SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter year ended September 30, 2002
Commission File Number: 333-55166
SMI PRODUCTS, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Nevada 88-0363465
________________________ ____________________________________
(State of organization) (I.R.S. Employer Identification No.)
3503 Cedar Locust
Sugarland, TX 77479
________________________________________
(Address of principal executive offices)
(713) 265-8660
__________________________________________________
Registrant's telephone number, including area code
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 and (2) has been
subject to such filing requirements for the past 90 days. Yes [x]
Securities registered under Section 12(g) of the Exchange Act:
There are 7,551,000 shares of common stock outstanding as of September 30, 2002.
TABLE OF CONTENTS
_________________
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
ITEM 2 MANAGEMENT'S DISCUSSION OF OPERATIONS AND
FINANCIAL CONDITION
PART II OTHER INFORMATION
ITEM 7 SIGNATURES
SMI PRODUCTS, INC.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
September 30, 2002
(Stated in US Dollars)
(UNAUDITED)
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
INTERIM BALANCE SHEETS
September 30, 2002 and December 31, 2001
(Stated in US Dollars)
(UNAUDITED)
September 30, December 31,
2002 2001
_____________ _____________
ASSETS
Current
Cash $ 69 $ 156
Advance receivable 87 87
_____________ ____________
$ 156 $ 243
============= ============
LIABILITIES
Current
Accounts payable $ 7,751 $ 8,285
Due to related party 7,430 900
Loan Payable 5,732
_____________ ____________
20,913 9,185
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value
25,000,000 shares authorized
7,551,000 shares issued 7,551 7,551
Additional paid-in capital 43,049 43,049
Deficit accumulated during the development stage (71,357) (59,542)
_____________ ____________
(20,757) (8,942)
_____________ ____________
$ 156 $ 243
============= ============
Nature and Continuance of Operations - Note 1
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS
for the three and nine month periods ended September 30, 2002 and 2001
and June 17, 1996 (Date of Inception) to September 30, 2002
(Stated in US Dollars)
(UNAUDITED)
June 17, 1996
(Date of
Three months ended Nine months ended Inception) to
September 30, September 30, September 30,
2002 2001 2002 2001 2002
_____________ _____________ _____________ _____________ _______________
Revenue $ - - 11,484 - 11,484
_____________ _____________ _____________ _____________ _______________
Expenses
Amortization $ - $ - $ - $ 83 $ 1,000
Audit fees 1043 2,772 4,396 9,314 17,010
Business plan - - - - 10,114
Consulting 3,000 - 8,000 - 19,878
Filing and legal 1,416 1,054 2,984 5,622 8,091
Marketing - - - 473 10,905
Office and miscellaneous 2,429 72 4,676 239 4,859
Promotion - - 3,500 - 3,500
Transfer Agent 675 - 1,935 2,135
Travel - - - 650 650
Website costs - 842 - 3,092 6,891
_____________ _____________ _____________ _____________ _______________
Net loss $ 8,563 $ 4,740 $ 25,491 $ 19,473 $ 85,033
_____________ _____________ _____________ _____________ _______________
Loss before the following $ (8,563) $ (4,740) $ (14,007) $ (19,473) $ (73,549)
Write-off of accounts payable $ - $ - $ 2,192 $ - $ 2,192
============= ============= ============= ============= ===============
Net loss $ (8,563) $ (4,740) $ (11,815) $ (19,473) $ (71,357)
Net loss per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
============= ============= ============= ============= ===============
Weighted average shares outstanding 7,551,000 7,551,000 7,551,000 7,551,000
============= ============= ============= =============
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
INTERIM STATEMENT OF STOCKHOLDER'S EQUITY
from the period June 17, 1996 (Date of Inception) to September 30, 2002
(Stated in US Dollars)
(UNAUDITED)
DEFICIT
ACCUMULATED
DURING THE
NUMBER CONTRIBUTED DEVELOPMENT
OF SHARES AMOUNT SURPLUS STAGE TOTAL
______________ ____________ _____________ _____________ ______________
Issued for services
