Americhip International (ACHI) 10QSB 2005 Q3 Quarterly report (small business)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDING AUGUST 31, 2005

AMERICHIP INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

Nevada (State or other jurisdiction of
incorporation or organization) 000-33127 (Commission File Number) 98-0339467 (I.R.S. Employer Identification)

9282 General Drive, Suite 100, Plymouth, MI	48170-4607
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (734) 207-0338

(Former name or former address, if changed since last report)

Copies of all communications, including all communications sent to the agent for service, should be sent to:

Joseph I. Emas, Attorney at Law

1224 Washington Avenue

Miami Beach, Florida 33139

Telephone: 305.531.1174

Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 o

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

As of October 17, 2005 222,885,535 shares of $.001 par value common stock were outstanding.

Transitional Small Business Disclosure Format (check one) Yes o No x

AMERICHIP INTERNATIONAL INC.

FORM 10-QSB

	Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Condensed balance sheets at August 31, 2005 and November 30, 2004	F-1
Condensed statements of operations for the Nine Months ended August 31, 2005 and 2004	F-2
Condensed statements of cash flows for the Nine Months ended August 31, 2005 and 2004	F-3 - F-4
Notes to the condensed consolidated financial statements	F-5 - F-20
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations	2
Item 3. Controls and Procedures	17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	18
Item 2. Changes in Securities	18
Item 3. Defaults Upon Senior Securities	18
Item 4. Submission of Matters to a Vote of Security Holders	18
Item 5. Other Information	19
Item 6. Exhibits and Reports on Form 8-K	19
Signatures	20

 

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

The financial statements of the company are set forth beginning on page F-1.

AMERICHIP INTERNATIONAL, INC

(Formerly Southborrough Ventures, Inc.)

CONSOLIDATED BALANCE SHEETS

	August 31, 2005 (unaudited)			November 30, 2004
ASSETS
CURRENT ASSETS
Cash	$	12,027		$	180,690
Accounts receivable - trade		18,172			32,446
Prepaid expenses		7,277			5,745
Inventory		232,766			230,000
TOTAL CURRENT ASSETS		270,242			448,881
FIXED ASSETS
Furniture & fixtures		12,464			10,439
Machinery & equipment		254,620			14,000
Less accumulated depreciation		(11,709	)		(1,616	)
TOTAL FIXED ASSETS		255,375			22,823
OTHER ASSETS
Intangible assets, net of amortization		—			6,750
Deposits		153,200			103,200
Technology rights and patents, net of amortization		21,561			24,716
Deferred debt offerings costs, net of amortization		78,750			157,500
TOTAL OTHER ASSETS		253,511			292,166
TOTAL ASSETS	$	779,128		$	763,870
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	317,122		$	149,102
Related party payable		1,024,873			826,407
Related party notes payable, current portion		21,006			23,940
Loan payable - employee		438			—
Convertible debentures, net of discounts		181,000			426,194
Accrued interest - related party		388,526			264,688
Accrued interest - other		14,954			7,500
Deposits - private placements		46,603			—
TOTAL CURRENT LIABILITIES		1,994,522			1,697,831
LONG TERM LIABILITIES
Related party notes payable, net of current portion		217,075			226,060
TOTAL LONG TERM LIABILITIES		217,075			226,060
MINORITY INTEREST		3,413			3,413
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 500,000,000 shares authorized,
196,415,298 and 128,787,255 shares issued and outstanding		196,415			128,787
Additional paid-in capital		6,267,883			4,121,061
Accumulated deficit		(7,900,180	)		(5,413,282	)
TOTAL STOCKHOLDERS' DEFICIT		(1,435,882	)		(1,163,434	)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT	$	779,128		$	763,870

The accompanying condensed notes are an integral part of these financial statements.

F-1

AMERICHIP INTERNATIONAL, INC

(Formerly Southborrough Ventures, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	August 31, 2005 (unaudited)			August 31, 2004 (unaudited)			August 31, 2005 (unaudited)			August 31, 2004 (unaudited)
REVENUES
Sales	$	29,560		$	5,940		$	88,797		$	5,940
Commissions		—			—			226			—
		29,560			5,940			89,023			5,940
COST OF SALES		13,787			3,399			47,569			3,399
Gross Profit		15,773			2,541			41,454			2,541
EXPENSES
Administrative service		65,212			140,848			368,832			144,067
Legal and accounting		52,986			165,433			255,641			220,643
Depreciation and amortization		10,485			33,029			19,998			35,461
Consulting expense		977,475			971,585			1,041,664			1,921,618
Directors fee		—			17,500			—			17,500
License expense		90,000			90,000			270,000			270,000
Office expense		11,847			3,010			26,708			22,980
Stock transfer fees		—			2,420			—			3,790
Total Expenses		1,208,005			1,423,825			1,982,843			2,636,059
LOSS FROM OPERATIONS		(1,192,232	)		(1,421,284	)		(1,941,389	)		(2,633,518	)
OTHER INCOME (EXPENSE)
Forgiveness of debt		—			—			—			7,588
Financing expense		(73,613	)		—			(255,289	)		—
Interest		(109,635	)		(60,500	)		(290,220	)		(69,500	)
Total Other Income (Expense)		(183,248	)		(60,500	)		(545,509	)		(61,912	)
LOSS BEFORE TAXES		(1,375,480	)		(1,481,784	)		(2,486,898	)		(2,695,430	)
INCOME TAX EXPENSE		—			—			—			—
NET LOSS	$	(1,375,480	)	$	(1,481,784	)	$	(2,486,898	)	$	(2,695,430	)
BASIC AND DILUTED NET LOSS PER SHARE	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.03	)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING,
BASIC AND DILUTED		173,921,721			107,246,523			146,960,491			98,312,931

The accompanying condensed notes are an integral part of these financial statements.

F-2

AMERICHIP INTERNATIONAL, INC

(Formerly Southborrough Ventures, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended August 31, 2005 (unaudited)			Nine Months Ended August 31, 2004 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers	$	103,297		$	—
Cash paid to suppliers & employees		(315,620	)		(354,561	)
Interest paid		(158,928	)		(62,500	)
Net cash used by operating activities		(371,251	)		(417,061	)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets		(242,645	)		(30,000	)
Payments on deposits		(50,000	)		(70,000	)
Net cash used by investing activities		(292,645	)		(100,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable - employee		2,025			—
Payments on loan payable - employee		(1,587	)		—
Payments on related party payable		(71,534	)		107,574
Payments made on related party notes payable		(11,919	)		—
Proceeds received on convertible debentures		543,000			—
Proceeds from the issuance of common stock		35,248			525,000
Common stock issued in private placement		—			118,602
Subscription receivable paid		—			5,000
Net cash provided by financing activities		495,233			756,176
NET INCREASE (DECREASE) IN CASH		(168,663	)		239,115
CASH, BEGINNING OF PERIOD		180,690			—
CASH, END OF PERIOD	$	12,027		$	239,115

The accompanying condensed notes are an integral part of these financial statements.

F-3

AMERICHIP INTERNATIONAL, INC

(Formerly Southborrough Ventures, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

	Nine Months Ended August 31, 2005 (unaudited)			Nine Months Ended August 31, 2004 (unaudited)
RECONCILIATION OF NET LOSS TO NET CASH
USED BY OPERATING ACTIVITIES
Net loss for the period	$	(2,486,898	)	$	(2,695,430	)
Depreciation and amortization which did not require the use of cash		19,998			35,461
Amortization of fniance charges which did not require the use of cash		215,556			—
Licenses expense which did not require the use of cash		270,000			—
Warrants issued for services		19,524			305,600
Common stock issued for interest on convertible debt		15,453			—
Common stock issued for consulting services		1,215,475			2,394,485
Common stock issue for professional services		3,750			—
Net cash used by operating activities		(727,142	)		40,116
Adjustments to reconcile net loss to net cash used by operating activities
(Increase) Decrease
Accounts receivable - trade		14,274			(5,940	)
Prepaid expenses		(1,532	)		—
Inventories		(2,766	)		(218,988	)
(Increase) Decrease
Accounts payable and accrued expenses		168,020			(239,249	)
Accrued interest payable		131,292			7,000
Deposits - private placement		46,603			—
Net cash used by operating activities	$	(371,251	)	$	(417,061	)
SUPPLEMENTAL NON-CASH ACTIVITY
Stock issued for repayment of convertible debt	$	925,000		$	—
Warrants issued for services		19,524			305,600
Common stock issued for interest on convertible debt		15,453			—
Common stock issued for consulting services		1,215,475			2,394,485
Common stock issued for professional services		3,750			—
Common stock issued for subscriptions		—			26,398
Common stock issued for debt offering costs		—			210,000
Stock issued for intangibles		—			9,000
Note payable for inventory & equipment		—			250,000

The accompanying condensed notes are an integral part of these financial statements.

F-4

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

NOTE 1 – BASIS OF PRESENTATION

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended November 30, 2004. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company's financial position and results of operations.

Certain amounts from prior periods have been reclassified to conform to the current period presentation. This reclassification has resulted in no changes to the Company’s accumulated deficit or net losses presented.

During the nine months ending August 31, 2005, no allocation of losses was made to the minority interest, because the Company’s 80% owned subsidiary, AmeriChip, Inc., is considered dormant and is not expected to conduct business in the future.

