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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM
10-QSB/A
 mark one
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934For the quarterly period ended March 31, 2006
 o
    
    Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from _______ to _______.
 Commission file number  0-11454
 VALENTEC SYSTEMS, INC.
  Delaware
    
    59-2332857(State or Other Jurisdiction of Incorporation
or Organization)
    
    (I.R.S. Employer Identification No.)2629 York Avenue
Minden, LA 71055
    
    71055(Address of principal executive offices)
    
    (Zip code)
 (318) 382-4574  (Issuers Telephone Number, Including Area Code)
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Page NumberPart I Financial InformationItem 1. Financial Statements
    
    
    1Item 2: Managements Discussion And Analysis Or Plan Of Operation
    
    
    16Item 3. Controls And Procedures
    
    
    18Part II Other InformationItem 1: Legal Proceedings
    
    
    20Item 2: Unregistered Sales Of Equity Securities And Use Of Proceeds
    
    
    20Item 3: Defaults Upon Senior Securities
    
    
    20Item 4: Submission Of Matters To A Vote Of The Security Holders
    
    
    20Item 5: Other Information
    
    
    21Item 6: Exhibits And Reports On Form 8-K
    
    
    21Signatures
    
    
    22Exhibit 31.1
    
    
    31.1-1Exhibit 32.1
    
    
    32.1-1Certification of Chief Executive Officer and Principal Accounting Officer Pursuant to Section 302Certification of Chief Executive Officer and Principal Accounting Officer Pursuant to Section 906




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PART I
 FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
  1




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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
 CONTENTS
 PAGE
    
    
    3
    
    
    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2006PAGE
    
    
    4
    
    
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005PAGE
    
    
    5
    
    
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005PAGE
    
    
    6
    
    
    UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 2




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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET  AS OF MARCH 31, 2006  (Unaudited)
 ASSETSCURRENT ASSETSCash
    
    
    10,238Accounts receivable and in-process billings, net
    
    
    15,587,196Inventories, net
    
    
    1,822,560Prepaid and other expenses
    
    
    251,403Total Current Assets
    
    
    17,671,397PROPERTY AND EQUIPMENT, NET
    
    
    1,472,810OTHER ASSETSAdvances  stockholder
    
    
    196,749Deferred income tax
    
    
    92,513Contract development cost, net
    
    
    6,175,767Deposits
    
    
    3,000Total Other Assets
    
    
    6,468,029TOTAL ASSETS
    
    
    25,612,236LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    
    5,303,344Accrued salaries and payroll withholding
    
    
    186,784Lines of credit
    
    
    12,082,764Notes payable  stockholders
    
    
    433,274Deferred revenue
    
    
    2,863,465Due to related party
    
    
    1,228,436Capital lease
    
    
    15,153Deferred income taxes payable
    
    
    475,241Total Current Liabilities
    
    
    22,588,461LONG TERM LIABILITIESCapital lease  long term
    
    
    71,749Total Liabilities
    
    
    22,660,210COMMITMENTS AND CONTINGENCIES
    
    
    STOCKHOLDERS EQUITYPreferred stock, $0.01 par value, 10,000,000 authorized, none issued and outstanding
    
    
    Common
stock, $0.01 par value, 250,000,000
shares authorized, 6,997,351 shares
issued and outstanding
    
    
    69,973Additional paid in capital
    
    
    3,040,752Retained earnings
    
    
    489,013Less deferred offering cost
    
    
    (647,712
    )Total Stockholders Equity
    
    
    2,952,026TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    
    25,612,236
  3




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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005  (Unaudited)
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2006
    
    
    March 31, 2005REVENUESContract revenues
    
    $
    5,972,891
    
    
    $
    3,781,830COST OF GOODS SOLD
    
    
    4,021,471
    
    
    
    2,694,967GROSS PROFIT
    
    
    1,951,420
    
    
    
    1,086,863OPERATING EXPENSESFringe benefit expenses
    
    
    149,241
    
    
    
    74,240Overhead expenses
    
    
    778,306
    
    
    
    540,728General and administrative
    
    
    754,877
    
    
    
    430,515Total Operating Expenses
    
    
    1,682,424
    
    
    
    1,045,483INCOME FROM OPERATIONS
    
    
    268,996
    
    
    
    41,380OTHER INCOME (EXPENSE)Interest income
    
    
    675
    
    
    
    7,202Miscellaneous
    
    
    2,381
    
    
    
    29,623Interest expense
    
    
    (391,961
    )
    
    
    (31,258
    )Total Other Income (Expense)
    
    
    (388,905
    )
    
    
    5,567NET INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (119,909
    )
    
    
    46,947Provision for Income Taxes
    
    
    
    
    
    
    (11,367
    )NET INCOME (LOSS)
    
    $
    (119,909
    )
    
    $
    35,580Net income (loss) per share  basic and diluted
    
    $
    (.01
    )
    
