UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report filed under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2003
or [ ] Transitional report filed under Section 13 or 15 (d) of
the Exchange Act.
Commission File No. 0-33153
STARMED GROUP, INC.
------------------------
(Name of Small Business Issuer in its Charter)
Nevada 52-2220728
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification Number
2029 Century Park East, Suite 1112, Los Angeles, CA 90067
-----------------------------------------------------------
(Address of principal executive office)
Issuer's telephone number: (310) 226-2555
--------------
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
been subject to such filing requirements for the past ninety (90) days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date:
As of March 31, 2003, there were 4,962,384 shares of Common Stock, par
value $0.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
1
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Consolidated Balance Sheets 3
(b) Consolidated Statements of Operations 4
(c) Consolidated Statement of Shareholders' Equity (deficit) 5
(d) Consolidated Statements of Cash Flows 6
(e) Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
Item 3. Controls and Procedures 9
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults On Senior Securities
Item 4. Submission of Items to a Vote
Item 5. Other Information
Item 6.
(a) Exhibits
(b) Reports on Form 8K
SIGNATURES AND CERTIFICATES 11
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TABLE OF CONTENTS
Consolidated Balance Sheets................................................F-2
Consolidated Statements of Operations......................................F-3
Consolidated Statement of Changes in Stockholders' Equity (Deficit)........F-4
Consolidated Statements of Cash Flows......................................F-5
Notes to Financial Statements..............................................F-6
F-1
STARMED GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------
March 31, 2003 December 31,
(un-audited) 2002
-------------- --------------
ASSETS
Current assets
Cash $ 3,807 $ 6,476
Accounts receivable 3,164 --
Inventory 38,875 40,865
Prepaid expenses 2,000 2,668
-------------- --------------
Total current assets 47,846 50,009
Equipment and furniture
Office furniture and computers 65,063 65,063
Accumulated depreciation (14,170) (11,845)
-------------- --------------
Total equipment and furniture 50,893 53,218
-------------- --------------
Total assets $ 98,739 $ 103,227
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 43,991 $ 22,755
Accrued expenses 33,904 31,781
Note payable with accrued interest 454,981 444,899
Capital lease obligation - current portion 13,190 12,802
-------------- --------------
Total current liabilities 546,066 512,237
Long term debt:
Capital lease obligation - less current portion 30,107 34,495
-------------- --------------
Total long term debt 30,107 34,495
-------------- --------------
Total liabilities 576,173 546,732
Shareholders' equity (deficit):
Common stock (par value $0.01) 50,000,000 shares authorized;
4,962,384 shares issued and outstanding at March, 31, 2003
and December 31, 2002, respectively 49,624 49,624
Additional paid in capital 88,924 88,924
Accumulated deficit (615,982) (582,053)
-------------- --------------
Total shareholders' deficit (477,434) (443,505)
-------------- --------------
Total liabilities and shareholders' equity (deficit) $ 98,739 $ 103,227
============== ==============
The accompanying notes are an integral part of these financial statements.
F-2
STARMED GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------
CUMULATIVE AMOUNTS
FOR THE THREE MONTHS FROM INCEPTION
ENDED MARCH 31, (JANUARY 10, 2000)
--------------------------------- THROUGH
2003 2002 MARCH 31, 2003
--------------- --------------- ---------------
Sales $ 7,039 $ -- $ 7,039
Cost of sales 8,541 -- 8,541
--------------- --------------- ---------------
Gross loss (1,502) -- (1,502)
Revenue from royalties -- 2,274 10,288
--------------- --------------- ---------------
(1,502) 2,274 8,786
--------------- --------------- ---------------
Expenses:
Compensation -- 28,930 231,475
Professional fees 5,023 26,235 89,712
Accounting fees 515 5,675 21,225
Office 4,121 11,009 41,742
Rent 7,250 5,997 55,912
Insurance 2,246 1,839 9,307
Advertising, marketing and promotion 580 11,710 88,390
Depreciation 2,325 2,441 14,170
Impairment of goodwill -- -- 4,698
Travel -- 2,004 2,385
--------------- --------------- ---------------
Total expenses 22,060 95,840 559,016
--------------- --------------- ---------------
Loss from operations (23,562) (93,566) (550,230)
Interest expense (10,367) (10,563) (65,752)
--------------- --------------- ---------------
Loss before income taxes (33,929) (104,129) (615,982)
Provision for income taxes -- -- --
--------------- --------------- ---------------
Net loss $ (33,929) $ (104,129) $ (615,982)
=============== =============== ===============
Net loss per share - basic $ (0.01) $ (0.02)
=============== ===============
Weighted average number of shares outstanding 4,962,384 4,945,384
=============== ===============
The accompanying notes are an integral part of these financial statements.