Operating results for the nine-month period ended August 31, 2005 are not necessarily indicative of the results that may be expected for the year ending November 30, 2005.

NOTE 2 – GOING CONCERN UNCERTAINTY

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred material recurring losses from operations. At August 31, 2005, the Company had an accumulated deficit of $7,900,180. For the nine months ended August 31, 2005, the Company sustained a net loss of $2,486,898. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. The Company’s

F-5

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

continuation as a going concern is contingent upon its ability to obtain additional financing and to generate revenue and cash flow to meet its obligations on a timely basis. The Company’s management is currently putting sales strategies in place which will, if successful, mitigate these factors which raise substantial doubt about the Company’s ability to continue as a going concern.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Accounting for Convertible Notes and Securities with Beneficial Conversion Features

Following guidance by EITF 00-27 the Company allocates proceeds received from convertible notes and/or securities first to warrants granted to the note holders. The value of the warrants and the beneficial conversion feature are recorded on the balance sheet as a debt discount and as an increase to shareholders equity. The discounts are amortized over the life of the loans.

Inventories

Inventories, consisting of products available for sale, are recorded using the weighted average method. As of August 31, 2005, the inventory of the Company’s subsidiary AmeriChip Tool and Abrasives, LLC totaled $232,766, consisting of $222,998 of grinding and abrasive products and $9,768 of other materials.

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years.

The following is a summary of property and equipment, at August 31, 2005:

Furniture and fixtures	$	12,464
Plant assets		254,620
		267,084
Less accumulated depreciation		( 11,709	)
	$	255,375

The Company recognized $10,093 in depreciation expense for the nine months ended August 31, 2005. The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized. The cost and related reserves of assets sold or retired are removed from the accounts and any resulting gain or loss is reflected in results of operations. The Company will begin the depreciating one asset when it has been placed in service.

F-6

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

Provision for Taxes

Income taxes are provided based upon the liability method of accounting pursuant to Statement of Financial Accounting Standards No. 109 (hereinafter “SFAS No. 109”), “Accounting for Income Taxes.” Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by SFAS No. 109 to allow recognition of such an asset.

At August 31, 2005 and November 30, 2004, the Company had deferred tax assets of approximately $2,686,000 and $1,652,000, respectively, principally arising from net operating loss carryforwards for income tax purposes multiplied by an expected tax rate of 34%. As management of the Company cannot determine that it is more likely than not that the Company will realize its benefit of the deferred tax assets, a valuation allowance equal to the deferred tax assets was present at August 31, 2005 and November 30, 2004.

The significant components of the deferred tax assets at August 31, 2005 and November 30, 2004 were as follows:

	August 31, 2005			November 30, 2004
Net operating loss carryforward	$	7,900,180		$	4,858,000
Warrants issued:	$	—		$	305,600
Deferred tax asset	$	2,686,000		$	1,652,000
Deferred tax asset valuation allowance	$	(2,686,000	)	$	(1,652,000	)

At August 31, 2005 and November 30, 2004, the Company has net operating loss carryforwards of approximately $7,900,180 and $4,858,000, respectively, which expire in the years 2021 through 2025. The Company recognized $0 and $305,600 of losses from issuance of warrants for services as of August 31, 2005 and November 30, 2004, respectively, which are not deductible for tax purposes and are not included in the above calculation of deferred tax assets. The change in the allowance account from November 30, 2004 to August 30, 2005 was $1,034,000.

The Tax Reform Act of 1986 substantially changed the rules relative to the use of net operating losses and general business credit carryforwards in the event of an “ownership change” of a corporation. The Company has issued additional shares of common stock, which may have resulted in restrictions on the future use of net operating losses and tax credit carryforwards generated before an ownership change. The effect of such change has not been determined.

F-7

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

Revenue and Cost Recognition Policies

The Company recognizes revenue from product sales when the products are shipped and title passes to customers. The Company has not provided an allowance for sales returns because the revenues are new and there is no historical experience on which to base an estimate. This assessment may change as the Company develops the appropriate history of transactions in its operating companies and a provision for sales returns will be established. Returns of a product, if permitted by the manufacturer, are charged a 15% restock fee. Specialized machined products created to the customer’s blueprint specifications are also being produced. These product costs are market driven and the Company warrants the finished product to the extent they meet the specifications.

In, 2004, the Company, through its business plan expanded its focus to include certain agency relationships for multiple vendors. As such, its policy for revenue recognition has been revised to recognize its status as an agent for these vendors. As an agent, the Company recognizes its commissions when earned. Commissions are earned by the Company when an order has been placed, delivery taken, and title has passed to the customer.

During the nine months ended August 31, 2005, the Company recognized $88,797 of revenues from product sales and $226 from the agency relationships. Cost of sales consists of the purchase price of products sold, inbound and outbound shipping charges, and packaging supplies. Cost of sales totaled $47,569 for the nine months ended August 31, 2005.

NOTE 4 – STOCK OPTIONS AND WARRANTS

Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,”defines a fair value-based method of accounting for stock options and other equity instruments. The Company has adopted this method, which measures compensation costs based on the estimated fair value of the award and recognizes that cost over the service period.

Stock Options

On October 22, 2003, the Company’s board of directors approved the AmeriChip International Inc. 2003 Non-Qualified Incentive Stock Option Plan (hereinafter “the Plan”). The Plan initially allowed the Company to issue up to 8,000,000 shares of the Company’s common stock to officers, directors, employees and consultants. On December 12, 2003, the Company’s board of directors authorized an increase of 4,000,000 shares issuable in accordance with the terms of the Plan. In May 2004, the Company’s board of directors authorized an increase of 8,000,000 shares issuable in accordance with the terms of the Plan. All 20,000,000 shares issuable in accordance with the Plan have been registered with the Securities and Exchange Commission on Form S-8. In the years ended November 30, 2004 and 2003, the Company issued 14,650,000 and 5,350,000 stock options, respectively, under this plan. There are no remaining options to be issued under the Plan. The Company issued 20,000,000 options to consultants for marketing, website, and

F-8

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

advisory services, of which 5,750,000 were to a related party. There were no options issued to officers, directors or employees. These options were all valued using the fair market value of the stock on the date of grant. On June 30, 2005, the Company filed a Form S-8 registering an additional 18,000,000 shares of common stock under this plan. On August 4, 2005, the Company filed a Form S-8 registering an additional 20,000,000 shares of common stock under this plan. On September 19, 2005, the Company filed a Form S-8 registering an additional 22,000,000 shares of common stock under this plan.

During the year ended November 30, 2004, options totaling 14,650,000 were exercised at an average of $0.11 per share for $1,582,500 of consulting services provided to the Company. The options were valued at the market price on the date of grant. These options were exercised immediately upon grant, and therefore the Company has deemed that no additional value should be assigned to the options.

During the nine month period ending August 31, 2005, options totaling 22,325,000 were exercised at an average of $0.03 per share for $728,000 of consulting fees provided to the Company. The options were valued at the market price on the date of grant. These options were exercised immediately upon grant, and therefore the Company has deemed that no additional value should be assigned to the options.

The following is a summary of stock option activity:

	Number of Shares Under the Option Plan			Weighted Average Exercise Price
Outstanding December 1, 2003		—			—
Granted		14,650,000		$	0.11
Exercised or expired		(14,650,000	)		(0.11	)
Outstanding November 30, 2004		—		$	—
Weighted average fair value of
options granted during the
period ended November 30, 2004				$	0.11
Outstanding December 1, 2004		—		$	—
Granted		38,000,000			0.03
Exercised or expired		(22,325,000	)		(0.03	)
Outstanding August 31, 2005		15,675,000		$	0.03
Weighted average fair value of
options granted during the
period ended August 31, 2005				$	0.03

F-9

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

Warrants

The fair value of warrants issued in the nine months ended August 31, 2005 was estimated on the grant date using the Black-Scholes Option Price Calculation. The following assumptions were made in estimating fair value: risk-free interest rate is 4%, volatility is 148%, and expected life is 3 years.

During the nine months ended August 31, 2005, 1,050,000 stock warrants previously issued under certain consulting agreements were cancelled. The Company issued 3,200,000 new three-year warrants to acquire 3,200,000 shares of common stock at an exercise price of $0.035 per share. Additional fair value of the warrants determined on the new grant date of $19,524 was expensed to consulting and 150,000 warrants of the aforementioned new issuance were exercised during the six months ended May 31, 2005 for common stock for cash of $5,250, which approximates the fair value on the date of grant. In June, 2005, these 3,050,000 of outstanding warrants were cancelled and replaced by the issuance of 6,065,000 shares of common stock.

In establishing fair value of warrants issued in the year ended November 30, 2004, the value was estimated on the grant date using the Black-Scholes Option Price Calculation with the following assumptions: risk-free interest rate is 5%, volatility is 100%, and expected life is 3 years.

In the year ended November 30, 2004, warrants were issued pursuant to a consulting agreement, to acquire 750,000 shares of common stock at an exercise price of $0.25. The fair value of the warrants, which was determined on the date of grant, was $31,500. The Company also issued 7,914,285 shares of common stock with 11,871,428 warrants attached. The warrants have an exercise price of $0.08 per share. The fair value of the warrants, which was determined on the date of grant, was $277,000. All warrants were issued for three years and were immediately expensed to consulting.

