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EX-32.1 - GUWENHUA INTERNATIONAL Cosmsakerr10qex321093011.htm
EX-31.1 - GUWENHUA INTERNATIONAL Cosmsakerr10qex311093011.htm


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 September 30, 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  o  NO  x
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:October 29, 2011: 10,025,034

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

 
 
SMSA Kerrville Acquisition Corp.

Form 10-Q for the Quarter ended September 30, 2011

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
15
   
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
17
   
Item 4 - Controls and Procedures
17
   
Part II - Other Information
 
   
Item 1 - Legal Proceedings
18
   
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
18
   
Item 3 - Defaults Upon Senior Securities
18
   
Item 4 - (Removed and Reserved)
18
   
Item 5 - Other Information
18
   
Item 6 - Exhibits
18
   
Signatures
18
 
 
 
 
2

 
 
Part I - Financial Information
Item 1 - Financial Statements


SMSA Kerrville Acquisition Corp. and Subsidiary
Consolidated Balance Sheets
September 30, 2011 and December 31, 2010


   
(Unaudited)
   
(Audited)
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
ASSETS
 
Current Assets
           
Cash on hand and in bank
  $ 48,760     $ 1,000  
Prepaid expenses
    -       -  
                 
Total Assets
  $ 48,760     $ 1,000  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
Current Liabilities
               
Accounts payable to related party
  $ 7,200     $ -  
Accrued income taxes payable
    2,100       -  
Note payable to officer
    25,000       -  
Accrued interest payable to officer
    937       -  
                 
Total Liabilities
    35,237       -  
                 
                 
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 )     (8,725 )
Retained earnings
    11,973       300 )
                 
Total Stockholders' Equity (Deficit)
    13,523       1,000  
                 
Total Liabilities and Stockholders Equity (Deficit)
  $ 48,760     $ 1,000  
 
 
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 Statement of Operations and Comprehensive Loss
Nine and Three months ended September 30, 2011 and 2010

(Unaudited)

   
Nine months
   
Three months
   
Nine months
   
Three months
 
   
ended
   
ended
   
ended
   
ended
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2011
   
2011
   
2010
   
2010
 
                         
Revenues
  $ 97,816     $ 65,186     $ -     $ -  
                                 
Operating expenses
                               
Service bureau fees
    62,547       62,547                  
Professional fees
    10,075       1,620       -       -  
Personnel costs
    7,200       3,600       -       -  
Other general and administrative costs
    2,684       1,200       -       -  
                                 
Total operating expenses
    82,506       68,967       -       -  
                                 
Income (Loss) from operations
    15,310       (3,781 )     -       -  
                                 
Other income (expense)
                               
Interest expense to officer
    (937 )     (378 )     -       -  
                                 
Loss before provision for income taxes
    14,373       (4,159 )     -       -  
                                 
Provision for income taxes
    (2,100 )     1,350       -       -  
                                 
Net Income (Loss)
    12,273       (2,809 )     -       -  
                                 
Other comprehensive income
    -       -       -       -  
                                 
Comprehensive Income (Loss)
  $ 12,273     $ (2,809 )   $ -     $ -  
                                 
Loss per weighted-average share
                               
of common stock outstanding,
                               
computed on net loss - basic
                               
and fully diluted
 
nil
   
nil
   
nil
   
nil
 
                                 
Weighted-average number of shares
                               
of common stock outstanding -
                               
basic and fully diluted
    10,025,034       10,025,034       0       0  
 
 
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 Statement of Changes in Stockholders Equity (Deficit)
Period from November 9, 2010 (date of inception) through September 30, 2011

(Unaudited)


               
Additional
             
   
Common Stock
   
paid-in
   
Retained
       
   
Shares
   
Amount
   
capital
   
earnings
   
Total
 
Common stock of SMSA Kerrville
                             
Acquisition Corp. issued pursuant
                             
to the plan of reorganization at
                             
bankruptcy settlement date on
                             
August 1, 2007 (par value $0.001)
    525,034     $ 525     $ 475     $ -     $ 1,000  
                                         
