change GAAP, ASC significantly changes the way
in which the accounting literature is organized. In the fourth quarter of fiscal
year 2009, the Company adopted ASC to reference GAAP accounting standards in its
consolidated financial statements. The adoption of ASC did not have an effect on
the Company’s consolidated financial position, results of operations or cash
flows.
  The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Management will base the use of estimates on (a) a
preset number of assumptions that consider past experience, (b) future
projections, and (c) general financial market conditions. Actual amounts could
differ from those estimates.
  The
Company recognizes revenues in accordance with ASC 605, which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements. ASC 605 outlines the basic criteria that must be met to recognize
revenue and provides guidance for disclosure related to revenue recognition
policies. In general, the Company recognizes revenue when (i) persuasive
evidence of an arrangement exists, (ii) delivery of the product has occurred or
services have been rendered, (iii) the sales price charged is fixed or
determinable, and (iv) collectibility is reasonably assured.
  15
  Interest
income from short term commercial loans is recognized, as earned, over the loan
period.
  Origination
fee revenue on short term commercial loans is amortized over the term of the
respective note.
  The
Company continually monitors events and changes in circumstances that could
indicate that the carrying amounts of long lived assets, including intangible
assets and goodwill, may not be recoverable. When such events or changes in
circumstances occur, the Company assesses the recoverability of long-lived
assets by determining whether the carrying value of such assets will be
recovered through undiscounted expected future cash flows. If the total of the
undiscounted cash flows is less than the carrying amount of these assets, the
Company recognizes an impairment loss based on the excess of the carrying amount
over the fair value of the assets.
  There
are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result.  See our
audited consolidated financial statements and Notes thereto which begin on page
F-1 of this Annual Report on Form 10-K, which contain accounting policies and
other disclosures required by generally accepted accounting principles in the
United States of America.
  Results
of operations
  Years
ended December 31, 2009 and 2008
  Total
revenue
  Total
revenue for the year ended December 31, 2009 was $1,039,000 compared to $758,000
for the year ended December 31, 2008 an increase of $281,000 or 37.1%. The
increase in revenue represents an increase in lending operations. In 2009,
$840,000 of the Company’s revenue represents interest income on the short term
secured commercial loans that the Company offers to small businesses compared to
$684,000 in 2008 and $199,000 represents origination fees on such loans compared
to $74,000 in 2008. Loans are secured by collateral such as real estate,
receivables, and marketable securities and generally are accompanied by personal
guarantees from the principals of the businesses.
  Web
Development expenses
  Web
development expenses for the year ended December 31, 2008 were $74,000. These
expenses are attributable to the amortization of nextyellow.com capitalized web
development costs. There were no web development expenses during the year ended
December 31, 2009 due to the fact that as of December 31, 2008 we decided that
these web development costs were not recoverable and therefore wrote off the
remaining  unamortized balance as of that date.
  16
  General
and administrative expenses
  General
and administrative expenses for the year ended December 31, 2009 were $673,000
compared to $682,000 for the year ended December 31, 2008, a decrease of $9,000
or 1.3%. This decrease is primarily attributable to a decrease in stock based
compensation expenses of approximately $65,000 in connection with non-cash
compensation, mainly due to decline in the share price, a decline in the risk
free interest rate and a decrease in number of options granted, a decrease in
professional fees of approximately $36,000 mainly due to a decrease in legal
expenses and accounting expenses and a decrease in investor relation expenses of
approximately $10,000, offset by an increase in payroll expenses of
approximately $106,000.
  Other
income (loss)
  For the
year ended December 31, 2009, we had other income of approximately $44,000
consisting mainly of dividend and interest income of approximately $24,000,
settlement income of $15,000 with the former CEO of Shopila Corp and realized
income on the sale of marketable securities of approximately $5,000. For the
year ended December 31, 2008, we had other loss of approximately $589,000
consisting mainly of other-than-temporary declines in the market value of
investments in marketable securities in the amount of $628,000 and a write-off
of investments in marketable securities in the amount of $93,000, offset by
dividend and interest income of approximately $74,000, a referral fee of
$29,000, a $10,000 fee in connection with the sale of a listing of potential
customers on the Nextyellow website and a
realized gain on the maturity of annuity contract in the amount of approximately
$18,000.
  Income
(loss) from continuing operations before income tax expense
  Income
from continuing operations before provision for income tax for the year ended
December 31, 2009 was $410,000 compared to a loss from continuing operations
before provision for income tax for the year ended December 31, 2008 of
$588,000. This increase is primarily attributable to an increase in revenue and
increase in other income (See other income (loss) factors noted
above).
  Income
tax expense
  In the
year 2009 the Company made a provision of $174,000 for income tax expense. In
the year 2008 the Company made a provision of $5,000 for income tax expense due
to the utilization of prior years’ net operating loss carry
forwards.
  Discontinued
Operations
  On April
20, 2006, the Company sold its remaining directories business for (i) $291,667
paid in cash at closing; (ii) a promissory note in the amount of $613,333
payable in 24 consecutive monthly installments of $25,556 each bearing interest,
at 5% per annum; and (iii) the Buyer’s assumption of liabilities relating to the
directories business.  The Company has been recording gains on the
2006 sale of the directories business under the installment method in proportion
to the payments received. Therefore the Company recorded gains on this sale in
the amount of $72,917 for the year ended December 31, 2008.
  17
  Liquidity
and Capital Resources
  At
December 31, 2009, we had cash, cash equivalents and marketable securities of
$1,112,000 and working capital of $7,332,000 compared to cash, cash equivalents
and marketable securities of $1,384,000 and working capital of $6,663,000 at
December 31, 2008.  The decrease in cash and cash equivalents and
marketable securities primarily reflects the making of short term commercial
loans in the total amount of $7,204,000, offset by collections received from
borrowers in the amount $6,290,000, an increase in income from operations of
approximately $364,000 and an increase in the value of marketable securities in
the amount of $143,000. The increase in working capital is primarily
attributable to the net income of approximately $236,000, a long term loan in a
prior year in the amount of $200,000 becoming due in the current year and an
increase in the value of marketable securities of approximately $143,000, offset
by an increase in income tax payable of approximately $151,000.
  Net cash
provided by operating activities was $486,000 for the year ended December 31,
2009 compared to $401,000 for the year ended December 31, 2008. The increase in
net cash provided by operating activities primarily results from an improvement
in collection of interest receivable during the year ended December 31, 2009
compared to the year ended December 31, 2008.
  Net cash
used in investing activities was $661,000 for the year ended December 31, 2009,
compared to $208,000 for the year ended December 31, 2008. Net cash used in
investing activities consisted primarily of the issuance of the Company’s short
term commercial loans in the amount of $7,204,000, offset by collection of these
loans in the amount of $6,290,000 and the proceeds from the sale of marketable
securities in the amount of $253,000.
  Net cash
provided by financing activities for the year ended December 31, 2008 was
$69,000.  Net cash provided by financing activities for 2008 reflects
the exercise of options in the amount of $78,000 by Mr. Ran our President and
Chief Executive Officer, offset by purchase of treasury stock in the amount of
$9,000. For the year ended December 31, 2009 cash used by financing activities
was $1,500, for the purchase of treasury stock.
  Until our
initial public offering in 1999, our only source of funds was cash flow from
operations, which funded both our working capital needs and capital
expenditures.  As a result of our initial public offering in May 1999,
we received proceeds of approximately $6.4 million, which has increased our
ability to pay operating expenses.  Our credit facilities are
limited.  As of December 31, 2009, our funds were invested in money
markets fund, marketable securities and short term commercial
loans.
  18
  Contractual
Obligations
  Contractual Obligations
                      
                      Total
                      
                      
                      Lessthan 1
                        Year
                      
                      
                      1-3
                        Years
                      
                      
                      3-5
                        Years
                      
                      
                      Morethan
                        5 yearsLong-Term
      Debt Obligations
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —Operating
      Lease Obligations
                      
                      
                      104,164
                      
                      
                      
                      69,135
                      
                      
                      
                      35,029
                      
                      
                      
                      —
                      
                      
                      
                      —Total
                      
                      $
                      104,164
                      
                      
                      $
                      69,135
                      
                      
                      $
                      35,029
                      
                      
                      $
                      —
                      
                      
                      $
                      —
  We
anticipate that our current cash balances together with our cash flows from
operations will be sufficient to fund the operations for the next 12
months.
  Recent
Technical Accounting Pronouncements
  In
December 2007, the FASB simultaneously issued new accounting standards for
business combinations under ASC 805, “Business Combinations” and ASC 810,
“Consolidation Variable
Interest Entities.”  Both standards update United States guidance on
accounting for “noncontrolling interests,” sometimes referred to as minority
interests, which interests represent a portion of a subsidiary not attributable,
directly or indirectly, to a parent. FASB and the International Accounting
Standards Board (“IASB”) have been working together to promote international
convergence of accounting standards. Prior to promulgation of these new
standards there were specific areas in accounting for business acquisitions in
which conversion was not achieved. The objective of both standards is to improve
the relevance, comparability, and transparency of the financial information that
a reporting entity provides in “business combinations” and consolidated
financial statements by establishing accounting and reporting standards. In
business combinations it is accomplished by establishing principles and
requirements concerning how an “acquirer” recognizes and measures identifiable
assets acquired, liabilities assumed, and noncontrolling interests in the
acquiree, as well as goodwill acquired in the combination or gain from a bargain
purchase; and determines information to be disclosed to enable users to evaluate
the nature and effects of business combinations. In consolidated financial
statements the standards require: identification of ownership interests held in
subsidiaries by parties other than the parent be clearly identified, labeled and
presented in consolidated financial position within equity (rather than
“mezzanine” between liabilities and equity) separately from amounts attributed
to the parent, with net income attributable to the parent and to the minority
interest clearly identified and presented on the face of consolidated statements
of income. The standards also provide guidance in situations where the parent’s
ownership interest in a subsidiary changes while the parent retains its
controlling financial interest. The standard also provides guidance on recording
a gain or loss based on fair value in situations involving deconsolidation of a
subsidiary. Entities must provide sufficient disclosures that distinguish
between interests of the parent and that of the noncontrolling interest. Both
standards are effective for fiscal years and interim periods beginning on or
after December 15, 2008 (that is January 1, 2009) for entities with calendar
years. Earlier adoption is prohibited. The standards shall be applied
prospectively as of the beginning of the fiscal year in which initially applied,
except for the presentation and disclosure requirements, which shall be applied
retrospectively for all periods presented. The adoption of these standards did
not have a material effect on the Company’s consolidated financial position,
results of operations or cash flows.
  19
  In April
2009, the FASB issued three related new accounting standards all of which impact
the accounting and disclosure related to certain financial
instruments:
  (i)
              ASC
      820-10-65, "Determining Fair Value When the Volume and Level of Activity
      for the Asset or Liability Have Significantly Decreased and Identifying
      Transactions That Are Not Orderly" provides additional guidance for
      estimating fair value in accordance with ASC 820-10 when the volume and
      level of activity for the asset or liability have significantly
      decreased.  It also includes guidance on identifying circumstances
      that indicate a transaction is not
orderly.
  (ii)
              ASC
      320, "Recognition and Presentation of Other-Than-Temporary Impairments"
      amends the other-than-temporary impairment guidance for debt securities to
      make the guidance more operational and to improve the presentation and
      disclosure of other-than-temporary impairments on debt and equity
      securities in the financial
statements.
  (iii)
              ASC
      825 and ASC 270 "Interim Disclosures about Fair Value of Financial
      Instruments" amends these ASC’s required disclosures about the fair value
      of financial instruments on an interim basis in addition to the annual
      disclosure requirements.
  All three
ASCs are required to be adopted for interim periods ending after June 15,
2009. The adoption of these standards had no material effect on the
Company’s consolidated results of operations, financial position or
liquidity.
  In May
2009, the FASB issued new accounting standards for Subsequent Events under ASC
855, “Subsequent Events”. ASC 855-10-05 establishes general standards for
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are available to be issued (“subsequent
events”). More specifically, ASC 855-10-05 sets forth the period after the
balance sheet date during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition in the financial
statements, identifies the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements and the disclosures that should be made about events or transactions
that occur after the balance sheet date. ASC 855-10-05 provides largely the same
guidance on subsequent events which previously existed only in auditing
literature. The disclosure is required in financial statements for interim and
annual periods ending after June 15, 2009. The Company has performed an
evaluation of subsequent events through March 16, 2010, which is the day the
financial statements were issued.
  In June
2009, the FASB issued “The FASB Accounting Standards Codification and Hierarchy
of Generally Accepted Accounting Principles” under ASC 105. ASC 105 establishes
the FASB Standards Accounting Codification (“Codification”) as the source of
authoritative U.S. generally accepted accounting principles (“GAAP”)
recognized by the FASB to be applied to nongovernmental entities and rules and
interpretive releases of the SEC as authoritative GAAP for SEC registrants. The
Codification supersedes all the existing non-SEC accounting and reporting
standards upon its effective date and subsequently, the FASB will not issue new
standards in the form of Statements, FASB Staff Positions or Emerging Issues
Task Force Abstracts. The adoption of this new standard did not have a material
effect on the Company’s disclosures of the consolidated financial
statements.
  20
  In
August 2009, the FASB issued an update to ASC 820. This Accounting
Standards Update (“ASU”) No. 2009-5, Measuring Liabilities at Fair Value
(“ASU 2009-5”) amends the provisions in ASC 820 related to the fair value
measurement of liabilities and clarifies for circumstances in which a quoted
price in an active market for the identical liability is not available. ASU
2009-5 is intended to reduce potential ambiguity in financial reporting when
measuring the fair value of liabilities. ASU 2009-5 is effective for the
Company in the first quarter of fiscal year 2010. ASU 2009-5 concerns disclosure
only.
  The
Company believes that the adoption of ASU 2009-5 will not have a material
effect on its consolidated financial statements.
  Management
does not believe that any other recently issued, but not yet effected,
accounting standards if currently adopted would have a material effect on the
Company’s consolidated financial statements.
  Item
7A.  Quantitative and Qualitative Disclosures About Market
Risk
  The
Company is a “smaller reporting company” as defined by Regulation S-K and as
such, is not providing the information contained in this item pursuant to
Regulation S-K.
  Item
8.  Financial Statements
  The
consolidated financial statements of the Company required by this item are set
forth beginning on page F-1.
  Item
9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
  None.
  Item
9A(T). Controls and Procedures
  1.
              Disclosure
      Controls and Procedures
  Our
management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of December 31, 2009 (the “Evaluation Date”).  Based upon that
evaluation, the chief executive officer and the chief financial officer
concluded that, as of the Evaluation Date, our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act (i) are
recorded, processed, summarized and reported, within the time periods specified
in the SEC’s rules and forms and (ii) are accumulated and communicated to
our management, including its chief executive and chief financial officer, as
appropriate to allow timely decisions regarding required
disclosure.
  21
  2.
              Internal
      Control over Financial Reporting
 
