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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 April 30, 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 June 12, 2000, there were
1,171,285 shares of the Registrant's Common Stock outstanding.
PART I
Item 1. Financial Statements
ACCOUNTANTS' REVIEW REPORT
Board of Directors
HOLMES MICROSYSTEMS, INC.
Salt Lake City, Utah
We have reviewed the accompanying condensed balance sheet of Holmes
Microsystems, Inc. (A Development Stage Company) as of April 30, 2000, and the
related condensed statements of operations and cash flows for the three months
ended April 30, 2000, and for the period from the re-entering of development
stage on February 1, 1994 through April 30, 2000. All information included in
these financial statements is the representation of the management of Holmes
Microsystems, Inc.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review consists
principally of inquiries of Company personnel and analytical procedures
applied to financial data. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed financial statements reviewed by us, in order
for them to be in conformity with generally accepted accounting principles.
The accompanying unaudited condensed financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 6
to the financial statements, the company has no on-going operations, has
incurred substantial losses since its inception, has liabilities in excess of
assets and has no working capital. These factors raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regards to these matters are also described in Note 6. The financial
statements do not include any adjustments that might result from the outcome
of these uncertainties.
/s/ Pritchett, Silver & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
May 19, 2000
Salt Lake City, Utah
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED BALANCE SHEETS
[Unaudited - See Accountants' Review Report]
ASSETS
April 30, January 31,
2000 2000
___________ ___________
CURRENT ASSETS:
Cash in bank $ - $ -
___________ ___________
Total Current Assets - -
___________ ___________
$ - $ -
___________ ___________
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 30,383 $ 30,383
___________ ___________
Total Current Liabilities 30,383 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, 1,171,285 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 (32,184) (32,184)
___________ ___________
Total Stockholders' (Deficit) (30,383) (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.
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF OPERATIONS
[Unaudited - See Accountants' Review Report]
From Re-entry of
For the Three Development Stage
Months Ended on February 1,
April 30, 1994 through,
______________________ April 30,
2000 1999 2000
__________ __________ ___________
REVENUE:
Sales $ - $ - $ -
__________ __________ ___________
Total Revenue - - -
__________ __________ ___________
EXPENSES:
General and administrative - - 32,134
__________ __________ ___________
Total Expenses - - (32,184)
__________ __________ ___________
LOSS BEFORE INCOME TAXES - - (32,184)
CURRENT INCOME TAXES - - -
DEFERRED INCOME TAX - - -
__________ __________ ___________
NET LOSS $ - $ - $ (32,184)
__________ __________ ___________
LOSS PER SHARE $ - $ - $ (.07)
__________ __________ ___________
The accompanying notes are an integral part of these unaudited condensed
financial statements.
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF CASH FLOWS
[Unaudited - See Accountants' Review Report]
From Re-entry of
For the Three Development Stage
Months Ended on February 1,
April 30, 1994 through,
______________________ April 30,
2000 1999 2000
__________ __________ ___________
Cash Flows From Operating
Activities:
Net loss $ - $ - $ (32,184)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Changes in assets and
liabilities:
Increase in interest
payable -related party - - 1,800
Increase in advances from
officers - - 30,384
__________ __________ ____________
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 three months ended April 30, 2000: None
For the three months ended April 30, 1999: None
The accompanying notes are an integral part of these unaudited condensed
financial statements.
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
April 30, 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
April 30, 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.
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. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", SFAS No. 134, "Accounting for Mortgage-Backed
Securities…", SFAS No. 135, "Rescission of FASB Statement No. 75 and
Technical Corrections", SFAS No. 136, "Transfers of Assets to a not for profit
organization or charitable trust that raises or holds contributions for
others", and 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.)," were recently issued. SFAS No. 132,
133, 134, 135, 136 and 137 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 April 30, 2000, the Company has available unused
operating loss carryforwards of approximately $32,000, 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 $10,800 as of April 30, 2000 with an offsetting valuation
allowance at each year end of the same amount, resulting in no change in the
valuation allowance during the period ending April 30, 2000.
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
During January 2000, the Company issued 29,400 shares of common stock in
exchange for 840 shares of preferred stock.
During the year ended January 31, 2000 the Company completed a 1 for 100
reverse 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.
During January 2000, the Company issued 20,600 shares of common stock for
cancellation of note 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.
During January 2000, a shareholder of the company contributed to the company
3,750 shares Series A preferred stock. The shares were immediately cancelled.
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.
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 years ended April 30, 2000 and 1999 and for the
period from the re-entering of development stage on February 1, 1994 through
April 30, 2000:
From the Re-entering of
For the Three Development Stage
Months Ended on February 1,
April 30, 1994 through
_______________________ April 30,
2000 1999 2000
__________ __________ ____________
Loss from continuing
operations available
to common stockholders
(numerator) $ - $ - $ (32,184)
__________ __________ ____________
Weighted average number of
common shares outstanding
used in earnings per share
during the period
(denominator) 1,171,285 480,515 507,780
__________ __________ ____________
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.
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 quarter ended April 30, 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 requiresubstantial 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: June 13, 2000 By /s/ Kip Eardley, President