F-10

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

Summarized information about stock warrants outstanding and exercisable at August 31, 2005 and the fiscal year ended November 30, 2004 are as follows:

	Number of warrants			Weighted Average Remaining Life		Average exercise price
Warrants issued and exercised for 2004		12,621,428			2.25	$	0.09
During the nine months ended August 31, 2005:
Issued		3,200,000			3.00	$	0.035
Cancelled		(3,050,000	)		3.00		0.035
Exercised		(150,000	)		—		0.035
Total warrants outstanding at August 31, 2005		—			—	$	—
Total unexercised warrants at August 31, 2005		—			—	$	—

NOTE 5 – COMMON STOCK

In May 2004, the Company’s board of directors elected to increase the authorized capital of the Company from 100,000,000 shares of common stock to 500,000,000 shares of $0.001 par value common stock. All shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

During the nine months ended August 31, 2005, the Company issued 32,133,043 shares of common stock for an average of $0.03 per share for convertible debt of $925,000 and related interest costs of $15,453. The value of these shares was determined by the agreement between the Company and Cornell Capital Partners LP. (See Note 6.) The Company also issued 150,000 shares of common stock for the exercise of warrants for cash of $5,250; 6,065,000 shares of common stock were issued in exchange for the cancellation of all outstanding warrants issued by the Company at a price of $0.35 per share for a fair value of $212,275; 2,800,000 shares of common stock were issued in a private placement for $29,998 in cash; 26,505,000 shares were issued at an average price of $0.03 per share for consulting services with a fair value of $872,700.

During the year ended November 30, 2004, 14,650,000 shares of common stock were issued upon exercise of options at an average of $0.11 per share for consulting services with a fair value of $1,582,500; 7,914,285 shares of common stock and warrants were issued for an average of $0.07 per share for consulting and services with a fair value of $551,100; and 2,900,000 shares of common stock were issued in a private placement for $145,000 in cash for $0.05 per share.

F-11

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

The Company issued 3,134,329 shares of common stock for an average of $0.067 per share for $210,000 of debt offering costs and 9,053,141 shares of common stock for an average of $0.033 per share for $275,000 of convertible debt and $3,901 of related interest costs. The Company also issued 150,000 shares of common stock for $0.06 per share for non-compete agreements valued at $9,000, related to the asset purchase agreement, 250,000 shares of common stock for $0.07 per share for $17,500 for director services, and 5,365,500 shares of common stock were issued for an average of $0.06 per share for consulting and services valued at $329,585. The fair value for all common stock issuances for consulting and services was determined using the fair market value of the stock on the dates of issuance.

In 2003, three shareholders acquired 900 shares of common stock of AmeriChip, Inc., of which, 720 shares were traded for all of the 225,000 shares of common stock outstanding of AmeriChip Ventures, Inc., which became a wholly owned subsidiary. This transaction created a minority interest in AmeriChip, Inc. of 20%. The aforementioned 225,000 shares were exchanged in May 2003 for 60,000,000 shares of common stock of AmeriChip International Inc. as part of the reverse merger acquisition. As the Company had no par value for its stock and had negative stockholders’ equity at the date of the merger, a discount on common stock in the amount of $26,345 was recorded in the accompanying consolidated financial statements for the year ended November 30, 2003. During the year ended November 30, 2004, the board of directors elected to cancel the discount after subsequently raising additional paid-in capital.

NOTE 6 – CORNELL CAPITAL PARTNERS LP FINANCING

Following guidance by EITF 00-27 the Company allocates proceeds received from convertible notes and/or securities first to warrants granted to the note holders. The value of the warrants and the beneficial conversion feature are recorded on the balance sheet as a debt discount and as an increase to shareholders equity. The discounts are amortized over the life of the loans.

In accordance with EITF 98-5 and 00-27, the amount of beneficial conversion is determined at the commitment date of each debt instrument as the difference between the stated conversion price within the instrument and the fair market value at the date of the draw-down on the debt instrument.

On May 25, 2004, the Company entered into a standby equity distribution agreement and various security and debenture agreements with Cornell Capital Partners LP (hereinafter “Cornell Capital”) in order to provide the Company with up to $6,000,000 of funding over approximately the next 24 months. These agreements are subject to limitation on borrowing and conversion of debt to equity. As part of its obligation under the agreements, the Company filed a registration statement on Form SB-2 to register the common stock issued to Cornell Capital and the common stock issuable in accordance with the terms of the equity distribution agreement. As of August 31, 2005, the Company has received a total of $1,205,500 under these agreements net of associated costs totaling $194,500. The Company also issued 3,134,329 shares of common stock valued at $210,000 as the commitment fee associated with this agreement. The commitment fee

F-12

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

was deemed to be a deferred debt offering cost and is being amortized as a financing expense over the effective period of 24 months. Amortization for the nine months ended August 31, 2005 and 2004 was $78,750 and $26,250, respectively.

Standby Equity Agreement Transactions

In August 2004, the Company signed a short-term promissory note in favor of Cornell Capital for $225,000. Terms of the note included a stipulated interest rate of 12% and a provision for full repayment within sixty-two calendar days. The note was convertible at the holder’s option any time up to maturity at a conversion price equal to the lower of 120% of the of the closing bid price of the common stock as listed on a principal market as of the date of the debenture or an amount equal to 80% of the lowest closing bid price of the Company’s common stock for the five trading days immediately preceding the conversion date. The Company received $206,125 in cash and incurred related fees and expenses of $18,875, which were expensed to financing costs. During the year ended November 30, 2004, Cornell Capital converted the loan into 5,809,251 shares of common stock in payment of the aforementioned note principal and related interest of $3,901. The Company had a beneficial conversion feature of $56,250 attributed to the aforementioned debt. According to EITF 00-27, because the debt was convertible at issuance, the debt discount was recorded as a charge to interest and was immediately expensed. The effective interest rate is approximately 2% on interest, 8% on financing fees and 25% on the beneficial conversion feature for a total of 35%.

In November 2004, the Company signed a short-term promissory note in favor of Cornell Capital for $275,000. Terms of the note included a stipulated interest rate of 12% and a provision for full repayment within eighty-nine calendar days. The note was convertible at the holder’s option any time up to maturity at a conversion price equal to the lower of 120% of the of the closing bid price of the common stock as listed on a principal market as of the date of the debenture or an amount equal to 80% of the lowest closing bid price of the Company’s common stock for the five trading days immediately preceding the conversion date. The Company received $249,375 in cash and incurred related fees and expenses of $25,625, which are being amortized as a financing expense over the duration of the note. Amortization for the nine months ended August 31, 2005 and 2004 was $25,625 and zero, respectively. In the year ended November 30, 2004, Cornell Capital received 3,243,210 shares of common stock in payment of $50,000 of principal for the aforementioned note. In the nine months ended August 31, 2005, Cornell Capital converted 4,961,842 shares of common stock for payment of the remaining note principal of $225,000 and related interest of $10,464. The Company had a beneficial conversion feature of $68,750 attributed to the aforementioned debt. According to EITF 00-27, because the debt was convertible at issuance, the debt discount was recorded as a charge to interest and was immediately expensed. The effective interest rate is approximately 4% on interest, 9% on financing fees and 25% on the beneficial conversion feature for a total of 38%.

In January 2005, the Company signed a short-term promissory note in favor of Cornell Capital for $250,000. Terms of the note included a stipulated interest rate of 12% and a provision for full repayment within eighty-two calendar days. The note is convertible at the holder’s option any time up to maturity at a conversion price equal to the lower of 120% of the of the closing bid

F-13

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

price of the common stock as listed on a principal market as of the date of the debenture or an amount equal to 80% of the lowest closing bid price of the Company’s common stock for the five trading days immediately preceding the conversion date. The Company received $226,250 in cash and incurred related fees and expenses of $23,750, which are being amortized as a financing expense over the duration of the note. Amortization for the nine months ended August 31, 2005 and 2004 was $23,750 and zero, respectively. In the nine months ended August 31, 2005, Cornell Capital converted 2,274,979 shares of common stock for payment of note principal of $125,000. Interest of $9,016 was expensed for the nine months ended August 31, 2005. The Company had a beneficial conversion feature of $62,250 attributed to the aforementioned debt. According to EITF 00-27, because the debt was convertible at issuance, the debt discount was recorded as a charge to interest and was immediately expensed. The effective interest rate is approximately 3% on interest, 10% on financing fees and 25% on the beneficial conversion feature for a total of 38%.

In March, 2005, the Company signed a short-term promissory note in favor of Cornell Capital for $350,000. Terms of the note included a stipulated interest rate of 12% and a provision for full repayment within one hundred twenty-seven calendar days. The note is convertible at the holder’s option any time up to maturity at a conversion price equal to the lower of 120% of the of the closing bid price of the common stock as listed on a principal market as of the date of the debenture or an amount equal to 80% of the lowest closing bid price of the Company’s common stock for the five trading days immediately preceding the conversion date. The Company received $316,750 in cash and incurred related fees and expenses of $33,250, which are being amortized as a financing expense over the duration of the note. Amortization for the nine months ended August 31, 2005 and 2004 was $14,250 and zero, respectively. In the nine months ended August 31, 2005, Cornell Capital received 6,119,661 shares of common stock for payment of note principal of $150,000. Interest of $0 was expensed for the nine months ended August 31, 2005. The Company had a beneficial conversion feature of $87,500 attributed to the aforementioned debt. According to EITF 00-27, because the debt was convertible at issuance, the debt discount was recorded as a charge to interest and was immediately expensed. The effective interest rate is approximately 3% on interest, 10% on financing fees and 25% on the beneficial conversion feature for a total of 38%.

