SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Check the appropriate box:
[X] Preliminary Information Statement [ ] Confidential, for Use
of the Commission
Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
HOLMES MICROSYSTEMS, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
HOLMES MICROSYSTEMS, INC.
57 West 200 South
Suite 310
Salt Lake City, Utah 84101
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held ____, 1999
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of Holmes Microsystems, Inc., a Texas corporation (the "Company" or
"Holmes"), will be held at the offices of the Company, 57 West 200 South,
Suite, 310, Salt Lake City, Utah 84101 on _________________, 1999, at 10:00
a.m. local time. An Information Statement for the Meeting is enclosed.
The Meeting is for the following purposes:
(1) To approve amendments to the Company's Restated Articles of
Incorporation that would effect (i) a one hundred-to-one reverse stock split
of the Company's issued common stock, par value $.001 per share (the "Common
Stock"); (ii) a change in the capitalization of the Company by eliminating the
preferred shares and increasing the authorized number of common shares from
49,000,000 to 50,000,000; and (iii) certain other technical changes.
(2) To authorize the issuance of 610,711 post reverse-split shares to
the president of the Company for the assumption of all of the outstanding debt
of the Company.
(3) To transact any other business that may properly come before the
Meeting and any adjournments thereof.
The close of business on August 31, 1999, has been fixed as the record
date for determining shareholders entitled to notice of and to vote at the
Meeting and any adjournments thereof. For a period of at least ten days prior
to the Meeting, a complete list of shareholders entitled to vote at the
Meeting will be open to the examination of any shareholder during ordinary
business hours at the offices of the Company at 57 West 200 South, Suite 310,
Salt Lake City, Utah 84101.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Information Statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. HOWEVER, ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON.
By Order of the Board of Directors
Kip Eardley, President
Salt Lake City, Utah
September 1, 1999
HOLMES MICROSYSTEMS, INC.
57 West 200 South
Suite 310
Salt Lake City, Utah 84101
INFORMATION STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _______, 1999
This Information Statement is being first mailed on ________, 1999, to
shareholders of Holmes Microsystems, Inc., a Texas corporation (the "Company"
or "Holmes"), by the Board of Directors in connection with a Special Meeting
of Shareholders (the "Meeting") of the Company to be held at the offices of
the Company, 57 West 200 South, Suite 310, Salt Lake City, Utah 84101, on
_______________, 1999, at 10:00 a.m., local time, and at such other times and
places to which the Meeting may be adjourned.
The purpose of the Meeting is to consider and act upon the following:
(1) the approval of amendments to the Company's Restated Articles
of Incorporation (the "Articles of Incorporation") that would effect (i) a one
hundred-to-one reverse stock split of the Company's issued common stock, par
value $.001 per share (the "Common Stock"); (ii) a change in the
capitalization of the Company by eliminating the preferred shares and
increasing the authorized number of common shares from 49,000,000 to
50,000,000; and (iii) certain other technical changes.
(2) The authorization of the issuance of 610,711 post
reverse-split shares to the president of the Company for the assumption of all
of the outstanding debt of the Company.
(3) Such other matters as may properly come before the Meeting and
any adjournments thereof.
A shareholder owning 30,778,149 shares (64.06%) of the outstanding Common
Stock has indicated its intent to vote in favor of each of these proposals.
RECORD DATE AND VOTING SECURITIES
The record date for determining the shareholders of the Company
entitled to notice of and to vote at the Meeting and any adjournments thereof
was the close of business on August 29, 1999 (the "Record Date"), at which
time the Company had issued and outstanding approximately 48,051,547 shares of
Common Stock. The shares of Common Stock constitute the only outstanding
voting securities of the Company entitled to be voted at the Meeting. No
preferred shares are outstanding.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the Common Stock issued and outstanding and entitled to vote
thereat is necessary to constitute a quorum to transact business. In deciding
all questions and other matters, a holder of Common Stock on the Record Date
will be entitled to cast one vote for each share of Common Stock then
registered in such holder's name. The approval of each of the proposals will
require the affirmative vote of a majority of the Common Stock issued and
outstanding at the Record Date.
Shares referred to as "broker non-votes" (shares held by brokers or
nominees as to which they have no discretionary authority to vote on a
particular matter and have received no instructions from the beneficial owners
or persons entitled to vote thereon), if any, are counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. However, for purposes of determining the outcome of any matter
requiring discretionary authority to vote, broker non-votes will be treated as
not voting with respect to that matter (even though those shares are
considered present for quorum purposes and may be entitled to vote on other
matters).
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of Common Stock as of the Record Date by (i) each person known by
the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each director of the Company, (iii) the Company's executive
officers and (iv) all directors and executive officers of the Company as a
group.
