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, 2000
[ ] 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 December 11, 2000,
there were 1,171,285 shares of the Registrant's Common Stock outstanding.
</Page>
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, 2000.
</Page>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED BALANCE SHEETS
[Unaudited]
ASSETS
October 31, January 31,
2000 2000
------------- -------------
CURRENT ASSETS $ - $ -
------------- -------------
Total Current Assets - -
------------- -------------
$ - $ -
============= =============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 32,421 $ 30,383
Accounts payable related party 2,240 -
------------- -------------
Total Current Liabilities 34,661 30,383
------------- -------------
STOCKHOLDERS' (DEFICIT):
Preferred stock Series A $.001 par value
100,000 shares authorized 3,750 shares
issued and outstanding 4 4
Preferred stock Series B $.001 par value
5,000 shares authorized, 0 shares issued
and outstanding - -
Common stock, $.001 par value, 49,000,000
shares authorized, 1,171,285 shares issued
and outstanding 1,171 1,171
Additional paid in capital 5,001,730 5,001,730
Retained deficit (5,001,104) (5,001,104)
Deficit accumulated during the
development stage (36,462) (32,184)
------------- -------------
Total Stockholders' (Deficit) (34,661) (30,383)
------------- -------------
$ - $ -
============= =============
Note: The balance sheet at January 31, 2000, was taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited
condensed financial statements.
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HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF OPERATIONS
[Unaudited]
From Re-entering
of Development
For the Three For the Nine Stage on
Months Ended Months Ended February 1,
October 31, October 31, 1994 through
------------------------ ----------------------- October 31,
2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- -----------
REVENUE $ - $ - $ - $ - $ -
COST OF SALES - - - - -
----------- ----------- ----------- ----------- -----------
GROSS PROFIT - - - - -
EXPENSES:
General and
Administrative 591 - 4,278 - 36,462
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS
BEFORE INCOME TAXES (591) - (4,278) - (36,462)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
NET LOSS $ (591) $ - $ (4,278) $ - $ (36,462)
----------- ----------- ----------- ----------- -----------
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.00) $ (.07)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these unaudited
condensed financial statements.
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HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF CASH FLOWS
[Unaudited]
From Re-entry
of Development
For the Nine Stage on
Months Ended February 1,
October 31, 1994 through
----------------------- October 31,
2000 1999 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,278) $ - $ (36,462)
Adjustments to reconcile net loss to
net cash used by operating activities:
Common stock issued for services - - 1,800
Changes in assets and liabilities:
Increase in accounts payable 2,038 - 32,422
Increase in accounts payable
related party 2,240 - 2,240
----------- ----------- -----------
Net Cash (Used) by Operating Activities - - -
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- - -
----------- ----------- -----------
Net Cash (Used) by Investing Activities - - -
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- - -
----------- ----------- -----------
Net Cash Provided by Financing Activities - - -
----------- ----------- -----------
Net Increase in Cash - - -
Cash at Beginning of the Period - - -
----------- ----------- -----------
Cash at End of the Period $ - $ - $ -
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
For the nine months ended October 31, 2000:
None
For the nine months ended October 31, 1999:
None
The accompanying notes are an integral part of these unaudited
condensed financial statements.
</Page>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION Holmes Microsystems, Inc. (the Company) was organized
under the laws of the State of Texas on January 20, 1988, under the
name of Blackwing Corporation. On April 4, 1989, Blackwing
Corporation, a publicly held corporation, acquired all of the issued
and outstanding shares of a company known as Surface Tech, Inc., which
was originally known as Holmes Microsystems, Inc. The transaction had
been accounted for as a recapitalization of Holmes Microsystems, Inc.
in a manner similar to a reverse purchase. Accordingly, Holmes
Microsystems, Inc. has been treated as the surviving entity. As part
of this transaction, Blackwing Corporation changed its name to Holmes
Microsystems Inc. and the original Holmes Microsystems Inc., which was
then a wholly owned subsidiary, was dissolved.
Until the fiscal year ended January 31, 1994, the Company had been
engaged in the sale of modems which provide data and facsimile
capabilities for portable computers. The Company had used the trade
name "Fax Em" as an overall description of its products. As of the
year ended January 31, 1994, the Company ceased all sales and
operations and became totally inactive. The Company is considered to
have re-entered into a new development stage on February 1, 1994.
CONDENSED FINANCIAL STATEMENTS - The accompanying financial
statements have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at October 31, 2000 and
1999 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
January 31, 2000 audited financial statements. The results of
operations for the periods ended October 31, 2000 are not necessarily
indicative of the operating results for the full year.
DEVELOPMENT STAGE The Company is considered a development stage
company as defined in SFAS no. 7.
LOSS PER SHARE - The computation of loss per share of common stock is
based on the weighted average number of shares outstanding during the
periods presented, in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" [See Note 7].
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash
flows, the Company considers all highly liquid debt investments
purchased with a maturity of three months or less to be cash
equivalents.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles required
management to make estimates and assumptions that effect the reported
amounts of assets and liabilities, the disclosures 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 estimated by
management.</Page>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONITNUED]
RECENTLY ENACTED ACCOUNTING STANDARDS Statement of Financial
Accounting Standards (SFAS) No. 136, "Transfers of Assets to a not for
profit organization or charitable trust that raises or holds
contributions for others", SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities deferral of the effective date of
FASB Statement No. 133 (an amendment of FASB Statement No. 133.),",
SFAS No. 138 "Accounting for Certain Derivative Instruments and
Certain Hedging Activities and Amendment of SFAS No. 133", SFAS No.
