UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NO. 000-29245
ASHLIN DEVELOPMENT CORPORATION
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(Exact name of small business issuer as specified in its charter)
FLORIDA
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(State or other jurisdiction of incorporation or organization)
65-0452156
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(I.R.S. Employer Identification Number)
4400 NORTH FEDERAL HIGHWAY, SUITE 210, BOCA RATON, FLORIDA 33431
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(Address of principal executive offices)
(561) 391-6196
---------------------------
(Issuer's telephone number)
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 [
]
There were 4,652,813 shares of common stock, $0.001 par value, of the
registrant outstanding at September 30, 2005.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
EXPLANATORY NOTE
We have amended the Index and the chart under "Stock Compensation" to correctly
reflect that this Quarterly Report pertains to the fiscal quarter ended
September 30, 2005. Additionally, in our discussion of Liquidity and Capital
Resources, we have amended the net cash used in operating activities for the
nine months ended September 30, 2005 to correctly reflect the number contained
in our Condensed Statements of Cash Flows. No amendment has been made to the
Financial Statements, including the Consolidated Condensed Statements of
Operations, Balance Sheets and Statements of Cash Flows, as previously filed and
reported.
References to Form 10-Q throughout this document refer to this amended Form
10-Q/A.
ASHLIN DEVELOPMENT CORPORATION
------------------------------
INDEX
PAGE
----
Facing Sheet.............................................................................................Cover Page
Index ........................................................................................................ii
Part I - Financial Information
Item 1. Condensed Financial Statements..................................................................1
Condensed Balance Sheet as of September 30, 2005 (Unaudited)....................................1
Condensed Statements of Operations for the three and nine months ended September 30, 2005
and 2004 (Unaudited)............................................................................2
Condensed Statements of Cash Flows for the nine months ended September 30, 2005
and 2004 (Unaudited)............................................................................3
Notes to Condensed Financial Statements.......................................................4-7
Item 2. Management's Discussion and Analysis or Plan of Operation........................................8
Item 3. Controls and Procedures........................................................................11
Part II - Other Information
Item 1. Legal Proceedings..............................................................................12
Item 2. Exhibits.......................................................................................12
Item 3. Defaults on Senior Securities..................................................................12
Item 4. Submission of Matters to Vote of Security Holders..............................................12
Signature........................................................................................................13
ASHLIN DEVELOPMENT CORP.
CONDENSED BALANCE SHEET
SEPTEMBER 30, 2005
(UNAUDITED)
ITEM 1. CONDENSED FINANCIAL STATEMENTS
- ---------------------------------------
ASSETS
Current assets:
Cash $ 68,557
---------
Total assets $ 68,557
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 66,667
Accrued expenses $ 9,542
---------
Total liabilities $ 76,209
---------
Stockholders' deficit:
Common stock, $0.001 par value, authorized 150,000,000
shares; 4,652,813 shares issued and outstanding 4,653
Additional paid-in capital 919,789
Accumulated deficit (932,094)
---------
Total stockholders' deficit (7,652)
---------
Total liabilities and stockholders' equity $ 68,557
=========
See accompanying notes to condensed financial statements.
