UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 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 I.R.S. Employer I.D. No.
of 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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
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 [ ]
Check if disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
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State issuer's revenues for its most recent fiscal year: $-0-
State the aggregate market value of the voting stock held by non-
affiliates of the Registrant computed by reference to the price
at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within the past 60 days:
The aggregate market value of the voting stock held by non-
affiliates of the Registrant computed by using the average bid
and asked prices at May 12, 2000, was $321,674.
State the number of shares outstanding of each of the Issuer's
classes of common equity as of the latest practicable date: At
May 11, 2000, there were 1,171,285 shares of the Registrant's
Common Stock outstanding.
Documents Incorporated by Reference: Exhibits from the
Registrant's annual report on Form 10-KSB dated January 31, 1997
are incorporated by reference into Part III hereof.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
History and Organization
Holmes Microsystems, Inc. (the "Company") was incorporated
under the laws of the State of Texas on January 20, 1988, under
the name Black Wing Corporation. On April 4, 1989, the Company
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, the Company changed its name to Holmes Microsystems
Inc. and the original Holmes Microsystems Inc., which was then a
wholly owned subsidiary, was liquidated.
Until the fiscal year ended January 31, 1994, the company
had been engaged in the sale of modems which provided 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.
On December 29, 1999, the outstanding shares of common stock
of the Company were reverse split at the rate of 100-for-1, which
means that each one hundred shares of common stock outstanding on
such date was reduced to one share. On such date the
shareholders of the Company also authorized the issuance of
610,711 post reverse-split shares to the president of the Company
for the assumption of outstanding debts of the Company.
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Business
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
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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
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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 the abandoned transaction with
Rascals and preliminary discussions with others, none of which
have evolved into serious negotiations. 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.
The Company has no employees and does not intend to employ
anyone in the future, unless its present business operations were
to change.
ITEM 2. DESCRIPTION OF PROPERTY
The Company does not maintain a principal office, but uses
the offices of one of its principal shareholders as the mailing
address for the Company. This arrangement is provided at no cost
to the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings or government actions, including any material
bankruptcy, receivership, or similar proceedings. Management
of the Company does not believe that there are any material
proceedings to which any director, officer or affiliate of the
Company, any owner of record of beneficially of more than five
percent of the common stock of the Company, or any associate of
any such director, officer, affiliate of the Company, or security
holder is a party adverse to the Company or has a material
interest adverse to the Company.
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The Company is subject to a number of outstanding
judgements in the principal amount of $27,492. These judgements
were assumed by an officer/shareholder of the Company along with
other debts of the Company in exchange for common stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
A special meeting of the shareholders of the Company was
held on December 29, 1999. The shareholders considered two
proposals at the special meeting: First, a proposal to approve a
one hundred-to-one reverse stock split of the Company's issued
and outstanding common stock, par value $.001 per share; and
second, a proposal 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. Each
proposal was approved by the shareholders. There were 30,778,149
votes cast for each proposal; -0- votes cast against each
proposal; and no abstentions or broker non-votes as to each
matter.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common shares of the Company have been quoted on the OTC
Electronic Bulletin Board since approximately December 1993, with
the trading symbol of "HOMM." Based upon the limited volume of
trading, the Company does not believe that there exists an
established market for the common stock. The table below sets
forth for the periods indicated the high and low bid quotations
as reported by various private services on the Internet. These
quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual
transactions. These quotations do not reflect the 100 for 1
reverse stock split effective December 29, 1999.
Quarter High Low
FISCAL YEAR ENDED
JANUARY 31, 1999 First $.002 $.002
Second $.002 $.002
Third $.002 $.002
Fourth $.002 $.002
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FISCAL YEAR ENDED
JANUARY 31, 2000 First $.002 $.002
Second $.437 $.002
Third $.05 $.04
Fourth $.06 $.031
At May 11, 2000, the Company had 594 shareholders of record.
The Company has appointed Atlas Stock Transfer, 5899 South State,
Suite 24, Murray, Utah 84107, to act as its transfer agent.
Since its inception, the Company has not paid any dividends
on its common stock and the Company does not anticipate that it
will pay dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company has had no revenues from operations in the last
two fiscal years. Until the fiscal year ended January 31, 1994,
the company had been engaged in the sale of modems which provided
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. Substantially all of the liabilities of the
Company at January 31, 2000, except for accrued legal fees, were
incurred in the course of the Company's prior operations.