 (a)
              Management’s
      Annual Report on Internal Control Over Financial
  Reporting
  The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting. As defined by the
SEC, internal control over financial reporting is defined in Rule 13a-15(f)
or 15d-15(f) promulgated under the Exchange Act as a process designed by, or
under the supervision of, the Company's principal executive and principal
financial officers and effected by the Company's 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. The
Company's internal control over financial reporting is supported by written
policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the Company's assets; (2) provide 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 of the Company are being made only in accordance with
authorizations of the Company's management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on the financial statements.
  The
Company's internal control system was designed to provide reasonable assurance
to the Company's management and Board of Directors regarding the preparation and
fair presentation of published financial statements. All internal control
systems, no matter how well designed, have inherent limitations which may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
  Management
conducted an evaluation of the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2009. In making this assessment,
management used the framework set forth in the report entitled Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, or COSO. The COSO framework summarizes each of the
components of a company’s internal control system, including (i) the
control environment, (ii) risk assessment, (iii) control activities,
(iv) information and communication, and
(v) monitoring.  Based on this evaluation, management concluded
that the Company’s internal control over financial reporting was effective as of
December 31, 2009.
  This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this annual
report.
  22
  (b)
              Changes
      in Internal Control Over Financial
Reporting
 
 There was
no change in our internal controlover
financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the
Exchange Act) identified in connection with the evaluation required by Rules
13a-15(d) or 15d-15(d) that occurred during the fiscal quarter ended December
31, 2009 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
  Item
9B.    Other Information.
  None.
  23
  PART
III
 
 Item
10.  Directors,
Executive Officers and Corporate Governance.
  Executive
Officers and Directors
  Our
executive officers and directors and their respective ages are as
follows:
  Name
                                          
                                          Age
                                          
                                          PositionAssaf
      Ran
                                          
                                          44
                                          
                                          Founder,Chairman
      of the Board, Chief Executive Officer,   President and
      DirectorInbar
      Evron-Yogev
                                          
                                          37
                                          
                                          Chief
      Financial Officer, Treasurer and SecretaryMichael
      Jackson (1,2,3)
                                          
                                          45
                                          
                                          DirectorPhillip
      Michals (1,2,3)
                                          
                                          40
                                          
                                          DirectorEran
      Goldshmid (1,2,3)
                                          
                                          43
                                          
                                          DirectorMark
      Alhadeff
                                          
                                          46
                                          
                                          DirectorLyron
      Bentovim(2)
                                          
                                          41
                                          
                                          Director
 
 (1)
Member of the Compensation Committee
 (2) Member
of the Audit Committee
 (3) Member
of the Nominating Committee
  All
directors hold office until the next annual meeting of shareholders and until
their successors are duly elected and qualified.  Officers are elected
to serve subject to the discretion of the board of directors.
  The Board
of Directors, acting through the Nominating Committee, is responsible for
assembling for stockholder consideration a group of nominees that, taken
together, have the experience, qualifications, attributes, and skills
appropriate for functioning effectively as a Board.
  The
Nominating Committee looks for certain characteristics common to all board
members, including integrity, strong professional reputation and record of
achievement, constructive and collegial personal attributes, and the ability and
commitment to devote sufficient time and energy to Board service.
  In
addition, the Nominating Committee seeks to include on the Board a complementary
mix of individuals with diverse backgrounds and skills reflecting the broad set
of challenges that the board confronts.
  Set forth
below is a brief description of the background and business experience of our
executive officers and directors:
  24
  Assaf
Ran, our founder, has been our Chief Executive Officer and President since our
inception in 1989.
  Mrs.
Evron-Yogev joined The Company in March 2006, as our Chief Financial Officer,
Mrs. Evron-Yogev is an Israeli licensed CPA and has professional experience in
financial accounting.  From 2003 until accepting her position with us,
Mrs. Evron-Yogev worked at PriceWaterhouseCoopers (“PWC”) in New York City, as
an experienced senior associate on an audit team.  From 2000 to 2003
Mrs. Evron-Yogev worked at the Luboshitz Kasierer office of Arthur Andersen, in
Tel-Aviv, Israel as a senior associate in an audit team.
  Michael
J. Jackson has been a member of our Board since July 2000.  Since April
2007, he has been the Chief Financial Officer and the Executive Vice President
of iCrossing, Inc., a digital marketing agency. From September 1999 to April
2007, he was the corporate controller of AGENCY.COM, a global Internet
professional services company, for which he was the Chief Accounting Officer
from May 2000 until September 2001 and the Chief Financial Officer from October
2001 to April 2007.  From October 1994 until August 1999, Mr. Jackson
was a manager at Arthur Andersen, LLP and Ernst and Young.  Mr.
Jackson also served on the New York State Society Auditing Standards and
Procedures Committee from 1998 to 1999 and served on the New York State
Society’s SEC Committee from 1999 to 2001.  Mr. Jackson holds an M.B.A. in
Finance from Hofstra University and is a Certified Public Accountant. During the
past five years, until May 2008, Mr. Jackson also was a member of the Board of
Directors of Adstar, Inc. (PINKSHEETS: ADST.PK).
  Phillip
Michals has been a member of our Board of Directors since March 1999. Since
November 2000, he has also been a principal and a vice president of RG Michals,
a management-consulting firm for a broker-dealer. Since August
2006, Mr. Michals has been registered as an Investment Advisor for
GunnAllen Financial. Mr. Michals received a BS degree in human
resources from the University of Delaware in May 1992.
  Eran
Goldshmid has been a member of our board of directors since March
1999.  Mr. Goldshmid received certification as a financial
consultant in February 1993 from the School for Investment Consultants, Tel
Aviv, Israel, and a BA in business administration from the University of
Humberside, England in December 1998.  From December 1998 until July
2001, he had been the general manager of the Carmiel Shopping Center in Carmiel,
Israel.  Since August 2001, he has been president of the New York
Diamond Center, New York, NY.
  Mark
Alhadeff has been a member of our Board since December 2005.  Mr.
Alhadeff also serves as the Chief Technology Officer of DAG Interactive,
Inc.  Mr. Alhadeff is the co-founder of Ocean-7 Development, Inc., a
technology corporation in the business of providing programming services as well
as web development services and database solutions.  Mr. Alhadeff has
been Ocean-7’s president since its formation in 1999.  Prior to
founding Ocean-7, Mr. Alhadeff served as a consultant to various publishers,
worked as an art director and was actively involved in creating and implementing
the transition to digital production methodologies before they became common
industry practice.  Mr. Alhadeff is a Stony Brook University
graduate.
  Lyron
Bentovim has been a member of our Board since December 2008.  Since August
2009 Mr. Bentovim is Chief Operating Officer and Chief Financial Officer at
Sunrise Telecom a leader in test and measurement solutions for telecom, wireless
and cable networks.
  25
  From
August 2001 to July 2009, he has been a Portfolio Manager of SKIRITAI Capital
LLC, an investment advisor based in San Francisco. From May 2000 to August 2001,
he served as the President, COO and co-founder of WebBrix Inc., a retail channel
aiming to provide physical space and services for online retailers.
Additionally, Mr. Bentovim spent time as a Senior Engagement Manager with
strategy consultancies of USWeb/CKS and the Mitchell Madison Group from
September 1997 to May 2000. Mr. Bentovim Also serves on the Board of Top Image
Systems (TISA).
  The Audit
Committee meets with management and our independent auditors to determine the
adequacy of internal controls and other financial reporting
matters.  In addition, the committee provides an avenue for
communication between the independent accountants, financial management and the
Board.  Subject to the prior approval of the Board, the committee is
granted the authority to investigate any matter or activity involving financial
accounting and financial reporting, as well as our internal
controls.  The Nominating Committee is responsible for nominating
director candidates for the Annual Meeting of Stockholders each year and will
consider director candidates recommended by shareholders.  In
considering candidates submitted by shareholders, the Nominating Committee will
take into consideration the needs of the Board and the qualification of the
candidate.
  Section
16(a) Beneficial Ownership Reporting
Compliance
  Section
16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, and persons who own more than ten percent (10%) of a registered class
of our equity securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission.  Officers, directors and
greater than ten percent (10%) shareholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they file.
  To the
best of our knowledge, based solely on review of the copies of such forms
furnished to us, or written representations that no other forms were required,
we believe that all Section 16(a) filing requirements applicable to our
officers, directors and greater than ten percent (10%) shareholders were
complied with during 2009.
  Code
of Ethics
  We have
adopted a code of ethics that applies to our principal executive officer,
principal financial officer and other persons performing similar
functions.  This code of ethics is posted on our web site at www.manhattanbridgecapital.com.
  AuditCommittee
  We
currently have a separately- designated standing Audit Committee of the Board of
Directors which was established in compliance with Section 3(a)(58)(A) of
the Securities Exchange Act of
1934.  The members of our Audit Committee are Michael J.
Jackson, Phillip Michals, Eran Goldshmid and Lyron Bentovim. The Board of
Directors has determined that Michael Jackson, the chairman of the Audit
Committee, is qualified as an Audit Committee Financial Expert pursuant to Item
407(d)(5) of Regulations S-K.  Each of the Audit Committee members is
independent, as that term is defined in Section 10A(m)(3) of the
Exchange Act, and their relevant experience is more fully described
above.
  26
  Stockholder
Communications
  The board
has established a process to receive communications from stockholders.
Stockholders and other interested parties may contact any member (or all
members) of the board, or the non-management directors as a group, any board
committee or any chair of any such committee by mail or electronically. To
communicate with the board of directors, any individual director or any group or
committee of directors, correspondence should be addressed to the board of
directors or any such individual director or group or committee of directors by
either name or title. All such correspondence should be sent "c/o Corporate
Secretary" at 192 Lexington Avenue New York, New York 10016.
  All
communications received as set forth in the preceding paragraph will be opened
by the Secretary of the Company for the sole purpose of determining whether the
contents represent a message to our directors. Any contents that are not in the
nature of advertising, promotions of a product or service, patently offensive
material or matters deemed inappropriate for the board of directors will be
forwarded promptly to the addressee. In the case of communications to the board
or any group or committee of directors, the Company Secretary will make
sufficient copies of the contents to send to each director who is a member of
the group or committee to which the envelope or e-mail is
addressed.
  Item 11.  ExecutiveCompensation.
  The
following Summary Compensation Table sets forth all compensation earned, in all
capacities, during the years ended December 31, 2009 and 2008 by our
(i) principal executive officer, and (ii) executive officers, other
than the principal executive officer, whose salaries for the 2009 and 2008 years
as determined by Regulation S-K, Item 402, exceeded $100,000. These
individuals are referred to as the ‘‘named executive officers.’’
  Summary
Compensation Table
  Name and
                                        Principal
                                        Position
                                      
