8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities and Exchange Act of 1934

Date of Report (date of earliest event reported): November 10, 2005

DEVCON INTERNATIONAL CORP.

(Exact Name of Registrant as Specified in Its Charter)

Florida	000-07152	59-0671992
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1350 East Newport Center Drive, Suite 201

Deerfield Beach, Florida 33442

(Address of principal executive office)

Registrant’s telephone number, including area code (954) 429-1500

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

This current report on Form 8-K/A amends and supplements a current report on Form 8-K filed by Devcon International Corp., a Florida corporation (“Devcon”), through Devcon Security Holdings, Inc. (“Devcon Security”), one of its wholly owned subsidiaries, on November 16, 2005 in connection with the purchase on November 10, 2005 of all of the issued and outstanding capital stock of Coastal Security Company, a Delaware corporation (“CSC”).

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired

The following financial statements filed as Exhibit 99.1 hereto are incorporated herein by reference:

	Exhibit 99.1 Page
Coastal Security Company — Consolidated Financial Statements
Report of Independent Registered Certified Public Accountants	1
Consolidated Balance Sheet as of December 31, 2004 and December 31, 2003	2
Consolidated Statement of Operations for the years ended December 31, 2004 and December 31, 2003	3
Consolidated Statement of Cash Flows for the years ended December 31, 2004 and December 31, 2003	4
Consolidated Statements of Changes in Stockholders’ Deficit for the years ended December 31, 2004 and December 31, 2003	5
Notes to Consolidated Financial Statements for the years ended December 31, 2004 and December 31, 2003	6

(b) Pro Forma Financial Information

The following financial statements filed as Exhibit 99.2 hereto are incorporated herein by reference:

	Exhibit 99.2 Page
Devcon International Corp. — Pro Forma Condensed Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Financial Statements – Basis of Presentation	1
Pro Forma Consolidated Balance Sheet as of September 30, 2005 (Unaudited)	2
Pro Forma Consolidated Statement of Operations for the twelve months ended December 31, 2004 (Unaudited)	3
Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2005 (Unaudited)	4
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)	5

(c) Exhibits

Exhibit No.	Document
10.1	Stock Purchase Agreement, dated as of November 10, 2005, by and among Topspin Associates, L.P., Bariston Investments, LLC, Sheldon E. Katz, Mike McIntosh, Christopher E. Needham (collectively, the “Sellers”), Bariston Partners, LLC and Topspin Management, LLC (as “Sellers’ Representatives”) and Devcon Security Holdings, Inc. (incorporated by reference to Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2005).
10.2	Credit Agreement, dated as of November 10, 2005, by and among Devcon Security Holdings, Inc., Devcon Security Services Corp., Coastal Security Company, Coastal Security Systems, Inc. and Central One, Inc., as Borrowers, and CapitalSource Finance LLC, as Agent and Lender (incorporated by reference to Exhibit 10.2 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2005).
10.3	Bridge Loan Agreement, dated as of November 10, 2005, by and among, Devcon Security Holdings, Inc., Devcon Security Services Corp., Coastal Security Company, Coastal Security Systems, Inc. and Central One, Inc., each as a Borrower, and CapitalSource Finance LLC, as Lender (incorporated by reference to Exhibit 10.3 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2005).
10.4	Guaranty, dated as of November 10, 2005, between Devcon International Corp. and CapitalSource Finance LLC (incorporated by reference to Exhibit 10.4 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2005).
23.1	Consent of Goldstein Schechter Price Lucas Horwitz & Co. P.A.
99.1	Coastal Security Company Consolidated Financial Statements.
99.2	Devcon International Corp. Unaudited Condensed Consolidated Pro Forma Data.

3

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DEVCON INTERNATIONAL CORP.
Date: January 26, 2006	By:	/s/ Stephen J. Ruzika
		Stephen J. Ruzika
		Chief Executive Officer and President

4

EXHIBIT INDEX

Exhibit No.	Description
23.1	Consent of Goldstein Schechter Price Lucas Horwitz & Co. P.A.
99.1	Coastal Security Company Consolidated Financial Statements
99.2	Devcon International Corp. Unaudited Condensed Consolidated Pro Forma Data

5

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report dated January 31, 2005, except for Note 15, as to which date is December 13, 2005, relating to the consolidated financial statements of Coastal Security Company and its Subsidiary, as of December 31, 2004 and 2003, by Devcon International Corp. as part of this Form 8-K.

Goldstein Schechter Price Lucas Horwitz & Co. P.A.

/s/ Goldstein Schechter Price Lucas Horwitz & Co. P.A.

Coral Gables, Florida

January 26, 2006

EX-99.1

Exhibit 99.1

Coastal Security Company – Consolidated Financial Statements

Board of Directors

Coastal Security Company and Subsidiary

We have audited the accompanying consolidated balance sheets of Coastal Security Company and subsidiary as of December 31, 2004 and 2003 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Coastal Security Company and subsidiary as of December 31, 2004 and 2003 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 15, the 2004 and 2003 consolidated financial statements have been restated.

Goldstein Schechter Price Lucas Horwitz & Co., P.A.