In June, 2005, the Company’s board of directors agreed to cancel its standby equity agreement with Cornell Capital. The Company’s management feels that this cancellation is in the best interest of the Company. In addition, the Company requested a complete accounting from Cornell Capital related to the standby equity agreement, from inception to the current date. As of August 31, 2005, no accounting related to this agreement has been received from Cornell.

Convertible Debenture

In May 2004, the Company signed a convertible debenture in favor of Cornell Capital for $300,000. Terms of the debenture agreement include a maturity date of May 25, 2007, an interest rate of 5% per annum, and a provision for the holder to convert unpaid principal and interest into Company common stock. The debenture is convertible at the holder’s option any time up to maturity at a conversion price equal to the lower of 120% of the of the closing bid price of the

F-14

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

common stock as listed on a principal market as of the date of the debenture or an amount equal to 80% of the lowest closing bid price of the Company’s common stock for the five trading days immediately preceding the conversion date. In connection with the debenture, the Company received $207,000 in cash and incurred loan fees and expenses of $93,000 which are being amortized as a financing expense over the three-year life of the debenture and a preferred conversion feature of $99,107, which was expensed. According to EITF 00-27, because the debt was convertible at issuance, the debt discount was recorded as a charge to interest and was immediately expensed. During the nine months ended August 31, 2005 and 2004, the Company recorded $93,000 and zero, respectively, of financing expense and $3,750 and zero, respectively of interest expense. Cornell Capital also received 14,219,021 shares of common stock at an average price of $0.0211 per share for payment of the entire principal in the amount of $300,000. The effective interest rate is approximately 15% on interest, 31% on financing fees and 33% on the beneficial conversion feature for a total of 79%.

NOTE 7 – CONTRACTS AND AGREEMENTS

CEOcast, Inc.

In November 2003, the Company executed a six-month agreement with CEOcast, Inc. (hereinafter “CEOcast”) to provide consulting services for AmeriChip. CEOcast is entitled to receive $10,000 upon signing the agreement, 300,000 shares of common stock, and $10,000 per month for six months commencing on December 2003. During the year ended November 30, 2004, 300,000 shares of common stock valued on the date of grant at a fair value of $30,000 were issued and recorded as consulting expense, and CEOcast agreed to cancel the agreement with no penalties and to cancel the amounts owed to CEOcast by the Company.

In July 2004, the Company signed a new agreement with CEOcast whereby the Company paid a retainer of $5,000 and issued 2,000,000 shares of common stock valued on the date of grant at a fair value of $140,000. The Company also agreed to pay $5,000 per month commencing in August 2004. During the year ended November 30, 2004, the Company paid $17,000 to CEOcast under the terms of the agreement. All amounts were immediately recorded as consulting expense. During the nine months ended August 31, 2005, the Company paid no fees to CEOcast, as their services were not required.

RM Communications

In October 2003, the Company executed a six-month agreement with RM Communications (hereinafter “RMC”), to provide services and website development for AmeriChip. RMC is entitled to receive $2,000 per month for six months, 100,000 shares of common stock upon signing the agreement, 100,000 shares of common stock upon completion of services, and 300,000 three-year warrants, which will expire in January 22, 2007. The warrants are exercisable per the following terms: 100,000 warrants at $0.30, 100,000 warrants at $0.40, and 100,000 warrants at $0.50. The warrants were determined to have an estimated fair value of $54,000. The Company will also pay additional costs incurred by RMC in performance of the contract. During the year ended November 30, 2004, the Company issued 100,000 shares of common stock

F-15

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

valued on the date of grant at a fair value of $18,000, 300,000 warrants, and $9,000 in cash to RMC. All amounts were immediately recorded as consulting expense.

In April 2004, the Company executed a continuation of the aforementioned agreement for an additional year. RMC is entitled to receive $3,500 per month, 200,000 shares of common stock upon signing the agreement, and 3-year warrants exercisable at $0.25, payable in increments of 150,000 to be issued at the beginning of each quarter. In the year ended November 30, 2004, the Company issued 750,000 warrants under the agreement, valued at the fair value on the date of grants of $31,500. The warrant value was immediately expensed to consulting. The 200,000 shares of common stock were issued with a fair market value of $20,000.

During the nine months ended August 31, 2005, the Company entered into a new agreement with RMC and cancelled all 1,050,000 existing warrants issued to RMC. The Company issued 3,200,000 new three-year warrants to acquire 3,200,000 shares of common stock at an exercise price of $0.035 per share. Additional fair value of the warrants determined on the new grant date of $19,524 was expensed to consulting and 150,000 warrants of the aforementioned new issuance were exercised for common stock for cash of $5,250. See Note 4. In addition, during the nine months ended August 31, 2005, the Company cancelled the 3,050,000 warrants outstanding which were issued to RMC, and issued 6,065,000 shares of restricted common stock to replace these cancelled warrants. These restricted shares were issued at a price of $0.035 per share, for a total amount of $212,275, which was expensed as consulting expenses at the time of their issue.

Seco-Caraboloy

In July, 2005, the Company’s wholly owned subsidiary, AmeriChip Tool and Abrasive has been awarded an expanded territory by Seco-Caraboloy in the State of Michigan.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company entered into a standby equity distribution agreement and various security and debenture agreements with Cornell Capital. (See Note 6.) The Company agreed to reserve 81,119,403 shares of common shares under these agreements and to pursue a registration of these shares with Securities and Exchange Commission. As of August 31, 2005, 41,186,284 common shares have been distributed to Cornell Capital in accordance with these agreements.

Licensing Agreement

In January 2003, the Company entered into a cancelable licensing agreement for patented technology with three shareholders which required aggregate payments of $1,000,000 to each of the three shareholders, payable in monthly installments of $10,000 to each shareholder. Interest on the unpaid principal is accrued at prime plus 1% or 5%, whichever is greater. The Company is currently in default under the agreement, due to non-fulfillment of the insurance clause provision of the contract. The Company is seeking to obtain insurance to satisfy this provision. The accrued principal due the shareholders at August 31, 2005 and November 30, 2004 was $930,000

F-16

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

and $660,000, respectively, and is included in the related party payable. The accrued interest on the principal is $388,526 and $262,500, respectively, and is included in the accrued interest. During the year ended November 30, 2004, the Company paid interest due to two shareholders in the amount of $12,500. The Company recognized $270,000 of monthly expenses for the nine months ended August 31, 2005 and 2004, under the licensing agreement as license expense. The three shareholders have agreed to a suspension of payments until the Company begins generating substantial revenues from operations. The amounts owed will continue to accrue monthly.

NOTE 9 – TECHNOLOGY RIGHTS AND PATENTS

In the year ended November 30, 2003, the Company acquired rights to the patents held by AmeriChip Ventures, Inc., a wholly owned subsidiary of AmeriChip International Inc. These patents are for a process known as Laser Assisted Chip Control technology (“LACC”) which can be used in manufacturing.

Technology licenses and patents are stated at cost. Amortization is provided using the straight-line method over the remaining estimated useful lives of the assets, which is ten years.

The following is a summary of technology licenses and patents and accumulated amortization:

	August 31, 2005			November 30, 2004
Technology licenses and patents	$	42,069		$	42,069
Less accumulated amortization		(20,508	)		(17,353	)
	$	21,561		$	24,716

Amortization expense was $3,155 in the nine months ended August 31, 2005 and $4,207 in the year ended November 30, 2004.

NOTE 10 – RELATED PARTY TRANSACTIONS

The Company has a related party payable for advances from a shareholder totaling $94,873 and $166,407 and as of August 31, 2005 and November 30, 2004, respectively. These advances are not interest bearing and are payable upon demand.

In the year ended November 30, 2004, there were 5,000,000 stock options issued to a related party under the S-8 stock option plan. See Note 4.

See Note 8 regarding the licensing agreement with shareholders.

F-17

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

NOTE 11 – LONG -TERM DEBT

In August 2004, the Company through its wholly owned subsidiary, AmeriChip Tool & Abrasives LLC, entered into an agreement to acquire certain assets of National Abrasive Systems, Co. (hereinafter “NASCO”), a Michigan corporation. NASCO is considered to be a related party because its president is also the president of the AmeriChip International Inc.

Assets acquired included inventory, equipment, and intangible assets. The transaction was funded by the Company’s execution of a $250,000 promissory note and a UCC-1 security interest in the assets acquired. In recording the transaction, the Company assigned fair values to the equipment and inventory, and no additional value to intangible assets acquired. The purchase was recorded as follows:

Furniture and fixtures	$	6,000
Machinery and equipment		14,000
Inventory		230,000
Total purchase price	$	250,000

Terms of the ten-year promissory note include 3.5% interest per annum. Payment of the note includes payment of interest only of $729 for the first six months and monthly payments thereafter of $2,417.

Payments are due on this note as follows for the next five years:

2005	$	9,668
2006	$	29,004
2007	$	29,004
2008	$	29,004
2009	$	29,004

The balance of the note at May 31, 2005 was as follows:

Related party note	$	238,081
Less: Current portion		(21,006	)
Long-term portion	$	217,075

As part of the transaction, the Company also issued 150,000 shares of its common stock valued at $9,000 to two NASCO shareholders for their execution of one-year non-competition agreements in favor of the Company. These non-competition agreements are included in other assets on the balance sheet as intangible assets. The cost is being amortized on the straight-line method over the term of the arrangements. Amortization of $6,750 and $2,250 has been charged to expense as of August 31, 2005 and November 30, 2004, respectively.

