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**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**___________________**FORM 10-QSB**___________________

 

**x                                QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended September 30, 2005**

 

**OR**

 

** ̈                                TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

For thetransition period from               to              

 

**Commission file number: 01-12584**

 

**SHEFFIELDPHARMACEUTICALS, INC.**(Exact Name Of RegistrantAs Specified In Its Charter)
| Delaware |      |      |      | 13-3808303

(State of Incorporation)
            
(I.R.S. Employer Identification No.)

 
                           
1220 Glenmore Drive, Apopka, FL
            
32712

(Address of Principal Executive Offices)
            
(ZIP Code)

 Registrant's Telephone Number, Including Area Code:(407) 880-2213

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes x No  ̈Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule12b-2 of the Exchange Act). Yes  ̈ No x 

At September 30,2005, the Registrant had 1,790,500 shares of common stock outstanding.

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act). Yes x No  ̈

 

**TABLE OF CONTENTS**
ItemDescriptionPage
**PART I - FINANCIAL INFORMATION**
  
ITEM 1.
            
  FINANCIAL    STATEMENTS.
    3  
ITEM 2.
            
  MANAGEMENT'S    DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
    3   ITEM 3.  CONTROLS AND PROCEDURES.4  
**PART II - OTHER    INFORMATION**
  
ITEM 1.
            
  LEGAL PROCEEDINGS.
    4  
ITEM 2.
            
  CHANGES IN SECURITIES.
    4   
ITEM 3.
            
  DEFAULT UPON    SENIOR SECURITIES.
    4   
ITEM 4.
            
  SUBMISSION OF    MATERS TO A VOTE OF SECURITY HOLDERS.
    5   
ITEM 5.
            
  OTHER INFORMATION.
    5   ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.5
 
****
**PART I - FINANCIAL INFORMATION**

ITEM1. FINANCIAL STATEMENTS****Backto Table of Contents

The Registrant's unaudited interim financial statementsare attached hereto. UnauditedInterim Financial Statements

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONBack to Table of Contents

Some of the statements contained in this quarterlyreport of Sheffield Pharmaceutical, Inc., a Delaware corporation (hereinafter referred to as "we", "us", "our","Company" and the "Registrant") discuss futureexpectations, contain projections of our plan of operation or financial condition or stateother forward-looking information. Forward-looking statements give our currentexpectations or forecasts of future events. You can identify these statements by the factthat they do not relate strictly to historical or current facts. They use of words such as"anticipate," "estimate," "expect," "project,""intend," "plan," "believe," and other words and terms ofsimilar meaning in connection with any discussion of future operating or financialperformance. From time to time, we also may provide forward-looking statements in othermaterials we release to the public.

General Background of the Registrant

Sheffield Pharmaceutical,Inc., a Delaware corporation, was incorporated under Canadianlaw in October 1986. In May 1992, the Registrant was domesticated to Wyoming pursuant to acontinuance procedure under Wyoming law. In January 1995, the Registrant's shareholdersapproved the proposal to reincorporate the Registrant in Delaware, which reincorporationwas effected on June 13, 1995. 

Prior to filing forbankruptcy in June 2003, the Registrant was a development stage company and, as such, hadbeen principally engaged in research, development and licensing efforts. The Companygenerated minimal operating revenue, sustained significant net operating losses, andrequired additional capital that the Company obtained through out-licensing of rights toits technology, as well as through equity and debt offerings. The Registrant providedpharmaceutical therapies by combining pulmonary drug delivery technologies with existingand emerging therapeutic agents and had developed a range of products to treat respiratoryand systemic diseases. Sheffield believed these pulmonary delivery technologies wouldallow it to capitalize on the growing drug delivery market by providing both advancedrespiratory treatments and patient-friendly alternatives for therapies that could havebeen administered only by injection or other inconvenient means.

By mid 2003, the Registrant had failed toreach profitability and was undercapitalized to implement its business plan. The Company'sinability to meet its obligations as they became due and to continue to operate itsbusiness as a going concern resulted in the Company’s decision to seek relief underChapter 7 of the Bankruptcy Code. 

