PINX:SKER Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

Form 10-Q

(Mark one)
x
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
       
   
For the quarterly period ended March 31, 2011
 
       
o
Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
       
   
For the transition period from ______________ to _____________
 

Commission File Number: 000-54275

SMSA Kerrville Acquisition Corp.
(Exact name of registrant as specified in its charter)

Nevada
27-3924073
(State of incorporation)
(IRS Employer ID Number)
2591 Dallas Parkway, Suite 100, Frisco, TX 75034
(Address of principal executive offices)

(972) 963-0001
(Issuer's telephone number)



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) has been subject to such filing requirements for the past 90 days.  YES  x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 
Large accelerated filer    o
Accelerated filer                          o
 
 
Non-accelerated filer      o
Smaller reporting company        x
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
YES  o   NO  x
 
State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date:May 10, 2012: 10,025,034

Transitional Small Business Disclosure Format (check one):     YES o  NO  x
 
 
 
 
1

 
 
SMSA Kerrville Acquisition Corp.

Form 10-Q for the Quarter ended March 31, 2012

Table of Contents


 
Page
Part I - Financial Information
 
   
Item 1 - Financial Statements
3
   
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
11
   
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
13
   
Item 4 - Controls and Procedures
14
   
Part II - Other Information
 
   
Item 1 - Legal Proceedings
14
   
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
14
   
Item 3 - Defaults Upon Senior Securities
14
   
Item 4 - (Removed and Reserved)
14
   
Item 5 - Other Information
14
   
Item 6 - Exhibits
14
   
Signatures
14
 
 
 
2

 
 
Part I - Financial Information
Item 1 - Financial Statements


SMSA Kerrville Acquisition Corp. and Subsidiary
Consolidated Balance Sheets
March 31, 2012 and December 31, 2011
 
   
(Unaudited)
   
(Audited)
 
   
March 31,
   
December 31,
 
   
2012
   
2011
 
ASSETS
 
Current Assets
           
Cash on hand and in bank
  $ 18,262     $ 28,669  
Accounts receivable
               
Trade
    10,339        288  
Federal income taxes
    405       -  
Prepaid expenses to related party
    1,981       400  
                 
Total current assets
    30,987       29,357  
                 
Total Assets
  $ 30,987     $ 29,357  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
Current Liabilities
               
Accounts payable to related party
  $ 7,000     $ 3,400  
Accrued interest payable to officer
    1,184       1,184  
Accrued federal income taxes payable
    -       3,480  
                 
Total current liabilities
    8,184       8,064  
                 
Total Liabilities
    8,184       8,064  
                 
                 
Commitments and Contingencies
               
                 
                 
Stockholders' Equity (Deficit)
               
Preferred stock - $0.001 par value
               
10,000,000 shares authorized.
               
None issued and outstanding
    -       -  
Common stock - $0.001 par value.
               
100,000,000 shares authorized.
               
10,025,034 shares issued and outstanding
    10,025       10,025  
Additional paid-in capital
    (8,475 )     (8,475 )
Retained earnings (Deficit)
    21,253       20,043  
                 
Total Stockholders' Equity
    22,803       21,293  
                 
Total Liabilities and Stockholders’ Equity
  $ 30,987     $ 29,357  
 
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
 
 
 
3

 


SMSA Kerrville Acquisition Corp. and Subsidiary
Consolidated Statements of Operations and Comprehensive Loss
Three months ended March 31, 2012 and 2011

(Unaudited)


   
Three months
   
Three months
 
   
ended
   
ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
 
             
Revenues
  $ 17,806     $ -  
                 
Operating expenses
               
Service bureau fees
    -       -  
Professional fees
    5,815       4,315  
Contract personnel costs
    3,600       -  
Occupancy costs paid to related party
    1,200       -  
Other general and administrative costs
    5,416       284  
                 
Total operating expenses
    16,031       4,599  
                 
Income (Loss) from operations
    1,775       (4,599 )
                 
Other income (expense)
               
Interest expense to officer/stockholder
    -       (185 )
                 