- 1 -
ASHLIN DEVELOPMENT CORP.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
================================================================================
3 MONTHS ENDED 3 MONTHS ENDED 9 MONTHS ENDED 9 MONTHS ENDED
2005 2004 2005 2004
----------- --------------- ----------- -----------
Revenue $ -- $ -- $ -- $ --
Cost of sales -- -- -- --
----------- --------------- ----------- -----------
Gross Profit -- -- -- --
----------- --------------- ----------- -----------
Operating expenses:
General and administrative expense 127,879 -- 440,575 --
Advertising and promotion -- -- -- --
Depreciation and amortization -- -- -- --
----------- --------------- ----------- -----------
Total operating expense 127,879 -- 440,575 --
----------- --------------- ----------- -----------
Loss from operations continued operations (127,879) -- (440,575) --
Discontinued operations
Income (Loss) from discontinued operations -- 185,899 (155,701) (773,788)
Other (income) expense:
Gain on sale -- -- 1,794,893 --
Interest income 225 -- 310 --
----------- --------------- ----------- -----------
Income (Loss) before income taxes (127,654) 185,899 1,198,927 (773,788)
----------- --------------- ----------- -----------
Benefit (provision) for income taxes -- -- -- --
----------- --------------- ----------- -----------
Net income (loss) (127,654) 185,899 1,198,927 (773,788)
=========== =============== =========== ===========
Net loss per share from continuing operations-basic $ (0.03) $ -- $ (0.10) $ --
=========== =============== =========== ===========
Net loss per share from discontinued operations-basic $ -- $ -- (0.04) --
=========== =============== =========== ===========
Net income (loss) per share - basic and diluted $ (0.03) $ 0.05 $ 0.27 $ (0.20)
=========== =============== =========== ===========
Weighted average number of shares - basic and diluted $ 4,561,009 $ 3,832,813 $ 4,392,707 $ 3,832,813
=========== =============== =========== ===========
See accompanying notes to condensed financial statements.
- 2 -
ASHLIN DEVELOPMENT CORP.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
================================================================================
2005 2004
----------- -----------
Cash flow from operating activities:
Net income (loss) $ 1,198,927 $ (773,788)
Adjustments to reconcile net income (loss) to net cash from operating
activities:
Gain from sale of operating assets and assumption of liabilities (1,794,893) --
Common stock issued for services 62,000 --
Decrease in assets and liabilities:
Accounts receivable 138,581 473,852
Prepaid assets 73,124 (85,273)
Depreciation and amortization -- 21,666
Inventory 22,437 126,124)
Accounts payable (57,561) 751,304
Accrued expenses (24,179) (64,797)
----------- -----------
Net cash provided by (used in) operating activities (381,564) 449,088
----------- -----------
Cash flow from investing activities:
Proceeds from sale of assets 350,000 (32,576)
----------- -----------
Net cash provided by (used in) investing activities 350,000 (32,576)
----------- -----------
Cash flow from financing activities:
Repayments on notes payable (27,175) (406,957)
----------- -----------
Net cash used in financing activities (27,175) (406,957)
----------- -----------
Net increase (decrease) in cash (58,739) 9,555
----------- -----------
Cash, beginning of period 127,296 7,406
----------- -----------
Cash, end of period 68,557 16,961
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
- -----------------------------------
Note payable for purchase of automobile $ -- $ 23,357
----------- ===========
See accompanying notes to condensed financial statements.
- 3 -
ASHLIN DEVELOPMENT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
================================================================================
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited condensed financial statements of Ashlin Development
Corp. (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of the results for the
interim periods presented have been included.
These results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's Annual Financial Statements for the year ended December 31,
2004. Operating results for the nine months ended September 30, 2005 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2005.
It is recommended that the accompanying condensed financial statements be read
in conjunction with the financial statements and notes for the year ended
December 31, 2004, found in the Company's Form 10-KSB.
The Company's financial statements in the three and nine months ended September
2005 are not comparative to the financial statements for the three months ended
September 2004. The effective date of the Company's plan of reorganization was
January 28, 2005.
Effective January 28, 2005 the Company completed a plan to divest its core
operations of Health and Nutrition Systems, Int'l Inc. The results of operations
and financial position are shown in the accompanying financial statements as
discontinued operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. There are no cash
equivalents as of September 30, 2005.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Revenue Recognition
- -------------------
The Company recognizes revenue when
o Persuasive evidence of an arrangement exists
o Shipment has occurred
o Price is fixed or determinable, and
o Collectability is reasonably assured
Basic Earnings Per Share
- ------------------------
Basic income per common share is computed by dividing the net income by the
weighted average number of shares of common stock outstanding during the year.
- 4 -
ASHLIN DEVELOPMENT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
================================================================================
Diluted Earnings Per Share
- --------------------------
Diluted earnings per share reflect the potential dilution that could occur if
dilutive securities (stock options and stock warrants) to issue common stock
were exercised or converted into common stock that then shared in the earnings
of the Company.
