UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to _____________
Commission file number 000-50101
E and S Holdings, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 91-2135425
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5046 E. Boulevard, NW, Canton, OH 44718
(Address of principal executive officer)
(330) 966-8120
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 15,100,000
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [ ]
E AND S HOLDINGS, INC.
(A Development Stage Company)
BALANCE SHEETS
FEBRUARY 28, 2006 AND MAY 31, 2005
February 28, 2006 May 31, 2005
----------------- ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash in bank $ 656 $ 136
Accounts receivable 672 2,209
Inventory 22,628 24,281
--------- ---------
Total Current Assets 23,956 26,626
--------- ---------
OTHER ASSETS
Patent - net of amortization of $3,711 at
February 28, 2006 and $2,969 at May 31, 2005 8,988 9,730
--------- ---------
Total Assets $ 32,944 $ 36,356
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 38,060 $ 23,549
Accounts payable - stockholder 20,503 18,520
Note payable - stockholder 9,000 0
Accrued wages - officer and stockholder 0 25,000
Accrued royalties 13 110
Accrued interest 387 0
Accrued warranty 136 134
--------- ---------
Total Liabilities 68,099 67,313
--------- ---------
STOCKHOLDERS' EQUITY
Common stock - 100,000,000 shares authorized,
15,100,000 outstanding as of Feb 28, 2006 and
15,000,000 outstanding at May 31, 2005 at .001 par value 15,100 15,000
Additional paid-in capital 237,999 211,099
Deficit accumulated during the development stage (288,254) (257,056)
--------- ---------
Total Stockholders' Equity (35,155) (30,957)
--------- ---------
Total Liabilities and Stockholders' Equity $ 32,944 $ 36,356
========= =========
Note: The balance sheet at May 31, 2005 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
See accompanying notes to financial statements.
1
E AND S HOLDINGS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2006
AND THE PERIOD FROM JUNE 20, 2001 (INCEPTION) TO FEBRUARY 28, 2006
Three Months Nine Months June 20, 2001
Ended Ended (Inception) to
February 28, 2006 February 28, 2006 February 28, 2006
----------------- ----------------- -----------------
(Unaudited) (Unaudited) (Unaudited)
SALES - NET $ 933 $ 2,764 $ 12,365
COST OF SALES
Purchases 477 1,542 5,940
--------- --------- ---------
GROSS PROFIT 456 1,222 6,425
OPERATING EXPENSES
Wage expense 2,000 2,000 118,600
Advertising 362 385 17,634
Legal and Accounting 4,962 20,269 96,087
Product development 0 0 814
Bank Charges 100 340 726
Rent - Stockholder 0 0 11,000
License and permits 0 0 1,943
Amortization 247 742 3,712
Franchise tax 50 50 219
Commission 0 16 75
Royalty expense 25 104 587
Office and administrative expense 1,500 2,020 17,861
Travel 224 1,252 4,181
Freight and delivery 0 0 825
Transfer agent expense 1,080 3,221 3,221
Postage 80 80 1,053
Payroll taxes 10 20 886
Insurance 0 0 1,042
Supplies 0 0 2,589
Telephone 120 347 2,059
Trade shows 0 176 3,890
UCC code and filing expense 480 760 1,660
Dues, subscriptions and membership fees 75 196 896
Warranty expense 19 55 235
--------- --------- ---------
(11,334) (32,033) (291,795)
--------- --------- ---------
NET INCOME (LOSS) FROM OPERATIONS (10,878) (30,811) (285,370)
OTHER INCOME (EXPENSE)
Miscellaneous income 0 0 29
Bad debts 0 0 (71)
Miscellaneous expense 0 0 (203)
Interest expense (194) (387) (2,639)
--------- --------- ---------
(194) (387) (2,884)
NET INCOME (LOSS) BEFORE INCOME TAXES (11,072) (31,198) (288,254)
PROVISION FOR INCOME TAXES 0 0 0
--------- --------- ---------
NET INCOME (LOSS) $ (11,072) $ (31,198) $(288,254)
========= ========= =========
NET INCOME (LOSS) PER COMMON SHARE - BASIC $ (.00) $ (.00) $ (.02)
========= ========= =========
See accompanying notes to financial statements.
