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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Period Ended
March 31, 2005 Commission File No. 0-15807
MARKETSHARE RECOVERY, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 31-1190725
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(State or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
95 Broadhollow Road, Suite 101, Melville, New York 11747
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (631) 385-0007
Former name, former address and former fiscal year, if changed since last
report: N/A
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for a shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the Registrant's Common Stock, $.001 par
value, as of May 11, 2005 was 3,806,221.
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PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet F-1
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2005 and March 31, 2004 F-2
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2005 and 2004 F-3
Notes to the Condensed Consolidated Financial Statements F4-F6
2
MARKETSHARE RECOVERY, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 2005
ASSETS
CURRENT ASSETS
Cash in escrow $ 45,000
Marketable securities 6,545
-----------
TOTAL CURRENT ASSETS 51,545
TOTAL ASSETS $ 51,545
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Loan Payable - Stockholder $ 109,736
Advances on letter of intent 75,000
Accrued expenses, accounts payable and other current liabilites 180,940
-----------
TOTAL CURRENT LIABILITIES 365,676
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock - $0.001 par value; 50,000,000 shares
authorized; 3,806,221 shares issued and outstanding 3,806
Additional paid-in capital 1,902,954
Accumulated deficit (2,220,891)
-----------
TOTAL STOCKHOLDERS' DEFICIENCY (314,131)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 51,545
===========
See notes to unaudited condensed consolidated financial statements.
F-1
MARKETSHARE RECOVERY, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For The Period Ended
March 31,
2005 2004
----------- -----------
Net revenues - sale of distribution lists $ -- $ 104,963
License fee revenue - related party $ -- $ --
----------- -----------
TOTAL NET REVENUES $ -- $ 104,963
COST OF REVENUES -- 91,431
----------- -----------
GROSS PROFIT -- 13,532
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 46,636 67,417
----------- -----------
OPERATING LOSS (46,636) (53,885)
----------- -----------
OTHER INCOME (EXPENSES)
Interest expense - stockholders (2,165) (5,000)
Interest expense -- --
Gain(Loss) on sale of marketable securities -- 764
Unrealized loss on marketable securities (14,847) (25,577)
----------- -----------
TOTAL OTHER EXPENSES (17,012) (29,813)
----------- -----------
LOSS BEFORE INCOME TAXES (63,648) (83,698)
PROVISION FOR INCOME TAXES -- 455
----------- -----------
NET LOSS $ (63,648) $ (84,153)
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Basic Net (Loss) Income Per Common Share $ (0.02) $ (0.37)
=========== ===========
Diluted Net (Loss) Income Per Common Share $ (0.02) $ (0.37)
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Weighted Average Number of Common Shares
Outstanding - Basic 3,808,461 227,717
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Weighted Average Number of Common
Shares Outstanding - Diluted 3,808,461 227,717
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See notes to unaudited condensed consolidated financial statements.
F-2
MARKETSHARE RECOVERY, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Period Ended
March 31,
2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (63,648) $ (84,153)
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Adjustments to reconcile net loss to net
cash provided by operating activities:
Compensatory element of stock issuances -- 40,271
Depreciation -- 88
Unrealized loss on marketable securities 14,847 --
Changes in operating assets and liabilities:
Deferred revenue -- 60,956
Prepaid and other current assets -- (51)
Due to affiliate -- (45,567)
Accrued expenses and other current liabilities 18,802 44,451
Marketable securities -- (1,308)
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TOTAL ADJUSTMENTS 33,649 98,840
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NET CASH PROVIDED BY(USED IN) OPERATING
ACTIVITIES (30,000) 14,687
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- (1,055)
NET CASH PROVIDED (USED IN) BY INVESTING
ACTIVITIES -- (1,055)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds letter of intent 75,000 --
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 75,000 --
--------- ---------
45,000 13,632
CASH - Beginning -- 9,877
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CASH - Ending $ 45,000 $ 23,509
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the years for:
Income taxes $ -- $ 455
See notes to unaudited condensed consolidated financial statements.