F-18

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

NOTE 12 – RESTATEMENT AND CORRECTION OF AN ERROR

Subsequent to the issuance of the original financial statements for the fiscal year ended November 30, 2004, management discovered that a certain accounting position and related information were not correct. The financial statements have been restated to correct errors for interest payments made to related parties, additional issuance of common stock, an improperly recorded expense and the recognition of beneficial conversion features and related interest and financing expenses of convertible debt and loans made to the Company by Cornell Capital.

The Company was advised by the staff of the Securities and Exchange Commission (the “SEC Staff”) as part of a registration filing, that the accounting treatment of debt offering costs, related amortization and beneficial conversion features of the Cornell Capital convertible debenture and promissory notes should be reexamined. The Company agreed with the position of the SEC Staff and has corrected the information. The debt offering cost, which was netted against the $300,000 convertible debenture has been reported as an asset and is being amortized over the life of the standby equity agreement, which is two years. The beneficial conversion features of the promissory notes and convertible debenture are being immediately expensed in accordance with EITF 00-27 because the debt was convertible at issuance. All related amortization and financing expenses are also being immediately expensed to financing costs.

The effect of the restatements for the period ended November 30, 2004 was to increase accumulated deficit $195,859, increase net loss $196,309 and had an immaterial effect on earnings per share. These changes were caused by an increase in deferred debt offering costs of $210,000, less amortization of $52,500, which were incorrectly recorded as a $207,000 deferred issuance cost against the $300,000 convertible debenture with Cornell Capital. The deferred debt offering cost should have only been recorded as an amortizable asset against the standby equity agreement. The increase in convertible debentures, net of discounts of $143,626 incorrectly overstated the preferential conversion features associated with the promissory notes with Cornell Capital. This amount includes removing the aforementioned deferred issuance cost of $207,000 and including the corrected beneficial conversion amount of $99,107 and correcting the amortization of the beneficial conversion features previously accounted for. The decrease in accrued interest of $5,000 includes incorrectly overstated accrued interest of $12,500 which was paid in cash on related party notes and understated interest due on promissory notes with Cornell Capital. The increase in additional paid in capital of $212,633 includes the change in beneficial conversion features and the incorrectly calculated related expenses of the convertible debenture and promissory notes with Cornell Capital. The decrease in consulting services of $12,500 was improperly classified. The increase in common stock issuance was due to 30,000 shares being improperly recorded. These shares were issued for services, but only 50,000 of the contracted

80,000 shares were valued. The shares have now been valued at $0.07 per share, per the original agreement and have increased the common stock by $30, additional paid in capital by $2,070 and consulting expense by $2,100. The increase in interest and financing expense of $206,259 includes the previously unrecognized amounts for related costs and beneficial conversion features of the convertible debenture and promissory notes with Cornell Capital. This amount

F-19

AMERICHIP INTERNATIONAL INC.

(Formerly Southborrough Ventures, Inc.)

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2005

includes a beneficial conversion feature in the amount of $99,107 and corrections for $107,152 of amortization and interest expenses.

Year Ended November 30, 2004
	As Originally Reported			As Restated
Financial Position:
Deferred Offering Costs		—		$	157,500
Convertible Debentures	$	282,568		$	426,194
Accrued Interest	$	277,188		$	272,188
Common Stock	$	128,757		$	128,787
Additional Paid-in Capital	$	3,906,358		$	4,118,991
Accumulated Deficit	$	(5,217,423	)	$	(5,411,182	)
Results of Operations:
Gross Profit	$	23,750		$	23,750
Expenses	$	(3,030,232	)	$	(3,017,732	)
Other Income (Expense)	$	(265,043	)	$	(471,302	)
Net Loss	$	(3,271,525	)	$	(3,465,284	)
Net Loss per Share	$	(0.03	)	$	(0.03	)

NOTE 13 – SUBSEQUENT EVENTS

KSI Machine and Engineering Inc.

On September 14, 2004, the Company executed a letter of intent with KSI Machine and Engineering, Inc. (hereinafter “KSI”) to acquire all of KSI’s outstanding stock. KSI is a manufacturer of automotive die and mold castings which use horizontal spindle 5 axis computer numerical controlled machines. During the year ended November 30, 2004, the Company paid a deposit of $50,000 for this agreement. On December 7, 2004, the Company paid an additional $100,000 and signed a purchase agreement with KSI. As of the date of these financial statements, this acquisition has not been completed. The board of directors of AmeriChip International Inc. entered into a licensing agreement with KSI Machine & Engineering, Inc. for the use of Americhip’s patented Laser Assisted Chip Control technology. KSI and AmeriChip are also negotiating a joint venture relationship, from which AmeriChip will generate revenues from the application of its proprietary technology in a Tier One environment. The Company intends to continue pursuing this acquisition.

F-20

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our unaudited consolidated interim financial statements and related notes thereto included in this quarterly report and in our audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contained in our Form 10-KSB for the year ended November 30, 2004. Certain statements in the following MD&A are forward looking statements. Words such as "expects", "anticipates", "estimates" and similar expressions are intended to identify forward looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. See “Special Note Regarding Forward Looking Information” below.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this Report and in the Company's periodic filings with the Securities and Exchange Commission constitute forward-looking statements. These statements involve known and unknown risks, significant uncertainties and other factors what may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward- looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "intends," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms or other comparable terminology.

The forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties. Such forward-looking statements are based on assumptions that the Company will obtain or have access to adequate financing for each successive phase of its growth, that there will be no material adverse competitive or technological change in condition of the Company's business, that the Company's President and other significant employees will remain employed as such by the Company, and that there will be no material adverse change in the Company's operations, business or governmental regulation affecting the Company. The foregoing assumptions are based on judgments with respect to, among other things, further economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company's control.

Although management believes that the expectations reflected in the forward-looking statements are reasonable, management cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither management nor any other persons assumes responsibility for the accuracy and completeness of such statements.

2

General Development of Business.

GENERAL

The Company

We were incorporated in the State of Nevada on October 17, 2000 as Southborrough Technology Corporation. On March 9, 2001 we changed our name to Southborrough Ventures, Inc. We were in the business of mineral exploration but initially relied upon the mineral exploration of others and never conducted any mineral exploration ourselves. We obtained an option to acquire a 100% interest in a mineral claim located in the Slocan Mining District Province of British Columbia, Canada. We referred to this mineral claim as the Cedar mineral claim. This option was exercisable by us completing further cash payments and share issuances to the option or and by completing minimum required exploration expenditures on the Cedar mineral claim. We allowed the option on this claim to expire on or about June 30, 2003.

Our objective was to conduct mineral exploration activities on the Cedar mineral claim in order to assess whether the claim possessed commercially exploitable reserves of silver, lead or zinc. We were unable to identify any commercially exploitable reserves. Our proposed exploration program was designed to search for commercially exploitable deposits.

On February 27, 2003, our board of directors approved the termination of our exploration activity and the acquisition of the AmeriChip Laser Assisted Chip Control (“LACC”) technology.

On February 27, 2003 our Board of Directors signed an Agreement and Plan of Reorganization with AmeriChip Ventures, Inc. (“AVI”), of Detroit, Michigan to acquire 100% of the outstanding common stock of AVI, in exchange for 60 million shares of our common stock.

On March 22, 2003 the terms of the Agreement and Plan of Reorganization dated February 27, 2003 were consummated pursuant to which we, AVI and AVI shareholders agreed to effect a reorganization under Section 368 (a) (1) (B) of the Internal Revenue Code of 1986, as amended. Pursuant to the Agreement and Plan of Reorganization, we acquired all of the issued and outstanding shares of AVI’s common stock with the result that AVI is now our wholly owned subsidiary corporation. In exchange, for the shares of AVI, we issued 60 million shares common stock to David Howard, the former Chairman of our Board of Directors, Marc Walther, our Chief Executive Officer, and Ed Rutkowski, a member of our Board of Directors. Each of the foregoing individuals received 20 million shares of common stock and were the sole shareholders of AVI.

On January 21, 2003, Ed Rutkowski, transferred his patent, which covers the technology discussed below, to AVI. In consideration of the transfer of the patent, we are

3

obligated to pay the following: Messrs Howard, Walther and Rutkowski, each received US $1 million payable at the rate of $10,000 on or before the first day of each calendar month beginning September 1, 2003 with interest accruing on any unpaid balance at the greater of (i) five percent (5%) and (ii) the prime rate plus 1% as reported in the Wall Street Journal on the first business day following each July and January 1, of each year until paid in full. The company may repay any or all of this amount without penalty. Messrs Howard, Walther and Rutkowski have agreed to a suspension in payments until we begin generating revenues from operations. The amounts owed to them, however, will continue to accrue.