January 31, 2005, except for Note 15,

as to which the date is December 13, 2005

1

COASTAL SECURITY COMPANY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2004 AND 2003

	2004			2003
	(restated)			(restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	503,375		$	505,683
Trade accounts receivable, net of allowance for doubtful accounts of $40,094 and $15,000 in 2004 and 2003, respectively		1,558,176			945,408
Inventories		742,297			544,680
Prepaid expenses		118,404			127,321
Deferred installation expenses		483,713			238,608
Total Current Assets		3,405,965			2,361,700
PROPERTY AND EQUIPMENT, net		1,063,035			818,352
OTHER ASSETS:
Customer contracts purchased, net		20,193,680			13,828,015
Intangible assets, net		1,076,280			1,145,495
Deferred installation expenses		2,397,091			1,296,056
Other assets		122,905			115,720
Total Other Assets		23,789,956			16,385,286
TOTAL ASSETS	$	28,258,956		$	19,565,338
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Trade accounts payable	$	397,062		$	286,352
Accrued compensation		349,350			282,816
Deferred installation revenues		324,112			181,938
Other liabilities		295,816			180,450
Unearned revenue		525,295			427,241
Customer deposits		190,595			207,994
Holdback payable		586,430			289,440
Current portion of long-term debt		1,000,000			1,000,000
Total Current Liabilities		3,668,660			2,856,231
LONG-TERM LIABILITIES:
Long-term debt, less current portion		16,316,667			9,438,333
8% Series A cumulative convertible preferred stock		9,500,000			9,500,000
8% Series B cumulative convertible preferred stock		2,000,016			—
Deferred installation revenues		1,585,354			988,561
Total Liabilities		33,070,697			22,783,125
STOCKHOLDERS’ DEFICIT:
Common stock, $.01 par value, 2,000,000 shares authorized; 268,455 shares issued and outstanding in 2004 and 210,000 shares in 2003		2,685			2,100
Additional paid-in capital		93,752			634
Accumulated deficit		(4,908,178	)		(3,220,521	)
Total Stockholders’ Deficit		(4,811,741	)		(3,217,787	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	28,258,956		$	19,565,338

See Accompanying Notes to Consolidated Financial Statements

2

COASTAL SECURITY COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

	2004			2003
	(restated			(restated)
REVENUES:
Retail monitoring and maintenance	$	8,234,595		$	5,526,895
Dealer monitoring and services		4,888,257			4,169,081
Installation		1,433,081			857,448
Repairs		1,106,435			736,826
Other revenues		242,810			151,528
Total Revenues		15,905,178			11,441,778
COST OF OPERATIONS:
Salaries and benefits		3,823,257			2,735,667
Installations, repairs and maintenance		2,035,281			1,232,846
Telecommunications		559,454			497,527
Contract labor		517,561			309,993
Automotive		257,046			175,275
Other		107,990			66,302
Total Cost of Operations		7,300,589			5,017,610
GROSS PROFIT		8,604,589			6,424,168
SELLING EXPENSES:
Salaries and benefits		1,284,172			801,265
Marketing		164,950			149,152
Other		180,964			153,324
		1,630,086			1,103,741
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and benefits		1,490,106			1,130,015
Office expense		1,364,841			1,119,917
Professional fees		155,641			179,227
Bad debt expense		103,250			169,013
Depreciation and amortization		4,453,788			4,802,605
Loss (gain) on disposal of fixed asset		16,164			(3,491	)
Other		88,091			43,397
		7,671,881			7,440,683
LOSS FROM OPERATIONS BEFORE INTEREST EXPENSE AND PROVISION FOR INCOME TAXES		(697,378	)		(2,120,256	)
INTEREST EXPENSE		735,709			487,382
LOSS BEFORE PROVISION FOR INCOME TAXES		(1,433,087	)		(2,607,638	)
PROVISION FOR INCOME TAXES		201,444			161,694
NET LOSS	$	(1,634,531	)	$	(2,769,332	)

See Accompanying Notes to Consolidated Financial Statements

3

COASTAL SECURITY COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

	2004			2003
	(restated)			(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,634,531	)	$	(2,769,332	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization		4,453,788			4,802,605
Loss (gain) on disposal of fixed assets		16,164			(3,491	)
Stock compensation expense		40,577			543
Changes in operating assets and liabilities:
Trade accounts receivable, net		(612,768	)		(138,388	)
Inventories		(197,617	)		(154,323	)
Prepaid and refundable income taxes		—			247,525
Prepaid expenses and other current assets		(236,188	)		(258,809	)
Other assets		27,524			12,868
Accounts payable		110,710			(11,003	)
Accrued expenses and other liabilities		324,075			145,473
Deferred installation expenses, net of revenues		(504,242	)		(269,058	)
Unearned revenue		98,054			64,773
Customer deposits		(17,399	)		106,772
Total Adjustments		3,502,678			4,545,487
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,868,147			1,776,155
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(685,436	)		(484,274	)
Proceeds from sale of property and equipment		65,041			48,974
Payment for purchase of Coastal Security System, Inc.		—			(1,000,000	)
Purchase of customer contracts		(10,158,900	)		(1,228,147	)
Net Cash Used in Investing Activities		(10,779,295	)		(2,663,447	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt		(1,000,000	)		(1,000,000	)
Borrowings on bank line of credit, net		7,878,334			555,000
Increase in holdback		296,990			268,735
Loan costs		(266,500	)		(26,822	)
Proceeds from issuance of 8% Series B preferred stock		2,000,016			—
Net Cash Provided by (Used in) Financing Activities		8,908,840			(203,087	)
NET DECREASE IN CASH		(2,308	)		(1,090,379	)
CASH AND CASH EQUIVALENTS:
Beginning of period		505,683			1,596,062
End of period	$	503,375		$	505,683
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	638,848		$	469,677
Taxes paid	$	171,934		$	160,774