F-3
MARKETSHARE RECOVERY, INC. AND SUBSIDIARY
(Formerly Health and Leisure, Inc. and subsidiary)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements include the accounts of Marketshare Recovery, Inc. and its
subsidiary, which is wholly owned. All significant inter-company accounts
and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and with
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. In the opinion of the
Company's management, the accompanying condensed consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the condensed consolidated
financial position and results of operations and cash flows for the
periods presented.
Results of operations for interim periods are not necessarily
indicative of the results of operations for a full year.
The condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business.
The Company has had recurring losses from operations and operating cash
constraints that raise substantial doubt about the Company's ability to
continue as a going concern. The condensed consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty. No assurance can be provided that the
Company will be successful in locating additional financing or completing
a reverse merger transaction (see Note 4).
NOTE 2 - Marketable Securities
The Company accounts for its investments in marketable
securities in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
Management determines the appropriate classification of all
securities at the time of acquisition and re-evaluates such designation
as of each balance sheet date. The Company has classified its
marketable equity securities as trading securities and has
F-4
MARKETSHARE RECOVERY, INC. AND SUBSIDIARY
(Formerly Health and Leisure, Inc. and subsidiary)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 2 - Marketable Securities - continued
recorded such securities at fair value. The Company uses the
specific identification method to determine realized gains and losses.
Unrealized holding gains and losses are included in earnings.
Marketable securities are classified as current assets and are
summarized as follows:
Marketable equity securities, at cost $ 30,363
=========
Marketable equity securities, at fair value $ 6,545
=========
NOTE 3 - Stockholders' Deficiency
Common Stock Cancelled
In March 2005, 2,642 shares of common stock were cancelled. These shares
were originally issued in 2003 to a consultant for services to be
provided. The consultant never provided those services and subsequently
returned those shares.
F-5
MARKETSHARE RECOVERY, INC. AND SUBSIDIARY
(Formerly Health and Leisure, Inc. and subsidiary)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 4 - Proposed Merger
On January 13, 2005 we entered into a letter of intent, which was amended
on March 11, 2005 for a possible acquisition of a private development
stage company engaged in the development of biometrics-based products for
the home security and electronics market, including biometrically enabled
residential door locks, central station alarm keypads, thermostats and
garage/gate openers. The transaction requires that the new subsidiary
would provide funds to pay all of our outstanding debt and escrow funds to
cover contingent or undisclosed liabilities and those that have not been
settled prior to closing. The general structure of the transaction would
involve the merger of the development stage company into a subsidiary to
be formed and the consideration for the merger would consist solely of
shares of the Company's common stock, which after giving effect to the
issuance, cancellation of a substantial amount of shares held by principal
stockholders and escrow of remaining shares for the same purposes as the
cash escrow, would constitute 90% of the shares then outstanding. The
letter of intent has binding confidentiality provisions and the
consummation of any transaction is conditioned upon, among other things,
the receipt of audited financial statements of the development stage
company, the consent of the majority of the holders of the development
stage company's common stock, the absence of material claims for appraisal
on the part of the development stage company's holders, due diligence and
the execution of a definitive merger agreement.
On April 27, 2005 the Company entered into entered into an Agreement and Plan of
Merger, dated as of April 27, 2005 with its to be formed wholly owned
subsidiary, MarketShare Merger Sub Inc., a Delaware corporation "Merger Sub")
and bioMetrx Technologies, Inc. ("bioMetrx"), a developer of proprietary
biometrics-based products for the home security and electronic markets. Under
the terms of the Agreement, MarketShare will acquire 100% of the total
outstanding capital stock of bioMetrx, by combining it with the Merger Sub.
Pursuant to the Agreement, MarketShare agreed to issue to the shareholders of
bioMetrx approximately 14,000,000 restricted shares of its common stock. The
merger consideration constitutes approximately 90% of the outstanding common
stock of MarketShare, post acquisition. Changes to management of MarketShare,
including the appointment of Mark Basile as President and CEO, the appointment
of new directors and the change of MarketShare's corporate name bioMetrx, are
expected to follow in the near future, after closing and subject to compliance
with applicable SEC rules. When the corporate name change occurs, the Company
will ask the OTCBB to change its trading symbol. Pending such change,
MarketShare will continue to trade under the symbol "MKSH."
