ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This report on Form 10-QSB contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements and from historical results of operations. Among the risks and uncertainties which could cause such a difference are those relating to our dependence upon certain key personnel, our ability to manage our growth, our success in implementing the business strategy, our success in arranging financing where required, and the risk of economic and market factors affecting us or our customers. The outcome of these risks and uncertainties are beyond the control of the Company and its management.

OVERVIEW

Through December 31, 2005, we were a developmental stage e-commerce company. We currently operate an e-commerce website that enables any business to establish a fully functional online retail presence. Our website, Pricester.com, is an Internet marketplace which allows vendors to host their website with product and service listings and allows consumers to search for listed products and services.

PLAN OF OPERATIONS

We have only received minimal revenues. We only have sufficient cash on hand to meet funding requirements for the next 60-90 days. We do not have sufficient cash on hand to meet funding requirements for the next twelve months. Although we eventually intend to primarily fund general operations and our marketing program with revenues received from the sale of Pricester Custom Designed Websites, transaction fees and hosting fees, our revenues are not increasing at a rate sufficient to cover our monthly expenses in the near future. We will have to seek alternative funding through debt or equity financing in the next twelve months that could result in increased dilution to the shareholders. No specific terms of possible equity or debt financing have been determined or pursued.

GOING CONCERN

As reflected in the accompanying consolidated financial statements, we had an accumulated deficit of $4,155,189, a working capital deficit of $206,975 at September 30, 2007, had net losses for the nine months ended September 30, 2007 of $1,185,201, and cash used in operations during the nine months ended September 30, 2007 of $164,943. While we are attempting to increase sales, the growth has not been significant enough to support the Company's daily operations. We will attempt to raise additional funds by way of a public or private offering. While we believe in the viability of our strategy to improve sales volume and in our ability to raise additional funds, there can be no assurances to that effect. Our limited financial resources have prevented us from aggressively advertising our products and services to achieve consumer recognition. Our ability to continue as a going concern is dependent on our ability to further implement our business plan and generate increased revenues.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management's applications of accounting policies. Critical accounting policies for Pricester.com, Inc. include the useful life of property and equipment and web development costs and stock-based compensation.

Computer equipment and furniture is stated at cost less accumulated depreciation. Depreciation is computed over the assets' estimated useful lives (five to seven years) using straight line methods of accounting. Maintenance costs are charged to expense as incurred while upgrades and enhancements that result in additional functionality are capitalized.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

We review the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

We follow the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin 104 for revenue recognition. In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. The following policies reflect specific criteria for our various revenues streams:

We have three primary revenue sources: website design, transaction fees, and hosting fees.

o Website design revenue is recognized as earned when the website is complete, control is transferred and the customer has accepted its website, usually within seven days of the order.

o Transaction fee income comprises fees charged for use of credit cards or other forms of payment in the purchase of items sold on the customers' websites. The transaction fee income is recognized as earned when funds transfers (via credit card or other forms of payments) between the buyer and seller has been authorized.

o Revenues from website hosting fees are recognized when earned. Web hosting fees received in advance are reflected as deferred revenue on the accompanying balance sheet.

Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payment ("SFAS No. 123R"). SFAS No. 123R establishes the financial accounting and reporting standards for stock-based compensation plans. As required by SFAS No. 123R, we recognize the cost resulting from all stock-based payment transactions including shares issued in the financial statements.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2006

Net sales for the nine months ended September 30, 2007 were $147,686 as compared to net sales of $85,493 for the nine months ended September 30, 2006, an increase of $62,193 or approximately 73%. We are continuing to create customer awareness for our products. Additionally, we have increased our marketing efforts and began offering website hosting services.

Total operating expenses for the nine months ended September 30, 2007 were $1,332,887, an increase of $909,639, or approximately 215%, from total operating expenses in the nine months ended September 30, 2006 of $423,248. This increase is primarily attributable to:

* a decrease of $3,490, or approximately 49%, in advertising expense incurred to promote our website and products. The decrease was attributable to decreased spending due to limited financial resources;
* an increase of $6,998, or approximately 42%, in professional fees incurred in connection with our SEC filings;
* an increase of $525,949 in consulting fees in connection with the issuance of our common stock for services rendered and amortization of deferred compensation;
* an increase of $397,504, or 213%, in compensation expense to $584,140 for the nine months ended September 30, 2007 as compared to $186,636 for the nine months ended September 30, 2006. This increase is a result of increases in overall compensation expense primarily due to increased staff due to the hiring of additional sales and website design personnel and the issuance of our common stock to various employees for services rendered amounting to $137,330 during the nine months ended September 30, 2007. We also recorded stock based compensation of $258,850 to our CEO for past services rendered during the nine months ended September 30, 2007.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

* a decrease of $17,322, or approximately 10%, in other selling, general and administrative expenses as a result of decrease spending in general expenses and office expenses due to limited resources.

We reported a loss from operations of $1,185,201 for nine months ended September 30, 2007 as compared to a loss from operations of $337,755 for nine months ended September 30, 2006. Although there can be no assurances, we anticipate that during the fiscal year ending December 31, 2007 our ongoing marketing efforts will result in an increase in our net sales from those reported in fiscal 2006. To support these increased sales we anticipate that our operating expenses will also increase during the fiscal year ending December 31, 2007 as compared to the fiscal 2006. We are, however, unable to predict at this time the amount of any such increase in operating expenses.