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL BENEFICIAL PERCENT
OWNER OR GROUP OWNERSHIP OF CLASS
Kip Eardley -0- -0-
5814 South 900 East
Salt Lake City, Utah 84117
Howard M. Oveson 30,778,149(1) 64.06%
57 West 200 South
Suite 310
Salt Lake City, Utah 84101
Marilyn Welch 3,147,100 6.55%
Las Vegas, Nevada
Executive Officers and -0- -0-
Directors as a Group (1 Person)
(1)*
PROPOSAL NO. 1
REVERSE STOCK SPLIT AND CHANGE OF CAPITALIZATION
The Board of Directors has adopted, and proposes that the shareholders
of the Company approve, amendments to the Articles of Incorporation that would
effect (i) a one hundred-to-one reverse stock split of the Company's issued
common stock, par value $.001 per share (the "Common Stock"); (ii) a change in
the capitalization of the Company by eliminating the preferred shares and
increasing the authorized number of common shares from 49,000,000 to
50,000,000; and (iii) certain other technical changes. The effect of the
revere stock split would be to increase the authorized but unissued shares by
a factor of 100.
REASONS FOR THE REVERSE STOCK SPLIT
The Company has been inactive since 1994 and presently has no assets or
on-going operations. Since 1996 the Company has been attempting to settle its
outstanding liabilities and seek a new business venture. Management believes
that the acquisition of any new business venture would include the issuance of
shares of the Common Stock as part of the purchase price therefor. And, it is
likely that any person agreeing to sell a business venture to the Company
would anticipate obtaining a controlling interest in the Company. Therefore,
management believes that the reverse stock split would provide sufficient
authorized but unissued shares of Common Stock to permit the Company to issue
a controlling interest in the Company to any potential acquiree.
On June 25, 1999, the Company entered into a letter of intent with
Rascals Enterprises, Inc. ("Rascals"), a Delaware corporation in connection
with a proposed reverse acquisition by Rascals. The Company did not have
sufficient unissued shares of Common Stock to consummate the transaction and
was not able to accomplish a reverse spit of the outstanding shares in order
to meet the time commitment in the letter of intent. Therefore the letter of
intent was terminated on or about July 14, 1999.
The Company believes the completion of the Reverse Stock Split may not
cause the trading price of the Common Stock to increase proportionately since
there is currently no active or established trading market of the Common
Stock. There can be no assurance that the Reverse Stock Split will result in
any change in the price of the Common Stock or that, if the price of the
Common Stock does increase as a result of the Reverse Stock Split, such
increase would be proportional to the amount of the reverse split.
SEARCH FOR NEW BUSINESS VENTURE
The Company is currently seeking potential business acquisitions or
opportunities to enter into in an effort to commence new business operations.
The Company does not propose to restrict its search for a business opportunity
to any particular industry or geographical area and may, therefore, engage in
essentially any business in any industry. The Company has unrestricted
discretion in seeking and participating in a business opportunity.
The Company's Board of Directors shall make the final determination
whether to complete any such venture; the approval of shareholders will not be
sought unless required by applicable laws, rules and regulations, its Articles
of Incorporation or Bylaws, or contract. Neither the Company's Articles of
Incorporation nor its Bylaws presently require stockholder approval for any
such acquisition and management does not intend to amend these documents to
require shareholder approval. The Company does not intend to provide any
disclosure documentation to its shareholders prior to any acquisition
transaction. However, as a reporting issuer subject to the reporting
requirements of the 1934 Act, the Company will be required to disclose any
such transaction in a Current Report on Form 8-K, including audited financial
statements of the acquired entity and consolidated pro forma financial
statements. Any change in management would be preceded by a statement filed
with the SEC and mailed to the shareholders describing the new management.
The selection of a business opportunity in which to participate is
complex and risky. Additionally, as the Company has only limited resources
available to it through advances by management, it may be difficult to find
good opportunities. There can be no assurance that the Company will be able
to identify and acquire any business opportunity based on management's
business judgement.
Management intends to consider a number of factors prior to
making any decision as to whether to participate in any specific business
endeavor, none of which may be determinative or provide any assurance of
success. These may include, but will not be limited to, an analysis of the
quality of the entity's management personnel; the anticipated acceptability of
any new products or marketing concepts; the merit of technological changes;
its present financial condition, projected growth potential and available
technical, financial and managerial resources; its working capital, history of
operations and future prospects; the nature of its present and expected
competition; the quality and experience of its management services and the
depth of its management; its potential for further research, development or
exploration; risk factors specifically related to its business operations; its
potential for growth, expansion and profit; the perceived public recognition
or acceptance of its products, services, trademarks and name identification;
and numerous other factors which are difficult, if not impossible, to properly
or accurately analyze, let alone describe or identify, without referring to
specific objective criteria.
Regardless, the results of operations of any specific entity may not
necessarily be indicative of what may occur in the future, by reason of
changing market strategies, plant or product expansion, changes in product
emphasis, future management personnel and changes in innumerable other
factors. Further, in the case of a new business venture or one that is in a
research and development stage, the risks will be substantial, and there will
be no objective criteria to examine the effectiveness or the abilities of its
management or its business objectives. Also, a firm market for its products or
services may yet need to be established, and with no past track record, the
profitability of any such entity will be unproven and cannot be predicted with
any certainty.
