SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10-QSB
(Mark One)
[ x ] Quarterly report under Section 13 or 15(D) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002
[ ] Transition report under Section 13 or 15(D) of the
Exchange Act
For the transition period from __________ to __________
Commission file number 0-15888
IGENE Biotechnology, Inc.
_________________________________________________________________
(Exact name of Small Business Issuer as Specified in its Charter)
Maryland 52-1230461
_________________________________________ ___________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
9110 Red Branch Road, Columbia, Maryland 21045-2024
___________________________________________________
(Address of Principal Executive Offices)
(410) 997-2599
________________________________________________
(Issuer's Telephone Number, Including Area Code)
None
____________________________________________________
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the Issuer: (1) 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:
91,147,995 shares as of November 6, 2002.
Transitional Small Business Disclosure Format (check one):
Yes No x
_____ _____
-1-
FORM 10-QSB
IGENE Biotechnology, Inc.
INDEX
PART I - FINANCIAL INFORMATION
Page
Consolidated Balance Sheets . . . . . . . . . . . . . 4-5
Consolidated Statements of Operations . . . . . . . . 6
Consolidated Statements of Stockholders' Deficit . . . 7-8
Consolidated Statements of Cash Flows . . . . . . . . 9
Notes to Consolidated Financial Statements . . . . . . 10-13
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 14-18
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . 19-21
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 22-24
-2-
IGENE BIOTECHNOLOGY, INC.
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
-3-
Part I.
Item 1. Financial Information
IGENE Biotechnology, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, December 31,
2002 2001
_____________ _____________
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 42,350 $ 394,487
Accounts receivable,
net allowances of $24,000; 2002 and 2001) 1,061,614 832,794
Inventory 1,122,732 959,856
Prepaid expenses and other current assets 257,814 290,553
Deferred costs, current portion 74,160 74,160
_____________ _____________
2,558,668 2,551,850
OTHER ASSETS
Property and equipment, net 255,690 232,923
Deferred costs, net of current portion 216,881 304,267
Equipment deposits 223,856 177,091
Deposits on manufacturing equipment 306,275 211,380
Other assets 57,821 61,495
_____________ _____________
TOTAL ASSETS $ 3,619,191 $ 3,539,006
============= =============
The accompanying notes are an integral part of the financial statements.
-4-
IGENE Biotechnology, Inc. and Subsidiaries
Consolidated Balance Sheets
(continued)
September 30, December 31,
2002 2001
_____________ _____________
(Unaudited)
LIABILITIES, REDEEMABLE PREFERED STOCK
AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,292,580 $ 1,085,893
Equipment lease payable --- 1,733
Variable rate subordinated debenture 1,500,000 1,500,000
_____________ _____________
TOTAL CURRENT LIABILITIES 2,792,580 2,587,626
_____________ _____________
LONG-TERM DEBT
Notes payable 6,057,959 6,057,959
Convertible debentures 4,814,212 3,514,212
Accrued interest 2,650,088 1,927,256
_____________ _____________
TOTAL LIABILITIES 16,314,839 14,087,053
_____________ _____________
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred
stock, 8% cumulative, convertible,
voting, series A, $.01 par value per
share. Redemption value $16.96
and $16.48, respectively. Authorized
1,312,500 shares, issued 26,405 shares 447,829 435,154
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value per share.
Authorized, 750,000,000 and
250,000,000 shares, respectively;
issued and outstanding 90,953,096
and 75,848,600 shares, respectively 909,531 758,486
Additional paid-in capital 22,524,240 22,188,836
Accumulated other comprehensive income 98,313 ---
Deficit (36,675,561) (33,930,523)
_____________ _____________
TOTAL STOCKHOLDERS' DEFICIT (13,143,477) (10,983,201)
_____________ _____________
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 3,619,191 $ 3,539,006
============= =============
The accompanying notes are an integral part of the financial statements.
