Attached files
file | filename |
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EX-32 - EXHIBIT 32 - DETONICS SMALL ARMS LTD | ex32.htm |
EX-31 - EXHIBIT 31 - DETONICS SMALL ARMS LTD | ex31.htm |
10-Q
Commission
File Number: 2-71136
DETONICS
SMALL ARMS LIMITED
(Exact
name of registrant as specified in it's charter)
Washington
|
91-1150122
|
(State
or other Jurisdiction of incorporation or organization)
|
(IRS
Employer ID No.)
|
14508 SE
51st, Bellevue, WA 98006
(Address
and zip code of principal executive offices)
Registrant's
telephone number, including area code: (425) 746-6761
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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: ¨
DOCUMENTS
INCORPORATED BY REFERENCE
Form S-1,
Detonics Small Arms Limited, Commission File No. 2- 71136, but excluding the
balance sheet of Detonics Small Arms Limited together with the report of
independent certified public accountants, is incorporated by
reference.
Page
1
PART I -
FINANCIAL INFORMATION
Item
1:
|
Financial
Statements
|
See
Appendix A
Item
2:
|
Management's
Discussion and Analysis of the Financial Condition and Results of
Operations
|
No
royalties or other income were booked in the third quarter of 2009.
The
partnership originally had licensed the manufacturing and sale of its products
to Detonics Manufacturing Corporation (DMC) a subsidiary of Energy Sciences
Corporation, (ESC). DMC, ESC and the Partnership entered Chapter 11
bankruptcy proceedings on April 29, 1986. In late 1987, the
Bankruptcy Court approved a sale of all of DMC's assets to a new entity, formed
by outside third parties, called New Detonics Manufacturing Corporation, (NDMC).
By subsequent majority vote of the limited partners of the Partnership, a new
license was entered into between the Partnership and NDMC, which called for
royalties to begin in late 1991 at the rate of 4% of gross sales. No
partnership income was expected before that time.
On May
13, 1988, ESC's bankruptcy was dismissed and all remaining assets were
repossessed by the sole secured creditor of ESC, the firm of Murphy &
Elgot. These assets are primarily amounts owed to ESC by the
partnerships and the rights to produce products owned by the
partnerships. The general partners had discussions with Mr. Murphy,
(who was also counsel for ESC and the partnerships), on the elimination of most
or all the debt owed by the Partnership to ESC, (and, therefor to Murphy &
Elgot).
As
previously reported, the general partners learned in late 1991 that production
of firearms at NDMC was suspended in 1991. The general partners have
subsequently been advised that Murphy & Elgot, the sole secured creditors of
the original DMC, have moved to have the "soft" assets (the name "Detonics" and
the right to manufacture the Detonics designs) which were assigned to NDMC by
the Bankruptcy Court be returned to Murphy & Elgot and Moore. This occured
in September 1992. Mr. Murphy passed away in 1997. The general
partners have had discussions with Mr. Elgot regarding future attempts to
recommercialize the products and he indicated he would approve any
recommercialization plan that the general partners would be able to
obtain. The general partners had been discussing such plans with a
third party. Royalty amounts of 5% of gross sales have been verbally
agreed to, but no written agreement had been prepared or signed as of December
31, 2002. It was learned in April 2003 that this plan would not take
place. Mr. Ahern continued to explore other financing sources and the
partnership has signed a three year agreement with Mr. Ahern giving him the
exclusive right to seek funding or a partner to reestablish production. There
can be no guarantee that it will be possible to arrange for production of any of
the Partnership's products.
Mr.Ahern
was successful in finding a backer and a new company named Detonics USA LLC was
formed (not owned by the partnership) The partnership signed a license agreement
with Detonics USA LLC which involves a royalty of about 5% of gross sales of
each of the partnership's products manufactured and sold, appropriately divided
among all the firearms partnerships and shared with Mark Elgot and Richard Moore
in the ratio of 35% to Elgot and Moore combined and 65% to the partnership(s)
whose products have been sold.
Detonics
USA was subsequently purchased by Double Nickel LLC in late 2007 and operates as
a division of that company. The partnership payments have been
changed to a flat $25.00 per Detonics and 1911A gun sold and $5.00 per
non-Detonics gun sold. Since Double Nickel has made some significant changes to
the origional Detonics design, it is possible that the partnership payments will
be renegotiated in the future.
The split
between the partnership and Mark Elgot and Richard Moore remains the same
65%/35%. There can be no assurance that Double Nickel will succeed
and that royalties will be paid.
None of
the partnership's firearms designs is yetin production by Double
Nickel.
Page
2
Sid
Woodcock, co-General Partner of the partnership is no longer affiliated with
Double Nickel. Michel Maes, also co-General and Managing Partner of the
partnership, is a co-owner of an electronics company. Mr. Maes is not
a stock holder and has not played an active role in Double Nickel
LLC.
