UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended May 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 000-50101
E and S Holdings, Inc.
(Name of small business issuer in its charter)
Nevada 91-2135425
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5046 East Boulevard NW, Canton, Ohio 44718
(Address of principal executive offices) (Zip Code)
Issuer's telephone number 330/966-8120
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None
Securities registered under Section 12(g) of the Exchange Act:
$0.001 pv common stock
(Title of class)
Check whether the issuer (1) 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. Yes [X] No [ ]
Check if there is no 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. [X]
State issuer's revenues of its most recent fiscal year. $9107.00
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) - At present there is no market for these
securities.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 15,000,000 shares common stock $.001
per value
DOCUMENTS INCORPORATED BY REFERENCE
Form 10-QSB for first, second and third quarter of fiscal year; Form SB-2,
effective November 18, 2002 for exhibits.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
TABLE OF CONTENTS
Number Item in Form 10-KSB Page No.
------ ------------------- --------
1 Description of Business 3
2 Description of Property 4
3 Legal Proceedings 4
4 Submission of Matters to a Vote of Security Holders 4
5 Market for Common Equity and Related Stockholder Matters 5
6 Management's Discussion and Analysis for Plan of Operation 5
7 Financial Statements 6
8 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 15
8A Controls and Procedures 15
9 Directors, Executive Officers, Promoters and Control Persons 15
10 Executive Compensation 16
11 Security Ownership of Certain Beneficial Owners and Management 16
12 Certain Relationships and Related Transactions 17
13 Exhibits and Reports on Form 8-K 17
14 Principal Accountant Fees and Services 18
Signatures 19
2
PART ONE
ITEM 1 - DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS: E & S was incorporated on June 20, 2001 under the laws
of the State of Nevada. It has not been involved in any bankruptcy, receivership
or similar proceedings, nor has it been a party to any merger, consolidation or
purchase or sale of a significant amount of assets not in the ordinary course of
business.
E & S is a corporation that is in its developmental stages, since its inception
in June, 2001. E & S was formed to produce a locking pliers tool which is being
marketed as the "Portable Pipe Vise". The jaws of the locking pliers have a
patented design. The tool is intended to secure cylindrical objects to a flat
surface. At the present time, E & S has produced and received the first
production run of 5,000 high quality Portable Pipe Vises for sale. E & S intends
to initially focus its marketing efforts on the welding industry and the
plumbing industry, since both industries require portable tools to secure pipes
to objects for modification or attachment to a flat surface.
Since the time that E & S took possession of the first production run, it has
stepped up its marketing efforts through direct mailing fliers . As a result of
its marketing efforts, E & S currently has secured five independent
representatives in various parts of the United States to sell the Portable Pipe
Vise. In addition, it is processing orders from independent tool retailers. The
Portable Pipe Vise is currently offered in catalog retailer's catalogs, both in
print and online. In recent months, E&S has also been requested to quote a
private label version of the Portable Pipe Vise in a container quantity.
Since obtaining the initial production run, E & S has sold a limited number of
Portable Pipe Vises. E & S has employed Mrs. Suzanne Barth for the purpose of
managing E & S's day-to-day operations, including the processing of orders and
communication with current representatives, as well as prospective distributors.
E & S will be competing for market share with well established hand tool
manufacturers both within the United States and abroad. While the specific
design of the locking pliers is patented, there are many other hand tools which
are currently marketed which can perform a similar function as the locking
pliers and which will be in direct competition in the marketplace with the
locking pliers. In addition, unless future steps are taken to secure patents
worldwide, foreign manufacturers may be able to produce and market a locking
pliers of a similar design in foreign markets. Further, the lack of a brand name
for E & S's locking pliers may adversely affect the public's confidence in the
tool and its success in the marketplace. The presence of established competitors
could adversely affect the ability of E & S to successfully implement its
business plan and sell the locking pliers.
E &S has limited financial, marketing, technical and other resources that are
necessary to implement its business plan. Many of E &S's competitors have
significantly greater financial, marketing, technical and other resources than E
& S . These competitors may be able to devote greater resources to the
development, promotion and sale of competing tools. Moreover, due to the size of
these competitors, they may be able to produce a tool with a different design,
but with a similar function which can be marketed at a price lower than which E
& S can market its locking pliers.
Although E & S is seeking suppliers within the United States to manufacture its
Portable Pipe Vise, the first production run was contracted through Nation
Technik, Ltd. a Hong Kong manufacturer. E & S currently holds an assignment of
the patent for the locking pliers. The patent was granted by the United States
Patent and Trademark Office on November 6, 2001 and is patent number 6,311,589.
