UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2003
Commission file number 0-12172
Lincoln Logs Ltd.
(Exact name of small business issuer as specified in its charter)
New York 14-1589242
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Riverside Drive, Chestertown, New York 12817
(Address of principal executive offices)
(518) 494 - 5500
(issuer's telephone number)
Neither name, address nor fiscal year has changed since last report
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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_________
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at June 12, 2003
Common Stock, $0.01 par value 7,360,059
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LINCOLN LOGS LTD. AND SUBSIDIARIES
INDEX
Page number
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated balance sheets as of
April 30, 2003 and January 31, 2003 3 - 4
Consolidated statements of operations for the
three months ended April 30, 2003 and 2002 5
Consolidated statements of changes in stockholders'
equity for the three months ended April 30, 2003
and the twelve months ended January 31, 2003 6
Consolidated statements of cash flows for the
three months ended April 30, 2003 and 2002 7
Notes to consolidated financial statements 8 - 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11 - 14
ITEM 3. CONTROLS AND PROCEDURES 14
PART II. OTHER INFORMATION 15
SIGNATURES 15
CERTIFICATIONS 16 - 18
- 2 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2003 AND JANUARY 31, 2003
ASSETS
April 30, January 31,
2 0 0 3 2 0 0 3
(Unaudited) (Audited)
---------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 957,464 $1,885,931
Trade accounts receivable, net of
allowance for doubtful accounts of
$20,199 106,984 207,692
Inventories (raw materials) 1,641,049 1,277,804
Work in process 263,974 228,076
Prepaid expenses and other current assets 567,988 416,404
Deferred tax asset 221,000 ---
Prepaid income taxes 11,592 ---
Mortgage and note receivable 2,592 2,592
Due from related parties 11,241 10,141
---------- ----------
Total current assets 3,783,884 4,028,640
------------ -----------
PROPERTY, PLANT AND EQUIPMENT:
Land 835,241 835,241
Buildings and improvements 2,490,272 2,479,801
Machinery and equipment 882,969 881,674
Furniture and fixtures 1,758,567 1,683,446
Transportation equipment 312,780 262,216
----------- ---------
6,279,829 6,142,378
Less: accumulated depreciation (3,719,163) (3,667,143)
---------- ---------
Total property, plant and
equipment - net 2,560,666 2,475,235
---------- ----------
OTHER ASSETS:
Mortgage receivable 61,425 63,304
Assets held for resale 7,491 11,802
Deposits and other assets 209,912 58,894
Intangible assets, net of accumulated
amortization of $78,304 at April 30, 2003
and $78,174 at January 31, 2003 4,029 4,159
--------- ---------
Total other assets 282,857 138,159
--------- ---------
TOTAL ASSETS $6,627,407 $6,642,034
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
( continued )
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LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS ( continued )
APRIL 30, 2003 AND JANUARY 31, 2003
LIABILITIES AND STOCKHOLDERS' EQUITY
April 30, January 31,
2 0 0 3 2 0 0 3
(Unaudited) (Audited)
---------- -----------
CURRENT LIABILITIES:
Current installments of long-term debt:
Related parties $ --- $ 210,000
Other 116,731 121,678
Trade accounts payable 518,924 347,520
Accrued payroll, related taxes and
withholdings 127,977 129,607
Accrued income taxes --- 23,100
Accrued expenses 592,684 662,906
Customer deposits 3,126,503 2,817,188
---------- ----------
Total current liabilities 4,482,819 4,311,999
LONG-TERM DEBT, net of current installments:
Convertible subordinated debentures:
Related parties 220,000 ---
Mortgage and notes payable 153,750 159,375
Other 77,251 64,362
---------- ----------
Total liabilities 4,933,820 4,535,736
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, $ .01 par value;
authorized 1,000,000 shares; issued
and outstanding - 0 - shares -- --
Common stock, $ .01 par value; authorized
10,000,000 shares; issued 7,759,299 shares 77,593 77,593
Additional paid-in capital 5,681,554 5,681,554
Accumulated deficit (3,181,125) (2,768,414)
----------- ----------
2,578,022 2,990,733
Less: cost of 504,240 shares of common
stock in treasury (884,435) (884,435)
----------- ----------
Total stockholders' equity 1,693,587 2,106,298
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $6,627,407 $6,642,034