- at $0.00002 5,000,000 $ 1 $ 99 $ - $ 100
Net loss for the period - - - (117) (117)
______________ ____________ ______________ _____________ _____________
Balance, December 31, 1996 5,000,000 1 99 (117) (17)
Net loss for the year (200) (200)
______________ ____________ ______________ _____________ _____________
Balance, December 31, 1997 5,000,000 1 99 (317) (217)
Net loss for the year (200) (200)
______________ ____________ ______________ _____________ _____________
Balance, December 31, 1998 5,000,000 1 99 (517) (417)
Net loss for the year (200) (200)
______________ ____________ ______________ _____________ _____________
Balance, December 31, 1999 5,000,000 1 99 (717) (617)
Stock split - 4,999 (4,999) - -
Issued for cash - at $0.01 2,500,000 2,500 22,500 - 25,000
- at $0.50 51,000 51 25,449 - 25,500
Net loss for the year - - - (36,522) (36,522)
______________ ____________ ______________ _____________ _____________
Balance, December 31, 2000 7,551,000 7,551 43,049 (37,239) 13,361
Net loss for the period - - - (22,303) (22,303)
______________ ____________ ______________ _____________ _____________
Balance, December 31, 2001 7,551,000 7,551 43,049 (59,542) (8,942)
Net Income(loss)for the period - - - (11,815) (11,815)
Balance, September 30, 2002 7,551,000 $ 7,551 $ 43,049 $ (71,357) $ (20,757)
============== ============ =============== ============== ==============
The number of shares issued and outstanding has been restated to give
retroactive effect for a forward stock split on a five thousand for one basis
approved by the shareholders on January 15, 2000. The par value and contributed
surplus were adjusted during the year ended December 31, 2000 to adjust the par
value amount in conformity with the number of shares then issued.
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
for the three and nine month periods ended September 30, 2002 and 2001
and June 17, 1996 (Date of Inception) to September 30, 2002
(Stated in US Dollars)
(UNAUDITED)
June 17, 1996
(Date of
Three months ended Nine months ended Inception) to
September 30, September 30, September 30,
2002 2001 2002 2001 2002
__________ ___________ _________ ___________ _____________
Cash flows used in operating activities
Net loss $ ( 8,563) $ (4,740) $ (11,815) $ (19,473) $ (71,357)
Adjustment to reconcile net loss to
net cash used in operations
Amortization - - 83 1,000
Prepaid expense - 450 - - -
Advance receivable - - - 913 (87)
Accounts payable (1,561) 3,430 (534) 6,040 7,751
__________ ___________ _________ ___________ __________
Net cash used in operating activities (10,124) (860) (12,349) (12,437) (62,693)
__________ ___________ _________ ___________ __________
Cash flow used in investing activity
Organization costs - - - - (1,000)
__________ ___________ _________ ___________ __________
Net cash used in investing activity - - - - (1,000)
__________ ___________ _________ ___________ __________
Cash flows provided by financing activities
Common stock issued for cash - - - - 50,600
Due to related party 6,530 - 6,530 - 7,430
Loan Payable 3,548 5,732 - 5,732
__________ ___________ _________ ___________ __________
Net cash provided by financing activities 10,078 - 12,262 63,762
__________ ___________ _________ ___________ __________
Net increase (decrease) in cash ( 46) (860) (87) (12,437) 69
Cash, beginning of period 115 1,601 156 13,178 -
__________ ___________ _________ ___________ __________
Cash, end of period $ 69 $ 741 $ 69 $ 741 $ 69
========== =========== ========= =========== ==========
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ - $ - $ - $ - $ -
========== =========== ========= =========== ==========
Income taxes $ - $ - $ - $ - $ -
========== =========== ========= =========== ==========
SEE ACCOMPANYING NOTES
SMI PRODUCTS, INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2002 (Unaudited) and December 31, 2001
(Stated in US Dollars)
(UNAUDITED)
Note 1 NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated in the State of Nevada on June 17, 1996.