This patent will restrict other domestic competitors from manufacturing a
3
locking pliers with the same or similar jaw configuration as the locking pliers
to be manufactured by E & S. Further, no foreign manufacturer will be able to
enter the United States market with a similar product. A patent lasts for 16
years from the date of filing. The date of filing of the patent was April 8,
1999. Therefore, E & S will enjoy protection for the patented portion of the
locking pliers, until April 8, 2015. The patent covering the locking pliers was
purchased from the inventor. E & S has a royalty agreement with the inventor
whereby the inventor receives 5% of gross sales as additional compensation for
the sale of the patent.
E & S does not anticipate the need to receive any government approval for its
Portable Pipe Vise. E & S does not believe that there are any significant
government regulations that would affect the ability of E & S to sell its
product. In addition, due to the nature of its product and the fact that it does
not manufacture its product, E & S does not anticipate that its operation will
result in the need to comply with any environmental laws. Therefore, there are
no costs allocated to the environmental law compliance.
During the last three fiscal years, a minimal amount of time and expense has
been utilized in developing the Portable Pipe Vise for marketing. All research
and development efforts were conducted by Mr. Edward A. Barth, who is not
separately compensated for these efforts.
E & S is currently operating with no paid employees. Mrs. Suzanne Barth, who is
responsible for all day-to-day operations of E & S is currently working for E&S
for no compensation. Mr. Edward A. Barth and Mr. Eugene H. Swearengin have also
agreed to work for the corporation for no compensation until such time as the
company commences to receive revenues from its Portable Pipe Vise. Both
individuals have previously received compensation, either directly or accrued,
for services rendered. However, due to the unforeseen length of time necessary
to bring the company's product to market, both individuals have agreed to forego
any further compensation, either paid or accrued until E & S commences to
recognize revenues from the sale of its product.
ITEM 2 - DESCRIPTION OF PROPERTY
At the present time, E & S's principal offices are located at 5046 East
Boulevard NW, Canton, Ohio 44718. These offices are being utilized, rent free,
by E & S and are owned by Mr. Edward A. Barth. Commencing April 1, 2002, E & S
rented two offices and 1,500 square feet of warehouse space at 4264 Strausser
Street NW, North Canton, Ohio 44720. This location will serve as the sales
office and warehouse for E & S. It is currently operating under an oral
sub-lease on a month-to-month basis from Mr. Herbert Barth. The monthly rental
fee of $500.00 has been waived until such time as E & S has sufficient cash flow
to pay rent. Management for E & S believes that the rented space will be
sufficient for the needs of the Corporation for at least the next 12 months.
ITEM 3 - LEGAL PROCEEDINGS
At the present time, E & S is not a party to any legal proceedings and is
unaware of any claims that may result in future legal proceedings against it or
that it may have against third-parties.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were presented for a vote to the shareholders of E & S during the
fourth quarter of its fiscal year.
4
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At present, there is no public trading market for E & S common stock. E & S has
made efforts to commence trading of its shares, however, to date , E & S's
shares are not listed on any exchange or O.T.C. Furthermore, there has been no
unregistered sales of securities by E & S in its past fiscal year. The only
sales of unregistered securities that have been made by E & S were the initial
sales, in which Mr. Edward A. Barth received 700,000 shares of common stock in
exchange for the transfer of the option to purchase the locking pliers patent.
Furthermore, E & S raised approximately $30,000 from the sale of 300,000 shares
of common stock in a private offering in December of 2001.
E & S has only one class of stock, it is the $0.001 per value common stock. As
of June 1, 2005 E & S had 41 shareholders, holding shares in either individual
names or as joint tenants.
E & S has not declared any dividends to its shareholders. It will not be able to
declare dividends until after it commences to receive revenue from sales. At
present, the directors have made no decision with regard to future dividend
declarations, although there are currently no restrictions on the future
declaration of dividends.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS FOR PLAN OF OPERATION
Over the past two fiscal years, E & S has received negligible revenues from sale
of product. During the past two fiscal years, E & S has had operations loses of
$52,252 for 2004 and $,41,108 for 2005. These losses were incurred as a result
of continuing operating expenses and negligible revenues being received by E &
S. Because E & S now has been operating for two years and is beginning to
receive repeat orders for its product, it anticipates that over the next twelve
months, it will receive revenues in an amount that would be sufficient to pay
current operating expenses. The management of E & S has received very favorable
comments on the Portable Pipe Vise and expects to see significant increases in
revenue over the next twelve months.