On June 6, 2003, the Registrant filed a voluntaryChapter 7 bankruptcy petition under the U.S. Bankruptcy Code in the U.S. Bankruptcy CourtWestern District of New York (case no. 03-22303). As a result of the Chapter 7 bankruptcy petition, the Registrant's assets weretransferred to a United States Trustee and the Registrant terminated its businessoperations.During 2003and 2004, the Bankruptcy Trustee had disposed of substantially all of the assets of theRegistrant and its subsidiaries. On June 7, 2005, the Trustee inproceedings under Chapter 7, filed a notice of motion for the sale of the Company'scorporate entity and 70,000,000 restricted shares of the Registrant's unissued commonstock. On July 6, 2005, the Bankruptcy Court approved an order authorizing a change incontrol and confirming that Glenin Bay Equity, LLC is a good faith purchaser pursuant to11 USC Section 363(m). The Court order further provided that the Company, subsequent tothe bankruptcy proceeding, is free and clear of all liens, claims and interests of othersand that the sale was free and clear of any and all other real or personal propertyinterests, including any interests in the former subsidiaries of Sheffield.

Change in Control following Bankruptcy

The material terms of the transactionconfirmed by the Bankruptcy Court authorized Glenin Bay Equity, LLC. to receive 70,000,000restricted shares of common stock and to appoint new members to the Registrant's board ofdirectors. On July 8, 2005, Glenin Bay Equity, LLC. appointed Michael F. Manion to the board of directors of the Registrant, which boardsubsequently appointed Mr. Manion to be chief executive officer and chief financialofficer of the Registrant (the "Management").

New BusinessObjectives of the Registrant

Asa result of the Chapter 7 bankruptcy proceeding, the Registrant has no present operations.Management determined to direct its efforts and limited resources to pursue potential newbusiness opportunities. The Registrant does not intend to limit itself to a particularindustry and has not established any particular criteria upon which it shall consider andproceed with a business opportunity.

Our common stock previously traded on the American StockExchange and subsequently on the NASDAQ OTCBB under the symbol SFFP. In 2003, due to theRegistrant's failure to file periodic and annual reports, the Registrant's shares weredeleted from the NASDAQ OTCBB market, following which the Registrant's common stock hasbeen subject to quotation on the pink sheets. There is currently only a limited tradingmarket in the Registrant's shares. There can be no assurance that there will be an activetrading market for our common stock. In the event that an active trading market commences,there can be no assurance as to the market price of our shares of common stock, whetherany trading market will provide liquidity to investors, or whether any trading market willbe sustained.

Managementintends to devote such time as it deems necessary to carry out the Registrant's affairs.The exact length of time required for the pursuit of any new potential businessopportunities is uncertain. No assurance can be made that we will be successful in ourefforts. We cannot project the amount of time that our Management will actually devote tothe Registrant's plan of operation.

Plan of Operation

We have no present operations orrevenues and our current activities are related to seeking new business opportunities,including seeking an acquisition or merger with an operating company. If our board ofdirectors seeks to acquire another business or pursue a new business opportunity,Management would have substantial flexibility in identifying and selecting a prospectivebusiness. Registrant would not be obligated nor does Management intend to seekpre-approval from our shareholders. Under the laws of the State of Delaware, the consentof holders of a majority of the issued and outstanding shares, acting without ashareholders meeting, can approve an acquisition.

The Registrant is entirely dependent onthe judgment of Management in connection with pursuing a new business opportunity or aselection process for a target operating company. In evaluating a prospective new businessopportunity or an operating company, we would consider, among other factors, thefollowing: (i) costs associated with effecting a transaction; (ii) equity interest in andopportunity to control the prospective candidate; (iii) growth potential of the targetbusiness; (iv) experience and skill of management and availability of additionalpersonnel; (v) necessary capital requirements; (vi) the prospective candidate'scompetitive position; (vii) stage of development of the business opportunity; (viii) themarket acceptance of the business, its products or services; (ix) the availability ofaudited financial statements of the potential business opportunity; and (x) the regulatoryenvironment that may be applicable to any prospective business opportunity. 

The foregoing criteria are not intendedto be exhaustive and there may be other criteria that Management may deem relevant. Inconnection with an evaluation of a prospective or potential business opportunity,Management may be expected to conduct a due diligence review.

Liquidity and Capital Resources

We will use our limited personnel andfinancial resources in connection with seeking new business opportunities, includingseeking an acquisition or merger with an operating company. It may be expected thatentering into a new business opportunity or business combination will involve the issuanceof a substantial number of restricted shares of common stock. If such additionalrestricted shares of common stock are issued, our shareholders will experience a dilutionin their ownership interest in the Registrant. If a substantial number of restrictedshares are issued in connection with a business combination, a change in control may beexpected to occur.