    
    Weighted average number of shares outstanding
during the period  basic and diluted
    
    
    6,997,351
    
    
    
    5,423,130
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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005  (Unaudited)
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2006
    
    
    March 31, 2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income (Loss)
    
    $
    (119,909
    )
    
    $
    35,580Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    212,108
    
    
    
    404,138In-kind contribution, interest
    
    
    7,119
    
    
    
    Changes in operating assets and liabilities:(Increase) decrease in:Accounts receivable and in-process billings
    
    
    (2,980,268
    )
    
    
    (533,245
    )Inventory
    
    
    (48,047
    )
    
    
    Prepaid expense
    
    
    (98,104
    )
    
    
    (4,195
    )Increase (decrease) in:Accounts payable, related party and accrued expenses
    
    
    185,810
    
    
    
    1,734,539Due to related party
    
    
    236,198
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    (4,765
    )Deferred revenue
    
    
    (479,316
    )
    
    
    1,291,150Net Cash Provided By (Used In) Operating Activities
    
    
    (3,084,409
    )
    
    
    2,923,202CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (6,374
    )
    
    
    (20,753
    )Net Cash Used In Investing Activities
    
    
    (6,374
    )
    
    
    (20,753
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from line of credit
    
    
    3,019,143
    
    
    
    244,000Net Cash Provided By Financing Activities
    
    
    3,019,143
    
    
    
    244,000NET INCREASE (DECREASE) IN CASH
    
    
    (71,640
    )
    
    
    3,146,449CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    81,878
    
    
    
    262,197CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    10,238
    
    
    $
    3,408,646SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    364,675
    
    
    $
    31,258Cash paid for income taxes
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING:During March 2006 the Company acquired fixed assets under
capital leases totaling $86,901.
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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
 (A) Organization
     (1)
    
    The balance sheet consists of the net assets of the acquirer at historical cost and
the net assets of the acquiree at historical cost.(2)
    
    The statement of operations includes the operations of the acquirer for the periods
presented and the operations of the acquiree from the date of the merger.
  (B) Use of Estimates
  (C) Cash and Cash Equivalents
   (D) Principles of Consolidation
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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
 (E) Inventory
  (F) Property and Equipment
  (G) Contract Revenue
    (H) Fair Value of Financial Instruments
  (I) Earnings (Loss) Per Share
  (J) Segment Information
  Three months ended March 31, 2006
 Systems
    
    Energetic
    
    Metal Parts
    
    TotalRevenues
    
    $
    3,773,426
    
    
    $
    2,013,037
    
    
    $
    186,428
    
    
    $
    5,972,891Gross Margin
    
    
    1,360,798
    
    
    
    700,436
    
    
    
    102,295
    
    
    
    2,163,529Order Backlog
    
    
    23,791,745
    
    
    
    1,691,732
    
    
    
    502,605
    
    
    
    25,986,082
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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
 Three months ended March 31, 2005
 FacilitySystems
    
    Energetic
    
    Metal Parts
    
    Management
    
    TotalRevenues
    
    $
    1,380,105
    
    
    $
    2,214,016
    
    
    $
    
    
    
    $
    187,709
    
    
    $
    3,781,830Gross Margin
    
    
    295,781
    
    
    
    767,109
    
    
    
    
    
    
    
    23,973
    
    
    
    1,086,863Order Backlog
    
    
    34,978,474
    
    
    
    3,451,426
    
    
    
    1,969,500
    
    
    
    
    
    
    
    40,399,400
 (K) Long-Lived Assets
  (L) Reclassification
  (M) Income Taxes
  (N) Stock Option Policy
  (O) Recent Accounting Pronouncements
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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
  NOTE 2 ACCOUNTS RECEIVABLE AND IN-PROCESS BILLINGS
  Billed
    
    $
    4,272,384Unbilled
    
    
    11,314,812$
    15,587,196
     NOTE 3 INVENTORY
  Raw materials
    
    $
    920,144Finished goods
    
    
    902,416$
    1,822,560
  NOTE 4 PROPERTY AND EQUIPMENT
  Furniture and fixtures
    
    $
    76,717Machinery and equipment
    
    
    2,496,813Leasehold improvements
    
    
    429,6493,003,179Less accumulated depreciation
    
    
    (1,530,369
    )$
    1,472,810
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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
  NOTE 5 DEVELOPMENT COSTS
  Keshet  Systems Integration
    
    $
    3,026,140Ammunition Mortar Rounds (60,81,120 mm)
    
    
    854,10840mm
    
    
    2,894,6926,774,940Less development cost amortization
    
    
    (599,173
    )$
    6,175,767
  NOTE 6 NOTE PAYABLE  LINE OF CREDIT
     NOTE 7 NOTE PAYABLE  STOCKHOLDERS
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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
 NOTE 8 EQUITY
    NOTE 9 WARRANTS
    NOTE 10 PROFIT SHARING PLAN
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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
 NOTE 11 RELATED PARTY
  March 31,
    