As revenues increase, however, E & S will incur additional liabilities in the
form of employee and officer salaries, which are currently being waived by the
company's employee and its officers.
In the event that anticipated sales exceed expectations of E & S, it may be
necessary for E & S to incur debt for the purpose of ordering additional tools
in larger quantities of the manufacturer, in order to increase inventories and
fill orders in a timely basis. During the next twelve months, E & S has to be
able to evaluate the marketability of the Portable Pipe Vise and determine
whether it will be advisable to add additional lines of tools, in order to
become profitable.
At present, it is not anticipated that E & S will require any additional capital
expenditures during the next twelve-month period. In addition, E & S does not
believe it will be necessary to seek additional capital through the offering of
additional shares in the corporation to the public.
OFF - BALANCE SHEET ARRANGEMENTS
At present, E & S has no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on E & S's financial
condition.
5
ITEM 7 - FINANCIAL STATEMENTS
HOBE & LUCAS
CERTIFIED PUBLIC ACCOUNTANTS, INC.
4807 Rockside Road
Suite 510
Independence, Ohio 44131
Tel: (216) 524-8900
Fax: (216) 524-8777
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of E and S Holdings, Inc.
Canton, Ohio
We have audited the balance sheets of E and S Holdings, Inc. (a development
stage company) as of May 31, 2005 and 2004, and the related statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended, and the period beginning June 20, 2001 (inception) and ended May 31,
2005. 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 audits.
We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). 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 referred to above present fairly, in
all material respects, the financial position of E and S Holdings, Inc. as of
May 31, 2005 and 2004, and the results of its operations and its cash flows for
the years then ended, and the period beginning June 20, 2001 (inception) and
ended May 31, 2005 in conformity with U.S. generally accepted accounting
principles.
As discussed in Note 1, the Company has been in the development stage since its
inception on June 20, 2001. Realization of a major portion of its assets is
dependent upon the Company's ability to successfully develop and market its
product, meet its future financing requirements, and the success of future
operations. These factors raise substantial doubt about the Company's ability to
continue as going concern.
/s/ Hobe & Lucas
----------------------------------
CERTIFIED PUBLIC ACCOUNTANTS, INC.
Independence, Ohio
July 27, 2005
6
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
MAY 31, 2005 AND 2004
2005 2004
--------- ---------
ASSETS
CURRENT ASSETS
Cash in bank $ 136 $ 3,760
Accounts receivable 2,209 0
Inventory 24,281 28,893
--------- ---------
26,626 32,653
OTHER ASSETS
Patent - net of amortization of $2,969 at
May 31, 2005 and $1,979 at May 31, 2004 9,730 10,720
--------- ---------
Total Other Assets 9,730 10,720
--------- ---------
Total Assets $ 36,356 $ 43,373
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 23,549 $ 4,555
Accounts payable - stockholder 18,520 16,500
Accrued wages 25,000 102,400
Accrued payroll taxes 0 379
Accrued other taxes 0 88
Accrued director's fees 0 5,000
Accrued royalties 110 0
Accrued rent - stockholder 0 1,000
Accrued warranty 134 0
--------- ---------
Total Current Liabilities 67,313 129,922
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - 100,000,000 shares authorized,
15,000,000 outstanding as of 2005, and 1,500,000
as of 2004 at .001 per share 15,000 1,500
Additional paid-in capital 211,099 127,899
Deficit accumulated during the development stage (257,056) (215,948)
--------- ---------
Total Stockholders' Equity (Deficit) (30,957) (86,549)
--------- ---------
Total Liabilities and Stockholders' Equity (Deficit) $ 36,356 $ 43,373
========= =========
See accompanying notes to financial statements.