The Company is in the development stage and is in the business of
internet real estate mortgage services. The Company has developed a
website and is in the pre-operating stage. The Company has earned
revenue from website advertising and is continuing to develop its
revenue model.
These financial statements have been prepared on a going concern basis.
The Company has accumulated losses of $71,357 since inception and has a
working capital deficiency of $20,757 at September 30, 2002. Its
ability to continue as a going concern is dependent upon the ability of
the Company to generate profitable operations in the future and/or to
obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due.
The outcome of these matters cannot be predicted, with any certainty,
at this time. Management plans to continue to provide for its capital
needs during the year ended December 31, 2002 by the continued
development of its internet real estate mortgage services. In addition,
the Company's capital requirements during the year ended December 31,
2002 will be supplemented by issuing equity securities. These financial
statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary should
the Company be unable to continue as a going concern.
Note 2 BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been
prepared by the SMI Products, Inc. (the "Company") pursuant to the
rules and regulations of the United States Securities and Exchange
Commission. Certain information and disclosures normally included in
annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. In the
opinion of management, all adjustments and disclosures necessary for a
fair presentation of these financial statements have been included.
Such adjustments consist of normal recurring adjustments. These interim
financial statements should be read in conjunction with the annual
audited financial statements for the Company for the fiscal year ended
December 31, 2000, as filed with the United States Securities and
Exchange Commission.
The results of operations for the period ended September 30, 2002 are
not indicative of the results that may be expected for the full year.
Note 3 REVENUE RECOGNITION
Revenue from advertising is recognized when earned, upon receipt of a
non-cancellable contract and collection is reasonable assured.
PART I FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
DESCRIPTION OF BUSINESS
We have commenced operations on the internet. We have filed and registered a
domain name and have developed a website with information services related to
the mortgage industry. There can be no assurance that we will be able to develop
operations in this area, or any other area.
The discussion of our future business is management's best estimate and analysis
of the potential market, opportunities and difficulties that we face. There can
be no assurances that our estimates and analysis accurately reflect our
opportunities and potential for success. Competitive and economic forces make
forecasting of revenues and costs difficult and unpredictable.
BUSINESS DEVELOPMENT.
We were incorporated in the State of Nevada on June 17, 1996, for the purpose of
providing consulting services to businesses, and engaging in any other lawful
activity. We were inactive from inception until January 2000, when we commenced
our current operations.
PRINCIPAL PRODUCTS AND SERVICES.
We currently have a web site at the URL mortgagecommunicator.com. We have
registered a domain name, and have a hosting service for
MORTGAGECOMMUNICATOR.COM.
Our web site provides information to visitors about different mortgages. The
site offers both free information services, as well as "subscribed for" member
services. The free information services include: a daily mortgage commentary; a
listing of the top online mortgage companies; and the daily top news headlines
and stories for the mortgage and real estate industry.
The subscribed for services include: A glossary of terms and frequently asked
questions for the mortgage and real estate industry; mortgage calculators; an
interest rate survey empowering individuals to make a more informed mortgage
decision; and rate alert, a feature which allows the subscriber to set the rate
and points they want, then be notified when the rate and points reach the level
desired.
Visitors who wish to subscribe for the member services will pay an annual
subscription fee of $49.95 per year, which allows them to use the member
services on our site for one year from the subscription date. Each subscriber
will be granted a password for entry into the member services section of our
website. We plan to charge this fee to the subscriber's credit or debit card. We
plan to process all orders by on line credit card or cyber cash systems. We
currently have developed a relationship to process online orders. In addition,
we have researched the needs of our planned website functions and the fees
associated with the services needed to fulfill those needs.
