Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

First Amended

Form 10/A

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934

Gateway International Holdings, Inc.

(Name of Small Business Issuer in its Charter)

Nevada		88-0375818
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2672 Dow Avenue Tustin, CA		92780
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number: (714) 630-6253

Securities registered pursuant to Section 12(b) of the Act:

Title of each class to be registered		Name of each exchange on which each class is to be registered

None		None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001

(Title of class)

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o

Non-accelerated filer o Smaller reporting company x

(Do not check if a smaller reporting company)

Gateway International Holdings, Inc.

Table of Contents

Form 10

Item 1.	Business.	1
Item 1A.	Risk Factors.	13
Item 2.	Financial Information.	16
Item 3.	Properties.	27
Item 4.	Security Ownership of Certain Beneficial Owners and Management.	28
Item 5.	Directors and Executive Officers.	28
Item 6.	Executive Compensation.	30
Item 7.	Certain Relationships and Related Transactions.	33
Item 8.	Legal Proceedings.	34
Item 9.	Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.	34
Item 10.	Recent Sales of Unregistered Securities.	35
Item 11.	Description of Registrant’s Securities to be Registered.	36
Item 12.	Indemnification of Directors and Officers.	36
Item 13.	Financial Statements and Supplementary Data.	37
Item 14.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	37
Item 15.	Financial Statements and Exhibits.	37

This Registration Statement on Form 10 includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading “Management Discussion and Analysis.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company’s future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

Item 1. Business.

Corporate History

Gateway International Holdings, Inc. (“We,” “Gateway” or “Company”) was incorporated in Nevada on September 24, 1997, under the name Gourmet Gifts, Inc. Prior to December 11, 2001, we were engaged in the business of catalogue retail gifts. At the time, our principal business activity entailed the packaging, sale and delivery of seasonal gourmet food and beverage items. However, due to difficulty in raising additional working capital to execute our business plan, we ceased operations, and subsequently completed a reverse merger with E.M. Tool Company, Inc., a California corporation d.b.a. Elite Machine Tool Company (“Elite Machine”).

Acquisition of Elite Machine and Reverse Acquisition Accounting

On December 11, 2001, we finalized an agreement to acquire 100% of the issued and outstanding capital stock of Elite Machine. Immediately prior to the merger, we had 100,000,000 shares authorized, of which 6,768,000 shares were outstanding. Pursuant to the merger, all of the outstanding shares of Elite Machine, aggregating 21,262 shares, were exchanged for shares of our common stock on a 1 to 1,274 basis or into 27,072,000 (net of 600,000 shares subsequently cancelled) shares of our common stock leaving a total of 33,240,000 shares of common stock issued and outstanding after the merger. Immediately after the merger, our previous officers and directors resigned and the executive officers and directors of Elite Machine were elected and appointed to such positions, thereby effecting a change of control.

Due to the change in voting control and change in senior management in Gateway as a result of the merger, the transaction was recorded as a “reverse-merger” whereby Elite Machine was considered to be the acquirer for accounting purposes. At the closing of the reverse merger, Elite Machine became our wholly-owned subsidiary and we changed our corporate name to Gateway International Holdings, Inc., effective January 28, 2002. After the merger, through Elite Machine, we were a company engaged in the acquisition, refurbishment, distribution and sales of pre-owned computer numerically controlled (“CNC”) machine tools to manufacturing customers across the United States of America. This was our sole business from this point until we acquired the additional businesses listed herein.

Acquisition of Eran Engineering, Inc.

In October, 2003, pursuant to a Stock Purchase Agreement, dated June 17, 2003, we acquired all the issued and outstanding shares of Eran Engineering, a California corporation, from its two shareholders, Hans B. Thallmayer and Alice Thallmayer, for an aggregate purchase price of $1,250,000. In addition to a cash payment of $650,000, which was credited to the purchase price, we executed a promissory note in favor of the sellers in the principal amount of $600,000, payable in three equal annual installments of $200,000 and accruing simple interest at the rate of six percent (6%) per annum. Our obligation under the promissory note was secured by the pledge by Lawrence A. Consalvi, a Director, and our then President and Chief Executive Officer (currently an Executive Vice President), and Joseph T.W. Gledhill, our Vice President and a Director, of a security interest in certain shares of our common stock worth approximately $4,285,716 as of the date of the pledge. Concurrently with the closing of the acquisition, Eran Engineering purchased from R & H Investments, a partnership owned by the two selling shareholders of Eran Engineering, the building in which Eran Engineering operates its business. The purchase price for the building was $1,250,000, and was paid as follows:

·	$650,000 in cash and;

·	A promissory note in the principal amount of $600,000, bearing simple interest at the rate of 6% per annum.

The cash portion of the purchase price paid by us for Eran Engineering and the building was financed pursuant to a term loan from Financial Federal Credit (“FFC”), in the principal amount of $1,300,000. The loan from FFC was primarily secured by a deed of trust on the building acquired by Eran Engineering and a security interest in all the equipment owned by Eran Engineering. This note has been paid in full.

Further, in connection with the acquisition, Eran Engineering entered into employment agreements with Erich Thallmayer to serve as the President and Chief Executive Officer of Eran Engineering at an annual base salary of $105,600 and with Hans Thallmayer to serve as its Operating Manager at an annual base salary of $90,000. Our Director and Vice President, Joseph T.W. Gledhill, subsequently replaced Erich Thallmayer as the company's President and Chief Executive Officer. Hans Thallmayer is no longer employed as the company's Operating Manager. We have no obligation to either Erich Thallmayer or Hans Thallmayer in connection with their past employment agreements.

As discussed below, Eran Engineering manufactures and assembles specialized, precision components used in equipment and machinery in the commercial aviation, medical, aerospace and defense industries. Joseph T.W. Gledhill, a Director and Executive Vice President of the Company, serves as the President of Eran Engineering.

Acquisition of CNC Sales, Inc.

All American CNC Sales, Inc. (“All American”) is a California corporation and was incorporated on November 4, 1993. All American was founded by our current Chief Executive Officer, Timothy D. Consalvi, and his wife. In October, 2004, pursuant to a share exchange agreement, we acquired all the outstanding shares of All American from Mr. Consalvi and his wife in exchange for 1,000,000 shares of our common stock. On December 21, 2005, we issued an additional 500,000 shares to the original shareholders pursuant to the earn-out provisions of the share exchange agreement, which provided that if All American’s gross profit exceeded the stated goal of $300,000 for each of fiscal year 2005 and fiscal year 2006, we would issue to the shareholders an aggregate of 250,000 shares for each year such target was reached. The stated target goals were reached for both years.

In connection with the acquisition, we entered into an employment agreement with Timothy Consalvi, the President and CEO of All American at the time of the exchange, for him to continue as President of All American. The agreement was superseded on November 20, 2006 with the execution of a new employment agreement under which Mr. Consalvi became our President and Chief Executive Officer. Timothy Consalvi was elected to our Board of Directors in March, 2005. Timothy Consalvi is the brother of Lawrence A. Consalvi, the President of Elite Machine and one of our Directors and an Executive Vice President.

As further described below, All American, is involved in selling new CNC machine tools.

Acquisition of Assets of CNC Repos, Inc..

On October 1, 2007, pursuant to a Asset Purchase Agreement, we acquired certain assets of CNC Repos, Inc., in exchange for 1,000,000 shares of our common stock. At the request of CNC Repos, these shares were delivered to Douglas Redoglia, Kenneth Collini, and Starr Garcia, all of whom were principals of CNC Repos. The primary assets we purchased from CNC Repos were the following: (i) all the rights to use CNC Repos, Inc., including any intellectual property in the name, (ii) all customer lists, contact lists, and vendor lists of CNC Repos, (iii) a list of all customers that purchased machines in that past 24 months, and (iv) a list of all banks and other financial institutions that CNC Repos had a relationship with over the past 36 months. CNC Repos was a company that was in the business of purchasing used CNC machines, refurbishing them, and reselling them to third parties, similar to Elite Machines.

In connection with the acquisition of these assets, we entered into employment agreements with Kenneth Collini and Douglas Redoglia, the President and Vice President of CNC Repos, respectively, at the time of the asset purchase. Under the terms of these employment agreements we hired Mr. Redoglia and Mr. Collini to assist our machine tools segment with the purchase and sale of used CNC machines each at an annual salary of $120,000 per year.

Former Acquisitions and Subsidiaries

In early 2007, our management elected to streamline our operations, reorganize our accounting, financial records and reporting systems, restructure our management team, and organize our business activities into two primary operating segments: the Machine Tools Group and the Precision Manufacturing Group. The restructuring of our management team included hiring Timothy Consalvi as our Chief Executive Officer, Lawrence A. Consalvi stepping down as our Chief Executive Officer, as well as Lloyd Leavitt, Robert Page and David Lyons resigning from our Board of Directors.

As part of this process, we divested ourselves, through a share re-exchange, of two prior operating subsidiaries that did not integrate with our new business operations and focus, primarily due to the time and resources of management and personnel required to manage and oversee those subsidiaries. Those two former subsidiaries are Nu-Tech Industrial Sales, Inc. and Gledhill/Lyons, Inc.

Nu-Tech Industrial Sales, Inc. (“Nu-Tech”). In March, 2005, we acquired Nu-Tech as a wholly-owned subsidiary from its two shareholders in an exchange of all the outstanding stock of Nu-Tech for an aggregate of 2,500,000 shares of our common stock. Nu-Tech is a company located in Southern California that supplies tools to the automotive, aerospace and medical equipment manufacturing industries. As part of the terms of the acquisition, Robert Page, the president of Nu-Tech, continued in that position. On March 23, 2007, we entered into a share exchange agreement with the original shareholders of Nu-Tech whereby we re-exchanged the shares in the earlier share exchange transaction. We exchanged all the Nu-Tech shares we held for the 2,500,000 shares of our common stock held by the Nu-Tech shareholders less 75,000 shares that those shareholders had previously sold.