7
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 2005, AND 2004
AND THE PERIOD FROM JUNE 20, 2001 (INCEPTION) TO MAY 31, 2005
Year Year June 20, 2001
Ended Ended (Inception) to
May 31, 2005 May 31, 2004 May 31, 2005
------------ ------------ ------------
SALES - NET $ 9,107 $ 464 $ 9,601
Cost of Sales
Purchases 4,202 186 4,398
--------- --------- ---------
GROSS PROFIT 4,905 278 5,203
OPERATING EXPENSES
Wage expense 11,800 4,800 116,600
Advertising and marketing 2,193 13,778 17,249
Legal and accounting 17,171 12,680 70,478
Professional fees 0 340 5,340
Product development 0 0 814
Bank charges 85 124 386
Rent - stockholder 1,500 2,500 11,000
License and permits 680 375 1,943
Amortization 990 990 2,970
Franchise tax 69 50 169
Workers' compensation 99 20 303
Commission 58 0 58
Royalty expense 439 43 483
Office and administrative expense 3,346 7,360 15,841
Travel 0 2,930 2,930
Freight and delivery 741 84 825
Postage 797 0 797
Payroll tax 0 563 563
Insurance 523 519 1,042
Supplies 2,589 0 2,589
Telephone 635 1,077 1,712
Trade shows 1,023 2,867 3,890
UCC code 150 750 900
Warranty expense 180 0 180
Membership fees 700 0 700
--------- --------- ---------
45,768 51,850 259,762
--------- --------- ---------
NET LOSS FROM OPERATIONS (40,863) (51,572) (254,559)
OTHER INCOME (EXPENSE)
Miscellaneous income 29 0 29
Miscellaneous expense (203) 0 (203)
Interest expense 0 (680) (2,252)
Bad debts (71) 0 (71)
--------- --------- ---------
(245) (680) (2,497)
NET LOSS BEFORE INCOME TAXES (41,108) (52,252) (257,056)
PROVISION FOR INCOME TAXES 0 0 0
--------- --------- ---------
NET LOSS $ (41,108) $ (52,252) $(257,056)
========= ========= =========
NET LOSS PER COMMON SHARE - BASIC $ (.00) $ (.00) $ (.02)
========= ========= =========
See accompanying notes to financial statements
8
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE PERIOD BEGINNING JUNE 20, 2001(INCEPTION
AND ENDED MAY 31, 2005
Common Stock Total
----------------------- Additional Stockholder's
Issued Paid-In Accumulated Equity
Shares Par Value Capital Deficit (Deficit)
------ --------- ------- ------- ---------
Issuance of Common Stock
September, 2001 700,000 $ 700 $ 1,199 $ 0 $ 1,899
Issuance of Common Stock
December 2001, net of
issuance costs of $2,500 300,000 300 27,200 0 27,500
Net (Loss) - May 31, 2002 0 0 0 (77,629) (77,629)
----------- -------- --------- --------- ---------
Balance, May 31, 2002 1,000,000 1,000 28,399 (77,629) (48,230)
Net (Loss) - May 31, 2003 0 0 0 (86,067) (86,067)
----------- -------- --------- --------- ---------
Balance, May 31, 2003 1,000,000 1,000 28,399 (163,696) (134,297)
Issuance of Common Stock
November, 2003 500,000 500 99,500 0 100,000
Net (Loss) - May 31, 2004 0 0 0 (52,252) (52,252)
----------- -------- --------- --------- ---------
Balance, May 31, 2004 1,500,000 1,500 127,899 (215,948) (86,549)
Forgiveness of debt by
Shareholders
November, 2004 0 0 96,700 0 96,700
Stock split-ten shares issued
for each outstanding share
May, 2005 13,500,000 13,500 (13,500) 0 0
Net(Loss)-May 31, 2005 0 0 0 (41,108) (41,108)
----------- -------- --------- --------- ---------
Balance, May 31, 2005 15,000,000 $ 15,000 $ 211,099 $(257,056) $ (30,957)
=========== ======== ========= ========= =========
See accompanying notes to financial statements.
9
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
AND THE PERIOD FROM JUNE 20, 2001 (INCEPTION) TO MAY 31, 2005
June 20, 2001
Year Ended Year Ended (Inception) to
May 31, 2005 May 31, 2004 May 31, 2005
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(41,108) $ (52,252) $(257,056)
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization 990 990 2,969
Decrease (Increase) in accounts receivable (2,209) (2,209)
Decrease (Increase) in inventory 4,612 (28,893) (24,281)
Interest capitalized 0 0 1,296
(Decrease)/Increase in accounts payable 18,994 (19,166) 23,549
(Decrease)/Increase in accrued wages 11,800 2,400 114,200
(Decrease)/Increase in accrued director's fees 0 0 5,000
(Decrease)/Increase in accrued interest 0 (276) 0
(Decrease)/Increase in accrued rent 1,500 (3,500) 2,500
Increase in stockholder payable 2,020 16,000 18,520
(Decrease)/Increase in accrued payroll taxes (379) 379 0
(Decrease)/Increase in accrued taxes (88) 88 0
Increase in accrued royalties 110 0 110
Increase in accrued warranty 134 0 134
-------- --------- ---------
Net Cash From (Used By) Operating Activities (3,624) (84,230) (115,268)
-------- --------- ---------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of patent 0 0 (10,800)
-------- --------- ---------
Net Cash Used In Investing Activities 0 0 (10,800)
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES
Loans from stockholders 0 0 10,800
Repayments of loans - stockholders 0 (12,096) (12,096)
Proceeds from issuance of common stock,
Net of issuance costs of $2,500 0 100,000 127,500
-------- --------- ---------
Net Cash Provided By Financing Activities 0 87,904 126,204
-------- --------- ---------
Net Increase (Decrease) In Cash (3,624) 3,674 136
Cash At Beginning Of Period 3,760 86 0
-------- --------- ---------
Cash At End of Period $ 136 $ 3,760 $ 136
======== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Interest paid $ 0 $ 680 $ 680
======== ========= =========
Taxes paid $ 0 $ 0 $ 0
======== ========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
On September 27, 2001, 700,000 shares of stock were issued at a value of
$1,899 in return for contribution of the patent option. The patent was
subsequently purchased for $10,800 in March 2002.