PART II -
OTHER INFORMATION
Item
1:
|
Legal
Proceedings
|
The staff
of the Securities and Exchange Commission's Division of Enforcement recommended
to the Commission that it authorize the staff to file a civil injunction action
against the Partnership and Messrs. Maes and Steffey to require timely filing of
reports with the commission. Such an injunction was entered on June
25, 1986. All subsequent reports have been timely filed.
On
October 16, 1989 the U.S. Bankruptcy Court ordered the conversion of the
partnership's Chapter 11 to a Chapter 7. On May 11, 1990, the
partnership filed an amended motion to dismiss the Chapter 7. The
motion was granted on June 21, 1990 and the partnership is no longer in
bankruptcy.
In March
1993, the partnership received a "Notice of Beginning of Administrative
Proceeding" from the Internal Revenue Service. The issue was a
possible finding that the partnership "burned out" and is subject to
recapture. The general partners are of the position that the products
and the partnership remain viable. In July, 1993, the general
partners received notification from the IRS that they did not intend to make any
changes as a result of that Administrave Proceeding. The IRS has the
right to bring the subject up again.
Item
2:
|
Changes
In Securities: None
|
Item
3:
|
Defaults
Upon Senior Securities: None
|
Item
4:
|
Submission
Of Matters To A Vote Of Security Holders:
None
|
Item
5:
|
Other
Information: None
|
Item
6:
|
Exhibits,
Financial Statement Schedules, and Reports on Form
8-K
|
|
a)
|
Documents
filed as part of this Report: Unaudited financial
statement.
|
|
b)
|
Reports
on Form 8-K: None.
|
Item
9:
|
Disagreements
on Accounting and Financial Disclosure
Matters
|
DSAL has
no independent accountant at present, in accordance with Rule 3-11 of Regulation
S-X
Item
9A
|
Controls
and Procedures
|
Page
3
The
Partnership's disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports that are filed or submitted
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summerized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. Disclosure controls and
procedures include, without limitation, controls and proceedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Act is accumulated and communicated to the
issuer's management including its principal executive and principal financial
officers, or persons performing similar functions (the Managing General
Partner), as appropriate to allow timely decisions regarding required
disclosure.
The
Managing General Partner has reviewed the effectiveness of the Partnership's
disclosure controls and procedures as of the end of the period covered by this
Form 10-Q report and have concluded that the disclosure controls and proceedures
are effective.
There
were no changes in our internal control over financial reporting during the
three months ended Sept.30, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
9B
|
Other
Information
|
None
Page
4
Appendix
A
DETONICS
SMALL ARMS LIMITED
BALANCE
SHEET
Sept.30,
2009
(UNAUDITED)
ASSETS
|
||||
Cash
|
$ | 0 | ||
Royalties
Receivable
|
0 | |||
TOTAL
CURRENT ASSETS
|
$ | 0 | ||
Intangible
Assets Less Amortization
|
0 | |||
Receivable
from Affiliates Less Allowance
|
0 | |||
TOTAL
ASSETS
|
$ | 0 | ||
LIABILITIES
AND PARTNERS' EQUITY
|
||||
Accounts
Payable
|
$ | 0 | ||
Taxes
Payable
|
0 | |||
TOTAL
CURRENT LIABILITIES
|
0 | |||
Payable
to Affiliates
|
672,769 | |||
TOTAL
LIABILITIES
|
672,769 | |||
Partners'
Capital
|
||||
(672,769 | ) | |||
TOTAL
LIABILITIES
|
||||
AND
PARTNER'S EQUITY
|
0 |
DETONICS
SMALL ARMS LIMITED
STATEMENT
OF INCOME
FOR THE
QUARTER ENDING
Sept.30,
2009
(UNAUDITED)
Royalty
Revenue
|
$ | 0 | ||
Expenses
|
0 | |||
Net
Income (Loss)
|
$ | 0 |
NOTE: The products owned by the Partnership were licensed to New Detonics
Manufacturing Corporation (NDMC). Under the terms of that license,
royalties were not scheduled to be paid to the Partnership until late
1991. NDMC suspended production of all firearms and the license with
NDMC has been terminated. A new intellectual property use agreement
was signed with Double Nickel LLC/Detonics in late 2007.
Page
5
DETONICS
SMALL ARMS LIMITED
STATEMENT
OF CASH FLOWS
FOR THE
QUARTER ENDING
Sept.30,
2009
(UNAUDITED)
Net
Cash Provided By Operating Activities
|
$ | 0 | ||
Net
Cash Used By Investing Activities
|
0 | |||
Net
Cash Provided By Financing Activities
|
0 | |||
Net
Increase In Cash
|
$ | 0 | ||
Cash
At Beginning Of Period
|
$ | 0 | ||
Cash
At End Of Period
|
$ | 0 |
SIGNATURES
Pursuant
to the Requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
DETONICS
SMALL ARMS LIMITED
|
|
(Registrant)
|
|
11/5/09
|
/S/ Michel
E. Maes, Managing General Partner
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(Date)
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(Signature)
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Page 6