Stock Compensation
- ------------------
The Company has adopted Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation." SFAS 123 encourages the
use of a fair-value-based method of accounting for stock-based awards, under
which the fair value of stock options is determined on the date of grant and
expensed over the vesting period. Under SFAS 123, companies may, however,
measure compensation costs for those plans using the method prescribed by
Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock
Issued to Employees." Companies that apply APB No. 25 are required to include
pro forma disclosures of net earnings and earnings per share as if the
fair-value-based method of accounting had been applied. The Company elected to
account for such plans under the provisions of APB No. 25. The Company accounts
for stock options granted to consultants under SFAS 123.
Had the compensation expense for the stock option plan been determined based on
the fair value of the options at the grant date consistent with the methodology
prescribed under Statement of Financial Standards No. 123, "Accounting for Stock
Based Compensation," at September 30, the Company's net income and earnings per
share would have been effected to the pro forma amounts indicated below:
SEPTEMBER 30, 2005
------------------
Net Income
As reported $ 1,198,927
============
Pro forma $ 1,198,927
============
Earnings per share
As reported $ 0.27
============
Pro forma $ 0.27
============
All but 55,000 options expired 30 days after January 28, 2005, the effective
date of the sale of substantially all of our operating assets.
NOTE 3 - GOING CONCERN
- ----------------------
The Company's condensed financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has ceased its Health
and Nutrition business effective January 28, 2005. The Company is currently
exploring its options which may include acquiring or otherwise entering into a
new business or merging with an as yet unidentified company or companies.
On October 15, 2004, the Company filed for protection under Chapter 11 of the
United States Bankruptcy Code. The Company has operated under the Chapter 11
guidelines since October 15, 2004 and under a plan of reorganization filed by
the Company. The effective date of the Company's plan of reorganization was
January 28, 2005.
There remains substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments to
reflect the possible effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
- 5 -
ASHLIN DEVELOPMENT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
================================================================================
NOTE 4 - EQUITY
- ---------------
During the nine months ended September 30, 2005, 300,000 shares of common stock
were issued to the Company's chief executive officer as per his employment
agreement. These shares were valued at $0.04 per share of common stock and the
Company recorded compensation expense of $12,000.
On March 3, 2005, the Company issued 320,000 shares of common stock to the
Company's chief executive officer in recognition of performance. These shares
were valued at $0.10 per share and the Company recorded compensation expense of
$32,000.
On March 3, 2005, the Company entered in to a consulting contract with a
consultant and issued 100,000 shares of common stock as part of this contract.
These shares were valued at $0.010 per share of common stock and $10,000 was
recorded as compensation expense.
On September 21, 2005, the Company entered in to a consulting contract with a
consultant and issued 100,000 shares of common stock as part of this contract.
These shares were valued at $0.08 per share of common stock and $8,000 was
recorded as compensation expense.
NOTE 5 - LEGAL MATTERS
- -----------------------
We were involved in litigation with J.C. Herbert Bryant, III, a former officer,
director and one of our shareholders, and KMS-Thin Tab 100, Inc., which was
settled in September 2002. As part of the settlement, we entered into a
distribution agreement with Mr. Bryant, beginning on September 26, 2002 and
ending on September 25, 2007, permitting Mr. Bryant to purchase certain products
from us and to exclusively distribute those products in Florida from Orlando
south. In October 2003, we terminated the distribution agreement with KMS based
on KMS's breach of material terms of the agreement. On December 1, 2003, we
filed suit against KMS-Thin Tab 100, Inc. in the Palm Beach County Circuit Court
(Case No. 2003CA012757XXCDAN) for breach of contract, trademark infringement and
for a declaration of rights that the distribution agreement is terminated and of
no further force and effect. KMS answered the complaint and filed its own
counterclaim for fraud in the inducement, trademark infringement, dilution and
fraudulent misrepresentation; the fraud-based counterclaims were dismissed with
prejudice by the Court on summary judgment. KMS subsequently amended its
counterclaim to allege a breach of contract under the distribution agreement. In
January 2005, the State Court in Florida ruled that neither party should
prevail, and rejected a request for attorney's fees by KMS-Thin Tab 100 Inc.,
thus adjudicating the matter. KMS-Thin Tab 100 Inc. subsequently filed a notice
of appeal.
