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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ____
Commission File Number: 0-21142
SANDSTON CORPORATION
(Exact name of small business issuer as specified in its charter)
Michigan 38-2483796
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
40950 Woodward Avenue, Suite 304, Bloomfield Hills, MI 48304
(Address of principal executive offices) (Zip Code)
(248) 723-3007
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
|X| YES |_| No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
No par value Common Stock: 8,396,981 outstanding as of August 12, 2005
Transitional Small Business Disclosure Format: |_| YES |X| NO
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Sandston Corporation
Condensed Balance Sheet
June 30, 2005 and December 31, 2004
June 30,
2005 December 31,
(Unaudited) 2004
------------ ------------
Assets
Current assets:
Cash $ 23,708 $ 42,286
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 15,680 $ 9,872
Accrued expenses -- 2,000
------------ ------------
Total current liabilities 15,680 11,872
Stockholders' equity:
Common stock, no par value, 30,000,000 shares authorized,
8,396,981 shares outstanding 33,679,784 33,679,784
Accumulated deficit (33,671,756) (36,649,370)
------------ ------------
Total shareholders' equity 8,028 30,414
------------ ------------
Total liabilities and shareholders' equity $ 23,708 $ 42,286
============ ============
See notes to condensed financial statements.
Page 2
Sandston Corporation
Condensed Statements of Operations
For The Three- and Six-Month Periods Ended June 30, 2005 and 2004
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
2005 2004 2054 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
Net revenues $ -- $ -- $ -- $ --
General and administrative expenses 3,950 31,716 22,386 31,716
------------ ------------ ------------ ------------
Operating loss from continuing operations (3,950) (31,716) (22,386) (31,716)
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Loss from continuing operations (3,950) (31,716) (22,386) (31,716)
Discontinued operations (Note 1):
Loss from discontinued operations -- -- -- (615,770)
Gain on sale of net assets of
discontinued operations -- -- -- 3,789,352
------------ ------------ ------------ ------------
Income from discontinued operations -- -- -- 3,173,582
------------ ------------ ------------ ------------
Net income (loss) $ (3,950) $ (31,716) $ (22,386) $ 3,141,866
============ ============ ============ ============
Per share amounts - basic and diluted (Note 2):
Continuing operations $ -- $ -- $ -- $ (0.01)
============ ============ ============ ============
Discontinued operations $ -- $ -- $ -- $ 0.55
============ ============ ============ ============
Weighted average shares
outstanding (Note 2):
Basic and diluted 8,396,981 8,396,981 8,396,981 5,758,525
============ ============ ============ ============
Sandston Corporation
Condensed Statements of Comprehensive Income (Loss)
For The Three- and Six-Month Periods Ended June 30, 2005 and 2004
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
Net income (loss) $ (3,950) $ (31,716) $ (22,386) $ 3,141,866
Other comprehensive income - equity
adjustment from foreign translation -- -- -- 64,757
------------ ------------ ------------ ------------
Comprehensive income (loss) $ (31,716) $ (31,716) $ (22,386) $ 3,206,623
============ ============ ============ ============
See notes to condensed financial statements.
Page 3
Sandston Corporation
Condensed Statements of Cash Flows
For The Six-Month Periods Ended June 30, 2005 and 2004
Six Months Ended June 30,
-------------------------------
2005 2004
(Unaudited) (Unaudited)
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (22,386) $ 3,141,866
Adjustments to reconcile net income (loss) to net cash flows
used in operating activities:
Gain on sale of net assets of discontinued operations -- (3,789,352)
Operating cash flows from discontinued operations -- 493,219
Changes in assets and liabilities that provided cash:
Accounts payable 5,808 11,524
Accrued expenses -- 2,000
------------ ------------
Net cash used in operating activities (16,578) (140,743)
------------ ------------
Cash flows from investing activities:
Investing cash flows used in discontinued operations -- (230,230)
------------ ------------
Net cash used in investing activities -- (230,230)
------------ ------------
Cash flows from financing activities:
Issuance of common stock (Note 1) -- 50,000
Financing cash flows from discontinued operations -- 188,934
------------ ------------
Net cash provided by financing activities -- 238,934
------------ ------------
Foreign currency translation effect - discontinued operations -- (13,292)
------------ ------------
Net decrease in cash and cash equivalents (16,578) (145,331)
Cash at beginning of period 42,286 207,139
------------ ------------
Cash at end of period $ 25,708 $ 61,808
============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest by discontinued operations -- $ 202,566
Cash paid for income taxes -- --
Non-cash financing and investing activities:
Disposal of net assets of discontinued operations:
Sales price - liabilities assumed $ 13,485,268
Cash sold (198,664)
All other assets sold (9,497,252)
------------
Gain on sale of assets and liabilities $ 3,789,352
============
See notes to condensed financial statements.