139, "Recission of SFAS No. 53 and Amendment to SFAS No 63, 89 and
21", and SFAS No. 140, "Accounting to Transfer and Servicing of
Financial Assets and Extinguishment of Liabilities", were recently
issued SFAS No. 136, 137, 138, 139 and 140 have no current
applicability to the Company or their effect on the financial
statements would not have been significant.
RESTATEMENT The financial statements have been restated for all
periods presented to reflect a 1 for 100 reverse stock split effective
June 25, 1999 (See Note 5).
NOTE 2 COMMITMENTS AND CONTINGENCIES
Management believes that the Company is not liable for any existing
liabilities related to its former operations, as the amounts were
assumed by the Company's president for stock (approximately $27,000
remain outstanding as of the date of the financial statements) [See
Note 5]. At January 31, 2000 there is the possibility that creditors
and others seeking relief, which if not paid by the Company's
president, may cause the Company to be included in claims and or
lawsuits. The Company is not currently named nor is it aware of any
such claims or suits against the Company. No amounts have been
reflected or accrued in these financial statements for any contingent
liability.
NOTE 3 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes".
FASB 109 requires the Company to provide a net deferred tax
asset/liability equal to the expected future tax benefit/expense of
temporary reporting differences between book and tax accounting
methods and any available operating loss or tax credit carryforwards.
At October 31, 2000, the Company has available unused operating loss
carryforwards of approximately $36,400, which may be applied against
future taxable income and which expire in various years through 2020.
The amount of and ultimate realization of the benefits from the
operating loss carryforwards for income tax purposes is dependent, in
part, upon the tax laws in effect, the future earnings of the Company,
and other future events, the effects of which cannot be determined.
Because of the uncertainty surrounding the realization of the loss
carryforwards the Company has established a valuation allowance equal
to the tax effect of the loss carryforwards and, therefore, no
deferred tax asset has been recognized in the financial statements for
the loss carryforwards. The net deferred tax assets are approximately
$12,300 as of October 31, 2000 with an offsetting valuation allowance
at each year end of the same amount, resulting in a change of $1,500
in the valuation allowance during the period ending October 31, 2000.
</Page>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTIONS
MANAGEMENT COMPENSATION During the periods presented, the Company
did not pay any compensation to its officers and directors.
OFFICE SPACE - The Company has not had a need to rent office space.
An officer/shareholder of the Company is allowing the Company to use
his office as a mailing address, as needed, at no expense to the
Company.
CHANGE IN MANAGEMENT During the year ended January 31, 2000, the
Company had a change in the officers and Board of Directors of the
Company.
NOTE 5 CAPITAL STOCK
PREFERRED STOCK The Company has authorized 100,000 shares of Series
A preferred stock, $.001 par value. At October 31, 2000 there are
3,750 shares issued and outstanding. The Company has also authorized
5,000 shares of Series B preferred stock. At October 31, 2000 there
are no shares issued or outstanding.
During January 2000, a shareholder of the company contributed 3,750
shares Series A preferred stock back to the Company. The shares were
immediately cancelled.
COMMON STOCK SPLIT During the year ended January 31, 2000 the
Company completed a 1 for 100 reverse common stock split. An
additional 59 common shares were issued as fractional shares, due to
rounding up to the next whole share. These financial statements have
been retro-actively re-stated to reflect the change.
COMMON STOCK ISSUED During January 2000, the Company issued 29,400
shares of common stock in exchange for 840 shares of series B
preferred stock.
During January 2000, the Company issued 20,600 shares of common stock
for cancellation of a note payable in the amount of $83,333 (or $4.05
per share).
During January 2000, the Company issued 593,711 shares of common stock
to an officer/shareholder for assumption and settlement of the
Company's judgements from prior operations in the amount of $386,798
(or $.65 per share).
During January 2000, the Company issued 30,000 shares of common stock
to an individual for service rendered valued at $1,800 (or $.06 per
share).
During January 2000, the Company issued 17,000 shares of common stock
for cancellation of notes payable totaling $140,413.
</Page>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 6 GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company
has no on-going operations and has incurred losses since its
inception. Further, the Company has current liabilities in excess of
assets and has no working capital to pay its expenses. These factors
raise substantial doubt about the ability of the Company to continue
as a going concern. In this regard, management is proposing to raise
any necessary additional funds not provided by operations through
loans or through sales of its common stock or through a possible
business combination with another company. There is no assurance that
the Company will be successful in raising this additional capital or
achieving profitable operations. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
NOTE 7 EARNINGS (LOSS) PER SHARE
The following data show the amounts used in computing income (loss)
per share and the effect on income and the weighted average number of
shares of dilutive potential common stock for the three and nine
months ended October 31, 2000 and 1999 and for the period from the
re-entering of development stage on February 1, 1994 through October
31, 2000:
From the
Re-entering of
Development
Stage on
For the Three For the Nine February
Months Ended Months Ended 1, 1994
October 31, October 31, Through
------------------- ------------------- October
2000 1999 2000 1999 31, 2000
--------- --------- --------- --------- ---------
Loss from continuing operations
available to common stock
holders (numerator) $ (591) $ - $ (4,278) $ - $(36,462)
Weighted average number of
common shares outstanding
used in earnings per share
during the period 1,171,226 480,515 1,171,226 480,515 557,323
Dilutive earnings per share was not presented, as the Company had no
common equivalent shares for all periods presented that would effect
the computation of diluted earnings (loss) per share.
</Page>
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, 2000, or during the first nine months ended October 31,
2000.
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 last 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.
In connection with attempting to locate a new business venture, the
Company reverse split the outstanding common stock at the rate of one share
for each 100 shares outstanding. The reverse split was effective December
29, 1999. The Company now 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
</Page>
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.
</Page>
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: December 12, 2000 By /s/ Kip Eardley, President
--------------------------
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