Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended October 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 000-18257
HOLMES MICROSYSTEMS, INC.
(Exact name of Registrant as specified in charter)
TEXAS 91-1939829
State or other jurisdiction of I.R.S. Employer I.D. No.
incorporation or organization
57 West 200 South, Suite 310, Salt Lake City, UT 84101
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 269-9500
Check whether the Issuer (1) has 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. (1) Yes
[X] No [ ] (2) Yes [X] No [ ]
State the number of shares outstanding of each of the Issuer's classes of
common equity as of the latest practicable date: At November 11, 1999, there
were 48,051,547 shares of the Registrant's Common Stock outstanding.
PART I
Item 1. Financial Statements
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. However, in
the opinion of management, all adjustments (which include only normal
recurring accruals) necessary to present fairly the financial position and
results of operations for the periods presented have been made. The results
for interim periods are not necessarily indicative of trends or of results to
be expected for the full year. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB, for the year ended January 31, 1999.
Holmes Microsystems, Inc.
Balance Sheets
October 31, 1999
ASSETS
Current Assets
Cash $ -0-
Total Assets $ -0-
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Judgements payable (1) $ 33,905
Notes Payable (1) 84,000
Total Current Liabilities 117,905
Stockholders' Equity
Preferred stock - series A; $.001 par value;
100,000 shares authorized;
3,750 shares issued and outstanding;
8% noncumlative convertible 4
Preferred stock - series B; $.001 par value;
5,000 shares authorized;
840 shares issued and outstanding;
10% cumlative convertible 1
Common Stock; $.001 Par Value;
49,000,000 shares authorized;
48,051,547 shares issued and outstanding 48,051
Paid In Capital 4,835,143
Accumulated Deficit (5,001,104)
Total Stockholder' Equity (117,905)
Total Liabilities & Stockholders' Equity $ -0-
Holmes Microsystems, Inc.
Statement of Operations
For the three For the three For the nine For the nine
Months Months Months Months
Ended Ended Ended Ended
October October October October
31, 1999 31, 1998 31, 1999 31, 1998
Revenues $ -0- $ -0- $ -0- $ -0-
Operating Expenses -0- -0- -0- -0-
Net Income $ -0- $ -0- $ -0- $ -0-
Net Income Per Share $ -0- $ -0- $ -0- $ -0-
Holmes Microsystems, Inc.
Statements of Cash Flows
For the nine For the nine
Months ended Months ended
October October
31, 1999 31, 1998
Cash Flows from Operating Activities
Net Income $ -0- $ -0-
Cash at Beginning of Year -0- -0-
Cash at End of Year $ -0- $ -0-
Notes to the Financial Statements
Note 1
In September of 1999, Mr. Eardley entered into an agreement with the
Company whereby Mr. Eardley will be issued 610,711 post-split shares of common
stock of the Company as compensation for monies invested and indemnification
of the Company for all remaining judgements and notes payable.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company had no revenues from operations during the fiscal year ended
January 31, 1999, or during the first three quarters ended October 31, 1999.
Management of the Company is in the process of settling all of the
outstanding liabilities of the Company and attempting to repurchase or convert
the outstanding preferred shares. When current management took control of the
Company in December 1996, Mr. Eardley began the process of attempting to
settle the outstanding obligations and convert or repurchase the outstanding
preferred stock. At the commencement of this year he agreed to assume all of
the outstanding judgements and promissory notes and attempt to settle these
individually using his own funds. In September 1999, this agreement was
memorialized in writing and Mr. Eardley agreed, subject to shareholder
approval, to accept 610,711 post 100-for-1 reverse split shares as
consideration for such assumption. During the quarter ended July 31, 1999,
Mr. Eardley settled $421,169 of the outstanding judgements and during the
quarter ended October 31, 1999, he settled $71,637 of the remaining
outstanding judgments.
In connection with attempting to locate a new business venture, the
Company is proposing to reverse split the outstanding common stock at the rate
of one share for each 100 shares outstanding. Following the reverse stock
split, and the conversion or repurchase of the outstanding preferred shares,
the Company intends to take advantage of any reasonable business proposal
presented which management believes will provide the Company and its
stockholders with a viable business opportunity.
The Company has no funds with which to pursue a new business venture.
The president of the Company has offered to advance an undetermined amount of
funds for the Company to seek and locate a potential merger or acquisition
candidate, and to postpone repayment of such advances until a new business
venture is acquired. In addition, he has negotiated with counsel to perform
legal services for the Company and to postpone payment for such services until
a merger or acquisition transaction is completed. Management anticipates that
it will negotiate with the owners of the new business venture to repay the
advances from him and to pay the legal costs incurred by the Company through
the consummation of an acquisition or merger. Mr. Eardley estimates that he
will be able to advance sufficient funds to the Company to meet the Company's
cash needs until a transaction with a new business venture can be consummated,
but the amount of such funds will be contingent upon the costs of locating and
consummating a transaction with a new business venture, which costs are
impossible to estimate. If the funds advanced by the president are
insufficient to locate a suitable business opportunity, he may seek additional
advances on behalf of the Company from Mr. Howard M. Oveson, a principal
shareholder of the Company. There is presently no agreement or specific
arrangement with Mr. Oveson to provide such additional funds and there is no
assurance that such funds would be available. The Company may also seek
equity financing if additional funds are necessary through the sale of shares
of its common stock. It is very unlikely that traditional forms of financing,
such as bank loans, would be available to the Company.
The investigation of specific business opportunities and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and
other instruments will require substantial management time and attention and
will require the Company to incur costs for payment of accountants, attorneys,
and others. If a decision is made not to participate in or complete the
acquisition of a specific business opportunity, the costs incurred in a
related investigation will not be recoverable. Further, even if an agreement
is reached for the participation in a specific business opportunity by way of
investment or otherwise, the failure to consummate the particular transaction
may result in the loss to the Company of all related costs incurred.
Currently, management is not able to determine the time or resources that
will be necessary to locate and acquire or merge with a business prospect.
There is no assurance that the Company will be able to acquire an interest in
any such prospects, products, or opportunities that may exist or that any
activity of the Company, regardless of the completion of any transaction, will
be profitable. If and when the Company locates a business opportunity,
management of the Company will give consideration to the dollar amount of that
entity's profitable operations and the adequacy of its working capital in
determining the terms and conditions under which the Company would consummate
such an acquisition. Potential business opportunities, no matter which form
they may take, will most likely result in substantial dilution for the
Company's shareholders due to the likely issuance of stock to acquire such an
opportunity. If management fails to locate and complete a transaction with a
merger candidate, it is likely that current management would resign and that
the Company would eventually be dissolved by the State of Texas.
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.
HOLMES MICROSYSTEMS, INC.
Date: November 11, 1999 By /s/ Kip Eardley, President