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
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LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 2003 AND 2002
(UNAUDITED)
<CAPTION)
Three Months Ended
April 30,
----------------------
2 0 0 3 2 0 0 2
--------- ---------
NET SALES $ 1,695,186 $ 1,442,066
COST OF SALES 1,016,528 914,394
---------- ----------
GROSS PROFIT 678,658 527,672
---------- ----------
OPERATING EXPENSES:
Commissions 228,439 163,490
Selling, general and administrative 1,148,280 914,795
---------- ----------
Total operating expenses 1,376,719 1,078,285
---------- ----------
(LOSS) FROM OPERATIONS ( 698,061) ( 550,613)
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 5,879 4,529
Interest expense ( 12,277) ( 17,388)
Other 70,748 25,439
---------- ----------
Total other income (expense) - net 64,350 12,580
---------- ----------
(LOSS) BEFORE INCOME TAXES ( 633,711) ( 538,033)
INCOME TAX BENEFIT ( 221,000) ---
---------- ----------
NET (LOSS) $( 412,711) $( 538,033)
========== ==========
PER SHARE DATA:
Basic and diluted (loss) per share $ ( .06) $ ( .07)
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
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LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND
THE TWELVE MONTHS ENDED JANUARY 31, 2003
Number Par Additional Total
of value paid-in (Accumulated Treasury stockholders'
shares amount capital deficit) stock equity
--------- ---------- ---------- ----------- ------------ -------------
Balance at January 31, 2002 7,759,299 $ 77,593 $5,681,554 $(3,968,567) $ ( 884,435) $ 906,145
Net income - 2003 --- --- --- 1,200,153 --- 1,200,153
---------- ---------- ---------- ----------- ------------ ------------
Balance at January 31, 2003 7,759,299 $ 77,593 $5,681,554 $(2,768,414) $ ( 884,435) $ 2,106,298
Net (loss) - 3 months
ended April 30, 2003 --- --- --- ( 412,711) --- ( 412,711)
---------- ---------- ---------- ----------- ------------ ------------
Balance at April 30, 2003 7,759,299 $ 77,593 $5,681,554 $(3,181,125) $ ( 884,435) $ 1,693,587
========== ========== ========== =========== ============ ============
<FN>
See accompanying notes to consolidated financial statements.
- 6 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 2003 AND 2002
(UNAUDITED)
Three Months Ended
April 30,
----------------------------
2 0 0 3 2 0 0 2
----------- -----------
OPERATING ACTIVITIES:
Net (loss) $ ( 412,711) $ ( 538,033)
Adjustments to reconcile net (loss)
to net cash (used) provided by
operating activities:
Depreciation and amortization 52,020 41,245
(Gain) on sale of assets held for resale ( 5,689) ---
Changes in operating assets and liabilities:
Decrease in trade accounts receivable 100,708 97,619
(Increase) in inventories ( 399,143) ( 213,298)
(Increase) in prepaid expenses
and other current assets ( 151,454) ( 64,680)
(Increase) in due from related parties ( 1,100) ---
(Decrease) in due to related parties --- ( 4,951)
(Increase) in deferred tax asset ( 221,000) ---
(Increase) in prepaid income taxes ( 11,592) ( 100)
(Increase) decrease in deposits
and other assets ( 13,906) 124
Increase in trade accounts payable 171,404 311,379
Increase in customer deposits 309,315 259,607
(Decrease) increase in accrued expenses
and other current liabilities ( 71,852) 115,401
(Decrease) in accrued income taxes ( 23,100) ( 3,490)
---------- ----------
Net cash (used) provided by operating
activities ( 678,100) 823
---------- ----------
INVESTING ACTIVITIES:
Additions to property, plant
and equipment ( 137,451) ( 84,498)
Proceeds from sale of assets held for
resale 10,000 ---
Payments of pre-acquisition costs ( 137,112) ---
Payments on mortgage receivable 1,879 1,401
---------- ----------
Net cash (used) by investing activities ( 262,684) ( 83,097)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 41,611 ---
Repayments of long-term debt ( 29,294) ( 18,019)
---------- ----------
Net cash provided (used) by financing
activities 12,317 ( 18,019)
---------- ----------
Net (decrease) in cash and cash equivalents ( 928,467) ( 100,293)
Cash and cash equivalents at
beginning of period 1,885,931 502,397
---------- ----------
Cash and cash equivalents at
end of period $ 957,464 $ 402,104
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
- 7 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
(1) BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim periods.
