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, 2004
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 June 1, 2004, there were 7,056,424 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 Consolidated 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 Shareholders' Equity (Deficit)...................F-4
Consolidated Statements of Cash Flows......................................F-5
Notes to Consolidated Financial Statements.................................F-6
F-1
STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------------------------------------
ASSETS
MARCH 31, 2004
(UNAUDITED) DECEMBER 31, 2003
------------------ ------------------
Current assets:
Cash $ 764,724 $ 247,288
Accounts receivable 20,117 20,215
Inventory 15,910 45,493
Prepaid expenses 5,946 5,946
------------------ ------------------
Total current assets 806,697 318,942
Equipment and furniture:
Office furniture and computers 65,063 65,063
Accumulated depreciation (23,466) (21,142)
------------------ ------------------
Total equipment and furniture 41,597 43,921
------------------ ------------------
Deferred tax assets 46,000 105,000
Deposits 7,391 6,313
------------------ ------------------
Total assets $ 901,685 $ 474,176
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 472,264 $ 133,527
Accrued expenses 355,794 355,848
Capital lease obligation - current portion 16,147 18,200
------------------ ------------------
Total current liabilities 844,205 507,575
Long term debt:
Capital lease obligation - less current portion 18,906 22,972
------------------ ------------------
Total long term debt 18,906 22,972
------------------ ------------------
Total liabilities 863,111 530,547
Shareholders' equity (deficit):
Common stock (par value $0.01) 50,000,000 shares authorized;
7,056,424 and 6,936,424 shares issued and outstanding at
March, 31, 2004 and December 31, 2003, respectively 70,564 69,364
Additional paid in capital 109,646 88,924
Accumulated deficit (141,636) (214,659)
------------------ ------------------
Total shareholders' equity (deficit) 38,574 (56,371)
------------------ ------------------
Total liabilities and shareholders' equity (deficit) $ 901,685 $ 474,176
================== ==================
See accompanying notes to financial statements
F-2
STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31,
-------------------------------------
2004 2003
---------------- ----------------
Sales $ 1,395,288 $ 7,039
Revenues from royalties 20,062 --
---------------- ----------------
Total revenues 1,415,350 7,039
---------------- ----------------
Cost of sales 1,130,851 8,541
General, selling and administrative expenses:
Compensation 32,635 --
Salaries 12,285 --
Professional fees 10,314 5,023
Accounting fees 11,335 515
Office 14,721 4,121
Rent 14,868 7,250
Insurance 2,219 2,246
Advertising, marketing and promotion 22,723 580
Depreciation 2,324 2,325
Travel 48 --
Other expense 27,371 --
---------------- ----------------
Total general, selling and administrative expenses 150,843 22,060
---------------- ----------------
Total expenses 1,281,694 30,601
---------------- ----------------
Income (loss) from operations 133,656 (23,562)
Interest expense (1,633) (10,367)
---------------- ----------------
Income (loss) before income taxes 132,023 (33,929)
Provision for income taxes (59,000) --
---------------- ----------------
Net income (loss) $ 73,023 $ (33,929)
================ ================
Net income (loss) per share - basic $ 0.01 $ (0.01)
================ ================
Net income (loss) per share - diluted $ 0.01 $ (0.01)
================ ================
Weighted average number of shares outstanding - basic 7,037,499 4,962,384
================ ================
Weighted average number of shares outstanding - diluted 7,312,499 5,237,384
================ ================
See accompanying notes to financial statements
F-3
STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
--------------------------------------------------
TOTAL
SHAREHOLDERS'
NUMBER OF PAR VALUE PAID IN ACCUMULATED EQUITY
SHARES ($0.01) CAPITAL DEFICIT (DEFICIT)
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 2002 4,962,384 $ 49,624 $ 88,924 $ (582,053) $ (443,505)
Conversion of note payable to
common shares 82,300 823 -- -- 823
Common shares issued for
compensation for services
rendered in September and
December 2003, valued at
$0.01 per share 1,891,740 18,917 -- -- 18,917
Net income -- -- -- 367,394 367,394
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 2003 6,936,424 69,364 88,924 (214,659) (56,371)
Common shares issued for
services in January 2004,
valued at $0.01 per share 110,000 1,100 -- -- 1,100
Common shares issued for
cancellation of contract
and in exchange for accounts
payable in March 2004,
valued at $2.08 per share 10,000 100 20,722 -- 20,822
Net income -- -- -- 73,023 73,023
-------------- -------------- -------------- -------------- --------------
Balance at March 31, 2004
(unaudited) 7,056,424 $ 70,564 $ 109,646 $ (141,636) $ 38,574