-5-
IGENE Biotechnology, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three months ended Nine months ended
______________________________ ______________________________
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
_____________ _____________ _____________ _____________
Sales - AstaXin(R) $ 1,240,278 $ 1,473,068 $ 2,409,193 $ 3,014,611
Sales - Nutraceuticals 418,608 --- 1,555,014 ---
Cost of sales - AstaXin(R) 1,136,670 1,332,906 2,171,311 2,659,467
Cost of sales - Nutraceuticals 377,060 --- 1,199,497 ---
_____________ _____________ _____________ _____________
Gross profit 145,156 140,162 593,399 355,144
_____________ _____________ _____________ _____________
Operating expenses:
Marketing and selling 265,004 435,031 847,878 900,115
Research, development and pilot plant 208,189 164,265 579,913 389,877
General and administrative 595,943 169,856 1,086,635 425,433
_____________ _____________ _____________ _____________
Total operating expenses 1,069,136 769,152 2,514,426 1,715,425
_____________ _____________ _____________ _____________
Operating (loss) (923,980) (628,990) (1,921,027) (1,360,281)
_____________ _____________ _____________ _____________
Other income (expense)
Miscellaneous income --- --- --- 6,000
Interest expense, net of interest
income of $253, $1,700, $1,082,
and $8,408, respectively (317,409) (173,182) (824,011) (601,029)
_____________ _____________ _____________ _____________
Net loss $ (1,241,389) $ (802,172) $ (2,745,038) $ (1,955,310)
============= ============= ============= =============
Basic and diluted
net loss per common share $ (0.01) $ (0.01) $ (0.03) $ (0.03)
============= ============= ============= =============
The accompanying notes are an integral part of the financial statements.
-6-
IGENE Biotechnology, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
(Unaudited)
Redeemable Preferred Stock
(shares/amount)
__________________________
Balance at January 1, 2001 26,405 $ 418,255
Cumulative undeclared dividends
on redeemable preferred stock --- 12,675
Issuance of common stock in
lieu of cash in payment of
interest on subordinate debenture --- ---
Shares issued for manufacturing agreement --- ---
Comprehensive loss:
Net loss for the nine months ended
September 30, 2001 --- ---
Other comprehensive income -
Foreign currency translation --- ---
___________ ___________
Balance at September 30, 2001 26,405 $ 430,930
=========== ===========
Balance at January 1, 2002 26,405 $ 435,154
Cumulative undeclared dividends
on redeemable preferred stock --- 12,675
Issuance of common stock in
lieu of cash in payment of
interest on subordinate debenture --- ---
Shares issued for manufacturing agreement --- ---
Comprehensive loss:
Net loss for the nine months ended
September 30, 2002 --- ---
Other comprehensive income -
Foreign currency translation --- ---
Total comprehensive loss --- ---
___________ ___________
Balance at September 30, 2002 26,405 $ 447,829
=========== ===========
The accompanying notes are an integral part of the financial statements.
-7-
IGENE Biotechnology, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
(Unaudited - Continued)
Accumulated
Additional Other Total
Common Stock Paid-in Comprehensive Stockholders'
(shares/amount) Capital Deficit Income(Loss) Deficit
_______________________ _____________ _____________ _____________ _____________
Balance at January 1, 2001 62,249,005 $ 622,490 $ 21,411,645 $(30,257,564) --- $ (8,223,429)
Cumulative undeclared dividends
on redeemable preferred stock --- --- (12,675) --- --- (12,675)
Issuance of common stock in
lieu of cash in payment of
interest on subordinate debenture 40,000 400 89,600 --- --- 90,000
Exercise of employee stock options 305,666 3,057 12,227 --- --- 15,284
Exercise of warrants 170,910 1,709 15,382 --- --- 17,091
Net loss for the nine months ended
September 30, 2001 --- --- --- (1,955,310) --- (1,955,310)
___________ ___________ _____________ _____________ _____________ _____________
Balance at September 30, 2001 62,765,581 $ 627,656 $ 21,516,179 $(32,212,874) --- $(10,069,039)
=========== =========== ============= ============= ============= =============
Balance at January 1, 2002 75,848,600 $ 758,486 $ 22,188,836 $(33,930,523) --- $(10,983,201)
Cumulative undeclared dividends
on redeemable preferred stock --- --- (12,674) --- --- (12,674)
Issuance of common stock in
lieu of cash in payment of
interest on subordinate debenture 40,000 400 89,600 --- --- 90,000
Issuance of common stock in
lieu of cash in payment for
consulting fee 12,000,000 120,000 180,000 --- --- 300,000
Shares issued
for manufacturing agreement 3,064,496 30,645 78,478 --- --- 109,124
Comprehensive loss:
Net loss for the nine months
ended September 30, 2002 --- --- --- (2,745,038) --- (2,745,038)
Other comprehensive income-
foreign currency translation --- --- --- --- 98,313 98,313
_____________
Total comprehensive loss (2,646,725)
___________ ___________ _____________ _____________ _____________ _____________
Balance at September 30, 2002 90,953,096 $ 909,531 $ 22,524,240 $(36,675,562) $ 98,313 $(13,143,477)
=========== =========== ============= ============= ============= =============
The accompanying notes are an integral part of the financial statements.