The results of operations for the three-month periods ended April 30, 2003
and 2002 are not necessarily indicative of the results to be expected for the
full year due to the seasonal nature of the business. The Company operates in
the housing industry whose activity pattern is more active during the months of
late-spring through late-autumn, and less active during the winter months of the
year. The Company's first and fourth quarters are largely in the winter months
of the year.
These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2003.
(2) LOSS PER SHARE
Basic loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding during the respective periods. The
weighted average number of common shares used to compute basic loss per share
was 7,255,059 for the three month periods ended April 30, 2003 and April 30,
2002, respectively.
Diluted loss per share is computed based on the weighted average number
of common shares outstanding during the respective periods. When the effects
are dilutive, the convertible subordinated debentures are assumed to have been
converted into common stock at the beginning of the period after giving
retroactive effect to the elimination of interest expense, net of income tax
effect, applicable to the convertible subordinated debentures. Stock options
and warrants are included in the computation of earnings per share under the
treasury stock method if the effect is dilutive. Diluted loss per share is
the same as basic loss per share because the effect of including stock options,
warrants and the assumed conversion of the convertible subordinated debentures
would be anti-dilutive.
(3) INCOME TAXES
The Company accrues income tax expense on an interperiod basis as
necessary, and accrues income tax benefits only when it is more likely than
not that such tax benefits will be realized. A $221,000 income tax benefit was
recognized in the three months ended April 30, 2003. No income tax expense or
benefit was accrued in the three months ended April 30, 2002.
- 8 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(4) INDEBTEDNESS
The Company has had two series of subordinated convertible debentures
outstanding during the past four years, Series B Convertible Subordinated
Debentures and Series C Convertible Subordinated Debentures (collectively
the "Debentures"). At April 30, 2003, the total amount of Debentures
outstanding equaled $220,000. The Debentures have a maturity date of May 15,
2003. On May 15, 2003, the total amount of Debentures were converted into
common stock of the Company. At April 30, 2003, the total amount of the
Debentures, $220,000, was reclassified as long-term debt. See also footnote
to consolidated financial statements No. 7 below.
In February 2003, the Company purchased a new pickup truck having a total
value of $41,611. The Company took advantage of special financing offered by
the truck manufacturer and financed the total amount of the purchase with an
interest rate of 0%. The borrowing has a maturity date of March 2006,
requires equal monthly payments and is collateralized by the truck purchased.
The Company also has other debt outstanding consisting of a mortgage on
owned real property, automotive equipment loans, and certain assets under
capital leases collateralized by copiers, facsimile machines, computers,
blueprinting equipment and milling equipment.
(5) RECLASSIFICATIONS
Certain amounts in the Consolidated Statement of Operations for the three
months ended April 30, 2002 have been reclassified to conform with the
presentation for the three months ended April 30, 2003. None of the reclass-
ifications had the effect of changing the net loss as previously reported.
(6) SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
During the three months ended April 30, 2003, cash was paid in the amounts
of $12,091 for interest and $34,692 for income taxes. During the three months
ended April 30, 2002, cash was paid in the amounts of $10,954 for interest and
$3,590 for income taxes.
Non-cash investing and financing activities:
During the first quarter ended April 30, 2003, a new truck was purchased for
$41,611. The Company took advantage of special financing offered by
the truck manufacturer and financed the total amount of the purchase with an
interest rate of 0%. The borrowing has a maturity date of March 2006.
During the first quarter ended April 30, 2002 there were no non-cash
investing and financing activities.