Income (Loss) before provision for income taxes
    1,775       (4,784 )
                 
Provision for income taxes
    (265 )     -  
                 
Net Income (Loss)
    1,510       (4,784 )
                 
Other comprehensive income
    -       -  
                 
Comprehensive Income (Loss)
  $ 1,510     $ (4,784 )
                 
Loss per weighted-average share
               
of common stock outstanding,
               
computed on net loss - basic
               
and fully diluted
 
nil
   
nil
 
                 
Weighted-average number of shares
               
of common stock outstanding -
               
basic and fully diluted
    10,025,034       10,025,034  
 
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
 
 
 
4

 
 
 
SMSA Kerrville Acquisition Corp. and Subsidiary
Consolidated Statements of Cash Flows
Three months ended March 31, 2012 and 2011

(Unaudited)
 
 
   
Three months
   
Three months
 
   
ended
   
ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
 
Cash Flows from Operating Activities
           
Net income (loss) for the period
  $ 1,510     $ (4,784 )
Adjustments to reconcile net loss
               
to net cash provided by operating activities
               
Depreciation
    -       -  
(Increase) Decrease in
               
Accounts receivable
               
Trade
    (10,051 )     -  
Federal income taxes
    (405 )     -  
Prepaid expenses to related party
    400       -  
Prepaid expenses - other
    (1,981 )     -  
Increase (Decrease) in
               
Accounts payable to related party
    3,600       -  
Accrued interest payable to officer/stockholder
    -       185  
Accrued federal income taxes payable
    (3,480 )     -  
                 
Net cash provided by operating activities
    (10,407 )     (4,599 )
                 
                 
Cash Flows from Investing Activities
    -       -  
                 
                 
Cash Flows from Financing Activities
               
Proceeds from short term loan payable from officer/stockholder
    -       25,000  
Repayment of short term loan payable from officer/stockholder
    -       -  
Capital contributed to support operations
    -       250  
                 
Net cash provided by financing activities
    -       25,250  
                 
Increase in Cash
    (10,407 )     20,651  
                 
Cash at beginning of period
    28,669       1,000  
                 
Cash at end of period
  $ 18,262     $ 21,651  
                 
Supplemental Disclosure of
               
Interest and Income Taxes Paid
               
Interest paid during the period
  $ -     $ -  
Income taxes paid during the period
  $ 4,150     $ -  
 
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
 
 
 
5

 

SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements
March 31, 2012 and December 31, 2011



Note A - Background and Description of Business

SMSA Kerrville Acquisition Corp. (Company) was organized on May 3, 2010 as a Nevada corporation to effect the reincorporation of Senior Management Services of Kerrville, Inc., a Texas corporation, mandated by the plan of reorganization discussed below.

On December 15, 2010, the Company, STC Edgar, Inc. (Edgar) and the individual stockholders of Edgar entered into a Share Exchange Agreement (Exchange Agreement) whereby the stockholders of Edgar exchanged 100.0% of the issued and outstanding stock of Edgar for 9,500,000 shares of restricted, unregistered common stock of the Company.  Edgar then became a wholly-owned subsidiary of the Company.

In February 2011, the Company filed a Registration Statement on Form 10 on a voluntary basis to become a reporting issuer pursuant to Section 12(g) of the Securities Exchange Act of 1934, which is a prerequisite for our common stock to become eligible for quotation on the OTC Bulletin Board.  This Registration Statement was declared effective by the SEC on or about April 13, 2011.

Effective April 1, 2011, the Company’s wholly-owned subsidiary, Edgar, commenced business as a start-up company and took over the electronic document filing operations and clients formerly serviced by Securities Transfer Corporation, a related entity controlled by the Company’s President and majority stockholder, Kevin B. Halter, Jr., which was closed.   No consideration was paid from the Company to Securities Transfer Corporation for the this business.  This action removed the Company from the requirements of reporting as a “development stage company”.