-8-
IGENE Biotechnology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30, September 30,
2002 2001
_____________ _____________
Cash flows from operating activities:
Net loss $ (2,745,038) $ (1,955,310)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation 39,647 17,715
Amortization 87,386 87,385
Foreign currency translation adjustment 98,313 ---
Consulting cost paid in shares of common stock 300,000 ---
Manufacturing cost paid in shares of common stock 109,122 ---
Interest on debenture paid in shares of common stock 90,000 90,000
Decrease (increase) in:
Accounts receivable (228,819) (1,095,065)
Inventory (162,876) 159,324
Prepaid expenses and other current assets 36,415 (82,858)
Increase in:
Accounts payable and accrued interest 929,520 1,369,448
_____________ _____________
Net cash used in operating activities (1,446,330) ( 1,409,361)
_____________ _____________
Cash flows from investing activities:
Capital expenditures (204,074) (58,872)
_____________ _____________
Net cash used in investing activities (204,074) (58,872)
_____________ _____________
Cash flows from financing activities:
Proceeds from borrowing 1,300,000 1,500,000
Proceeds from (repayment of) long-term debt (1,733) (2,290)
Proceeds from exercise of employee stock options --- 12,500
_____________ _____________
Net cash provided by financing activities 1,298,267 1,510,210
_____________ _____________
Net increase (decrease) in cash
and cash equivalents (352,137) 41,977
Cash and cash equivalents at beginning of period 394,487 143,572
_____________ _____________
Cash and cash equivalents at end of period $ 42,350 $ 185,549
============= =============
Supplementary disclosure and cash flow information
Cash paid for:
Interest $ 67,973 $ 440
Income taxes -0- -0-
The accompanying notes are an integral part of the consolidated financial statements.
-9-
IGENE Biotechnology, Inc. and Subsidiaries
Notes to Financial Statements
(1) Unaudited consolidated financial statements
The consolidated financial statements presented herein are
unaudited, and in the opinion of management, include all
adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of financial position and
results of operation and cash flows. Such financial
statements do not include all of the information and
footnote disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States. This quarterly
report on Form 10-QSB should be read in conjunction with
Igene's Annual Report on Form 10-KSB for the year ended
December 31, 2001.
(2) Noncash investing and financing activities
During the nine months ended September 30, 2002, Igene
issued and sold $300,000 in aggregate principal amount of 8%
convertible debentures to certain directors of Igene. These
debentures are convertible into shares of Igene's common
stock at $.03 per share. In consideration of the commitment
to purchase the 8% convertible debenture, these directors
also received an aggregate of 10,000,000 warrants to
purchase common stock at $.03 per share. These debentures,
if not converted earlier, become due on July 17th 2012.
During the nine months ended September 30, 2002, the Board
of Directors, in further attempts to ascertain a
manufacturing partner, has authorized retention of the
services of Mr. Martin Gerson. The expected term of the
service will be for two (2) years. In compensation for this
service, Mr. Gerson was awarded 12,000,000 shares of Igene
common stock.
During the nine months ended September 30, 2002 and 2001,
the Company recorded in each period dividends in arrears on
8% redeemable preferred stock at $.48 per share aggregating
$12,674 and $12,675, respectively, which has been removed
from paid-in capital and included in the carrying value of
the redeemable preferred stock.
During the nine months ended September 30, 2002 and 2001 the
Company issued 40,000 shares of common stock in each period
in payment of interest on the variable rate subordinated
debenture. If paid in cash, the interest would have been
payable at 12% in the amount of $90,000 in each period.
Shares may be issued in lieu of cash under the terms of the
debenture agreement at the higher of $2.25 per share or
market price per share. The stock was issued and related
interest was paid at $2.25 per share, or $90,000, in each
period.
During the nine months ended September 30, 2001, the Company
capitalized leased equipment by recording a lease obligation
payable of $20,500 under a capital lease.
During the nine months ended September 30, 2001, the Company
satisfied its obligations under demand notes payable of
$1,000,000 and related accrued interest of $14,211 by
issuing new 8% convertible debentures in the aggregate
principal amount of $1,014,211.