Total other expense decreased $189, or approximately 100%, for nine months ended September 30, 2007 as compared to nine months ended September 30, 2006. Included in this net decrease is:

* a decrease in interest income of $161 for the nine months ended September 30, 2007 ;
* a decrease of $350, in interest expense for the nine months ended September 30, 2007 as compared to nine months ended September 30, 2006 which reflects a decrease in our borrowings.

We reported a net loss of $1,185,201 or $(.04) per share for the nine months ended September 30, 2007 as compared to a net loss of $337,944 or $(.01) per share for the nine months ended September 30, 2006.

THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2006

Net sales for the three months ended September 30, 2007 were $46,805 as compared to net sales of $37,348 for the three months ended September 30, 2006, an increase of $9,457 or approximately 25%. We are continuing to create customer awareness for our products. Additionally, we have increased our marketing efforts and began offering website hosting services.

Total operating expenses for the three months ended September 30, 2007 were $256,164, an increase of $112,564, or approximately 78%, from total operating expenses in the three months ended September 30, 2006 of $143,600. This increase is primarily attributable to:

* an increase of $109,332 in consulting fees in connection with the issuance of our common stock for services rendered and amortization of deferred compensation;
* an increase of $17,447, or 27%, in compensation expense to $83,063 for the three months ended September 30, 2007 as compared to $65,616 for the three months ended September 30, 2006. This increase is a result of increases in overall compensation expense primarily due to increased staff due to the hiring of additional sales and website design personnel and the issuance of our common stock to various employees for services rendered during the three months ended September 30, 2007.
* a decrease of $13,004, or approximately 21%, in other selling, general and administrative expenses as a result of decrease spending in general expenses and office expenses due to limited resources.

We reported a loss from operations of $209,359 for three months ended September 30, 2007 as compared to a loss from operations of $106,252 for the three months ended September 30, 2006.

Total other expense decreased $14, or approximately 100%, for the three months ended September 30, 2007 as compared to three months ended September 30, 2006.

We reported a net loss of $209,359 or $(.01) per share for the three months ended September 30, 2007 as compared to a net loss of $106,238 or $(.00) per share for the three months ended September 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows used in operating activities for the nine months ended September 30, 2007 amounted to $164,943 and was primarily attributable to our net losses of $1,185,201 offset by non-cash compensation of $407,280, amortization of deferred compensation of $608,768, depreciation of $2,345, donation of former officer's compensation of $15,000 and net changes in assets and liabilities of ($13,135). Net cash flows used in operating activities for the nine months ended September 30, 2006 amounted to $277,349 and was primarily attributable to our net losses of $337,944 offset by stock-based non-cash compensation of $7,500, amortization of deferred compensation of $37,500, depreciation of $5,233, and changes in assets and liabilities.

Net cash flows used in investing activities for the nine months ended September 30, 2006 amounted to $279 as compared to net cash used in investing activities of $0 for the nine months ended September 30, 2007. For the nine months ended September 30, 2006, we used cash for capital expenditures of $279.

Net cash flows provided by financing activities was $155,239 for the nine months ended September 30, 2007 as compared to net cash provided by financing activities of $258,800 for the nine months ended September 30, 2006, a decrease of $103,561. For the nine months ended September 30, 2007, we received proceeds from the sale of common stock and treasury stock of $98,339 and proceeds of $75,500 from related party advances offset by the repayment of related party advances of $18,600. For the nine months ended September 30, 2006, we received proceeds from the sale of common stock of $186,950 and proceeds of $74,600 from related party advances offset by the repayment of related party advances of $750 and the repayment of loans payable of $2,000.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

We reported a net decrease in cash for the nine months ended September 30, 2007 of $9,704 as compared to a net decrease in cash of $18,828 for the nine months ended September 30, 2006. At September 30, 2007, we had cash on hand of $18,124.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). This Statement defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure related to the use of fair value measures in financial statements. The Statement is to be effective for the Company's financial statements issued in 2008; however, earlier application is encouraged. The Company is currently evaluating the timing of adoption and the impact that adoption might have on its financial position or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosure using both the rollover approach and the iron curtain approach, as those terms are defined in SAB 108. The rollover approach quantifies misstatements based on the amount of the error in the current year financial statement, whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement's year(s) of origin. Financial statements would require adjustment when either approach results in quantifying a misstatement that is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. If a Company determines that an adjustment to prior year financial statements is required upon adoption of SAB 108 and does not elect to restate its previous financial statements, then it must recognize the cumulative effect of applying SAB 108 in fiscal 2006 beginning balances of the affected assets and liabilities with a corresponding adjustment to the fiscal 2006 opening balance in retained earnings. SAB 108 is effective for interim periods of the first fiscal year ending after November 15, 2006. The adoption of SAB 108 did not have an impact on the Company's consolidated financial statements.

In December 2006, FASB Staff Position No. EITF 00-19-2, "Accounting for Registration Payment Arrangements," was issued. The FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, "Accounting for Contingencies." The Company believes that its current accounting is consistent with the FSP.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115", under which entities will now be permitted to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. This Statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. The Company is currently assessing the impact, if any, the adoption of SFAS 159 will have on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

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