UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from to
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Commission File Number: 000-33231
SRM Networks, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 95-4868120
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1241 North Central Avenue, Suite 7, Glendale, California 91202
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(Address of principal executive offices)
(818) 243.1181
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(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of November 13, 2001, there were
3,225,000 shares of the issuer's $.001 par value common stock issued and
outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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SRM NETWORKS, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
2
SRM NETWORKS, INC.
(a development stage company)
CONTENTS
PAGE
Financial Statements (Unaudited)
Balance Sheet 4
Statements of Operations 5
Statements of Changes in Stockholders' Equity 6
Statements of Cash Flows 7
Notes to Financial Statements 8
3
SRM NETWORKS, INC.
(a development stage company)
BALANCE SHEET
SEPTEMBER 30, 2001
(UNAUDITED)
ASSETS
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Current assets
Cash $ 3,467
Accounts receivable, net of allowance of $-0- 405
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Total current assets 3,872
Other assets ---
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Total assets $ 3,872
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable and accrued expenses $ 1,000
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Total current liabilities 1,000
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Stockholders' Equity
Preferred stock, $.001 par value;
Authorized shares -- 5,000,000
Issued and outstanding share -- 0
---
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Common stock, $.001 par value;
Authorized shares-- 50,000,000
Issued and outstanding shares-- 2,500,000 2,500
Additional paid-in capital 14,207
Deficit accumulated during the development stage (13,835)
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Total stockholders' equity 2,872
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Total liabilities and stockholders' equity $ 3,872
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See accompanying notes to financial statements.
4
SRM NETWORKS, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
JUNE 8, 2001
THREE MONTHS ENDED (INCEPTION) -
SEPTEMBER 30, 2001 SEPTEMBER 30, 2001
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Revenues
Website hosting $ 280 $ 400
Website development 793 1,393
Less: returns and allowances --- ---
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Net revenues 1,073 1,793
Operating expenses
Legal and professional fees 9,508 12,183
Occupancy 595 740
Office supplies 2,670 2,705
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Total operating expenses 12,773 15,628
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Loss from operations (11,700) (13,835)
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Provision for income tax expense (benefit) --- ---
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Net loss/Comprehensive loss $ (11,700) $ (13,835)
=============== ==============
Net income per common share --- basic and diluted $ (---) $ (---)
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Weighted average of common shares --- basic and diluted 2,500,000 2,500,000
=============== ==============
See accompanying notes to financial statements.
5
SRM NETWORKS, INC.
(a development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
JUNE 8, 2001 (INCEPTION) THROUGH SEPTEMBER 30, 2001
(UNAUDITED)
Common Stock Additional
--------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------- -------------
Balance, June 8, 2001 --- $ --- $ --- $ --- $ ---
Issuance of common stock,
June 9, 2001 2,500,000 2, 500 7,500 --- 10,000
Cost of occupancy
Contributed by officer --- --- 145 --- 145
Net loss/comprehensive loss --- --- (2,135) (2,135)
------------ ------------ ------------ ------------- -------------
Balance, June 30, 2001 2,500,000 2,500 7,645 (2,135) 8,010
------------ ------------ ------------ ------------- -------------
Registration expenses --- --- 5,967 --- 5,967
Cost of occupancy
Contributed by officer --- --- 595 --- 595
Net loss/comprehensive loss --- --- --- (11,700) (11,700)
------------ ------------ ------------ ------------- -------------
Balance, September 30, 2001 2,500,000 $ 2,500 $ 14,207 $ (13,835) $ 2,872
============ ============ ============ ============= =============
See accompanying notes to financial statements.
6
SRM NETWORKS, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
JUNE 8, 2001
THREE MONTHS ENDED (INCEPTION) -
SEPTEMBER 30, 2001 SEPTEMBER 30, 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (11,700) $ (13,835)
Adjustments to reconcile net loss to net cash used in operating
activities
Occupancy costs contributed by officer 595 740
Registration expenses paid by officer 5,967 5,967
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable 315 (405)
Increase (decrease) in accounts payable
and accrued expenses (1,000) 1,000
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Net cash provided by operating activities (5,823) (6,533)
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CASH FLOWS FROM INVESTING ACTIVITIES --- ---
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock --- 10,000
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Net cash provided by financing activities --- 10,000
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,823) 3,467
CASH AND CASH EQUIVALENTS, beginning of period 9,290 ---
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CASH AND CASH EQUIVALENTS, end of period $ 3,467 $ 3,467
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ --- $ ---
================ ===============
Interest paid $ --- $ ---
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See accompanying notes to financial statements.
7
SRM NETWORKS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The unaudited financial statements included herein have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended September
30, 2001 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2001. These financial statements and the related
notes should be read in conjunction with the Company's audited financial
statements for the period ended June 30, 2001 included in the Company's
registration statement filing on Form SB-2.
NOTE 2 - COMMON STOCK
On June 9, 2001, the Company issued 2,500,000 shares of its common
stock to its officers for cash of $10,000. Since there was no readily available
market value at the time of issuance, the value of $0.004 per share was
considered as a reasonable estimate of fair value between the Company and the
officers.