Subsequently, on July 29, 2005, the 4th District Court of Appeals granted the
Company's motion to dismiss the appeal by KMS-Thin Tab 100 Inc.
The Company is not aware of any other outstanding litigation.
NOTE 6- ACCOUNTING PRONOUNCEMENT
- --------------------------------
SFAS No. 154, Accounting Changes and Error Corrections, was issued in May 2005
and replaces APB Opinion N0. 20 and SFAS No. 3. SFAS No. 154 requires
retrospective application for voluntary changes in accounting principle in most
instances and is required to be applied to all accounting changes made in fiscal
years beginning after December 15, 2005. The Company's expected April 1, 2006
adoption of SFAS No. 154 is not expected to have a material impact on the
Company's consolidated financial condition or results of operations.
- 6 -
ASHLIN DEVELOPMENT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
================================================================================
NOTE 7-SUBSEQUENT EVENTS
- ------------------------
On August 4, 2005, the shareholders approved an amendment to the Company's
Articles of Incorporation which increased the total number of authorized shares
of the Company to 160,000,000 shares, consisting of (i) 150,000,000 shares of
common stock and (ii) 10,000,000 shares of "blank check" preferred stock.
- 7 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ------------------------------------------------------------------
This quarterly report on Form 10-QSB contains forward-looking statements. Any
statements that are not statements of historical fact should be regarded as
forward-looking statements. For example, the words "intends," "believes,"
"anticipates," "plans," and "expects" are intended to identify forward-looking
statements. There are a number of important factors that could cause our actual
results to differ materially from those indicated by such forward-looking
statements. These factors include without limitation those factors contained in
our Form 10-KSB filed with the Securities and Exchange Commission. We do not
undertake any obligation to update any such factors or to publicly announce the
result of any revision to any of the forward looking statements contained herein
to reflect future events or developments.
The following discussion of our results of operations and financial condition
should be read together with our unaudited Financial Statements contained in
Part I, Item 1 and the related Notes in this Form 10-QSB and our audited
Financial Statements and the related Notes contained in our Form 10-KSB filed
with the Securities and Exchange Commission.
Critical Accounting Estimates
- -----------------------------
Financial Reporting Release No. 60, which was released by the U.S. Securities
and Exchange Commission, encourages all companies to include a discussion of
critical accounting policies or methods used in the preparation of financial
statements. Our financial statements include a summary of the significant
accounting policies and methods used in the preparation of our financial
statements.
Management believes the following critical accounting policies affect the
probable returns, significant judgments and estimates used in the preparation of
the financial statements. These policies relate specifically to discontinued
operations, as the Company completed the sale of substantially all of its assets
effective January 28, 2005. Since our current business plan is to acquire or
otherwise enter into a new business or merge with an as yet unidentified company
or companies, each of the following policies are subject to change.
Revenue Recognition
- -------------------
The Company recognizes revenue when
o Persuasive evidence of an arrangement exists
o Shipment has occurred
o Price is fixed or determinable, and
o Collectability is reasonably assured
Use of Estimates
- ----------------
Management's discussion and analysis of financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, management evaluates these estimates,
including those related to valuation allowance for the deferred tax asset,
estimated useful life of fixed assets and the carrying value of long-lived
assets, intangible assets and allowances for sales returns, doubtful accounts,
and obsolete and slow moving inventory and reserve for customer liabilities.
Management based these estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
- 8 -
ASHLIN DEVELOPMENT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
================================================================================
Recent Developments
- -------------------
At the 2005 Annual Meeting of Shareholders held on August 4, 2005, Theodore T.