Through the Company’s wholly-owned subsidiary, Edgar, the Company provides EDGARizing services to various commercial and corporate entities.   Our primary service is the EDGARization of corporate documents that require filing on EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system maintained by the Securities and Exchange Commission.  EDGAR performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the Securities and Exchange Commission.  These documents include registration statements, prospectuses, annual reports, quarterly reports, periodic reports, debt agreements, special proxy statements, offering circulars, tender offer materials and other documents related to corporate financings, acquisitions and mergers. We receive our clients’ information in a variety of media, and reformat it for distribution, either in print, digital or Internet form.  Neither the Company nor its wholly-owned subsidiary have any past or present  affiliation with the U. S. Securities and Exchange Commission in any manner.


Note B - Preparation of Financial Statements

The acquisition of STC Edgar, Inc. on December 15, 2010 by SMSA Kerrville Acquisition Corp. effected a change in control and was accounted for as a “reverse acquisition” whereby STC Edgar, Inc. is the accounting acquiror for financial statement purposes.  Accordingly, for all periods subsequent to the December 15, 2010 “reverse acquisition” transaction, the historical financial statements of the Company reflect the financial statements of STC Edgar, Inc. since it’s inception on November 9, 2010 and the operations of SMSA Kerrville Acquisition Corp. subsequent to December 15, 2010.

The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles and has established a year-end for accounting purposes of December 31.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
 
 
 
6

 

SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note B - Preparation of Financial Statements - Continued

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission on its Annual Report on Form 10-K containing the Company’s financial statements for the year ended December 31, 2011.  The information presented within these interim financial statements may not include all disclosures required by generally accepted accounting principles and the users of financial information provided for interim periods should refer to the annual financial information and footnotes when reviewing the interim financial results presented herein.

In the opinion of management, the accompanying interim financial statements, prepared in accordance with the U. S. Securities and Exchange Commission’s instructions for Form 10-Q, are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented.  The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full fiscal year ending December 31, 2012.


Note C - Related Party Transactions and Conflicts of Interest

Timothy P. Halter, the Company’s former sole officer and director from August 1, 2007 (date of bankruptcy settlement) through December 14, 2010, is the sole officer, director and stockholder of Halter Financial Group, Inc. (HFG), and an officer and member of Halter Financial Investments GP, LLC, general partner of Halter Financial Investments, L. P. (HFI), our former controlling stockholder.  Timothy P. Halter is the brother of Kevin B. Halter, Jr. who has served as the Company’s sole officer and director since December 15, 2010.  Kevin B. Halter, Jr. is responsible for the implementation and operation of our business plan.

Approximately 14.97% and 24.95% of the Company’s gross revenues during the three months ended March 31, 2012 and the year ended December 31, 2011, respectively, were received from entities controlled by or affiliated with HFG or HFI.

Kevin Halter, Jr., our controlling stockholder, is also the President and majority stockholder of Securities Transfer Corporation, an affiliated entity which formerly provided services comparable to those of the Company.  Mr. Halter is not obligated to contribute any specific number of hours to our affairs, which may result in an conflict of interest in allocating his time between our operations and his other business affairs.   If his other business affairs require him to devote more substantial amounts of time to such interests, it could limit his ability to devote time to our affairs and could have a negative impact on our ability to manage our business plan.

Subsequent to the December 15, 2010 transaction date, the Company and it’s current controlling stockholder, Kevin Halter, Jr., agreed that additional funds were necessary to support the corporate entity, comply with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and commence operations under the Company’s business plan.  To this end, in February 2011, Mr. Halter loaned the Company $25,000 through a loan agreement bearing interest at 6.0% with the note being due upon demand.  This loan was repaid in November 2011 from funds generated through operating activities.  The Company accrued approximately $1,164 in interest payable which remains unpaid as of the release date of these financial statements.

On April 1, 2011, concurrent with the commencement of operation of our business plan, the Company contracted with Securities Transfer Corporation to provide personnel, office space, equipment and administrative support for our business plan.  Accordingly, the Company has paid or accrued approximately $1,200 per month for personnel costs and approximately $400 per month for office space, equipment usage and administrative support in the operation of our business plan, totaling approximately $4,800 and $14,400 for the three months ended March 31, 2012 and the year ended December 31, 2011, respectively.
 