At the year ended January 31, 2000, the Company had
outstanding judgments in the principal amount of $27,492, all of
which were obtained by product and service providers when the
Company failed to pay obligations to such persons. An officer of
the Company assumed these debts for the issuance of common stock.
The only liabilities shown on the balance sheet were for legal
fees incurred in the current year. The Company also
previously issued promissory notes in the amount of $84,000 to
affiliates of the Company for funds advanced to the Company which
present management believes were used for the Company's
operations. These obligations were incurred when the Company was
operating its modem business.
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 fiscal
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. At January
31, 2000, Mr. Eardley had settled all but $27,492 of the
outstanding judgments and all of the outstanding promissory notes.
Mr. Eardley is continuing to negotiate settlement of the remaining
outstanding liabilities and has agreed to indemnify the Company
against the full amount of these remaining liabilities.
The Company had previously issued 7,500 shares of Series A
Convertible Preferred Shares and 840 shares of Series B
Convertible Preferred Shares. On June 1, 1999, management of the
Company negotiated a repurchase of 3,750 of the Series A shares
for $5,000. These funds were advanced by Mr. Eardley, who agreed
to apply such amount as additional capital contribution on the
shares to be issued to him in connection with the assumption of
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the outstanding liabilities of the Company. The Company has no
obligation to repay the $5,000 advanced by Mr. Eardley. The
repurchased shares were canceled and returned to the authorized
but unissued shares of the Series A Preferred Stock. In January
2000, the Company converted the outstanding shares of the Series
B Preferred Shares into 29,400 shares of common stock. The
Company also issued an additional 20,600 shares of common stock
to the holder of the Series B Convertible Preferred Shares for
cancellation of any and all obligations owed by the Company to
such person. The 840 shares of Series B Convertible Preferred
Shares were canceled and returned to the authorized but unissued
Series B Preferred Stock. The Company is also negotiating the
conversion of the remaining Series A Convertible Preferred
Shares.
The Company was originally organized for the purpose of
engaging in any lawful activity permitted under Texas state law;
however, the Company does not have any significant cash or other
material assets, nor does it have an established source of
revenues, except as provided by management, sufficient to cover
operating costs and to allow it to continue as a going concern.
The Company intends to take advantage of any reasonable business
proposal presented which management believes will provide the
Company and its stockholders with a viable business opportunity.
The board of directors will make the final approval in
determining whether to complete any acquisition, and, unless
required by applicable law, the articles of incorporation, or the
bylaws, or by contract, stockholders' approval will not be
sought.
The Company has no funds with which to pursue a new business
venture. The president of the Company has offered to advance an
undetermined amount of funds for the Company to seek and locate a
potential merger or acquisition candidate, and to postpone
repayment of such advances until a new business venture is
acquired. In addition, he has negotiated with counsel to perform
legal services for the Company and to postpone payment for such
services until a merger or acquisition transaction is completed.
Management anticipates that it will negotiate with the owners of
the new business venture to repay the advances from him and to
pay the legal costs incurred by the Company through the
consummation of an acquisition or merger. Mr. Eardley estimates
that he will be able to advance sufficient funds to the Company
to meet the Company's cash needs until a transaction with a new
business venture can be consummated, but the amount of such funds
will be contingent upon the costs of locating and consummating a
transaction with a new business venture, which costs are
impossible to estimate. If the funds advanced by the president
are insufficient to locate a suitable business opportunity, he
may seek additional advances on behalf of the Company from Mr.
Howard M. Oveson, a principal shareholder of the Company. There
is presently no agreement or specific arrangement with Mr. Oveson
to provide such additional funds and there is no assurance that
such funds would be available. The Company may also seek equity
financing if additional funds are necessary through the sale of
shares of its common stock. It is very unlikely that traditional
forms of financing, such as bank loans, would be available to the
Company.
The investigation of specific business opportunities and the
negotiation, drafting, and execution of relevant agreements,
disclosure documents, and other instruments will require
substantial management time and attention and will require the
Company to incur costs for payment of accountants, attorneys, and
others. If a decision is made not to participate in or complete
the acquisition of a specific business opportunity, the costs
incurred in a related investigation will not be recoverable.
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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.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company are set forth
immediately following the signature page of this annual report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
No change in accountant is reportable pursuant to this item.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth as of May 11, 2000, the name,
age, and position of the sole executive officer and director of
the Company and the term of office of such director:
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Name Age Position(s) Director Since
Kip Eardley 40 President,Secretary December 1996
and Treasurer
Mr. Eardley has been president of the company since December
18, 1996. Mr. Eardley has been self-employed as a consultant to
various public and private companies since 1989. He performs
these services as president and owner of Capital Consulting of
Utah, Inc.