Gledhill/Lyons, Inc., dba Accurate Technology (“Accurate”). In December, 2004, we acquired all the outstanding stock of Accurate from its shareholders in an exchange for an aggregate of 12,000,000 shares of our common stock. Accurate specializes in the manufacture of precision metal systems with a diverse client base in the aerospace, defense and automotive industries. In connection with the acquisition, Accurate entered into employment agreements with David Lyons, the President of Accurate, to serve as its President, and with William Gledhill, the Vice President of Accurate, to serve as its Vice President and elected Mr. Gledhill as one of our Directors. William Gledhill is the son of Joseph T.W. Gledhill, one of our Directors and the President of Eran Engineering. On March 23, 2007, we entered into a share exchange agreement with the past Accurate shareholders and re-exchanged all the Accurate shares for the 12,000,000 shares of our common stock held by the Accurate principals. As part of the divestiture of Accurate, William Gledhill resigned as one of our Directors.

In addition to divesting our ownership in Nu Tech and Accurate, as part of this reorganization we also streamlined other companies we had either acquired or formed. These companies have been either merged into our existing operations, dissolved, or both. The following is a description of these companies.

ESK Engineering, Inc. (“ESK”). In December, 2004, we acquired ESK Engineering Inc., a California corporation, as a wholly-owned subsidiary from its sole shareholder, Erich Thallmayer, formally the President of Eran Engineering, through an exchange of all of the outstanding stock of ESK for an aggregate of 219,780 shares of our common stock and a cash payment of $50,000. Prior to the acquisition, ESK had only one major customer: Eran Engineering. Shortly after the acquisition, we transferred the operations of ESK to Eran Engineering and dissolved ESK on June 25, 2007.

Spacecraft Machine Products, Inc (“Spacecraft”). In January, 2005, we acquired all the outstanding stock of Spacecraft Machine Products, Inc., a California corporation, in exchange for 600,000 shares of our common stock. The exchange agreement provided for the additional payment of 150,000 shares of our common stock in each year that Spacecraft met certain annual profit goals as follows: $200,000 gross profits by December 31, 2005, $300,000 gross profits by December 31, 2006, and $350,000 by December 31, 2007. We anticipated that the gross profits would exceed the combined profit targets specified in the exchange agreement, and accordingly, on December 21, 2005, our Board of Directors approved and issued all 450,000 contingent shares.

In connection with the acquisition of Spacecraft, we executed a promissory note in favor of the Leavitt Family Trust in the principal amount of $220,000 to be paid in equal monthly installments over a 60-month period, secured by our pledge of a security interest in the Spacecraft stock acquired pursuant to the share exchange. In addition, we issued a second promissory note in the principal amount of $75,000, payable in monthly installments of $6,250.

In connection with the original share exchange transaction, Lloyd R. Leavitt, III, previously the owner of Spacecraft, entered into an employment agreement with us to serve as our Chief Operating Officer during the six months following the closing of the acquisition of Spacecraft at an annual base salary of $115,000. On February 28, 2007, we negotiated a mutually-acceptable termination of his employment agreement.

Spacecraft had been in operation for over 35 years in Torrance, California, operating as a precision machine tool shop specializing in the manufacture of parts for the defense, aerospace and automotive industries. In July, 2005, the operations of Spacecraft were merged with Accurate Technology and we closed the manufacturing facilities of Spacecraft and sold all the equipment, furniture, fixtures and fittings in an auction pursuant to which we received proceeds of $560,000. We dissolved the Spacecraft corporate entity on June 25, 2007.

A-Line Capital Corporation (“A-Line”). We established A-Line Capital Corporation, a California corporation, in 2004, to provide financial services to consumers seeking financing for the purchase and/or lease of machine tools and equipment. Elite Machine and All American frequently sell machines that are financed through equipment lease financing companies that are not affiliated with us. A-Line was established to capture the income stream that was lost to equipment lease brokers in prior years and to provide equipment lease financing for transactions for our other subsidiaries. No financing agreements were entered into by A-Line and subsequently, we dissolved A-Line as part of our strategy to focus the time and skills of management on our core business.

The Enforcement Action

Our common stock was previously registered with the Securities and Exchange Commission (the “Commission”) under Section 12(g) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our stock was originally registered on or around September 1999. From September 1999 through our quarterly report for the quarter ended December 31, 2002, we filed the required quarterly and annual reports with the Commission as a reporting company under Exchange Act. However, beginning with our quarterly report for the quarter ended March 31, 2003 through our quarterly report for the quarter ended March 31, 2005 we failed to timely file compliant annual and quarterly reports. Our failure to file these reports was primarily caused by our failure to obtain financial documentation from two companies we acquired in late 2002, Bechler Cams, Inc. and Nelson Engineering, Inc. Our inability to obtain this financial information led to our auditors being unable to adequately review and audit our financial statements, as required under the Exchange Act. Although we requested this information from Bechler Cams, Inc. and Nelson Engineering, Inc., in hindsight there may have been additional actions our previous management and consultants could have taken to obtain this information. Additionally, with proper due diligence, our previous management and consultants should have obtained the financial statements and determined their ability to be audited prior to closing the acquisitions. These are two areas our new management and consultants have looked at closely since that time to ensure this does not occur in the future.

As a result of not getting the required reports on file, the Commission instituted an enforcement proceeding against us in April 2005. Although we were able to eventually file our delinquent reports by unwinding certain acquisitions, the Commission ruled that our audit reports and review were still non-compliant and after a hearing in front of an administrative law judge and a subsequent appeal heard by the Commission, on May 31, 2006, the Commission entered an Order finding the following: i) our conduct with respect to our reporting obligations was “serious, egregious, recurrent, and evidenced a high degree of culpability” as evidenced by our knowledge, through our then Chief Executive Officer, Lawrence A. Consalvi, of our reporting obligations and our failure to file a total of seven annual and quarterly reports due between May 2003 and December 2004; ii) our failure to notify the Commission of our inability to file our periodic reports; iii) our failure to terminate the registration of our common stock; iv) our failure to hire new auditors to replace Squar Milner after they resigned until eighteen months had passed; v) our continuation of an aggressive growth strategy during a time when we were not complying with our Exchange Act reporting requirements; vi) our failure to offer credible assurances against future violations of our reporting obligations under the Exchange Act; and vii) our failure to accept responsibility for our failure to meet our reporting obligations under the Exchange Act, and not taking all measures available to us to obtain the necessary financial information from Bechler Cams, Inc. and Nelson Engineering.

Based on these findings the Commission entered an Order Imposing Remedial Sanctions which revoked the registration of our common stock pursuant to Section 12(j) of the Exchange Act and ordered our then president and chief executive officer, Lawrence A. Consalvi, to cease and desist from causing any violations or future violations of the Exchange Act.

Due to the Commission’s decision to deregister our common stock we were de-listed from the OTC Bulletin Board and Pink Sheets. Our common stock is not currently listed on any national stock exchange or over-the-counter securities market.

The Remedial Measures and Re-Registration of our Common Stock

As a result of the Commission’s action, our management underwent a comprehensive review of the primary causes for our delinquent reports, and our inability to timely remedy these issues. Although the primary cause of our inability to file timely compliant reports was the breach of the acquisition agreements by the companies we acquired, there was also inadequate internal financial personnel in place to properly review these acquisitions and perform the day-to-day accounting functions necessary for a reporting company under the Exchange Act. In order to remedy these issues we have undergone numerous changes. With respect to our management, we have undergone the following changes: i) Lawrence A. Consalvi is no longer our President or Chief Executive Officer, but he is still on our Board of Directors and runs one of our subsidiaries, ii) Timothy D. Consalvi is now our President and Chief Executive Officer, and has been since November, 2006 when Lawrence A. Consalvi resigned from those positions; iii) Stephen M. Kasprisin, who has a long public company accounting background, was our full-time Chief Financial Officer from November 2006 until October 2007, and has recently agreed to serve as our part-time Chief Financial Officer until a full time replacement is hired; and iv) we hired Mr. Robert Crowson, as our full-time controller. With respect to our board of directors, we have appointed Mr. Kasprisin to our board of directors and removed the individuals that were related to subsidiaries we no longer own. We do not have an audit committee for our board of directors since all of our current directors are interested directors, however, Mr. Kasprisin is a financial expert. In addition to our changes to management and our board of directors, we have hired a financial consulting company to assist with our monthly, quarterly and annual financial statement preparation, and to assist our Chief Financial Officer and controller. We also have a new independent auditors and legal counsel.

These advisors, in conjunction with our management, have discussed the due diligence review, and legal and financial preparations, that must occur prior to closing any future acquisitions. These preparations include full legal review of any letters of intent and acquisition agreements prior to execution, and review of any target company’s financial statements and information by our Chief Financial Officer, controller and outside financial consultants, to ensure the target company’s financial information can be fully audited prior to completing any acquisition. Additionally, in preparation for becoming a reporting company under the Exchange Act, we will be conducting quarterly and annual evaluations, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As part of this process we have worked with our executives at the subsidiary level to ensure proper communication with our controller and Chief Financial Officer, and have provided our controller and Chief Financial Officer with outside financial consultants to assist as needed to ensure accurate and timely reporting of our financial information.

Our management believes the changes to our management outlined above, as well as the new internal company procedures put in place, will help ensure that what occurred previously, the acquisition of third party companies from which we could not obtain the financial information necessary to file our required Exchange Act quarterly and annual reports, will not occur in the future, and will help ensure we are able to timely file our periodic reports under the Exchange Act.

Our management has elected to seek to re-register our common stock under Section 12 of the Exchange Act and become a reporting company, primarily, to ultimately seek to get re-listed on the OTC Bulletin Board in order to provide a market for our common stock for our hundreds of shareholders, many of which purchased our stock when it was registered under Section 12 and we were listed on the OTC Bulletin Board or Pink Sheets. Additionally, Section 12(g) of the Exchange Act requires a company to file a registration statement under that Act within 120 days when, on the last day of any fiscal year, the company's securities are held of record by at least 500 persons and the company has total assets exceeding $10,000,000. As of our fiscal year end June 30, 2007 and 2006, while we only had approximately 100 shareholders of record, we had total current assets totaling approximately $6.5 million and $20.5 million, respectively. Therefore, if we are able to maintain $10 million in total assets and we acquire additional shareholders of record we would, at some point in the future, be required to re-register our common stock. There are no plans currently underway to acquire additional shareholders. Third, as noted above, one of our business strategies is to acquire companies that are in one of our two primary industry segments. If our stock is publicly-traded it may enable us to acquire these target companies utilizing equity and, correspondingly, less cash. Although we do not have any new acquisitions targeted we may acquire additional companies in the future, and may issue stock to acquire these companies, causing dilution to our existing shareholders.