F-3
STARMED GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (JANUARY 10, 2000) THROUGH MARCH 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
-----------------------------------------------
DEFICIT TOTAL
ACCUMULATED SHAREHOLDERS'
NUMBER OF PAR VALUE PAID IN DEVELOPMENT EQUITY
SHARES ($0.01) CAPITAL STAGE (DEFICIT)
-------------- -------------- -------------- -------------- --------------
Balance at inception (January 10, 2000) 4,040,592 $ 40,406 $ (40,406) $ -- $ --
Common shares issued for cash October
2000 at average price per share $0.23 135,000 1,350 29,500 -- 30,850
Adjustment for common shares issued for
compensation for services in October 2000
valued at average price per share of shares
issued for cash $0.23 300,000 3,000 66,000 -- 69,000
Net loss -- -- -- (74,060) (74,060)
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 2000 4,475,592 44,756 55,094 (74,060) 25,790
Acquisition, July 27, 2001, of all
469,792 outstanding shares (par value
$0.01) of Sierra Medicinal, Inc. for
469,792 shares of the Company, Sierra had
no assets and no liabilities. The fair
market value of net assets acquired was
zero. The fair market value of the shares
issued is not determinable since there is
no market for the Company's stock. The
Company has used the common stock par
value $0.01 to value the acquisition 469,792 4,698 -- -- 4,698
Net loss -- -- -- (125,586) (125,586)
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 2001 4,945,384 49,454 55,094 (199,646) (95,098)
Common shares issued for cash in
September 2002, at $2 per share 5,000 50 9,950 -- 10,000
Common shares issued for compensation
for services, in September and October 12,000 120 23,880 -- 24,000
2002 valued at $2 per share
Net loss -- -- -- (382,407) (382,407)
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 2002 4,962,384 49,624 88,924 (582,053) (443,505)
Net loss -- -- -- (33,929) (33,929)
-------------- -------------- -------------- -------------- --------------
Balance at March 31, 2003 (unaudited) 4,962,384 $ 49,624 $ 88,924 $ (615,982) $ (477,434)
============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements.
F-4
STARMED GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
CUMULATIVE AMOUNTS
FOR THE THREE MONTHS FROM INCEPTION
ENDED MARCH 31, (JANUARY 10, 2000)
----------------------------- THROUGH
2003 2002 MARCH 31, 2003
------------- ------------- -------------
Cash flows from operating activities:
Net loss during development stage $ (33,929) $ (104,129) $ (615,982)
Adjustments to reconcile net loss)to net cash:
Depreciation 2,325 2,441 14,170
Shares issued for compensation and services -- -- 93,000
Impairment of goodwill -- -- 4,698
(Increase) decease in operating assets:
Accounts receivable (3,164) -- (3,164)
Inventory 1,990 (23,340) (38,875)
Prepaid expenses 668 -- (2,000)
Increase (decrease) in operating liabilities:
Accounts payable 21,236 (50) 43,991
Accrued expenses 2,123 -- 33,904
------------- ------------- -------------
Net cash used in operating activities (8,751) (125,078) (470,258)
Cash flows from investing activities:
Purchase of equipment and furniture -- -- (65,063)
------------- ------------- -------------
Net cash used in investing activities -- -- (65,063)
------------- ------------- -------------
Cash flows from financing activities:
Increase in note payable and accrued interest 10,082 109,694 454,981
Capital lease (4,000) (3,820) 43,297
Proceeds from issuance of common stock -- -- 40,850
------------- ------------- -------------
Net cash provided by financing activities 6,082 105,874 539,128
------------- ------------- -------------
Net increase (decrease) in cash (2,669) (19,204) 3,807
Cash, beginning of period 6,476 189,349 --
------------- ------------- -------------
Cash, end of period $ 3,807 $ 170,145 3,807
============= ============= =============
SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING
AND FINANCIAL ACTIVITIES:
Stock issued for compensation and services $ -- $ -- 93,000
============= ============= =============
Stock issued for acquisition of subsidiary $ -- $ -- 4,698
============= ============= =============
Reduction of lease payments and computer costs based on
adjustment of lease $ -- $ -- 3,300
============= ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Payments of interest $ -- $ 869 10,486
============= ============= =============
The accompanying notes are an integral part of these financial statements.
F-5
STARMED GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS FOR PRESENTATION
----------------------
The financial information included herein is unaudited, however, such
information reflects all adjustments (consisting solely of normal
occurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods. The
results of operations for the three months ended March 31, 2003 are not
necessarily indicative of the results to be expected for the full year.
The accompanying consolidated financial statements do not include
footnotes and certain financial presentations normally required under
generally accepted accounting principles; and, therefore, should be
read in conjunction with the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2002.
2. SUBSEQUENT EVENTS
-----------------
NOTE PAYABLE
------------
In 2002, the Company had a $400,000 convertible note payable with an
interest rate at 10% per annum which matured on August 31, 2003.
