UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(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, 2009
 
¨ 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 incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
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)
 
Indicate by check mark 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
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ¨ YES    ¨ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large Accelerated Filer ¨
Accelerated Filer ¨
Non- Accelerated Filer ¨
Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   x YES    ¨ No
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: No par value Common Stock:
 
10,796,981 shares outstanding as of August 10, 2009

 
 
 
 
PART I — FINANCIAL INFORMATION

Item 1.       Financial Statements

Sandston Corporation
Condensed Balance Sheet
June 30, 2009 and December 31, 2008

   
June 30,
       
   
2009
   
December 31,
 
   
( Unaudited )
   
2008
 
Assets
           
Current assets:
           
Cash
  $ 29,556     $ 45,073  
Deposit
    1,800       1,800  
                 
Total assets
  $ 31,356     $ 46,873  
                 
Liabilities and Shareholders’ Equity
               
                 
Current liabilities - accounts payable
  $ 1,947     $  2,388  
                 
Shareholders’ deficit:
               
Common stock, no par value, 30,000,000 shares authorized, 10,796,981 shares issued and outstanding
    33,799,784       33,799,784  
Accumulated deficit
    (33,770,375 )     (33,755,299 )
                 
Total shareholders’ equity
    29,409       44,485  
                 
Total liabilities and shareholders’ equity
  $ 31,356     $ 46,873  

See notes to condensed financial statements.

 
Page 2
 

Sandston Corporation
Condensed Statements of Operations
For The Three- and Six-Month Periods Ended June 30, 2009 and 2008

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2009
   
2008
   
2009
   
2008
 
   
(Unaudited)
   
(Unaudited)
   
( Unaudited)
   
(Unaudited)
 
                                 
Net revenues
  $ -     $ -     $ -     $ -  
General and administrative expenses
    4,746       5,099       15,076       15,687  
                                 
Loss before income taxes
    (4,746 )     (5,099 )     (15,076 )     (15,687 )
Income taxes
    -       -       -       -  
                                 
Net loss
  $ (4,746 )   $ (5,099 )   $ (15,076 )   $ (15,687 )
                                 
Loss per share amounts – basic and diluted (Note 2):
  $ -     $ -     $ -     $ -  
Weighted average shares outstanding – basic and diluted (Note 2):
    10,796,981       10,796,981       10,796,981       10,796,981  

See notes to condensed financial statements.

 
Page 3
 

Sandston Corporation
Condensed Statements of Cash Flows
For the Six Month Periods Ended June 30, 2009 and 2008

   
Six Months Ended June 30,
 
   
2009
   
2008
 
   
(Unaudited)
   
(Unaudited)
 
Cash flows from operating activities:
           
Net loss
  $ (15,076 )   $ (15,687 )
Adjustments to reconcile net loss to net cash flows used in operating activities:
               
Changes in assets and liabilities that provided (used) cash:
               
Accounts payable
    (441 )     1,577  
Net cash used in operating activities
    (15,517 )     (14,110 )
                 
Net decrease in cash
    (15,517 )     (14,110 )
Cash at beginning of period
    45,073       69,062  
                 
Cash at end of period
  $ 29,556     $ 54,952  
                 
Supplemental disclosures of cash flow information:
               
Cash paid for interest
  $ -     $ -  
Cash paid for income taxes
    -       -  

See notes to condensed financial statements.

 
Page 4
 

Sandston Corporation
Notes To Condensed Financial Statements
For The Three- and Six-Month Periods Ended June 30, 2009 and 2008
 
Note 1 - Basis of Presentation
 
Pursuant to a recommendation of the Company’s Board of Directors and approval by its shareholders on January 13, 2004, the Company sold to NC Acquisition Corporation (the "Purchaser") on March 31, 2004 all of its tangible and intangible assets, including its real estate, accounts, equipment, intellectual property, inventory, subsidiaries, 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 and it had no liabilities.  It also retained no subsidiaries.  On April 1, 2004 the Company amended its Articles of Incorporation to change its name from Nematron Corporation to Sandston Corporation (the “Company”) and to implement a shareholder approved five-for-one 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.  On April 1, 2004 the Company also 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, the Company’s Chairman of the Board, CEO, President and Principal Financial Officer.  Pursuant to its purchase of these shares, Dorman Industries became the owner of 62.50% of the then outstanding common stock of the Company and currently is the beneficial owner of 54.17% of the Company’s outstanding common stock.
 
             Effective April 1, 2004, the Company became a "public shell" corporation.
 
             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 multiple industry groups.  The Company has yet to acquire, or enter into an agreement to acquire, any company or entity.
 
             During the period prior to the Net Asset Sale, the Company’s businesses included 1) the design, manufacture, and marketing of environmentally ruggedized computers and computer displays known as industrial workstations; 2) the design, development and marketing of software for worldwide use in factory automation and control and in test and measurement environments; and 3) providing application engineering support to customers of its own and third parties’ products.  These businesses were sold on March 31, 2004 to the Purchaser.
 
 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 infor-mation 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-K.
 