Stock issued at formation of
                                       
STC Edgar, Inc. (par value $1.00)
                                       
on November 9, 2010
    1,000       1,000       -       -       1,000  
                                         
Net effect of share exchange agreement
                                       
between SMSA Kerrville Acquisition
                                       
Corp. and STC Edgar, Inc. on
                                       
December 15, 2010
    9,499,000       8,500       (9,200 )     -       (700 )
                                         
Net loss for the period from
                                       
November 9, 2010 (date of
                                       
inception) through December 31,
                                       
2010
    -       -       -       (300 )     (300 )
                                         
Balances at December 31, 2010
    10,025,034       10,025       (8,725 )     (300 )     1,000  
                                         
Capital contributed to support operations
    -       -       250       -       250  
                                         
Net income  for the nine months
                                       
ended September 30, 2011
    -       -       -       12,273       12,273  
                                         
Balances at September 30, 2011
    10,025,034     $ 10,025     $ (8,475 )   $ 11,973     $ 13,523  


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
Consolidated Statement of Cash Flows
Nine months ended September 30, 2011 and 2010

(Unaudited)

   
Nine months
   
Nine months
 
   
ended
   
ended
 
   
September 30,
   
September 30,
 
   
2011
   
2010
 
Cash Flows from Operating Activities
           
Net income (loss) for the period
  $ 12,273     $ -  
Adjustments to reconcile net loss
               
to net cash provided by operating activities
               
Depreciation
    -       -  
(Increase) Decrease in
               
Prepaid expenses
    -       -  
Increase (Decrease) in
               
Accounts payable to a related party
    7,200       -  
Accrued income taxes payable
    2,100          
Accrued interest payable to officer
    937       -  
                 
Net cash provided by operating activities
    22,510       -  
                 
                 
Cash Flows from Investing Activities
    -       -  
                 
                 
Cash Flows from Financing Activities
               
Cash received on loan from officer
    25,000       -  
Capital contributed to support operations
    250       -  
Sale of common stock at the formation of STC Edgar, Inc.
    -       -  
Cash contributed for the formation of STC Edgar, Inc.
    -       -  
                 
Net cash provided by financing activities
    25,250       -  
                 
Increase in Cash
    47,760       -  
                 
Cash at beginning of period
    1,000       -  
                 
Cash at end of period
  $ 48,760     $ -  
                 
Supplemental Disclosure of
               
Interest and Income Taxes Paid
               
Interest paid during the period
  $ -     $ -  
Income taxes paid during the period
  $ -     $ -  
 
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.
 
 
6

 


SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011 and December 31, 2010



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 Companys 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 Companys 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 Companys 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 - Reorganization Under Chapter 11 of the U. S. Bankruptcy Code

On January 17, 2007, Senior Management Services of Kerrville, Inc. and its affiliated companies (SMS Companies or Debtors) filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code.  During the three years prior to filing the reorganization petition, SMS Companies operated a chain of skilled nursing homes, located principally in Texas, which prior to the bankruptcy proceedings consisted of a total of 14 separate nursing facilities, ranging in size from approximately 114 beds to 325 beds.  In the aggregate, SMS Companies provided care to approximately 1,600 resident patients and employed over 1,400 employees.  A significant portion of the SMS Companies cash flow was provided by patients covered by Medicare and Medicaid.  The SMS Companies facilities provided round-the-clock care for the health, well-being, safety and medical needs of its patients.  The administrative and operational oversight of the nursing facilities was provided by an affiliated management company located in Arlington, Texas.  In 2005, SMS Companies obtained a secured credit facility from a financial institution.  The credit facility eventually was comprised of an $8.3 million term loan and a revolving loan of up to $15 million which was utilized for working capital and to finance the purchase of the real  property on which 2 of its nursing care facilities operated.  By late 2006, SMS Companies were in an "overadvance" position, whereby the amount of funds extended by the lender exceeded the amount of collateral eligible to be borrowed under the credit facility.  Beginning in September 2006, SMS Companies entered into the first of a series of forbearance agreements whereby the lender agreed to forebear from declaring the financing in default provided SMS Companies obtained a commitment from a new lender to refinance and restructure the credit  facility.  SMS Companies were unsuccessful in obtaining a commitment from a new lender and, on January 5, 2007, the lender declared SMS Companies in default and commenced foreclosure and collection proceedings.  On January 9, 2007, the lender agreed to provide an additional $1.7 million to fund payroll and permit a controlled transaction to bankruptcy.  Subsequently, on January 17, 2007, the SMS Companies filed a petition for reorganization under Chapter 11 of the Bankruptcy Code.
 