See Accompanying Notes to Consolidated Financial Statements

4

COASTAL SECURITY COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (restated)

	Common Stock			Additional Paid-In Capital			Accumulated Deficit			Total
	Shares	Amount
Balance – December 31, 2002	210,000	$	2,100	$	91		$	(451,189	)	$	(448,998	)
Amortization of Deferred Stock Compensation					543						543
Net Loss for the year ended December 31, 2003, as restated								(2,769,332	)		(2,769,332	)
Balance – December 31, 2003, as restated	210,000		2,100		634			(3,220,521	)		(3,217,787	)
Stock Dividend	14,205		142		52,984			(53,126	)
Issuance of Common Stock as Compensation	44,250		443		39,807						40,250
Amortization of Deferred Stock Compensation					549						549
Stock Options Granted					918						918
Forfeiture of 2,080 Stock Options					(1,140	)					(1,140	)
Net Loss for the year ended December 31, 2004, a restated								(1,634,531	)		(1,634,531	)
Balance – December 31, 2004, as restated	268,455	$	2,685	$	93,752		$	(4,908,178	)	$	(4,811,741	)

See Accompanying Notes to Consolidated Financial Statements

5

COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION

Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Coastal Security Company and its wholly-owned subsidiary Coastal Security Systems, Inc. (the “Company”). Significant intercompany accounts and transactions have been eliminated in consolidation.

Organization - The Company commenced operations in November 2002 and is engaged in the selling, servicing and monitoring of electronic security systems. The Company’s primary market is the State of Florida.

Cash and cash equivalents - Cash and cash equivalents include cash and highly liquid instruments, with an original maturity of three months or less. The Company maintains its cash in bank deposit accounts with a major financial institution, which at times may exceed federally insured limits. The Company believes that no significant concentration of credit risk exists on the cash balances.

Inventories - Inventories, including supplies are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Inventories consist of parts for alarm installations and replacement parts for maintenance. Uncompleted installations are included in inventories at the accumulated costs of the components and labor.

Property and equipment - Property and equipment are stated at their original cost less accumulated depreciation and amortization. Depreciation and amortization is generally computed using accelerated methods. Under these accelerated methods the Company switches to straight-line depreciation after a fixed period of time. Property and equipment are depreciated over their useful lives, which approximates 5 - 7 years. Gains and losses from sales are included in current operations.

Intangibles - The Company has capitalized loan acquisition fees, customer contracts purchased and non-compete agreements. These intangible costs are amortized on a straight-line basis over their useful lives.

Management periodically reviews the carrying value of acquired intangible assets to determine whether an impairment may exist. The Company considers relevant cash flow and profitability information, including estimated future operating results, trends and other available information, in assessing whether the carrying value of intangible assets can be recovered. If it is determined that the carrying value of intangible assets will not be recovered, the carrying value of such intangible assets would be considered impaired and reduced by a charge to operations in the amount of the impairment. The Company has determined that there was no impairment as of December 31, 2004 and 2003.

Income taxes - The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be recognized.

Revenue recognition and unearned revenues - Revenue from services or installations are recognized on the consolidated statements of operations as services are rendered or installations are completed. Monitoring fees which consist of subscriber billings for services not yet rendered, are deferred and taken into income as earned and the deferred element is included as unearned revenue in current liabilities.

Stock options - The Company has adopted the fair value based method of accounting prescribed in Financial Accounting Standards Board Statement No. 123 Accounting for Stock Based Compensation for its employee stock option plan.

6

COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION – Continued

Trade accounts receivable and credit policies - Trade accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date.

The carrying amount of trade accounts receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. Management individually reviews all trade accounts receivable balances that exceed 90 days from invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. Additionally, management estimates for a general allowance an amount based on actual losses in preceding years adjusted for management’s estimate of any changes in future economic conditions that might give rise to results that differ from past experience.

Use of estimates - The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. This affects 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. Estimates are used for, but not limited to, the accounting for doubtful accounts and depreciation and amortization. Actual results could differ from those estimates.

Advertising - Advertising costs are expensed as incurred. For the years ended December 31, 2004 and 2003, advertising expense was approximately $155,000 and $146,000, respectively.

NOTE 2 CUSTOMER CONTRACTS PURCHASED AND ACCUMULATED AMORTIZATION

Customer contracts purchased - The Company has entered into agreements with other security companies (dealers), under which it agrees to purchase their customer contracts. The contract agreements also provide for a holdback, usually 10% of the purchase price, in the event customers cancel their contracts. The seller usually has two options, either to replace the customer contract with a new customer, or the residual value of the contract will be offset against the holdback amount. The holdback is paid out over a pre-determined term prescribed in each respective contract. As of December 31, 2004 and 2003, holdbacks amounted to $586,430 and $289,440, respectively.

Accumulated amortization – Customer contracts are amortized using the straight-line method over their estimated lives of seven years. The seven-year amortization period is management’s best estimate of the average life of a typical customer based on historical experience within the industry. The Company evaluates acquired customer contracts periodically to assess whether an impairment may exist.