F-6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BACKGROUND
Pursuant to an Acquisition Agreement and Plan of Merger dated June
13, 2003 (the "Merger Agreement"), by and among Health & Leisure, Inc (the"
Registrant"); Venture Sum, Inc., a Delaware corporation and a wholly owned
subsidiary of Registrant ("Mergerco"); and MarketShare Recovery, Inc., a NewYork
corporation, ("MKSR"), Mergerco merged with and into MKSR, and MKSR became a
wholly owned subsidiary of the Registrant. The merger became effective June 13,
2003, (the "Effective Date,") however closing of the Agreement occurred on July
15, 2003. Subsequently, Health & Leisure, Inc. filed an amendment to its
certificate of incorporation and thereby changed its name to
MarketShareRecovery, Inc.
MarketShare Recovery, the parent company's operating subsidiary
similarly named MarketShare Recovery, Inc., was incorporated in New York in
November 2000. The subsidiary, MarketShare Recovery, Inc. was a provider of
online direct marketing solutions for enterprises. The solutions enabled
corporations to create and deliver online direct marketing programs that drive
revenue, influence behavior and deepen customer relationships. Our solutions
provided customer insight and powerful program execution through a combination
of hosted applications and technology infrastructure.
We had derived our revenues from the sale of solutions that enable
businesses to proactively communicate with their customers online. Primarily,
these services have consisted of the design and execution of online direct
marketing campaigns and additional services provided by our Professional
Services organization, including the development and execution of Customer
Acquisition programs. Revenue for direct marketing and acquisition campaigns
were recognized when persuasive evidence of an arrangement exists, the campaign
has been sent, the fee was fixed or determinable and collection of the resulting
receivables is reasonably assured. Revenue generated by our professional service
organization was typically recognized as the service is provided.
Our ability to grow and operate our existing business was
constrained by new technologies and e-mail filtering devices installed at
internet service providers and on consumer's personal computers. These programs
block our emails from reaching their final destination, which in turn affected
our ability to effectively market our services. These technological obstacles
have been put in place to combat spam however their effect has been more
widespread and has adversely affected our ability to deliver our clients
messages to our opt-in database of users. As a result, we found it harder to
maintain and grow our business as we were not able to deliver as many
advertisements for our clients and in turn had having difficulty in recruiting
new sales persons as well as retaining members of our existing sales force.
In 2004, we entered into a database license agreement with 110 Media
Group to use and to sublicense the use of our database for a term of ten years
for a total license fee of $45,567. For financial reporting, revenue is
recognized using the straight-line method, based upon the economic useful life
of three years. At March 31, 2005, our remaining deferred revenue of $0 and we
are no longer required to perform any further services nor incur any costs
related to this agreement.
3
As a result of the foregoing, we decided to discontinue that business and
sought out new bossiness opportunities. On October 7, 2004, the Company entered
into an Asset Purchase Agreement with Palomar Enterprises, Inc. (the
"Agreement"). Pursuant to the Agreement, the Company agreed to purchase certain
assets, including certain automotive notes and contracts, a business plan and
model for an automotive financial services company and a data base of potential
customers and $150,000 in cash from Palomar in exchange for 85%, a controlling
interest.
On November 2, 2004, by mutual agreement, the Company and Palomar
terminated the Agreement. As a result of the foregoing, there will be no change
of control of the Company as reported in the Company's Form 8-K filed with the
SEC on October 13, 2004.
The Company entered into an Agreement and Plan of Merger, dated as of
April 27, 2005 with its to be formed wholly owned subsidiary, MarketShare Merger
Sub Inc., a Delaware corporation ("Merger Sub") and bioMetrix Technologies, Inc.