Our site content will consist of information relating to the mortgage industry.
In the future, we may plan to provide interest rate information by geographic
area. A portion of the information available on our website may be available
free of charge at other locations; however, we intend to develop more expansive
information than that available free of charge.
Applying for a mortgage can be a confusing, tedious and intrusive experience for
homebuyers, especially first-time homebuyers. We plan to demystify the mortgage
loan process by providing more expansive information to familiarize persons
interested in mortgages.
We plan to establish our market through e-mail advertising. We have not
conducted any market testing to determine prospective advertisers on our
website. Visitors will be able to obtain information twenty-four hours per day,
seven days per week through the website. We also plan to sell advertising on our
website to banks, mortgage brokers, builders, land appraisers, surveyors,
inspectors, title companies and real estate brokers. We have not developed
criteria for pricing of the advertising space; however, we anticipate pricing
will be based upon advertisement size, web page placement, content requirements,
contract duration and other factors. We currently have no advertisers.
We plan to classify lenders' advertisements by loan products they each offer.
We plan to seek lender advertisers that have a variety of products including
full disclosure loans that require verification of income, assets, credit,
source of funds, employment and residence history, based solely on the
borrower's credit history and the loan to value ratios without any further
documentation. We also plan to attract advertisers who offer programs for
borrowers with previous credit blemishes and those offering sub-prime loans.
The process of applying for a mortgage may be an invasive and foreign process.
We believe we can take the mystique out of the process by familiarizing the
borrower with required steps to obtain a mortgage.
We face many challenges in the rapidly-evolving and changing internet
marketplace. These challenges include our:
o Need to further develop, maintain, and increase awareness of our web
site;
o Need to attract and retain customers;
o Dependence on web site and transaction processing performance and
reliability;
o Need to compete effectively;
o Need to establish ourselves as a participant in the evolving market
for mortgage information;
o Need to establish and develop relationships with entities related to
and involved in the mortgage industry in order to obtain advertising
revenues for our site.
We expect to increase our operating expenses substantially as we:
o Further develop our website;
o Initiate our marketing activities and advertising efforts;
o Provide our customers with promotional benefits;
o Increase our general and administrative functions to support our
developing operations; and
o Develop enhanced technologies and features to improve our web site.
We will pay our increased operating expenses from our revenues, assuming they
are sufficient; otherwise, we plan to borrow funds from our management to pay
expenses, assuming management has sufficient resources to loan us monies, as and
when required. Otherwise, we will have to seek additional debt and/or equity
financing from third parties. Depending upon the extent that our development
costs outpace our revenues, our losses will accumulate more rapidly. In
addition, we may find that our development efforts are more expensive than we
currently anticipate.
Our success will be largely dependent upon our communications software and
hardware, which we acquire from third parties. Our systems will also be
vulnerable to damage from earthquake, fire, floods, power loss,
telecommunications failures, break-ins and similar events. Failure of
information delivery can occur due to e-mail system, hosting site and/or local
system failures. Any of these events could adversely
affect our business operations and revenues. We have no insurance coverage on
our property or business interruption insurance coverage and we do not intend to
obtain this coverage in the near future. we may be vulnerable to computer
viruses, physical or electronic break-ins, deliberate attempts by third parties
to exceed the capacity of our systems leading to interruptions, delays, loss of
data or cessation of service. The occurrence of any of these events could cause
our current and prospective users to question our ability to keep their
information confidential.
DISTRIBUTION.
We plan to deliver our services through our website. As of the date of this
prospectus, we have an Internet service provider, web site developer and a basic
web site, all of which will be necessary to execute our plan of business.
NEW PRODUCTS OR SERVICES.
We currently have no new products or services announced or planned to be
announced to the public.
COMPETITIVE BUSINESS CONDITIONS.