As management has estimated this amortization, it is at least reasonably possible that actual lives of these contracts could be greater than or less than this estimate. If so, the amortization period would be changed thus increasing or decreasing amortization expense in the future. At December 31, 2004 and 2003 customer contracts purchased consisted of the following:

	2004			2003
Customer contracts purchased	$	40,466,362		$	30,307,462
Less accumulated amortization		(20,272,682	)		(16,479,447	)
	$	20,193,680		$	13,828,015

Amortization expense was $3,787,239 and $4,186,701 for the years ended December 31, 2004 and 2003, respectively. The estimated amortization expense for the five succeeding years ending December 31, 2005 to December 31, 2009 and thereafter are as follows: 2005 - $3,876,000; 2006 - $3,627,000; 2007 - $3,533,000; 2008 - $3,485,000 and 2009 - $3,143,000 and thereafter - $2,530,000.

7

COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003 – Continued

NOTE 3 PROPERTY AND EQUIPMENT

At December 31, 2004 and 2003 property and equipment consisted of the following:

	2004			2003
Auto and trucks	$	952,630		$	727,033
Central receiving equipment		482,839			464,756
Computer and other equipment		692,925			514,644
Furniture and fixtures		533,353			426,995
Leasehold improvements		166,650			158,409
		2,828,397			2,291,837
Less accumulated depreciation and amortization		(1,765,362	)		(1,473,485	)
	$	1,063,035		$	818,352

Depreciation expense was $359,548 and $323,976 for the years ended December 31, 2004 and 2003, respectively.

NOTE 4 CREDIT AGREEMENT

The Company entered into an amended and restated credit agreement on May 28, 2004, amending the existing credit agreement to increase the amount available for borrowing under a revolving line of credit from $10,000,000 to $18,000,000 and to re-establish the term loan at the original amount of $7,000,000. Availability of borrowings under the line of credit is based on a formula as defined in the credit agreement. Direct borrowings bear interest at the LIBOR rate or the prime rate, at the option of the Company, plus the applicable margin (as defined in the credit agreement). Under the terms of the line of credit the available maximum line of commitment is reduced by $1,125,000 each August, November, February and May commencing on August 31, 2007 and ending on the maturity date May 28, 2011. The term loan is payable in 84 equal installments of $83,333 plus interest through May 28, 2011. All borrowings are collateralized by all assets of the Company and guaranteed by Coastal Security Company. The provisions of this agreement require that the Company maintain certain financial ratios and also maintain a compensating balance equal to a minimum of $250,000. The Company pays a fee for its revolving credit line. The amount outstanding under the agreement at December 31, 2004 and 2003 was $17,316,667 and $10,438,333, respectively and the interest rate at December 31, 2004 and 2003 was approximately 5.5% and 4.5% respectively.

Minimum payments of long-term debt for the five years subsequent to December 31, 2004 and thereafter are summarized as follows:

2005	$	1,000,000
2006		1,000,000
2007		1,000,000
2008		1,000,000
2009		1,000,000
Thereafter		12,316,667
	$	17,316,667

8

COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003 – Continued

NOTE 5 COMMITMENTS

The Company conducts its operations in leased facilities under non-cancelable operating leases, which expire at various dates through the year 2008. These leases require the company to pay its pro rata share of common area maintenance. Also, the Company leases certain equipment under long-term lease agreements. These leases are classified as operating leases and expire at various dates through the year 2009. Future minimum lease payments under non-cancelable operating leases for the years subsequent to December 31, 2004, are as follows:

	EQUIPMENT		FACILITIES		TOTAL
2005	$	72,247	$	298,760	$	371,007
2006		68,670		276,551		345,221
2007		67,266		189,468		256,734
2008		50,890		70,242		121,132
2009		1,612		—		1,612
	$	260,685	$	835,021	$	1,095,706

Rent expense was $327,381 and $263,776 for the years ended December 31, 2004 and 2003, respectively.

NOTE 6 INCOME TAXES

The Company files a consolidated Federal and Florida corporate income tax return with its subsidiary. The Company’s effective rate differs from the statutory federal rate primarily as a result of the valuation allowance described below, state income taxes, certain permanent differences and net operating loss carryforwards.

The provision for income taxes as of December 31, 2004 and 2003 consists of the following:

	2004			2003
Federal:
Current	$	179,268		$	156,290
State:
Current		31,079			26,699
Tax benefit of state net operating loss carryforward		(8,903	)		(21,295	)
	$	201,444		$	161,694

9

COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003

NOTE 6 INCOME TAXES - Continued

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give, rise to significant deferred tax assets and liabilities are as follows:

	2004			2003
Deferred tax assets:
Amortization of customer contracts purchased	$	2,677,875		$	2,508,821
Amortization of covenants not to compete		116,653			61,600
Bad debt allowance		13,492			4,950
State net operating loss		—			9,068
Other		6,163			—
Accrued expenses		13,972			40,436
Total Deferred Tax Assets		2,828,155			2,624,875
Deferred tax liability:
Difference between book and tax depreciation		114,920			9,516
Net deferred tax asset before valuation allowance		2,713,235			2,615,359
Valuation allowance		(2,713,235	)		(2,615,359	)
Net Deferred Tax Asset	$	—		$	—

At December 31, 2004 and 2003, the Company recorded a full valuation allowance for the net deferred tax assets as the Company’s ability to realize these benefits is not “more likely than not”. Accordingly, no net deferred tax asset is reported in the accompanying consolidated balance sheets at December 31, 2004 and 2003.