Business Overview

We currently conduct all of our operations through our three wholly-owned operating subsidiaries: Elite Machine, Eran Engineering, and All American. Through these subsidiaries we provide services and products to the machine tool industry, including the sale of new and refurbished CNC machines and the manufacture of precision metal components.

Our services and products are primarily marketed and sold to the aerospace, defense, medical, racing and recreational vehicle industries. Currently we manage the operations of these subsidiaries. In the future we hope to expand our business, both through the growing of our existing businesses and their client bases, as well as through acquisitions of third party operating companies that complement the products and services we currently offer through our subsidiaries.

During the past year, we streamlined our operations, reorganized our accounting, financial records and reporting systems, restructured our management team, and organized our business activities into two primary operating sectors: the Machine and Tools Group and the Precision Manufacturing Group. As discussed above, we divested ourselves, through a share re-exchange, of two prior operating subsidiaries that did not integrate with our new, streamlined business operations primarily due to the time and resources of management and personnel required to manage and oversee those subsidiaries. We also merged several other subsidiaries into our current three operating subsidiaries.

Machine Tools Group

The Machine Tools Group is composed of two of our subsidiaries, Elite Machine and All American., both of which are in the business of acquiring and selling computer numerically controlled (“CNC”) machines, and related tools, to manufacturing customers. The operations of this group also include the business generated from our purchase of certain assets of CNC Repos, Inc., as discussed above.

CNC machines use commands from an onboard computer to control the movement of cutting tools and the rotation speeds of the part being produced. The computer controls enable the operator to program specific operations, such as part rotation and tooling selection and movement, for a particular part and then store that program in memory for future use. Because CNC machines can manufacture parts unattended and operate at speeds faster than similar manually-operated machines, they can generate higher profits with less rework and scrap. Elite Machines specializes in selling used, refurbished CNC machines, while All American sells new machines it purchases from third party manufacturers.

For the nine months ended March 31, 2008, and the year ended June 30, 2007, the Machine and Tools Group accounted for $8,975,782 (68%) and $10,990,408 (66%) of our total revenue, respectively. All revenues for both periods were from sales to external third parties. This segment of our business also accounted for 54% and 42% of our gross profits for the nine months ended March 31, 2008, and the year ended June 30, 2007, respectively.

(a)

Company Overview

(1) E.M. Tool Company, Inc.

Elite Machine is a California corporation and was founded in 1990 by our Director and Executive Vice President, Lawrence A. Consalvi. Mr. Consalvi is also the President of Elite Machine. Through the reverse merger transaction described above, Elite Machines became our wholly-owned subsidiary, which today specializes in the sale of previously-owned CNC machine tools from CNC machine manufacturers like Mori Seiki, Matsuura and Kitamura. Elite Machine is one of the largest dealers of pre-owned CNC machine tools in the Western United States. Elite Machine purchases high-quality used CNC machinery from Japan, Europe, and the United States, and then inspects and repairs them prior to being refurbished for resale. The primary industry segments in which Elite Machine machines are utilized to make component parts are in the aerospace, military and medical fields.

(2) All American CNC Sales, Inc.

All American is a California corporation and was incorporated on November 4, 1993. All American was founded by Timothy D. Consalvi, our Chief Executive Officer. In October, 2004, pursuant to a share exchange agreement, we acquired all the outstanding shares of All American from Mr. Consalvi and his wife in exchange for 1,000,000 shares of our common stock. On December 21, 2005, we issued an additional 500,000 shares to the original shareholders for meeting certain earn-out provisions under the share exchange agreement.

All American specializes in the sale of new CNC machines throughout the Orange County, California market with a current customer base of over 530 companies, representing approximately a 10% market share in that area. The primary product lines offered through All American include: Fadal Vertical Machining Centers, Hwacheon CNC Turning Centers and Vertical Machining Centers, Kiwa CNC Horizontal Machining Centers, Visionwide CNC Bridge Mills, and Clausing Industrial CNC Vertical Machining Centers. The primary industry segments in which All American sells machines are in the aerospace, military and medical fields.

(b)

Principal Products and Services.

Both Elite Machines and All American are in the business of selling computer numerically controlled (“CNC”) machines. Neither company manufactures its own CNC machines. Elite Machines buys used CNC machines, refurbishes them and sells them, while All American sells new CNC machines manufactured by third parties. CNC machines use commands from an onboard computer to control the movement of cutting tools and the rotation speeds of the part being produced. The computer controls enable the operator to program specific operations, such as part rotation and tooling selection and movement, for a particular part and then store that program in memory for future use. The machines are then typically used to mass produce a particular part. This helps ensure all the same parts are identical. The machine can then be reprogrammed to manufacture a different part depending on the needs of the customer.

Elite Machines purchases all the used machines it sells and bears the risk of reselling the machine. Normally the machines sold by Elite Machines are sold “as is.” However, Elite Machines does offer a limited warranty to the purchasers of the used CNC machines it sells, but the company is planning on moving away from this practice. Currently, approximately 80% of Elite Machines’ customers are under some type of warranty with Elite Machines with most on a 30-day warranty.

All American typically does not purchase a machine from one of its manufacturers until a customer has ordered and purchased the machine from All American. However, at times, All American will purchase a CNC machine when it does not have a prospective customer to purchase the machine. This normally occurs when All American either needs a CNC machine for a showroom, management believes it needs one or more machines on hand to meet future customer demand, and/or when All American believes it can get a good deal from a manufacturer. Normally, the original manufacturer of the machine, not All American, is responsible for any problems or issues with the machine, since the machines are typically under warranty.

(c)

Product Manufacturing.

Neither Elite Machines nor All American manufacture any of its own products.

Elite Machine locates CNC machines for resale through relationships with past customers, the monitoring of both internet and direct mail sale boards, and personal relationships with machine tool companies. Elite Machine purchases the machines on terms and in some cases cash on delivery. Machines are purchased based upon the desirability of the model and make and the age and condition of the machine. Refurbishment generally entails cleaning the machine, spot painting and testing for basic functionality. All machines are sold on a warranty basis, typically with 30-day expiration, and Elite generally installs the machine in the customer’s plant.

All American purchases new CNC machines from several different third parties, including Fadal Vertical Machining Centers, Hwacheon CNC Turning Centers and Vertical Machining Centers, Kiwa CNC Horizontal Machining Centers, Visionwide CNC Bridge Mills, and Clausing Industrial CNC Vertical Machining Centers, and then resells the new machines to its customers. New machines are generally installed by the manufacturer and come with a manufacturers warranty for various periods of time.

(d)

Sales, Marketing and Distribution.

The Elite Machine and All American product line consists of used and new CNC machines, respectively. These machines are marketed through our in-house sales staff. Sales personnel are assigned regions and sell both new and used machines in their territory. New machines are generally installed by the manufacturer and come with a manufacturers warranty for various periods of time. We have a limited warranty for labor on some of the new machines sold. Used machines are sold on a warranty basis, typically with 30-day expiration, and generally includes installation of the machine at the customer’s location. We are currently investigating a strategy to sell machine tools through alternative channels such as the internet and auctions

Manufactured products are normally sold on a bid/contract basis with the majority being on a bid basis with no contractual liability. Because our products are complex in nature, generally have a high cost of production and require considerable customer contact, education and post-sales support, sales are handled internally through our sales team that deals directly with clients.

All American operates as a manufacturers representative for the manufacturers it purchases CNC machines from and is limited in the territories in which it can solicit customers to sell machines. The territories in which All American can sell these machines varies by the particular manufacturer. The most expansive territory for one of our manufacturers includes the following counties in California: Orange, Los Angeles, Ventura, San Diego, San Bernardino, and Riverside. For other manufacturers we are limited to only one or a few of the above counties.

(e)

New Product Development.

Due to Elite Machine and All American selling machines manufactured by third parties, as opposed to being a manufacturing company, neither company manufactures its own products and therefore does not have any new product development. However, both companies do advise the CNC machine manufacturers regarding customer needs and requirements to assist with their future machine development.

(f)

Competition.

Our competitors in the machine tools industry consist of a large fragmented group of companies, including certain business units or affiliates of our customers. Our management believes that competition within the industry will increase substantially as a result of industry consolidations and trends toward favoring greater outsourcing of components and reducing the number of preferred suppliers. Certain of our competitors may have substantially greater financial, production and other resources and may have (i) the ability to adapt more quickly to changes in customer requirements and industry conditions or trends, (ii) stronger relationships with customers and suppliers, and (iii) greater name recognition.

All American, our subsidiary specializing in the sale of new CNC machines throughout the Orange County, California market, has a current customer base of over 530 companies which we believe represents approximately 10% of the Orange County, California market.

The competition for design, manufacturing and service in precision machining and machine tools consists of independent firms, many of which, however, are smaller than our collective group of wholly-owned subsidiaries. We believe that this allows it to bring a broader spectrum of support to its customers.

In addition to similar companies, we compete against the in-house manufacturing and service capabilities of our larger customers. We believe these large manufacturers are increasingly outsourcing activities that are outside their core competency to increase their efficiencies and reduce their costs. This outsourcing provides an opportunity for us to grow with our current clients and the addition of new clients.

Although there are numerous domestic and foreign companies which compete in the markets for the products and services offered by us, our management believes that it will be able to compete effectively with these firms on price, ability to meet customer deadlines and the stringent quality control standards. We strive to develop a competitive advantage by providing high quality, high precision and quick turnaround support to customers from design to delivery.

(g)

Sources and Availability of Raw Materials.

All of the products sold by our machine tools division are manufactured by third parties so we do not directly purchase any raw materials. However, the third party companies that manufacture CNC machines rely on the availability of a variety of raw materials, primarily metals such as steel and aluminum, but none of the primary raw materials are scarce and we do not anticipate the third party manufacturers will have any problems obtaining these raw materials.