Alflen, James A. Brown, and Steven Pomerantz were duly reelected as our board of
directors. At the meeting, the shareholders also approved an amendment to our
Articles of Incorporation which increased the total number of authorized shares
of the Company to 160,000,000 shares, consisting of (i) 150,000,000 shares of
common stock and (ii) 10,000,000 shares of "blank check" preferred stock.
On October 15, 2004, the Company filed in the Southern District of Florida a
plan of reorganization under Chapter 11 of the United States bankruptcy code.
This culminated a lengthy effort by management and the Board of Directors to
find alternatives to enhance shareholder value in the face of deteriorating
operating performance. The Court confirmed the Company's plan of reorganization
on January 10, 2005 and the plan was declared effective on January 28, 2005. We
formally emerged from bankruptcy protection on April 29, 2005.
As part of the plan:
(1) TeeZee, Inc., a company formed by our former Chief Executive
Officer, Christopher Tisi, purchased substantially all of the assets of the
Company, including the rights to the name "Health & Nutrition Systems
International, Inc." in exchange for $350,000 in cash and assumption of
approximately $1,841,000 in liabilities. Although allowed for under the plan no
other bids were submitted.
(2) The Company entered into an employment agreement with Mr. James
Brown, which provides for:
o Salary of $9,200 per month until May 29, 2005 (30 days after
the Company emerged from bankruptcy), and thereafter at a
rate of $7,000 per month; and
o The issuance by the Company to Mr. Brown of 300,000 shares
of its Common Stock, which are shares subject to repurchase
by the Company if Mr. Brown terminates his employment with
the Company for any reason at any time prior to the first
anniversary of the agreement, or his employment with the
Company is terminated by the Company for cause;
(3) TeeZee, Inc. assumed the secured claim of Garden State Nutritionals
(GSN), a division of Vitaquest International, Inc.; GSN retained its
pre-existing lien on substantially all of the transferred assets;
(4) TeeZee, Inc. assumed the secured claim of SunTrust Bank on the
Company's 2004 Honda Element on the effective date; SunTrust retained its
pre-existing lien on the vehicle;
(5) TeeZee, Inc. assumed most unsecured claims, including those of
trade and employee creditors, together with any unsecured deficiency claims of
GSN and SunTrust. The unassumed unsecured claims of the Company were paid, pro
rata, from a fund which did not exceed $50,000;
(6) A permanent injunction was issued barring the Company and the
purchaser from violating Window Rock Enterprises, Inc.'s trademarks for
"CortiSlim" and the Company agreed not to challenge Window Rock's trademark for
this product; and
(7) All holders of the Company's common stock retained their shares.
Since the effective date of the Plan, the Company has continued to exist as a
separate incorporated entity. The present directors of the Company have
continued as directors of the Company, and Mr. Brown has continued to serve as
Chief Executive Officer and Chairman of the Board of Directors. He is the sole
officer of the Company.
- 9 -
ASHLIN DEVELOPMENT CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
================================================================================
The Company has been engaged in the business of seeking suitable commercial
activities or a strategic alliance with an operating entity.
From inception through the effective date of our Plan of Reorganization, we
developed, marketed and sold weight management, energy and sport nutrition
products to national and regional, food, drug, health, pharmacy, mass-market
accounts, and independent health and pharmacy accounts. Our product formulations
were not proprietary.
We currently have no business operations or revenues, and our current business
plan is to acquire or merge with an unidentified company or companies.
OVERVIEW
--------
The Company, effective January 28, 2005, completed the sale of substantially all
of its assets to TeeZee, Inc. The Company had operating activities in January
that have been reported as discontinued operations in the Statement of
Operations for the nine months ended September 30, 2005. The discontinued
operations produced a loss of $155,701.
There was no revenue for the three and nine months ended September 30, 2005,
except that attributable to discontinued operations; this compared to revenue
for the three and nine months ended September 30, 2004 of $2,370,380 and
$5,249,928, all attributable to discontinued operations.
Total operating expenses from continued operations for the three and nine months
ended September 30, 2005 were $127,879 and $440,575, respectively, which
primarily consisted of general and administrative expenses. Total operating
expenses from discontinued operations for the nine months ended September 30,
2005 were $155,701, which primarily consisted of general and administrative
expenses.