NOTE 7 EMPLOYEE BENEFIT PLAN

The Company has a defined contribution 401K Plan (the “Plan”) under which an employee may defer a portion of their salary. The Plan is open to all employees that have reached the age of 18 and have completed ninety days of service. Employees may defer up to 15% of their compensation under the Plan. The Company has elected to contribute an amount equal to 50% of the employee’s contribution, not to exceed $2,000 for a Plan year. Employees earn a vested interest of 33% per year over three years of the employer’s contribution. The Company’s contributions to the Plan for the years ended December 31, 2004 and 2003 totaled approximately $68,400 and $63,200, respectively.

NOTE 8 CONTINGENCIES

The Company is involved in litigation relating to claims arising out of its operations in the normal course of business. The Company is not currently engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on the Company.

NOTE 9 STOCK OPTION PLAN

The Company has a fixed stock option plan under which the Company may grant options to key employees, officers, directors and independent contractors for up to a total 15,000 shares of common stock. The exercise price of each option equals $1.83. The option’s maximum term is ten years and they vest over four years.

10

COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003

NOTE 9 STOCK OPTION PLAN – Continued

The fair value of each option granted is estimated on the grant date using the Black-Scholes option-pricing model. The following assumptions were made in estimating fair value:

Assumption
Risk free interest rate	4%
Expected life	10 years
Volatility	0%

The Company’s Board of Directors during 2004, granted 360 stock options with a determined fair value of $918. Compensation cost, related to the options, charged to operations for the years ended December 31, 2004 and 2003 was $549 and $543, respectively.

A summary of the status of the Company’s stock options as of December 31, 2004 and 2003 and changes during the years ended December 31, 2004 and 2003 is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2002	9,000		$	1.83
Granted	—
Exercised	—
Cancelled	—
Outstanding at December 31, 2003	9,000			1.83
Granted	360			1.83
Exercised	—
Cancelled	(2,080	)		1.83
Outstanding at December 31, 2004	7,280		$	1.83
Options exercisable at December 31, 2003	—
Options exercisable at December 31, 2004	2,424		$	1.83

The weighted-average remaining contractual life for stock options outstanding at December 31, 2004 is 7.83 years.

11

COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003

NOTE 10 SERIES A AND SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK

The Series A and Series B cumulative convertible preferred stock have been classified as liabilities in accordance with FASB Statement 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.

In May 2004 the Board of Directors issued 117,648 shares of 8% series B cumulative convertible preferred stock for $2,000,016. Each share of series A and B preferred stock is convertible into 1 share of common stock and are entitled to cumulative dividends. These dividends are calculated at a rate of 8% per annum compounded annually on the sum of $12.1795 for each share of series A preferred stock outstanding and at a rate of 8% per annum compounded annually on the sum of $17.00 for each share of series B preferred stock outstanding. Preferred stockholders are entitled to voting privileges and liquidation preferences.

The Series A preferred stock has a par value of $.01 per share with 780,000 shares authorized, issued and outstanding. The Series B preferred stock has a par value of $.01 per share with 117,648 shares authorized, issued and outstanding.

At December 31, 2004 and 2003 dividends in arrears on the Series A cumulative convertible preferred stock was $1,689,146 and $860,320, respectively and on Series B cumulative convertible preferred stock, dividends in arrears at December 31, 2004 was $96,900.

Under a mandatory redemption provision, the Company is required to redeem all preferred stock on November 30, 2011 or such earlier date that is not less than thirty days following the date upon which obligations under the bank agreements (see Note 4) have been paid in full. Under certain conditions this redemption can be deferred by a vote of at least a majority of the outstanding preferred stockholders. As of December 31, 2004 and 2003 the aggregate liquidation preferences are as follows:

	2004		2003
Series A	$	14,014,399	$	11,678,666
Series B		2,218,018		—

NOTE 11 COMMON STOCK RESERVED FOR FUTURES ISSUANCE

At December 31, 2004, the Company has reserved 897,647 shares of its authorized but unissued common stock for possible future issuance in connection with conversion of preferred stock.

NOTE 12 COVENANTS NOT TO COMPETE

In November 2002, the Company paid $1,200,000 in consideration for non-compete agreements with two stockholders for a term beginning November 18, 2002 and ending three years after termination or cessation of employment. These non-compete agreements are being amortized over 5 years on a straight-line basis.

Amortization expense was $240,000 for each year ended December 31, 2004 and 2003. The estimated amortization expense for the years ending December 31, 2005 to December 31, 2007 are as follows: 2005 - $240,000; 2006 - $240,000 and 2007 - $200,000.

NOTE 13 STOCK EXCHANGED FOR SERVICES

During 2004, the Company distributed 44,250 shares of common stock in exchange for services rendered by one of its stockholders. The cost of the services, which amounted to $40,250, has been charged to operations and additional paid-in capital has been increased by $39,807, representing the excess of the cost of the services over the par value of the common stock issued.

12

COASTAL SECURITY COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2003

NOTE 14 STOCK DIVIDEND

On May 28, 2004, the Company distributed 14,205 shares of common stock in connection with a stock dividend. As a result of the stock dividend, common stock was increased by $142, additional paid-in capital was increased by $52,984 and accumulated deficit was increased by $53,126.

NOTE 15 RESTATEMENT OF FINANCIAL STATEMENT

The Company has restated its previously issued Consolidated Financial Statements for the years 2004 and 2003. The restatement resulted from the Company’s requirement to provide financial statements, which are in compliancy with Staff Accounting Bulletin No. 104 (“SAB-104”) and Regulation S-X, to Devcon Security Holdings (“Devcon”) due to Devcon’s acquisition of the Company.