(h)

Dependence on Major Customers.

Neither company in our Machines and Tools Group depend on one or two major customers. In fact, the largest single customer of this group accounted for less than 10% of the total revenue for this group.

(i)

Patents, Trademarks and Licenses.

Neither Elite Machines nor All American have any patents or licenses, or other intellectual property.

(j)

Need for Government Approval.

As noted above, Elite Machines and All American do not manufacture their own products, they merely sell used and new CNC machines. As sellers of used and new CNC machines, Elite Machines and All American do not need government approval to operate their business.

(k)

Effect of Government Regulation on Business.

However, inasmuch as Elite Machines refurbishes used CNC machines to resell, it maintains strict control standards on the maintenance and use of its equipment to ensure employee safety during the refurbishing process.

(l)

Research and Development

Because both Elite Machine and All American sell products manufactured by third parties this business segment does not spend a material amount on research and development.

(m)

Effects of Compliance with Environmental Laws.

The machine tool industry is subject to environmental laws and regulations concerning emissions into the air, discharges into waterways, and the generation, handling, storage and disposal of waste materials, some of which may be hazardous. CNC machines contain coolants which are deemed as hazardous waste and must be disposed of according to the laws of specific jurisdictions. In addition , we perform spot painting of machines during the re-furbishing process. As required we provide for waste containers for coolants and cleaning products and contract with a hazardous waste company for proper disposal.

We strive to comply with all applicable environmental, health and safety laws and regulations. We believe that our operations are in compliance with all applicable laws and regulations on environmental matters. These laws and regulations, on federal, state and local levels, are evolving and frequently modified and we cannot predict accurately the effect, if any, they will have on its business in the future. In many instances, the regulations have not been finalized, or are frequently being modified. Even where regulations have been adopted, they are subject to varying and contradicting interpretations and implementation. In some cases, compliance can only be achieved by capital expenditure and we cannot accurately predict what capital expenditures, if any, may be required.

Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with any violations. As a generator of hazardous materials, we are subject to financial exposure with regard to intentional or unintentional violations. In addition, we utilize facilities located in industrial areas with lengthy operating histories and it is possible that historical or neighboring activities could impact our facilities. Any present or future noncompliance with environmental laws or future discovery of contamination could have a material adverse effect on our results of operations or financial condition.

(n)

Employees.

As of March 31, 2008, we, with our subsidiaries, employ a total of 65 full-time employees, including three executive employees. For the manufacturing tool group, we employ one managerial employee, and 10 employees engaged in the sales and processing of the groups CNC machine sales.

We are not aware of any problems in its relationships with its employees and prides itself that a majority of its employees have worked with us (including our subsidiaries) for over 10 years. Our employees are not represented by a collective bargaining organization and we have never experienced any work stoppage.

Precision Manufacturing Group

The Precision Manufacturing Group is composed of Eran Engineering, a wholly-owned subsidiary, which is in the business of manufacturing and assembling specialized, precision components used in equipment and machinery in the commercial aviation, medical, aerospace and defense industries.

For the nine months ended March 31, 2008, and the year ended June 30, 2007, the Precision Manufacturing Group accounted for $4,303,524 (32%) and $5,661,936 (34%) of our revenue, respectively. All revenues for both periods were from sales to external third parties. This segment of our business also accounted for 46% and 58% of our gross profits for the nine months ended March 31, 2008, and the year ended June 30, 2007, respectively.

(a)

Company Overview

Eran Engineering, Inc.

In October, 2003, pursuant to a Stock Purchase Agreement, dated June 17, 2003, we acquired all the issued and outstanding shares of Eran Engineering, a California corporation, from its two shareholders for an aggregate purchase price of $1,250,000. In addition to a cash payment of $650,000, which was credited to the purchase price, we executed a promissory note in favor of the sellers in the principal amount of $600,000, payable in three equal annual installments of $200,000 and accruing simple interest at the rate of six percent (6%) per annum. Our obligation under the promissory note was secured by the pledge by Lawrence A. Consalvi, a Director, and our then President and Chief Executive Officer (currently our Executive Vice President), and Joseph T.W. Gledhill, our Vice President and a Director, of a security interest in certain shares of our common stock worth approximately $4,285,716 as of the date of the pledge. Concurrently with the closing of the acquisition, Eran Engineering purchased from R & H Investments, a partnership owned by the two selling shareholders of Eran Engineering, the building in which Eran Engineering operated its business. The purchase price for the building was $1,250,000, and was paid as follows:

·	$650,000 in cash and;

·	A promissory note in the principal amount of $600,000, bearing simple interest at the rate of 6% per annum.

Concurrently with the acquisition of Eran Engineering, we purchased the Santa Ana, California, building in which Eran Engineering operated. The purchase price for the building was $1,250,000, of which we paid $600,000 by a promissory note in the amount of $600,000 and the remainder in cash financed pursuant to a term loan in the principal amount of $1,300,000. On February 23, 2007, we completed the sale of the building and property for a sales price of $2,017,000 resulting in a net gain to us of over $600,000.

(b)

Product Manufacturing.

Eran Engineering manufactures and assembles specialized, precision components used in equipment and machinery in the commercial aviation, medical, aerospace and defense industries. The primary components sold by Eran during the nine months ended March 31, 2008, were parts sold to Panasonic Avionics Corporation, a leading provider of in-flight entertainment systems for commercial aircraft. The other components were parts manufactured for, and sold to, medical companies and general commercial aircraft companies. Eran Engineering maintains approximately 57 CNC machines for use in its specialized manufacturing processes. Joseph T.W. Gledhill, one of our Directors and Executive Vice Presidents, serves as the President of Eran Engineering.

(c)

Sales, Marketing and Distribution.

Eran maintains an in-house sales staff that solicits orders from customers. Solicitation of orders is generally based upon relationships with buyers versus the use of advertising or other forms of solicitation. Orders are received via a bid process and Eran prepares costs estimates and submits a bid for the manufacturing order. Once an order is received, generally through a purchase order rather than a binding contract, Eran programs its machines to manufacture the part. Shipments are based upon pre-determined shipping requirements on the order. Parts are manufactured internally and then in most cases, assembled at Eran’s facility. Most assemblies require the receipt of parts manufactured by other companies and as a result, delays in shipment could be encountered as a result of delays in manufacturing by contractors retained by the customer. Eran has no control or liability for these parts manufactured by other manufacturers used in the assembly’s delivered by Eran.

(d)

New Product Development.

Eran does not develop any proprietary products. Instead, Eran works with principal manufacturers to machine the components they require for the development of their products.

(e)

Competition.

The market for precision tool manufacturing is extremely competitive. There are no substantial barriers to entry, and we expect that competition will intensify in the future. We believe that our ability to compete successfully depends upon a number of factors, including market presence, connections in the industry, reliability, low error rate, technical expertise and functionality, performance and quality of our parts, customization, the pricing policies of our competitors, customer support, our ability to support industry standards, and industry and general economic trends.

Many of our competitors have greater market presence, engineering and marketing capabilities, and financial, technological and personnel resources than those available to us. As a result, they may be able to develop and expand more quickly, adapt more swiftly to new or emerging technologies and changes in customer requirements, take advantage of acquisition and other opportunities more readily, and devote greater resources to the marketing of their services than we can.

(f)

Sources and Availability of Raw Materials.

Our precision equipment group utilizes a variety of raw materials in its specialized manufacturing processes, however, the primary raw materials it utilizes are widely available and we believe they will be readily available for our use as needed.

(g)

Dependence on Major Customers.

Eran has one major customer, Panasonic Avionics Corp., which accounts for 78% and 84% of the segments revenues for the nine months ended March 31, 2008, and year ended June 30, 2007, respectively. This customer also accounts for 37% and 28% of our total revenue for the nine months ended March 31, 2008, and year ended June 30, 2007, respectively.

(h)

Patents, Trademarks and Licenses.

Eran does not have any patents or licenses, or other intellectual property.

(i)

Need for Government Approval.

As a manufacturer of precision parts, Eran’s business is not subject to government approval for its operations or its end products. .

(j)

Effect of Government Regulation on Business.

As a manufacturer of precision parts there are certain regulations that relate to the conduct of our business in general, such as regulations and standards established by the Occupational Safety and Health Act or similar state laws relating to employee health and safety. As such we maintain strict control standards on the maintenance and use of its equipment to ensure employee safety. We comply with all guidelines and recommendations regarding the use of safety equipment such as safety goggles, protective gloves and aprons, ventilators or air guards as may be required. Employees are specifically trained, including emphasis on safety procedures, for each machine used. Management maintains and reviews a schedule of maintenance and safety check for all the equipment used in its operations.

Although there are not many regulations on the manufacturing of precision parts, there are certifications companies can receive in the industry. Eran is ISO 9001-2000 and AS9100 rev. B registered.

(k)

Research and Development.

Our precision manufacturing group does not engage in research and development. Eran purchases manufactured CNC machines and receives a purchase order with detailed instructions from its customers regarding the specifications for the parts it wishes to have Eran manufacture.

(l)

Effects of Compliance with Environmental Laws.

The precision equipment industry is subject to environmental laws and regulations concerning emissions into the air, discharges into waterways, and the generation, handling, storage and disposal of waste materials, some of which may be hazardous.

The precision manufacturing division utilizes various coolants and lubricants that could be considered hazardous waste. Care is taken to prevent accidental discharge and all coolants and lubricants removed from machines are contained and disposed of by an outside waste disposal company. In addition, our Tustin facility is subject to certain local waste water regulations and is required annually to have its waste water and backflow prevention equipment tested by an outside testing agency. The last test was performed in September 2007 and we passed without exception.

Eran strives to comply with all applicable environmental, health and safety laws and regulations. Eran believes that its operations are in compliance with all applicable laws and regulations on environmental matters. These laws and regulations, on federal, state and local levels, are evolving and frequently modified and we cannot predict accurately the effect, if any, they will have on its business in the future. In many instances, the regulations have not been finalized, or are frequently being modified. Even where regulations have been adopted, they are subject to varying and contradicting interpretations and implementation. In some cases, compliance can only be achieved by capital expenditure and we cannot accurately predict what capital expenditures, if any, may be required.