                                      Year
                                      
                                      
                                      Salary

                                          ($)
                                      
                                      
                                      Bonus

                                          ($)
                                      
                                      
                                      Stock
                                        Awards

                                          ($)
                                      
                                      
                                      Option
                                        Awards

                                          ($)
                                          (1)
                                      
                                      
                                      Non
                                        Equity
                                        Incentive
                                        plan
                                        Compen-sation

                                          ($)
                                      
                                      
                                      Non-qualified
                                        Deferred
                                        Compen-sation
                                        Earning

                                          ($)
                                      
                                      
                                      All Other
                                        Compen-
                                        sation

                                          ($)
                                          (2)
                                      
                                      
                                      Total

                                          ($)Assaf
      Ran Chief Executive Officer and President
                                      
                                      
                                      2009
                                        2008
                                      
                                      
                                      $
                                        $
                                      91,586
                                        56,250
                                      
                                      
                                      $
                                      65,000
                                        —
                                      
                                      
                                      
                                      —
                                        —
                                      
                                      
                                      $
                                        $
                                      47,574
                                        70,939
                                      
                                      
                                      $
                                        $
                                      2,748
                                        1,687
                                      
                                      
                                      
                                      —
                                        —
                                      
                                      
                                      $
                                        $
                                      2,748
                                        1,687
                                      
                                      
                                      $
                                        $
                                      206,908
                                        128,876
 
 (1)
Consists of stock options valued in accordance with ASC Topic 718
 (2)
Company’s matching contributions are made pursuant to a simple master IRA
plan.
  27
  Employment
Contracts
  In March
1999, we entered into an employment agreement with Assaf Ran, our President and
Chief Executive Officer.  Mr. Ran’s employment term renews
automatically on July 1st of each year for successive one-year periods unless
either party gives 180 days written notice of its intention to terminate the
agreement.  Under the agreement, Mr. Ran receives an annual base
salary of $75,000 and annual bonuses as determined by the compensation committee
of the Board of Directors in its sole and absolute discretion and is eligible to
participate in all executive benefit plans established and maintained by
us.  Under the agreement, Mr. Ran agreed to a one-year non-competition
period following the termination of his employment. As of March 2003 the
compensation committee approved an increase in Mr. Ran’s compensation to an
annual base salary of $225,000. On March 13, 2008 the compensation committee
approved Mr. Ran’s reduction of his annual salary by 75% to $56,000 for an
additional one year or until the Company has more significant operations (as
defined by the Committee). On March 18, 2009 the compensation committee approved
Mr. Ran’s continuing the reduction of his annual salary to $100,000 for one year
or until the Company has more significant operations (as defined by the
Committee). In November 2009, the Compensation committee of the Board of
Directors approved Mr. Ran a one-time bonus of $65,000 for the year 2009. Mr.
Ran’s annual base compensation was $92,000 and $56,000 during the years 2009 and
2008, respectively.
  Outstanding
Equity Awards at Fiscal Year-End
  The
following table sets forth information concerning outstanding options to
purchase our common stock by the named executive as of December 31,
2009.
  Option Awards
                                      
                                      Stock AwardsName
                                        (a)
                                      
                                      
                                      
                                      Number of
                                        Securities
                                        Underlying
                                        Unexercised
                                        Options
                                        (#)
                                        Exercisable
                                      
                                      
                                      Number of
                                        Securities
                                        Underlying
                                        Unexercised
                                        Options
                                        (#)
                                        Unexercisable
                                      
                                      
                                      Equity
                                        Incentive Plan
                                        Awards:
                                        Number of
                                        Securities
                                        Underlying
                                        Unexercised
                                        Unearned
                                        Options
                                        (#)
                                      
                                      
                                      Option
                                        Exercise
                                        Price
                                        ($)
                                      
                                      Option
                                        Expiration
                                        Date
                                      
                                      Number
                                        of Shares
                                        or Units
                                        of Stock
                                        That
                                        HaveNot
                                        Vested
                                        (#)
                                      
                                      
                                      Market
                                        Value of
                                        Shares or
                                        Units of
                                        Stock That
                                        Have Not
                                        Vested
                                        ($)
                                      
                                      
                                      Equity
                                        Incentive
                                        Plan
                                        Awards:
                                        Number
                                        of
                                        Unearned
                                        Shares,
                                        Units or
                                        Other
                                        Rights
                                        That
                                        Have Not
                                        Vested
                                        (#)
                                      
                                      
                                      Equity
                                        Incentive Plan
                                        Awards:
                                        Market or
                                        Payout Value
                                        of Unearned
                                        Shares, Units
                                        or Other
                                        Rights That
                                        Have Not
                                        Vested
                                        ($)Assaf
      Ran
                                      
                                      2005
                                      (1)
                                      
                                      70,000
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      $
                                      4.47
                                      
                                      3/3/2010
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Chief
      Executive
                                      
                                      2006
                                      (2)
                                      
                                      140,000
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      $
                                      2.26
                                      
                                      3/15/2011Officer
      and
                                      
                                      2007
                                      (3)
                                      
                                      70,000
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      $
                                      1.69
                                      
                                      3/22/2012President
                                      
                                      2008
                                      (4)
                                      
                                      46,667
                                      
                                      
                                      
                                      23,333
                                      
                                      
                                      
                                      —
                                      
                                      
                                      $
                                      1.01
                                      
                                      3/13/20132009
                                      (5)
                                      
                                      46,667
                                      
                                      
                                      
                                      93,333
                                      
                                      
                                      
                                      
                                      
                                      
                                      $
                                      0.74
                                      
                                      3/18/2014
 
 (1)
              The
      options were granted on March 3, 2005.  One third of such
      options vested immediately and the balance vest in equal annual
      installments on each anniversary of the grant date.  The
      exercise price represents 110% of the fair market price on the date of
      grant.
   28
  (2)
              The
      options were granted on March 15, 2006.  One third of such
      options vested immediately and the balance vest in equal annual
      installments on each anniversary of the grant date.  The
      exercise price represents 110% of the fair market price on the date of
      grant.
  (3)
              The
      options were granted on March 22, 2007.  One third of such
      options vested immediately and the balance vest in equal annual
      installments on each anniversary of the grant date.  The
      exercise price represents 110% of the fair market price on the date of
      grant.
  (4)
              The
      options were granted on March 13, 2008.  One third of such
      options vested immediately and the balance vest in equal annual
      installments on each anniversary of the grant date.  The
      exercise price represents 110% of the fair market price on the date of
      grant.
  (5)
              The
      options were granted on March 18, 2009.  One third of such
      options vested immediately and the balance vest in equal annual
      installments on each anniversary of the grant date.  The
      exercise price represents 110% of the fair market price on the date of
      grant.
  In
addition, Inbar Evron-Yogev, our current Chief Financial Officer was granted
options for 5,000 shares of the Company’s common stock on each of on March 15,
2006, March 22, 2007 and March 13, 2008.  The exercise price of each
option is $2.05, $1.54 and $0.92, respectively, which was the fair market price
on the date of the grant.
  Compensation
of Directors
  Non-employee
directors are granted, upon becoming a director, and renewal of director term,
five-year options to purchase 7,000 shares of common stock at an exercise price
equal to the fair market value of a share of common stock on the date of
grant.  They also receive cash compensation of $600 per board meeting
attended and $300 for any other committee participation. Assaf Ran and Mark
Alhadeff do not receive compensation in connection with their position on our
board.
  Director
Compensation
 Name

                          (a)
                      
                      Fees
      Earned or
                        Paid
      in Cash
                        ($)
                      
                      
                      Option Awards
                        ($)

                          (1)
                      
                      
                      Total ($)Michael
      Jackson (2)
                      
                      $
                      2,400
                      
                      
                      $
                      3,764
                      
                      
                      $
                      6,164Phillip
      Michals(2)
                      
                      $
                      2,700
                      
                      
                      $
                      3,764
                      
                      
                      $
                      6,464Eran
      Goldshmid (2)
                      
                      $
                      2,700
                      
                      
                      $
                      3,764
                      
                      
                      $
                      6,464Mark
      Alhadeff
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Lyron
      Bentovim (3)
                      
                      $
                      1,800
                      
                      
                      $
                      6,256
                      
                      
                      $
                      8,056
  (1)
              Consists
      of stock options. Valuation is based on ASC Topic
  718.
  (2)
              Represents
      option awards to purchase 7,000 shares of our common
    stock..
  (3)
              Representsoption awards to purchase 14,000 shares of our common
      stock.
  29
  Item
12.  Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters
  The
following table, together with the accompanying footnotes, sets forth
information, as of March 16, 2010, regarding the beneficial ownership of our
common stock by all persons known by us to beneficially own more than 5% of our
outstanding common stock, each named executive officer, each director, and all
of our directors and officers as a group:
  Name of Beneficial Owner (1)
                        
                        Title of
                          Class
                        
                        Amount and
                          Nature of
                          Beneficial
                          Ownership (2)
                        
                        
                        Percentage
                          of
                          ClassExecutive
      Officers and DirectorsAssaf
      Ran (3)
                        
                        Common
                        
                        
                        1,848,928
                        
                        
                        
                        50.00
                        %Michael
      Jackson (4)
                        
                        Common
                        
                        
                        35,000
                        
                        
                        
                        1.04
                        %Phillip
      Michals (5)
                        
                        Common
                        
                        
                        50,000
                        
                        
                        
                        1.49
                        %Eran
      Goldshmid (4)
                        
                        Common
                        
                        
                        35,000
                        
                        
                        
                        1.04
                        %Mark
      Alhadeff (6)
                        
                        Common
                        
                        
                        135,000
                        
                        
                        
                        3.97
                        %Lyron
      Bentovim (7)
                        
                        Common
                        
                        
                        19,358
                        
                        
                        
                        *All officers and directors as
      a group(7 persons)
                        
                        Common
                        
                        
                        2,135,286
                        
                        
                        
