10-Q 1 septrpt.txt ALLSTATE PROPERTIES LP FORM 10-Q 9/30/2007 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007 COMMISSION FILE NUMBER 0-12895 ALL-STATE PROPERTIES L.P. (Exact name of registrant as specified in its charter) Delaware 59-2399204 (State or other jurisdiction or (I.R.S. Employer incorporation or organization) Identification No.) 4201 North Federal Highway, Suite B, Pompano Beach, FL 33064-6048 (Address of principal executive offices) (Zip Code) Mailing address: P.O. Box 5524,Fort Lauderdale, FL 33310-5524 Registrant's telephone number, including area code (954) 941-2290 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days YES X NO Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ?accelerated filer and large accelerated filer? in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer X UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (CONTINUED) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES X NO Indicate the number of limited partnership units outstanding as of the latest practicable date. Class Outstanding at September 30, 2007 Limited Partnership Units 3,118,065 Units Page 1 ALL-STATE PROPERTIES L.P. FORM 10-Q QUARTERLY REPORT THREE MONTHS ENDED SEPTEMBER 30, 2007 I N D E X PART 1 ? FINANCIAL INFORMATION PAGE ITEM 1 Financial Statements 2-10 ITEM 2 Management?s Discussion and Analysis of Financial Condition and Results of Operations. 11 ITEM 3 Quantitative and Qualitative Disclosures About Market Risk. 11 ITEM 4 Controls and Procedures. 11 Supplemental Information - Exhibit 12 PART II ? OTHER INFORMATION ITEM 1 Legal Proceedings 13 ITEM 1A Risk Factors 13 ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 13 ITEM 3 Defaults upon Senior Securities 13 ITEM 4 Submission of Matters to Vote of Security Holders 13 ITEM 5 Other Information 13 ITEM 6 Exhibits and Reports on Form 8-K 13-14 Signatures 15 Page 2 ITEM 1 FINANCIAL STATEMENTS ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) CONDENSED BALANCE SHEETS SEPTEMBER 30, 2007 AND JUNE 30, 2007 SEPTEMBER JUNE 30, 30, 2 0 0 7 2 0 0 7 (UNAUDITED) ASSETS Cash $ 22,336 $ 28,134 LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY) LIABILITIES: Accounts payable and accrued liabilities $ 44,460 $ 28,134 PARTNERS? CAPITAL (DEFICIENCY): Partners' Capital (22,124) - TOTAL LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY) $ 22,336 $ 28,134 See accompanying notes. Page 3 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
2 0 0 7 2 0 0 6 REVENUES: Interest income $ 222 $ - Equity in income (loss) of real estate limited liability company - related party - (5,496) Total Revenue $ 222 $ (5,496) COST AND EXPENSES: General and administrative 22,346 7,683 Interest expense - 2,708 22,346 10,391 NET INCOME (LOSS) $ (22,124) $ (15,887) NET INCOME (LOSS) PER PARTNERSHIP UNIT $ (0.01) $ (0.01) CASH DISTRIBUTIONS PER UNIT $ NONE $ NONE
See accompanying notes. Page 4 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, (UNAUDITED) 2 0 0 7 2 0 0 6 CASH FLOW FROM OPERATING ACTIVITIES: Cash paid for general and administrative expenses $ (6,020) $ (13,188) Interest received 222 - Cash Used in Operating Activities (5,798) (13,188) CASH FLOW FROM FINANCING ACTIVITIES: Repayment notes payable - related party, net - 12,500 Cash Provided by Financing Activities - 12,500 NET DECREASE IN CASH (5,798) (668) CASH AT BEGINNING OF YEAR 28,134 961 CASH AT END OF PERIOD $ 22,336 $ 273 See accompanying notes. Page 5 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) CONDENSED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, (UNAUDITED) 2 0 0 7 2 0 0 6 RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: Net Loss $ (22,124) $ (15,887) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: Equity in (income) loss of real estate limited liability company ? related party - 5,496 Interest expense - 2,708 Changes in Assets and Liabilities: Increase (decrease) in accounts payable 16,326 (5,505) Total adjustments 16,326 2,699 CASH USED IN OPERATING ACTIVITIES $ (5,798) $ (13,188) See accompanying notes. Page 6 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) 1. BUSINESS (a) General Development of Business All-State Properties L.P., a limited partnership (the ?Partnership?) was organized under the Revised Uniform Limited Partnership Act of Delaware on April 27, 1984 to conduct the business formerly carried on by its predecessor corporation, All- State Properties, Inc. (the ?Corporation?); and together with the Partnership, the ?Company?. In March 2007 Hubei Longdan (Delaware), Inc. (?Longdan Delaware? and ?Subsidiary?) was organized under the laws of the State of Delaware as a wholly- owned subsidiary of the Company. Longdan Delaware has only nominal assets and no liabilities and has conducted no activities except in connection with the transactions contemplated by the Acquisition Agreement (See item 1(b)(ii)). The Company together with Longdan Delaware referred to herein as the ?Registrant?. Pursuant to a Plan of Liquidation adopted by shareholders of the Corporation on September 30, 1984, the Corporation transferred substantially all of its assets to the Partnership, and the Corporation distributed such limited partnership interests to its shareholders. The Registrant was engaged since inception in land development and the construction and sale of residential housing in various parts of the eastern United States and in Argentina with its most recent transactions being in Florida. Since August 1999, the Company?s only business has been the ownership of a member interest of approximately 35% in Tunicom LLC, a Florida limited liability company (?Tunicom?). An