(m)

Employees.

As of March 31, 2008, we, with our subsidiaries, employ a total of 65 full-time employees, including three executive employees. For the precision manufacturing group, we employ five managerial employees, one sales manager, and 45 employees engaged in tool manufacturing-related positions.

We are not aware of any problems in its relationships with its employees and prides itself that a majority of its employees have worked at the Company (including its subsidiaries) for over 10 years. The Company’s employees are not represented by a collective bargaining organization and the Company has never experienced any work stoppage.

Industry Overview

CNC Machines

Since the introduction of CNC tooling machines, continual advances in computer control technology have allowed for easier programming and additional machine capabilities. A vertical turning machine permits the production of larger, heavier and more oddly-shaped parts on a machine that uses less floor space when compared to the traditional horizontal turning machine because the spindle and cam are aligned on a vertical plane, with the spindle on the bottom. Horizontal turning machines have become faster and more accurate with the ability to perform more functions i.e. milling of the parts and cross milling both on and off center line of the part. The vertical turning machines have additionally increased thru-put for part production through increase spindle RPM’s (rotations per minute), with the ability to accomplish high speed machining and increased accuracy through new electronics. Finally, the horizontal machines through the same features mentioned above and with the expansion of more tools and the ability to add multiple pallets out in the field gives the customer the ability to grow into the machine as his work flow increases.

Historically, CNC machines had been sold by the manufacturer, however, more recently many manufacturers are utilizing third party manufacturing representation companies, like All American, to sell their machines in order to cut down on internal overhead expenses related to a sales staff.

Precision Tools

The precision tools industry, as it relates to Eran and our business, deals with the manufacturing of specific, specialized parts for use in several different industries, including, but not limited to, the commercial aviation, medical, aerospace and defense industries. Since the introduction of Computer Numerical Control (CNC) machines into the manufacturing arena, the process of taking raw material and producing a product have had a significant impact in today’s highly competitive manufacturing environment. Precision tool manufacturing companies operate by receiving a purchase order from a customer, then with a blueprint drawing from engineering, and produce a part program which is then loaded into the on board memory of the CNC machine tool. The machine tool follows the part program and cuts the material into the desired shape which the engineers have designed. The CNC Machine tool benefits are: a more consist end product as well as a closer tolerance product on a consistent part-over-part process. In today’s competitive market all types of raw materials are used from a varied type of steel, aluminum, brass, copper as well as plastics.

The precision manufacturing business is an ever changing segment and to remain competitive companies must be prepared to constantly maintain their quality programs, equipment and train their personnel. Manufacturing in today’s work environment is extremely competitive and, therefore, maintaining ISO registration is almost certainly a requirement. To become a first tier supplier to major aerospace and defense contractors a company must become AS9100 compliant with a Continuous Improvement Operation with an eye on the future. All of these programs in conjunction with a competitive price point and on time delivery commitment will make a significant impact to a company’s ability to maintain their business and grow.

Change in Fiscal Year

In fiscal year 2006, our Board of Directors approved the change of our fiscal year end from September 30 to June 30. As a result, any references in this registration statement for the period ended June 30, 2006, is for the nine months ended June 30, 2006, not for a twelve-month period.

Item 1A. Risk Factors.

As a smaller reporting company we are not required to provide a statement of risk factors. However, we believe this information may be valuable to our shareholders for this filing. We reserve the right to not provide risk factors in our future filings. Our primary risk factors and other considerations include:

If we are unable to maintain relationships with our suppliers, our business could be materially adversely affected.

Substantially all of our products are manufactured by third parties. To the extent that a manufacturer is unwilling to do business with us, or to continue to do business with us once we enter into formal agreements with it, our business could be materially adversely affected. In addition, to the extent that the manufacturer modifies the terms of any contract it may enter into with us (including, without limitation, the terms regarding price, rights of return, or other terms that are favorable to us), or extend lead times, limit supplies due to capacity constraints, or other factors, there could be a material adverse effect on our business.

We operate in a competitive industry and continue to be under the pressure of eroding gross profit margins, which could have a material adverse effect on our business.

The market for the products we sell is very competitive and subject to rapid technological change. The prices for our intended products tend to decrease over their life cycle, which can result in decreased gross profit margins for us. There is also substantial and continuing pressure from customers to reduce their total cost for products. We expend substantial amounts on the value creation services required to remain competitive, retain existing business, and gain new customers, and we must evaluate the expense of those efforts against the impact of price and margin reductions. Further, our margins will be lower in certain geographic markets and certain parts of our business than in others. If we are unable to effectively compete in our industry or are unable to maintain acceptable gross profit margins, our business could be materially adversely affected.

Products sold by us may be found to be defective and, as a result, warranty and/or product liability claims may be asserted against us, which may have a material adverse effect on the company.

We may face claims for damages as a result of defects or failures in the products we intend to sell to our customers. Although many of our products are sold under a third party warranty or are sold “as is” our ability to avoid liabilities, including consequential damages, may be limited as a result of differing factors, such as the inability to exclude such damages due to the laws of some of the locations where we do business. Our business could be materially adversely affected as a result of a significant quality or performance issue in the products developed by us, if we are required to pay for the damages that result.

Our share ownership is concentrated.

Our officers and directors, as a group, beneficially own approximately 48% of our voting shares. As a result, these stockholders can exert significant influence over all matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation or sale of all or substantially all of assets, as well as any charter amendment and other matters requiring stockholder approval. In addition, these stockholders may dictate the day to day management of the business. This concentration of ownership may delay or prevent a change in control and may have a negative impact on the market price of our common stock by discouraging third party investors. In addition, the interests of these stockholders may not always coincide with the interests of our other stockholders.

When we make acquisitions, we may not be able to successfully integrate them or attain the anticipated benefits.

We intend to acquire other businesses that are synergistic with ours. If we are unsuccessful in integrating our acquisitions, or if integration is more difficult than anticipated, we may experience disruptions that could have a material adverse effect on our business. In addition, we may not realize all of the anticipated benefits from our acquisitions, which could result in an impairment of goodwill or other intangible assets.

If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls over financial reporting, we may not be able to report our financial results accurately or timely or detect fraud, which could have a material adverse effect on our business.

An effective internal control environment is necessary for us to produce reliable financial reports and is an important part of our effort to prevent financial fraud. We will be required to periodically evaluate the effectiveness of the design and operation of our internal controls over financial reporting. Based on these evaluations, we may conclude that enhancements, modifications or changes to internal controls are necessary or desirable. While management will evaluate the effectiveness of our internal controls on a regular basis, and although we have recently undergone substantial changes to address any weaknesses, these controls may not always be effective. There are inherent limitations on the effectiveness of internal controls, including collusion, management override, and failure of human judgment. In addition, control procedures are designed to reduce rather than eliminate business risks. If we fail to maintain an effective system of internal controls, or if management or our independent registered public accounting firm discovers material weaknesses in our internal controls, we may be unable to produce reliable financial reports or prevent fraud, which could have a material adverse effect on our business. In addition, we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or limit our access to capital.

Currently, we only have a part time, interim Chief Financial Officer. We have hired expert accounting consultants, with experience in public company accounting, and a full time controller in order to help ensure that proper internal controls are in place to ensure there are accounting oversights or irregularities, there can be assurance this will be adequate.

We rely on third-party suppliers and manufacturers to provide our CNC machine products, and we will have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity.

All of our CNC machine products will be manufactured by unaffiliated manufacturers. We may not have any long-term contracts with these suppliers or manufacturing sources, and we expect to compete with other companies for production capacity and availability.

There can be no assurance that there will not be a significant disruption in the supply of CNC machines from our intended sources or, in the event of a disruption, that we would be able to locate alternative suppliers of equipment of comparable quality at an acceptable price, or at all. In addition, we cannot be certain that our unaffiliated manufacturers will be able to fill our orders in a timely manner. If we experience significant increased demand, or need to replace an existing manufacturer, there can be no assurance that additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any supplier or manufacturer would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new manufacturing sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or increased costs in the manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term.

In addition, there can be no assurance that our suppliers and manufacturers will continue to manufacture products that are consistent with our standards. We may receive shipments of product that fail to conform to our quality control standards. In that event, unless we are able to obtain replacement products in a timely manner, we risk the loss of revenues resulting from the inability to sell those products and related increased administrative and shipping costs. In addition, because we do not control our manufacturers, products that fail to meet our standards or other unauthorized products could end up in the marketplace without our knowledge, which could harm our reputation in the marketplace.

We have one customer that accounts for more than 25% of our total revenue and more than 75% of our precision equipment group’s revenue.

Panasonic Avionics Corp., accounts for 37% and 28% of our total revenue for the nine months ended March 31, 2008, and year ended June 30, 2007, respectively. This customer accounts for 78% and 84% of our precision equipment group’s revenues for the nine months ended March 31, 2008, and year ended June 30, 2007, respectively. We do not have a long term, exclusive agreement with this customer. If this customer stopped ordering precision parts from Eran it would have a detrimental effect on our total revenue and would have a major impact on Eran’s revenue, which would cause us to lose a substantial portion of our sales within this segment, and on a consolidated basis, and have a corresponding negative impact on our operating profit margin due to operation leverage this customer provides.

Under our loan agreement with Pacific Western Bank we have numerous affirmative and negative covenants we must comply with on at least a quarterly basis. If we are unable to meet these covenants and cannot obtain a waiver from Pacific Western Bank, our breach of these covenants would constitute a default under the loan agreement and Pacific Western Bank could require us to repay all indebtedness immediately. If this were to occur we likely would not be able to repay this indebtedness and it would have a severe, negative impact on our business and our ability to continue doing business.