Directors are elected until the next annual meeting of
shareholders. Annual meetings of the stockholders, for the
selection of directors to succeed those whose terms expire, are
to be held at on the 15th day of April of each year. Officers of
the Company are elected by the Board of Directors, which is
required to consider that subject at its first meeting after
every annual meeting of stockholders. Each officer holds his
office until the next regular meeting of the Board of Directors
and until his successor is elected and qualified or until his
earlier resignation or removal.
Management devotes only nominal time to the activities of
the Company. If the Company is able to locate a suitable new
business venture, it is anticipated that Mr. Eardley will devote
substantially all of his time to completing the acquisition.
Section 16(a) Beneficial Ownership Reporting Compliance
For the fiscal year ended January 31, 2000, the following
are persons, who were directors, officers, or beneficial owners
of more than 10% of the Common Stock during such fiscal year, and
who failed to file on a timely basis reports required by Section
16(a) of the Securities Exchange Act of 1934 during such fiscal
year or any prior fiscal year:
Number of
Transactions Not
Number of Reported
Name Position Late Reports on Timely Basis
Kip Eardley Director & Officer 1 1
Howard Oveson Beneficial Owner 1 1
ITEM 10. EXECUTIVE COMPENSATION
There has been no compensation awarded to, earned by, or
paid to any of the executive officers of the Company during the
fiscal years ended January 31, 2000, 1999, 1998.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information furnished
by current management concerning the ownership of common stock of
the Company as of May 11, 2000, of (i) each person who is known
to the Company to be the beneficial owner of more than 5 percent
of the Common Stock; (ii) all directors and executive officers;
and (iii) directors and executive officers of the Company as a
group:
Amount and Nature
Name and Address of Beneficial
of Beneficial Owner Ownership (1) Percent of Class
Kip Eardley 590,711 50.43%
6337 South Highland Drive
Suite 130
Salt Lake City, Utah 84121
Howard M. Oveson 307,782(2) 26.28%
57 West 200 South
Suite 310
Salt Lake City, Utah 84101
Dr. & Mrs. Andrew Welch 88,875 7.59%
Las Vegas, Nevada
Executive Officers and 898,493 76.71%
Directors as a Group
(1 Person)
(1) Unless otherwise indicated, this column reflects amounts
as to which the beneficial owner has sole voting power and sole
investment power.
(2) The shares listed are held of record by K. T. Higginson
& Company, Inc. Mr. Oveson acquired the shares, but has not
transferred them to his own name. Mr. Oveson holds a proxy to
vote these shares.
The Company is seeking potential business acquisitions or
opportunities. (See "Item 1. Description of Business.") It is
likely that such a transaction would result in a change of
control of the Company, by virtue of issuing a controlling number
of shares in the transaction, change of management, or otherwise.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1999, Kip Eardley, an officer, director, and
principal shareholder of the Company, entered into an agreement
to assume all of the outstanding debts of the Company at such
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time. In return for this, the Company agreed to issue 610,711
shares of common stock to him. The agreement was approved by the
shareholders in December 1999. Mr. Eardley reduced the number of
shares he received by 17,000 to 593,711 shares in order to allow
the Company to issue a like number of shares to settle
outstanding obligations assumed by Mr. Eardley. The Company
subsequently issued 17,000 shares to creditors of the Company to
satisfy outstanding promissory notes in the principal amount of
$134,000 and an outstanding judgement in the principal amount of
$6,413.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. The following financial
statements are included in this report:
Page
Report of Auditor
F-1
Balance Sheet as of January 31, 2000
F-2
Statements of Operations for the years
ended January 31, 2000 and 1999 F-3
Statement of Stockholders' Equity for
the years ended January 31, 2000 and 1999 F-4
Statements of Cash Flows for the years
ended January 31, 2000 and 1999 F-6
Notes to Financial Statements F-7
(a)(2) Exhibits. The following exhibits are included as
part of this report:
Exhibit No. Description of Exhibit
3.1 Articles of Incorporation filed January
20, 1988 *
3.2 Articles of Amendment filed May 3, 1989 *
3.3 Articles of Amendment filed January 16, 1990 *
3.4 Statement of Resolution Establishing series of
Shares filed January 16, 1990 (Series
A Preferred Stock) *
3.5 Statement of Resolution Establishing series of
Shares filed October 29, 1990 (Series B
Preferred Stock) *
3.6 Statement of Resolution Establishing series of
Shares filed May 10, 1991 (Series D Preferred
Stock) *
3.7 Current Bylaws *
4.1 Form of Common Stock Certificate *
10.1 Agreement for Assumption of Debt *
*Incorporated by reference from the exhibits to the
Company's Form 10-KSB dated January 31, 1997.