Management will attempt to meet personally with management and key
personnel of the entity sponsoring any business opportunity afforded to the
Company, visit and inspect material facilities, obtain independent analysis or
verification of information provided and gathered, check references of
management and key personnel and conduct other reasonably prudent measures
calculated to ensure a reasonably thorough review of any particular business
opportunity; however, due to time constraints of management, these activities
may be limited.
The Company is unable to predict the time as to when and if it may
actually participate in any specific business endeavor. The Company
anticipates that proposed business ventures will be made available to it
through personal contacts of directors, executive officers and principal
stockholders, professional advisors, broker dealers in securities, venture
capital personnel, members of the financial community, attorneys and others
who may present unsolicited proposals. In certain cases, the Company may agree
to pay a finder's fee or to otherwise compensate the persons who submit a
potential business endeavor in which the Company eventually participates. Such
persons may include the Company's directors, executive officers, beneficial
owners or their affiliates. In this event, such fees may become a factor in
negotiations regarding a potential acquisition and, accordingly, may present a
conflict of interest for such individuals.
Although the Company has not identified any potential acquisition
target, the possibility exists that the Company may acquire or merge with a
business or company in which the Company's executive officers, directors,
beneficial owners or their affiliates may have an ownership interest. Current
Company policy does not prohibit such transactions. Because no such
transaction is currently contemplated, it is impossible to estimate the
potential pecuniary benefits to these persons.
Although it currently has no plans to do so, depending on the nature
and extent of services rendered, the Company may compensate members of
management in the future for services that they may perform for the Company.
Because the Company currently has extremely limited resources, and is unlikely
to have any significant resources until it has completed a merger or
acquisition, management expects that any such compensation would take the form
of an issuance of the Company's stock to these persons; this would have the
effect of further diluting the holdings of the Company's other stockholders.
However, due to the minimal amount of time devoted to management by any person
other than the Company's sole director and executive officer, there are no
preliminary agreements or understandings with respect to management
compensation. Although it is not prohibited by statute or its Articles of
Incorporation, the Company has no plans to borrow funds and use the proceeds
to make payment to its management, promoters or affiliates.
Further, substantial fees are often paid in connection with the
completion of these types of acquisitions, reorganizations or mergers, ranging
from a small amount to as much as $250,000. These fees are usually divided
among promoters, founders, or principal shareholders, after deduction of
legal, accounting and other related expenses, and it is not unusual for a
portion of these fees to be paid to members of management or to principal
stockholders as consideration for their agreement to retire a portion of the
shares of common stock owned by them. Management may actively negotiate or
otherwise consent to the purchase of all or any portion of its common stock as
a condition to, or in connection with, a proposed merger or acquisition. It
is not anticipated that any such opportunity will be afforded to other
stockholders or that such stockholders will be afforded the opportunity to
approve or consent to any particular stock buy-out transaction. In the event
that such fees are paid, they may become a factor in negotiations regarding
any potential acquisition by the Company and, accordingly, may present a
conflict of interest for such individuals.
None of the Company's directors, executive officers or promoters, or
their affiliates or associates, has had any negotiations with any
representatives of the owners of any business or company regarding the
possibility of an acquisition or merger transaction with the Company, except
for prior negotiations in connection with abandoned transaction with Rascals.
Nor are there any present plans, proposals, arrangements or understandings
with any such persons regarding the possibility of any acquisition or merger
involving the Company.
EFFECTIVE INCREASE OF AUTHORIZED SHARES
The Company proposes to effect the Reverse Stock Split while increasing
the authorized number of shares of Common Stock from 49,000,000 to 50,000,000.
Even without the increase in the authorized number of shares of Common Stock,
the Reverse Stock Split will have the effect of increasing the number of
authorized shares of Common Stock. The Preferred Stock will not be affected by
the Reverse Stock Split, but will be canceled in connection with the adoption
of the Amended and Restated Articles of Incorporation. The Company does not
have any shares of Preferred Stock issued and outstanding. The Board of
Directors believes the proposed amounts of Common Stock and Preferred Stock
authorized for issuance are adequate to meet the Company's needs in the
foreseeable future. If the Reverse Stock Split is approved, no shareholder
approval will be solicited for the issuance of all or any portion of the
Common Stock unless required by law or any rules or regulations to which the
Company may be subject.
EFFECT OF REVERSE STOCK SPLIT ON SHAREHOLDERS
The Reverse Stock Split will not affect any shareholder's proportionate
equity interest in the Company, except for those shareholders who would
receive one more or one less share of Common Stock in lieu of fractional
shares. Holders of Common Stock will continue to be entitled to receive such
dividends as may be declared by the Board of Directors. The Company's
reporting obligations under the Securities Exchange Act of 1934, as amended,
will not be affected by the Reverse Stock Split.