affiliate of Tunicom was engaged in the ownership and operation of an adult rental apartment complex until the sale of the apartment complex in August 2000. Since that time, Tunicom?s only business was activities relating to its attempts to sell its only remaining asset, five acres of commercial and residential land in Broward County, Florida (the ?Remaining Property?). For a description of the sale of the Remaining Property by Tunicom and the liquidating distribution by the Company, see Item 1(b)(i). Following the completion of the transactions described in Item (b)(ii) the Company became a ?shell company? (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) because is has no or nominal operations and no or nominal assets (other than cash). In March 2007, the Company entered into an Acquisition Agreement which contemplates a reverse merger with a private operating Chinese pharmaceutical company provided that certain conditions are satisfied, including approval of the transaction by its partners (See Item 1(b)(ii)). Page 7 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) 1. BUSINESS (CONTINUED) (a) General Development of Business (Continued) On November 2, 2007, the Company terminated the Acquisition Agreement based on the breach of its terms by Longdan. As previously disclosed, the Company currently intends to dissolve. Since the Company has no net assets, no further distributions will be made to the partners. (b) Narrative Description of Business (i) Remaining Property Sale On December 19, 2006, Tunicom sold the Remaining Property and thereafter distributed the net sales proceeds to its members, including the Company, as a final liquidating distribution. After payment of certain debt and after setting aside a reserve for expenses, the Company distributed the remaining cash to its partners. Following the distribution, the Company has no assets other than a small cash reserve which it has set aside for payment of anticipated final expenses of the Company. (ii) Acquisition Agreement The Company had been negotiating a definitive agreement with Hubei Longdan Biological Medicine Technology Co., Ltd. (?Longdan?), a company organized under the laws of the People?s Republic of China (the ?PRC?), pursuant to which the Company would issue approximately eighty nine percent (89%) of its capital stock to Longdan?s shareholders in return for acquisition of the business of Longdan (the ?Acquisition?). Longdan is engaged in the marketing and sale of pharmaceutical products in the PRC. On March 14, 2007, the Company, Longdan Delaware, Longdan and Longdan International Inc., a corporation formed under the laws of Nevis (?Longdan International?), entered into an Acquisition Agreement (the ?Agreement?) pursuant to which the Company will acquire Longdan International and an indirect interest in Longdan and the shareholders of Longdan International will acquire a controlling interest in the Company. The Company will account for the transaction as a reverse merger. Under the terms of the Agreement, it is contemplated that the Company will convert from a Delaware limited partnership to a newly-formed Delaware corporation to be called Longdan International Holdings, Inc. (?LIH?) and Longdan International will merge with and into Longdan Delaware. At the Page 8 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) 1. BUSINESS (CONTINUED) (ii) Acquisition Agreement (Continued) Merger Effective Time (as defined in the Agreement), the shareholders of Longdan will be issued shares representing approximately eighty nine percent (89%) of the capital stock of the Company and the Company?s shareholders will hold shares representing approximately eleven percent (11%) of the capital stock of the Company, in each case, on an ?as if converted basis?. Longdan had agreed to pay all costs associated with the Acquisition, including legal fees incurred in connection with the related corporate law transactions and required filings under the securities laws, and had also agreed to pay for any costs incurred by the Company in connection with maintaining its registration under the Securities Exchange Act of 1934, as amended, after June 30, 2007. On October 31, 2007 Longdan advised the Company that it will not fulfill its contractual commitment to pay these expenses. Accordingly, by its letter to Longdan dated November 2, 2007, All-State terminated the Acquisition Agreement based on this breach. As previously mentioned in its filings with the Securities and Exchange Commission, the Company?s current intention is to dissolve itself. Since the Company has no net assets, no further distributions will be made to the partners. The General Partner of the Company has indicated that he will pay or seek to settle any remaining liabilities of the Company, though he has no legal obligation to do so. (iii) Registrant has no plans for any new products. (iv) Registrant holds no patents, trademarks, etc. (v) No part of Registrant?s business is subject to significant seasonal variation. (vi) Registrant?s only present source of working capital is the cash in bank. (vii) No portion of Registrant?s business involved government contracts. Page 9 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) 1. BUSINESS (CONTINUED) (viii) Registrant incurs no research and development expenses. (ix) Registrant employs no employees. 2. BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited interim financial information reflects all adjustments, consisting of normal recurring accruals, necessary for a fair presentation in all material respects, of the information contained therein. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the Securities and Exchange Commission. The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed financial statements are read in conjunction with the audited financial statements and related notes included in the Company?s Annual Report on Form 10-K for the fiscal year ended June 30, 2007. Operating results for the quarter ended September 30, 2007 are not necessarily indicative of the results expected for the full year (See Note 3). The preparation of condensed financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions, including estimates of future contract costs and earnings. Such estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and earnings during the current reporting period. Management periodically assess and evaluates the adequacy and/or deficiency of estimated liabilities recorded for various reserves, liabilities, contract risks and uncertainties. Actual results could differ from these estimates. Page 10 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) 3. BUSINESS CONTINUITY These financial statements have been prepared on a going concern basis. As of February 6, 2007, the Company has realized its last remaining asset and has distributed all cash except for approximately $22,336 on hand as of September 30, 2007. This cash will be used to pay expenses. The Company had no operations for the quarter ended September 30, 2007 and a working capital deficit of $22,124 as of September 30, 2007. As previously disclosed in filings with the Securities and Exchange Commission the Company?s current intention is to dissolve and the General Partner of the Company has indicated that he will contribute capital or seek to settle the working capital deficit and any other remaining liabilities of the Company. Page 11 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) NOTES TO CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) ITEM 2 MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ? ALL-STATE PROPERTIES L.P. The following discussion and analysis of our financial condition, results of operations, liquidity and capital resources should be read in conjunction with our financial statements and notes thereto. THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2006 The Company had no operations for the three months ended September 30, 2007. On November 2, 2007, the acquisition agreement with Longdan has been terminated and the Company intends to dissolve. LIQUIDITY AND CAPITAL RESOURCES During the three months ended September 30, 2007 and September 30, 2006, cash used in operations was $5,798 and $13,188, respectively, primarily for the payment of general and administrative expenses. The General Partner of the Company has indicated that he will contribute capital or seek to settle the working capital deficit of $22,124 and any other remaining liabilities of the Company, though he has no legal obligation to do so. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None. ITEM 4 CONTROLS AND PROCEDURES An evaluation was performed under the supervision and with the participation of our management, including the general partner, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of period covered by this report. Based on that evaluation, the general partner concluded that these disclosure controls and procedures were effective. There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Page 12 ALL-STATE PROPERTIES L.P. (A LIMITED PARTNERSHIP) EXHIBIT - COMPUTATION OF NET INCOME (LOSS) PER PARTNERSHIP UNIT THREE MONTHS ENDED SEPTEMBER 30, 2 0 0 7 2 0 0 6 Partnership units outstanding 3,118,065 3,118,303 Net Income (Loss) $ (22,124) $ (15,887) Net Income (Loss) Per Partnership Unit $ (0.01) $ (0.01) Page 13 ALL-STATE PROPERTIES L.P. PART II - OTHER INFORMATION ITEM 1 ? Legal Proceedings None. ITEM 1A- Risk Factors There have been no material changes from the risk factors disclosed in All-State Properties L.P. Form 10-K. ITEM 2 ? Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the quarter covered by this report. ITEM 3 - Defaults upon Senior Securities There were no defaults by Registrant on its senior securities during the quarter covered by this report. ITEM 4 - Submission of Matters to Vote of Security Holders No matters were submitted during the quarter covered by this report to a vote of limited partners. ITEM 5 ? Other Information None. ITEM 6 ? Exhibits and Reports on Form 8-K (10a)Execution of Definitive Agreement by and among All-State Properties L.P., Hubei Longdan (Delaware), Inc., Hubei Longdan Biological Medicine Technology Co., Ltd. and Longdan International, Inc. (File No. 0-12895) dated March 14, 2007 and incorporated herein by reference. (10b)Change in Certifying Registrant?s Accountant (File No. 0-12895) dated May 17, 2007 and incorporated herein by reference. Page 14 ALL-STATE PROPERTIES L.P. PART II - OTHER INFORMATION ITEM 6 ? Exhibits and Reports on Form 8-K (Continued) (10c)Termination of a Material Definitive Agreement by and among All-State Properties L.P., Hubei Longdan (Delaware), Inc., Hubei Longdan Biological Medicine Technology Co., Ltd. and Longdan International, Inc. (File No. 0-12895) dated November 2, 2007 and incorporated herein by reference. (31) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Page 21). (32) Certification of Chief Executive Officer (General Partner) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (Page 23). Page 15 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 thereunto duly authorized. ALL-STATE PROPERTIES L.P. By: /s/ Stanley R. Rosenthal STANLEY R. ROSENTHAL General Partner Dated: November 13, 2007