During the nine months ended September 30, 2001 employees
exercised 55,666 stock options using $2,250 of 8% notes
payable plus accrued interest of $533.30. 55,666 new shares
of common stock were issued pursuant to these exercises of
options and $2,250 of 8% notes were cancelled.
During the nine months ended September 30, 2001 170,910
warrants were exercised using $17,091 of 8% notes payable.
170,910 new shares of common stock were issued pursuant to
these exercises of options and $17,091 of 8% notes were
cancelled.
-10-
IGENE Biotechnology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(continued)
(3) Foreign Currency Translation and Transactions
Since the day-to-day operations of Igene's foreign
subsidiary in Chile are dependent on the economic
environment of the parent's currency, the financial position
and results of operations of Igene Chile are determined
using Igene's reporting currency (US dollars) as the
functional currency. All exchange gains and losses from
remeasurement of monetary assets and liabilities that are
not denominated in US dollars are recognized currently in
income. These losses and gains occurred primarily as a
result of the effect of valuation of the Chilean Peso on
Igene's accounts receivables, which are most denominated in
Chilean Pesos.
The aggregate transaction loss included in determining net
income for the nine months ended September 30, 2001 was
$180,379 and is included in the Marketing and selling
expenses in the Consolidated Statement of Operations. These
losses occurred primarily as a result of the effect of
substantial de-valuation of the Chilean Peso during the
months of April through September 2001 on Igene's accounts
receivables, which are mostly denominated in Chilean Pesos
as of September 30, 2001 and for the nine months then ended.
The effect of exchange rate changes occurring subsequent to
September 30, 2001 has been immaterial.
The financial position and results of operations of Igene
Norway, whose functional currency is the Norway Krone,
consolidated herein have been translated into US dollars in
accordance with SFAS No. 52, "Foreign Currency Translation,"
(as amended by SFAS No. 130, "Reporting Comprehensive
Income"). All assets and liabilities of this subsidiary
have been translated at the exchange rate at the balance
sheet date. Income statement amounts have been translated
using average rate of exchange over the period. Any
resultant translation adjustments are included in other
comprehensive income, a separate component of stockholders'
equity. Any gains and losses from foreign currency
transactions of this subsidiary are included in operations.
Because this subsidiary was purchased in December 2001, no
foreign currency translation adjustment arose in the nine
month period ended September 30, 2001. For the nine months
ended September 30, 2002 a foreign currency gain of $98,313
resulted because the Norway Krone fluctuated favorably
against the US dollar.
(4) Inventories
Inventory, stated at lower of cost, on a first-in first-out
basis, or market value, represents AstaXin(R) manufactured
and held for sale, as follows:
September 30, December 31,
2002 2001
_____________ _____________
Work-in-process - AstaXin(R) $ --- $ 35,764
Finished goods - AstaXin(R) 1,001,083 776,381
Nutraceuticals 121,649 147,711
_____________ _____________
Total inventory $ 1,122,732 $ 959,856
-11-
IGENE Biotechnology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(continued)
(5) Stockholders' Equity (Deficit)
At September 30, 2002 and 2001, 52,810 shares of authorized
but unissued common stock were reserved for issue upon
conversion of the Company's outstanding preferred stock.
As of September 30, 2002 and 2001, 74,604,500 shares of
authorized but unissued common stock were reserved for
exercise pursuant to the Company's Employee Stock Option
Plans.
As of September 30, 2002 and 2001, 40,000 and 120,000
shares, respectively, of authorized but unissued common
stock were reserved for issuance for payment of interest on
the variable rate subordinated debenture and 375,000 shares
of authorized but unissued common stock were reserved for
issuance upon conversion of the variable rate subordinated
debenture.
As of September 30, 2002 and 2001, 13,174,478 shares of
authorized but unissued common stock were reserved for the
conversion of outstanding convertible promissory notes in
the aggregate amount of $1,082,500 held by directors of the
Company.
As of September 30, 2002, 66,427,651 shares of authorized
but unissued common stock were reserved for the conversion
of outstanding convertible promissory notes in the aggregate
amount of $3,814,212 held by directors of the Company.
As of September 30, 2002 and 2001, 198,016,085 and
168,516,085 shares, respectively, of authorized but unissued
common stock were reserved for the exercise of outstanding
warrants.
As of September 30, 2002 and 2001, 11,892,485 and 20,000,000
shares, respectively, of authorized but unissued common
stock were reserved for issuance to the Company's contract
manufacturer pursuant to the terms of the current
manufacturing contract. For the nine months ended September
30, 2002, 3,064,496 shares have been issued pursuant to this
agreement at an average price of $.035 per share or
$109,124, which has been included as cost of manufacturing.