                        54.70
                        %
 
 * Less
than 1%
  (1)           Unless
otherwise provided, the address of each of the individuals above is c/o
Manhattan Bridge Capital, Inc., 192 Lexington Avenue, New York, New York
10016.
  (2)           A
person is deemed to be a beneficial owner of securities that can be acquired by
such person within 60 days from March 16, 2010 upon the exercise of options and
warrants or conversion of convertible securities.  Each beneficial
owner’s percentage ownership is determined by assuming that options, warrants
and convertible securities that are held by such person (but not held by any
other person) and that are exercisable or convertible within 60 days from March
16, 2010 have been exercised or converted.  Except as otherwise
indicated, and subject to applicable community property and similar laws, each
of the persons named has sole voting and investment power with respect to the
shares shown as beneficially owned.  All percentages are determined
based on 3,324,459 shares outstanding on March 16, 2010.
  (3)  Includes
373,333 shares that are vested options as of December 31, 2009.
  (4)  All
of the shares beneficially owned by Michael Jackson and Eran Goldshmid are
vested options as of December 31, 2009.
  (5)  Includes
35,000 shares that are vested options as of December 31, 2009.
  (6)  Includes
75,000 shares that are vested options as of December 31, 2009.
  (7)  Includes
14,000 shares that are vested options as of December 31, 2009.
  30
  Equity
Compensation Plan Information
  On June
23, 2009 the Company adopted the 2009 Stock Option Plan (the “Plan”) and
replaced the 1999 Stock Option Plan as amended (the “Prior Plan”), which expired
in May of 2009. Options granted under the Prior Plan remain outstanding until
expired, exercised or cancelled.
  The
following table summarizes the (i) options granted under the Company’s 1999
Stock Option Plan, (ii) options granted under the Company’s 2009 Stock Option
Plan, and (iii) options granted outside the Company Option Plan, as of December
31, 2009.  The shares covered by outstanding options and warrants are
subject to adjustment for changes in capitalization stock splits, stock
dividends and similar events.  No other equity compensation has been
issued.
  Equity Compensation Plan TableNumber of
                    securities(1) to
                    be issued upon
                    exercise of
                    outstanding
                    options,
                    warrantsand
                    rights
                  
                  
                  Weighted-average
                    exercise price of
                    outstanding
                    options, warrants
                    and rights
                  
                  
                  Number of
                    securities(1)
                    remaining
                    availablefor
                    future issuance
                    under equity
                    compensation
                    plansEquity
      Compensation Plans Approved By Security HoldersGrants
      under the Company’s 1999 Stock OptionPlan
                  
                  
                  596,000
                  
                  
                  $
                  1.85
                  
                  
                  
                  0Grants
      under the Company’s 2009 Stock OptionPlan
                  
                  
                  28,000
                  
                  
                  $
                  0.93
                  
                  
                  
                  172,000Equity
      Compensation Plans Not Requiring Approval By Security
    HoldersAggregate
      Individual Option Grants
                  
                  
                  75,000
                  
                  
                  $
                  2.37
                  
                  
                  Not applicableTotal
                  
                  
                  699,000
                  
                  
                  $
                  1.87
                  
                  
                  
                  172,000
  The
market value of the common stock underlying the options abovementioned, as of
March 16, 2010 is $768,000.
  Item
13.  Certain Relationships and Related Transactions and Director
Independence
  Ocean-7
currently holds a 20% interest in DAG Interactive, our subsidiary. Mark Alhadeff
is the controlling shareholder of Ocean-7. Effective December, 2005 Mr. Alhadeff
became a member of our Board of Directors.
  Director
Independence
 
 Our Board
of Directors is comprised of Assaf Ran, Michael J. Jackson, Mark Alhadeff,
Phillip Michal, Eran Goldshmid and Lyron Bentovim.
  The Board
has determined, in accordance with Nasdaq’s listing standards, that:
(i) Messrs. Jackson, Michals, Goldschmid and Bentovim (the “Independent
Directors”) are independent and represent a majority of its members;
(ii) Messrs. Jackson, Michals, Goldschmid and Bentovim, as the sole
members of the Audit Committee, are independent for such purposes; and
(iii) Messrs. Jackson, Michals and Goldschmid, members of Compensation
Committee, as the sole members of the Compensation Committee, are independent
for such purposes.
  31
  In
determining director independence, our Board applies the independence standards
set by Nasdaq. In its application of such standards the Board takes into
consideration all transactions with Independent Directors and the impact of such
transactions, if any, on any of the Independent Directors’ ability to continue
to serve on our Board. To that end, for the fiscal year ended 2009, our Board
considered the options awarded to the Independent Directors disclosed above in
“Item 11 – Executive Compensation – Director Compensation” and determined
that those transactions were within the limits of the independence standards set
by Nasdaq and did not impact their ability to continue to serve as Independent
Directors.
  Item
14.  Principal Accountant Fees and Services
  The
aggregate fees billed by our principal accounting firm, Hoberman, Miller,
Goldstein & Lesser, P.C, for the fiscal years ended December 31, 2009
and 2008 are as follows:
  (a)           Audit
Fees
  2009
  The
aggregate fees incurred during 2009 for Hoberman, Miller, Goldstein &
Lesser, P.C, our principal accountant, were $47,500, covering the audit of our
annual financial statements and the review of our financial statements for the
first, second and third quarters of 2009.
  2008
  The
aggregate fees incurred during 2008 for Hoberman, Miller, Goldstein &
Lesser, P.C, our principal accountant, were $45,000, covering the audit of our
annual financial statements and the review of our financial statements for the
first, second and third quarters of 2008.
  The
aggregate fees billed during 2008 by Amper, Politziner & Mattia,
P.C., our former principal accountant were $10,000, covering the reissue
of its audit opinion for 2006.
  (b)           Audit-Related
Fees
  There
were no audit-related fees billed by Hoberman, Miller, Goldstein & Lesser,
P.C, our principal accountant during 2009 or 2008.
  There
were no audit-related fees billed by Amper, Politziner & Mattia,
P.C., our former principal accountant during 2009 or 2008.
  (c)           Tax
Fees
  Tax fees
of $2,500 were billed by our principal accountants in 2009 for preparing the
2008 tax return.
  Tax fees
of $6,000 were billed by our principal accountants in 2008 for preparing the
2007 tax return.
  32
  (d)       All
Other Fees
  Our
principal accountants billed no other fees, beyond those disclosed in this Item
14, in 2009 and 2008.
  Audit
Committee Pre-Approval, Policies and Procedures
  Our Audit
Committee approved the engagement with Hoberman, Miller, Goldstein & Lesser,
P.C, our principal accountant, in advance. In addition the Audit Committee
approved tax services (as described in c above) provided by our independent
auditors. These services were pre-approved by our Audit Committee to assure that
such services do not impair the auditor’s independence from us.
  The
percentage of hours expended on audit by persons other than our principal
accountant’s full time, permanent employees, did not exceed 50%.
  33
  PART
IV
  Item
15.  Exhibits, Financial Statement Schedules
  (a)
              1.Financial
      Statements- See
      Index to Financial Statements on page
F-1.
  2.  Financial
Statement Schedules–See (c) below.
  3.  Exhibits–See (b) below.
  (b)
              Certain
      of the following exhibits were filed as Exhibits to the registration
      statement on form SB-2, Registration No. 333-74203 and amendments thereto
      (the "Registration Statement") filed by the Registrant under the
      Securities Act of 1933, as amended, or the reports filed under the
      Securities and Exchange Act of 1934, as amended, and are hereby
      incorporated by reference.
  ExhibitNo.
                  
                  Description3.1(a)
                  
                  Certificate
      of Incorporation of the Company (1)3.1(b)
                  
                  Certificate
      of Amendment of the Certificate of Incorporation (7)3.1(c)
                  
                  Certificate
      of Change (6)3.2
                  
                  By-laws
      of the Company (1)4.1
                  
                  Specimen
      Stock Certificate (2)4.2
                  
                  Form
      of Underwriter’s Warrant (1)10.1*
                  
                  Employment
      Agreement dated March 1, 1999 by and between Assaf Ran and the Company
      (1)10.2*
                  
                  Form
      of the Company’s 1999 Stock Option Plan As Amended (3)10.3
                  
                  Web
      Site Company Formation, Development and Services Agreement dated December
      5, 2005 by and between Manhattan Bridge Capital, Inc. and Ocean-7
      Development, Inc. (4)10.5
                  
                  Lease
      Agreement by and between The Company. and Cres, Inc. for the premises
      located at 192 Lexington Avenue, New York, New York
      10016.  (5)10.6*
                  
                  Form
      of the Company’s 2009 Stock Option Plan (7)23.1
                  
                  Consent
      of Hoberman, Miller, Goldstein & Lesser, P.C., dated March 16, 2010.
      (filed herewith)31.1
                  
                  Chief
      Executive Officer Certification as required under section 302 of the
      Sarbanes Oxley Act (filed herewith)31.2
                  
                  Chief
      Financial Officer Certification as required under section 302 of the
      Sarbanes Oxley Act (filed herewith)32.1**
                  
                  Chief
      Executive Officer Certification pursuant to 18 U.S.C. section 1350 as
      adopted pursuant to section 906 of the Sarbanes Oxley Act (furnished
      herewith)32.2**
                  
                  Chief
      Financial Officer Certification pursuant to 18 U.S.C. section 1350 as
      adopted pursuant to section 906 of the Sarbanes Oxley Act (furnished
      herewith)
 
 *
Compensation plan or arrangement for current or former executive officers and
directors.
 **
Furnished, not filed, in accordance with item 601(32)(ii) of Regulation
S-K.
 (1)
              Previously
      filed as exhibit to Form SB-2 on March 10,
1999.
 (2)
              Previously
      filed as exhibit to Form SB-2/A on April 23,
  1999.
 (3)
              Previously
      filed as exhibit to Form S-8 on February 8,
  2002.
  34
  ExhibitNo.
                
                Description
 (4)
                Previously
      filed as exhibit to Form 8-K on December 12, 2005.(5)
                Previously
      filed as an exhibit to Form 10-QSB on August 14,
  2006.
 
 (6)
              Previously
      filed as exhibit to Form 8-K on July 24,
2008.
 (7)
              Previously
      filed as exhibit to Form DEF 14A on May 15,
  2009.
  (c)
              No
      financial statement schedules are included because the information is
      either provided in the financial statements or is not required under the
      related instructions or is inapplicable and such schedules therefore have
      been omitted.
  35
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
  Manhattan
      Bridge Capital, Inc.By:
                /s/ Assaf RanAssaf
      Ran, President, Chief Executive
                  Officer
      and Chairman of the Board of
                  Directors
 Date:  March
16, 2010
  In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on March
16, 2010:
  Signature
                  
                  Date
                  
                  Title/s/ Assaf Ran
                  
                  March
      16, 2010
                  
                  President,
      Chief Executive OfficerAssaf
      Ran
                  
                  
                  
                  and
      Chairman of the Board of
                    Directors
      (principal executive
                    officer)/s/ Inbar Evron-Yogev
                  
                  March
      16, 2010
                  
                  Chief
      Financial Officer (principalInbar
      Evron-Yogev
                  
                  
                  
                  financial
      and accounting officer)/s/ Phillip Michals
                  
                  March
      16, 2010
                  
                  DirectorPhillip
      Michals/s/ Eran Goldshmid
                  
                  March
      16, 2010
                  
                  DirectorEran
      Goldshmid/s/ Michael Jackson
                  
                  March
      16, 2010
                  
                  DirectorMichael
      Jackson/s/ Mark Alhadeff
                  
                  March
      16, 2010
                  
                  DirectorMark
      Alhadeff/s/ Lyron Bentovim
                  
                  March
      16, 2010
                  
                  DirectorLyron
      Bentovim
  36
 MANHATTAN BRIDGE CAPITAL,
INC.
 