Page 4
Sandston Corporation
Notes To Consolidated Condensed Financial Statements
For The Three- and Six Month Periods Ended June 30, 2005 and 2004
Note 1 - Basis of Presentation
Pursuant to a recommendation of Nematron Corporation's Board of Directors
and approval by its shareholders on January 13, 2004, on March 31, 2004 Nematron
sold to NC Acquisition Corporation ("Purchaser") all of its tangible and
intangible assets, including its real estate, accounts, equipment, intellectual
property, inventory, goodwill and other intangibles, except for $30,000 in cash,
(the "Net Asset Sale"). The Purchaser also assumed all of Nematron's liabilities
pursuant to the Net Asset Sale. Following the Net Asset Sale, Nematron's only
remaining assets were $30,000 in cash; it retained no liabilities. On April 1,
2004 Nematron amended its Articles of Incorporation to change its name to
Sandston Corporation (the "Company") and implemented a shareholder approved
one-for-five reverse stock split of the Company's common stock, whereby every
five issued and outstanding shares of the Company's common stock became one
share. Also, on April 1, 2004 Nematron sold a total of 5,248,257 post-split
shares to Dorman Industries, LLC ("Dorman Industries") for $50,000. Dorman
Industries is a Michigan limited liability company wholly owned by Mr. Daniel J.
Dorman, who became the Company's Chairman of the Board, CEO and President
following such stock purchase. By virtue of its purchase of common stock, Dorman
Industries owns 62.5% of the outstanding common stock of the Company.
Although the Company does not currently have any revenue generating
activities, the Company intends to build long-term shareholder value by
acquiring and/or investing in and operating strategically positioned companies.
The Company expects to target companies in several industry groups. The targeted
companies are generally expected to have the following characteristics: sales
volume of between $20 million and $250 million; value added manufacturing,
distribution and business services; fragmented industries; experienced
management; and consistent historical financial performance. The Company has yet
to acquire, or enter into an agreement to acquire, any company.
During the period prior to the Net Asset Sale, the Company owned the
following wholly-owned subsidiaries: Nematron Limited, a United Kingdom
corporation, Nematron Canada, Inc., a Canadian corporation, A-OK Controls
Engineering, Inc. a Michigan corporation, and Optimation, Inc., an Alabama
corporation (collectively, "Subsidiaries"). The assets and liabilities of the
Subsidiaries were included in the Net Asset Sale described above, and since
April 1, 2004, the Company has not had any ownership interest in the
Subsidiaries or an ownership interest in any other entity.
The accompanying consolidated financial statements include the accounts of
Sandston Corporation (formerly Nematron Corporation) and its Subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation.
In the opinion of management, all adjustments considered necessary for a
fair presentation of the consolidated financial statements for the interim
periods have been included. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission's rules and regulations, although the Company
believes that the disclosures are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report on Form 10-KSB.
Page 5
The results of the operations for the three- and six-month periods ended
June 30, 2005 and 2004 are not necessarily indicative of the results to be
expected for the full year. Additionally, since the Net Asset Sale, which was
effective April 1, 2004, the Company has had no revenue generating activities.
Note 2 - Earnings Per Share
The weighted average shares outstanding used in computing basic loss per
share for the three- and six-month periods ended June 30, 2005 and 2004 have
been adjusted to give effect to the one-for-five reverse stock split discussed
in Note 1. Pursuant to the terms of the agreements underlying the Net Asset
Sale, all outstanding dilutive securities, including stock options, warrants and
conversion rights under all employee and director option plans and various
warrant and note agreements, were cancelled effective March 31, 2004 and are no
longer outstanding.
Page 6
Item 2. Management's Discussion and Analysis of Results of Operations
Three-Month Period Ended June 30, 2005 Compared with
Three-Month Period Ended June 30, 2004
Continuing Operations
Readers should refer to a description of the Net Asset Sale described in
Note 1 to the condensed financial statements included in this Form 10-QSB. As
described therein, the net assets and the industrial controls businesses of the
Company were sold effective as of the close of business on March 31, 2004. Such
operations are reflected in the Condensed Statements of Operations as losses
from discontinued operations. Since April 1, 2004, the Company has not engaged
in any revenue generating activities, although it has considered various
investment opportunities and it has incurred administrative expenses related to
legal, accounting and administrative activities. The Company has had no
employees since that date. The administrative activities of the Company are
performed by the Chairman, who also serves as the CEO, President and Principal
Financial Officer. Direct administrative expenses of the Company for the three
month period ended June 30, 2005 and 2004 totaled $3,950 and $31,716,
respectively. The decrease in expenses during the current period results
primarily from a lower level of administrative activities in the current period.
Six-Month Period Ended June 30, 2005 Compared with
Six-Month Period Ended June 30, 2004
Continuing Operations
Direct administrative expenses of the Company for the six month period
ended June 30, 2005 and 2004 totaled $22,386 and $31,716, respectively. The
decrease in expenses during the current period results primarily from a lower
level of administrative activities in the current period.
