UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 000-18257
HOLMES MICROSYSTEMS, INC.
(Exact name of Registrant as specified in charter)
TEXAS 91-1939829
State or other jurisdiction of I.R.S. Employer I.D. No.
incorporation or organization
57 West 200 South, Suite 310, Salt Lake City, UT 84101
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 269-9500
Check whether the Issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. (1) Yes
[X] No [ ] (2) Yes [X] No [ ]
State the number of shares outstanding of each of the Issuer's classes of
common equity as of the latest practicable date: At September 12, 2000, there
were 1,171,285 shares of the Registrant's Common Stock outstanding.
PART I
Item 1. Financial Statements
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. However, in
the opinion of management, all adjustments (which include only normal
recurring accruals) necessary to present fairly the financial position and
results of operations for the periods presented have been made. The results
for interim periods are not necessarily indicative of trends or of results to
be expected for the full year. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB, for the year ended January 31, 2000.
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
UNAUDITED CONDENSED FINANCIAL STATEMENTS
JULY 31, 2000
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONTENTS PAGE
- Unaudited Condensed Balance Sheets,
July 31, 2000 and January 31, 2000 1
- Unaudited Condensed Statements
of Operations, for the three and six months
ended July 31, 2000 and 1999 and from the 2
re-entering of development stage on
February 1, 1994 through July 31, 2000
- Unaudited Condensed Statements of Cash
Flows, for the six months ended July 31,
2000 and 1999 and from the re-entering
of development stage on February 1, 1994
through July 31, 2000 3
- Notes to Unaudited Condensed Financial Statements 4 - 7
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED BALANCE SHEETS
[Unaudited]
ASSETS
July 31, January 31,
2000 2000
___________ ___________
CURRENT ASSETS $ - $ -
___________ ___________
Total Current Assets - -
___________ ___________
$ - $ -
___________ ___________
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 34,070 $ 30,383
___________ ___________
Total Current Liabilities 34,070 30,383
___________ ___________
STOCKHOLDERS' (DEFICIT):
Preferred stock - Series A $.001 par value
100,000 shares authorized 3,750 shares
issued and outstanding 4 4
Preferred stock - Series B $.001 par value
5,000 shares authorized, 0 shares issued
and outstanding - -
Common stock, $.001 par value, 49,000,000
shares authorized, 1,171,285 shares
issued and outstanding 1,171 1,171
Additional paid in capital 5,001,730 5,001,730
Retained deficit (5,001,104) (5,001,104)
Deficit accumulated during the development
stage (35,871) (32,184)
___________ ___________
Total Stockholders' (Deficit) (34,070) (30,383)
___________ ___________
$ - $ -
___________ ___________
Note: The balance sheet at January 31, 2000 was taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited condensed
financial statements.
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF OPERATIONS
[Unaudited]
From the
Re-entering of
For the Three For the Six Development Stage
Months Ended Months Ended on February 1,
July 31, July 31, 1994, Through
_____________ _____________ July 31,
2000 1999 2000 1999 2000
____ _____ ______ ______ ___________
REVENUE $ - $ - $ - $ - $ -
COST OF SALES - - - - -
____ _____ ______ ______ ___________
GROSS PROFIT - - - - -
EXPENSES:
General and
Administrative - - 3,687 - 35,871
____ _____ ______ ______ ___________
LOSS FROM OPERATIONS
BEFORE INCOME TAXES - - (3,687) - (35,871)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
____ _____ ______ ______ ___________
NET LOSS $ - $ - $ (3,687) $ - $ (35,871)
____ _____ ______ ______ ___________
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.00) $ (.07)
____ _____ ______ ______ ___________
The accompanying notes are an integral part of these unaudited condensed
financial statements.
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF CASH FLOWS
[Unaudited]
From Re-entry of
For the Six Development Stage
Months Ended on February 1,
July 31, 1994 through,
____________ July 31,
2000 1999 2000
_____ _____ _______
Cash Flows From Operating Activities:
Net loss $ (3,687) $ - $ (35,871)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Common stock issued for services - - 1,800
Changes in assets and liabilities:
Increase in accounts payable 3,687 - 34,071
_____ _____ _______
Net Cash (Used) by Operating
Activities - - -
_____ _____ _______
Cash Flows From Investing Activities:
- - -
_____ _____ _______
Net Cash (Used) by Investing
Activities - - -
_____ _____ _______
Cash Flows From Financing Activities:
- - -
_____ _____ _______
Net Cash Provided by Financing
Activities - - -
_____ _____ _______
Net Increase in Cash - - -
Cash at Beginning of the Period - - -
_____ _____ _______
Cash at End of the Period $ - $ - $ -
_____ _____ _______
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Noncash Investing and Financing Activities:
For the six months ended July 31, 2000:
None
For the six months ended July 31, 1999:
None
The accompanying notes are an integral part of these unaudited condensed
financial statements.