The loss from operations for the three and nine months ended September 30, 2005
attributable to continued operations was $127,879 and $440,575, respectively.
The loss from operations for the nine months ended September 30, 2005
attributable to discontinued operations was $155,701. This compared to a net
profit for the three months and a net loss for the nine months ended September
30, 2004 of $185,899 and 773,788, each attributable to discontinued operations.
During the nine months ended September 30, 2005, we recorded a one-time gain of
$1,794,893 on the sale of substantially all of our assets.
For the nine months ended September 30, 2004, we recorded an expense for
interest of $24,572.
Net income (loss) for the three and nine months ended September 30, 2005 was
$(127,654) and $1,198,927, respectively. The loss for the three month period
ended September 30, 2005 consists of administrative expenses, including legal
expenses, incurred without any offsetting revenue. Net income for the nine
months ended September 30, 2005 is attributable to the gain from the sale of
substantially all of our assets less the loss from our continued operations and
from our discontinued operations during such period. Net income of $185,899 for
the three months ended September 30, 2004 and a loss of $773,788 for the nine
months ended September 30, 2004 reflect the results of discontinued operations
during such period.
Employees
- ---------
As of September 30, 2005, the Company had one employee, Mr. Brown, our Chairman,
Chief Executive Officer and Secretary. Since all other employees employment was
terminated at the closing, all except 55,000 stock options granted to the
directors of the Company were cancelled 30 days after January 28, 2005.
- 10 -
Liquidity and Capital Resources
- -------------------------------
At September 30, 2005, the Company had working capital deficit of $7,652,
compared to a working capital deficit of $920,763 at September 30, 2004. The
improvement in working capital is based on the sale of substantially all of our
assets.
Net cash used in operating activities for the nine months ended September 30,
2005, was ($381,564) compared to $449,088 provided by operating activities for
the nine months ended September 30, 2004. This decrease, while not directly
comparable to 2004 due to the discontinued operations, is attributable to the
sale of substantially all of the assets and the loss from operations.
The Company is currently exploring its options which may include acquiring or
otherwise entering into a new business or merging with an as yet unidentified
company or companies. To the extent that we are unable to identify and
successfully complete a transaction within the next six months, we may be unable
to continue as a going concern.
Going Concern Qualification
- ---------------------------
Because of uncertainties as to our future ability to secure capital, our
independent auditors' report on our financial statements for the year ended
December 31, 2004 contains an explanatory paragraph about our ability to
continue as a going concern.
There is substantial doubt about our ability to continue as a going concern. We
currently have no business operations or revenues, and our current business plan
is to acquire or merge with an unidentified company or companies. Our financial
statements do not include any adjustments to reflect the possible effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
New Accounting Pronouncements
- -----------------------------
SFAS No. 154, Accounting Changes and Error Corrections, was issued in May 2005
and replaces APB Opinion N0. 20 and SFAS No. 3. SFAS No. 154 requires
retrospective application for voluntary changes in accounting principle in most
instances and is required to be applied to all accounting changes made in fiscal
years beginning after December 15, 2005. The Company's expected April 1, 2006
adoption of SFAS No. 154 is not expected to have a material impact on the
Company's consolidated financial condition or results of operations.
ITEM 3. CONTROLS AND PROCEDURES.
- ---------------------------------
Evaluation of Disclosure Controls and Procedures
- ------------------------------------------------
As of the end of the period, the Company carried out an evaluation of the
effectiveness of the design and operation of its disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. This evaluation was done by our
Chief Executive Officer, our sole executive officer and employee. Based upon
that evaluation, he concluded that the Company's disclosure controls and
procedures are effective in gathering, analyzing, and disclosing information
needed to satisfy our disclosure obligations under the Exchange Act.
Change in Internal Controls
- ---------------------------
There were no changes in the Company's internal control over financial reporting
or in other factors that could significantly affect those controls since the
most recent evaluation of such controls.