**Incorporated by reference to Exhibit 10.2 filed with
the Company's Form 8-K/A-2 dated June 25, 1999, and filed with
the Commission on September 21, 1999.
(b) Reports on Form 8-K: No reports on Form 8-K were filed
during the fourth quarter of the fiscal year ended January 31,
2000.
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SIGNATURES
In accordance with Section 13 or 15(d) 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: May 15, 2000 By: /s/ Kip Eardley, President,
Chief Financial &
Principal Accounting
Officer
In accordance with the Exchange Act, this report has been
signed below by the following person on behalf of the registrant
and in the capacitates and on the dates indicated.
Date: May 15, 2000 /s/ Kip Eardley, Sole Director
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
HOLMES MICROSYSTEMS, INC.
Salt Lake City, Utah
We have audited the accompanying balance sheet of Holmes Microsystems, Inc. [a
development stage company] at January 31, 2000, and the related statements of
operations, stockholders' (deficit) and cash flows for the years ended January
31, 2000 and 1999 and for the period from the re-entering of development stage
on February 1, 1994 through January 31, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Holmes Microsystems, Inc. [a
development stage company] as of January 31, 2000 and the results of its
operations and its cash flows for the years ended January 31, 2000 and 1999
and for the period from the re-entering of development stage on February 1,
1994 through January 31, 2000, in conformity with generally accepted
accounting principles.
The accompanying 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, Siler & Hardy, P.C.
May 12, 2000
Salt Lake City, Utah
F-1
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
BALANCE SHEET
ASSETS
January 31,
2000
___________
CURRENT ASSETS:
Cash in bank $ -
___________
Total Current Assets -
___________
$ -
___________
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 30,383
___________
Total Current Liabilities 30,383
___________
STOCKHOLDERS' (DEFICIT):
Preferred stock - Series A $.001 par value,
100,000 shares authorized 3,750 shares
issued and outstanding 4
Preferred stock - Series B $.001 par value,
5,000 shares authorized, no shares issued
and outstanding -
Common stock, $.001 par value, 49,000,000
shares authorized, 1,171,285 shares issued
and outstanding 1,171
Additional paid in capital 5,001,730
Retained deficit (5,001,104)
Deficit accumulated during the development stage (32,184)
___________
Total Stockholders'(Deficit) (30,383)
___________
$ -
___________
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
Cumulative from
the Re-entering of
Development Stage
For the Year Ended on February 1,
January 31, 1994 through
_____________________ January 31,
2000 1999 2000
__________ __________ ___________
REVENUE:
Sales $ - $ - $ -
__________ __________ ___________
Total Revenue - - -
__________ __________ ___________
EXPENSES:
General and administrative 32,184 - 32,184
__________ __________ ___________
Total Expenses 32,184 - 32,184
__________ __________ ___________
LOSS FROM OPERATIONS (32,184) - (32,184)
CURRENT INCOME TAX - - -
DEFERRED INCOME TAX - - -
__________ __________ ___________
NET LOSS $ (32,184) $ - $(32,184)
__________ __________ ___________
LOSS PER SHARE $ (.07) $ - $ (.07)
__________ __________ ___________
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' (DEFICIT)
FROM THE RE-ENTERING OF DEVELOPMENT STAGE ON
FEBRUARY 1, 1994 THROUGH JANUARY 31, 2000
[RESTATED]
<TABLE>
<CAPTION>
Deficit
Preferred Stock - A Preferred Stock B Common Stock Additional Retained during the
Shares Amount Shares Amount Shares Amount Paid in Capital Deficit Development Stage
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 1,
1994 7,500 $ 8 840 $ 1 480,515 $ 481 $ 4,389,904 $(5,001,104) $ -
Net loss for the year
ended January 31,
1994 - - - - - - - - -
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
BALANCE, January 31,
1994 7,500 8 840 1 480,515 481 4,389,904 (5,001,104) -
Net loss for the year
ended January 31,
1995 - - - - - - - - -
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
BALANCE, January 31,
1995 7,500 8 840 1 480,515 481 4,389,904 (5,001,104) -
Net loss for the year
ended January 31,
1996 - - - - - - - - -
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
BALANCE, January 31,
1996 7,500 8 840 1 480,515 481 4,389,904 (5,001,104) -
Net loss for the year
ended January 31,
1997 - - - - - - - - -
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
BALANCE, January 31,
1997 7,500 8 840 1 480 515 481 4,389,904 (5,001,104) -
Net loss for the year
ended January 31,
1998 - - - - - - - - -
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
BALANCE, January 31,
1998 7,500 8 840 1 480,515 481 4,389,904 (5,001,104) -
Net loss for the year ended
January 31, 1999 - - - - - - - - -
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
</TABLE>
[CONTINUED]
F-4