The conventional method of obtaining mortgage information, for at least the past
fifty years, has been through personal contact with mortgage brokers or lenders,
commercial banks, savings and loan associations, credit unions and insurance
companies. The public has been reticent to try new vehicles or formats through
which they would receive mortgage information. Despite the convenience of
information offered over the Internet, including at our website, many consumers
will view conventional methods of obtaining this information more convenient and
offering better customer service. We believe conventional methods will continue
to be a prime source of competition, along with the many other internet based
mortgage information and service sites.
Several on-line mortgage service companies have already failed and are no longer
in business. The industry is extremely volatile and competitive.
We believe that acceptance of our services will depend on the following factors,
among others:
o the growth of the Internet as a medium for commerce generally, and as
a market for financial products and services in particular;
o development of the necessary Internet network infrastructure to
support new technologies and handle the demands placed upon the
Internet;
o government regulation of the Internet;
o our ability to successfully and efficiently develop on-line
information that is attractive to a sufficiently large number of
consumers and mortgage brokers; and
o a change in the perception among many consumers and real estate
service providers that obtaining mortgage information on-line is less
dependable than obtaining mortgage information through more
traditional methods.
Slower response times could adversely affect use of our website. We may be
unable to develop and introduce new services or service enhancements in a timely
manner. In addition, because the market for on-line mortgage information is in
the early stages of development, data pertaining to the volume of visitors to
other mortgage websites is difficult to predict. If the volume of website
visitors falls below expectations of financial analysts or the public, we may be
unable to obtain quality advertising contracts. The occurrence of any of these
factors could have a material adverse effect upon the very nature of our
business and the continuation of our website.
Mortgage business depends upon the overall level of sales and refinancing of
residential real estate, as well as mortgage loan interest rates. The
residential real estate industry is highly cyclical. Shifts in the economy and
residential real estate values
generally affect the number of home sales and new housing starts. The demand for
mortgage loan increases as the number of home sales increases. Declining
interest rates generally increase mortgage loan financing activity, because
homeowners refinance existing mortgage loans to obtain favorable interest rates.
Rising interest rates, in contrast, discourage refinancing activities and
generally reduce the number of home sales that occur. Any fluctuation in
interest rates or an adverse change in residential real estate or general
economic conditions could cause a serious decline in visitation to our website,
memberships, and the retention rate of our previously enrolled members. we may
be unable to develop our business if higher interest rate and decreased home
sales occur.
The market for Internet services is recent and rapidly changing. Market demand
and acceptance for recently introduced Internet services is uncertain and
difficult to predict. The success of our website will depend upon the adoption
of the Internet by a broad base of consumers and vendors. There can be no
assurance of widespread acceptance of Internet commerce in general, including
Internet mortgage information and services. Companies now offering services
similar to ours have relied on consumers and vendors who use traditional means
of commerce. Consumers and vendors must accept and utilize novel ways of
conducting business and exchanging information if our business is to be
successful.
COMPETITORS
We will face intense competition in all aspects of the mortgage business. We
will compete with financial intermediaries, commercial banks, savings
associations, credit unions, loan brokers and insurance companies that also
provide mortgage information and services to the public. These companies may
offer convenience and customer service superior to that offered by our company.
Many sites offer free information and have financial resources far greater than
ours, thus giving them a distinct advantage over us because they can afford to
offer free information, as they have other sources of revenues and we have to
rely only on subscriber fees. In addition, these companies may have better
marketing and distribution channels. There can be no assurance that we will be
able to compete effectively in this highly competitive industry, which could
have a material adverse impact upon market acceptance of our website and the
information we wish to disseminate.