EFFECT OF THE REVERSE STOCK SPLIT ON CAPITAL STOCK
The Company's Articles of Incorporation currently authorize the
issuance of 49,000,000 shares of Common Stock and 1,000,000 shares of
Preferred Stock. On the Record Date, the Company had outstanding 48,051,547
shares of Common Stock, leaving 948,453 authorized but unissued shares of
Common Stock available for issuance. Following the Reverse Stock Split, the
Company will have approximately 480,515 shares of Common Stock outstanding,
leaving 49,519,485 authorized but unissued shares of Common Stock available
for issuance (giving effect to the increase in the number of authorized shares
of Common Stock from 49,000,000 to 50,000,000). Such action could result in
potential dilution of the percentage ownership interest of existing
shareholders if the effective increase in the authorized but unissued shares
of Common Stock were to result in management issuing a significant number of
such shares, which is very likely. The par value of the Common Stock will
remain at $.001 per share. Because the number of issued shares of Common Stock
will decrease but the par value will remain the same after the Reverse Stock
Split, the Company's stated capital will decrease by approximately $47,571,
and the Company's surplus account will increase by a corresponding amount.
This change in the Company's capital accounts will be reflected in the
Company's financial statements, along with a notation of the change in
outstanding shares of Common Stock, as a result of the Reverse Stock
Split.
There were no shares of Preferred Stock issued or reserved for issuance
on the Record Date. The Preferred Stock will be unaffected by the Reverse
Stock Split, but will be eliminated in the Amended and Restated Articles of
Incorporation.
If the Reverse Stock Split Amendment is approved by the shareholders, the
Company will file Amended and Restated Articles of Incorporation (the
"Restated Articles"), in the form of Exhibit A attached to this Information
Statement, reflecting the Reverse Stock Split Amendment, with the Secretary of
State of the State of Texas promptly following the conclusion of the Meeting.
The Reverse Stock Split will become effective on the date of such filing (the
"Effective Date"). On the Effective Date, without further action of the
Company or its shareholders, (i) every one hundred shares of Common Stock
outstanding will automatically be reverse split into one share outstanding,
(ii) the number of shares of authorized Common Stock will be increased from
49,000,000 to 50,000,000, and (iii) the par value of the Common Stock will
remain at $.001 per share. Based on information as of the Record Date, the
Company anticipates that the number of outstanding shares of Common Stock,
after giving effect to the Reverse Stock Split, will be approximately 480,515
shares. Upon filing the Restated Articles, the Company will notify the
shareholders that the Reverse Stock Split has been effected.
CERTAIN ANTI-TAKEOVER EFFECTS OF THE REVERSE STOCK SPLIT
As described above, approval of the Reverse Stock Split Amendment will
increase the number of authorized shares of Common Stock available for
issuance. Under certain circumstances, the Board of Directors could create
impediments to, or delay persons seeking to effect, a takeover or transfer of
control of the Company by causing such additional authorized shares to be
issued to a holder or holders who might side with the Board in opposing a
takeover bid that the Board of Directors determines is not in the best
interests of the Company and its shareholders. Such an issuance could diminish
the voting power of existing shareholders who favor a change in control, and
the ability to issue the shares could discourage an attempt to acquire control
of the Company. While it may be deemed to have potential anti-takeover
effects, the Board is proposing the Reverse Stock Split solely for the purpose
of increasing the number of authorized but unissued shares of Common Stock
which would be available for issuance in any reverse acquisition of a new
business venture. The proposed amendment is not prompted by any specific
effort or takeover threat currently perceived by management.
Approval of the Reverse Stock Split Amendment could have material
adverse consequences to the Company's independent stockholders. Such adverse
consequences include, but are not limited to, the following:
Although the effect of the Reverse Stock Split Amendment would be
to reverse split the outstanding stock on a pro rata basis, thus affecting
each of the shareholders equally, many shareholders would be reduced below 100
shares which would make it significantly more difficult to sell the shares
should any market for the Common Stock be established.
The present Board of Directors would have available 49,519,485
authorized but unissued shares of Common Stock, some or all of which could be
issued without shareholder approval. The issuance of a significant number of
shares could materially dilute the percentage ownership interest of the
current shareholders and there is no assurance that such issuance would result
in benefits to the existing shareholders such as greater market liquidity or a
higher market price for the shares.
If the Board of Directors were to issue additional shares to the
current sole director, he could acquire sufficient shares to constitute a
majority of the outstanding shares. As such, he could continue to vote to
retain his position as the sole director; he could adopt provisions which
could make it more difficult for anyone to take over the Company; or he could
condition any take over on the sale of his interest in the Company at a price
greater than could be realized by any other shareholders in any market which
may develop for the Common Stock.