Discontinued Operations
The loss from discontinued operations for the six month period ended June
30, 2004 totaled $615,770. Revenues totaled $3,478,720 and costs and expenses
exceeded that amount by the amount of the loss. As reflected above, the net
assets and the industrial controls businesses of the Company were sold effective
as of the close of business on March 31, 2004.
The Purchaser of the net assets and the industrial controls businesses of
the Company assumed all of the Company's liabilities and acquired all of its
assets, except for $30,000 cash, as of March 31, 2004. The net liabilities
assumed by the Purchaser exceeded the net assets acquired by the Purchaser by
$3,789,352, and such amount has been reported as gain on sale of net assets of
discontinued operations.
Liquidity and Capital Resources
On March 31, 2004, the Company sold to NC Acquisition Corporation
("Purchaser") all of its tangible and intangible assets, including its real
estate, accounts, equipment, intellectual property, inventory, goodwill and
other intangibles, except for $30,000 in cash, (the "Net Asset Sale"). The
Purchaser also assumed all of the Company's liabilities pursuant to the Net
Asset Sale. Following the Net Asset Sale, the Company's only remaining assets
were $30,000 in cash; it retained no liabilities. On April 1, 2004, the Company
amended its Articles of Incorporation to change its name to Sandston Corporation
and implemented a shareholder approved one-for-five reverse stock split of the
Company's common stock, whereby every five issued and outstanding shares became
one share. Also, on April 1, 2004, the Company sold a total of 5,248,257
post-split shares to Dorman Industries for $50,000. Dorman Industries is a
Michigan limited liability company wholly owned by Mr. Daniel J. Dorman, who
became the Company's Chairman of the Board, CEO and President following such
stock purchase. By virtue of the purchase of the shares by Dorman Industries,
Dorman Industries owns 62.5% of the outstanding common stock of the Company.
Page 7
Although the Company does not currently have any revenue generating
activities, the Company intends to build long-term shareholder value by
acquiring and/or investing in and operating strategically positioned companies.
The Company expects to target companies in several industry groups. The targeted
companies are generally expected to have the following characteristics: sales
volume of between $20 million and $250 million; value added manufacturing,
distribution and business services; fragmented industries; experienced
management; and consistent historical financial performance. The Company has yet
to acquire, or enter into an agreement to acquire, any company.
At this time, Company management is evaluating its investment alternatives
and it has not recommended to the Board of Directors for their consideration any
specific investment opportunities. However, as investment opportunities present
themselves and management completes its due diligence on such opportunities, the
timing and nature of potential investment targets may accelerate.
The Company is funding its current operating expenses with cash retained
from the Net Asset Sale and from cash generated by the sale of additional shares
of common stock to Dorman Industries. While it is the Company's objective to
ultimately be able to use the securities of the Company as a currency in the
acquisition of portfolio businesses, it is clear that the initial acquisitions
of portfolio businesses will require the Company to be infused with capital
thereby diluting the Company's shareholders, including Dorman Industries, to the
extent that it does not participate in the capital infusion.
Uncertainties Relating to Forward Looking Statements
Parts of this Form 10-QSB contain certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Statements
containing the words "believes," "anticipates," "estimates," "expects,"
"intends," "plans," "seeks," "will," "may," "should," "would," "projects,"
"predicts," "continues," and similar expressions or the negative of these terms
constitute forward-looking statements that involve risks and uncertainties. The
Company intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and are including this statement for purposes of
invoking these safe harbor provisions. Such statements are based on current
expectations and are subject to risks, uncertainties and changes in condition,
significance, value and effect, including those discussed in the section
entitled "Risk Factors" contained in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2004. Such risks, uncertainties and
changes in condition, significance, value and effect could cause the Company's
actual results to differ materially from those anticipated events. Except as may
be required under federal law, we undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur.
Page 8
Risks and uncertainties may include the following:
o The inability of the Company to successfully implement its strategy;
o The potential inability of the Company to locate potential
businesses and to negotiate the closing of identified businesses so
as they become businesses of the Company;
o Unforeseen increases in operating expenses;
o The inability to attract or retain management, sales and/or
engineering talent for any acquired business;
o The inability to continue financing the administrative expenses of
the Company out of available funds and the inability to raise
additional funds to cover any shortfall.
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Based on his evaluation as of June 30, 2005, our principal executive
officer and principal financial officer concluded that our disclosure
controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under
the Securities Exchange Act of 1934, as amended) are effective to ensure
that the information required to be disclosed in our reports filed or
submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the requisite time periods.
(b) Changes in internal controls.
There have been no changes in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934, as amended) during the quarter ended June
30, 2005 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits included herewith are set forth on the Index to Exhibits, which
is incorporated herein by reference.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Sandston Corporation
August 12, 2005 /s/ Daniel J. Dorman
- ------------------- ----------------------------------------------
Date President, CEO and Principal Financial Officer
Page 9
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
- -------------- ----------------------
31.0 Certification of the Principal Executive Officer and Principal
Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.0 Certification of President, CEO (Principal Executive Officer)
and Principal Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Page 10