 

 
7

 

SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note D - Summary of Significant Accounting Policies

1.
Cash and cash equivalents

The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

2.
Accounts receivable

In the normal course of business, the Company extends unsecured credit to virtually all of its customers which are located throughout the United States.  Because of the credit risk involved, management has provided an allowance for doubtful accounts which reflects its opinion of amounts which will eventually become uncollectible.  In the event of complete non-performance, the maximum exposure to the Company is the recorded amount of trade accounts receivable shown on the balance sheet at the date of non-performance.

The Company charges all customers on an “as-completed” project basis with virtually all projects being completed in 1 working day or less.  Accordingly, revenue is recognized by the Company at the point at which the project is transmitted to the U. S. Securities and Exchange Commission.  The Company then has no remaining performance obligations, management is of the opinion that collection is reasonably assured and the Company’s services do not allow for any no right of return on the part of the customer.

3.
Reorganization costs

The Company has adopted the provisions of provisions required by the Start-Up Activities topic of the FASB Accounting Standards Codification whereby all costs incurred with the incorporation and reorganization of the Company were charged to operations as incurred.

4.
Income taxes

The Company files income tax returns in the United States of America and various states, as appropriate and applicable.  The Company does not anticipate any examinations of any tax returns filed since the Company’s inception in 2010.

The Company uses the asset and liability method of accounting for income taxes.  At March 31, 2012 and December 31, 2011, respectively, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences.  Temporary differences generally represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization, allowance for doubtful accounts and vacation accruals, as well as the potential impact of any net operating loss carryforwards (s) and their potential utilization.

The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification.  The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority.  As a result of the implementation of Codification’s Income Tax Topic, the Company did not incur any liability for unrecognized tax benefits.

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.

Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).
 
 
 
8

 

SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note D - Summary of Significant Accounting Policies - Continued

5.
Income (Loss) per share

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.

As of March 31, 2012 and 2011, respectively, the Company had no outstanding stock warrants, options or convertible securities which could be considered as dilutive for purposes of the loss per share calculation.

6.
Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flows.


Note E - Fair Value of Financial Instruments

The carrying amount of cash, accounts receivable, accounts payable and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates.  The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.

Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates.  The Company does not use derivative instruments to moderate its exposure to financial risk, if any.


Note F - Income Taxes

The components of income tax (benefit) expense for the three months ended March 31, 2012 and 2011, respectively, is as follows:
 
      Three months     Three months  
      ended     ended  
      March 31, 2012     March 31, 2011  
               
 
Federal:
           
 
Current
  $ 265     $ -  
 
Deferred
    -       -  
        265       -  
 
State:
               
 
Current
    -       -  
 
Deferred
    -       -  
        -       -  
                   
 
Total
  $ 265     $ -  

 
 
9

 
 
SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note F - Income Taxes - Continued

As of March 31, 2012, the Company has no net operating loss carryforwards.  The amount and availability of any future net operating loss carryforward will be subject to the limitations set forth in the Internal Revenue Code.  Such factors as the number of shares ultimately issued within a three year look-back period; whether there is a deemed more than 50 percent change in control; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of any net operating loss carryforward(s).

The Company's income tax expense (benefit) for the three months ended March 31, 2012 and 2011, respectively, varied from the statutory rate of 34% as follows:
 
   
Three months
   
Three months
 
   
ended
   
ended
 
   
March 31, 2012
   
March 31, 2011
 
             
Statutory rate applied to
           
income before income taxes
  $ 600     $ (1,600
Increase (decrease) in income
               
taxes resulting from:
               
State income taxes
    -       -  
Other, including the application
               
of a net operating loss carryforward
               
and the effect of graduated tax brackets
    (335 )     1,600  
                 
Income tax expense
  $ 265     $ -  

The Company’s only temporary difference due to statutory requirements in the recognition of assets and liabilities for tax and financial reporting purposes, as of March 31, 2012 and December 31, 2011, respectively, relates solely to the Company’s net operating loss carryforward(s).  This difference gives rise to the financial statement carrying amounts and tax bases of assets and liabilities causing either deferred tax assets or liabilities, as necessary, as of December 31, 2011 and 2010, respectively:
 