However, management believes that with the current number of shares
outstanding, it would be extremely difficult to attract potential new business
ventures. Since the Company presently has no operations and no potential for
funding without acquiring a new business venture, management believes that the
only reasonable alternative would be to reverse split the outstanding stock in
order to have available a sufficient number of authorized but unissued shares
to issue a controlling block of stock in an acquisition transaction.
EXCHANGE OF CERTIFICATES; NO FRACTIONAL SHARES
After the Effective Date, the Company will authorize the issuance of
certificates representing one share of Common Stock in exchange for each one
hundred shares of Common Stock presently outstanding upon surrender of an
existing certificate evidencing outstanding shares of Common Stock.
No fractional shares of common stock will be issued in connection with
the Reverse Stock Split. Assuming the approval of the Reverse Stock Split
Amendment, a shareholder who would otherwise be entitled to receive, in the
aggregate, a number of shares of Common Stock that included a fraction of a
share equal to or greater than one-half will receive, in lieu thereof, that
number of shares rounded up to the next highest whole share. A shareholder who
would otherwise be entitled to receive, in the aggregate, a number of shares
that included a fraction less than one-half will not receive such fractional
share and will be entitled only to that number of shares aggregate, rounded
down to the next lowest whole share; provided, however, that any shareholder
owning less than one hundred shares will be rounded up to at least one whole
share. All shares returned to the Company as a result of the Reverse Stock
Split will be canceled and returned to the status of authorized but unissued
shares. It is possible that shareholders holding less than 100 shares
(otherwise known as "Odd Lots") of the Company's Common Stock following the
Reverse Stock Split may have difficulty in disposing of their shares in that
the commissions charged to sell such shares may exceed the value of the
shares.
The Company's transfer agent will represent the Company as exchange agent
("Exchange Agent"), in connection with the Reverse Stock Split. As soon as
practicable after the Effective Date, the holders of the Common Stock will be
notified that the Reverse Stock Split has been effected and will be asked to
surrender to the Exchange Agent any certificate(s) representing outstanding
shares of Common Stock in exchange for new certificate(s) representing the
reduced number of shares of Common Stock that will result from the Reverse
Stock Split. On the Effective Date, each certificate representing shares of
Common Stock will be deemed for all purposes to represent the reduced number
of shares of Common Stock that will result from the Reverse Stock Split,
whether or not the certificates representing outstanding Common Stock are
surrendered for exchange.
NO DISSENTERS' RIGHTS
The Texas Business Corporation Act does not vest shareholders of the
Company with dissenters' rights with respect to the Reverse Stock Split.
RESALES OF RESTRICTED SECURITIES
The Reverse Stock Split Amendment will not affect the transferability of
shares of Common Stock or any present restriction on the sale thereof.
Therefore, for purposes of determining the relevant holding period as
prescribed by Rule 144 under the Securities Act of 1933, as amended, the
shares of Common Stock to be issued to each shareholder after the Effective
Date will be deemed to have been acquired on the date on which the shareholder
acquired the shares of Common Stock held immediately prior to the Effective
Date.
FEDERAL INCOME TAX CONSEQUENCES
A summary of the federal income tax consequences of the Reverse Stock
Split is set forth below. The discussion is based on present federal income
tax law. The discussion is not, and should not be relied on as, a
comprehensive analysis of the tax issues arising from or relating to the
Reverse Stock Split. This summary does not purport to deal with all aspects of
federal income taxation that may be relevant to a particular shareholder in
light of such shareholder's personal investment circumstances or to certain
types of shareholders subject to special treatment under the Internal Revenue
Code of 1986, as amended (the "Code") (including, without limitation,
financial institutions, broker-dealers, regulated investment companies, life
insurance companies, tax-exempt organizations, foreign corporations and
non-resident aliens). Accordingly, shareholders are urged to consult their
personal tax advisors for an analysis of the effect of the Reverse Stock Split
on their respective tax situations, including consequences under applicable
state, local or foreign tax laws.
Pursuant to Section 368(a)(1)(E) of the Code, the Company believes the
Reverse Stock Split will qualify as a recapitalization to the extent that
outstanding shares of Common Stock are exchanged for a reduced number of
shares of Common Stock. Therefore, neither the Company nor its shareholders
will recognize any gain or loss for federal income tax purposes as a result
thereof.
The shares of Common Stock to be issued to each shareholder to effect the
Reverse Stock Split will have an aggregate basis, for computing gain or loss,
equal to the aggregate basis of the shares of Common Stock held by such
shareholder immediately prior to the Effective Date. A shareholder's holding
period for the shares of Common Stock to be issued will include the holding
period for shares of Common Stock exchanged therefor, provided that such
outstanding shares of Common Stock were held by the shareholder as capital
assets on the Effective Date.