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Holmes Microsystems, Inc. (the Company) was organized under the
laws of the State of Texas on January 20, 1988, under the name of Blackwing
Corporation. On April 4, 1989, Blackwing Corporation, a publicly held
corporation, acquired all of the issued and outstanding shares of a company
known as Surface Tech, Inc., which was originally known as Holmes
Microsystems, Inc. The transaction had been accounted for as a
recapitalization of Holmes Microsystems, Inc. in a manner similar to a reverse
purchase. Accordingly, Holmes Microsystems, Inc. has been treated as the
surviving entity. As part of this transaction, Blackwing Corporation changed
its name to Holmes Microsystems Inc. and the original Holmes Microsystems
Inc., which was then a wholly owned subsidiary, was dissolved.
Until the fiscal year ended January 31, 1994, the Company had been engaged in
the sale of modems which provide data and facsimile capabilities for portable
computers. The Company had used the trade name "Fax Em" as an overall
description of its products. As of the year ended January 31, 1994, the
Company ceased all sales and operations and became totally inactive. The
Company is considered to have re-entered into a new development stage on
February 1, 1994.
Condensed Financial Statements - The accompanying financial statements have
been prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
July 31, 2000 and 1999 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's January 31, 2000
audited financial statements. The results of operations for the periods ended
July 31, 2000 are not necessarily indicative of the operating results for the
full year.
Development Stage - The Company is considered a development stage company as
defined in SFAS no. 7.
Loss Per Share - The computation of loss per share of common stock is based on
the weighted average number of shares outstanding during the periods
presented, in accordance with Statement of Financial Accounting Standards No.
128, "Earnings Per Share" [See Note 7].
Cash and Cash Equivalents - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a maturity
of three months or less to be cash equivalents.
Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles required management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimated
by management.
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONITNUED]
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", SFAS No. 134, "Accounting for Mortgage-Backed
Securities…", SFAS No. 135, "Rescission of FASB Statement No. 75 and
Technical Corrections", SFAS No. 136, "Transfers of Assets to a not for profit
organization or charitable trust that raises or holds contributions for
others", and SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - deferral of the effective date of FASB statement No. 133 ( an
amendment of FASB Statement No. 133.)," were recently issued. SFAS No. 132,
133, 134, 135, 136 and 137 have no current applicability to the Company or
their effect on the financial statements would not have been significant.
Restatement - The financial statements have been restated for all periods
presented to reflect a 1 for 100 reverse stock split effective June 25, 1999
(See Note 5).
NOTE 2 - COMMITMENTS AND CONTINGENCIES
Management believes that the Company is not liable for any existing
liabilities related to its former operations, as the amounts were assumed by
the Company's president for stock (approximately $27,000 remain outstanding as
of the date of the financial statements) [See Note 5]. At January 31, 2000
there is the possibility that creditors and others seeking relief, which if
not paid by the Company's president, may cause the Company to be included in
claims and or lawsuits. The Company is not currently named nor is it aware of
any such claims or suits against the Company. No amounts have been reflected
or accrued in these financial statements for any contingent liability.
NOTE 3 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability equal
to the expected future tax benefit/expense of temporary reporting differences
between book and tax accounting methods and any available operating loss or
tax credit carryforwards. At July 31, 2000, the Company has available unused
operating loss carryforwards of approximately $35,000, 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 $11,900 as of July 31, 2000 with an offsetting valuation
allowance at each year end of the same amount, resulting in a change of $1,100
in the valuation allowance during the period ending July 31, 2000.
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTIONS
Management Compensation - During the periods presented, the Company did not
pay any compensation to its officers and directors.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his office
as a mailing address, as needed, at no expense to the Company.
Change in Management - During the year ended January 31, 2000, the Company had
a change in the officers and Board of Directors of the Company.
NOTE 5 - CAPITAL STOCK
Preferred Stock - The Company has authorized 100,000 shares of Series A
preferred stock, $.001 par value. At July 31, 2000 there are 3,750 shares
issued and outstanding. The Company has also authorized 5,000 shares of
Series B preferred stock. At July 31, 2000 there are no shares issued or
outstanding.
During January 2000, a shareholder of the company contributed 3,750 shares
Series A preferred stock back to the Company. The shares were immediately
cancelled.
Common Stock Split - During the year ended January 31, 2000 the Company
completed a 1 for 100 reverse common stock split. An additional 59 common
shares were issued as fractional shares, due to rounding up to the next whole
share. These financial statements have been retro-actively re-stated to
reflect the change.
Common Stock Issued - During January 2000, the Company issued 29,400 shares of
common stock in exchange for 840 shares of series B preferred stock.
During January 2000, the Company issued 20,600 shares of common stock for
cancellation of a note payable in the amount of $83,333 (or $4.05 per share).
During January 2000, the Company issued 593,711 shares of common stock to an
officer/shareholder for assumption and settlement of the Company's judgements
from prior operations in the amount of $386,798 (or $.65 per share).
During January 2000, the Company issued 30,000 shares of common stock to an
individual for service rendered valued at $1,800 (or $.06 per share).
During January 2000, the Company issued 17,000 shares of common stock for
cancellation of notes payable totaling $140,413.