In March of 2003, interest accrued on stockholder loans payable in the
amount of $1,296 was added to the outstanding loan balance when the stockholder
notes due March 2003 were renewed.
In November of 2004, certain officers, directors, and shareholders of the
company forgave accrued wages, director's fees, and rents totaling $96,700.
These transactions are reflected as increases to paid-in capital.
See accompanying notes to financial statements.
10
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2005 AND 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of E and S Holdings, Inc.
(hereinafter the "Company"), is presented to assist in understanding the
financial statements. The financial statements and notes are representations of
the Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to accounting principles
generally accepted in the United States of America and have been consistently
applied in the preparation of the financial statements.
NATURE OF OPERATIONS
The Company sells specialized locking pliers which are used primarily by the
plumbing and welding industry. The Company's product is sold primarily to
wholesalers. The Company recognizes its revenue when the product is shipped to
the customer.
INVENTORIES
Inventories which consist of specialized locking pliers are recorded at the
lower of cost (first-in, first-out) or market.
ADVERTISING AND MARKETING
Advertising and marketing costs are charged to operations when incurred.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
DEVELOPMENT STAGE COMPANY
E and S Holdings, Inc. (a Nevada corporation) has been in the development stage
since its formation on June 20, 2001. It is primarily engaged in the development
and marketing of new products on which it holds the patent. Realization of a
major portion of its assets is dependent upon the Company's ability to
successfully develop and market the products, meet its future financing
requirements, and the success of future operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty. The Company's majority stockholder has agreed
to advance funds necessary to meet the Company's near-term cash needs.
NOTE 2 - FAIR VALUE OF FINANCIAL STATEMENTS
The carrying amount of cash, accounts receivable and liabilities approximates
the fair value reported in the balance sheet.
11
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2005 AND 2004
3 - NEW NOTE ACCOUNTING PROUNCEMENTS
There are no new accounting prouncements that impact the Company for its May 31,
2005 fiscal year.
NOTE 4 - INCOME TAXES
Income taxes on continuing operations at May 31 include the following:
June 20, 2001
(inception) to
2005 2004 May 31, 2005
---- ---- ------------
Currently payable $ 0 $ 0 $ 0
Deferred 0 0 0
---- ---- ----
Total $ 0 $ 0 $ 0
==== ==== ====
A reconciliation of the effective tax rate with the statutory U.S. income tax
rate at May 31 is as follows:
June 20, 2001
(inception) to
2005 2004 May 31, 2005
------------------ ------------------- -------------------
% of % of % of
Pretax Pretax Pretax
Income Amount Income Amount Income Amount
------ ------ ------ ------ ------ ------
Income taxes per statement of operations $ 0 0% $ 0 0% $ 0 0%
Loss for financial reporting purposes
without tax expense or benefit (13,977) (34)% (17,766) (34)% (87,399) (34)%
-------- ----- -------- ----- -------- -----
Income taxes at statutory rate $(13,977) (34)% $(17,766) (34)% $(87,399) (34)%
======== ===== ======== ===== -------- -----
At May 31, 2005 the Company had net operating loss carryforwards of
approximately $11,846, $34,067, $52,753 and $24,908 expiring in 2023, 2024, 2025
and 2026.