 
 
7

 

SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010



Note B - Reorganization Under Chapter 11 of the U. S. Bankruptcy Code - Continued

Under Chapter 11, certain claims against the Debtors in existence prior to the filing of the petitions for relief under Federal Bankruptcy Laws are stayed while the Debtors continue to operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.  These claims were reflected in the predecessor companys balance sheets as Liabilities Subject to Compromise through the settlement date.  Additional claims (liabilities subject to compromise) may arise subsequent to the petition date resulting from the rejection of executory contracts, including leases, and from the determination of the court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts.

The First Amended, Modified Chapter 11 Plan, (the Plan) as presented by SMS Companies and their creditors was approved by the United States Bankruptcy Court, Northern District of Texas - Dallas Division on August 1, 2007.  The Plan, which contemplates the Company entering into a reverse merger transaction, provided that certain identified claimants as well as unsecured creditors, in accordance with the allocation provisions of the Plan of Reorganization, and the Companys new controlling stockholder would receive new shares of the Companys post-reorganization common stock, pursuant to Section 1145(a) of the Bankruptcy Code (Plan Shares).  As a result of the Plans approval, all liens, security interests, encumbrances and other interests, as defined in the Plan of Reorganization, attach to the creditors trust.  Specific injunctions prohibit any of these claims from being asserted against the Company prior to the contemplated reverse merger.

All assets, liabilities and other claims, including Allowed Administrative Claims which arise in the processing of the bankruptcy proceedings, against the Company and its affiliated entities were combined into a single creditors trust for the purpose of distribution of funds to creditors.  Each of the individual SMS Companies entities otherwise remained separate corporate entities.  From the commencement of the bankruptcy proceedings through August 1, 2007 (the confirmation date of the plan of reorganization), all secured claims and/or administrative claims during this period were satisfied through either direct payment or negotiation.

The bankruptcy court had no continuing jurisdiction over the Company other than the acceptance by the court of a certificate of completion of a reverse merger or acquisition transaction when consummated which was filed with the court in accordance with the procedures provided in the confirmation order.  Upon closing of the transaction with STC Edgar, Inc., we timely filed a certificate of compliance with the bankruptcy court which stated that the requirements of the Plan had been met and the discharge was granted.  Thereafter, the post discharge injunction provisions set forth in the Plan and the confirmation order became effective.

Pursuant to the Plan, the pre-confirmation unsecured creditors of Senior Management Services of Kerrville, Inc. (our predecessor company) agreed to accept Plan Shares in SMSA Kerrville Acquisition Corp., as reorganized, in lieu of asserting recovery of their claims against the Plans liquidating trust.

The Companys Plan of Reorganization was confirmed by the Bankruptcy Court on August 1, 2007 and became effective on August 10, 2007.  It was determined that SMSA Kerrville Acquisition Corps reorganization value computed immediately before August 1, 2007, the confirmation date of the Plan of Reorganization, was approximately $1,000, which consisted of the following:

Current assets to be transferred to the post-confirmation entity
  $ 1,000  
Fair market value of property and equipment
    -  
Deposits with vendors and other assets transferred
       
to the post-confirmation entity
    -  
         
Reorganization value
  $ 1,000  



 
8

 
 
SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010



Note B - Reorganization Under Chapter 11 of the U. S. Bankruptcy Code - Continued