On October 16, 2003, we executed a definitive Asset Purchase Agreement with American Production Machining LLC, a Michigan limited liability company (“APM”) to acquire certain of its assets, pay APM’s outstanding balance to Comerica Bank and, assume $1,900,000 in liabilities owed by APM to Comerica Bank. The agreement expired on January 24, 2004. We were unable to obtain the necessary funding to conclude the transaction. Currently, we have secured the financing resources to pursue this acquisition with our agreement with Cornell Capital. In August 2004, we tendered a bid to the United States Bankruptcy Court to pursue our acquisition of APM. On April 13^th, 2005, the Company on advice of counsel withdrew its offer to purchase the assets of APM.

In December 2003, we changed our name to AmeriChip International Inc. and we now trade on the Bulletin Board operated by the National Association of Securities Dealers, Inc. under the symbol (OTC-BB) under the symbol “ACHI”.

Our principal offices are located at 9282 General Drive, Suite 100, Plymouth, MI 48170-4607 USA.

Summary

As of September 8, 2004, we have two patents covering the technology described below. To support these patents, we have ordered and put a deposit on equipment sufficient to manufacture production and trial orders. The deposit was in the amount of $50,000 and paid to GSI Lumonics, Inc. The total cost of the robot and laser is $229,845. In April 2005, the Company paid the balance owing on the robot and laser and took delivery of the equipment.

Overview

Our core patented technology includes the use of lasers to effect a controlled breaking of the metal chip. Our technology focuses on increasing the machining efficiencies to effect faster feed rates and less down time. The process is designed to work with technologies of existing machines and operations. We expect to continue to develop additional proprietary technology to enhance the patent and its benefits.

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Our technology, when implemented, will eliminate dangerous ribbon-like steel chips that tangle around moving tool parts, automation devices and other components essential to the machine processing of low to medium grade carbon steels and non-ferrous metal parts. We believe that the result of this process is a superior product manufactured in a safer working environment, avoiding many of the health and safety issues associated with traditional metal processing methodologies, while offering potential cost savings.

We have completed the design and testing of the patented LACC technology. We are currently working with automakers and vendors with a view to supplying processed parts.

Alliances

The Company has the following alliances:

Meritage Solutions is now known as Automated Concepts. This company delivers integrated systems for automated production lines. Automated Concepts has designed production cells that are lasered between centers.

GSI Lumonics - A leading provider of laser equipment. GSI Lumonics has been used as the exclusive supplier of laser equipment to the Company.This is being done, in part, as a result of GSI’s participation and support of the Company during our research and development stage.

Creative Automation - A leading integrator of palletized automation and integration with laser, robots and part quality.

Seco-Carboloy - Carboloy, a Seco Tools company, is a leader in metalworking technology.

The Company does not have written agreements with the three named strategic alliance companies. The Company’s arrangement with GSI Lumonics is that the Company will exclusively purchase lasers and robots from them in exchange for being able to run trials in their laboratory in their Canton, MI testing facility. Meritage, Inc. will be utilized if there is a requirement to process a fully automated system which includes lasers robots and conveyors. Should an order require palletization, then the Company is committed to giving Creative Automation Company the right to fill the requirement on a first come, first serve basis. All of the Company arrangements are sales driven.

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Subsidiaries

On May 5, 2004, the Company created a wholly-owned subsidiary, AmeriChip Tool and Abrasives, LLC. (“ATA”). The new subsidiary will be responsible for providing all the tools necessary for metal removal in the machining process.

On July 19, 2004, ATA secured the right to represent Seco-Carboloy, in addition to Kinik, Superior Abrasive and Val-U-Max. ATA has entered into distribution agreements/arrangements with: Kinik - Grinding Wheels , Superior Abrasive - abrasive products, Valu-U-Max,(Special cutting tools) - ACE Drill Corporation, (High Speed Drills) Sidley Diamond Tool Company, ( Diamond Drills ) Bates Abrasives, Inc. (Abrasive products) The Desmond-Stephan Mfg. Co., Production Tool Supply, (Dressers and Cutters) Michigan Drill Corporation, (Drills) Carboloy, (Carbide Tools) Oil Screen-Reven, (filters) Keo Cutters, (Drills) Morse Cutting Tools (Cutting Tools), Marxman Tools (Cutting Tools) Gemtex (Abrasive products) Indasa (Coated Abrasives) Howell Tool Service (Tooling and Abrasives) Felton Brush ( Brushes) and Mitutoyo Gauges (Gauges) Magafor Precision (Drills), Sandusky CO. (Abrasives), Cumi (Grinding Wheels), and Kinik (Grinding Wheels). These relationships give the Company the right to make sales calls and or sell the products of these companies directly to ATA’s customer base. The right to represent is defined by “being appointed to act as a distributor on behalf of a specific company and given the right to represent their product line on behalf of the subject company.” The products are sold to ATA, which acts as a distributor, at a discount from market price. ATA then sells the product at the market price. The companies provide the Company with all their marketing tools, samples and other selling material, which assists the Company in selling their product line. The Company is also able to offer their products via our on-line marketing section of the Company’s website at www.americhiplacc.com. The Company derives the Company’s income from selling the various companies products to their customers. The primary motivation for having distributors is to eliminate the need for a sales staff. All of the companies, with which ATA has chosen to become associated, make products that are in the metal removal industry, which is consistent with our business model.

On August 3, 2004, ATA announced its purchase of the Nasco Brand name of abrasive products. This line of abrasive products has been sold throughout the United States and Canada for many years. The Company believes that the acquisition of this brand and its inventory will allow its subsidiary, AmeriChip Tool and Abrasives, to immediately generate sales by offering a wider breadth of products for all its current and future customers who require abrasive products in their manufacturing processes. Abrasives are typically used in the process after machining. The purchase of this brand name is consistent with the implementation of the Company’s business model.

The Process

Traditional methods of handling the residue of machining metal parts has necessitated the manufacture of specially designed chip control inserts and or the use of coolants to assist in the separation and flushing of contaminated metal chips, a problem that has plagued the metal parts manufacturing industry for more than 60 years. The

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problem, however, has become even more prevalent with the development of highly automated machine tools during the last two decades. Automated machinery was developed to satisfy the demand for the increased production of machined metal components by the automotive sector as well as other industries. Certain operations resulted in such serious chip control problems that some companies were unable to effectively capitalize on the benefits of automation.

The metal machining industry seeks to increase production and automate the machining process. The automotive industry has been particularly hard pressed to effect lower costs both within its own internal operations as well as components manufactured on its behalf by outside suppliers who must remain competitive. Preventing the forfeiting of contracts to foreign parts providers where labor and other costs are considered lower than in the United States is of key importance. Stringy metal chips wrap around automatic gauging and interfere with robotics to cause an interruption or discontinuance of the automation to manual operations. The AmeriChip LACC process allows this problem to be eliminated.

Currently coolant is deployed to flush the long stringy chips out of the machine components and remove them from the machine base itself. If the base becomes clogged it can cause many hours of non-productive down time and added costs while the machinery is cleaned. Coolant represents a major component of the entire manufacturing processes, representing as much as 15% of the total machining production cost. Coolant also has to be disposed of in accordance with environmental regulations, adding even more cost. Additional, coolant fumes may pose potentially serious health risks and the cause of long term problems when inhaled. The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) has established standards for coolant exposure in the five (5ml) per cubic meter and has requested that even stricter regulations be adopted at ten times more stringent. The multiple cost factor associated with the use of coolant as well as related health and environmental factors represent a challenge for metal machining manufacturing companies to significantly reduce the consumption of coolant or to eliminate its use altogether. By eliminating the use of coolant, incidence of workman’s compensation claims will be dramatically reduced. Additionally, the ribbons of metal chips that remain following the machining of metal components without the contamination of bacteria laden coolant will provide an additional revenue source for the company as the “chips” can be salvaged and recycled.

We have targeted the automotive sector initially, but our process can be applied to any industry where the machining of metal is a major process of manufacturing of component parts. This includes, but is not limited to oil production and refining, off-road construction, farm implements, aerospace and defense contractors.

Although our main goal is to acquire automotive parts manufacturers such as KSI, we could apply our process to auto parts such as axle shafts, axle tubes, spindles, and connecting rods, in our own facility.

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In this scenario, the customer would deliver raw goods (un-machined auto parts) to our facility where we would apply the LACC process and the customer would retrieve the “treated” part for machining at their location. Such a plan would require the purchase of several specialized lasers and robotics and the leasing of approximately 40,000 sq ft. This would allow for space three (3) separate lasers and a holding area of approximately 10,000 sq ft for the raw goods/treated parts.

Our customers are expected to find a variety of compelling benefits. We believe that many of these benefits result in operational efficiencies and significant cost savings in the overall machining of metal parts. We believe that the benefits of using our process would include the following:

* Less Machine Down-Time

1.	Chip Clearing by operators of tools and parts
2.	Reduced tool breakage resulting from wrapping of chips, re-cutting of chips
3.	Eliminate down time required for chip pullers to clear machines and under floor conveyers of clogged chip bundles
4.	Increased machine efficiency by eliminating chip bundles from tangling around tool slides, posts, holders and interfering with adjacent moving parts, such as robotics, automation, chucking and in-line process gauging
5.	Predictable tool change management program linked to consistency in tool life
6.	Reduced incidents of on-the-job injury from exposure to sharp, long continuous stringy chips, which requires medical down time. Jobs are handled more quickly and efficiently leading to less frustration and constant worry about dealing with dangerous chips.