- 9 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(7) SUBSEQUENT EVENT
The Company had outstanding debt in the form of Series B Convertible
Subordinated Debentures and Series C Convertible Subordinated Debentures in the
amount of $170,000 and $50,000, respectively, whose redemption dates were
May 15, 2003. On May 15, 2003, all holders of both Series B and Series C
Convertible Subordinated Debentures elected to convert their holdings into
common stock of the Company. Series B Convertible Subordinated Debentures are
convertible into common stock at the rate of 1 share for each $0.20 of
principal, or 850,000 shares. Series C Convertible Subordinated Debentures are
convertible into common stock at the rate of 1 share for each $0.16 of
principal, or 312,500 shares. At April 30, 2003, the Company has reclassified
the $220,000 of outstanding Series B and Series C Convertible Subordinated
Debentures as long-term debt.
- 10 -
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended April 30, 2003 vs. April 30, 2002
Net sales were $1,695,186 for the three months ended April 30, 2003 as
compared to $1,442,066 in the same period in 2002, an increase of $253,120, or
18%. When compared with the same period in the previous year, there was a 14%
increase in the number of units shipped, and the average sales value per unit
shipped increased 6%. The increase in units shipped was due in part to the 6%
increase in the number of customer contracts in the backlog of undelivered
contracts at the beginning of the quarter, as compared to the beginning of the
same quarter last year, and was in spite of unfavorable spring weather
conditions. The increase in the average sales value per unit shipped in the
three months ended April 30, 2003 is partly attributable to shipment of slightly
larger homes than those shipped in the comparable period of the previous year.
The rise in average sales value per unit shipped is also attributable to price
increases that the Company instituted over the past two years.
Gross profit amounted to $678,658, or 40% of net sales for the three months
ended April 30, 2003 as compared to $527,672, or 37% for the same period in
2002. The overall dollar increase in gross profit was 29%. Gross profit
increased for the three months ended April 30, 2003 as compared to the three
months ended April 30, 2002 due to decreases (as a percentage of net sales) in
material costs and manufacturing overhead. Material costs in absolute dollars
increased 11% in the quarter ended April 30, 2003 as compared with the same
three-month period of the previous year due to increased shipments.
Material costs as a percentage of net sales declined by 2% primarily as a
result of lower framing lumber costs as compared with the first quarter of last
year. Manufacturing overhead increased by 10% in absolute dollars, but
decreased by 1% as a percentage of net sales. The largest decrease as a
percentage of sales was in design and engineering costs. The time spent to
design a house has dropped significantly compared with the prior year, as the
Company's designers better utilize a new computer aided design software
together with a growing library of standard model drawings. These resources
can be called upon as the basis for many of our shipped houses to efficiently
draw custom homes, which in many instances are modified versions of our
standard models.
Total operating expenses of $1,376,719, or 81% of net sales, increased
$298,434 from the previous year's amount of $1,078,285, or 75% of net sales.
The overall increase in operating expenses was 28%. Sales commissions were
$228,434 for the three months ended April 30, 2003 and $163,490 for the three
months ended April 30, 2002. Commissions were 13% and 11% of net sales in the
quarters ended April 30, 2003 and 2002, respectively. Selling, general and
administrative expenses were $1,148,280 for the three months ended April 30,
2003 compared with $914,795 in the same period of the previous year, an
increase of $233,485, or 26%. Selling, general and administrative expenses were
68% and 63% of net sales at April 30, 2003 and 2002, respectively.
Although net sales increased by 18% in the first quarter ended April 30, 2003
total sales commissions increased by 40% during the same period. During the
quarter ended April 30, 2003, 24% of the shipments were sold by the Company's
employee sales persons as compared with 30% of the previous year's first quarter
- 11 -
sales. Because the Company compensates its employee sales persons at a lower
commission rate than its independent dealer representatives, total commissions
expense can fluctuate differently from the change in net sales depending upon
the total composition of home sales by employee sales persons and independent
dealer representatives. In this instance, the increase in the number of homes
attributed to the Company's independent dealers, especially those with higher
commission rates, resulted in increased commissions expense.
Several specific items contributed to the increase in selling, general, and
administrative expenses more than others during the first quarter ended April
30, 2003 when compared to the previous year's first fiscal quarter. The
principal items include an expanded and more comprehensive annual sales
convention, an increase in the number of sales support personnel and an increase
in the number of national trade show exhibitions that the Company attended.