============== ============== ============== ============== ==============
See accompanying notes to financial statements
F-4
STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31,
---------------------------------------
2004 2003
----------------- -----------------
Cash flows from operating activities:
Net income (loss) $ 73,023 $ (33,929)
Adjustments to reconcile net income (loss)to net cash:
Depreciation 2,324 2,325
Deferred tax assets 59,000 --
Shares issued for services 1,100 --
(Increase) decease in operating assets:
Accounts receivable 98 (3,164)
Inventory 29,583 1,990
Prepaid expenses -- 668
Deposit (1,078) --
Increase (decrease) in operating liabilities:
Accounts payable 359,559 21,236
Accrued expenses (54) 2,123
----------------- -----------------
Net cash provided (used) by operating activities 523,555 (8,751)
----------------- -----------------
Cash flows from financing activities:
Increase in note payable and accrued interest -- 10,082
Capital lease (6,119) (4,000)
----------------- -----------------
Net cash (used) provided by financing activities (6,119) 6,082
----------------- -----------------
Net increase (decrease) in cash 517,436 (2,669)
Cash, beginning of period 247,288 6,476
----------------- -----------------
Cash, end of period $ 764,724 $ 3,807
================= =================
SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING
AND FINANCIAL ACTIVITIES:
Stock issued for compensation and services $ 1,100 $ --
================= =================
Stock issued in exchange for accounts payable $ 20,822 $ --
================= =================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Payments of interest $ 1,633 $ --
================= =================
See accompanying notes to financial statements
F-5
STARMED GROUP, INC. AND SUBSIDIARY
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, 2004 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, 2003.
2. INVENTORY
---------
During the three months ended March 31, 2004, the Company disposed of
expired inventory totaling $27,371 through a donation to a
not-for-profit organization.
3. CAPITAL STOCK
-------------
On January 13, 2004, the Company issued 110,000 common shares for
services rendered valued at $1,100.
On March 16, 2004, the Company issued 10,000 common shares for
cancellation of a contract in exchange for accounts payable of $20,822.
F-6
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 commissioned the writing of three books, one on
diabetes, the second is a spanish translation of the Starch Blocker Diet book
published by Harper Collings, and the third is on weight loss for dogs. The
Company plans to produce and market the products that help alleviate the health
problems discussed in the books.
8
THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE MONTHS ENDED MARCH 31, 2003
- -------------------------------------------------------------------------------
TOTAL REVENUES. The Company's total sales increased to $1,395,288 in
the quarter ended March 31, 2004 as compared to $7,039 sales in the quarter
ended March 31, 2003. This dramatic increase resulted from the agreement entered
with NHTC, Inc.
Operating revenues derived by the Company's from the sales of its
products were to $1,395,288 in the quarter ended March 31, 2004 as compared to
$7,039 revenues in the quarter ended March 31, 2003.
Revenues for the Company's from royalty payments in the quarter ended
March 31, 2004 totaled $20,062 compared to $0 in the quarter ended March 31,
2003. This increase resulted from the agreement entered with Perrigo Co.
TOTAL EXPENSES. The Company's total expenses for the quarter ended
March 31, 2004 totaled $1,281,694 compared to $30,601 in the quarter ended March
31, 2003, representing a dramatic increase in total expenses primarily due to
marketing and other costs associated with the sale of the Company's products.
This reflects the increased costs incurred by the Company as it started to
significantly increase its sales and derive revenues from its operations.
NET INCOME (LOSS). The Company had a net income of $73,023 for the
quarter ended March 31, 2004, compared to a net loss of (33,929) for the quarter
ended March 31, 2003. The gain reflects the dramatic increase in Company's sales
as compared to the quarter ended March 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $764,724 at March 31, 2004 as
compared to $247,288 at December 31, 2003.
The Company had negative working capital at March 31, 2004. The Company
has been able to borrow and raise sufficient capital to continue operations.
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
On January 13, 2004, the Company issued 110,000 common shares for
services rendered valued at $1,110.
On March 16, 2004, the Company issued 10,000 common shares for
cancellation of a contract in exchange for accounts payable of $20,822.
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. None
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 30, 2004 /s/ Herman Rappaport
--------------------------
By: Herman Rappaport, President
11