    March 31,2006
    
    2005Sales to affiliates
    
    $
    3,773,426
    
    
    $
    1,380,105Due from affiliates (included in advances -
stockholders in accompanying balance sheet)
    
    $
    196,749
    
    
    $
    196,749Due to related party
    
    $
    1,228,436
    
    
    $
    852,150Advance payment on a contract  related party
    
    $
    2,837,619
    
    
    $
    2,453,788
   NOTE 12 CONTRACT STATUS
  Backlog -
 Total contract price of initial contract awards including
exercised options and approved change orders (modifications)
    
    $
    31,958,973Completed to date
    
    
    5,972,891Authorized backlog
    
    $
    25,986,082
    *
 
 *
    
    Included in this amount is $23,791,745 in authorized backlog from a related party (Soltam
Systems). 12




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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
 NOTE 13 COMMITMENTS AND CONTINGENT LIABILITIES
 (A) Litigation
    (B) Financing Agreement
  (C) Consulting Agreement
  (D) Employment Agreement
  13




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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
 (E) Capital Lease
   Capital LeasesYear ending December 31,2006
    
    $
    16,3022007
    
    
    22,0552008
    
    
    22,0552009
    
    
    22,0552010
    
    
    18,5002011
    
    $
    5,718Total minimum lease payments
    
    $
    106,685Less amounts representing interest
    
    
    (19,783
    )Present value of net minimum capital lease payments
    
    $
    86,902Less current portion of capital lease obligations
    
    
    (15,153
    )Capital lease obligations less current portion
    
    $
    71,749
  NOTE 14 CONCENTRATIONS
  (A) Revenue and Receivables
  (B) Suppliers
  (C) Materials
  14




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VALENTEC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2006  (Unaudited)
 (D) Foreign Operations
  NOTE 15 GOING CONCERN
  NOTE 16 SUBSEQUENT EVENTS
   15




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 FORWARD-LOOKING STATEMENTS
 Information included or incorporated by reference in this filing may contain forward-looking
statements. This information may involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements of the Company to be materially
different from the future results, performance or achievements expressed or implied by any
forward-looking statements. Forward-looking statements, which involve assumptions and describe our
future plans, strategies and expectations, are generally identifiable by use of the words may,
should, expect, anticipate, estimate, believe, intend, or project, or the negative of
these words or other variations on these words or comparable terminology.
 This filing contains forward-looking statements, including statements regarding, among other
things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated
trends in our industry, (d) our future financing plans and (e) our anticipated needs for working
capital. These statements may be found under Managements Discussion and Analysis or Plan of
Operations, as well as in this filing generally. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various factors. In light of
these risks and uncertainties, there can be no assurance that the forward-looking statements
contained in this filing will in fact occur.
 OVERVIEW
   ̈
    
    Systems Management/Integration segment consists of 120mm Mortar Weapon System
with Electronic Fire Control and mortar ammunition consisting of 120mm, 81mm and 60mm. The
Company will pursue contracts from foreign governments for vehicle integration and mortar
ammunition. ̈
    
    Energetic Manufacturing segment consists of 40mm flares and simulators.
Valentec is a producer of various flares and simulators with multiple end uses, such as
illumination, signaling and, training purposes to simulate a battlefield environment. The
Company will pursue contracts from the U.S. Army. ̈
    
    Metal Parts Manufacturing segment consists of 105mm Spiral Wrapped Cartridge
Cases which are used by the U.S. Armed forces in battlefield. The Company is currently
marketing this product with foreign governments and is also actively fulfilling a contract
with the U. S. Army. The Company will pursue additional contracts with U.S. governments.
     16




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RESULTS OF OPERATION
      LIQUIDITY AND CAPITAL RESOURCES
     17




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RECENT ACCOUNTING PRONOUNCEMENTS
  OFF-BALANCE SHEET ARRANGEMENTS
  CRITICAL ACCOUNTING POLICIES
   Revenue Recognition via the Percentage of Completion Method.
   
 ITEM 3. CONTROLS AND PROCEDURES
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Changes In Internal Controls Over Financial Reporting
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PART II
 
 ITEM 1. LEGAL PROCEEDINGS
    
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 None.
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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ITEM 5. OTHER INFORMATION
 None.
 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 (a) The following exhibits are filed as part of this filing:
 Exhibit No
    
    Description
    
    Location31.1
    
    Certification by Chief Executive
Officer and Principal Accounting
Officer pursuant to 15 U.S.C.
Section 7241, as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Provided herewith32.1
    
    Certification by Chief Executive
Officer and Principal Accounting
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Provided herewith
 (b) Reports of Form 8-K :
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SIGNATURES
  VALENTEC SYSTEMS, INC.May 16, 2006
    By:
    /s/ Robert A. ZummoRobert A. ZummoChief Executive Officer and
Principal Accounting Officer 22