VOTE REQUIRED
Approval of the Reverse Stock Split Amendment requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote on the proposal. If the Reverse Stock Split Amendment is
approved by the shareholders of the Company, the proper officers of the
Company will file a copy of the Restated Articles with the Secretary of State
of the State of Texas to effect the Reverse Stock Split as promptly as
practicable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REVERSE STOCK SPLIT
AMENDMENT
PROPOSAL NO. 2
ISSUANCE OF 610,711 SHARES OF COMMON STOCK
The Company is seeking ratification of a proposal to issue 610,711
post reverse-split shares of Common Stock to Kip Eardley, the sole director
and president of the Company. Mr. Eardley has assumed all of the outstanding
liabilities of the Company in consideration for such shares. At April
30,1999, the Company had total liabilities of $610,711, including outstanding
judgments against it in the principal amount of approximately $526,711 and
outstanding promissory notes in the principal amounts of $84,000. These
liabilities were incurred in connection with the prior business of the Company
which ceased during the year ended January 31, 1994. Mr. Eardley has settled
and filed satisfactions of judgement for approximately $492,806 of the
outstanding judgements set forth in the financial statements. Mr. Eardley has
agreed to indemnify the Company for the remaining judgements in the amount of
$33,905, plus interest, and the promissory notes in the principal amount of
$84,000, plus interest. Notwithstanding the agreement, the Company will remain
principally liable for the unsettled outstanding judgements and promissory
notes. The Company has no cash or other assets with which to settle the
liabilities, and management believes that the elimination of such liabilities
from the balance sheet may make it easier to attract new business
ventures.
The number of shares to be issued to Mr. Eardley was arbitrarily
determined by him at a value of $1.00 per share for each $1.00 of principal
debt assumed. The determination of the number of shares to be issued to him
was also based upon a desire to provide him with numerical control of the outsta
nding stock of the Company. As a result of the issuance of the 610,711 shares
to Mr. Eardley, he will own approximately 56% of the outstanding shares.
Thus, Mr. Eardley would be able to elect all directors in the future.
Mr. Eardley has not received any compensation, directly or indirectly,
from the Company for his services as an officer of the Company. He may
actively negotiate or otherwise consent to the purchase of all or a portion of
the remaining shares of Common Stock owned by him as a condition to, or in
connection with, a proposed merger or acquisition. It is not anticipated that
any such opportunity will be afforded to other stockholders or that such
stockholders will be afforded the opportunity to approve or consent to any
particular stock buy-out transaction. In the event that such fees are paid,
they may become a factor in negotiations regarding any potential acquisition
by the Company and, accordingly, may present a conflict of interest for such
individuals.
The effect of the issuance of the 610,711 shares to Mr. Eardley would
be to further dilute the holdings of the other stockholders of the Company.
Giving effect to the Reverse Stock Split, Mr. Eardley would then own
approximately 56% of the total outstanding shares of Common Stock. No shares
of Common Stock have preemptive rights.
Approval of the issuance of the 610,711 shares of Common stock to Mr.
Eardley requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote on the proposal.
As a result of the issuance of the shares to Mr. Eardley and the
assumption of the existing liabilities, and assuming Mr. Eardley is able to
settle all of the obligations, the liabilities set forth on the balance sheet
of the Company at April 30, 1999, would be eliminated, stated capital would be
increased by $3,000, additional paid-in capital would be increased by
$607,711, and the accumulated deficit would be decreased by a like amount.
Because of Mr. Eardley's interest in the proposed transaction, the
Board of Directors is not making a recommendation relating to this
proposal.
FINANCIAL STATEMENTS
Copies of the Company's unaudited financial statements for the year
ended January 31, 1999 (including operating statements for the year ended
January 31, 1998), and the period ended April 30, 1999, are attached
hereto.
By Order of the Board of Directors
/s/ Kip Eardley, Secretary
Salt Lake City, Utah
September 1, 1999
Holmes Microsystems, Inc.
Balance Sheets
April January January
30, 1999 31, 1999 31, 1998
ASSETS
Current Assets
Cash $ -0- $ -0- $ -0-
Total Assets $ -0- $ -0- $ -0-
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Judgements payable $ 526,711 $ 526,711 $ 526,711
Notes Payable 84,000 84,000 84,000
Total Current Liabilities 610,711 610,711 610,711
Stockholders' Equity
Preferred stock - Series A;
$.001 par value; 100,000
shares authorized; -0-,
7,500 and 7,500 shares
issued & outstanding
8% noncumlative
convertible -0- 8 8
Preferred stock - Series B;
$.001 par value;
5,000 shares authorized;
-0-, 840 and 840 shares
issued and outstanding
10% cumlative convertible -0- 1 1
Common Stock; $.001 Par Value;
49,000,000 shares authorized;
48,051,547 shares issued and
outstanding 48,051 48,051 48,051
Paid In Capital 4,342,333 4,342,333 4,342,333
Accumulated Deficit (5,001,104) (5,001,104) (5,001,104)
Total Stockholder' Equity (610,711) (610,711) (610,711)
Total Liabilities &
Stockholders' Equity $ -0- $ -0- $ -0-
<PAGE>
Holmes Microsystems, Inc.