 Index to Consolidated
Financial Statements
 
 Page NumberReport
      of Independent Registered Public Accounting Firm
                    
                    F-2Consolidated
      Financial Statements:Balance
      Sheets at December 31, 2009 and 2008
                    
                    F-3Statements
      of Operations for the years ended December 31, 2009 and
    2008
                    
                    F-4Statements
      of Changes in Shareholders’ Equity for the years ended December 31, 2009
      and 2008
                    
                    F-5Statements
      of Cash Flows for the years ended December 31, 2009 and
    2008
                    
                    F-6Notes
      to Consolidated Financial Statements
                    
                    F-7
  F-1
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders
 Manhattan
Bridge Capital, Inc.
 
 We have
audited the accompanying consolidated balance sheets of Manhattan Bridge
Capital, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the related
consolidated statements of operations, shareholders’ equity and cash flows for
the years then ended.  These financial statements are the
responsibility of the Company’s management.  Our responsibility is to
express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audits included
consideration of internal control over financial reporting as a basis for
designing 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,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Manhattan
Bridge Capital, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the
results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
 
 By: /s/
Hoberman, Miller, Goldstein & Lesser, P.C
 
 Hoberman,
Miller, Goldstein & Lesser, CPA’s, P.C.
 New York,
New York
 
 March 16,
2010
  F-2
 
 MANHATTAN
BRIDGE CAPITAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2009 and 2008
 
 2009
                        
                        
                        2008AssetsCurrent
      assets:Cash
      and cash equivalents
                        
                        $
                        707,449
                        
                        
                        $
                        884,296Investment
      in marketable securities
                        
                        
                        404,268
                        
                        
                        
                        499,207Total
      cash and cash equivalents and investment in marketable securities at fair
      value
                        
                        
                        1,111,717
                        
                        
                        
                        1,383,503Short
      term loans
                        
                        
                        6,476,621
                        
                        
                        
                        5,362,060Interest
      receivable on short term loans
                        
                        
                        60,207
                        
                        
                        
                        79,674Due
      from purchaser
                        
                        
                        —
                        
                        
                        
                        23,881Other
      current assets
                        
                        
                        26,568
                        
                        
                        
                        8,813Total
      current assets
                        
                        
                        7,675,113
                        
                        
                        
                        6,857,931Long
      term loans
                        
                        
                        —
                        
                        
                        
                        200,000Property
      and equipment, net
                        
                        
                        5,458
                        
                        
                        
                        9,421Security
      deposit
                        
                        
                        17,515
                        
                        
                        
                        17,515Investment
      in privately held company, at cost
                        
                        
                        100,000
                        
                        
                        
                        100,000Total
      assets
                        
                        $
                        7,798,086
                        
                        
                        $
                        7,184,867Liabilities
      and Shareholders’ EquityCurrent
      liabilities:Accounts
      payable and accrued expenses
                        
                        $
                        77,768
                        
                        
                        $
                        130,375Deferred
      origination fees
                        
                        
                        102,751
                        
                        
                        
                        53,106Income
      taxes payable
                        
                        
                        162,182
                        
                        
                        
                        11,104Total
      liabilities, all current
                        
                        
                        342,701
                        
                        
                        
                        194,585Commitments
      and contingenciesShareholders’
      equity:Preferred
      shares - $.01 par value; 5,000,000 shares authorized; no shares
      issued
                        
                        
                        —
                        
                        
                        
                        —Common
      shares - $.001 par value; 25,000,000 authorized; 3,405,190 issued;
      3,324,459 and 3,325,760 outstanding at December 31, 2009 and 2008,
      respectively
                        
                        
                        3,405
                        
                        
                        
                        3,405Additional
      paid-in capital
                        
                        
                        9,476,762
                        
                        
                        
                        9,399,861Treasury
      stock, at cost- 80,731 and 79,430 common shares at December 31, 2009 and
      2008, respectively
                        
                        
                        (241,400
                        )
                        
                        
                        (239,944
                        )Accumulated
      other comprehensive income (loss)
                        
                        
                        123,823
                        
                        
                        
                        (30,088
                        )Accumulated
      deficit
                        
                        
                        (1,907,205
                        )
                        
                        
                        (2,142,952
                        )Total
      shareholders’ equity
                        
                        
                        7,455,385
                        
                        
                        
                        6,990,282Total
      liabilities and shareholders’ equity
                        
                        $
                        7,798,086
                        
                        
                        $
                        7,184,867
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
 
 MANHATTAN
BRIDGE CAPITAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 2009
                        
                        
                        2008Interest
      income from short and long term loans
                        
                        $
                        839,802
                        
                        
                        $
                        684,012Origination
      fees
                        
                        
                        199,023
                        
                        
                        
                        73,517Subscription
      revenues, net
                        
                        
                        —
                        
                        
                        
                        137Total
      Revenue
                        
                        
                        1,038,825
                        
                        
                        
                        757,666Operating
      costs and expenses:Web
      development expenses
                        
                        
                        —
                        
                        
                        
                        74,015General
      and administrative expenses
                        
                        
                        673,221
                        
                        
                        
                        682,455Total
      operating costs and expenses
                        
                        
                        673,221
                        
                        
                        
                        756,470Income
      from operations
                        
                        
                        365,604
                        
                        
                        
                        1,196Interest
      and dividend income
                        
                        
                        24,210
                        
                        
                        
                        73,976Realized
      net (loss) gain on marketable securities
                        
                        
                        (5,940
                        )
                        
                        
                        18,122Realized
      gain on marketable securities that were previously marked
    down
                        
                        
                        10,653
                        
                        
                        
                        —Write-off
      of investment in marketable securities
                        
                        
                        —
                        
                        
                        
                        (92,619
                        )Other
      than temporary decline in the market value of marketable
      securities
                        
                        
                        —
                        
                        
                        
                        (627,777
                        )Other
      income
                        
                        
                        15,000
                        
                        
                        
                        39,000Total
      other income (loss)
                        
                        
                        43,923
                        
                        
                        
                        (589,298
                        )Income
      (loss) from continuing operations before income tax
expense
                        
                        
                        409,527
                        
                        
                        
                        (588,102
                        )Income
      tax expense
                        
                        
                        (173,780
                        )
                        
                        
                        (4,674
                        )Income
      (loss) from continuing operations
                        
                        
                        235,747
                        
                        
                        
                        (592,776
                        )Discontinued
      Operations:Gain
      on the sale of the Directories business (net of tax effect of 0 in
      2008)
                        
                        
                        —
                        
                        
                        
                        72,917Income
      from discontinued operations
                        
                        
                        —
                        
                        
                        
                        72,917Net
      income (loss)
                        
                        $
                        235,747
                        
                        
                        $
                        (519,859
                        )Basic
      net income (loss) per common shareContinuing
      operations
                        
                        $
                        0.07
                        
                        
                        $
                        (0.18
                        )Discontinued
      operations
                        
                        
                        —
                        
                        
                        
                        0.02Net
      income (loss) per common share-Basic
                        
                        $
                        0.07
                        
                        
                        $
                        (0.16
                        )Diluted
      net income (loss) per common share outstanding:Continuing
      operations
                        
                        $
                        0.07
                        
                        
                        $
                        (0.18
                        )Discontinued
      operations
                        
                        
                        —
                        
                        
                        
                        0.02Net
      income (loss) per common share- Diluted
                        
                        $
                        0.07
                        
                        
                        $
                        (0.16
                        )Weighted
      average number of common shares outstanding—Basic
                        
                        
                        3,325,566
                        
                        
                        
                        3,247,409—Diluted
                        
                        
                        3,330,315
                        
                        
                        
                        3,247,409
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  F-4
 
 MANHATTAN
BRIDGE CAPITAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 Common Stock
                    
                    
                    Additional
                      Paid-in
                      Capital
                    
                    
                    Treasury Stock
                    
                    
                    Accumulated
                      Other
                      Comprehensive
                      Income (Loss)
                    
                    
                    Accumulated
                      Deficit
                    
                    
                    TotalsShares
                    
                    
                    Amount
                    
                    
                    
                    
                    
                    Shares
                    
                    
                    CostBalance,
      January 1, 2008
                    
                    
                    3,305,190
                    
                    
                    $
                    3,305
                    
                    
                    $
                    9,180,235
                    
                    
                    
                    68,730
                    
                    
                    $
                    (231,113
                    )
                    
                    $
                    (441,272
                    )
                    
                    $
                    (1,623,093
                    )
                    
                    $
                    6,
      888,062Issuance
      of common stock from exercise of options
                    
                    
                    100,000
                    
                    
                    
                    100
                    
                    
                    
                    77,900
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    78,000Non
      cash compensation
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    141,726
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    141,726Treasury
      Shares
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    10,700
                    
                    
                    
                    (8,831
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (8,831
                    )Unrealized
      loss on preferred stocks and other marketable securities
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (216,593
                    )
                    
                    
                    
                    
                    
                    
                    (216,593
                    )Other
      than temporary decline in the market value of other marketable
      securities
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    627,777
                    
                    
                    
                    
                    
                    
                    
                    627,777Net
      loss for the year ended December 31, 2008
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (519,859
                    )
                    
                    
                    (519,859
                    )Total
      comprehensive loss
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (108,675
                    )Balance,
      December 31, 2008
                    
                    
                    3,405,190
                    
                    
                    
                    3,405
                    
                    
                    
                    9,399,861
                    
                    
                    
                    79,430
                    
                    
                    
                    (239,944
                    )
                    
                    
                    (30,088
                    )
                    
                    
                    (2,142,952
                    )
                    
                    
                    6,990,282Non
      cash compensation
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    76,901
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    76,901Treasury
      Shares
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1,301
                    
                    
                    
                    (1,456
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (1,456
                    )Unrealized
      gain on preferred stocks and other marketable securities
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    153,911
                    
                    
                    
                    
                    
                    
                    
                    153,911Net
      income  for the year ended December 31, 2009
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    235,747
                    
                    
                    
                    235,747Total
      comprehensive income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    389,658Balance,
      December 31, 2009
                    
                    
                    3,405,190
                    
                    
                    $
                    3,405
                    
                    
                    $
                    9,476,762
                    
                    
                    
                    80,731
                    
                    
                    $
                    (241,400
                    )
                    
                    $
                    123,823
                    
                    
                    $
                    (1,907,205
                    )
                    
                    $
                    7,455,385
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-5
  MANHATTAN
BRIDGE CAPITAL, INC.  AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 2009
                    
                    
                    2008Cash
      flows from operating activities:Net
      income (loss)
                    
                    $
                    235,747
                    
                    
                    $
                    (519,859
                    )Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities -Gain
      on sale of Directories business
                    
                    
                    —
                    
                    
                    
                    (72,917
                    )Depreciation
                    
                    
                    3,963
                    
                    
                    
                    4,840Amortization
      of web development costs
                    
                    
                    —
                    
                    
                    
                    74,015Non
      cash compensation expense
                    
                    
                    76,901
                    
                    
                    
                    141,726Realized
      gain on marketable securities that were previously marked
    down
                    
                    
                    (10,653
                    )
                    
                    
                    —Write-off
      of investment in marketable securities
                    
                    
                    —
                    
                    
                    
                    92,619Other
      than temporary decline in the market value of marketable
      securities
                    
                    
                    —
                    
                    
                    
                    627,777Realized
      loss (gain) on sale of marketable securities, net
                    
                    
                    5,940
                    
                    
                    
                    (18,122
                    )Changes
      in operating assets and liabilitiesInterest
      receivable on short and long term commercial loans
                    
                    
                    19,467
                    
                    
                    
                    (38,490
                    )Other
      current and non current assets
                    
                    
                    (17,755
                    )
                    
                    
                    8,270Accounts
      payable and accrued expenses
                    
                    
                    (52,607
                    )
                    
                    
                    6,489Deferred
      origination fees
                    
                    
                    49,645
                    
                    
                    
                    48,509Due
      from purchasers
                    
                    
                    23,881
                    
                    
                    
                    35,000Income
      taxes payable
                    
                    
                    151,078
                    
                    
                    