 The results of the operations for the three- and six-month periods ended June 30, 2009 and 2008 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.

 
Page 5
 
 
Recent Accoutning Pronouncements
 
In May 2009, the FASB issued SFAS No. 165, Subsequent Events .   SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.   Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards.   The standard also includes a required disclosure of the date through which the entity has evaluated subsequent events and whether the evaluation date is the date of issuance or the date the financial statements were available to be issued.   The standard is effective for interim or annual periods ending after June 15, 2009. The Company has complied with the disclosure requirements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162 . The FASB Accounting Standards Codification (Codification) will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be appli ed by nongovernmental entities.   Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.   On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards.   All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative.   This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.   The Company will comply with the requirements of the Statement beginning in the third quarter of 2009.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 165 , Subsequent Events , we have evaluated subsequent events through the date of this filing.   We do not believe there are any material subsequent events which would require further disclosure.
 
Liquidity and Management Plans
 
The Company became a "public shell" corporation on April 1, 2004 following the Net Asset Sale and since that date its operational activities have been limited to considering various acquisition opportunities, and its financial activities have been limited to administrative activities and incurring expenditures for accounting, legal, filing, printing, office and auditing services.  These expenditures have been paid with the $30,000 cash retained from the businesses that were sold, from $50,000 of proceeds from the sale of common stock on April 1, 2004 to Dorman Industries, and from $120,000 of proceeds from the sale, through a private placement, of unregistered common stock in December 2006 to certain accredited investors.
 
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, 2009 and 2008 have been adjusted to give effect to the five-for-one reverse stock split discussed in Note 1.  The Company has no dilutive securities.

 
Page 6
 

Item 2.          Management's Discussion and Analysis of Results of 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-Q.  As described therein, the net assets and industrial controls businesses of the Company were sold effective as of the close of business on March 31, 2004.  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.  
 
Three Month Periods Ended June 30, 2009 and 2008
 
Direct administrative expenses of the Company totaled $4,746 and $5,099 for the three month periods ended June 30, 2009 and 2008, respectively, as the administrative services required in each period remained constant.
 
Six Month Periods Ended June 30, 2009 and 2008
 
Direct administrative expenses of the Company totaled $15,076 and $15,687 for the six month periods ended June 30, 2009 and 2008, respectively, as the administrative services required in each period remained constant.
 
Liquidity and Capital Resources
 
Primary sources of liquidity for the Company following the March 31, 2004 Net Asset Sale have been cash balances that have been used to pay administrative expenses.  Operating expenses of the Company have been funded with $30,000 of available cash retained from the Net Asset Sale and from $50,000 of cash generated by the sale of additional shares of common stock to Dorman Industries on April 1, 2004.  In December 2006, the Company sold through a private placement of unregistered securities 2.4 million shares of Common Stock for a total of $120,000.  As reflected in the accompanying balance sheet at June 30, 2009, cash totals $29,556.  Based on such balance and management’s forecast of activity levels during the foreseeable future, management believes that the present cash balance will be sufficient to pay its current liabilities and its administrative expenses as such expenses become due.  The Company has not identified as yet potential acquisition candidates, the acquisition of which would mean that the Company would cease being a “public shell” and begin operating activities.
 
 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, the initial acquisitions of portfolio businesses may require the Company to be infused with additional 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
 
"Item 2 - Management's Discussion and Analysis of Results of Operation" and other parts of this Form 10-Q contain certain "forward-looking statements" within the meaning of the Securities Act of 1934, as amended.  While management of the Company believes any forward-looking statements it has made are reasonable, actual results could differ materially since the statements are based on current management expectations and are subject to risks and uncertainties. These risks and uncertainties include, but are not limited to the following:

 
Page 7
 

 
·
We have had no operating history since April 2004 and no revenues or earnings from operations since April 2004.  We have no material assets and we will, in all likelihood, sustain operating expenses without corresponding revenues at least until the consummation of a business combination.
 
·
Since we have no operating history, we will be subject to the risks inherent in establishing a new business.  We have not identified what our new line of business will be; therefore, we cannot fully describe the specific risks presented by such business.
 
·
We may be unable to successfully identify and acquire a suitable merger partner or acquisition candidate.
 
·
Recent turmoil across various sectors of the financial markets may negatively impact our ability to complete an acquisition.
 
·
We will incur significant costs in connection with our evaluation of suitable merger partners and acquisition candidates.  As part of our plan to acquire or invest in strategically positioned companies, our management is seeking, analyzing and evaluating potential acquisition and merger candidates.  We have incurred and will continue to incur significant costs, such as due diligence and legal and other professional fees and expenses, as part of these efforts.  Notwithstanding these efforts and expenditures, we cannot give any assurance that we will identify an appropriate acquisition opportunity in the near term, or at all.
 
·
Because we may consummate a merger or acquisition with a company in any industry and are not limited to any particular type of business, there is no current basis for shareholders to evaluate the possible merits or risks of the particular industry in which we may ultimately operate or the target business which we may ultimately acquire.
 