The Company's deferred tax assets and liabilities at May 31 consist of:
2005 2004
-------- --------
Deferred tax asset $ 51,000 $ 70,600
Valuation allowance (51,000) (70,600)
Deferred tax liability 0 0
-------- --------
$ 0 $ 0
======== ========
Deferred taxes are provided for temporary differences in deducting expenses for
financial statement and tax purposes. The principal source for deferred tax
assets are net operating loss carryforwards and accrued wages and director's
fees. No deferred taxes are reflected in the balance sheet at May 31, 2005 or
2004 due to a valuation allowance, which decreased $19,600 in 2005 and increased
$18,600 in 2004.
12
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2005 AND 2004
NOTE 5 - RENT - STOCKHOLDER
The Company rents office and storage space from one of its stockholders, Herbert
G. Barth, on a month-to-month basis. Rent began in April, 2002 at a rate of $500
per month. Rent expenses for the years ended May 31, 2005 and 2004 were $1,500
and $2,500, respectively. Rent expense was $11,000 for the period June 20, 2001
(inception) to May 31, 2005. Accrued rents to this stockholder were $0 and
$1,000 at May 31, 2005 and 2004, respectively.
During November, 2004 $2,500 of accrued rent was written off as part of the
related party debt forgiveness (Note 10).
NOTE 6 - ACCRUED WAGES - STOCKHOLDER
A stockholder of the Company had accrued wages in the amount of $0 and $75,000
at May 31, 2005 and 2004. Per his employment agreement, these wages can only be
paid from the net profits of the Company. As such, no cash wages have been paid
to this stockholder to date.
During November, 2004 $75,000 of accrued wages was written off as part of the
related party debt forgiveness (Note 10).
NOTE 7 - AMORTIZATION OF PATENT
The Company held an option to purchase the patent pending rights to its
proprietary product, locking pliers. The Company exercised its option to acquire
the patent for its locking pliers product in March 2002 for $10,800. The patent
is being amortized over its remaining legal life, beginning in the first quarter
of fiscal 2002. The agreement also provides for payment of 5% of the gross
consideration received for the use and licensing of the patent.
Amortization for the next five years is as follows:
2006 $ 990
2007 990
2008 990
2009 990
2010 990
Thereafter 4,780
-------
$ 9,730
=======
NOTE 8 - LOSS PER COMMON SHARE
In May, 2005 the Company recognized a stock split of ten shares for each
outstanding share. As a result, the weighted average shares outstanding have
been retroactively restated to reflect the impact of the split.
Loss per common share is based on the weighted average number of shares
outstanding which was:
15,000,000 for the year ended May 31, 2005
12,916,670 for the year ended May 31, 2004, and
11,598,474 for the period beginning June 20, 2001 (inception) and ended May 31,
2005.
13
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2005 AND 2004
NOTE 9 - PRODUCT WARRANTIES
The Company sells its products to customers together with limited repair or
replacement warranties. The accompanying financial statements for 2005 and 2004
include, respectively, $180 and $0 for estimated warranty claims, based on the
company's experience of the amount of such claims actually paid. Following is a
reconciliation of the aggregate warranty liability as of May 31, 2005:
Balance, June 1, 2004 $ 0
Claims paid during 2005 (46)
Additional warranties issued during 2005 180
Revisions in estimates for previously issued warranties 0
-----
Balance, May 31, 2005 $ 134
=====
NOTE 10 - FORGIVENESS OF DEBT - RELATED PARTIES
During November, 2004, certain officers, directors, and shareholders of the
Company forgave accrued wages, director's fees and rents totaling $96,700. These
transactions are reflected as increases to paid-in capital.
NOTE 11 - RELATED PARTY SALES
During the year ended May 31, 2005, a stockholder purchased 150 locking pliers
for $1,500. Included in the accounts receivable at May 31, 2005 is $1,500 due
from the stockholder.
NOTE 12 - SUBSEQUENT EVENT - RELATED PARTY
In June, 2005, the Company borrowed $4,000 from a stockholder. The funds were
borrowed under a unsecured demand note with interest at 10%.
14
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 8 A - CONTROLS AND PROCEDURES
The management of E & S recognize its responsibility for establishing and
maintaining adequate internal controls over financial reporting for E & S. Due
to the small size of E & S, the company's Chief Executive Officer and Chief
Operating Officer is aware of all matters pertaining to the operations of E & S
Holdings, Inc and has reviewed all aspects of the financial information included
in the company's financial reporting. At the present time, management is of the
opinion that the company's internal controls over financial reporting for the
past fiscal year is adequate. However, management has identified a material
weakness in its procedures in that the small size of management causes a lack of
segregation of duties and limits management's ability to recognize potential
inadequacies of the internal controls over the financial reporting.