                    11,104Net
      cash provided by operating activities
                    
                    
                    485,607
                    
                    
                    
                    400,961Cash
      flows from investing activities:Proceeds
      from sale of marketable securities
                    
                    
                    253,563
                    
                    
                    
                    —Redemption
      of insurance annuity contract
                    
                    
                    —
                    
                    
                    
                    944,069Investment
      in auction rate securities
                    
                    
                    —
                    
                    
                    
                    (1,175,000
                    )Proceeds
      from sale of auction rate securities
                    
                    
                    —
                    
                    
                    
                    1,175,000Short
      term commercial loans made
                    
                    
                    (7,204,229
                    )
                    
                    
                    (5,339,756
                    )Collections
      received from short term commercial loans
                    
                    
                    6,289,668
                    
                    
                    
                    4,090,907Cash
      received on sale of  the Directories business
                    
                    
                    —
                    
                    
                    
                    97,222Net
      cash used in investing activities
                    
                    
                    (660,998
                    )
                    
                    
                    (207,558
                    )Cash
      flows from financing activities:Proceeds
      from exercise of options
                    
                    
                    —
                    
                    
                    
                    78,000Purchase
      of treasury stock
                    
                    
                    (1,456
                    )
                    
                    
                    (8,831
                    )Net
      cash (used in) provided by financing activities
                    
                    
                    (1,456
                    )
                    
                    
                    69,169Net
      (decrease) increase in cash and cash equivalents
                    
                    
                    (176,847
                    )
                    
                    
                    262,572Cash
      and cash equivalents, beginning of year
                    
                    
                    884,296
                    
                    
                    
                    621,724Cash
      and cash equivalents, end of year
                    
                    $
                    707,449
                    
                    
                    $
                    884,296Supplemental
      Cash Flow Information:Taxes
      paid during the year
                    
                    $
                    30,753
                    
                    
                    $
                    11,599Interest
      paid during the year
                    
                    $
                    1,234
                    
                    
                    $
                    4,692
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-6
 
 MANHATTAN
BRIDGE CAPITAL, INC. AND SUBSIDIARY
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2009 AND 2008
 
 1.
                The
    Company
 
 Manhattan
Bridge Capital, Inc. and subsidiaries (the “Company”), was incorporated in New
York in 1989. The Company provides short term secured non–banking commercial
loans, to small businesses.
  In
addition, our subsidiary DAG Interactive, Inc. (“DAG Interactive”) has developed
innovative software and a related web site that allows retail businesses and
other service providers to reach prospective customers and clients for their
goods and services in a more effective way than traditional on-line and print
yellow pages.
  DAG
Interactive is currently inactive and the roll-out and full scale marketing of
Nextyellowcontinues to
await new funding for this operation, preferably at the subsidiary level, or
reaching agreement with a marketing partner.
  2.
                Significant
      Accounting Policies
 
 Principles of
Consolidation
 
 The
consolidated financial statements include the accounts of Manhattan Bridge
Capital, Inc., its wholly-owned subsidiary DAG Funding Solutions, Inc.(“DAG
Funding”) and its 80% owned subsidiary, DAG Interactive. All significant
intercompany balances and transactions have been eliminated in
consolidation.
  Basis of Presentation
 
 The
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States (“GAAP”). On
July 1, 2009, the Financial Accounting Standards Board (“FASB”) released
the authoritative version of its new Accounting Standards Codification (“ASC”)
as the single source for GAAP, which replaces all previous GAAP accounting
standards. While not intended to change GAAP, ASC significantly changes the way
in which the accounting literature is organized. In the fourth quarter of fiscal
year 2009, the Company adopted ASC to reference GAAP accounting standards in its
consolidated financial statements. The adoption of ASC did not have an effect on
the Company’s consolidated financial position, results of operations or cash
flows.
  Use of Estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Management will base the use of estimates on (a) a
preset number of assumptions that consider past experience, (b) future
projections, and (c) general financial market condition. Actual amounts could
differ from those estimates.
  Cash and Cash Equivalents
 
 For the
purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
  F-7
 
 Marketable Securities
 
 Marketable
securities are reported at fair value and are classified as available-for-sale.
Unrealized gains and losses from those securities are reported as a separate
component of shareholders’ equity, net of the related tax effect. Realized gains
and losses are determined on a specific identification basis. Additionally,
theCompany
assesses whether an other-than-temporary impairment loss on the investments has
occurred due to declines in fair value or other market conditions. Declines in
fair value that are considered other than temporary, if any, are recorded as
charges in the Consolidated Statements of Operations. The Company did not record
an impairment loss on marketable securities for the year ended December 31,
2009. For the year ended December 31, 2008 the Company recorded an impairment
loss of $627,777.
  Concentrations of Credit
Risk
 
 Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents and marketable securities.
The Company maintains cash and cash equivalents with various major financial
institutions. t December 31, 2009, approximately $700,000 in cash was held with
one financial institution.
  Credit
risks associated with short and long term commercial loans, and related interest
receivable, the Company makes to small businesses are described in Note 4
entitled Short Term Commercial Loans.
  Property
and Equipment
  Property
and equipment are recorded at cost. Depreciation is provided on a straight-line
basis over the estimated useful economic lives of the assets, ranging from three
to five years. Leasehold improvements are amortized over the shorter of the
lease agreement or the useful life of the assets.
  Impairment of long- lived
assets
 
 The
Company continually monitors events or changes in circumstances that could
indicate carrying amounts of long lived assets, may not be recoverable. When
such events or changes in circumstances occur, the Company assesses the
recoverability of long-lived assets by determining whether the carrying value of
such assets will be recovered through undiscounted expected future cash flows.
If the total of the undiscounted cash flows is less than the carrying amount of
these assets, the Company recognizes an impairment loss based on the excess of
the carrying amount over the fair value of the assets. There was no impairment
to the carrying value of property and equipment during the year ended December
31, 2009.
  Income Taxes
 
 The
Company accounts for income taxes under the provisions of FASB ASC 740, “Income
Taxes”. Under the provisions of FASB ASC 740, deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred taxes of a change in tax rate is recognized in
income in the period that includes the enactment date.
  F-8
  Significant
judgment is required in determining any valuation allowance recorded against
deferred tax assets. In assessing the need for a valuation allowance, the
Company considers all available evidence including past operating results,
estimates of future taxable income, and the feasibility of tax planning
strategies. In the event that the Company changes its determination as to the
amount of deferred tax assets that can be realized, the Company will adjust its
valuation allowance with a corresponding impact to the provision for income
taxes in the period in which such determination is made.
  Revenue Recognition
 
 The
Company recognizes revenues in accordance with ASC 605, which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements. ASC 605 outlines the basic criteria that must be met to recognize
revenue and provides guidance for disclosure related to revenue recognition
policies. In general, the Company recognizes revenue when (i) persuasive
evidence of an arrangement exists, (ii) delivery of the product has occurred or
services have been rendered, (iii) the sales price charged is fixed or
determinable, and (iv) collectibility is reasonably assured.
  Interest
income from short term commercial loans is recognized, as earned, over the loan
period.
  Origination
fee revenue on short term commercial loans is amortized over the term of the
respective note.
  Web Development Costs
 
 Costs
incurred to develop software for internal use are required to be capitalized and
amortized over the estimated useful life of the software in accordance with ASC
350-40, Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use. Costs related to design or maintenance of internal-use software
are expensed as incurred. The Company was amortizing the capitalized web
development costs of approximately $148,000, over an estimated useful life of 3
years. As of December 31, 2008 the Company decided that there is no value to the
web development costs and, accordingly, wrote-off the remaining balance as
amortization expense.  Amortization expense for the years ended
December 31, 2009 and 2008 were approximately $0 and $74,000,
respectively.
  Earnings
Per Share (“EPS”)
 
 Basic and
diluted earnings per share are calculated in accordance with ASC 260 “Earnings
Per Share”. Under ASC 260, basic earnings per share is computed by dividing
income available to common shareholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share include the
potential dilution from the exercise of stock options and warrants for common
shares using the treasury stock method.
  The
numerator in calculating both basic and diluted income per common share for each
year is the reported net income.  The denominator is based on the
following weighted average number of common shares:
  Years ended
                        December 31,2009
                      
                      
                      2008Basic
      weighted average common shares outstanding
                      
                      
                      3,325,566
                      
                      
                      
                      3,247,409Incremental
      shares for assumed exercise of options
                      
                      
                      4,749
                      
                      
                      
                      —Diluted
      weighted average common
      shares outstanding
                      
                      
                      3,330,315
                      
                      
                      
                      3,247,409
  F-9
 
 694,251
and 615,000 stock options were not included in the diluted earnings per share
calculation for the years ended December 31, 2009 and 2008, respectively, as
their effect would have been anti-dilutive.
  Stock-Based Compensation
 
 The
Company measures and recognizes compensation awards for all stock option grants
made to employees and directors, based on their fair value in accordance with
ASC 718 “Compensation- Stock Compensation”, which establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. A key provision of this statement is to measure the cost
of employee services received in exchange for an award of equity instruments
(including stock options) based on the grant-date fair value of the award. The
cost will be recognized over the service period during which an employee is
required to provide service in exchange for the award (i.e., the requisite
service period or vesting period). The Company accounts for equity instruments
issued to non-employees in accordance with the provisions of ASC 718 and ASC
505-50, “Equity Based Payment to Non-Employees”. All transactions with
non-employees, in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more appropriately measurable.
  Fair Value of Financial
Instruments
 
 For cash
and cash equivalents and account payable as well as short term interest bearing
commercial loans held by the Company, the carrying amount approximates fair
value due to the short-term nature of such instruments.
  Events Occurring After Reporting
Date
 
 The
Company has evaluated events and transactions that occurred between December 31,
2009 and March 16, 2010, which is the date the financial statements were
available to be issued, for possible disclosure and recognition in the financial
statements.
  Other Comprehensive Loss
 
 Other
comprehensive income (loss) consists of the Company’s net income (loss) and net
unrealized income (losses) on marketable securities. The Company’s comprehensive
income for the year ended December 31, 2009 amounted to $389,658. For the year
ended December 31, 2008 the Company’s comprehensive loss amounted to
($108,675).
  Recent Accounting
Pronouncements
 