* Reduced Costs

1.	Increased throughput as a result of less downtime
2.	Reduction of direct labor - chip pullers are no longer required
3.	Elimination of maintenance and outside special services to clean and repair chip evacuation systems, thus increasing productivity through reduced machine down time
4.	Reduction of overtime because of increased through-put per machine
5.	Reduced use of Hi-Lo driver’s time to removed containers filled quickly because of the chip bundles. Few containers are necessary due to chip compaction.
6.	Improved tool life due to less breakage because of chip bundles
7.	Less machine maintenance required
8.	Reduced scrap
9.	Elimination of coolant. The LACC process does not require the use of coolant whatsoever. The working environment is therefore less toxic, cleaner and safer.

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10.	Reduction in coolant filter cost
11.	Reduction in coolant disposal cost
12.	Reduced costs of gloves and aprons as fewer are needed
13.	Better railcar utilization due to chip compaction
14.	Lower insurance rates as a result in the reduction of injuries related to the handling of long, sharp, stringy chips, cleaner and safer work area, which is less toxic
15.	Uncontaminated chips can now be sold for profit as compared to the cost of removal of contaminated chips.

* Tooling and Process Efficiencies

1.	Elimination of the need for light/semi finish and finish depths of cuts in low to medium carbon materials and non-ferrous metals
2.	Reduced welding and packing of chips, which reduces the wear and tear on cutting tools
3.	Improved chip disposal and handling costs through better management of chip lengths
4.	Reduced capital equipment expenditures since high-pressure coolant systems are no longer necessary
5.	The need for specially designed chip control inserts and the use of coolants to manage the “chip” are no longer required with the LACC process.

The Company believes that as a result of implementing our LACC process on certain automobile parts prior to machining that we well be able to pass on many benefits that will result in operational efficiencies and significant cost savings in the overall machining of metal parts.

With the lasering of parts prior to machining our process reduces machine down time which is traditionally caused because chips have to be cleared by the operators away from tools and parts and the replacement of tools which have been broken as a result of the wrapping of chips around them. Down time is also created when time is taken by chip pullers to clear machines and under floor conveyers of clogged chip bundles. Since we can eliminate chip bundles from tangling around tool slides, posts, holders and interfering with adjacent moving parts, such as robotics, automation, chucking and in-line process gauging we increase machine efficiencies. Tools are not damaged from chips and there we can offer predictable tool change management program linked to consistency in tool life. We believe that there will be reduced incidents of on-the-job injury from exposure to sharp, long continuous stringy chips keeping workers working instead of seeking medical treatment. With a continuous job run, projects will be handled more quickly and efficiently leading to less frustration and constant worry about dealing with dangerous chips.

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With the implementation of the LACC prior to machining metal parts our client will enjoy reduced costs due to increased throughput as a result of less downtime and the reduction of direct labor since chip pullers will no longer be required. Our process eliminates the need for maintenance and outside special services to clean and repair chip evacuation systems, thus increasing productivity through reduced machine down time. The LACC process provides for increased through-put for each machine and therefore more work can be accomplished per shift, allowing for the reduction of overtime costs required to ensure that jobs are completed on schedule. With no chip bundles being produced, a client would no longer need to use a Hi-Lo driver’s time to removed containers filled with chip bundles. In addition, fewer containers are necessary due to chip compaction adding to reduced costs. Other benefits included improved tool life due to less breakage because of chip bundles, less machine maintenance, reduced scrap and the scrap that remains can be recycled and sold for cash. Uncontaminated chips can now be sold for profit as compared to the cost of removal of contaminated chips.

The LACC process does not require the use of coolant whatsoever and therefore the working environment is therefore less toxic, cleaner and safer. The benefits to the client include a reduction in coolant filter cost, reduction in coolant disposal cost, reduced costs of gloves and aprons as fewer are needed and better railcar utilization due to chip compaction. The reduction of injuries related to the handling of long, sharp, stringy chips in a cleaner and safer work area, in which there are fewer toxins can lead to reduced insurance costs for the client.

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One of the key benefits to applying the LACC process prior to machining is that it results in tooling and process efficiencies .This is accomplished due to the elimination of the need for light/semi finish and finish depths of cuts in low to medium carbon materials and non-ferrous metals. In addition, the welding and packing of chips is reduced which normally affects the wear and tear on cutting tools, shortening their life span. Improved chip disposal and handling costs through better management of chip lengths makes the machining process run much more smoothly. Since high-pressure coolant systems are no longer necessary, the client will enjoy reduced capital equipment expenditures. The need for specially designed chip control inserts and the use of coolants to manage the “chip” are no longer required with the LACC process.

KSI Machine & Engineering Inc.

On September 14, 2004, the Company executed a letter of intent with KSI Machine and Engineering, Inc. (hereinafter “KSI”) to acquire all of KSI’s outstanding stock. KSI is a manufacturer of automotive die and mold castings which use horizontal spindle 5 axis computer numerical controlled machines. During the year ended November 30, the Company paid a deposit of $50,000 for this agreement. On December 7, 2004 the Company paid an additional $100,000 and signed a stock purchase agreement with KSI. On June 24, 2005 the Company announced that it was entering in to a license agreement with KSI Machine and Engineering Inc. for the use of AmeriChip’s Laser Assisted Chip Control technology. KSI and AmeriChip are also negotiating a joint venture relationship,

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from which AmeriChip will generate revenues from the application of its proprietary technology in a Tier One environment. As of the report date of these financial statements, this acquisition has not been completed.  

The completion of the transaction is subject to a number of factors, including but not limited to, the satisfactory completion of due diligence, the negotiation and execution of definitive agreements, and other customary closing conditions. There can be no assurance that the purchase will be consummated. The material terms of the agreement are as follows: The stock purchase will be for an aggregate consideration of $3.2 million. The Company agreed under a separate agreement with Mr. Jim Kotsonis, owner of KSI to issue 500,000 restricted shares of the Company’s common stock for consulting services to be rendered over the next 18 months.

Osborn International

On December 2, 2004, we issued a press release to announce the appointment of AmeriChip International as a distributor for Osborn International, the world's largest industrial brush maker and a manufacturer of tools for surface finishes.

AmeriChip International Holdings, LLC

On September 10, 2004, we established AmeriChip International Holdings, LLC, as a wholly owned subsidiary of AmeriChip International, Inc. This entity was created in order to acquire American Production and Machining, LLC, an unrelated entity, out of bankruptcy. This transaction has not occurred as of the date of this report. Accordingly, AmeriChip International Holdings, LLC is at present a non-operating entity.

RM Communications

In October 2003, we executed a six-month agreement with RM Communications (hereinafter “RMC”), to provide services and website development for AmeriChip. RMC is entitled to receive $2,000 per month for six months, 100,000 shares of common stock upon signing the agreement, 100,000 shares of common stock upon completion of services, and 300,000 three-year warrants, which will expire in January 22, 2007. The warrants are exercisable per the following terms: 100,000 warrants at $0.30, 100,000 warrants at $0.40, and 100,000 warrants at $0.50. We will also pay additional costs incurred by RMC in performance of the contract.

In April 2004, we executed a continuation of the aforementioned agreement for an additional year. RMC is entitled to receive $3,500 per month, 200,000 shares of common stock upon signing the agreement, and 3-year warrants exercisable at $0.25, payable in increments of 150,000 to be issued at the beginning of each quarter. During the year ended November 30, 2004, 100,000 shares of common stock, 300,000 warrants, and $9,000 in cash were paid to RMC. During the three months ended February 28, 2005, the Company entered into a new agreement with RMC and cancelled all 1,050,000 existing warrants issued to RMC. The Company issued 3,200,000 new three-year warrants to

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acquire 3,200,000 shares of common stock at an exercise price of $0.035 per share. Additional fair value of the warrants determined on the new grant date of $19,524 was expensed to consulting and 150,000 warrants of the aforementioned new issuance were exercised for common stock for cash of $5,250. In June 2005, the Company cancelled all remaining warrants issued to RM Communications. In June 2005, the Company issued 6,065,000 shares of its capital stock pursuant to Rule 144. These shares replaced all outstanding warrants and completed the Company’s contract with RM Communications. The Company will not be renewing its contract in January 2006.

Current Products and Services

Our patented laser assisted chip control process is readily applicable to any metal component that requires precision finishing. We believe that our process will provide significant value to our customers by decreasing the costs and increasing the efficiency of their operations. We are targeting our service to businesses in the following markets:

*Automobiles

*Oil Production and Refining

*Aerospace

*Off-Road Construction

*Farm Implements Manufacturing

*Defense Contractors

Sales & Marketing

We intend to transition from being a company focusing almost solely on product development and testing, to focusing on sales and marketing. We expect to sell a service and a product. The service will be the manufacturing of a finished product using equipment with the LACC technology. We further anticipate that customers will purchase equipment using LACC technology from one of our strategic alliances and also pay AmeriChip a royalty for use of the LACC technology. Initially we will focus on customers in the automobile industry.

Management has identified what is believed to be large markets that remain underserved but would be logical, potentially strong candidates given an appropriate product and service offering at the right price. Just for automotive products, management has identified particular market segments that would be likely to benefit from our LACC technology: axle shafts, axle tubes, torque converters, spindles, pinions, input/output shafts, side gears and connecting rods.

Insurance

We do not maintain any keyman insurance but are securing quotes from various insurance underwriters to select the best plan for the Company. Since we are not manufacturers of product, we are not required to carry product liability insurance.

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Government Regulations

In addition to regulations applicable to businesses in general, our plant operations will be subject to other regulations that are common in industrial manufacturing.

