I just found a toy sheltie on Indiana Sheltie Rescue facebook page. Amber weighs 12 lbs. And height is 13 inches.
Even though there are a few people out there Breeding for "toy" shelties the majority of shelties that are in rescue and the shelters are from pet shops and from byb! Like sheep said that one is probably a runt/undersized sheltie. Remember this breed is new still and there are size throwbacks all over the place. We still have not come up with a size controller yet!!!
They are both wonderful dogs and I think will shine in Flyball and if I had the time/energy I think in agility also. That said NEITHER should be bred. Not due to health concerns, rather they are out of spec and would dilute what is Sheltie. IMO doing so would be irresponsible and should be discouraged.