   
March 31,
   
December 31,
 
   
2012
   
2011
 
Deferred tax assets
           
Net operating loss carryforwards
  $ -     $ -  
Less valuation allowance
    -       -  
                 
Net Deferred Tax Asset
  $ -     $ -  
 

During the three months ended March 31, 2012 and the year ended December 31, 2011, the valuation allowance for the deferred tax asset increased (decreased) by approximately $-0- and $(100), respectively.


Note G - Capital Stock Transactions

On December 15, 2010, the Company, STC Edgar, Inc. (Edgar) and the individual stockholders of Edgar entered into a “Share Exchange Agreement” (Exchange Agreement) whereby the stockholders of Edgar exchanged 100.0% of the issued and outstanding stock of Edgar for 9,500,000 shares of restricted, unregistered common stock of the Company.  Edgar then became a wholly-owned subsidiary of the Company.


Note H - Subsequent Events

Management has evaluated all activity of the Company through May 10, 2012 (the issue date of the financial statements) and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to consolidated financial statements.


 
10

 

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1)  
Caution Regarding Forward-Looking Information

Certain statements contained in this quarterly filing, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; the ability to attract and retain qualified personnel; and other factors referenced in this and previous filings.

Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

(2)
General

SMSA Kerrville Acquisition Corp. (Company) was organized on May 3, 2010 as a Nevada corporation to effect the reincorporation of Senior Management Services of Kerrville, Inc., a Texas corporation, mandated by the plan of reorganization discussed below.

On December 15, 2010, the Company, STC Edgar, Inc. (Edgar) and the individual stockholders of Edgar entered into a Share Exchange Agreement (Exchange Agreement) whereby the stockholders of Edgar exchanged 100.0% of the issued and outstanding stock of Edgar for 9,500,000 shares of restricted, unregistered common stock of the Company.  Edgar then became a wholly-owned subsidiary of the Company.

In February 2011, the Company filed a Registration Statement on Form 10 on a voluntary basis to become a reporting issuer pursuant to Section 12(g) of the Securities Exchange Act of 1934, which is a prerequisite for our common stock to become eligible for quotation on the OTC Bulletin Board.  This Registration Statement was declared effective by the SEC on or about April 13, 2011.

Effective April 1, 2011, the Company’s wholly-owned subsidiary, Edgar, commenced business as a start-up company and took over the electronic document filing operations and clients formerly serviced by Securities Transfer Corporation, a related entity controlled by the Company’s President and majority stockholder, Kevin B. Halter, Jr., which was closed.   No consideration was paid from the Company to Securities Transfer Corporation for the this business.

Through the Company’s wholly-owned subsidiary, Edgar, the Company provides EDGARizing services to various commercial and corporate entities.   Our primary service is the EDGARization of corporate documents that require filing on EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system maintained by the Securities and Exchange Commission.  EDGAR performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the Securities and Exchange Commission.  These documents include registration statements, prospectuses, annual reports, quarterly reports, periodic reports, debt agreements, special proxy statements, offering circulars, tender offer materials and other documents related to corporate financings, acquisitions and mergers. We receive our clients’ information in a variety of media, and reformat it for distribution, either in print, digital or Internet form.  Neither the Company nor its wholly-owned subsidiary have any past or present  affiliation with the U. S. Securities and Exchange Commission in any manner.

The acquisition of STC Edgar, Inc. on December 15, 2010 by SMSA Kerrville Acquisition Corp. effected a change in control and was accounted for as a “reverse acquisition” whereby STC Edgar, Inc. is the accounting acquiror for financial statement purposes.  Accordingly, for all periods subsequent to the December 15, 2010 “reverse acquisition” transaction, the historical financial statements of the Company reflect the financial statements of STC Edgar, Inc. since it’s inception on November 9, 2010 and the operations of SMSA Kerrville Acquisition Corp. subsequent to December 15, 2010.
 