("bioMetrix"), a developer of proprietary biometrics-based products for the home
security and electronic markets. Under the terms of the Agreement, MarketShare
will acquire 100% of the total outstanding capital stock of bioMetrix, by
combining it with the Merger Sub.
Pursuant to the Agreement, MarketShare agreed to issue to the shareholders
of bioMetrix approximately 14,000,000 restricted shares of its common stock and
each holder of warrants or options of bioMetrix (approximately 402,500) will
receive corresponding instruments in MarketShare being substantially the same
rights, preferences as the original instrument issued by bioMetrix. The merger
consideration constitutes approximately 90% of the outstanding common stock of
MarketShare of a fully diluted basis, post acquisition. Changes to management of
MarketShare, including the appointment of Mark Basile as President and CEO, the
appointment of new directors and the change of MarketShare's corporate name to
bioMetrix, are expected to follow in the near future, after closing and subject
to compliance with applicable SEC rules. When the corporate name change occurs,
the Company will ask the OTCBB to change its trading symbol. Pending such
change, MarketShare will continue to trade under the symbol "MKSH."
Founded in 2001, bioMetrix is focused on developing a line of home
security products called smartTOUCH which included biometrically enabled
residential door locks, central station alarm keypads, thermostats and
garage/gate openers. bioMetrix products utilize fingerprint recognition
technology designed to augment or replace conventional security methods such as
keys, keypads and PIN numbers.
BUSINESS OBJECTIVES
In the event the above transaction is not completed, the Company will seek
one or more potential businesses that Management believes warrant the Company's
involvement. As a result of its limited resources, the number of potential
businesses available will be extremely limited. The Company will not restrict
its search to any particular industry. Nevertheless, Management does not intend
to become involved with a company that is an investment company under the
Investment Company Act of 1940; with a company that is a broker or dealer of
investment securities or commodities; or with any company in which the officers,
directors or shareholders of the target company are officers or directors of the
Company. These business objectives are extremely general and are not intended to
be restrictive upon the discretion of Management. Except for the general
limitations contained above, management has not developed and does not intend to
develop specific criteria to be followed in the search for and selection of a
business acquisition, Shareholders will therefore have extremely limited
information as to Management's specific intentions and investors will be unable
to determine even the industries which management might consider.
4
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The preparation of our consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the related disclosures. Certain of our accounting
policies are considered critical as they are both important to the portrayal of
our financial condition and results of operations and require judgments on the
part of management about matters that are uncertain. We have identified the
following accounting policies that are important to the presentation of our
financial condition and results of operations.
REVENUE RECOGNITION
We had generated revenue from the sale of solutions that enable
businesses to proactively communicate with their customers online.
MarketShare Recovery applies the provisions of Staff Accounting
Bulletin104 "Revenue Recognition" and recognizes revenue when persuasive
evidence of an arrangement exists, the service has been delivered, the fee is
fixed or determinable and collection of the resulting receivables is reasonably
assured. Customer Marketing revenues are recognized upon sending of the
campaigns. Revenues attributable to one-time set-up fees for service initiation
are deferred and recognized ratably over the term of the client's service
agreement.
Customer Acquisition revenues are derived primarily from programs
that assist clients in marketing their respective products or services. Customer
Acquisition programs fall into two general categories: CPM mailing programs and
CPA campaign programs. CPM mailing programs involve the execution and delivery
of email campaigns to a defined number of individuals based on a fixed fee per
number of e-mails delivered. The CPM, which stands for cost per thousand will
vary based on the specificity of the demographic to whom the campaign is
delivered to. CPA campaign programs are performance based campaigns which
involve the execution and delivery of email campaigns wherein we are paid either
a flat fee of a percentage of a successful sale or acquisition of a customer by
one of our clients.
We assess probability of collection based on a number of factors,
including our past transaction history with the customer and the
credit-worthiness of the customer. New customers and certain existing customers
may be subject to a credit review process which evaluates the customers'
financial position and ultimately their ability to pay according to the original
terms of the arrangement. Based on our review process, if it is determined from
the outset or during the term of an arrangement that collection of the resulting
receivable is not reasonably assured, then revenue is recognized on a
cash-collected basis.