 In
December 2007, the FASB simultaneously issued new accounting standards for
business combinations under ASC 805, “Business Combinations” and ASC 810,
“Consolidation Variable
Interest Entities.”  Both standards update United States guidance on
accounting for “noncontrolling interests,” sometimes referred to as minority
interests, which interests represent a portion of a subsidiary not attributable,
directly or indirectly, to a parent. FASB and the International Accounting
Standards Board (“IASB”) have been working together to promote international
convergence of accounting standards. Prior to promulgation of these new
standards there were specific areas in accounting for business acquisitions in
which conversion was not achieved. The objective of both standards is to improve
the relevance, comparability, and transparency of the financial information that
a reporting entity provides in “business combinations” and consolidated
financial statements by establishing accounting and reporting
standards.
  F-10
  In
business combinations it is accomplished by establishing principles and
requirements concerning how an “acquirer” recognizes and measures identifiable
assets acquired, liabilities assumed, and noncontrolling interests in the
acquiree, as well as goodwill acquired in the combination or gain from a bargain
purchase; and determines information to be disclosed to enable users to evaluate
the nature and effects of business combinations. In consolidated financial
statements the standards require: identification of ownership interests held in
subsidiaries by parties other than the parent be clearly identified, labeled and
presented in consolidated financial position within equity (rather than
“mezzanine” between liabilities and equity) separately from amounts attributed
to the parent, with net income attributable to the parent and to the minority
interest clearly identified and presented on the face of consolidated statements
of income. The standards also provide guidance in situations where the parent’s
ownership interest in a subsidiary changes while the parent retains its
controlling financial interest. The standards also provide guidance on recording
a gain or loss based on fair value in situations involving deconsolidation of a
subsidiary. Entities must provide sufficient disclosures that distinguish
between interests of the parent and that of the noncontrolling interest. Both
standards are effective for fiscal years and interim periods beginning on or
after December 15, 2008 (that is January 1, 2009) for entities with calendar
years. Earlier adoption was prohibited. The standards shall be applied
prospectively as of the beginning of the fiscal year in which initially applied,
except for the presentation and disclosure requirements, which shall be applied
retrospectively for all periods presented. The adoption of these standards did
not have a material effect on the Company’s consolidated financial position,
results of operations or cash flows.
  In April
2009, the FASB issued three related new accounting standards all of which impact
the accounting and disclosure related to certain financial
instruments:
  (i)
                ASC
      820-10-65, "Determining Fair Value When the Volume and Level of Activity
      for the Asset or Liability Have Significantly Decreased and Identifying
      Transactions That Are Not Orderly" provides additional guidance for
      estimating fair value in accordance with ASC 820-10 when the volume and
      level of activity for the asset or liability have significantly
      decreased.  It also includes guidance on identifying circumstances
      that indicate a transaction is not
orderly.
  (ii)
                ASC
      320, "Recognition and Presentation of Other-Than-Temporary Impairments"
      amends the other-than-temporary impairment guidance for debt securities to
      make the guidance more operational and to improve the presentation and
      disclosure of other-than-temporary impairments on debt and equity
      securities in the financial
statements.
  (iii)
                ASC
      825 and ASC 270 "Interim Disclosures about Fair Value of Financial
      Instruments" amends these ASC’s required disclosures about the fair value
      of financial instruments on an interim basis in addition to the annual
      disclosure requirements.
  All three
ASCs are required to be adopted for interim periods ending after June 15,
2009. The adoption of these standards had no material effect on the
Company’s consolidated results of operations, financial position or
liquidity.
  In May
2009, the FASB issued new accounting standards for Subsequent Events under ASC
855, “Subsequent Events”. ASC 855-10-05 establishes general standards for
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are available to be issued (“subsequent
events”). More specifically, ASC 855-10-05 sets forth the period after the
balance sheet date during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition in the financial
statements, identifies the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements and the disclosures that should be made about events or transactions
that occur after the balance sheet date. ASC 855-10-05 provides largely the same
guidance on subsequent events which previously existed only in auditing
literature. The disclosure is required in financial statements for interim and
annual periods ending after June 15, 2009. The Company has performed an
evaluation of subsequent events through March 16, 2010, which is the day the
financial statements were issued.
  F-11
  In June
2009, the FASB issued “The FASB Accounting Standards Codification and Hierarchy
of Generally Accepted Accounting Principles” under ASC 105. ASC 105 establishes
the FASB Standards Accounting Codification as the source of authoritative
U.S. generally accepted accounting principles recognized by the FASB to be
applied to nongovernmental entities and rules and interpretive releases of the
SEC as authoritative GAAP for SEC registrants. The Codification supersedes all
the existing non-SEC accounting and reporting standards upon its effective date
and subsequently, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts..The
adoption of this new standard did not have a material effect on the Company’s
disclosures of the consolidated financial statements.
  In
August 2009, the FASB issued an update to ASC 820. This Accounting
Standards Update (“ASU”) No. 2009-5, Measuring Liabilities at Fair Value
(“ASU 2009-5”) amends the provisions in ASC 820 related to the fair value
measurement of liabilities and clarifies for circumstances in which a quoted
price in an active market for the identical liability is not available. ASU
2009-5 is intended to reduce potential ambiguity in financial reporting when
measuring the fair value of liabilities. ASU 2009-5 is effective for the
Company in the first quarter of fiscal year 2010. ASU 2009-5 concerns disclosure
only. The Company believes that the adoption of ASU 2009-5 will not have a
material effect on its consolidated financial statements.
  Management
does not believe that any other recently issued, but not yet effected,
accounting standards if currently adopted would have a material effect on the
Company’s consolidated financial statements.
 
 3.
                Marketable
      Securities
 
 Effective
January 1, 2008, the Company adopted the ASC 820, Fair Value Measurements,
which defines fair value as 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 at the measurement date. ASC 820-10 establishes a
three-level fair value hierarchy that prioritizes the inputs used to measure
fair value. This hierarchy requires entities to maximize the use of observable
inputs and minimize the use of unobservable inputs. The three levels of inputs
used to measure fair value are as follows:
  Level 1—Quoted
prices in active markets.
  Level 2—Observable
inputs other than quoted prices in active markets that are either directly or
indirectly observable.
  Level 3—Unobservable
inputs in which little or no market data exists, therefore requiring an entity
to develop its own assumptions.
  Cash
equivalents and investment instruments are classified within Level 1 or Level 2
of the fair value hierarchy.The Company’s Level 1
investments are valued using quoted market prices in active markets.The Company’s Level 2
investments are valued using broker or dealer quotations for similar assets and
liabilities.As of
December 31, 2009 and 2008 the Company’s Level 1 investments consisted of cash,
money market accounts and marketable securities in the amount of approximately
$1,112,000 and $1,384,000, respectively, and were recorded as cash and cash
equivalents and marketable securities in the Company’s consolidated balance
sheets.
  F-12
  The
Company’s marketable securities consist of the following:
  As of 12/31/2009
                          
                          Fair Value
                          
                          
                          Cost
                          
                          
                          Holding Gains(Losses)Investment
      in Marketable Securities
                          
                          $
                          404,268
                          
                          
                          $
                          280,445
                          
                          
                          $
                          123,823As of 12/31/2008Investment
      in Marketable Securities
                          
                          $
                          499,207
                          
                          
                          $
                          1,157,072
                          
                          
                          $
                          (657,865
                          )Other
      than temporary decline in the market value of marketable
      securities
                          
                          
                          —
                          
                          
                          
                          (627,777
                          )
                          
                          
                          (627,777
                          )Total
                          
                          $
                          499,207
                          
                          
                          $
                          529,295
                          
                          
                          $
                          (30,088
                          )
 
 At
December 31, 2008 the Company wrote-off its investment in a marketable security
in the amount of $92,619, as a result of the bankruptcy filing of the related
issuer. In addition, at December 31, 2008 the Company concluded that certain
other investments in marketable securities were other-than-temporarily impaired
based on the severity of the declines in the market value, and therefore the
Company recognized a non-cash impairment charge of $627,777, for the year
2008.
  4.
                Short
      Term Commercial Loans
 
 The
Company offers short-term secured commercial loans to small
businesses.  Loans are secured by collateral such as real estate,
receivables, and marketable securities and, generally, accompanied by personal
guarantees from the principals of the businesses. The loans are generally for a
term of one year. Most of the loans provide for receipt of interest only during
the term of the loan and a balloon payment at the end of the term. For the years
ended December 31, 2009 and 2008 the total amounts of $7,204,229 and $5,339,756,
respectively, have been lent, offset by collections received from borrowers,
under the short term commercial loans in the amount of $6,289,668 and
$4,090,907, respectively. Loans ranging in size from $50,000 to $1,020,000 were
concluded at stated interest rates of 12% to 16%, but often at higher effective
rates based upon points or other up-front fees.  The Company uses its
own employees, outside lawyers and other independent professionals to verify
titles and ownership, to file liens and to consummate the
transactions.  Outside appraisers are also used to assist the
Company’s officials in evaluating the worth of collateral.  To date,
the Company has not experienced any defaults and none of the loans previously
made have been non-collectable, although no assurances can be given that
existing or future loans may not go into default or prove to be non-collectible
in the future.
  One of
the loans in the Company’s portfolio at December 31, 2009, was jointly funded by
the Company and an unrelated entity during the year ended December 31, 2009, for
an aggregate loan of $650,000. The accompanying balance sheet includes the
Company’s portion of the loan in the amount of $325,000.
  At
December 31, 2009, the Company was committed to an additional $1,822,000 in
construction loans that can be drawn by the borrower when certain conditions are
met.
  At
December 31, 2009, approximately $671,000 of the loans outstanding are due from
one entity, which represents more than 10% of the total balance of the loans
outstanding. The majority of the loans are secured by commercial real estate
located in the New York metropolitan area. The remaining loans are also
principally secured by real estate located in the New York metropolitan area. At
December 31, 2009 one individual has a fifty percent interest in each of four of
the Company’s outstanding loans in the aggregate amount of
$1,245,000.
  F-13
  At
December 31, 2008, approximately $2,597,000 of the loans outstanding are due
from four different entities,  each one of which represents more than
10% of the total balance of the loans outstanding. The majority of the loans are
secured by commercial real estate located in the New York metropolitan area. The
remaining loans are also principally secured by real estate located in the New
York metropolitan area.
  5.
                Property
      and Equipment
 
 Property
and equipment, at cost, consist of the following:
  December 312009
                      
                      
                      2008Office equipment
                      
                      $
                      20,744
                      
                      
                      $
                      20,744Less:  Accumulated
      depreciation
                      
                      
                      (15,286
                      )
                      
                      
                      (11,323
                      )Property
      and equipment, net
                      
                      $
                      5,458
                      
                      
                      $
                      9,421
 
 Depreciation
expense was $3,963 and $4,840 for the years ended December 31, 2009 and 2008,
respectively.
  6.
                Lines
      of Credit
 
 The
Company established a line of credit with Smith Barney.  The line of credit
provides for maximum borrowings in the amount of up to 50% of the value of the
Company's marketable securities held by Smith Barney.  This line bears
interest at the prime rate minus .75%. During the year 2009 the Company
used approximately $157,000 from its line, which was paid during the fourth
quarter of 2009. During the year 2008 the Company used
approximately  $96,000 from its line, which was paid during the second
quarter of 2008.
  In
addition in 2009 the Company established a line of credit with Park Avenue Bank.
The line of credit provides for maximum borrowings in the amount of up to
$300,000, the line bears fixed interest at the rate of 9%. During the year 2009
the company used approximately $262,000 from this line which was paid by the end
of 2009.
  7.
                Income
      Taxes
 
 Income
tax expense (benefit) consists of the following:
  2009
                      
                      
                      2008Current
      Taxes:Federal
                      
                      $
                      131,300
                      
                      
                      $
                      86,221State
                      
                      
                      42,480
                      
                      
                      
                      15,215173,780
                      
                      
                      
                      101,436Deferred
      taxes:Federal
                      
                      
                      —
                      
                      
                      
                      (76,500
                      )State
                      
                      
                      —
                      
                      
                      
                      (20,262
                      )—
                      
                      
                      
                      (96,762
                      )Income
      tax expense
                      
                      $
                      173,780
                      
                      
                      $
                      4,674
  F-14
  Deferred
tax assets consist of the following:
  2009
                      
                      
                      2008Deferred
      tax assets:Unrealized
      loss on marketable securities (*)
                      
                      $
                      122,009
                      
                      
                      $
                      197,210Realized
      losses on marketable securities (*)
                      
                      
                      48,186
                      
                      
                      
                      —Compensation
      expenses
                      
                      
                      34,605
                      
                      
                      
                      63,777Deferred
      tax assets
                      
                      
                      204,800
                      
                      
                      
                      260,987Less:
      valuation allowance
                      
                      $
                      (204,800
                      )
                      
                      $
                      (260,987
                      )—
                      
                      
                      
                      —
 
 (*)
Unrealized losses on marketable securities are not deductible for federal and
state income tax purposes unless the underlying security giving rise to the loss
is actually sold or has no market, at which time the resulting loss is only
deductible to the extent of capital gains, if any.
  The
income tax expense (benefit) differs from the amount computed using the federal
statutory rate of 34% as a result of the following:
  Year Ended December 31,
                      
                      2009
                      
                      
                      2008Federal
      Statutory Rate
                      
                      
                      34
                      %
                      
                      
                      (34
                      )%State
      income tax expense (benefit), net of federal tax effect
                      
                      
                      11
                      %
                      
                      
                      (11
                      )%Valuation
      allowance
                      
                      
                      —
                      
                      
                      
                      45
                      %State
      and local franchise taxes
                      
                      
                      —
                      
                      
                      
                      1
                      %Other
                      
                      
                      (3
                      )%
                      
                      
                      —Income
      tax expense (benefit)
                      
                      
                      42
                      %
                      
                      
                      1
                      %
 
 The 2008
income tax expense includes the utilization of the Company’s remaining 2007 net
operating loss carry forward in the amount of approximately $225,000, for which
a deferred tax benefit was not previously recorded.
  The
Company continues to reflect interest and penalties, if any, in its income tax
liability.  As of December 31, 2009, the Company did not have any
accrued interest or penalties.
  The
Company is no longer subject to U.S. federal and state and local income tax
examinations by tax authorities for years prior to 2004, as these tax years are
closed.
 