As of September 30, 2001 5,000,000 shares of authorized but
unissued common stock was reserved for issuance upon receipt
of $400,000 in funding for operations pursuant to the
commitment on March 27, 2001 of $1,500,000 by certain
directors of the Company.
During the nine months ended September 30, 2001, the Company
issued 305,666 new shares of common stock at $.05 per share
or $15,283, pursuant to the exercise of employee stock
option.
During the nine months ended September 30, 2001 170,910
warrants were exercised using $17,091 of 8% notes payable in
a cashless exercise. 170,910 new shares of common stock
were issued pursuant to these exercises of options and
$17,091 of 8% notes were cancelled.
(6) Basic and diluted net loss per common share
Basic and diluted net loss per common share for the nine
months ended September 30, 2002 and 2001 is based on
91,147,995 and 62,461,597, respectively, of weighted average
common shares outstanding. For purposes of computing net
loss per common share, the amount of net loss has been
increased by cumulative undeclared dividends in arrears on
preferred stock. No adjustment has been made for any common
stock equivalents outstanding because their effects would be
antidilutive.
-12-
IGENE Biotechnology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(continued)
(7) Income Taxes
The Company uses the liability method of accounting for
income taxes as required by SFAS No. 109, "Accounting for
Income Taxes". Under the liability method, deferred-tax
assets and liabilities are determined based on differences
between the financial statement carrying amounts and the tax
bases of existing assets and liabilities (i.e., temporary
differences) and are measured at the enacted rates that will
be in effect when these differences reverse. Deferred
income taxes will be recognized when it is deemed more
likely than not that the benefits of such deferred income
taxes will be realized; accordingly, all net deferred income
taxes have been eliminated by a valuation allowance.
(8) Contingency - Litigation
Archer Daniels Midland, Inc. ("ADM") has sued Igene,
alleging patent infringement and requesting injunctive
relief as well as an unspecified amount of damages (suit
filed July 21, 1997, U.S. District Court, Baltimore, MD).
Igene has filed a $300,450,000 counterclaim concerning the
theft of trade secrets (counter claim filed August 4, 1997).
The court denied ADM's request for preliminary injunctive
relief. Mediation efforts during 1999 did not resolve this
dispute, which has been returned to the court for a judicial
disposition. Presently, a stay on all discovery remains in
effect while a court-appointed expert analyzes the yeast
products of both parties. Igene believes that it is not
probable that this dispute will result in an unfavorable
outcome to Igene. Accordingly, no liability has been
reflected in the September 30, 2002 balance sheet.
Nonetheless, should ADM prevail, Igene could be liable for
damages, and Igene could also lose the right to use a
particular strain of yeast. However, Igene expects that
this will not affect Igene's ability to make and sell its
product, AstaXin(R). The Company had expenses of $-0-, in
the nine months ended September 30, 2002 and 2001 relating
to this on-going litigation.
(9) Subsequent Events
October 1, 2002, Igene gave notice to the holder of the
$1,500,000 variable rate subordinated debenture, that
pursuant to the debenture agreement, "Payment of Principal
upon Maturity", Igene is exercising our right to discharge
the principal due by converting the Debenture into 187,500
Shares of Cumulative Convertible Preferred stock at $8.00
per share.
-13-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
IGENE Biotechnology, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
CAUTIONARY STATEMENTS FOR PURPOSES OF "SAFE HARBOR PROVISIONS" OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
EXCEPT FOR HISTORICAL FACTS, ALL MATTERS DISCUSSED IN THIS
REPORT, WHICH ARE FORWARD LOOKING, INVOLVE A HIGH DEGREE OF RISKS
AND UNCERTAINTIES. POTENTIAL RISKS AND UNCERTAINTIES INCLUDE,
BUT ARE NOT LIMITED TO, COMPETITIVE PRESSURES FROM OTHER
COMPANIES AND WITHIN THE BIOTECH INDUSTRY, ECONOMIC CONDITIONS IN
THE COMPANY'S PRIMARY MARKETS, FLUCTUATIONS IN CURRENCY EXCHANGE
RATES, AND OTHER UNCERTAINTIES DETAILED FROM TIME-TO-TIME IN THE
COMPANY'S SECURITIES AND EXCHANGE COMMISSION FILINGS.