Our main, existing and potential competitors for real estate professionals and
service providers, homebuyers, homeowners, sellers and renters and related
content include:
o Web sites offering real estate listings together with other related
services, such as Apartments.com, Microsoft's HomeAdvisor,
NewHomeNetwork.com, Move.com and RentNet; CyberHomes, HomeSeekers,
Homes.com, Homestore.com.
o Web sites offering real estate and mortgage related content and
services such as mortgage calculators and information on the home
buying, selling and renting processes, such as IndyMac Bank Home
Lending, LoansDirect, Mortgagebot.com, PHH Mortgage Services,
Countrywide Home Loans, Infoloan.com, Quicken Loans, East West
Mortgage, Washington Mutual Mortgage, E-Loan, Alliance Mortgage,
FiNet.com, MortgageIT.com, First Union, GMAC Mortgage, ditech.com,
SFNB, Nexstar, Regions Mortgage, LoanSurfer.com
o General-purpose consumer web sites, such as AltaVista and Yahoo! that
also offer real estate-related content; and
o Traditional print media such as newspapers and magazines.
OUR COMPETITIVE POSITION
We believe competition takes place on many levels, including pricing,
convenience in obtaining mortgage information and loans, specialization, breadth
of product offerings and lending sources. Our intent is to brand ourselves as
one of the leading online interactive mortgage/financing magazine offering an
all in one "one stop mortgage
shop" for consumers interested in information on financing or refinancing their
home regionally and nationally. We intend to serve as a content aggregator for
related information on the Internet, an unbiased comprehensive information
source, as well as marketplace and facilitator for mortgage financings, loans
and other services related to the home real estate industry.
Our objective is to provide a service that helps the consumer cut through the
often perceived clutter, confusion and noise of the marketplace and help them
confidently and quickly find a loan or information that meets their goals and
fits their lifestyle.
We will attempt to brand mortgagecommunicator.com as the consumer's partner in
his or her search for mortgages and related information. We will attempt to
provide consumers with a one stop shopping destination where they can access
information and decision support tools, such as mortgage calculators and finance
worksheets, information concerning the home buying and selling process and
features that aid users in evaluating the home mortgage decision to assist them
in deciding to buy or finance a home. By attempting to provide specialized
information services and tools for consumers, we will seek to differentiate
ourselves from other competing service offerings. However, we have no assurance
we will be successful in differentiating ourselves from our competitors, or that
we will be successful in competing in the marketplace for our services.
By offering a specialized mortgage information service we will be targeting
those consumers that are looking for such. We believe that consumers will pay
for a service that is specialized, unbiased, and comprehensive and a service
that helps them cut through the perceived clutter, confusion and noise of the
marketplace and help them confidently and quickly find a loan or information
that meets their goals and fits their lifestyle.
We expect that our operations will depend on a number of third parties over
which we will have limited control. Specifically, we do not plan to own an
Internet gateway, but instead we will rely on a third-party, independent and
unrelated Internet Service Provider to host our website. We may experience
interruptions in our website connection and our telecommunications access due to
our reliance upon third parties. This could result in loss of business and
revenues. We anticipate that we will use software that is dependent on an
operating system, database and server software developed and produced by and
licensed by independent third parties. we may discover errors and defects in
this third party software and rely on the third parties to correct these errors
and defects in a timely manner. Accordingly, continuous or prolonged
interruptions in our website connection or in our telecommunications access
would have an adverse effect upon consumer perception of our ability to provide
information in a timely and efficient manner.
A significant barrier to entry in the area of electronic commerce and
communications is the secure transmission of confidential information over
public networks. We will rely on encryption and authentication technology
licensed from third parties to provide the security and authentication necessary
to effect secure transmission of confidential information. There can be no
assurance that advances in computer capabilities, new discoveries in the field
of cryptography or other events or developments will not result in a compromise
or breach of the algorithms we may use to protect customer transaction data. If
any compromise of our security were to occur, potential users may lack
confidence in our site and our ability to protect their commerce information,
such as credit card information, billing address, etc. Furthermore, we may be
subject to damage claims from our users or others.