A summary of the effects of the restatement on the Consolidated Statements of Operations and Consolidated Balance Sheets follows:

	2004			2003
Consolidated Statements of Operations
Revenue previously reported	$	16,644,145		$	12,446,761
Impact of restatement		(738,967	)		(1,004,983	)
Revenue restated	$	15,905,178		$	11,441,778
Gross profit previously reported	$	8,448,679		$	6,432,874
Impact of restatement		155,910			(8,706	)
Gross profit restated	$	8,604,589		$	6,424,168
Selling expenses previously reported	$	1,716,165		$	1,283,830
Impact of restatement		(86,079	)		(180,089	)
Selling expenses restated	$	1,630,086		$	1,103,741
Net (loss) previously reported	$	(1,945,972	)	$	(2,972,644	)
Impact of restatement		311,441			203,312
Net (loss) restated	$	(1,634,531	)	$	(2,769,332	)
Consolidated Balance Sheets
Total assets previously reported	$	25,813,096		$	18,169,884
Impact of restatement		2,445,860			1,395,454
Total assets restated	$	28,258,956		$	19,565,338
Total liabilities previously reported	$	19,661,216		$	12,112,625
Impact of restatement		1,909,465			1,170,500
Reclassification of equity to liabilities as a result of Regulation S-X requirement		11,500,016			9,500,000
Total liabilities restated	$	33,070,697		$	22,783,125

13

EX-99.2

Exhibit 99.2

Devcon International Corp. – Pro Forma Financial Data

Devcon International Corp.

Unaudited Pro Forma Condensed Consolidated Financial Statements

Basis of Presentation

The following unaudited pro forma condensed consolidated financial statements give effect to the acquisition (the “Transaction”) of the stock of Coastal Security Company (“Coastal”) by Devcon International Corp. (the “Company”) for approximately $50.7 million using the purchase method of accounting.

The unaudited pro forma condensed consolidated financial statements also give effect to other transactions that occurred during the period, based on unaudited pro forma information presented in previously filed Form 8-K for the acquisition of Starpoint Limited and the divestiture of V.I Cement and Building Products, Inc. (“VICBP”).

The following presents the Company’s unaudited pro forma condensed consolidated financial information as of September 30, 2005, for the nine months ended September 30, 2005 and for the fiscal year ended December 31, 2004. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2005 gives effect to the transaction as if it had occurred on September 30, 2005. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2004 and the nine month period ended September 30, 2005 give effect to the Transaction as if it had occurred as of the beginning of each respective period.

The unaudited pro forma condensed consolidated financial statements should be read together with the Company’s consolidated financial statements as of December 31, 2004, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as well as the Company’s unaudited consolidated financial statements as of September 30, 2005, and for the nine months period then ended, including the notes thereto, included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

We are providing the pro forma condensed consolidated financial information for illustrative purposes only. The results may have been different had these transactions actually occurred during the periods presented. You should not rely on the unaudited pro forma condensed consolidated financial information as being indicative of the historical results that would have been achieved had the transactions actually occurred during the periods presented or the future results that the Company will experience. The unaudited pro forma condensed consolidated statements of operations do not give effect to any cost savings or operating synergies expected to result from the acquisition and divestiture or the costs to achieve such cost savings or operating synergies.

1

Pro Forma Financial Statements – Balance Sheet September 30, 2005

	As of September 30, 2005 (Unaudited) (amounts shown in thousands except share and per share data)
	Devcon International Corp.			Coastal Historical			Pro Forma Adjustments For Coastal Acquisition			Notes	Pro Forma Information
Cash and cash equivalent	$	7,856		$	417		$	(11,900	)	(1)	$	(3,627	)
Accounts receivable, net		21,101			1,321			—		(1)		22,422
Accounts receivable, related party		630			—			—				630
Notes receivable		4,241			—			—				4,241
Other current assets		12,991			1,680			(877	)	(1),(2),(3)		13,794
Total current assets		46,819			3,418			(12,777	)			37,460
Property, plant and equipment, net of accumulated depreciation		24,713			1,161			(229	)	(1)		25,645
Customer accounts, net		21,057			19,484			14,116		(1)		54,657
Goodwill		19,965			—			14,013				33,978
Intangible assets		570			819			381				1,770
Other non-current assets		9,631			3,230			(3,065	)	(1),(3)		9,796
Total assets		122,755			28,112			12,439				163,306
Trade accounts payable and accrued expenses	$	13,153		$	884		$	287		(2)	$	14,324
Deferred revenue		2,405			541			—				2,946
Other current liabilities		2,571			1,036			7,338		(1),(2)		10,945
Total current liabilities		18,129			2,461			7,625				28,215
Long term debt, excluding current installments		23,873			16,967			14,395		(1),(2),(3)		55,235
Long term debt, related party		1,725			—			—				1,725
Series A and Series B cumulative convertible preferred stock		—			11,500			(11,500	)	(1)		—
Other long term liabilities, excluding current portion		5,033			2,019			(2,019	)			5,033
Total liabilities		48,760			32,947			8,501				90,208
Common stock		599			3			(3	)	(1)		599
Additional paid in capital		31,166			92			(92	)	(1)		31,166
Retained earnings		44,219			(4,930	)		4,033		(1),(2),(3)		43,322
Accumulated other comprehensive loss		(1,910	)		—			—				(1,910	)
Treasury stock		(79	)		—			—				(79	)
Total stockholders’ equity (deficit)		73,995			(4,835	)		3,938				73,098
Total liabilities and stockholders’ equity	$	122,755		$	28,112		$	12,439			$	163,306