Pursuant to the Plan of Reorganization, all of the operations of the Company were transferred to a combined creditors trust and, as approved by the Bankruptcy Court, a completely new entity was formed for purposes of completing the aforementioned reverse merger transaction.  The Company adopted fresh-start reporting because the holders of existing voting shares immediately before filing and confirmation of the Plan received less than 50.0% of the voting shares of the emerging entity and its reorganization value is not greater than its postpetition liabilities and allowed claims, as shown below:

Postpetition current liabilities
  $ -  
Liabilities deferred pursuant to Chapter 11 proceeding
    -  
New common stock issued upon reorganization
    1,000  
         
Total postpetition liabilities and allowed claims
    1,000  
Reorganization value
    (1,000 )
         
Excess of liabilities over reorganization value
  $ -  

The reorganization value of SMSA Kerrville Acquisition Corp. was determined in consideration of several factors and by reliance on various valuation methods, including discounting cash flow and price/earnings and other applicable ratios.  The factors considered by SMSA Kerrville Acquisition Corp. included the following:

 
·
Forecasted operating and cash flows results which gave effect to the estimated impact of
 
-
Corporate restructuring and other operating program changes
 
-
Limitations on the use of available net operating loss carryforwards and other tax attributes resulting from the Plan of Reorganization and other events
 
·
The discounted residual value at the end of the forecast period based on capitalized cash flows for the last year of that period.
 
·
Market share and position
 
·
Competition and general economic conditions
 
·
Projected sales growth
 
·
Potential profitability
 
·
Seasonality and working capital requirements

After consideration of SMSA Kerrville Acquisition Corp.s debt capacity and other capital structure considerations, such as industry norms, projected earnings to fixed charges, projected earnings before interest and projected free cash flow to debt service and other applicable ratios, management determined that SMSA Kerrville Acquisition Corp.s reorganization capital structure should be as follows:

Common Stock (525,034 new shares to be issued at $0.001 par value)
  $ 525  
Additional paid-in capital
    475  
         
Total reorganized capital structure
  $ 1,000  

As previously discussed, the cancellation of all existing shares outstanding at the date of the bankruptcy filing and the issuance of all new shares of the reorganized entity caused an issuance of shares of common stock and a related change of control of the Company with more than 50.0% of the new shares being held by persons and/or entities which were not pre-bankruptcy stockholders.  Accordingly, per the Reorganization topic of the FASB Accounting Standards Codification (Reorganization topic), the Company adopted fresh-start accounting as of the bankruptcy discharge date whereby all continuing assets and liabilities of the Company were restated to the fair market value.  The Reorganization topic further states that fresh start financial statements prepared by entities emerging from bankruptcy will not be comparable with those prepared before their plans were confirmed because they are, in fact, those of a new entity.  For accounting purposes, the Company adopted fresh start accounting in accordance with the Reorganization topic as of August 1, 2007, the confirmation date of the Plan.

As of August 1, 2007, in accordance with the Plan of Reorganization, the only asset of the Company was approximately $1,000 in cash transferred from the bankruptcy creditors trust.
 
 

 
9

 

SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010



Note C - 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 its 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 Companys 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.

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 Registration Statement on Form 10 containing the Companys financial statements for the year ended December 31, 2010.  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 Commissions 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, 2011.


Note D - Going Concern Uncertainty

Prior to April 1, 2011, the Company had no operating history, limited cash on hand, no operating assets and a business plan with inherent risk.  Because of these factors, the Companys auditors have issued an audit opinion on the Companys annual financial statements which includes a statement describing our going concern status.  This means, in the auditors opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion.

The Companys current business plan is to provide 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.

Prior to April 1, 2011, the Companys current and former majority stockholders maintained the corporate status of the Company by providing all nominal working capital support on the Company's behalf from August 1, 2004 (date of bankruptcy settlement) through December 15, 2010 (date of transaction with Edgar).
 
 
 
10

 
 
SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010



Note D - Going Concern Uncertainty - Continued

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 its 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.