Statement of Operations
For the three For Year For Year
Months ended Ended Ended
April January January
30, 1999 31, 1999 31, 1998
Revenues $ -0- $ -0- $ -0-
Operating Expenses -0- -0- -0-
Net Income $ -0- $ -0- $ -0-
Net Income Per Share $ .00 $ .00 $ .00
<PAGE>
Holmes Microsystems, Inc.
Statements of Cash Flows
For the three For Year For Year
Months ended Ended Ended
April January January
30, 1999 31, 1999 31,1998
Cash Flows from Operating
Activities
Net Income $ -0- $ -0- $ -0-
Adjustments to Reconcile
Net Income to Net Loss
Used by Operating
Activities:
Forgiveness of Debt -0- -0- -0-
Increase in Accounts Payable -0- -0- -0-
Net Cash Used by
Operating Activities -0- -0- -0-
Cash Flows from Financing Activities
Advances from Officer -0- -0- -0-
Net Cash Used from
Financing Activities -0- -0- -0-
Net Decrease in Cash -0- -0- -0-
Cash at Beginning of Year -0- -0- -0-
Cash at End of Year $ -0- $ -0- $ -0-
Disclosures from Operating Activities
Interest $ -0- $ -0- $ -0-
Taxes -0- -0- -0-
<PAGE>
Holmes Microsystems, Inc.
Statement of Change in Stockholders' Equity
Preferred Preferred Additional
Stock Stock Common Paid-In Accum.
Series A Series B Stock Capital Deficit Total
Balance as
of 1/31/97
Shares 7,500 840 48,051,547
Amount $ 8 $ 1 $ 48,051 $ 4,342,333 $(5,001,104) $(610,711)
Net Income $ -0- $ -0-
Balance as
of 1/31/98
Shares 7,500 840 48,051,547
Amount $ 8 $ 1 $ 48,051 $ 4,342,333 $(5,001,104) $(610,711)
Net Income $ -0- $ -0-
Balance as
of 1/31/99
Shares 7,500 840 48,051,547
Amount $ 8 $ 1 $ 48,051 $ 4,342,333 $(5,001,104) $(610,711)
Net Income $ -0- $ -0-
Retirement of
Preferred Shares
Shares (7,500) (840)
Amount $ (8) $ (1)
Balance as
of 4/30/99
Shares -0- -0- 48,051,547
Amount $ -0- $ -0- $ 48,051 $ 4,342,333 $(5,001,104) $(610,711)
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
HOLMES MICROSYSTEMS, INC.
ARTICLE ONE
Holmes Microsystems, Inc. a Texas corporation (the "Corporation"),
pursuant to the provisions of Article 4.07 of the Texas Business Corporation
Act, hereby adopts the attached Amended and Restated Articles of Incorporation
that accurately copy the Articles of Incorporation of the Corporation and all
previous amendments thereto and further amend the Articles of Incorporation as
provided therein (these "Restated Articles"). These Restated Articles contain
no other change in any provision of the Articles of Incorporation.
ARTICLE TWO
The Articles of Incorporation of the Corporation are hereby amended by
these Restated Articles as follows:
(1)Article One is amended to change the name of the Corporation to
"Rascals Entertainment Companies, Inc., Inc."
(2)Article Four is amended to effect a one hundred-to-one reverse stock
split of the issued common stock, par value $.001 per share (the "Old Common
Stock"), of the Corporation, eliminating the preferred stock, and increasing
the number of shares of common stock from 49,000,000 to 50,000,000. Effective
as of the close of business on the date of filing these Restated Articles (the
"Effective Time"), the filing of these Restated Articles shall effect a
reverse stock split (the "Reverse Stock Split") pursuant to which each share
of Old Common Stock currently issued shall be reclassified and converted into
one-one hundredth of a share of common stock, par value $.001 per share (the
"New Common Stock"), of the Corporation, thereby reducing the number of issued
shares of Common Stock from 48,051,547 to approximately 480,515 (with any
fractional share equal to or greater than one-half being rounded up to the
nearest whole share and any fractional share less than one-half being rounded
down to the nearest whole share, except that for any shareholder who owns less
than one hundred shares of the Old Common Stock, he shall receive at least one
share of New Common Stock). Each stock certificate that prior to the Effective
Time represented shares of Old Common Stock shall, following the Effective
Time, represent the number of shares of New Common Stock into which such
shares of Old Common Stock shall have been converted.
(2)Article Seven of the original Articles of Incorporation is amended to
eliminate the names and addresses of the members of the Board of Directors in
place at the time the Articles of Incorporation of the Corporation were
previously adopted, and now reflects the names and addresses of the current
members of the Board of Directors of the Corporation.
(3)Articles Five and Six of the original Articles of Incorporation are
amended to affect certain technical changes, and Article Ten is added to the
Restated Articles to permit action by the shareholders without a meeting.