5
RESULTS OF OPERATIONS
COMPARISON OF QUARTERS ENDED MARCH 31, 2005 AND 2004
Our net revenue decreased by 100% from $104,963 for the three months ended March
31, 2004 to $0 for the three months ended March 31, 2005. The decrease is due to
discontinuation of operations. Cost of revenues decreased from $91,431 for the
three months ended March 31, 2004 to $0 for the three months ended March 31,
2005. The decrease in cost of revenues is due to discontinued operations.
Selling, general and administrative expenses decrease by 30% from $67,417 for
the three months ended March 31, 2004 to $46,636 for the three months ended
March 31, 2005. This decrease is due to the decision to discontinue existing
operations.
Other (expenses) income decreased by 43% from $(29,813) for the three months
ended March 31, 2004 to $(17,012) for the three months ended March 31, 2005.
This decrease is primarily due to a decrease in unrealized loss on marketable
securities.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided (used) by operating activities during the three months ended March
31, 2005 amounted to $(30,000) compared to $14,687 during the three months ended
March 31, 2004. The decrease in cash is due to the decision to discontinue
existing operations.
Cash used in investing activities during the three months ended March 31, 2005
amounted to $0 compared to $1,055 during the three months ended March 31,2004.
Cash provided by financing activities during the three months ended March 31,
2005 amounted to $75,000 compared to $0 during the three months ended March 31,
2004. The company received an advance from a third party in connection with a
letter of intent.
In view of our accumulated deficit and recurring losses, there is substantial
doubt about our ability to continue as a going concern. In this regard,
management adopted the plan to cease operations and seek out new business
opportunities development of our video and website product lines as well as
seeking additional capital through the private sale of our debt or equity
securities. There is no assurance that we will complete the acquisition or that
its business will achieve profitable operations. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
We expect to fund operations on a minimal basis until we complete the
transaction described above. There is no assurance that this transaction will be
consummated. We do not currently have adequate cash reserves to continue to
cover such anticipated expenditures and cash requirements. These factors, among
others, raise substantial doubt about our ability to continue as a going
concern.
6
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
related to income tax and marketing related agreements with our affiliates. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
When used in this Report on Form 10-QSB, the words "may," "will,"
"expect," "anticipate," "continue," "estimate," "intend," "plans", and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 regarding events, conditions and financial
trends which may affect the Company's future plans of operations, business
strategy, operating results and financial position. Such statements are not
guarantees of future performance and are subject to risks and uncertainties and
actual results may differ materially from those included within the
forward-looking statements as a result of various factors. Such factors include,
among others: (i) the Company's ability to obtain additional sources of capital
to fund continuing operations; in the event it is unable to timely generate
revenues (ii) the Company's ability to retain existing or obtain additional
licensees who will act as distributors of its products; (iii) the Company's
ability to obtain additional patent protection for its technology; and (iv)
other economic, competitive and governmental factors affecting the Company's
operations, market, products and services. Additional factors are described in
the Company's other public reports and filings with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date made. The Company
undertakes no obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB issued Interpretation No. 46 (revised),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,"
("FIN 46R"). FIN 46R addresses how a business enterprise should evaluate whether
it has a controlling financial interest in an entity through means other than
voting rights and, accordingly, should consolidate the variable interest entity
("VIE"). FIN 46R replaces FIN46 that was issued in January 2003. All public
companies were required to fully implement FIN 46R no later than the end of the
first reporting period ending after March 15, 2004. The adoption of FIN 46R had
no impact on SiriCOMM's financial condition or results of operations.
On December 16, 2004, the Financial Accounting Standards Board (FASB)
issued FASB Statement No. 123R (revised 2004), Share-Based Payment, which is a
revision of FASB Statement No. 123, Accounting for Stock-Based Compensation.
Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to
7
Employees, and amends FASB Statement No. 95, Statement of Cash Flows. The
approach to accounting for share-based payments in Statement 123(R) is similar
to the approach described in Statement 123. However, Statement 123(R) requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values
and no longer allows pro forma disclosure as an alternative to financial
statement recognition. The Company will be required to adopt Statement 123(R) at
the beginning of its quarter ending March 31, 2006. The Company has not
determined what financial statement impact Statement 123(R) will have on the
Company.
COMMITMENTS
We do not have any commitments that are required to be disclosed in
tabular form as of March 31, 2005.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements.
ITEM 3: CONTROLS AND PROCEDURES
Pursuant to provisions of the Securities Exchange Act of 1934, the
Company's Chief Executive Officer and Chief Financial Officer are responsible
for establishing and maintaining disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under their supervision,
for the Company. They have designed such disclosure controls and procedures to
ensure that material information relating to the Company, is made known to them
by others within the Company, particularly during the periods when the Company's
quarterly and annual reports are being prepared.
Changes in Internal Controls. During the first quarter of fiscal
year 2005, there were no changes in our internal control over financial
reporting that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. However, we intend to
continue to refine our internal controls on an ongoing basis. Our management and
our independent auditors have reported to our board of directors certain matters
involving internal controls that our independent auditors considered to be
material weaknesses, under standards established by the American Institute of
Certified Public Accountants. The material weakness relates to the December 31,
2004 financial closing process. Certain adjustments were identified in the
annual audit process, related to the accounting for stocks received by
customers, payment of commissions with marketable securities, as well as the
lack of segregation of duties in the process of cash receipts and disbursements.
In addition, there were instances where accounting analyses did not include
evidence of a timely review. The adjustments related to these matters were made
by the Company in connection with the preparation of the audited financial
statements for the year ended December 31, 2004.
8
Given these material weaknesses, management devoted additional
resources to resolving questions that arose during our year-end audit. As a
result, we are confident that our consolidated financial statements for the year
ended December 31, 2004 and for this quarter ended March 31, 2005 fairly
present, in all material respects, our financial condition and results of
operations.
The material weaknesses have been discussed in detail among
management, our board of directors and our independent auditors, and we are
committed to addressing and resolving these matters fully and promptly, by
putting in place the personnel, processes, technology and other resources
appropriate to support our revenue recognition and financial close processes. In
that regard we will contract a full time CPA who will serve as our CFO and will
assist in the preparation of our financial statements, 10-QSB's and 10-KSB's. We
have completed a full review of our revenue recognition policy and practices and
have implemented a number of process improvements. We completed a review of our
financial disclosure process and we have implemented needed improvements in this
quarter ending March 31, 2005.
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None
(b) None
(c) None
(d) Not Applicable
ITEM 3.: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4.: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
9
ITEM 5.: OTHER INFORMATION
On April 18, 2005, based upon the recommendation of and approval by our
board of directors, MarketShare Recovery, Inc. (the "Company") dismissed Marcum
& Kliegman LLP ("M&K") as its independent auditor and engaged Wolinetz, Lafazan
& Co. P.C. to serve as its independent auditor for the fiscal year ending
December 31, 2005.
M&K's reports on the Company's consolidated financial statements for
each of the fiscal years ended December 31, 2004 and 2003 did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles. However, M&K's reports
each contained an explanatory paragraph about the Company's ability to continue
as a going concern.
During the years ended December 31, 2004 and 2003 and through April 18,
2005, there were no disagreements with M&K on any matter of accounting principle
or practice, financial statement disclosure or auditing scope or procedure
which, if not resolved to M&K's satisfaction, would have caused them to make
references to the subject matter in connection with their reports of the
Company's consolidated financial statements for such years.
ITEM 6.: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
31.1 Certification of Chief Executive Officer of Periodic
Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
31.2 Certification of Chief Financial Officer of Periodic
Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May ___, 2005 MARKETSHARE RECOVERY, INC.
By: /s/ Raymond Barton
---------------------------------
Raymond Barton
Chief Executive Officer
By: /s/ Timothy Schmidt
---------------------------------
Timothy Schmidt
Chief Financial Officer
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