On July 23, 2003, the Company entered into an agreement for the
cancellation of the note payable in the amount of $467,255 including
accrued interest through July 23, 2003, in exchange for the issuance
82,300 restricted shares of common stock. The agreement includes a
guarantee and option whereby the Company guarantees a market price of
$3.50 per share in the event of the future sale of the shares by the
related shareholder in the form of either cash or additional shares of
common stock valued at the bid price on the date of payment. The
Company's liability associated with the guarantee and option clause of
the agreement totaled $288,050. The Company recorded a gain on
forgiveness of debt as a result of this transaction in the amount of
$178,382 for the nine months ended September 30, 2003.
CAPITAL STOCK
-------------
On September 25, 2003, the Company issued 804,381 common shares for
services rendered and also as retainer fees valued at $8,044.
On December 31, 2003, the Company issued 1,000,000 common shares for
compensation to its officers valued at $10,000. The Company also issued
87,359 common shares for services rendered valued at $873.
On January 13, 2004, the Company issued 110,000 common shares for
services rendered valued at $1,110.
F-6
STARMED GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUBSEQUENT EVENT (Continued)
----------------
OFFICE LEASE
------------
The Company entered into a twelve month lease for office space
commencing on November 1, 2003 and expiring on October 31, 2004. Future
minimum rental payments at March 31, 2003, under the office lease are
$59,592.
F-7
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS PRELIMINARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Plan of Operation of this Quarterly Report on Form
10-QSB include "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which could cause the actual results of the Company (sometimes
referred to as "we", "us" or the "Company"), performance (financial or
operating) or achievements expressed or implied by such forward-looking
statements not to occur or be realized. Such forward-looking statements
generally are based upon the Company's best estimates of future results, general
merger and acquisition activity in the marketplace, performance or achievement,
based upon current conditions and the most recent results of operations.
Forward-looking statements may be identified by the use of forward-looking
terminology such as "may," "will," "project," "expect," "believe," "estimate,"
"anticipate," "intends," "continue", "potential," "opportunity" or similar
terms, variations of those terms or the negative of those terms or other
variations of those terms or comparable words or expressions. (See the Company's
Form 10SB for a description of certain of the known risks and uncertainties of
the Company.)
Overview of the Company's Business
- ----------------------------------
StarMed Group, Inc., a Nevada corporation, referred herein to as "we",
"StarMed Group" or the "Company", is a holding company of Sierra Medicinals,
Inc., an Arizona corporation, and our wholly-owned subsidiary ("Sierra
Medicinals"). StarMed Group, through Sierra Medicinals is engaged in the
development and marketing of natural alternative medicinals.
The Company's products include two products to help problems with
eyesight, one product to help those suffering from arthritis, one products for
colon distress and two products for weight loss. The Company's physicians have
formulated several levels of nutritionals for different levels of each patient's
need.
The Company recognizes the need for product education not only to the
public, but also to doctors who are not trained in alternative medicine. The
Company, therefore, has as one of its primary efforts, the preparation of
educational material, including research data to support its products.
The Company has engaged the services of two medical authors to write
two books on illnesses that effect the general public. The Company plans to
produce and market the products that help alleviate the problems discussed in
the books
8
Results of Operations for the quarter ended March 31, 2003
- ----------------------------------------------------------
For the three months period ending March 31, 2003, the Company's
expenditures were $22,060 (un-audited), which are comparable to the three
month ended March 31, 2002 of $95,840 (un-audited) as the Company did not start
up operations until August of 2003. The Company will be expending more for
advertising and travel in the coming periods as sales and marketing become more
extensive.
The net loss for the three months period ending March 31, 2003 was
$(33,929) (un-audited) compared to the net loss from the first three months
ended March 31, 2002 of $(104,129) (un-audited) that included an increase in
payment of professional fees and general and administrative expenses. There were
no signed contracts in the quarter ended March 31, 2003 that would have produced
revenue.
ITEM 3. Controls and Procedures
Our President and Treasurer/Chief Financial Officer (the "Certifying Officer")
is responsible for establishing and maintaining disclosure controls and
procedures and internal controls and procedures for financial reporting for the
Company. The Certifying Officer has designed such disclosure controls and
procedures and internal controls and procedures for financial reporting to
ensure that material information is made known to him, particularly during the
period in which this report was prepared. The Certifying Officer has evaluated
the effectiveness of the Company's disclosure controls and procedures and
internal controls and procedures for financial reporting as of March 31, 2003
and believes that the Company's disclosure controls and procedures and internal
controls and procedures for financial reporting are effective based on the
required evaluation. There have been no significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
9
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS- NONE
ITEM 2 - CHANGES IN SECURITIES- NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES- NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS- NONE
ITEM 5 - OTHER INFORMATION- NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. Forms 8-K AND Form 8-K/A were filed during the quarter
ended March 31, 2003 with respect to Item 4. Change in the Registrant's
Certifying Accountant.
10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
STARMED GROUP, INC.
June 24, 2004 /s/ Herman Rappaport
--------------------------
By: Herman Rappaport, President
11