Many other expenses had modest increases as the Company prepares itself to
support the higher sales level expected for the full fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency at both April 30, 2003 and
April 30, 2002 of $698,935 and $1,660,764, respectively. For the twelve months
ended April 30, 2003 working capital increased $961,829, as compared to an
increase of $97,731 in the same period in 2002. As of the Company's fiscal
year end at January 31, 2003, current liabilities exceeded current assets by
$283,359. At April 30, 2003 the Company's backlog of undelivered contracts
was approximately $20,359,000. Cash was primarily used during the three-month
period ended April 30, 2003 to fund the operating loss, to purchase inventory,
to pay for prepaid expenses and other current assets, to pay for pre-acquisition
costs, to purchase additional fixed assets, to make payments towards long-term
debt. Cash was primarily provided through the receipt of customer deposits and
the reduction of trade receivables, and by an increase in accounts payable.
For the three months ended April 30, 2003, the Company's operations used cash
in the amount of $678,100. Comparatively, the Company's operations provided
cash in the amount of $823 for the three months ended April 30, 2002. Overall,
the Company experienced a net decrease in its cash position of $928,467 during
the three months ended April 30, 2003 as compared to a net decrease in its cash
position of $100,293 during the three months ended April 30, 2002.
The Company had outstanding on April 30, 2003, $170,000 of Series B
Convertible Subordinated Debentures and $50,000 of Series C Convertible
Subordinated Debentures (collectively the "Debentures") whose maturity dates
are May 15, 2003. On May 15, 2003, all holders of the debentures elected to
- 12 -
convert their respective holdings into common stock of the Company. The
Series B Convertible Subordinated Debentures are convertible at a rate of one
share for each $0.20 of principal, or 850,000 shares, and the Series C
Convertible Subordinated Debentures are convertible at a rate of one share for
each $0.16 of principal, or 312,500 shares.
The Company's backlog of undelivered contracts at April 30, 2003 and April
30, 2002 was approximately $20,359,000 and $17,642,000, respectively, and the
backlog of undelivered customer contracts at January 31, 2003 was approximately
$20,100,000. A contract is considered to be part of the Company's backlog when
the contract is signed by the customer, is accompanied by a deposit and is
countersigned by an officer of the Company. It has been the Company's
experience over the past three years that an average of approximately 44% of
its backlog at the conclusion of its fiscal year will result in shipment in the
following fiscal year. One hundred percent of the shipments that occurred in
the first quarter ended April 30, 2003 were contained in the Company's backlog
at its fiscal year end date of January 31, 2003. In the comparable three-month
period of the previous year, 96% of the shipments were contained in the
Company's backlog at January 31, 2002. The net increase in the backlog of
undelivered contracts resulted from new contract signings that were in excess
of shipments and cancellations.
Each year the Company experiences contract cancellations. The reasons for
cancellations are varied and no one particular reason is dominant over the
population of reasons given by the Company's customers. The Company's history
over the past three years reveals that an average of approximately 24% of the
customer contracts contained in the backlog at the beginning of the fiscal year
cancelled in the subsequent fiscal year. Contract cancellations in the first
quarter ended April 30, 2003 and 2002 were approximately $1,798,000 and
$1,142,200, respectively. One hundred percent of the cancellations for both
periods were contained in the backlog of undelivered contracts at January 31,
2003 and January 31, 2002, respectively.
The Company realizes a certain amount of revenue for work performed on most
cancelled contracts related to drafting and engineering services. After
deduction of the charges for services performed, the balance of the customer's
deposit is returned to the customer. During the first quarter ended April 30,
2003 and 2002, the Company realized revenues of $33,035 and $40,599,
respectively, related to the aforementioned services.