Inconnection with our plan to seek new business opportunities and/or effecting a businesscombination, we may determine to seek to raise funds from the sale of restricted stock ordebt securities.We have no agreements to issue any debt or equity securities and cannotpredict whether equity or debt financing will become available at terms acceptable to us,if at all.

Thereare no limitations in our articles of incorporation on our ability to borrow funds orraise funds through the issuance of restricted common stock to effect a businesscombination. Our limited resources and lack of operating history may make it difficult todo borrow funds or raise capital. Our inability to borrow funds or raise funds through theissuance of restricted common stock required to effect or facilitate a businesscombination may have a material adverse effect on our financial condition and futureprospects, including the ability to complete a business combination. To the extent thatdebt financing ultimately proves to be available, any borrowing will subject us to variousrisks traditionally associated with indebtedness, including the risks of interest ratefluctuations and insufficiency of cash flow to pay principal and interest, including debtof an acquired business.

ITEM 3.CONTROLS AND PROCEDURES****Backto Table of Contents

*Evaluation of disclosure controls andprocedures.*Management was appointed during the third quarterof 2005. As of September 30, 2005, the Company's chief executive officer and chieffinancial officer conducted an evaluation regarding the effectiveness of the Company'sdisclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) underthe  Exchange Act. Based upon the evaluation of these controls and procedures, ourpresident and chief financial officer concluded that our disclosure controls andprocedures were effective as of the date of filing this quarterly report.

*Changes in internal controls.*During the quarterly period covered by this report, no changesoccurred in our internal control over financial reporting that materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.

**PART II - OTHER INFORMATION**

ITEM 1. LEGALPROCEEDINGS****Back to Table ofContents

None.

ITEM 2. CHANGESIN SECURITIESBack to Table ofContents

During the period ended September 30, 2005, the Companyissued 1,115,000 restricted shares in exchange for expenses totaling $11,150 paid onbehalf of the Company by the Company's chief executive officer. The Company believes thatthe issuances of these restricted shares was exempt from registration pursuant to Section4(2) of the Act as privately negotiated, isolated, non-recurring transactions notinvolving any public solicitation. Appropriate restrictive legends are affixed to thestock certificates issued in such transactions. 

ITEM3. DEFAULTS UPON SENIOR SECURITIES****Back to Table of Contents

None.

ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSBack to Table of Contents

None.

ITEM5. OTHER INFORMATION****Backto Table of Contents

None.

ITEM6. EXHIBITS AND REPORTS ON FORM 8-K****Back to Table of Contents

(a) The following documents are filed as exhibits tothis report on Form 10-QSB or incorporated by reference herein. Any document incorporatedby reference is identified by a parenthetical reference to the SEC filing that includedsuch document.

Exhibit    No.Description31.1Certification of Chief    Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of    the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1Certification of Chief    Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K during the quarter covered by this report:

The Registrant filed a Form 8-K on October 7, 2005 with disclosure underItem 8.01 Other Events and on October 18, 2005 with disclosure under Item 1.02 Terminationof A Material Definitive Agreement.

SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacities and on the dateindicated.
* */s/    Michael F. Manion    Michael F. Manion       *CEO, CFO and Chairman**   Dated: November 14, 2005*
**Financial Statements for the Interim Periods ended September 30, 2005 and 2004**Back to Table of Contents
**Sheffield Pharmaceuticals, Inc.**Balance Sheets** ****September    30, 2005****December    31, 2004**** ****(Unaudited)**** **
ASSETSCurrent Assets:   Cash$0$0   Inventory00  Prepaid expenses00           Total current assets00  Assets from discontinued    operations held for sale:    Equipment,    net00   Other assets00             Total Assets$0$0  
LIABILITIES    AND STOCKHOLDERS' EQUITYCurrent Liabilities:   Accounts    payable-trade$0$0   Accrued expenses00   Notes payable00            Total current liabilities00  Long term debt  Stockholders' Deficiency:   Preferred Stock,    10,000,000 authorized, $0.001 par value;00   Common stock,    100,000,000 authorized, $0.001 par value;        1,790,500 issued and outstanding at September 30, 2005 and         29,563,712 issued and outstanding at December 31, 200417,905295,637   Additional paid-in    capital(6,755)(295,637)   Retained earnings(11,150)0     Total    Equity00  
       Total Liabilities and Stockholders' Equity$0$0     See    Notes to Unaudited Interim Financial Statements.**Sheffield    Pharmaceuticals, Inc.**Statement of Operations  
**Three Months Ended September 30,**
**Nine Months Ended September 30,**
**(Unaudited)**
**(Unaudited)****2005****2004****2005****2004**Revenue$0$0$0$0  Costs and Expenses:   General and administrative11,150011,1500   Interest0000Total costs and expenses11,150011,1500  Loss from continuing operations before    discontinued operations(11,150)0(11,150)0  Discontinued operations:   Loss from    discontinued operations (net of taxes)0000   Gain on disposal of assets used in    discontinued operations0000Income from discontinued operations0000  Net Income (loss)$(11,150)$0$(11,150)$0  Preferred stock dividends0000Net loss available to common shareholders$(11,150)$0$(11,150)$0  Basic and diluted per shares amounts:   Continued operations$(0.01)$0.00$0.00$0.00   Discontinued operations$0.00$0.00$0.00$0.00Basic and diluted net loss$(0.00)$0.00$0.00$0.00  Weighted average shares outstanding (basic and    diluted)1,026,859395,500608,266395,500  See Notes to Unaudited Interim    Financial Statements.**Sheffield    Pharmaceuticals, Inc.**Statements of Cash Flows
**Nine Months Ended September 30,****(Unaudited)**** ****2005****2004**       Cash    flows used by operating activities$0$0  Cash flow from investing activities:   Purchase of    equipment00     Cash    used in investing activities00   Cash flows from financing activities:   Proceeds from    debt borrowings00   Payments on long    term debt00   Cash transferred to bankruptcy    estate00     Net    cash provided by financing activities00       Change in cash00Cash - beginning of period00Cash - end of period$0$0  See Notes to Unaudited Interim    Financial Statements.    Supplemental Cash Flow Information:   Expenses paid by related party$11,150
**SHEFFIELD PHARMACEUTICALS, INC.**NOTES TO UNAUDITED INTERIMFINANCIAL STATEMENTS
****1. Basis of Presentation**

Sheffield Pharmaceuticals, Inc. (the "Company"), wasincorporated in 1986 and changed its domicile to Delaware on June 13, 1995. Prior tofiling for bankruptcy under chapter 7, Sheffield marketed a portfolio of products utilizedfor treatment of pulmonary and respiratory diseases.

The Financial Statements presented herein have been prepared by us inaccordance with the accounting policies described in our December 31, 2004 Annual Reporton Form 10-KSB and should be read in conjunction with the Notes to Consolidated FinancialStatements which appear in that report.

The preparation of these financial statements in conformity withaccounting principles generally accepted in the United States requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenuesand expenses, and related disclosure of contingent assets and liabilities. On an on goingbasis, we evaluate our estimates, including those related intangible assets, income taxes,insurance obligations and contingencies and litigation. We base our estimates onhistorical experience and on various other assumptions that are believed to be reasonableunder the circumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily apparent from otherresources. Actual results may differ from these estimates under different assumptions orconditions.

In the opinion of management, the information furnished in this Form10-QSB reflects all adjustments necessary for a fair statement of the financial positionand results of operations and cash flows as of and for the three-month and nine-monthperiods ended September 30, 2005 and 2004. All such adjustments are of a normal recurringnature. The Consolidated Financial Statements have been prepared in accordance with theinstructions to Form 10-QSB and therefore do not include some information and notesnecessary to conform with annual reporting requirements.
**"Fresh Start" Accounting: On June 6, 2003 all assets weretransferred to the chapter 7 trustee in settlement of all outstanding corporateobligations. We adopted "fresh-start" accounting as of June 7, 2003 inaccordance with procedures specified by AICPA Statement of Position ("SOP") No.90-7, "Financial Reporting by Entities in Reorganization under the BankruptcyCode."

All results for periods subsequent to June 6, 2003 are referred to asthose of the "Successor Company". The results of operations and cash flows aspresented on previously filed 2003 financial statements reflect the predecessor company.The results of the discontinued component had been reclassified from continuing operationsto discontinued operations. The reclassification reduced sales for the period ended June30, 2003 by $75,000 and related expenses by $1,245,000. The successor company had notransactions between June 6, 2003 and the end of the reporting period. 