We have a business loan agreement with Pacific Western Bank dated August 21, 2006. This loan agreement has numerous affirmative and negative covenants, which we are required to abide by as a condition of our loan. These covenants primarily relate to our financial condition, such as net worth, working capital, debt ratio, etc., as well as restricts our ability to enter into certain transactions outside the ordinary course of business without prior written approval by Pacific Western Bank. Our failure to meet these affirmative and negative covenants under the Agreement would constitute a default under the loan agreement. If we were to default under the loan agreement, and if at that time we are unable to get the lender to waive or forbear the default, then the lender could immediately terminate the loan agreement and all indebtedness then owed by us to the lender would be immediately due and payable, without any further notice by the lender. Were this to occur it would have a significant negative impact on our business.

As of March 31, 2008, we were not in compliance with one of the above covenants. Our tangible net worth was $2,437,000 as of March 31, 2008. Therefore, we were not in compliance with the covenant requiring us to maintain a minimum tangible net worth of $2,500,000. However, on May 13, 2008, we received a letter from Pacific Western Bank agreeing to forbear any rights or remedies it has under the credit agreement until the earlier of (i) June 30, 2008, (ii) any Event of Default by us under the credit agreement, or (iii) the changing of the covenants under a new loan agreement. Since the lender agreed to forbear any rights or remedies it has until the time periods set forth above, our non-compliance with this covenant did not have any impact on our operations or liquidity through the date of the forbearance letter. The quarter ended June 30, 2008 is the end of our fiscal year. Currently, we do not know if we will be able to remedy this non-compliance for our quarter ended June 30, 2008, or will meet the other covenants set forth above. If we are unable to renegotiate or comply with the covenants in the future, our liquidity will be adversely impacted as we may be required to repay the outstanding amounts.

The Commission previously revoked the registration of our common stock pursuant to Section 12(j) of the Exchange Act due to our failure to timely file our periodic reports under the Exchange Act. If we fail to timely file these reports in the future, we could be delisted from an exchange and/or the Commission could delist our common stock again, which could negatively impact our business and cause a significant decrease in our stock price.

On May 31, 2006, the Commission entered an Order Imposing Remedial Sanctions which revoked the registration of our common stock pursuant to Section 12(j) of the Exchange Act and ordered our then president and chief executive officer, Lawrence A. Consalvi, to cease and desist from causing any violations or future violations of the Exchange Act. This deregistration was the result of our inability to obtain financial information from acquisitions we completed in the past. Although we have since divested ourselves of those acquisitions, and taken numerous remedial measures to ensure this does not occur in the future, there can be no assurance that future acquisitions by us will not have issues or cause us to be delinquent with our required filings under the Exchange Act. Any delinquent filings could have an adverse effect on our business and our stock price, if we are publicly-traded. These adverse effects include being delisted from any exchange where our common stock may be listed, such as the OTC Bulletin Board, which could cause our stock price to decrease. Additionally, if we are unable to timely file our periodic reports under the Exchange Act, the Commission could again revoke the registration of our common stock pursuant to Section 12(j) of the Exchange Act, prohibiting us from listing our stock on any public marketplace, including the OTC Bulletin Board and Pink Sheets, which would have the effect of our common stock not being publicly-traded and greatly reduce the liquidity of our common stock and greatly reduce the ability of our stockholders to sell or trade our common stock. Regarding our business, if we were delinquent in our filings and/or had the registration of our common stock revoked, we may be unable to effectuate our business plan to acquire other companies in our industry since we likely would not be able to structure these acquisitions using our common stock or other securities. This could negatively impact our business and cause a significant decrease in our stock price.

Item 2. Financial Information.

Management Discussion and Analysis

We are providing the following selected financial data, which has been derived from the financial statements for the nine month period ended June 30, 2006, the fiscal year ended June 30, 2007, and the nine months periods ended March 31, 2008 and 2007. The following information should be read in conjunction with our Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and related notes included elsewhere in this registration statement.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

You should read the following discussion in conjunction with our financial statements and the related notes and other financial information included in this Form 10. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10, particularly in the Section titled Risk Factors.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which requires us to make estimates and assumptions in certain circumstances that affect amounts reported. In preparing these financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. We believe that of our significant accounting policies (more fully described in Notes to the Consolidated Financial Statements), the following are particularly important to the portrayal of our results of operations and financial position and may require the application of a higher level of judgment by our management, and as a result are subject to an inherent degree of uncertainty.

Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. We review our estimates on an on-going basis, including those related to sales allowances, the allowance for doubtful accounts, inventory reserves, long-lived assets, income taxes and litigation. We base our estimates on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates, and material effects on our operating results and financial position may result. We believe the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We recognize revenues when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) our price to the customer is fixed or determinable; and (iv) collection of the sales price is reasonably assured. Delivery occurs when goods are shipped and title and risk of loss transfer to the customer, in accordance with the terms specified in the arrangement with the customer. Revenue recognition is deferred in all instances where the earnings process is incomplete. We record reserves for estimated sales returns and allowances for both CNC machine sales and manufactured parts in the same period as the related revenues are recognized.. We base these estimates on our historical experience for returns or the specific identification of an event necessitating a reserve. Our estimates may change from time to time in the event we ship manufactured parts which in the customers opinion that do not conform to the specifications provided. To the extent actual sales returns differ from our estimates, our future results of operations may be affected.

Accounts Receivable

We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. While our credit losses have historically been within our expectations and the allowance established, we may not continue to experience the same credit loss rates as we have in the past. Accounts receivable are written off or reserves established when considered to be uncollectible or at risk of being uncollectible. While management believes that adequate allowances have been provided in the Consolidated Financial Statements, it is possible that we could experience unexpected credit losses. Additionally, our accounts receivable are concentrated in a relatively few number of customers. Therefore, a significant change in the liquidity or financial position of any one customer could make it more difficult for us to collect our accounts receivable and require us to increase our allowance for doubtful accounts, which could have a material adverse impact on our consolidated financial position, results of operations and cash flows.

Inventories

Within our Precision Manufacturing segment, we seek to purchase and maintain raw materials at sufficient levels to meet lead times based on forecasted demand. Within our Machine Tools segment, we purchase machines held for resale based upon management’s judgment of current market conditions and demand for both new and used machines. If forecasted demand exceeds actual demand, we may need to provide an allowance for excess or obsolete quantities on hand. We also review our inventories for changes in the market prices of machines held in inventory and provide reserves as deemed necessary. If actual market conditions are less favorable than those projected by management, additional inventory reserves may be required. We state our inventories at the lower of cost, using the first-in, first-out method on an average costs basis, or market.

We adopted SFAS No. 151, Inventory Costs, an amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4 beginning January 1, 2006, with no material effect on our financial condition or results of operations. Abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) are recognized as current-period charges. Fixed production overhead is allocated to the costs of conversion into inventories based on the normal capacity of the production facilities. We utilize an expected normal level of production within the Precision Manufacturing segment, based on our plant capacity. To the extent we do not achieve a normal expected production levels, we charge such under-absorption of fixed overhead to operations.

Long-lived Assets

We continually monitor and review long-lived assets, including fixed assets, goodwill and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. The determination of recoverability is based on an estimate of the cash flows expected to result from the use of an asset and its eventual disposition. The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. Our estimates of cash flows may differ from actual cash flows due to, among other things increased competition, loss of customers and loss of manufacturer representation contract, all which can cause materially changes our operating performance. If the sums of the cash flows are less than the carrying value, we recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset.

Goodwill and Acquired Intangible Assets

We account for goodwill and acquired intangible assets in accordance with SFAS 142 “Goodwill and Other Intangible Assets”, whereby goodwill is not amortized, and is tested for impairment at the reporting unit level annually or when there are any indications of impairment. A reporting unit is an operating segment for which discrete financial information is available and is regularly reviewed by management. We have one reporting unit, our Machine Tools group, to which goodwill is assigned.

SFAS 142 requires a two-step approach to test goodwill for impairment for each reporting unit. The first step tests for impairment by applying fair value-based tests to a reporting unit. The second step, if deemed necessary, measures the impairment by applying fair value-based tests to specific assets and liabilities within the reporting unit. Application of the goodwill impairment tests require judgment, including identification of reporting units, assignment of assets and liabilities to each reporting unit, assignment of goodwill to each reporting unit, and determination of the fair value of each reporting unit. The determination of fair value for a reporting unit could be materially affected by changes in these estimates and assumptions.

Accounting for Income Taxes

We account for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes”. Under this method, we determine deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. The tax consequences of most events recognized in the current year's financial statements are included in determining income taxes currently payable. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenues, expenses, gains and losses, differences arise between the amount of taxable income and pre-tax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in the financial statements. Because it is assumed that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount on the consolidated balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and unless we believe that recovery is more likely than not, we must establish a valuation allowance.

Stock-Based Compensation

We account for stock-based compensation in accordance with SFAS No. 123R, “Share-Based Payment”. SFAS 123R requires that we account for all stock-based compensation transactions using a fair-value method and recognize the fair value of each award as an expense, generally over the service period. The fair value of stock options is based upon the market price of our common stock at the grant date. We estimate the fair value of stock option awards, as of the grant date, using the Black-Scholes option-pricing model. The use of the Black-Scholes model requires that we make a number of estimates, including the expected option term, the expected volatility in the price of our common stock, the risk-free rate of interest and the dividend yield on our common stock. If our expected option term and stock-price volatility assumptions were different, the resulting determination of the fair value of stock option awards could be materially different and our results of operations could be materially impacted.

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN 48 describes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Therefore, FIN 48 will be effective for us beginning October 1, 2007. The cumulative effect of adopting FIN 48 is required to be reported as an adjustment to the opening balance of retained earnings (or other appropriate components of equity) for that fiscal year, presented separately.