CERTAIN STATEMENTS IN THIS REPORT SET FORTH MANAGEMENT'S
INTENTIONS, PLANS, BELIEFS, EXPECTATIONS OR PREDICTIONS OF THE
FUTURE BASED ON CURRENT FACTS AND ANALYSES. ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH STATEMENTS, DUE TO
A VARIETY OF FACTORS INCLUDING REDUCED PRODUCT DEMAND, INCREASED
COMPETITION, AVAILABILITY OF PRODUCT CAPACITY, GOVERNMENT ACTION,
WEATHER CONDITIONS, AND OTHER FACTORS.
Results of Operations
_____________________
Sales and other revenue
Sales of AstaXin(R) for the quarter ended September 30, 2002
and 2001, were $1,240,278 and $1,473,068, respectively a decrease
of $232,790 or 15.8%. Sales for the nine months ended September
30, 2002 and 2001 were $2,409,193 and $3,014,611, a decrease of
$605,418 or 20%. Th reduction in sales is due to a lack of a
satisfactory level of production coupled with current market
condition pressures. It is expected that sales for subsequent
quarters will return to the levels of 2001, provided we will be
able to achieve a satisfactory level of production. However,
there can be no assurance that these returns, or any increases in
sales will occur, or that they will be material.
During the quarter ended September 30, 2002 Igene recorded
sales of $418,608 for Nutraceuticals. Sales for the nine month
period ended September 30, 2002 Igene recorded sales of
$1,555,014 for Nutraceuticals. This is a new business line for
Igene, which it added along with the 2001 acquisition of ProBio
Nutraceuticals. Sales for subsequent quarters are expected to
increase but no subsequent trend is seen. However, there can be
no assurance that these, or any increases in sales will occur, or
that they will be material.
Cost of sales and gross profit (loss)
Gross Profit on sales of AstaXin(R) was $103,608 for the
quarter ended September 30, 2002. This is a decrease of $36,554
from the $140,162 for the same quarter in the preceding year.
Gross Profit on sales of AstaXin(R) was $237,882 for the nine
months ended September 30, 2002, which is a decrease of $117,262
from the $355,144 for the nine months ended September 30, 2001.
Gross profits fell from 12% of sales for the nine months ended
September 30, 2001 to 10% of sales for the nine months ended
September 30, 2002, respectively. The company attributes the
fall in gross profit to a combination of pricing pressures in the
market and inefficiencies in production. The Company expects
that the gross profit will return to prior levels and be
maintained in the future as a percentage of sales, with expected
increases in production efficiency offsetting pricing
competition, but the company can provide no assurances in that
regard. The Company plans to continue to increase production of
AstaXin(R), as needed, to meet expected increased sales of
AstaXin(R). Demand is expected to increase both due to seasonal
increases in customer usage and increases in our market share.
If demand for AstaXin(R) continues to increase, as the Company
expects that it will, sales and gross profits may be limited by
the quantities of AstaXin(R) the Company is able to product with
-14-
IGENE Biotechnology, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
Cost of sales and gross profit (loss) (continued)
its presently available capacity with its contract manufacturer,
as was the case during the fourth quarter of 2001, coupled with
the concern output from the current manufacturer has been falling
rather than increasing during the current quarter. To avoid
this limitation, the Company is presently investigating other
additional sources of available production capacity. However,
there can be no assurance that the Company will be able to find
and subsequently be able to utilize other additional sources of
production capacity as quickly as they are needed, and sales and
gross profit growth may be limited unless augmented by increases
in production efficiency resulting from process research and
development.
The preceding resulted in cost of sales for the quarter
ended September 30, 2002 and 2001 of $1,136,670 and $1,322,906
respectively, a decrease of $186,236 or 14%. Cost of sales for
the nine months ended September 30, 2002 and 2001 were $2,171,311
and $2,659,467, respectively, a decrease of $488,156 or 18%.
The quarter ended September 30, 2002 Igene recorded gross
profit of $41,548 for Nutraceuticals as a result of $377,060 in
cost of sales. For the nine months ended September 30, 2002
Igene recorded gross profit of $355,517 for Nutraceuticals as a
result of $1,199,497 in cost of sales. This is a gross profit of
10% and 23% as a percentage of sales respectively. This is a new
business line for Igene, which it added along with the 2001
acquisition of ProBio Nutraceuticals.
Profit for subsequent quarters are expected to increase in
total, maintaining the same profit percentage, but no subsequent
trend is seen. However, there can be no assurance that these, or
any increases in sales or profits will occur, or that they will
be material.