In accordance with SOP No. 90-7, the reorganized value of the Companywas allocated to the Company's assets based on procedures specified by SFAS No. 141,"Business Combinations". Each liability existing at the plan sale date, otherthan deferred taxes, was stated at the present value of the amounts to be paid atappropriate market rates. It was determined that the Company's reorganization valuecomputed immediately before June 7, 2003 was $0. We adopted "fresh-start"accounting because holders of existing voting shares immediately before filing andconfirmation of the sale received less than 50% of the voting shares of the emergingentity and its reorganization value is less than its post-petition liabilities and allowedclaims. 

The accounts of the former subsidiaries were not included in thebankruptcy sale and have not been carried forward.
**2. Bankruptcy Proceedings

On June 6, 2003, the Registrant filed a voluntary Chapter 7 petitionunder the U.S. Bankruptcy Code in the U.S. Bankruptcy Court Western District of New York(case no. 03-22303). On July 6, 2005, the Bankruptcy Court approved an Order confirmingthe sale of the public shell to Glenin Bay Equity, LLC. The transaction confirmed by theBankruptcy Court authorized Glenin Bay Equity, LLC. to receive 70,000,000 shares of commonstock or 70.3% of common shares outstanding. **Resultant Change in Control: In connection with the Orderconfirming the sale of debtor's interest to Glenin Bay Equity, LLC. approved by the U.S.Bankruptcy Court Western District of New York on July 6, 2005, the Court authorized achange in control pursuant to which Michael F. Manion will become our new director. Thenew board of directors appointed Michael F. Manion as chief executive officer and chieffinancial officer on July 8, 2005. The Court order further provided that the sale was freeand clear of liens, claims and interests of others and that the sale was free and clear ofany and all other real or personal property interests, including any interests inSheffield’s subsidiaries. The issuance of 70,000,000 shares of common stock alongwith a change in our board has resulted in a change in control.

**3. Earnings/Loss Per Share**

Basic earnings per share is computed by dividing income available tocommon shareholders (the numerator) by the weighted-average number of common sharesoutstanding (the denominator) for the period. Diluted earnings per share assume that anydilutive convertible securities outstanding were converted, with related preferred stockdividend requirements and outstanding common shares adjusted accordingly. It also assumesthat outstanding common shares were increased by shares issuable upon exercise of thosestock options for which market price exceeds the exercise price, less shares which couldhave been purchased by us with the related proceeds. In periods of losses, diluted lossper share is computed on the same basis as basic loss per share as the inclusion of anyother potential shares outstanding would be anti-dilutive.

**4. Common Stock**

During the quarter ended September 30, 2005 we issued 1,115,000 sharesof our common stock in exchange for expenses paid on our behalf by Mr. Manion. The shareswere issued in consideration for Mr. Manion’s agreement to convert into shares ofcommon stock all amounts due and owing to him as a result of advances made to the company.As a result of the conversion of the advances into shares of common stock, the full amountof the loans and/or advances made by Mr. Manion to Sheffield Pharmaceuticals, Inc. as ofand through September 30, 2005, and all accrued interest thereon, are deemed to be paid infull. The shares were valued at $ 11,150 or $0.01 per share and reflected the aggregateamount of payments made on our behalf at the time of issuance. The shares are notregistered and are subject to restrictions as to transferability.

The shares of Sheffield common stock were issued in a private, nonpublic transaction to persons having direct knowledge of the business and financialcondition of Sheffield and, accordingly, the transaction is considered exempt from theregistration provisions of the Securities Act of 1933 pursuant to the exemption providedby Section 4(2) of that Act.
***Reverse Stock Split:** On August 30, 2005, theBoard unanimously adopted and the consenting stockholder approved a resolution to effect aone-for-two hundred fifty (1:250) reverse stock split of the Common Stock of Sheffield.The resulting share ownership interest including resulting fractional shares for eachindividual shareholder were rounded up to the third whole integer. No fractional shareswere issued. The immediate effect of the Reverse Split reduced the total number of sharesof Sheffield common stock from approximately 99,563,712 shares to approximately 675,500shares issued and outstanding. 

The Reverse Split became effective on September 30, 2005 (the"Effective Date") for shareholders of record on September 20, 2005. A resolutionand consent granting the authority to effect the one-for-two hundred fifty reverse stocksplit of the Common Stock of Sheffield is included herein by reference to the Definitive14C filed 9/20/2005. All per share disclosures retroactively reflect shares outstanding orissuable as though the reverse split had occurred January 1, 2004. 