2
E AND S HOLDINGS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2005
Three Months Nine Months
Ended Ended
February 28, 2005 February 28, 2005
----------------- -----------------
(Unaudited) (Unaudited)
SALES - NET $ 1,194 $ 6,832
COST OF SALES
Purchases 547 2,995
-------- --------
GROSS PROFIT 647 3,837
OPERATING EXPENSES
Wage expense 0 10,800
Payroll taxes 19 19
Insurance 0 0
Commissions 40 59
Freight and delivery 393 512
Legal and accounting 4,041 12,091
Bank charges 14 64
Rent - stockholder 0 2,500
UCC code 0 150
Franchise tax 50 50
Workers' compensation 19 99
Amortization 247 742
Advertising 0 903
Marketing 958 958
Royalty expense 28 310
Telephone, fax, and internet 62 403
Trade show expense 200 1,023
Office supplies and expense 1,175 6,163
-------- --------
7,246 36,846
-------- --------
NET LOSS FROM OPERATIONS (6,599) (33,009)
OTHER INCOME (EXPENSE)
Interest expense 0 0
-------- --------
NET LOSS BEFORE INCOME TAXES (6,599) (33,009)
PROVISION FOR INCOME TAXES 0 0
-------- --------
NET LOSS $ (6,599) $(33,009)
======== ========
NET LOSS PER COMMON SHARE - BASIC $ (.00) $ (.00)
======== ========
See accompanying notes to financial statements.
3
E AND S HOLDINGS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2006 AND FEBRUARY 28, 2005
AND THE PERIOD FROM JUNE 20, 2001 (INCEPTION) TO FEBRUARY 28, 2006
Nine Months Nine Months June 20, 2001
Ended Ended (Inception) to
February 28, 2006 February 28, 2005 February 28, 2006
----------------- ----------------- -----------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (31,198) $ (33,009) $(288,254)
Adjustments to reconcile net income to net
Cash provided by operating activities:
Amortization 742 742 3,712
Wages capitalized 2,000 0 2,000
Interest capitalized 0 0 1,296
Decrease (Increase) in accounts receivable 1,537 (1,949) (672)
Decrease (Increase) in inventory 1,653 2,995 (22,628)
(Decrease) Increase in accounts payable 14,511 13,785 38,060
(Decrease) Increase in accounts payable-stockholder 1,983 1,000 20,503
(Decrease) Increase in accrued wages-officer and stockholder 0 11,800 114,200
(Decrease) Increase in accrued payroll taxes 0 (379) 0
(Decrease) Increase in accrued other taxes 0 (88) 0
(Decrease) in accrued director's fees 0 0 5,000
(Decrease) Increase in accrued royalties (97) 156 13
(Decrease) Increase in accrued interest 387 0 387
(Decrease) Increase in accrued rent 0 1,500 2,500
(Decrease) Increase in accrued warranty 2 0 136
--------- --------- ---------
Net Cash From (Used By) Operating Activities (8,480) (3,447) (123,747)
--------- --------- ---------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of patent 0 0 (10,800)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from (repayments to) stockholders 9,000 0 7,703
Proceeds from issuance of common stock,
Net of issuance costs of $2,500 0 0 127,500
--------- --------- ---------
Net Cash Provided By Financing Activities 9,000 0 135,203
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 520 (3,447) 656
CASH AT BEGINNING OF PERIOD 136 3,760 0
--------- --------- ---------
CASH AT END OF PERIOD $ 656 $ 313 $ 656
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Interest paid $ 0 $ 0 $ 680
========= ========= =========
Taxes paid $ 0 $ 0 $ 0
========= ========= =========
4
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.
In Feb. of 2006, a shareholder of the company forgave accrued wages of
$17,000. This transaction is reflected as an increase to paid-in capital. In
addition, the shareholder acquired 100,000 shares of stock in exchange for
accrued wages of $8,000. Wage expense in the amount of $2,000 was also
recognized on the difference between the exchange price of the stock and the
price at fair value.
See accompanying notes to financial statements.
5
E AND S HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2006
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form
10-QSB and item 310(b) of Regulation S-B. Accordingly, they do not include all
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. For
further information, refer to the financial statements and footnotes thereto
included in the E and S Holdings, Inc. Form 10-KSB filing for the year ended May
31, 2005.
NOTE B - 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 patent, 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.
NOTE C - FORGIVENESS OF DEBT
During the three months ended February 28, 2006, an officer - shareholder
of the company forgave accrued wages of $17,000. This amount is reflected as an
increase to additional paid-in capital.
