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 MARCH 31, 2002
[ ] 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 May 14, 2002, there were
35,475,000 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.
FINANCIAL STATEMENTS
MARCH 31, 2002
2
SRM NETWORKS, INC.
CONTENTS
PAGE
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Financial Statements (Unaudited)
Balance Sheet 4
Statement of Operations 5
Statement of Changes in Stockholders' Equity 6
Statement of Cash Flows 7
Notes to Financial Statements 8
3
SRM NETWORKS, INC.
BALANCE SHEET
MARCH 31, 2002
(UNAUDITED)
ASSETS
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Current assets
Cash $ 11,421
Accounts receivable, net ---
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Total current assets 11,421
Other assets ---
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Total assets $ 11,421
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable and accrued expenses $ 5,150
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Total current liabilities 5,150
Stockholders' Equity
Preferred stock, $.001 par value;
Authorized shares-- 5,000,000
Issued and outstanding share-- 0
---
Common stock, $.001 par value;
Authorized shares-- 50,000,000
Issued and outstanding shares-- 35,475,000 3,225
Additional paid-in capital 50,922
Accumulated deficit (47,876)
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Total stockholders' equity 6,271
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Total liabilities and stockholders' equity $ 11,421
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See accompanying notes to financial statements.
4
SRM NETWORKS, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
Net revenues $ 40
Operating expenses
Legal and professional fees 11,125
Occupancy 595
Office supplies 260
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Total operating expenses 11,980
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Loss from operations (11,940)
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Provision for income tax expense (benefit) ---
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Net loss/comprehensive loss $ (11,940)
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Net loss per common share --- basic and diluted $ (---)
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Weighted average of common shares --- basic and diluted 19,350,000
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See accompanying notes to financial statements.
5
SRM NETWORKS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
JUNE 8, 2001 (INCEPTION) THROUGH MARCH 31, 2002
(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
Issuance of common stock,
October 30, 2001 523,000 523 25,627 --- 26,150
Issuance of common stock,
November 1, 2001 202,000 202 9,898 --- 10,100
Registration expenses 5,967 --- 5,967
--- ---
Cost of occupancy
contributed by officer --- --- 1,335 --- 1,335
Net loss/comprehensive loss --- --- (35,936) (35,936)
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Balance, December 31, 2001 3,225,000 3,225 50,327 (35,936) 17,616
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Stock split (11:1)
February 15, 2002 32,250,000 --- --- --- ---
Cost of occupancy
contributed by officer --- --- 595 --- 595
Net loss/comprehensive loss --- --- (11,940) (11,940)
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Balance, March 31, 2002 35,475,000 $ 3,225 $ 50,922 $ (47,876) $ 6,271
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See accompanying notes to financial statements.
6
SRM NETWORKS, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
Cash flows from operating activities
Net loss $ (11,940)
Adjustments to reconcile net loss to net cash used in
operating activities
Occupancy costs contributed by officer 595
Changes in operating assets and liabilities
Decrease in accounts receivable 40
(Decrease) in accounts payable and accrued expenses (3,021)
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Net cash used by operating activities (14,326)
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Cash flows from investing activities ---
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Cash flows from financing activities
Receipts on advances to stockholders 20,000
Payments on advances from stockholder (4,635)
Stock subscriptions payable (14,000)
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Net cash provided by financing activities 1,365
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Net decrease in cash and cash equivalents (12,961)
Cash and cash equivalents, beginning of period 24,382
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Cash and cash equivalents, end of period $ 11,421
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Supplemental disclosure of cash flow information
Income taxes paid $ ---
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Interest paid $ ---
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See accompanying notes to financial statements.
7
SRM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(UNAUDITED)
NOTE 1 - NATURE OF OPERATIONS
SRM Networks, Inc. (the "Company") is an Internet solutions company
that specializes in website hosting and development services. The Company was
incorporated in the state of Nevada on June 8, 2001 is headquartered in
Glendale, California.
NOTE 2 - 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 months ended March 31, 2002 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2002. These financial statements and the related notes should
be read in conjunction with the Company's audited financial statements for the
period ended December 31, 2001 included in the Company's annual report on Form
10-KSB.
NOTE 3 - 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.
On October 30 and November 1, 2001, the Company issued 725,000
shares of its common stock to various individuals and an entity pursuant to its
registration statement filing on Form SB-2 under the Securities Act of 1933. Per
the registration statement, the Company issued the shares at $0.05 per share for
a total of $36,250.
On February 8, 2002, the Company's Board of Directors authorized the
splitting of the Company's common stock on an eleven-to-one (11:1) basis for
stockholders of record on February 14, 2002 and the resulting shares from the
split were distributed on February 15, 2002. On February 15, 2002, there were
35,475,000 shares issued and outstanding.
NOTE 4 - 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.
8
SRM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(UNAUDITED)
NOTE 4 - RELATED PARTY TRANSACTIONS (continued)
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.
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 three months ended March 31, 2002.
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Liquidity and Capital Resources. Our total current assets are $11,421 as of
March 31, 2002, all of which is represented by cash. We had no other assets as
of March 31, 2002.
Our total current liabilities were approximately $5,150 as of March 31, 2002,
which is represented solely by accounts payable and accrued expenses. We had
no other commitments or contingencies as of March 31, 2002.
9
Results of Operations.
Revenues. For the three month period ended March 31, 2002, we realized revenues
of approximately $40 from providing web hosting and development services. We
hope to generate more revenues as we expand our customer base and service menu.
Operating Expenses. For the three months ended March 31, 2002, our total
expenses were approximately $11,980. The majority of those expenses were
represented by legal and professional fees of $11,125. We also had expenses for
occupying our offices, in the amount of $595, and for office supplies in the
amount of $260. For the three months ended March 31, 2002, we experienced a net
loss of approximately $11,940.
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 $11,421 as of March 31, 2002. In the opinion of management,
available funds will satisfy our working capital requirements through the next
twelve months. 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 officer and director will contribute
funds to pay for our expenses. Our belief that our officer and director will pay
our expenses is based on the fact that our officer and director owns 27,500,000
shares of our common stock, which represents approximately 77.52% of our common
stock. We believe that our officer and director will continue to pay our
expenses as long as he maintains his ownership of our common stock. Therefore,
we have not contemplated any plan of liquidation in the event that we do not
generate revenues.
We have also contemplated acquiring a third party, merging with a third party or
pursuing a joint venture with a third party in order to support our development.
We have conducted informal discussions with potential acquisition or merger
candidates, although we have not conducted any formal negotiations. We cannot
guaranty that we will acquire or merge with a third party, or that in the event
we acquire or merge with a third party, such acquisition or merger will increase
the value of our common stock.
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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On February 8, 2002, our Board of Directors authorized a forward split of all of
our issued and outstanding shares of common stock on an eleven to one (11:1)
basis. Such split was effectuated through a dividend of ten (10) shares of
common stock for each share of common stock then held of record by such holder.
The record date for that declared dividend was February 14, 2002. The pay date
for that declared dividend was February 15, 2002.
Item 3. Defaults Upon Senior Securities
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None.
10
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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(a) Exhibit No.
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3.1 Articles of Incorporation*
3.2 Bylaws*
* Included in the registration statement on Form SB-2 filed on August 7, 2001.
(b) Reports on Form 8-K
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1. Form 8-K filed on February 25, 2002, which reported a change in control under
Item 1 and resignation of directors under Item 6.
11
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
May 14, 2002 By: /s/ Jan H. Barcikowski
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Jan H. Barcikowski
Its: President, Secretary, Director