	Nine Months Ended			Nine Months Ended
	March 31, 2007			March 31, 2008			Change ($)			Change (%)
Sales	$	11,504,509		$	13,279,306		$	1,774,797			15	%
Cost of sales		8,208,294			9,965,664			1,757,370			21	%
Gross profit		3,296,215			3,313,642			17,427			1	%

Operating expenses:
Selling, general and administrative		2,527,650			3,618,134			1,090,484			43	%
Amortization of intangible assets		64,155			81,565			17,410			27	%
Total operating expenses		2,591,805			3,699,699			1,107,894			43	%
Operating income (loss)		704,410			(386,057	)		(1,090,467	)		-155	%

Interest expense		(254,764	)		(108,296	)		146,468			-57	%
Interest income		1,221			4,237			3,016			247	%
Gain on sale of assets		681,465			43,437			(638,028	)		-94	%
Other, net		(28,046	)		-			28,046			-100	%
Income (loss) from continuing operations before income taxes		1,104,286			(446,679	)		(460,498	)		-42	%

Income tax (provision) benefit Income (loss) from continuing operations		(435,712	)		156,639			592,351			-136	%
		668,574			(290,040	)		131,853			20	%
Loss from discontinued operations, net of income taxes		(2,459,764	)		-			2,459,764			-100	%
Net loss	$	(1,791,190	)	$	(290,040	)	$	2,591,617			-145	%

	Nine Months Ended March 31,
	2007			2008			Change ($)			Change (%)
Sales by segment
Machine Sales	$	7,651,755		$	8,975,782		$	1,324,027			17	%
Precision Manufacturing		3,852,754			4,303,524			450,770			12	%
	$	11,504,509		$	13,279,306		$	1,774,797			15	%
Gross profit by segment
Machine Sales	$	1,255,772		$	1,784,477		$	528,705			42	%
Precision Manufacturing		2,040,443			1,529,164			(511,279	)		-25	%
	$	3,296,215		$	3,313,641		$	17,426			1	%
Gross margin
Machine Sales		16	%		20	%		3	%
Precision Manufacturing		53	%		36	%		-17	%

	Nine Months Period
	Ended			Year Ended
	June 30, 2006			June 30, 2007			Change ($)			Change (%)
Sales	$	11,200,364		$	16,652,344		$	5,451,980			49	%
Cost of sales		8,853,201			11,998,306			3,145,105			36	%
Gross profit		2,347,163			4,654,038			2,306,875			98	%
Operating expenses:
Selling, general and administrative		2,665,718			3,098,283			432,565			16	%
Amortization of intangible assets		64,155			85,540			21,385			33	%
Total operating expenses		2,729,873			3,183,823			453,950			17	%
Operating income (loss)		(382,710	)		1,470,215			1,852,925			-484	%

Interest expense		(222,285	)		(332,498	)		(110,213	)		50	%
Interest income		-			5,110			5,110			0	%
Gain on sale of assets		-			691,967			691,967			0	%
Other, net		12,500			27,625			15,125			121	%
Income (loss) from continuing operations before income taxes		(592,495	)		1,862,419			601,989			-102	%

Income tax (provision) benefit		234,089			(748,657	)		(982,746	)		-420	%
Income (loss) from continuing operations		(358,406	)		1,113,762			(380,757	)		106	%
Loss from discontinued operations, net of income taxes		(1,389,333	)		(2,459,764	)		(1,070,431	)		77	%
Net loss	$	(1,747,739	)	$	(1,346,002	)	$	(1,451,188	)		83	%

	Nine Month Period Ended June 30, 2006			Year Ended June 30, 2007			Change ($)			Change (%)
Sales by segment
Machine Sales	$	8,544,215		$	10,990,408		$	2,446,193			29	%
Precision Manufacturing		2,656,149			5,661,936			3,005,787			113	%
	$	11,200,364		$	16,652,344		$	5,451,980			49	%
Gross profit by segment
Machine Sales	$	1,405,863		$	1,941,444		$	535,581			38	%
Precision Manufacturing	$	941,300		$	2,712,594		$	1,771,294			188	%
	$	2,347,163		$	4,654,038		$	2,306,875			98	%
Gross margin by segment
Machine Sales		16	%		18	%		1	%
Precision Manufacturing		35	%		48	%		12	%

	Nine Month
	Period Ended			Yearended			Nine months ended March31,
	June 30,2006			June 30,2007			2008			2007
Provided by (used in)
Operating activities		$(17,495	)		$1,242,489			$302,119			$863,426
Investing activities		36,262			1,293,247			(302,933	)		1,676,992
Financing activities		(527,710	)		(1,676,388	)		33,567			(1,462,084	)
		$(508,943	)		$859,348			$32,753			$1,078,334

	2009		2010		2011		2012		2013		Total

Debt obligations	$	1,323,231	$	286,822	$	179,087	$	50,360	$	20,815	$	1,860,316
Capital leases		69,560		55,471		18,327		18,816		6,897		169,072
Operating leases		532,221		551,136		515,978		456,687		115,002		2,171,024
	$	1,925,012	$	893,429	$	713,392	$	525,863	$	142,714	$	4,200,412

Title of Class	Name and Address of Beneficial Owner (2)	Amount and Nature of Beneficial Ownership			Percent of Class (1)
Common Stock	Timothy D. Consalvi (3)		1,500,000	(4)		5.3	%

Common Stock	Joseph Gledhill (3)		6,000,000			21.1	%

Common Stock	Lawrence A. Consalvi (3)		5,880,000	(5)		20.7	%

Common Stock	Stephen M. Kasprisin (3)		-0-			0	%

	All officers and directors as a group (4 persons)		13,380,000			47.1	%

Name	Age	Position(s)

Timothy D. Consalvi (1)	48	President, Chief Executive Officer and Director
Joseph Gledhill	69	Executive Vice President and Director
Lawrence A. Consalvi (1)	50	Executive Vice President and Director
Stephen M. Kasprisin	53	Part Time Chief Financial Officer and Director

Name and Principal Position	Year (1)		Salary ($)		Bonus ($)		Stock Awards ($) *		Option Awards ($) *		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation ($)		All Other Compensation ($)			Total ($)

Timothy D. Consalvi		2007		260,000		-		-		-		-		-		10,864	(5)		270,864
President, Chief Executive Officer and Director		2006		148,923		-		-		-		-		-		4,463	(5)		153,386

Joseph Gledhill		2007		260,000		-		-		-		-		-		16,327	(6)		276,327
Executive Vice President and Director		2006		140,000		-		-		-		-		-		12,028	(6)		152,028

Lawrence A. Consalvi		2007		260,000		-		-		-		-		-		15,629	(7)		275,629
Executive Vice President and Director		2006		144,000		-		-		-		-		-		10,867	(7)		154,867

Stephen M. Kasprisin (3)		2007		134,615		-		-		-		-		-		4,874	(8)		139,489
Director and		2006		34,615		-		-		-		-		-		-			34,615
Interim Chief Financial Officer

Lloyd Leavitt (4)		2007		119,569		-		-		-		-		-		8,850	(9)		128,419
Ex-Chief Financial Officer		2006		35,385		-		-		-		-		-		2,700	(9)		38,085

Report of Independent Registered Public Accounting Firm	F-1

Consolidated Balance Sheets	F-2

Consolidated Statements of Operations	F-3

Consolidated Statements of Changes in Shareholders’ Equity	F-4

Consolidated Statements of Cash Flows	F-5

Notes to Consolidated Financial Statements	F-6

	Nine Months Ended June 30, 2006			Year Ended June 30, 2007			Nine Months Ended March 31, 2007			Nine Months Ended March 31, 2008
							(unaudited)			(unaudited)

Sales	$	11,200,364		$	16,652,344		$	11,504,509		$	13,279,306
Cost of sales		8,853,201			11,998,306			8,208,294			9,965,664
Gross profit		2,347,163			4,654,038			3,296,215			3,313,642

Operating expenses:
Selling, general and administrative		2,665,718			3,098,283			2,527,650			3,618,134
Amortization of intangible assets		64,155			85,540			64,155			81,565
Total operating expenses		2,729,873			3,183,823			2,591,805			3,699,699
Operating income (loss)		(382,710	)		1,470,215			704,410			(386,057	)

Interest expense (a)		(222,285	)		(332,498	)		(254,764	)		(108,296	)
Interest income		-			5,110			1,221			4,237
Gain on sale of assets		-			691,967			681,465			43,437
Other, net		12,500			27,625			(28,046	)		-
Income (loss) from continuing operations before income taxes		(592,495	)		1,862,419			1,104,286			(446,679	)

Income tax (provision) benefit		234,089			(748,657	)		(435,712	)		156,639
Income (loss) from continuing operations		(358,406	)		1,113,762			668,574			(290,040	)
Loss from discontinued operations, net of income taxes		(1,389,333	)		(2,459,764	)		(2,459,764	)		-
Net loss	$	(1,747,739	)	$	(1,346,002	)	$	(1,791,190	)	$	(290,040	)

Basic and diluted net loss per share:
Continuing operations	$	(0.01	)	$	0.03		$	0.02		$	(0.01	)
Discontinued operations	$	(0.03	)	$	(0.07	)	$	(0.06	)	$	-
	$	(0.04	)	$	(0.04	)	$	(0.04	)	$	(0.01	)
Weighted average number of common shares under in per share calculations (basic and diluted)		42,553,729			38,308,598			42,003,204			28,166,626

(a) Related party interest expense	$	60,748		$	92,531		$	34,827		$	28,777

	Common Stock						Additional Paid-in			Common Stock to be			Accumulated
	Shares			Amount			Amount			Issued			Deficit			Total

Balance, September 30, 2005		41,186,666		$	41,187		$	15,217,117		$	1,315,000		$	(2,524,487	)	$	14,048,817
Imputed interest on related party notes		-			-			145,966			-			-			145,966
Sale of common stock		183,668			184			110,016			-			-			110,200
Issuance of common stock for acquisitions		1,300,000			1,300			1,313,700			(1,315,000	)		-			-
Net loss		-			-			-			-			(1,747,739	)		(1,747,739	)
Balance, June 30, 2006		42,670,334			42,671			16,786,799			-			(4,272,226	)		12,557,244
Imputed interest on related party notes		-			-			13,763			-			-			13,763
Common stock retired upon divestiture of business units		(14,425,000	)		(14,425	)		(8,352,075	)		-			-			(8,366,500	)
Common repurchased		(600,000	)		(600	)		(29,400	)		-			-			(30,000	)
Net loss		-			-			-			-			(1,346,002	)		(1,346,002	)
Balance, June 30, 2007		27,645,334			27,646			8,419,087			-			(5,618,228	)		2,828,505
Common stock issued for creditor settlement		150,000			150			62,850			-			-			63,000
Retirement of stock securing repaid note		(416,689	)		(417	)		417			-			-			-
Common stock issued for acquisition of CNC Repos, Inc.		1,000,000			1,000			439,000			-			-			440,000
Net loss for the nine months ended March 31, 2008		-			-			-			-			(290,040	)		(290,040	)
Balance, March 31, 2008 (unaudited)		28,378,645		$	28,379		$	8,921,354		$	-		$	(5,908,268	)	$	3,041,465

	·	$650,000 in cash and;

	·	Promissory note in the principal amount of $600,000, bearing simple interest at the rate of 6% per annum.