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' (DEFICIT)
FROM THE RE-ENTERING OF DEVELOPMENT STAGE ON
FEBRUARY 1, 1994 THROUGH JANUARY 31, 2000
[RESTATED]
[CONTINUED]
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock - A Preferred Stock B Common Stock Additional Retained during the
Shares Amount Shares Amount Shares Amount Paid in Capital Deficit Development Stage
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 31,
1999 7,500 $ 8 840 $ 1 480,515 $ 481 $ 4,389,904 $(5,001,104) $ -
Fractional shares
issued 59 - - - - - - - -
Conversion of 840
shares of preferred
stock January 31,
2000 - - (840) (1) 29,400 29 (28) - -
Conversion of debt
for 20,600 shares
of common stock
January 31, 2000 - - - - 20,600 20 83,313 - -
Common stock issued
for assumption of
debt, January 31,
2000 - - - - 593,711 594 385,704 - -
Common stock issued
for cancelation of
debt, January 31,
2000 - - - - 17,000 17 140,396 - -
Issuance of 30,000
shares of common
stock for services
January 31, 2000 - - - - 30,000 30 1,770 - -
Cancellation of
stock 3,750 (4) - - - - 4 - -
Net loss for the year
ended January 31,
2000 - - - - - - - - (32,184)
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
BALANCE, January 31,
2000 3,750 $ 4 - $ -1,171,285 $1,171 $ 5,001,730 $(5,001,104) $ (32,184)
_________ _________ ________ ________ ________ ______ _______________ ____________ _________________
</TABLE>
The accompanying notes are an integral part of this financial statement .
F-5
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
Cumulative from
the Re-entering of
Development Stage
For the Year Ended on February 1,
January 31, 1994 through
_____________________ January 31,
2000 1999 2000
__________ __________ ___________
Cash Flows From Operating Activities:
Net loss $ (32,184) $ - $ (32,184)
Adjustments to reconcile net loss to
net cash used by operating activities:
Common stock issued for services 1,800 - 1,800
Changes in assets and liabilities:
Increase in accounts payable 30,384 - 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 Year - - -
__________ __________ ___________
Cash at End of the Year $ - $ - $ -
__________ __________ ___________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Noncash Investing and Financing Activities:
For 2000:
The Company issued 20,600 shares of common stock in payment of $83,333 in
liabilities.
The Company issued 593,711 shares of common stock to an individual to settle
or assume $385,704 of liabilities of the Company and also issued 17,000 shares
of common stock to cancel debot of $140,396.
The Company issued 29,400 shares of common stock upon the conversion of 840
preferred shares of the Company.
The Company issued 30,000 shares of common stock for services rendered valued
at $1,800.
For 1999:
None
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO 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.
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.
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).
F-7
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
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 $17,000 remain outstanding as
of the date of the financial statements) [See Note 5]. At January 31, 2000
there is the possibility that a 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 January 31, 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 January 31,2000 with an offsetting valuation
allowance at each year end of the same amount, resulting in a change in the
valuation allowance of approximately $10,800 during the year ending January
31, 2000.
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.
F-8
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
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.
F-9
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO 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 January 31, 2000 and 1999 and for
the period from the re-entering of development stage on February 1, 1994
through January 31, 2000:
Cumulative from
the Re-entering of
Development Stage
For the Year Ended on February 1,
January 31, 1994 through
_____________________ January 31,
2000 1999 2000
__________ __________ ___________
Loss from continuing operations
available to common stockholders
(numerator) $(32,184) $ - $ (32,184)
__________ __________ ___________
Weighted average number of
common shares outstanding
used in earnings per share
during the period (denominator) 482,434 480,515 480,995
__________ __________ ___________
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.
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the year ended January 31, 2000 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 30,383
<BONDS> 0
0
4
<COMMON> 1,171
<OTHER-SE> (31,558)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 32,184
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (32,184)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,184)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,184)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