NOTE 3 - RELATED PARTY TRANSACTIONS
On June 9, 2001, the Company issued 2,500,000 shares of its common
stock to it current officers for cash as described in Note 3.
On August 31, 2001, legal and professional expenses related to the
Company's registration statement were paid by its officer in the amount of
$5,967. The payment of the fees was considered an additional contribution to
capital by the officer and the Company.
The Company occupies office space provided by its officer. Accordingly,
occupancy costs have been allocated to the Company based on the square foot
percentage assumed multiplied by the officer's total monthly costs. These
amounts are shown in the accompanying statement of operations for the period
June 8, 2001 (inception) through June 30, 2001 and are considered additional
contributions of capital by the officer and the Company.
NOTE 4 - SUBSEQUENT EVENTS
On November 1, 2001, the Company issued 725,000 pursuant to its
registration statement on Form SB-2 at $0.05 per share for a total of $36,250.
8
Item 2. Plan of Operation
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This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. We cannot guaranty
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
We are an Internet solutions company that specializes in website hosting and
development services. Website hosting encompasses a broad range of possible
services, including basic services, such as simply posting a customer's website
on the Internet using the hosting company's computer hardware and software, as
well as enhanced services such as enabling financial transactions over the
Internet, email, audio and video capabilities. Enhanced services may be
developed internally by the web hosting company or purchased from external
sources and resold by the web hosting company.
We offer, on a resale basis, a range of basic and enhanced web hosting services
to businesses wishing to place their website on the Internet. These businesses
often decide to use a web hosting company in order to avoid the financial cost,
time and expertise requirements of hosting the website and obtaining enhanced
services themselves. We focus on meeting the needs of small and medium-sized
businesses and individuals who are establishing a commercial or informational
presence on the Internet.
For the period from June 8, 2001, our date of formation, through September 30,
2001.
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Liquidity and Capital Resources. We had cash of $3,467 as at September 30, 2001.
Our accounts receivable were approximately $405 as at September 30, 2001.
Despite our limited history, we believe that we will collect those receivables
in a timely fashion. Our total current assets are $3,872. We believe that our
available cash is sufficient to pay our day-to-day expenditures.
Results of Operations.
Revenues. From our inception on June 8, 2001 through September 30, 2001, we
realized revenues of approximately $1,793 from providing web hosting and
development services. We hope to generate more revenues as we expand our
customer base and service menu.
9
Operating Expenses. For the quarter ended September 30, 2001, our total expenses
were approximately $12,773. The majority of those expenses were represented by
legal and professional fees of $9,508. We also had expenses for occupying our
offices, in the amount of $595, and for office supplies in the amount of $2,670.
For the quarter ended September 30, 2001, we experienced a net loss of
approximately $11,700. Additionally, from our inception on June 8, 2001 to
September 30, 2001, we experienced a net loss of approximately $13,835.
Our Plan of Operation for the Next Twelve Months. To effectuate our business
plan during the next twelve months, we must increase our current customer base.
We must also effectively market our services. We anticipate that we will use the
revenues generated to fund marketing activities and for working capital. Our
failure to market and promote our services will harm our business and future
financial performance.
We had cash of $3,467 as at September 30, 2001. In the opinion of management,
available funds will satisfy our working capital requirements through March
2002. Our forecast for the period for which our financial resources will be
adequate to support our operations involves risks and uncertainties and actual
results could fail as a result of a number of factors. We anticipate that we may
need to raise additional capital to expand our operations, although we have not
made any efforts to obtain additional capital. Such additional capital may be
raised through public or private financing as well as borrowings and other
sources. We cannot guaranty that additional funding will be available on
favorable terms, if at all. If adequate funds are not available, then our
ability to expand our operations may be adversely affected. If adequate funds
are not available, we believe that our officers and directors will contribute
funds to pay for our expenses. Our belief that our officers and directors will
pay our expenses is based on the fact that our officers and directors
collectively own 2,500,000 shares of our common stock, which represents
approximately 77.52% of our common stock. We believe that our officers and
directors will continue to pay our expenses as long as they maintain their
ownership of our common stock. Therefore, we have not contemplated any plan of
liquidation in the event that we do not generate revenues. As of September 30,
2001, our officers and directors provided us with our initial capitalization of
$10,000. On September 6, 2001, Mr. Sherman contributed an additional $5,000 to
pay any expenses that we may incur in the next two months. We have not
negotiated any specific repayment terms with Mr. Sherman.
We are not currently conducting any research and development activities, other
than the development of our website. We do not anticipate conducting such
activities in the near future. In the event that we expand our customer base,
then we may need to hire additional employees or independent contractors as well
as purchase or lease additional equipment.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
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None.
Item 2. Changes in Securities.
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None.
Item 3. Defaults Upon Senior Securities
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None.
Item 4. Submission of Matters to Vote of Security Holders
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None.
Item 5. Other Information
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None.
Item 6. Exhibits and Reports on Form 8-K
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None.
10
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SRM Networks, Inc.,
a Nevada corporation
November 13, 2001 By: /s/ Scott Sherman
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Scott Sherman
Its: President, Secretary, Director