Subsequent to the December 15, 2010 transaction date, the Company and its 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 Companys business plan.  To this end, Mr. Halter has loaned the Company $25,000 through a loan agreement bearing interest at 6.0% and maturity due upon demand.  However, the Company is at the mercy of current and future economic trends, as well as current and future business operations for the Company and/or the Companys majority stockholder to have the resources available to support the Company.  Should this pledge fail to provide financing, the Company has not identified any alternative sources of working capital to support the Company.

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 Companys 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 Companys ability to issue preferred stock may limit the Companys 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 Companys 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 Companys 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.


Note E - Related Party Transactions and Conflicts of Interest

Timothy P. Halter, the Companys 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 Companys sole officer and director since December 15, 2010.  Kevin B. Halter, Jr. is responsible for the implementation and operation of our business plan.

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 its 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 Companys business plan.  To this end, Mr. Halter has loaned the Company $25,000 through a loan agreement bearing interest at 6.0% and maturity due upon demand.  However, the Company is at the mercy of current and future economic trends, as well as current and future business operations for the Company and/or the Companys majority stockholder to have the resources available to support the Company.  Should this pledge fail to provide financing, the Company has not identified any alternative sources of working capital to support the Company.
 
 
 
 
11

 
 
SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010



Note E - Related Party Transactions and Conflicts of Interest - Continued

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.


Note F - 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.
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.

3.
Income taxes

The Company will file income tax returns in future periods in the United States of America and various states, as appropriate and applicable.

The Company uses the asset and liability method of accounting for income taxes.  At September 30, 2011 and December 31, 2010, 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 managements 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 Codifications Income Tax Topic, the Company did not incur any liability for unrecognized tax benefits.

4.
Income (Loss) per share

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).

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 Companys net income (loss) position at the calculation date.

As of September 30, 2011 and December 31, 2010, 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.

5.
Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Companys results of operations, financial position or cash flows.
 
 
 
12

 

SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010



Note G - 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 Companys 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 Companys 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 H - Income Taxes

The components of income tax (benefit) expense for the nine months ended September 30, 2011 and 2010 is as follows:
 
      Nine months     Nine months  
      ended     ended  
      September 30, 2011     September 30, 2010  
               
 
Federal:
           
 
Current
  $ 2,100     $ -  
 
Deferred
    -       -  
        2,100       -  
 
State:
               
 
Current
    -       -  
 
Deferred
    -       -  
        -       -  
                   
 
Total
  $ 2,100     $ -  

The Company's income tax expense (benefit) for the nine months ended September 30, 2011 and 2010 varied from the statutory rate of 34% as follows:
 
   
Nine months
   
Nine months
 
   
ended
   
ended
 
   
September 30, 2011
   
September 30, 2010
 
             
Statutory rate applied to
           
income before income taxes
  $ 4,900     $ -  
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
    (2,800 )     -  
                 
Income tax expense
  $ 2,100     $ -  

The Companys only temporary difference due to statutory requirements in the recognition of assets and liabilities for tax and financial reporting purposes, as of September 30, 2011 and December 31, 2010, relates solely to the Companys 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 September 30, 2011 and December 31, 2010, respectively:
 
 
 
 
13

 
 
SMSA Kerrville Acquisition Corp. and Subsidiary
Notes to Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
 

 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
Deferred tax assets
           
Net operating loss carryforwards
  $ -     $ 100  
Less valuation allowance
    -       (100 )
                 
Net Deferred Tax Asset
  $ -     $ -  
 
Note H - Income Taxes - Continued

During the nine months ended September 30, 2011 and the period from November 9, 2010 (date of inception) through December 31, 2010, the valuation allowance for the deferred tax asset increased (decreased) by approximately $(100) and $100, respectively.


Note I - Capital Stock Transactions

Pursuant to the Plan affirmed by the U. S. Bankruptcy Court - Northern District of Texas - Dallas Division, the Company will issue a sufficient number of Plan shares to meet the requirements of the Plan.  Such number was estimated in the Plan to be approximately 500,000 Plan Shares relative to each Post Confirmation Debtor.