A party who is able to circumvent our security measures could misappropriate
proprietary information. We may be required to expend significant capital and
other resources to protect against security breaches or to alleviate problems
caused by breaches. Concerns over the
security of Internet transactions and the privacy of users may also inhibit the
growth of the Internet generally, and the World Wide Web in particular,
especially as a means of conducting commercial transactions. To the extent that
our future activities or those of third party contractors whom we may use
involve the storage and transmission of proprietary information, such as credit
card numbers, security breaches could expose us to a risk of loss or litigation.
There can be no assurance that we will be able to implement security measures
that will prevent security breaches.
SOURCES AND AVAILABILITY OF RAW MATERIALS.
As of the date of this prospectus, we have no need for raw materials or
suppliers.
CUSTOMER BASE.
As of the date of this prospectus, we have no customers. If we are able to
establish a customer base in the future, we do not anticipate we will depend on
one or a few major customers. There can be no assurance that this assumption is
correct.
INTELLECTUAL PROPERTY.
We do not have any trademarks, patents, licenses, royalty agreements, or other
proprietary interests, except for the web domain name mortgagecommunicator.com.
GOVERNMENTAL REGULATION ISSUES.
We are not now affected by direct government regulation. However, we are
affected by laws, rules and regulations directly applicable to access to or
commerce on the Internet generally. However, due to increasing usage of the
Internet, a number of laws and regulations may be adopted relating to the
Internet, covering user privacy, pricing, and characteristics and quality of
products and services. Furthermore, the growth and development for Internet
commerce may prompt more stringent consumer protection laws imposing additional
burdens on those companies conducting business over the Internet. The adoption
of any additional laws or regulations may decrease the growth of the Internet,
which, in turn, could decrease the demand for Internet services and increase the
cost of doing business on the Internet. These factors may have an adverse effect
on our business, results of operations and financial condition.
Moreover, the interpretation of sales tax, libel and personal privacy laws
applied to Internet commerce is uncertain and unresolved. We may be required to
qualify to do business as a foreign corporation in each state or foreign
country. Our failure to qualify as a foreign corporation in a jurisdiction where
we are required to do so could subject us to taxes and penalties. Any existing
or new legislation or regulation, including state sales tax, or the application
of laws or regulations from jurisdictions whose laws do not currently apply to
our business, could have a material adverse effect on our business, results of
operations and financial condition.
RESEARCH AND DEVELOPMENT.
To date, we have not undergone any research and development, except hat required
to put up our website.
ENVIRONMENTAL LAW COMPLIANCE.
To the extent which environmental compliance may be necessary, we do not
anticipate any significant compliance expense.
EMPLOYEES.
We currently have one employee, James Charuk, our president and a director, who
works for our corporation part-time. We have no employment contracts and our
employee is not a union member or affected by labor contracts.
REPORTS TO SECURITY HOLDERS.
After the effective date of this registration statement, we will be a reporting
company under the requirements of the Exchange Act and will file quarterly,
annual and other reports with the Securities and Exchange Commission. Our annual
report will contain the required audited financial statements. We are not
required to deliver an annual report to security holders and will not
voluntarily deliver a copy of the annual report to the security holders. The
reports and other information filed by us will be available for inspection and
copying at the public reference facilities of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549.
Copies of the material may be obtained by mail from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Commission
maintains a World Wide Website on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
PLAN OF OPERATIONS
The discussion contained in this prospectus contains "FORWARD-LOOKING
STATEMENTS" that involve risk and uncertainties. These statements may be
identified by the use of terminology such as "BELIEVES," "EXPECTS," "MAY,"
"WILL," "SHOULD" or "ANTICIPATES" or expressing this terminology negatively or
similar expressions or by discussions of strategy. The cautionary statements
made in this prospectus are applicable to all related forward-looking statements
wherever they appear in this prospectus. Our actual results could differ
materially from those discussed in this prospectus. Important factors that could
cause or contribute to these differences include those discussed under the
caption entitled "RISK FACTORS," as well as those discussed elsewhere in this
registration statement.