2

Pro Forma Financial Statements – Statement of Operations for the Twelve Months Ended December 31, 2004

	For the twelve months ended December 31, 2004 (Unaudited) (amounts shown in thousands except share and per share data)
	Devcon International Corp.			Starpoint Historical			Pro Forma Adjustments For Starpoint Acquisition			Notes		Pro Forma Adjustments for VICBP Divesture			Notes		Coastal Historical			Pro Forma Adjust- ments for Coastal Acquisition			Notes		Pro Forma Information
Revenue:
Materials revenue	$	41,061		$	—		$	—				$	(14,531	)			$	—		$	—				$	26,530
Materials revenue, related party		1,919			—			—					(611	)				—			—					1,308
Construction revenue		14,657			—			—					—					—			—					14,657
Construction revenue, related party		10,394			—			—					—					—			—					10,394
Security revenue		943			19,875													15,905								36,723
Other revenue		184			—			—					—					—			—					184
Total revenue		69,158			19,875			—					(15,142	)				15,905			—					89,796
Cost of sales:
Cost of materials		(36,083	)		—			—					12,826					—			—					(23,257	)
Cost of construction		(17,547	)		—			—					—					—			—					(17,547	)
Cost of security		(648	)		(11,600	)		169		(4)			—					(7,300	)		—					(19,379	)
Cost of other		(156	)		—			—					—					—			—					(156	)
Gross profit		14,724			8,275			169					(2,316	)				8,605			—					29,457
Operating expenses:
Selling, general and administrative		(15,142	)		(11,281	)		2,089		(4	),(5)		2,044					(9,198	)		1,547		(11	)		(29,941	)
Severance and retirement		(1,656	)		—			—					(8	)				—			—					(1,664	)
Other		(622	)		—			—					—					(104	)		—					(726	)
Operating (loss) income		(2,696	)		(3,006	)		2,258					(280	)				(697	)		1,547					(2,874	)
Interest income		2,896			—			—					(149	)				—			—					2,747
Gain on Antigua notes		10,970			—			—					—					—			—					10,970
Interest expense		(164	)		(7	)		(2,050	)	(6	)		835		(9	)		(736	)		(2,979	)	(12	)		(5,101	)
Other income (expense)		71			—			—					—					—			—					71
(Loss) income from continuing operations before income taxes		11,077			(3,013	)		208					406					(1,433	)		(1,432	)				5,813
Income tax benefit (expense)		(441	)		—			953		(7	)		445		(10	)		(202	)		487		(13	)		1,242
Net (loss) income from continuing operations	$	10,636		$	(3,013	)	$	1,161				$	851				$	(1,635	)	$	(945	)			$	7,055
Per share data:
Net (loss) income from continuing operations per common share-basic	$	2.44																							$	1.62
Net (loss) income from continuing operations per common share-diluted	$	2.09																							$	1.38
Weighted average number of shares outstanding
Basic		4,363,476																								4,363,476
Diluted		5,096,566																								5,096,566

3

Pro forma Financial Statements – Statement of Operations for the Nine Months Ended September 30, 2005

	For the nine months ended September 30, 2005 (Unaudited) (amounts shown in thousands except share and per share data)
	Devcon International Corp.			Starpoint Historical			Pro Forma Adjustments For Starpoint Acquisition			Notes		Coastal Historical			Pro Forma Adjust- ments for Coastal Acquisition			Notes		Pro Forma Information
Revenue:
Materials revenue	$	20,104		$	—		$	—				$	—		$	—				$	20,104
Construction revenue		22,437			—			—					—			—					22,437
Construction revenue, related party		6,529			—			—					—			—					6,529
Security revenue		11,146			3,046			—					13,882			—					28,074
Other revenue		542			—			—					—			—					542
Total revenue		60,758			3,046			—					13,882			—					77,686
Cost of sales:
Cost of materials		(18,516	)		—			—					—			—					(18,516	)
Cost of construction		(27,228	)		—			—					—			—					(27,228	)
Cost of security		(4,725	)		(1,992	)		38		(4)			(6,601	)		—					(13,280	)
Cost of other		(336	)		—			—					—			—					(336	)
Gross profit		9,953			1,054			38					7,281			—					18,326
Operating expenses:
Selling, general and administrative		(16,617	)		(1,243	)		171		(4),(5)			(6,289	)		(185	)	(11)			(24,163	)
Severance and retirement		(629	)		—			—					—			—					(629	)
Other		—			—			—					(2	)		—					(2	)
Operating (loss) income		(7,293	)		(189	)		209					990			(185	)				(6,468	)
Interest income		663																			663
Interest expense		(1,218	)		(4	)		(342	)	(6	)		(842	)		(1,944	)	(12	)		(4,350	)
Other income (expense)		598			(246	)		—					(19	)							333
(Loss) income from continuing operations before income taxes		(7,250	)		(439	)		(133	)				129			(2,129	)				(9,822	)
Income tax benefit (expense)		1,316			—			194		(7)			(152	)		724		(13)			2,082
Net (loss) income from continuing operations	$	(5,934	)	$	(439	)	$	61				$	(23	)	$	(1,405	)			$	(7,740	)
Per share data:
Net (loss) income from continuing operations per common share-basic	$	(1.01	)																	$	(1.32	)
Net (loss) income from continuing operations per common share-diluted	$	(1.01	)																	$	(1.32	)
Weighted average number of shares outstanding
Basic		5,872,736																			5,872,736
Diluted		5,872,736																			5,872,736

4

Devcon International Corp.