·
The reporting requirements under federal securities law may delay or prevent us from making certain acquisitions.  Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended, require companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition.   The time and additional costs that may be incurred by some target entities to prepare such statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by us.
 
·
The role of our management team and key personnel from the target business we acquire cannot presently be ascertained.  While we intend to closely scrutinize any individuals we engage after a redeployment of our assets, we cannot assure that our assessment of these individuals will prove to be correct.
 
·
We must conduct a due diligence investigation of the target businesses we intend to acquire. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance and legal professionals who must be involved in the due diligence process. Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure that this diligence will reveal all material issues that may affect a particular target business, or that factors outside the control of the target business and outside of our control will not later arise.
 
·
NOLs may be carried forward to offset federal and state taxable income in future years and eliminate income taxes otherwise payable on such taxable income, subject to certain adjustments.  Based on current federal corporate income tax rates, our NOL and other carryforwards could provide a benefit to us, if fully utilized, of significant future tax savings.  However, our ability to use these tax benefits in future years will depend upon the amount of our otherwise taxable income.  If we do not have sufficient taxable income in future years to use the tax benefits before they expire, we will lose the benefit of these NOL carryforwards permanently.
 
Page 8
 
 
·
We may effect an acquisition or merger with a company located outside of the United States.  If we did, we would be subject to any special considerations or risks associated with companies operating in the target business’ home jurisdiction.
 
·
If we effect an acquisition or merger with a company located outside of the United States, the laws of the country in which such company operates will govern almost all of the material agreements relating to its operations.  We cannot assure you that the target business will be able to enforce any of its material agreements or that remedies will be available in this new jurisdiction. The system of laws and the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital.
 
·
Compliance with the Sarbanes-Oxley Act of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition.
 
·
In the event we engage in a business combination that results in us holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940.  In such event, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs.
 
·
Management anticipates that it may be able to participate in only one potential business venture because a business partner might require exclusivity.  This lack of diversification should be considered a substantial risk to our shareholders because it will not permit us to offset potential losses from one venture against gains from another.
 
·
Our common stock is quoted only on the OTC bulletin board and there may not be a sustained trading market for our common stock.
 
·
Our common stock may be subject to significant restriction on resale due to federal penny stock restrictions.
 
·
The market prices of our common stock have been highly volatile.  The market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.
 
·
Although our stockholders may receive dividends if, as, and when declared by our Board of Directors, we do not intend to pay dividends on our common stock in the foreseeable future.
 
·
Our Amended and Restated Articles of Incorporation provides that our Board of Directors will be authorized to issue from time to time, without further stockholder approval, up to 30,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations, or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of any series.  Such shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights.  We may issue additional preferred stock in ways which may delay, defer, or prevent a change in control of the Company without further action by our stockholders.
 
·
A key element of our growth strategy is to make acquisitions.  As part of our acquisition strategy, we may issue additional shares of common stock as consideration for such acquisitions.  These issuances could be significant.  To the extent that we make acquisitions and issue our shares of common stock as consideration, current stockholders’ equity interest in the Company will be diluted.
 
·
If the Company enters a business combination with a private concern, that, in all likelihood, would result in the Company issuing securities to shareholders of any such private company.  The issuance of our previously authorized and unissued Common Stock would result in reduction in percentage of shares owned by our present and prospective shareholders and may result in a change in our control or in our management.
 
Page 9
 
·
Our principal shareholder, Daniel J. Dorman, owns or controls 48.61% of our common stock. His wife owns 5.56% of our common stock.  Consequently, they will have significant influence over all matters requiring approval by our shareholders, but not requiring the approval of the minority shareholders.  In addition, he is now an officer and director. Because he and his wife own or control a majority of our common stock, they will be able to elect all of the members of our board of directors, allowing them to exercise significant control of our affairs and management.  In addition, they may transact most corporate matters requiring shareholder approval by written consent, without a duly-noticed and duly-held meeting of  shareholders.
 
·
Uncertainties discussed elsewhere in “Management's Discussion and Analysis of Results of Operations”.
 
Item 3. 
Quantitative and Qualitative Disclosures About Market Risk
 
Not Applicable.
 
Item 4. 
Controls and Procedures
 
(a)          Evaluation of disclosure controls and procedures.
 
Based on his evaluation as of June 30, 2009, 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, 2009 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 10, 2009
 
/s/ Daniel J. Dorman
Date
 
President, CEO and Principal Financial Officer
 
Page 10
 
INDEX TO EXHIBITS
 
Exhibit Number
 
Description of Exhibit
     
31.1
 
Certification of the Principal Executive Officer Pursuant to  15 U.S.C. 78M(A) or 780(D) (Section 302 of the Sarbanes-Oxley Act of 2002)
     
31.2
 
Certification of the Principal Financial Officer Pursuant to 15 U.S.C. 78M(A) or 780(D) (Section 302 of the Sarbanes-Oxley Act of 2002)
     
32.1
 
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Sec. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
     
32.2
 
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Sec. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
 
Page 11
 
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