	·	Acquiring and selling new Computer Numerically Controlled (“CNC”) machine-tool equipment through its All American subsidiary.
	·	Acquiring, refurbishing and selling pre-owned CNC machine-tool equipment through its Elite subsidiary.
	·	Manufacturing precision metal component parts in the defense, automotive, aerospace and medical industries through its Eran Engineering subsidiary.

	Nine Month Period Ended			Year ended			Nine months ended March 31,
	June 30, 2006			June 30, 2007			2007			2008

% of sales		12	%		28	%		25	%		40	%
# of customers		1			1			1			2

Consideration paid:
Fair value of common stock issued	$	420,000
Direct acquisition costs		20,000
	$	440,000

Intangible assets -customer relationships	$	417,831
Deferred tax liability		(176,000	)
Goodwill		198,169
	$	440,000

	Estimated useful life (in years)		2006			2007

Machinery and equipment		7	$	1,602,296		$	2,125,983
Equipment under capital leases		4 to 5		258,912			520,025
Building		38		1,250,000			-
Furniture, fixtures and office equipment		3 to 5		118,320			153,818
Vehicles		5		58,428			72,939
Leasehold improvements		12		51,540			14,351
				3,374,639			2,887,116
Less accumulated depreciation and amortization				(1,099,356	)		(1,300,537	)
			$	2,275,283		$	1,586,579

			2006
	Life (in years)		Cost		Accumulated Amortization			Carrying Amount		Accumulated Amortization			Carrying Amount

Customer relationships		10	$	855,400	$	(145,856	)	$	709,544	$	(231,396	)	$	624,004

	Machine Sales		Precision Manufacturing			Total
Balance at September 30, 2005	$	194,378	$	10,436,205		$	10,630,583
Impairment of Accurate				(1,100,000	)		(1,100,000	)
Balance at June 30, 2006		194,378		9,336,205			9,530,583
Goodwill written off related to sale of Nu-Tech		-		(1,672,319	)		(1,672,319	)
Goodwill written off related to sale of Accurate and Spacecraft		-		(7,663,886	)		(7,663,886	)
Balance at June 30, 2007		194,378		-			194,378
Acquisition of CNC Repos		198,169		-			198,169
Balance at March 31, 2008	$	392,547	$	-		$	392,547

	2006		2007
Professional fees	$	-	$	70,000
Compensation and related benefits		64,305		97,487
Other		292,704		209,029
	$	357,009	$	376,516

2008	$	114,606
2009		101,636
2010		32,372
Total minimum lease payments		248,614
Less amount representing interest		(32,412	)

Present value of future minimum lease payments		216,202

Less - current portion of capital lease obligations		(88,607	)

Capital lease obligations, net of current portion	$	127,595

	2006			2007

Note payable to a financial institution, secured by the underlying equipment, payable in monthly installments of $2,617 including interest at 9.75% per annum for a 60 month term maturing on August 11, 2011.	$	—		$	128,217

Two notes payable to a financial institution, secured by the underlying vehicles, payable in aggregate monthly installments of $1,278 including interest at 2.9% per annum for a period of 36 months.		—			31,079

Unsecured bank loan for working capital purposes with interest of 11.50% per annum, due on demand.		—			60,000

Secured notes payable to a First Financial Credit		1,575,203			—

Notes payable to two individuals with aggregate monthly payments of $18,049, including interest at 6% per annum, maturing in January 2008. The note is secured by 833,378 shares of the Company’s common stock		344,434			—
Total		1,919,637			219,296
Less - current portion		(433,545	)		(104,270	)
Long-term portion	$	1,486,092		$	115,026

Year ending	Amount
2008	$	104,270
2009		44,948
2010		36,061
2011		31,400
2012		2,617
Thereafter		-
Total	$	219,296

	2006			2007

Unsecured note payable to Joseph T. W. Gledhill for working capital requirements, due January 2009, with interest of 6% per annum.	$	747,821		$	676,200

Unsecured note payable to a related party, the mother of Timothy Consalvi, for working capital requirements due February 1, 2009, payable in monthly installments of $4,435 including interest at 6% per annum.		100,000			84,143

Unsecured note payable to a shareholder payable in monthly installments of $4,505 per month, non-interest bearing, including interest imputed at 12% per annum for financial statement purposes.		186,993			139,641

Unsecured note payable to a shareholder payable in monthly installments of $1,000 per month, including interest at 6% per annum due January 21, 2008.		—			19,516

Unsecured note payable to Joseph T.W. Gledhill payable in monthly installments of $6,250 per month, non-interest bearing. Interest has been imputed at a rate of 12% per annum for financial statement purposes		50,000			—
Total		1,084,814			919,500
Less - current portion		(856,488	)		(803,798	)
Long-term portion	$	228,326		$	115,702

	Nine Month period ended June 30, 2006			Year ended June 30, 2007
Current federal	$	-		$	32,632
Current state		6,400			115,759
Deferred federal		(194,734	)		683,224
Deferred state		(45,755	)		(82,958	)
Provision (benefit) for income taxes	$	(234,089	)	$	748,657

	Nine Month period ended June 30, 2006			Year ended June 30, 2007
Statutory rate		34	%		34	%
Increase (decrease) in taxes resulting from the following:
State income taxes, net of federal tax benefit		6	%		6	%
Permanent differences and other		1	%		1	%
Other		(1	)%		(1	)%
Total		40	%		40	%

	Asset (liability)
	2006			2007
Deferred tax assets:
Current:
State income taxes	$	-		$	11,152
Allowance for doubtful accounts		-			15,929
		-			27,081
Non-current:
Net operating loss carry forwards		943,707			259,457
Other		-			38,054
Allowance for doubtful accounts		43,513			-
		943,707			297,511
Deferred tax liabilities:
Non-current
Intangible assets		(1,357,595	)		-
Depreciation		(98,460	)		(99,705	)
		(1,456,055	)		(99,705	)
Total	$	(468,835	)	$	197,806

	Machine Sales			Precision Manufacturing		Discontinued Operations			Corporate			Total
Revenues	$	8,544,215		$	2,656,149	$	-		$	-		$	11,200,364
Interest income		-			-		-			-			-
Interest expense		(595	)		91,815		-			131,065			222,285
Depreciation and amortization		68,690			271,561		-			-			340,251
Income (loss) before taxes		389,400			123,676		(1,421,639	)		(1,105,570	)		(2,014,133	)
Total assets		2,332,043			3,983,642		14,183,868			144,714			20,644,267
Capital expenditures	$	7,460		$	68,949	$	-		$	-		$	76,409

	Machine Sales			Precision Manufacturing		Discontinued Operations			Corporate			Total

Revenues	$	10,990,408		$	5,661,936	$	-		$	-		$	16,652,344
Interest income		3,047			-		-			2,063			5,110
Interest expense		118,882			123,163		-			90,453			332,498
Depreciation and amortization		105,308			392,982		-			-			498,290
Income (loss) before taxes		(1,701	)		2,232,897		(3,767,358	)		(368,777	)		(1,904,939	)
Total assets		2,257,125			3,987,813		-			346,588			6,591,526
Capital expenditures	$	44,924		$	492,314	$	-		$	-		$	537,238

	Nine Month Period Ended June 30, 2006			Year Ended June 30, 2007

Net sales	$	9,180,647		$	9,927,371
Loss from discontinued operations before income taxes		(1,421,639	)		(273,810	)
Income tax benefit		32,306			95,035
Loss from discontinued operations after income taxes		(1,389,333	)		(178,775	)
Loss on sale of discontinued operations before income taxes		-			(3,493,548	)
Income tax benefit		-			1,212,559
Loss on sale of discontinued operations after income taxes		-			(2,280,989	)
Loss from discontinued operations and loss on sale, net of tax benefit	$	(1,389,333	)	$	(2,459,764	)

Cash	$	190,928
Accounts receivable and other (net)		1,454,277
Inventories		1,116,102
Intangibles, net		2,178,367
Goodwill		9,244,194
Total assets	$	14,183,868

Accounts payable and accrued liabilities	$	(1,713,298	)
Deferred income taxes		(1,212,559	)
Notes payable and capital lease obligations		(610,522	)
Total liabilities	$	(3,536,379	)

Item No.		Description

3.1 (1)		Articles of Incorporation of Gateway International Holdings, Inc., a Nevada corporation, as amended

3.2 (1)		Bylaws of Gateway International Holdings, Inc., a Nevada corporation

10.1 (1)		Asset Purchase Agreement with CNC Repos, Inc. and certain of its shareholders dated October 1, 2007

10.2 (1)		Commercial Real Estate Lease dated February 15, 2007 for the office space located in Tustin, CA

10.3 (1)		Commercial Real Estate Lease dated November 15, 2007 for the office space located in Anaheim, CA

10.4 (1)		Employment Agreement with Timothy D. Consalvi dated February 1, 2007

10.5 (1)		Employment Agreement with Joseph T.W. Gledhill dated February 5, 2007

10.6		Employment Agreement with Lawrence A. Consalvi dated February 5, 2007

10.7 (1)		Share Exchange Agreement with Gledhill/Lyons, Inc. dated March 26, 2007

10.8 (1)		Share Exchange Agreement with Nu-Tech Industrial Sales, Inc. dated March 19, 2007

10.9 (1)		Fee Agreement with Steve Kasprisin dated April 30, 2008

21 (1)		List of Subsidiaries

	/s/ Timothy D. Consalvi
	By: Timothy D. Consalvi
	Its: President