- 11 -
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- ---------------------------
We were involved in litigation with J.C. Herbert Bryant, III, a former officer,
director and one of our shareholders, and KMS-Thin Tab 100, Inc., which was
settled in September 2002. As part of the settlement, we entered into a
distribution agreement with Mr. Bryant, beginning on September 26, 2002 and
ending on September 25, 2007, permitting Mr. Bryant to purchase certain products
from us and to exclusively distribute those products in Florida from Orlando
south. In October 2003, we terminated the distribution agreement with KMS based
on KMS's breach of material terms of the agreement. On December 1, 2003, we
filed suit against KMS-Thin Tab 100, Inc. in the Palm Beach County Circuit Court
(Case No. 2003CA012757XXCDAN) for breach of contract, trademark infringement and
for a declaration of rights that the distribution agreement is terminated and of
no further force and effect. KMS answered the complaint and filed its own
counterclaim for fraud in the inducement, trademark infringement, dilution and
fraudulent misrepresentation; the fraud-based counterclaims were dismissed with
prejudice by the Court on summary judgment. KMS subsequently amended its
counterclaim to allege a breach of contract under the distribution agreement. In
January 2005, the State Court in Florida ruled that neither party should
prevail, and rejected a request for attorney's fees by KMS-Thin Tab 100 Inc.,
thus adjudicating the matter. KMS-Thin Tab 100 Inc. subsequently filed a notice
of appeal.
Subsequently, on July 29, 2005, the 4th District Court of Appeals granted the
Company's motion to dismiss the appeal by KMS-Thin Tab 100 Inc. The Company is
not aware of any other outstanding litigation.
The disclosure set forth under "Item 2. Management's Discussion and Analysis or
Plan of Operation - Recent Developments" is incorporated herein by reference.
ITEM 2. EXHIBITS.
- ------------------
Exhibit 31.1 Certification Pursuant to Item 601(b)(31) of Regulation S-B,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(furnished pursuant to Item 601(b)(32) of Regulation S-B).
ITEM 3 DEFAULTS ON SENIOR SECURITIES
- ---------------------------------------
N/A
ITEM 4 SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
- ----------------------------------------------------------
At the Company's annual meeting held on August 4, 2005, the shareholders elected
James A. Brown, Steven Pomerantz and Theodore Alflen as to serve as directors
until the next annual meeting. The shareholders also approved an amendment to
the Company's Articles of Incorporation which increased the total number of
authorized shares of the Company to 160,000,000 shares, consisting of (i)
150,000,000 shares of common stock and (ii) 10,000,000 shares of "blank check"
preferred stock.
- 12 -
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.
Date: November 14, 2005 ASHLIN DEVELOPMENT CORPORATION
By: /s/James A. Brown
--------------------------------------
James A. Brown
Chairman, Chief Executive Officer
and Secretary
(Principal executive officer and duly
authorized officer)
- 13 -
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- --------- ------------------------------------------------------------------
31.1 Certification Pursuant to Item 601(b)(31) of Regulation S-B, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(furnished pursuant to Item 601(b)(32) of Regulation S-B).
Exhibit 31.1
CERTIFICATIONS
I, James A. Brown, Chief Executive Officer of Ashlin Development
Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A of Ashlin
Development Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
small business issuer as of, and for, the periods presented in this report;
4. I am currently the sole officer and employee of the small business
issuer and I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to me by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report my conclusions
about the effectiveness of the disclosure and controls procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the small business issuer's auditors and
the audit committee of the small business issuer's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: November 14, 2005
/s/ James A. Brown
-------------------------
James A. Brown
Chief Executive Officer
Exhibit 32.1
ASHLIN DEVELOPMENT CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ashlin Development Corporation (the
"Company") on Form 10-QSB/A for the quarterly period ended September 30, 2005 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, James A. Brown, Chairman, Chief Executive Officer and Secretary of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in
all material respects, the financial condition and results
of operations of the Company.
ASHLIN DEVELOPMENT CORPORATION
/s/ James A. Brown
-----------------------------------
James A. Brown
Chief Executive Officer
November 14, 2005