Competition

We compete with other parts machining companies. We have generated some revenues from our wholly owned subidiary, AmeriChip Tool and Abrasives, and are a minuscule participant in the parts manufacturing business.

Intellectual Property

We rely on our patents to protect our technology. We also have unpatented proprietary technology. We rely on nondisclosure and other contractual provisions to protect our proprietary technology. Currently, we have two patents granted and we intend to file other patent applications for enhancements to the existing patents. As part of our confidentiality procedures, we generally enter into nondisclosure agreements with our employees, consultants, distributors and partners and limit the dissemination and access to our technical documentation and other proprietary information. There is no assurance our patents will provide us with adequate protection. If a third party infringes on our patents, we do not have adequate funds available for protracted litigation and consequently may not be able to enforce our rights under applicable patent laws.

As of September 8, 2004, we had filed a total of two patent applications with the U.S. Patent and Trademark Office (PTO) covering our technology, both of which have been approved. The approved patents are as follows:

1.	“UNITED STATES PATENT RUTKOWSKI” with PTO Patent Number 5,200,593, issued April 6, 1993.
2.	“UNITED STATES PATENT RUTKOWSKI” with PTO Patent Number 5,384,446, issued January 24, 1995.

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RESULTS OF OPERATIONS

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

COMPARISON OF NINE MONTHS ENDED AUGUST 31, 2005,

TO NINE MONTHS ENDED AUGUST 31, 2004

Revenue Recognition. We have generated revenues from our operations during the last two years. We recognize revenue when received of which there is no assurance of such recognition as described below, in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectibility is reasonably assured.

Revenues and Sales. Revenues for the nine months ended August 31, 2005 increased from $5,940. for the nine months ended August 31, 2004 to $89,023. Gross Profit for the nine months ended August 31, 2005 increased from $2,541 for the nine months ended August 31, 2004 to $41,454. The increases were primarily from the sales of product less $226. in commissions and $44,170 in costs of sales.

Operating Expenses . Operating expenses, which include administrative expenses, legal and accounting expenses, consulting expenses and license decreased from $2,636,059 for the nine months ended August 31, 2004 to $1,982,843 for the nine months ended August 31, 2005, a decrease of $653,216. This decrease is due to a larger amount of start up costs incurred during the nine months ended August 31, 2004.

Net Loss.    Net loss decreased from a net loss of ($2,695,430) for the nine months ended August 31, 2004 to a net loss of ($2,486,898) for the nine months ended August 31, 2005, primarily due to the larger start up costs for the nine months ended August 31, 2004 partially offset by an increase in financing and interest expense incurred during the nine months ended August 31, 2005.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED AUGUST 31, 2005,

TO THREE MONTHS ENDED AUGUST 31, 2004

Revenues and Sales. Revenues for the three months ended August 31, 2005 increased from $5,940. for the three months ended August 31, 2004 to $29,560. Gross Profit for the three months ended August 31, 2005 increased from $2,591 for the three months ended August 31, 2004 to $15,773. The increases were primarily from the sales of product less than $0. in commissions and $10,388 in costs of sales.

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Operating Expenses . Operating expenses, which include administrative expenses, legal and accounting expenses, consulting expenses and license decreased from $1,423,825 for the three months ended August 31, 2004 to $1,208,005 for the three months ended August 31, 2005, a decrease of $ 215,820. This decrease is due to the larger amount of start up costs incurred during the three months ended August 31, 2004.

Net Loss.Net loss decreased from a net loss of ($1,481,784) for the three months ended August 31, 2004 to a net loss of $(1,375,480) for the three months ended August 31, 2005, primarily due to the start up costs incurred during the three months ended August 31, 2004, partially offset by a larger amount of financing and interest expense for the three months ended August 31, 2005.

PLAN OF OPERATION

While we are in the process of finalizing our relationship with KSI Machine and Engineering, we are now in a position to implement our technology. We anticipate that the operations of KSI Machine and Engineering will bring to the consolidated balance sheet of AmeriChip annual revenues of approximately $3,600,000 based on revenues generated in 2004.

The facilities of KSI Machine and Engineering are large enough to permit allocation of space for our new laser and robotic equipment which is now in operation at the KSI location,. This equipment is required in the implementation of the LACC process and we are currently conducting pilot projects for various Tier One suppliers.

KSI Machine and Engineering is a manufacturer of automotive die and mold castings which use horizontal spindle 5 axis computer numerical controlled machines.

We believe that the patented technology, Laser Assisted Chip Control process ("LACC") for companies engaged in the machining of automobile parts can produce significant revenues for us. While we are optimistic about our initial customer experiences, there can be no assurances that the savings realized will be experience by all customers or that we will achieve significant revenues.

LIQUIDITY AND CAPITAL RESOURCES

We have not attained profitable operations since inception and we have not progressed significantly in our operations. We have incurred recurring losses and at November 30, 2004 had an accumulated deficit of ($5,413,282) and for the quarter ended August 31. 2005, we had an accumulated deficit of ($7,900,180). For the year ended November 30, 2004, we sustained a net loss of ($3,467,384) and for the quarter ended August 31, 2005, we had a net loss of ($2,486,898).

On April 23, 2003, the Company executed a letter of intent with American Production Machining, LLC (hereinafter “APM”) to acquire certain assets of APM subject to the

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execution of a definitive agreement. APM is manufacturer of automotive, truck and aircraft parts. They use computer numerical controlled machines and state of the art inspection equipment. On October 16, 2003, the Company executed a definitive Asset Purchase Agreement which required the payment of cash and the assumption of $1,900,000 in liabilities owed by APM to Comerica Bank. The original closing date for this transaction was November 15, 2003. We were, at the time, unable to obtain the necessary funding to conclude the transaction. Currently, the Company has secured the financing resources to pursue this acquisition with its agreement with Cornell Capital. In August 2004, the Company tendered a bid to the United States Bankruptcy Court to pursue its acquisition of APM. In April 2005, the Company withdrew its bid with the court and does not intend to pursue this purchase.

As a result of our new relationship with KSI Machine and Engineering, we no longer need to access the Line of Credit arranged with Cornell Capital Partners, LLC. Accordingly, on June 20, 2005, we notified Cornell Capital Partners, LLC in writing that we would no longer draw down any funds against the existing SEDA. We also requested that Cornell Capital Partners, LLC provide a full accounting of all transactions from inception with respect to our account with Cornell Capital Partners, LLC. We believe a full accounting will show that we have overpaid Cornell Capital Partners, LLC, although we can have no assurances of such an overpayment until a full accounting is provided.

Even though we have secured adequate funding, no assurances can be provided that our business activities will generate sufficient revenues which may result in net profits for the Company.

Our auditors have raised substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

We intend to continue to explore potential business combinations with other parties which may enhance or supplement the operation of our business or which may generate new or additional sources of revenues related to the patented Laser Assisted Chip process. For example, we are exploring whether it may be feasible to acquire the assets of an existing manufacturing firm engaged in manufacturing automobile parts which we could subsequently enhance and benefit through the use of the patented process. Any additional acquisition or other business combination will be dependent on our ability to obtain financing from traditional sources or from seller carryback financing, or a combination thereof. There is no assurance that we will be able to obtain any financing to pursue any future acquisitions or combinations. Even if adequate financing is obtained, no assurance can be provided that any additional acquisition or combination will generate sufficient revenues which may result in net profits for us.

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ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, 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-14. This evaluation was done under the supervision and with the participation of the Company's Principal Executive Officer and Principal Financial Officer. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to satisfy the Company's disclosure obligations under the Exchange Act.

Changes in Internal Controls

There were no significant changes in the Company's internal controls or in other factors that could significantly affect those controls since the most recent evaluation of such controls.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to various claims and legal actions in the ordinary course of business. We are not aware of any pending or threatened litigation, except for our dispute with Cornell Capital Partners, LLC, that we believe is reasonably likely to have a material adverse affect on our results of operations, financial position or liquidity. None of these matters, in the opinion of management, is likely to result in a material effect on us based upon information available at this time.

Item 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities

There were no changes in securities or purchase or sales of securitiesduring the period ended August 31, 2005.

Item 3. Defaults upon Senior Securities

There were no defaults upon senior securities during the period ended August 31, 2005.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to the vote of securities holders during the period ended August 31, 2005.

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Item 5. Other Information

There is no information with respect to which information is not otherwise called for by this form.

Item 6. Exhibits and Reports on Form 8-K

A. Exhibits:

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of theSarbanes-Oxley Act.
32.2	Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

B. Reports of Form 8-K.

On June 24, 2005, the Company issued a press release announcing the intention to enter into a license agreement with KSI Machine and Engineering as well as a joint venture agreement with KSI. The Company is now able to quote on projects with Tier One status. The Company also reported that it notified Cornell Capital Partners, LLC that it would no longer be proceeding with the Standby Equity Distribution Agreement.

On July 13, 2005 the Company announced that Seco-Carboloy had expanded AmeriChip Tool and Abrasives, sales territory in the State of Michigan.

On August 29^th, 2005, the Company announced that it had a new website domain address at www.americhiplacc.com.

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: October 17, 2005	By:	/s/ Marc Walther
		Marc Walther, President, CEO, Director and Authorized Signatory

By:	/s/ Marc Walther
	Marc Walther, Principal Financial and Accounting Officer

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