 
 
11

 

(3)
Results of Operations

The Company received revenue of approximately $17,800 and $-0- during the three months ended March 31, 2012 and 2011, respectively.  Prior to April 1, 2011, the Company had no operations, revenue or revenue sources.  Effective with all ‘34 Act filings as of and after June 30, 2011, the SEC required interactive data files prepared using XBRL (as defined in the appropriate Regulations) to be filed as an exhibit to a Registrant’s financial statements.  To facilitate this new requirement, Edgar engaged the services of a subcontract service bureau.  This situation is responsible for the significant increase in revenues during the 3rd quarter of Calendar 2011 and the related corresponding expenses.  These fees are seasonal and are not anticipated to recur until the same time in the following year.

General and administrative expenses for the respective three month periods ended March 31, 2012 and 2011 were approximately $16,031 and $4,600, respectively.  The 2012 expenses include all ordinary operating costs related to the Company’s operations, including approximately $4,800 paid or accrued to Securities Transfer Corporation for personnel and administrative costs.  The approximate $4,600 in 2011 expenses relate, principally, to professional fees and services related to the Company’s Form 10 filing.

It is anticipated that the Company’s operations, by quarter, should become more comparable and reflective of current and future trends with the passage of time and maturation of the Company’s operations.  Further, it is anticipated that future revenue and expenditure levels may fluctuate as the Company’s business plan matures.

Earnings per share for the three months ended March 31, 2012 and 2011, respectively, were approximately $0.00 and $(0.00) based on the weighted-average shares issued and outstanding.

(4)
Liquidity and Capital Resources

At March 31, 2012 and December 31, 2011, the Company had working capital of approximately $22,800 and $(3,500), respectively.

The Company’s current business operations consist of providing the conversion and filing of various documents prepared in accordance with either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, for small to mid-sized public companies with the U.S. Securities and Exchange Commission (SEC) electronically through EDGAR, the Commission's Electronic Data Gathering, Analysis, and Retrieval system.  The Company is not and has never been affiliated with the U.S. Securities and Exchange Commission in any manner.

Kevin Halter, Jr., our controlling stockholder, is also the President and majority stockholder of Securities Transfer Corporation, an affiliated entity which formerly provided services comparable to those of the Company.  Mr. Halter is not obligated to contribute any specific number of hours to our affairs, which may result in an conflict of interest in allocating his time between our operations and his other business affairs.   If his other business affairs require him to devote more substantial amounts of time to such interests, it could limit his ability to devote time to our affairs and could have a negative impact on our ability to manage our business plan.

The Company's continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis.  Further, the Company faces considerable risk in it’s business plan and a potential shortfall of funding due to our potential inability to raise capital in the equity securities market.  If no additional operating capital is received during the next twelve months, the Company will be forced to rely on existing cash in the bank and additional funds loaned by management and/or significant stockholders.

If necessary in the future, the Company may offer sales of equity securities.  However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.

The Company’s certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock and 100,000,000 shares of common stock.  The Company’s ability to issue preferred stock may limit the Company’s ability to obtain debt or equity financing as well as impede potential takeover of the Company, which takeover may be in the best interest of stockholders.  The Company’s ability to issue these authorized but unissued securities may also negatively impact our ability to raise additional capital through the sale of our debt or equity securities.

In a restricted cash flow scenario, the Company may be unable to maintain its business plan, and could, instead, delay all cash intensive activities.  Without necessary cash flow, the Company could become dormant during the next twelve months, or until such time as necessary funds could be raised in the equity securities market.

While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach its goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.
 
 
 
12

 

(5)
Related Party Transactions and Conflicts of Interest

Timothy P. Halter, the Company’s former sole officer and director from August 1, 2007 (date of bankruptcy settlement) through December 14, 2010, is the sole officer, director and stockholder of Halter Financial Group, Inc. (HFG), and an officer and member of Halter Financial Investments GP, LLC, general partner of Halter Financial Investments, L. P. (HFI), our former controlling stockholder.  Timothy P. Halter is the brother of Kevin B. Halter, Jr. who has served as the Company’s sole officer and director since December 15, 2010.  Kevin B. Halter, Jr. is responsible for the implementation and operation of our business plan.