PART THREE
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Executive Officers and Directors and their respective ages as of June 1,
2005 are as follows:
DIRECTORS
Name of Director: Age: Term in office Other directorships held
----------------- ---- -------------- ------------------------
Edward A. Barth 46 2001-2005 None
Eugene H. Swearengin 51 2001-2005 None
EXECUTIVE OFFICERS
Executive Officer: Age: Office: Term in office
------------------ ---- ------- --------------
Edward A. Barth 46 President, Chief Executive Officer 2001-2005
and Treasurer
Eugene H. Swearengin 51 Vice-President and Secretary 2002-2005
Edward A. Barth, age 46, is the Founder and Officer of Registrant, and serves as
a Director. Mr. Barth received a Bachelor of Science degree in civil engineering
technology from Youngstown State University in 1984. He has been employed by the
City of North Canton, Ohio, Michael Baker Engineering Corporation and in 1990
returned to the family construction business where he served as President of
Barth Construction Co., Inc. In August 2001 Mr. Barth changed the name of the
corporation to Stark Concrete Leveling, Inc. and presides as President of the
leveling and concrete rehabilitation business. Mr. Barth continues to be
employed by Stark Concrete Leveling, Inc. He resides in Canton, Ohio.
Eugene H Swearengin, age 51, has been a Director of the Registrant since June
21, 2001. He is Vice-president and secretary of the Corporation. Mr. Swearengin
started his carrier as an apprentice carpenter. He successfully obtained his
journeyman's card in 1977. In 1998 he purchased a 50% interest in Callahan Door
Sales, Inc. Mr. Swearengin has managed a successful career in the garage and
entrance door business for the past 25 years. He resides in North Canton, Ohio.
In the past fiscal year there were no individuals who were required to comply
with the reporting requirements under Rule 16A-3 of the Exchange Act. There were
no changes in ownership interest or beneficial interest of any shareholder,
officer or director of the corporation during the past fiscal year.
At the present time, E & S has not developed a code of ethics that applies to E
& S's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions. E & S
maintains that the fact that all major management functions, both executive and
financial are centered in one individual, it is not necessary to establish a
code of ethics at this time.
15
At present, E&S does not maintain an audit committee, instead the company's
board of directors is responsible to review all audit matters.
ITEM 10 - EXECUTIVE COMPENSATION
The table below summarizes all compensation awarded to, earned by, or paid to
the executive officers of E & S by any person for all services rendered in any
capacity to E & S for the present fiscal year.
Other Securities
Name and Annual Restricted Underlying All Other
principal Compen- Stock Options/ LTIP Compen-
position Year Salary($) Bonus sation($) Award(s)($) SARs($) Payouts($) sation($)
-------- ---- --------- ----- --------- ----------- ------- ---------- ---------
Edward A. 2003 $0* 0.00 0.00 0.00 0.00 0.00 0.00
Barth, 2004 $0* 0.00 0.00 0.00 0.00 0.00 0.00
President, CEO 2005 $0* 0.00 0.00 0.00 0.00 0.00 0.00
Eugene H. 2003 $0* 0.00 0.00 0.00 0.00 0.00 0.00
Swearengin, 2004 $0* 0.00 0.00 0.00 0.00 0.00 0.00
Vice-President, 2005 $0* 0.00 0.00 0.00 0.00 0.00 0.00
Secretary
----------
* Because E and S has experienced a delay in commencing production, both Mr.
Barth and Mr. Swearengin waived any compensation for their services
commencing January 1, 2003.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There are no securities authorized for issuance under any equity compensation
plans. The following table provides the names and addresses of each person known
to own directly or beneficially more than a 5% of the outstanding common stock
as of June 1, 2005 and by the officers and directors, individually and as a
group. Except as otherwise indicated, all shares are owned directly.
Name and address Amount of
of beneficial owner beneficial ownership Percent of class
------------------- -------------------- ----------------
Edward A. Barth 7,000,000 47.33% (total)
Director, President and Chief
Executive Officer
5046 East Boulevard NW
Canton, OH 44718
Suzanne I. Barth *
5046 East Boulevard NW
Canton, OH 44718
----------
* Indicates husband and wife. Each individual has a beneficial ownership in
their spouse's stock holdings. Common stock: All Officers and Directors as
a group that consist of one person, 7,000,000 shares direct, 100,000
beneficial, 47.33% total.
The percent of class is based on 15,000,000 shares of common stock issued and
outstanding as of June 1, 2005.