ARTICLE THREE
Each amendment made by these Restated Articles has been effected in
conformity with the provisions of the Texas Business Corporation Act. The
number of shares of Common Stock outstanding at the time these Restated
Articles were adopted was 48,051,547, and the number of shares of such Common
Stock entitled to vote on the Restated Articles as so amended was 48,051,547.
At a meeting held on the date these Restated Articles were filed, the
shareholders of the Corporation voted for and against the Restated Articles as
follows:
CLASS FOR AGAINST
Common Stock ________________ ________________
ARTICLE FOUR
These Restated Articles maintain the par value of the Common Stock at
$.001 per share and effect a reverse stock split of the Old Common Stock in
the ratio of one hundred-to-one. Accordingly, the stated capital of the
Corporation has been decreased from $48,051 to $480, with $47,571 being
transferred to the Corporation's capital surplus.
ARTICLE FIVE
The Articles of Incorporation and all of the amendments and supplements
thereto are hereby superseded by the attached Amended and Restated Articles of
Incorporation, which accurately copy the entire text thereof, as amended as
above set forth.
EXECUTED as of the _______ day of September 1999.
HOLMES MICROSYSTEMS, INC.
By /s/ Kip Eardley, President
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
HOLMES MICROSYSTEMS, INC.
ARTICLE ONE
The name of the Corporation is Rascals Entertainment Companies, Inc.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is the transaction of
any or all lawful business for which corporations may be incorporated under
the Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares of capital stock that the Corporation will
have authority to issue is 50,000,000, all of which will be shares of Common
Stock, having a par value of $.001 per share.
Effective as of the close of business on the date of filing these
Restated Articles (the "Effective Time"), the filing of these Restated
Articles shall effect a reverse stock split (the "Reverse Stock Split")
pursuant to which each share of common stock, par value $.001 per share (the
"Old Common Stock"), of the Corporation currently issued shall be reclassified
and converted into one-one hundredth of a share of common stock, par value
$.001 per share (the "New Common Stock"), of the Corporation, thereby reducing
the number of issued shares of Common Stock from 48,051,547 to approximately
480,515 (with any fractional share equal to or greater than one-half being
rounded up to the nearest whole share and any fractional share less than
one-half being rounded down to the nearest whole share, except that for any
shareholder who owns less than one hundred shares of the Old Common Stock, he
shall receive at least one share of New Common Stock). Each stock certificate
that prior to the Effective Time represented shares of Old Common Stock shall,
following the Effective Time, represent the number of shares of New Common
Stock into which such shares of Old Common Stock shall have been converted.
ARTICLE FIVE
The post office address of the Corporation's registered office is 2139
Stone Moss Lane, Grapevine, Texas 75051, and the name of its registered agent
at such address is Mark White.
ARTICLE SIX
The number of directors of the Corporation shall be specified or
determined in the manner provided in the Bylaws, and such number may from time
to time be increased or decreased in such manner as may be prescribed in the
Bylaws. The name and address of the current member of the Board of Directors
who will serve as such until the next annual meeting of shareholders or until
his successor is elected and qualified, is as follows: Kip Eardley, 5814
South 900 East, Salt Lake City, UT 84117.
ARTICLE SEVEN
To the fullest extent permitted by the laws of the State of Texas as the
same exist or may hereafter be amended, a director of the Corporation will not
be liable to the Corporation or its shareholders for monetary damages for an
act or omission in the director's capacity as a director. Any repeal or
modification of this Article will not increase the personal liability of any
director of the Corporation for any act or occurrence taking place before such
repeal or modification, or adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification. The provisions of this Article shall not be deemed to limit or
preclude indemnification of a director by the Corporation for any liability of
a director that has not been eliminated by the provisions of this Article.
ARTICLE EIGHT
The shareholders of the Corporation shall not have a preemptive right to
acquire additional, unissued or treasury shares of the Corporation, or
securities of the Corporation convertible into or carrying a right to
subscribe to or acquire shares.
ARTICLE NINE
The shareholders of the Corporation by this Article are hereby prohibited
from cumulatively voting their shares at any election for Directors.
ARTICLE TEN
Any action required or permitted by law, these Articles of Incorporation
or the Bylaws of the Corporation to be taken at a meeting of the shareholders
of the Corporation may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken, shall have been signed by the holder or holders of shares having not
less than the minimum number of votes that would be necessary to take such
action at a meeting at which the holders of all shares entitled to vote on the
action were present and voted.
Prompt notice of the taking of any action by shareholders without a
meeting by less than unanimous written consent shall be given to those
shareholders who did not consent in writing to the action.
EXECUTED as of the _______ day of September 1999.
By Kip Eardley, President
Holmes Microsystems, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 610,711
<BONDS> 0
0
0
<COMMON> 48,051
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 0
<EPS-BASIC> 0
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</TABLE>