We are a development stage company. We are unable to satisfy cash requirements
without management's financial support or other funding. Our management and
certain investors have made $50,100 of capital contributions to our business.
We generated $11,484 in revenues for the nine month period ended September 30,
2002 as compared to $0 for the nine month period ended September 30, 2001. We
anticipate, but have no assurance, that we will meet our cash requirements for
the foreseeable future through the financial support of our management.
Management's capital contributions will be accomplished through interest bearing
promissory notes between our company and management. No promissory notes are
currently in effect. We have not determined the amount of funds that will be
necessary for management to contribute at this time. Nor is there any assurance
our management will have funds available to loan us as and when we require
funds. In this event, we will be required to seek loans and/or equity funding
from third parties, and there is no assurance we will be able to do so.
Total operating expenses for the nine months ended September 30, 2002 were
$25,491. This represents an increase of $6,018 in total operating expenses from
the comparable nine month period ended September 30, 2001, when we recorded
total operating expenses of $19,473. The principal operating expenses for the
period ended September 30, 2002 were related to audit fees ($4,396), consulting
fees ($8,000), promotion ($3,500) and office and miscellaneous ($4,676).
Over the next twelve months, --we plan to further develop our web site to
provide mortgage related information. Specifically, during the next 12 months,
we anticipate focusing our efforts on the following specific areas of
operations:
1. Internet marketing
2. Maintaining and enhancing content of website
3. Subscriber payment credit card processing
We will require additional funds to further develop our website. Although we
plan to raise additional funds, we have not yet determined how, where or when we
will obtain these funds. There is no assurance that we will be able to obtain
financing for our business development. If adequate funds are not available to
us, we believe that our business development will be adversely affected.
Our future capital requirements will also depend on one or more of the following
factors:
o market acceptance of our services;
o the extent and progress of our research and development programs;
o competing technological and market developments; and
o the costs of commercializing our services.
There can be no assurance that funding will be available on favorable terms to
permit successful commercialization of our website or be successful in our.
business operations.
In addition, we have no credit facility or other committed sources of capital.
We may be unable to establish credit arrangements on satisfactory terms, if at
all. If capital resources are insufficient to meet our future capital
requirements, we may have to raise additional funds to continue development of
our website. There can be no assurance that the funds will be available on
favorable terms, if at all.
To the extent that additional capital is raised through the sale of equity
and/or convertible debt securities, the issuance of the securities will likely
result in dilution to our shareholders.
Until such time as our website is fully developed, we do not expect to have any
significant revenues from our operations. We anticipate that if our website
becomes fully operational, we will generate revenues from the sale of
subscriptions to the website and though the sale of advertisements. There is no
assurance that we will be successful in selling subscriptions or advertising for
our website. We have no other sources of revenue. Therefore,, if we are not
successful in this regard, we will be unable to achieve revenues under our
current business plan.
PART II EXHIBITS
99.1 Written Certification of Chief Executive Officer
99.2 Written Certification of Chief Financial Officer
PART II OTHER INFORMATION
ITEM 7. SIGNATURES
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.
SMI PRODUCTS, INC.
Date: November 13, 2002 By:/s/ JAMES CHARUK
_________________ __________________________________
James Charuk,
President, Chairman and Director
By:/s/ CYNTHIA CARTER
_________________________________________
Cynthia Carter
Secretary, Treasurer, C.F.O. and Director
CERTIFICATION
I, James Charuk, as the Chief Executive Officer of SMI Products, Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-QSB of SMI Products, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 /s/ JAMES CHARUK
___________________________
James Charuk
Chief Executive Officer
SMI Products, Inc.
CERTIFICATION
I, Cynthia Carter, as the Chief Financial Officer of SMI Products, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of SMI Products, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 /s/ CYNTHIA CARTER
___________________________
Cynthia Carter
Chief Financial Officer
SMI Products, Inc.