Marketing and selling expenses
Marketing expenses for AstaXin(R) are expected to increase,
since to achieve continuing and increasing sales, and to enter
other markets for both AstaXin(R) and Nutraceuticals, the Company
will need to make additional marketing efforts for both products.
These additional expenses are expected to be funded by gross
profits from product sales, however, there can be no assurance
that these sales will occur, that they will be material or that
gross profits will result. Marketing and selling expenses for
the quarter ended September 30, 2002 were $265,004, a decrease of
$170,027, or 39% from the marketing and selling expenses of
$435,031 for the quarter ended September 30, 2001. Marketing and
selling expenses for the nine months ended September 30, 2002
were $847,878, a decrease of $52,237, or 6% over the marketing
and selling expenses of $900,115 for the nine months ended
September 30, 2001.
Research, development and pilot plant expenses
Research, development and pilot plant expenses are expected
to continue to increase, but at a more moderate rate as a portion
of the current increase has been attributable to the acquisition
ProBio and the addition of research and development costs
related to the Nutraceuticals product line. Additionally costs
increased in support of increasing the efficiency of the
manufacturing process through experimentation in the Company's
pilot plant, developing higher yielding strains of yeast and
other improvements in the Company's AstaXin(R) and Nutraceuticals
technology. For the quarters ended September 30, 2002 and 2001,
these expenses were $208,189 and $164,265, respectively, an
increase of $43,924 or 27%. For the nine months ended September
30, 2002 and 2001, these expenses were $579,913 and $389,877,
respectively, an increase of $190,036 or 49%. These expenses are
expected to be funded through additional funding from
stockholders, and by profitable operations, if profitable
operations occur.
-15-
IGENE Biotechnology, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
Operating expenses
General and administrative expenses for the quarters ended
September 30, 2002 and 2001 were $595,943 and $169,856,
respectively, an increase of $426,087 or 250%. General and
administrative expenses for the nine months ended September 30,
2002 and 2001 were $1,086,635 and $425,433, respectively, an
increase of $661,202 or 155%. This increase is due mainly to a
one time charge for shares issued as compensation. The Board of
Directors, in further attempts to ascertain a manufacturing
partner, has authorized retention of the services of Mr. Martin
Gerson. The expected term of the service will be for two (2)
years. In compensation for this service, Mr. Gerson was awarded
12,000,000 shares of Igene common stock. As there is only an
expectation for term of service but no requirement the total
estimated compensation $300,000 was expensed during the third
quarter. In addition, an increase results from the purchase of
ProBio Nutraceuticals, the additional management received
incurring additional management compensation expense, and the
overhead incurred, as well as increases in cost of insurance
coverage, increased legal fees and administrative travel due to
the expansion of the Company. General and administrative
expenses are expected to remain at the current level with the
exception of the one time payment to Mr. Gerson. These expenses
are expected to be funded by additional funding from
stockholders, and by profitable operations, if profitable
operations occur. However, we can provide no assurances that
such additional funding will become available or that such
funding, if any, will be available upon terms favorable to us.
Litigation expenses
Management expects to ultimately recover, through damage
awards, some portion of litigation expenses previously incurred,
in connection with the suit filed against the Company by ADM and
the Company's counterclaim, and expects to preserve its
commercial product rights associated with AstaXin(R). However,
there can be no assurance that the Company will receive damage
awards or that its rights will be preserved. The Company
incurred no litigation expenses during the nine months ended
September 30, 2002 or 2001. Expenses associated with this on-
going litigation have decreased since a stay on all discovery has
remained in effect while a court appointed expert analyzes the
yeast product of both parties to the suit. Costs of litigation
will continue in the future based on management's continuing
assessments of the potential costs and benefits of various
litigation strategies and alternatives. These expenses are
expected to be funded by additional funding from stockholders.
A range of reasonably possible losses from the litigation cannot
be estimated at this time, and accordingly, no liability has been
reflected in the September 30, 2002 or 2001financial statements.
Interest expense (net of interest income)
Interest expense (net of interest income) for the quarter
ended September 30, 2002 and 2001 was $317,409 and $173,182,
respectively, an increase of $144,227 or 83%. Interest expense
(net of interest income) for the nine months ended September 30,
2002 and 2001 was $824,011 and $601,029, respectively, an
increase of $222,982 or 37%. This interest expense (net of
interest income) was almost entirely composed of interest on the
Company's long term financing from its directors and other
stockholders, and interest on the Company's subordinated
debenture in both periods and has increased due to increased
financing from directors.