16
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Edward A. Barth is the sole promoter of E & S, further, he currently holds a
control position in the business, owning a total of 47.33% of the outstanding
common stock (directly and beneficially). Prior to January 1, 2003, Mr. Barth
was accruing a salary at the rate of $5,000 per month for all services which he
rendered to E & S. Since January 1, 2003, Mr. Barth has waived any compensation,
until such time as E & S commences to receive sustained revenues. Mr. Barth
advanced the Corporation the sum of $1,212.00 in order to pay for incorporation
costs. This amount was subsequently repaid to Mr. Barth on January 9, 2002
without interest, from proceeds received out of the $30,000.00 which E & S
received in stock subscriptions. In addition, Mr. Barth has advanced the
corporation the sum of $20,000 in order to commence the first production run of
the Portable Pipe Vise. Since that time, Mr. Barth has advanced various sums to
provide E&S with necessary operating funds. To date, E & S has repaid a portion
of the amount, however, the amount of $18,520 remains outstanding as of the end
of the corporation's fiscal year.
Mr. Barth received the 700,000 shares of common stock in E & S in exchange for
transferring to E & S the option to purchase the patent rights to the locking
pliers. This amount increased to 7,000,000 shares as the result of a stock split
which occurred during the past fiscal year. At the time Mr. Barth purchased the
option, the patent had not yet been granted and was in danger of being lost as a
result of the inventor's lack of necessary funds to continue the patent process.
A portion of the personal funds which Mr. Barth utilized in the obtaining of the
patent option was utilized to file the necessary documentation with the United
States Patent and Trademark Office so that the patent could issue.
Mr. Herbert Barth, the father of Edward A. Barth, owns 3% of the outstanding
shares of the Corporation. Mr. Herbert Barth is the owner of the real estate
from which E & S is subletting its offices. Mr. Barth is currently waiving any
rental charge for the space. The agreed upon rent for the office space was $500
per month. E & S maintains that the space leased from Mr. Barth is leased at the
fair market value for similar commercial space in Canton, Ohio.
With the exception of the above referred to transactions, there are no
contractual agreements between Mr. Barth or any other individual, whether a
shareholder or not, and E & S.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 3.1 - Articles of Incorporation - incorporated by reference Form SB-2
Exhibit 3.2 - By-laws - incorporated by reference Form SB-2
Exhibit 11 - Statement regarding computation of earnings per share - See
financial statement attached
Exhibit 13 - Form 10-QSB - incorporated by reference
Exhibit 31.1 - Rule 13a-12(a), 15d-14(a) Certification
Exhibit 31.2 - Rule 13a-12(a), 15d-14(a) Certification
Exhibit 32.1 - Certification of Pursuant to Section 906 of the Sarbanes Oxley
Act of 2002
Exhibit 32.2 - Certification of Pursuant to Section 906 of the Sarbanes Oxley
Act of 2002
17
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following information concerns the aggregate fees billed for each of the
last two fiscal years for professional services rendered by Hobe & Lucas
Certified Public Accountants, Inc., the principal accountant for E & S.
2004 2005
---- ----
1. Audit Fees $8,390 $11,160
2. Audit-Related Fees 0 0
3. Tax Fees $ 500 $ 500
4. All Other Fees* 0 0
----------
* There were no other fees billed to E & S by its principal accountant for
the last two fiscal years for any products or services not covered in items
1, 2 or 3 above.
Because E & S has only two directors, none of whom are outside directors, E & S
does not maintain a standing audit committee. As such, E & S does not have
pre-approval policies and procedures regarding the engagement of an independent
auditor for its year-end financial statements. Instead, the engagement of an
auditor is approved by the ad hoc audit committee of the Board of Directors
prior to the commencement of the audit. The balance of the services described in
Items 2 or 3 above were pre-approved by the audit committee, only to the extent
that discussions were held with the principal independent accountant for E & S
prior to the commencement of any services by the accountant, during which time
all services to be performed by the accountant on behalf of E & S were outlined.
18
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.
E and S Holdings, Inc.
By: /s/ Edward A. Barth
--------------------------------
Date: August 25, 2005
------------------------------
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Edward A.Barth
--------------------------------
Edward A. Barth,
CEO, CFO President and Director
Date: August 25, 2005
------------------------------
By: /s/ Eugene H. Swearengin
--------------------------------
Eugene H. Swearengin,
Vice-President,
Secretary and Director
Date: August 25, 2005
------------------------------
19