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EX-32 - CERTIFICATION - DETONICS SMALL ARMS LTDexhibit32.htm
EX-31 - CERTIFICATION - DETONICS SMALL ARMS LTDexhibit31.htm
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________

Commission File Number: 002-71136

DETONICS SMALL ARMS LIMITED
(Exact name of registrant as specified in its charter

Washington 91-1150122
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)

14508 SE 51st, Bellevue, WA 98006
(Address and zip code of principal executive offices)

(425) 746-6761
(Registrant's telephone number, including area code)

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 [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [  ]   No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ] Accelerated filer  [  ]
Non-accelerated filer [  ]  (Do not check if a smaller reporting company) Smaller reporting company  [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]    No [X]


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 2010.

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 partnership and the rights to produce products owned by the partnership. 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 and has been renamed Detonics. 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. 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.

Parts are being manufactured by Detonics and firearms assembly is now expected to take place late in 2010.

Sid Woodcock, co-General Partner of the partnership is no longer a consultant to 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 the company now named Detonics.


PART II - OTHER INFORMATION

Item 1: Legal Proceedings: None
   
Item 2: Unregisterd Sales of Equity securities andUse of Proceeds: None
   
Item 3: Defaults Upon Senior Securities: None
   
Item 4: Controls and Procedures:
   
 

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, summarized 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 procedures are effective.

There were no changes in our internal control over financial reporting during the three months ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

   
Item 5: Other Information: None
   
Item 6: Exhibits:
   
  a) Documents filed as part of this Report: Unaudited financial statement.
   
  b) Reports on Form 8-K: None.

DSAL has no independent auditor at present, in accordance with Rule 3-11 of Regulation S-X.


Appendix A

DETONICS SMALL ARMS LIMITED
BALANCE SHEET
September 30, 2010
(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
September 30, 2010
(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.


DETONICS SMALL ARMS LIMITED
STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDING
September 30, 2010
(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)
   
11/3/10 /s/ Michel E. Maes, Managing General Partner
(Date)       (Signature)