**5. New Accounting Standards**

In December 2004, the FASB issued SFAS No. 123 (revised 2004)"Share-Based Payment," or SFAS No. 123(R). SFAS No. 123(R) revises FASBStatement No. 123 "Accounting for Stock-Based Compensation," and supersedes APBOpinion No. 25, and its related implementation guidance. This Statement eliminates theability to account for share-based compensation using the intrinsic value method under APBOpinion No. 25. SFAS No. 123(R) focuses primarily on accounting for transactions in whichan entity obtains employee services in share-based payment transactions. SFAS No. 123(R)requires a public entity to measure the cost of employee services received in exchange foran award of equity instruments based on the grant-date fair value of the award (withlimited exceptions). That cost will be recognized over the period during which an employeeis required to provide service in exchange for the award, known as the requisite serviceperiod, which is usually the vesting period. SFAS No. 123(R) is effective for companiesfiling under Regulation SB as of the beginning of the first interim or annual reportingperiod that begins after December 15, 2005, which for us will be our first quarter of theyear ending December 31, 2006. We anticipate adopting SFAS No. 123(R) beginning in thequarter ending March 31, 2006. Accordingly, the provisions of SFAS No. 123(R) will applyto new awards and to awards modified, repurchased, or cancelled after the requiredeffective date. Additionally, compensation cost for the portion of awards for which therequisite service has not been rendered that are outstanding as of the required effectivedate must be recognized as the requisite service is rendered on or after the requiredeffective date. These new accounting rules will lead to a decrease in reported earnings.Although our adoption of SFAS No. 123(R) could have a material impact on our financialposition and results of operations, we are still evaluating the potential impact fromadopting this statement.

In December 2004, the FASB issued SFAS No. 153, *"Exchanges ofNonmonetary Assets—an amendment of APB Opinion No. 29,"* which is effectivefor us starting July 1, 2005. In the past, we were frequently required to measure thevalue of assets exchanged in non-monetary transactions by using the net book value of theasset relinquished. Under SFAS No. 153, we will measure assets exchanged at fair value, aslong as the transaction has commercial substance and the fair value of the assetsexchanged is determinable within reasonable limits. A non-monetary exchange has commercialsubstance if the future cash flows of the entity are expected to change significantly as aresult of the exchange. The adoption of SFAS No. 153 is not anticipated to have a materialeffect on our consolidated financial position, results of operations or cash flows.

In September 2004, the EITF reached a consensus regarding IssueNo. 04-1, "Accounting for Preexisting Relationships Between the Parties to aBusiness Combination" ("EITF 04-1"). EITF 04-1 requires an acquirer in abusiness combination to evaluate any preexisting relationship with the acquiree todetermine if the business combination in effect contains a settlement of the preexistingrelationship. A business combination between parties with a preexisting relationshipshould be viewed as a multiple element transaction. EITF 04-1 is effective for businesscombinations after October 13, 2004, but requires goodwill resulting from priorbusiness combinations involving parties with a preexisting relationship to be tested forimpairment by applying the guidance in the consensus. We will apply EITF 04-1 toacquisitions subsequent to the effective date and in our future goodwill impairmenttesting. 

In December 2004, the FASB issued FASB Staff Position No. FAS 109-2, orFAS 109-2, *"Accounting and Disclosure Guidance for the Foreign EarningsRepatriation Provision within the American Jobs Creations Act of 2004."* The AJCAintroduces a limited time 85% dividends received deduction on the repatriation of certainforeign earnings to a U.S. taxpayer (repatriation provision), provided certain criteriaare met. FAS No. 109-2 provides accounting and disclosure guidance for the repatriationprovision. Although FAS 109-2 is effective immediately, we have not begun our analysis anddo not expect to be able to complete our evaluation of the repatriation provision untilafter Congress or the Treasury Department provides additional clarifying language on keyelements of the provision

In December 2003, the FASB released a revised version of Interpretation No. 46,"Consolidation of Variable Interest Entities" ("FIN 46") called FIN46R, which clarifies certain aspects of FIN 46 and provides certain entities withexemptions from requirements of FIN 46. FIN 46R only slightly modified the variableinterest model from that contained in FIN 46 and did change guidance in many other areas.We adopted FIN 46 during 2003. FIN 46R was adopted and implemented in the first quarter offiscal 2004 and had no impact on the Company’s financial position or results ofoperations.********* |
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