 8.
                Simple
      IRA Plan
 
 On
October 26, 2000, the Board of Directors approved a Simple IRA Plan (the “IRA
Plan”) for the purpose of attracting and retaining valuable
executives.  The IRA Plan was effective August 2000 with a trustee,
which allows up to 100 eligible executives to participate.  It is a
“Matching Contribution” plan under which eligible executives may contribute up
to 6% of their yearly salary, on a pre-tax basis (with a cap of $10,500), with
the Company matching on a dollar-for-dollar basis up to 3% of the executives’
compensation (with a cap of $10,500).  These thresholds are subject to
change under notice by the trustee.   The Company is not
responsible for any other costs under this plan.  For the years ended
December 31, 2009 and 2008 the Company contributed $2,748 and $1,687,
respectively, as matching contributions to the IRA Plan.
  F-15
 
 9.
                Stock
      Option Plan
 
 On June
23, 2009 the Company adopted the 2009 Stock Option Plan (the “Plan”) and
replaced the 1999 Stock Option Plan as amended (the “Prior Plan”), which expired
in May of 2009. Options granted under the Prior Plan remain outstanding until
expired, exercised or cancelled.
  The
purpose of the Plan is to align the interests of officers, other key employees,
consultants and non-employee directors of the Company and its subsidiaries with
those of the stockholders of the Company, to afford an incentive to such
officers, employees, consultants and directors to continue as such, to increase
their efforts on behalf of the Company and to promote the success of the
Company’s business.  The availability of additional shares will
enhance the Company’s ability to achieve these goals. The basis of participation
in the Plan is upon discretionary grants of the Board. The Board
may at any time, and from time to time, suspend or terminate the Plan in whole
or in part or amend it from time to time.
  The
maximum number of Common Shares reserved for the grant of awards under the Plan
is 200,000, subject to adjustment as provided in Section 9 of the Plan. As of
December 31, 2009. 28,000 options were granted and 172,000 is available for
grant under the 2009 stock option plan.
  The
exercise price of options granted under the Company’s stock option plan may not
be less than the fair market value on the date of grant. Stock options under our
stock option plan may be awarded to officers, key-employees, consultants and
non-employee directors of the Company.  Under our stock option plan,
every non-employee director of the Company is granted 7,000 options upon first
taking office, and then 7,000 upon each additional year in office. Generally,
options outstanding vest over periods not exceeding four years and are
exercisable for up to five years from the grant date
  Share
based compensation expense recognized under ASC 718 for the years ended December
31, 2009 and 2008 were $76,901 and $141,726, respectively.
  The fair
value of each option is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average share assumptions used
for grants in 2009 and 2008, respectively: (1) expected life of 5 years; (2) No
annual dividend yield; (3) expected volatility 62% to 70%; (4) risk free
interest rate of 1.5% to 5.1%.
  The
following summarizes stock option activity for the years ended December 31, 2009
and 2008:
  Number
                      ofShares
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Weighted
                      Average
                      Remaining
                      Contractual
                      Term (inyears)
                    
                    
                    Aggregate
                      Intrinsic
                      ValueOutstanding
      at January 1, 2008
                    
                    
                    610,000
                    
                    
                    
                    2.64Granted
      in 2008
                    
                    
                    196,000
                    
                    
                    
                    0.87Exercised
      in 2008
                    
                    
                    (100,000
                    )
                    
                    
                    0.78Forfeited
      in 2008
                    
                    
                    (91,000
                    )
                    
                    
                    2.09Outstanding
      at December 31, 2008
                    
                    
                    615,000
                    
                    
                    $
                    2.51
                    
                    
                    
                    2.29
                    
                    
                    $
                    741,474Granted
      in 2009
                    
                    
                    175,000
                    
                    
                    
                    0.77Exercised
      in 2009
                    
                    
                    —
                    
                    
                    
                    —Forfeited
      in 2009
                    
                    
                    (91,000
                    )
                    
                    
                    4.04Outstanding
      at December 31, 2009
                    
                    
                    699,000
                    
                    
                    $
                    1.87
                    
                    
                    
                    2.30
                    
                    
                    $
                    624,353Vested
      and exercisable at December 31, 2008
                    
                    
                    536,000
                    
                    
                    $
                    2.69
                    
                    
                    
                    2.05
                    
                    
                    $
                    689,659Vested
      and exercisable at December 31, 2009
                    
                    
                    576,333
                    
                    
                    $
                    2.10
                    
                    
                    
                    1.94
                    
                    
                    $
                    576,413
  F-16
 
 The
weighted-average fair value of each option granted during the year ended
December 31, 2009 and 2008, estimated as of the grant date using the
Black-Scholes option-pricing model, was $0.37 per option and $0.43 per option,
respectively.
  A summary
of the status of the Company’s nonvested shares as of December 31, 2009 and
2008, and changes during the years then ended is as presented
below:
  Number
                        ofShares
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price
                      
                      
                      Weighted Average
                        Remaining
                        Contractual Term(inyears)Nonvested
      shares at January 1,
      2008
                      
                      
                      125,334
                      
                      
                      $
                      2.04
                      
                      
                      
                      3.60Granted
                      
                      
                      196,000
                      
                      
                      
                      0.87
                      
                      
                      
                      4.66Vested
                      
                      
                      (242,334
                      )
                      
                      
                      1.35
                      
                      
                      
                      3.86Nonvested
      shares at December 31, 2008
                      
                      
                      79,000
                      
                      
                      $
                      1.25
                      
                      
                      
                      3.87Granted
                      
                      
                      175,000
                      
                      
                      
                      0.77
                      
                      
                      
                      4.29Vested
                      
                      
                      (131,333
                      )
                      
                      
                      1.01
                      
                      
                      
                      3.72Nonvested
      shares at December 31, 2009
                      
                      
                      122,667
                      
                      
                      $
                      0.82
                      
                      
                      
                      3.98
 
  The
following table summarizes information about stock options outstanding at
December 31, 2009:
  Stock Option Outstanding
                      
                      
                      ExercisableRange of ExercisePrices
                      
                      Number
                        ofShares
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price
                      
                      
                      WeightedAverage
                        Remaining
                        ContractualTerm(in years)
                      
                      
                      NumberofShares
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price$
      0.60- $ 1.00
                      
                      
                      201,000
                      
                      
                      $
                      0.78
                      
                      
                      
                      4.18
                      
                      
                      
                      104,667
                      
                      
                      $
                      0.81$
      1.01- $ 2.00
                      
                      
                      187,000
                      
                      
                      
                      1.44
                      
                      
                      
                      2.57
                      
                      
                      
                      161,667
                      
                      
                      
                      1.50$
      2.01- $ 3.00
                      
                      
                      220,000
                      
                      
                      
                      2.29
                      
                      
                      
                      1.16
                      
                      
                      
                      219,000
                      
                      
                      
                      2.29$
      3.01- $ 4.00
                      
                      
                      21,000
                      
                      
                      
                      3.09
                      
                      
                      
                      0.50
                      
                      
                      
                      21,000
                      
                      
                      
                      3.09$
      4.01- $ 5.00
                      
                      
                      70,000
                      
                      
                      
                      4.47
                      
                      
                      
                      0.25
                      
                      
                      
                      70,000
                      
                      
                      
                      4.47699,000
                      
                      
                      $
                      1.87
                      
                      
                      
                      2.30
                      
                      
                      
                      576,333
                      
                      
                      $
                      2.10
 
 10.
                Shareholders’
      Equity
 
 In May
2008, the Board of Directors of the Company authorized a stock repurchase
program. The program authorized the Company to purchase up to 150,000 common
shares of the Company within the next year.  As of December 31, 2009,
the Company has purchased 10,700 common shares, from this repurchase program, at
an aggregate cost of approximately $9,000.
  In
October 2009, the Board of Directors of the Company authorized a stock
repurchase program. The program authorizes the Company to purchase up to 100,000
common shares of the Company within the next year.  As of December 31,
2009, the Company has purchased 1,301 common shares, from this repurchase
program, at an aggregate cost of approximately $1,400.
  In
November of 2008 100,000 options were exercised by the Company’s Chief Executive
Officer for the aggregate amount of $78,000.
  F-17
  11.
                Discontinued
      Operations
 
 On April
20, 2006, the Company sold its two remaining Directories business for (i)
$291,667 paid in cash at closing; (ii) a promissory note in the amount of
$613,333 payable in 24 consecutive monthly installments of $25,556 each, bearing
interest at 5% per annum; and (iii) the Buyer’s assumption of liabilities
relating to the Directories business. The Company has been recording gains on
the 2006 sale of the directories business under the installment method in
proportion to the payments received. Therefore the Company has recorded gains on
this sale in the amount of $0 and $72,917 for the years ended December 31, 2009
and 2008, respectively.
 
 12.
                Commitments
      and Contingencies
 
 Operating Leases
 
 On June
12, 2006, we entered into a new Lease Agreement dated as of June 9, 2006 (the
“Agreement”). In accordance with the Agreement, we are leasing the Premises for
a term of 5 years commencing July 1, 2006 and ending on June 30,
2011.  At December 31, 2009, approximate future minimum rental and
utilities payments under these commitments are as follows:
  2010
                      
                      
                      69,0002011
                      
                      
                      35,000Total
                      
                      $
                      104,000
 
 Rent
expense was approximately $62,000 and $55,000 in 2009 and 2008,
respectively.
 
 Employment
Agreements
 
 In March
1999, the Company entered into an employment agreement with Assaf Ran, its
president and chief executive officer.  Mr. Ran’s employment term
initially renews automatically for successive one-year periods unless either
party gives 180 days written notice of its intention to terminate the
agreement.  Under the agreement, Mr. Ran will receive an annual base
salary of $75,000, annual bonuses as determined by the compensation committee of
the Board of Directors in its sole and absolute discretion, and is eligible to
participate in all executive benefit plans established and maintained by the
Company.  Under the agreement, Mr. Ran has also agreed to a one-year
non-competition period following the termination of his employment. As of March
2003 the compensation committee approved an increase in Mr. Ran’s compensation
to an annual base salary of $225,000. On March 13, 2008 the compensation
committee approved Mr. Ran’s reduction of his annual salary by 75% to $56,000
for an additional one year or until the Company has more significant operations
(as defined by the Committee). On March 18, 2009 the compensation committee
approved Mr. Ran’s continuing the reduction of his annual salary to $100,000 for
one year or until the Company has more significant operations (as defined by the
Committee). In November 2009, the Compensation committee of the Board of
Directors approved Mr. Ran a one-time bonus of $65,000 for the year 2009. Mr.
Ran’s annual base compensation was $92,000 and $56,000 during the years 2009 and
2008, respectively.
  F-18
 
 13.
                Related
      Parties Transactions
 
 DAG
Interactive Inc, our subsidiary is being held 20% by Ocean-7. Mark Alhadeff is
the main shareholder of Ocean-7 and effective December of 2005 is a member of
our board of directors.
  General
and administrative expenses include approximately $6,150 of software maintenance
fees incurred for the year ended December 31, 2008, under an agreement with
Ocean-7. Accounts payable and accrued expenses at December 31, 2009 and 2008
include approximately $30,000 due to Ocean-7.
  F-19