Notes to the Pro Forma Condensed Consolidated Financial Statements

(Unaudited)

Coastal Acquisition

(1) The acquisition of Coastal has been accounted for using the purchase method of accounting. Purchase accounting requires that the assets and liabilities acquired be recorded at their fair value at the date of acquisition. The preliminary purchase price allocation is based on management’s best estimate of fair value and is therefore subject to adjustment upon completion of an independent valuation. The purchase price allocation will be finalized and the resulting adjustments will be applied to assets and liabilities.

The preliminary purchase price allocation is detailed as follows:

	September 30, 2005 (dollars in thousands)
Cash and cash equivalent	$	417
Accounts receivable		1,321
Inventory		855
Other assets		189
Net fixed assets		932
Customer accounts		33,600
Identified intangible assets		1,200
Trade accounts payable and accrued expenses		(884	)
Deferred revenue		(541	)
Other current liabilities		(374	)
Goodwill		14,013
Purchase price	$	50,728

(2) The Coastal acquisition purchase price is summarized as follows:

	(dollars in thousands)
Cash	$	11,900
Bridge loan		8,000
Revolving line of credit		30,511
Transaction costs		317
Total	$	50,728

To complete financing of the Coastal acquisition on November 10, 2005, the Company entered into an $8 million bridge loan and a revolving credit facility under which the $30.5 million was advanced. The foregoing descriptions of the credit agreement and the bridge loan agreement are not complete and are qualified in their entirety by reference to the credit agreement, which is incorporated by reference herein as Exhibit 10.2, and the bridge loan agreement, which is incorporated by reference herein as Exhibit 10.3.

(3) To reflect the write-off of deferred financing costs for extinguishing debt and record costs related to the $8 million bridge loan and revolving line of credit amortized over 4 months and 3 years, respectively.

Starpoint Limited Acquisition

Since the consummation of the acquisition of Starpoint Limited on February 28, 2005, the Company’s results of operations for the nine month period ended September 30, 2005 already include the period from the acquisition date up to and including September 30, 2005.

5

Devcon International Corp.

Notes to the Pro Forma Condensed Consolidated Financial Statements

(Unaudited) – Continued

(4) Adjustments were made to asset balances in applying purchase accounting. The adjustment reflects the decrease in depreciation and amortization expense to (i) the amortization of identifiable intangibles using the straight-line method over a weighted-average average life of 10 years and (ii) a decrease in depreciation resulting from a reduction in value of property, plant and equipment, depreciated on a straight-line basis over an average remaining life of 4 years.

(5) Starpoint Limited recorded a corporate allocation of $1.531 million and $241,000 for the twelve month period ended December 31, 2004 and the two month period ended February 28, 2005, respectively. Because the Starpoint Limited acquisition was an acquisition of assets, the foregoing expense is not being assumed. However, the treatment of the foregoing expense is not included as a pro forma adjustment.

(6) Includes interest expense associated with financing of the acquisition of $24.6 million of long-term debt issued under the credit agreement at an assumed rate of 7.5%. The credit agreement contains provisions regarding unused commitment fees, which costs are included in the adjustment for interest expense on a pro forma basis along with the impact of amortization of loan origination costs over 6 years.

(7) Starpoint Limited did not record a federal and state income tax expense. The Company is currently in a federal taxable position and accordingly calculated a pro forma income tax expense based upon an estimated effective tax rate of 34%.

VICBP’s Divestiture

The results of operations of the VICBP business sold on September 30, 2005 were classified as discontinued operations and are not included in the Company’s historical results from continuing operations for the nine month period ended September 30, 2005.

(8) Does not include the gain before taxes on the sale of VICBP’s materials division assets.

(9) Includes the elimination of interest expense related to the Company’s debt resulting from the extinguishment of certain of the Company’s debt with the proceeds from the disposition.

(10) Includes the income tax effects of the adjustment discussed in footnote (9), based on a 34% tax rate. The income tax effect of VICBP’s materials division income excluding the adjustment discussed in footnote (9) is based on an estimated effective tax rate of 37.5%.

Coastal Acquisition

(11) As part of its purchase accounting, the Company recorded certain definite lived assets at fair value. These assets included customer contracts and non-compete agreements. An adjustment was recorded to amortization expense for the twelve month period ended December 31, 2004 and the nine month period ended September 30, 2005, respectively, based on remaining useful lives of 3 years.

(12) In order to finance its acquisition of Coastal, the Company used $31.4 million of its revolving line of credit bearing interest at a rate of 10% per annum and subscribed to an $8.0 million bridge loan bearing interest at a rate of 7% per annum. Additionally, this line of credit and bridge loan allowed the early extinguishment of the credit agreement entered into to finance the Starpoint Limited acquisition. The pro forma interest expense adjustment includes the effect of early retirement of loan origination costs on a pro forma basis.

(13) Includes the income tax effects of the adjustments discussed in footnotes (11) and (12), based on a 34% tax rate.

6