Approximately 8.145 and 24.95% of the Company’s gross revenues during the three months ended March 31, 2012 and the year ended December 31, 2011, respectively, were received from entities controlled by or affiliated with HFG or HFI.

Kevin Halter, Jr., our controlling stockholder, is also the President and majority stockholder of Securities Transfer Corporation, an affiliated entity which formerly provided services comparable to those of the Company.  Mr. Halter is not obligated to contribute any specific number of hours to our affairs, which may result in an conflict of interest in allocating his time between our operations and his other business affairs.   If his other business affairs require him to devote more substantial amounts of time to such interests, it could limit his ability to devote time to our affairs and could have a negative impact on our ability to manage our business plan.

Subsequent to the December 15, 2010 transaction date, the Company and it’s current controlling stockholder, Kevin Halter, Jr., agreed that additional funds were necessary to support the corporate entity, comply with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and commence operations under the Company’s business plan.  To this end, in February 2011, Mr. Halter loaned the Company $25,000 through a loan agreement bearing interest at 6.0% with the note being due upon demand.  This loan was repaid in November 2011 from funds generated through operating activities.  The Company accrued approximately $1,164 in interest payable which remains unpaid as of the release date of these financial statements.

On April 1, 2011, concurrent with the commencement of operation of our business plan, the Company contracted with Securities Transfer Corporation to provide personnel, office space, equipment and administrative support for our business plan.  Accordingly, the Company has paid or accrued approximately $1,200 per month for personnel costs and approximately $400 per month for office space, equipment usage and administrative support in the operation of our business plan, totaling approximately $4,800 and $14,400 for the three months ended March 31, 2012 and the year ended December 31, 2011, respectively.

(6)
Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”).  GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported.  These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition.  We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note D of our financial statements.  While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates.  Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
 
(7)
Effect of Climate Change Legislation

The Company currently has no known or identified exposure to any current or proposed climate change legislation which could negatively impact the Company’s operations or require capital expenditures to become compliant.


Item 3 - Quantitative and Qualitative Disclosures About Market Risk

In future periods, the Company may become subject to certain market risks, including changes in interest rates and currency exchange rates.  At the present time, the Company has no identified exposure and does not undertake any specific actions to limit exposures, if any.
 
 
 
13

 

Item 4 - Controls and Procedures

(a)
Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive and Financial Officer (Certifying Officer), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 promulgated under the Exchange Act as of the end of the period covered by this Annual Report.  Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Certifying Officer, as appropriate, to allow timely decisions regarding required disclosure.  Based upon that evaluation, our Certifying Officer concluded that as of such date, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the time periods specified by the SEC due to a inherent weakness in our internal controls over financial reporting due to commencing business operations within the current reporting quarter and having a sole officer and director.  However, our Certifying Officer believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the respective periods presented.

(b)
Changes in Internal Controls

There were no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Part II - Other Information

Item 1 - Legal Proceedings
From time to time, in future periods, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business.  The Company has not been a party to any such proceedings to date and anticipates that any future proceeding, either individually or in the aggregate, will not be material to its business or likely to result in a material adverse effect on its future operating results, financial condition, or cash flows.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
None

Item 3 - Defaults Upon Senior Securities
None

Item 4 - Mine Safety Disclosures
None

Item 5 - Other Information
None

Item 6 - Exhibits
 
31.1       Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1       Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101        Interactive data files pursuant to Rule 405 of Regulation S-T.


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.
 
 
  SMSA Kerrville Acquisition Corp.
   
Dated: May 10, 2012
        /s/ Kevin B. Halter, Jr.             
 
Kevin B. Halter, Jr.
  President, Chief Executive Officer,
  Chief Financial Officer and Sole Director
 
 
 
14

 
 

PINX:SKER Quarterly Report 10-Q Filling

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PINX:SKER Quarterly Report 10-Q Filing - 3/31/2012
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