6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
E & S Holdings (E & S) is a developmental stage company that has received
revenues of approximately $933 during the three-month period ending February 28,
2006. E & S has received no significant revenues since its inception.
As of February 28, 2006, E & S has cash assets of $656 and accounts
receivable of $672. The inventory of the company is $22,628. Because the liquid
assets of the company are low, management is contemplating increasing needed
capital through a private offering of additional shares, although no definite
plans have been formulated at this time. E & S continues to receive small orders
for its Portable Pipe Vise. In order to promote additional sales, management has
continued to do direct mailing as funds permit. Management has altered its
marketing strategy and now is emphasizing direct sales to large retail outlets
and direct sales through its website,WWW.PORTABLEPIPEVISE.COM. These moves have
been initiated to reduce costs of sales. The Portable Pipe Vise is currently
placed in the catalog of a nationally recognized tool retailer and in the Black
Book of Tools catalog. Recently, E & S has sent samples of its product to
established national marketing representatives in an effort to secure a national
account in a major retail chain. In addition, in an effort to expand exposure of
its product, E & S has secured a booth for the 2006 National Hardware Show in
Las Vegas, Nevada that runs between May 9th and May 11th.
Management is attempting to focus on specific industries in which the
Portable Pipe Vise would be most useful. Therefore, its first marketing effort
is focused toward the welding equipment suppliers. Its second round of direct
marketing will focus on plumbing suppliers and retailers of heating, ventilating
and air conditioning supplies. Management intends to increase its marketing
efforts at such time as additional funds are made available through sales of the
product.
E & S has succeeded in its efforts to list the shares of E & S on the OTC
Bulletin Board. The shares were listed effective December 16, 2005 under the
symbol ESHI.
Over the last three months, E & S has sustained operating losses in the
amount of $11,072. Of this amount, $4,962 involves costs for legal and
accounting fees incurred during the last quarter. As of February 28, 2006, E & S
has total liabilities of $68,099. There has been a reduction in the total
liabilities since the last calendar quarter due to a reduction in accrued wages
to officers and stockholders. This reduction was accomplished by a forgiveness
of the debt by the corporation's Vice President and Secretary, Mr. Eugene
Swearengin. At the last shareholder's meeting, the shareholders voted a stock
option to Mr. Swearengin which enabled him to convert his accrued wages into a
maximum of 100,000 shares of the corporation's common stock. Mr. Swearengin
exercised this option and converted $8,000 of the $25,000 in accrued wages into
100,000 shares of the corporation's common stock. The balance of accrued wages,
of $17,000, were then forgiven by Mr. Swearengin.
There are no off balance sheet arrangements involving E & S at this time.
ITEM 3 - 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
7
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 II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
To the best of its knowledge, management of E & S is not aware of any legal
proceedings in which E & S is currently involved.
ITEM 2 - CHANGES IN SECURITY
There are no changes in security since the last annual statement for the
year ending May 31, 2005.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There are no defaults upon any senior securities.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on January 17, 2006. Three
proposals were submitted for approval to the shareholders. The first proposal
concerned the election of directors. Mr. Edward A. Barth and Mr. Eugene H.
Swearengen were reelected as the directors of the company.
The second proposal, which was passed by the shareholders, appointed Hobe &
Lucas Certified Public Accountants, Inc. as the company's independent auditors
for the year ending May 31,2006. The third proposal approved by the shareholders
was to grant a non-qualified stock option to Mr. Eugene H. Swearengen. This
option would permit Mr. Swearengen the right to convert a portion of his accrued
wages into common stock of the company. The option permitted Mr. Swearengen the
right to obtain a maximum of 100,000 shares of common stock at a conversion rate
of $0.25 per share. The option was later revised by an action without meeting of
the shareholders (pursuant to Nevada law). The revised option decreased the
exercise price of the conversion to $0.08 per share.
ITEM 5 - OTHER INFORMATION
There are no items of information required to be disclosed pursuant to this
item at this time.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. The following are filed as Exhibits to this quarter of the report. The
numbers refer to the exhibit table of Item 601 of regulation S-K: Reference is
hereby made to the exhibits contained in the registration statement (Form SB-2)
filed by E & S.
Exhibit 31 - Certification Pursuant to Section 302 of the Sarbanes Oxley Act of
2002
Exhibit 32 - Certification Pursuant to Section 906 of the Sarbanes Oxley Act of
2002
B. Reports on Form 8-K - 9/21/2005
Reports on Form 8-K - 12/16/2005
Reports on Form 8-K - 2/10/2006
8
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.
E & S HOLDINGS, INC.
Date: April 13, 2006 By: /s/ Edward A. Barth
--------------------------------------------
Edward A. Barth, Principal Financial Officer
Date: April 13, 2006 By: /s/ Edward A. Barth
--------------------------------------------
Edward A. Barth, Principal Executive Officer
9