ACQUISITIONS
The Company is currently in the process of completing its due diligence
investigation and purchase contract negotiations related to the intended
acquisition of three companies, two of which are affiliated to each other
through common ownership. No closing dates have yet been established for
these acquisitions.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
It should be noted that in this Management's Discussion and Analysis of
Financial Condition and Results of Operations contains "forward-looking
statements." The terms "believe", "anticipate", "intend", "goal", "expect" and
similar expressions may identify forward-looking statements. These forward-
looking statements represent the Company's current expectations or beliefs
concerning future events. The matters covered by these statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements, including
the Company's dependence on weather-related factors, introduction and customer
acceptance of new products, the impact of competition and price erosion, as well
as supply and manufacturing constraints and other risks and uncertainties. The
foregoing list should not be construed as exhaustive, and the Company disclaims
- 13 -
any obligation to subsequently revise any forward-looking statements to reflect
events or circumstances after the date of such statements, or to reflect the
occurrence of anticipated or unanticipated events. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation that
the strategy, objectives or other plans of the Company will be achieved. The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On July 30, 2002, the Financial Accounting Standards Board ("FASB") issued
Statement No 146, "Accounting for Costs Associated with Exit or Disposal
Activities" ("SFAS No. 146"). This standard requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS No. 146 is
to be applied prospectively to exit or disposal activities initiated after
January 31, 2003, at which time the Company will adopt SFAS No. 146. The
Company does not believe this statement will have a material impact on its
financial statements.
In December 2002, FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation-Transaction and Disclosure" ("SFAS No. 148"). The standard amends
SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods for voluntary transition to SFAS No. 123's fair value method of
accounting for stock-based employee compensation ("the fair value method").
SFAS No. 148 also requires disclosure of the effects of an entity's accounting
policy with respect to stock-based employee compensation on reported net income
(loss) and earnings (loss) per share in annual and interim financial statements.
The transition provisions of SFAS No. 148 are effective in fiscal years
beginning after December 15, 2002. The Company is currently evaluating the
transition provisions of SFAS No. 148 and has adopted the disclosures provisions
of SFAS No. 148.
ITEM 3 CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, an evaluation
was carried out under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-14(c) under the
Securities Exchange Act of 1934). Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the design and
operation of these disclosure controls and procedures were effective. No
significant changes were made in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.
- 14 -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit Index
99.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
b. Reports on Form 8-K
On February 19, 2003, the Company filed a report under Item 9
on Form 8-K (Regulation FD disclosure of a proposed acquisition).
On May 28, 2003, the Company filed a report under Item 9 on
Form 8-K (Regulation FD disclosure of a proposed acquisition).
There were no other reports on Form 8-K filed by the Company
during the quarter ended April 30, 2003, or through and including
the date of this filing.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LINCOLN LOGS LTD.
/ s / John D. Shepherd
John D. Shepherd
Chairman of the Board, President and
Chief Executive Officer
June 13, 2003
/ s / William J. Thyne
William J. Thyne
Vice President, Treasurer, Secretary,
and Chief Financial Officer
June 13, 2003
- 15 -
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Shepherd, certify that:
1. I have reviewed this quarterly report of Form 10-QSB of Lincoln Logs
Ltd.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of Lincoln Logs Ltd. as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
- 16 -
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: June 13, 2003
/ s / John D. Shepherd
Name: John D. Shepherd
Title: Chairman of the Board, President
and Chief Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William J. Thyne, certify that:
1. I have reviewed this quarterly report of Form 10-QSB of Lincoln Logs
Ltd.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of Lincoln Logs Ltd. as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
- 17 -
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: June 13, 2003
/ s / William J. Thyne
Name: William J. Thyne
Title: Vice President, Treasurer,
Secretary, and Chief Financial Officer
- 18 -
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Lincoln Logs, Ltd. ("the Company")
on Form 10-QSB for the period ending April 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, John D.
Shepherd, Chief Executive Officer of the Company, certify that, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that, to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/ s / John D. Shepherd
Name: John D. Shepherd
Title: Chairman of the Board, President
and Chief Executive Officer
[A signed original of this written statement required by Section 906 has been
provided to Lincoln Logs Ltd. and will be retained by Lincoln Logs Ltd. and
furnished to the Security and Exchange Commission or its staff upon request.]
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Lincoln Logs, Ltd. ("the Company")
on Form 10-QSB for the period ending April 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, William
J. Thyne, Chief Financial Officer of the Company, certify that, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that, to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/ s / William J. Thyne
Name: William J. Thyne
Title: Vice President, Treasurer,
Secretary, and Chief Financial Officer
[A signed original of this written statement required by Section 906 has been
provided to Lincoln Logs Ltd. and will be retained by Lincoln Logs Ltd. and
furnished to the Security and Exchange Commission or its staff upon request.]