As provided in the Plan, 80.0% of the Plan Shares of the Company were issued to Halter Financial Group, Inc. (HFG) in exchange for the release of its Allowed Administrative Claims, the performance of certain services and the payment of certain fees related to the then-anticipated reverse merger or acquisition transactions as described in the Plan.  The remaining 20.0% of the Plan Shares of the Company were issued to other holders of various claims as defined in the Plan.

Based upon the calculations provided by the Creditors Trustee, the Company issued an aggregate 525,034 shares of the Companys new common stock to all unsecured creditors and the controlling stockholder in settlement of all unpaid pre-confirmation obligations of the Company and/or the bankruptcy trust.

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 J - Subsequent Events

Management has evaluated all activity of the Company through October 29, 2011 (the issue date of the financial statements) and concluded that no subsequent events, other than disclosed above, have occurred that would require recognition in the financial statements or disclosure in the notes to consolidated financial statements.






(Remainder of this page left blank intentionally)
 
 
 
14

 


Item 2 - Managements 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 prerequsite 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.

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.

(3)
Results of Operations

The Company received revenue of approximately $97,816 and $65,186 during the nine and three months ended September 30, 2011 as a result of commencing operations as described above.  Prior to April 1, 2011, the Company had no 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 and the corresponding expenses.  These fees are seasonal and are not anticipated to recur until the same time in the following year.
 
 
 
15

 
 
General and administrative expenses for the respective nine month periods ended September 30, 2011 and 2010 were approximately $20,000 and $-0-.  The calendar 2011 year-to-date expenses relate directly to the commencement of EDGAR filing services on behalf of the Company’s clients which started on April 1, 2011.

It is anticipated that future revenue and expenditure levels may fluctuate as the Company’s business plan matures.

Earnings per share for the nine months ended September 30, 2011 and 2010 were approximately $(0.00) and $(0.00) based on the weighted-average shares issued and outstanding.

(4)
Liquidity and Capital Resources

At September 30, 2011 and December 31, 2010, the Company had working capital of approximately $13,500 and $1,000, respectively.

Prior to April 1, 2011, the Company had no operating history, limited cash on hand, no operating assets and a business plan with inherent risk.  Because of these factors, the Company’s auditors have issued an audit opinion on the Company’s annual financial statements which includes a statement describing our going concern status.  This means, in the auditor’s opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion.

The Company’s current business plan is to provide 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.

Prior to April 1, 2011, the Company’s current and former majority stockholders maintained the corporate status of the Company by providing all nominal working capital support on the Company's behalf from August 1, 2004 (date of bankruptcy settlement) through December 15, 2010 (date of transaction with Edgar).

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.

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, Mr. Halter has loaned the Company $25,000 through a loan agreement bearing interest at 6.0% and maturity due upon demand.  However, the Company is at the mercy of current and future economic trends, as well as current and future business operations for the Company and/or the Company’s majority stockholder to have the resources available to support the Company.  Should this pledge fail to provide financing, the Company has not identified any alternative sources of working capital to support the Company.

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.

(5)
Related Party Transactions and Conflicts of Interest
 
 
 
16

 
 
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.

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, Mr. Halter has loaned the Company $25,000 through a loan agreement bearing interest at 6.0% and maturity due upon demand.  However, the Company is at the mercy of current and future economic trends, as well as current and future business operations for the Company and/or the Company’s majority stockholder to have the resources available to support the Company.  Should this pledge fail to provide financing, the Company has not identified any alternative sources of working capital to support the Company.

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.

(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 E 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.


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.
 
 
 
17

 

(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 September 30, 2011 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 - (Removed and Reserved)


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: Octyober 29, 2011
        /s/ Kevin B. Halter, Jr.             
 
Kevin B. Halter, Jr.
  President, Chief Executive Officer,
  Chief Financial Officer and Sole Director
 
 
 
 
 
 
18