<PAGE>
HOLMES MICROSYSTEMS, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 6 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company has no on-going
operations and has incurred losses since its inception. Further, the Company
has current liabilities in excess of assets and has no working capital to pay
its expenses. These factors raise substantial doubt about the ability of the
Company to continue as a going concern. In this regard, management is
proposing to raise any necessary additional funds not provided by operations
through loans or through sales of its common stock or through a possible
business combination with another company. There is no assurance that the
Company will be successful in raising this additional capital or achieving
profitable operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
NOTE 7 - EARNINGS (LOSS) PER SHARE
The following data show the amounts used in computing income (loss) per share
and the effect on income and the weighted average number of shares of dilutive
potential common stock for the three and six months ended July 31, 2000 and
1999 and for the period from the re-entering of development stage on February
1, 1994 through July 31, 2000:
From the
Re-entering of
For the Three For the Six Development
Months Ended Months Ended Stage on May 1,
June 30, June 30, 1991, Through
_____________ ____________ June 30,
2000 1999 2000 1999 2000
______ ______ ______ ______ __________
Loss from continuing operations
available to common stock
holders (numerator) $ - $ - $ (3,687) $ - $ (35,871)
______ ______ ______ ______ __________
Weighted average number of
common shares outstanding
used in earnings per share
during the period 1,171,285 480,515 1,171,285 480,515 533,821
______ ______ ______ ______ __________
Dilutive earnings per share was not presented, as the Company had no common
equivalent shares for all periods presented that would effect the computation
of diluted earnings (loss) per share.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company had no revenues from operations during the fiscal year ended
January 31, 2000, or during the first six months ended July 31, 2000.
Management of the Company is in the process of settling all of the
outstanding liabilities of the Company and attempting to repurchase or convert
the outstanding preferred shares. When current management took control of the
Company in December 1996, Mr. Eardley began the process of attempting to
settle the outstanding obligations and convert or repurchase the outstanding
preferred stock. At the commencement of last year he agreed to assume all of
the outstanding judgements and promissory notes and attempt to settle these
individually using his own funds. In September 1999, this agreement was
memorialized in writing and Mr. Eardley agreed, subject to shareholder
approval, to accept 610,711 post 100-for-1 reverse split shares as
consideration for such assumption.
In connection with attempting to locate a new business venture, the
Company reverse split the outstanding common stock at the rate of one share
for each 100 shares outstanding. The reverse split was effective December 29,
1999. The Company now intends to take advantage of any reasonable business
proposal presented which management believes will provide the Company and its
stockholders with a viable business opportunity.
The Company has no funds with which to pursue a new business venture.
The president of the Company has offered to advance an undetermined amount of
funds for the Company to seek and locate a potential merger or acquisition
candidate, and to postpone repayment of such advances until a new business
venture is acquired. In addition, he has negotiated with counsel to perform
legal services for the Company and to postpone payment for such services until
a merger or acquisition transaction is completed. Management anticipates that
it will negotiate with the owners of the new business venture to repay the
advances from him and to pay the legal costs incurred by the Company through
the consummation of an acquisition or merger. Mr. Eardley estimates that he
will be able to advance sufficient funds to the Company to meet the Company's
cash needs until a transaction with a new business venture can be consummated,
but the amount of such funds will be contingent upon the costs of locating and
consummating a transaction with a new business venture, which costs are
impossible to estimate. If the funds advanced by the president are
insufficient to locate a suitable business opportunity, he may seek additional
advances on behalf of the Company from Mr. Howard M. Oveson, a principal
shareholder of the Company. There is presently no agreement or specific
arrangement with Mr. Oveson to provide such additional funds and there is no
assurance that such funds would be available. The Company may also seek
equity financing if additional funds are necessary through the sale of shares
of its common stock. It is very unlikely that traditional forms of financing,
such as bank loans, would be available to the Company.
The investigation of specific business opportunities and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and
other instruments will require substantial management time and attention and
will require the Company to incur costs for payment of accountants,
attorneys, and others. If a decision is made not to participate in or
complete the acquisition of a specific business opportunity, the costs
incurred in a related investigation will not be recoverable. Further, even
if an agreement is reached for the participation in a specific business
opportunity by way of investment or otherwise, the failure to consummate the
particular transaction may result in the loss to the Company of all related
costs incurred.
Currently, management is not able to determine the time or resources that
will be necessary to locate and acquire or merge with a business prospect.
There is no assurance that the Company will be able to acquire an interest in
any such prospects, products, or opportunities that may exist or that any
activity of the Company, regardless of the completion of any transaction, will
be profitable. If and when the Company locates a business opportunity,
management of the Company will give consideration to the dollar amount of that
entity's profitable operations and the adequacy of its working capital in
determining the terms and conditions under which the Company would consummate
such an acquisition. Potential business opportunities, no matter which form
they may take, will most likely result in substantial dilution for the
Company's shareholders due to the likely issuance of stock to acquire such an
opportunity. If management fails to locate and complete a transaction with a
merger candidate, it is likely that current management would resign and that
the Company would eventually be dissolved by the State of Texas.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
HOLMES MICROSYSTEMS, INC.
Date: September 12, 2000 By /s/ Kip Eardley, President