Net loss and basic and diluted net loss per common share
As a result of the foregoing, the Company reported net
losses of $1,241,389 and $802,172, respectively, for the quarters
ended September 30, 2002 and 2001, an increased loss of $439,217
or 55%. The Company reported net losses of $2,745,038 and
$1,955,310, respectively, for the nine months ended September 30,
2002 and 2001, an increased loss of $789,728, or 40%. This
represents a loss of $.01 per basic and diluted common share in
each of the quarters ended September 30, 2002 and 2001, and $.03
per basic and diluted common share in each of the nine months
ended September 30, 2002 and 2001. The weighted average number
of shares of common stock outstanding of 81,879,107 and
62,628,979, respectively, for the quarters ended September 30,
2002 and 2001 have increased by 19,250,128 shares. This resulted
from the weighted average adjustments of the issuance of 80,000
shares in lieu of interest payment on a subordinated
debenture, the issue of 8,000,000 shares of stock related to
the purchase of ProBio, the issuance of 300,666 shares of common
-16-
IGENE Biotechnology, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
Net loss and basic and diluted net loss per common share
(continued)
stock pursuant to the exercise of employee stock options, the
issuance of 8,107,515 shares to its manufacturer as regards the
manufacturing agreement, and 12,000,000 shares to Mr. Gerson as
regards the consulting agreement. The weighting of the last
issuance of 595,728 shares to its manufacturer, and the
12,000,000 to Mr. Gerson will have only a minimal effect on the
weighted average number of shares of common stock outstanding as
of September 30, 2002 as they were not issued until the later
half of the current quarter.
Financial Position
__________________
During the nine months ended September 30, 2002 and 2001, the
following actions also materially affected the Company's
financial position:
- - Igene increased inventory from manufacturing during the nine
month period ended September 30, 2002 by $162,876.
- - The carrying value of redeemable preferred stock was
increased and paid-in capital available to common shareholders
was decreased by $12,674, reflecting cumulative unpaid
dividends on redeemable preferred stock.
- - Prepaid expenses and other current assets decreased by
$36,415 for the nine-month period ended September 30, 2002.
- - Accounts receivable increased during the nine-month period
ended September 30, 2002 using $228,819 in cash for operating
activities of the Company.
In December 1988, as part of an overall effort to contain
costs and conserve working capital, the Company suspended payment
of the quarterly dividend on its preferred stock. Resumption of
the dividend will require significant improvements in cash flow.
Unpaid dividends cumulate for future payment or addition to the
liquidation preference or redemption value of the preferred
stock. As of September 30, 2002, total dividends in arrears on
the Company's preferred stock totaled $236,589 ($8.96 per share)
and are included in the carrying value of the redeemable
preferred stock.
Liquidity and Capital Resources
_______________________________
Historically, Igene has been funded primarily by equity
contributions and loans from directors and stockholders. As of
September 30, 2002 the Company had a negative working capital of
approximately $233,912 and cash and cash equivalents of $42,350.
Cash used by operating activities during the nine months
ended September 30, 2002 and 2001 amounted to $1,446,330 and
$1,409,361, respectively, an increase of $36,969.
Cash used by investing activities increased by $145,202,
from $58,872 for the nine months ended September 30, 2001 to
$204,074 for the nine month ended September 30, 2002. This was
as a result of an increased in capital expenditures.
Cash provided by financing activities decreased by $211,943
from $1,510,210 for the nine months ended September 30, 2001 to
$1,298,267 for the nine months ended September 30, 2002.
Financing activities consisted principally of notes from
directors. For the nine-month periods ended September 30, 2002
and 2001, the contributions were $1,300,000 and $1,500,000,
respectively.
-17-
IGENE Biotechnology, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
Liquidity and Capital Resources (continued)
___________________________________________
Over the next twelve months, Igene believes it will need
additional working capital. Igene hopes to achieve profits from
sales of AstaXin(R) and Nutraceuticals, but additional funds will
also be required to finance increased customer receivables and
inventory levels caused by expansion of sales and manufacturing.
However, there can be no assurance that projected profits, if
any, from sales, or projected additional funding from directors
will be available to Igene to fund its continued operations.
Igene does not believe that inflation has had a significant
impact on its operations during the nine months ended September
30, 2002 and 2001, however foreign currency adjustments could
have a significant effect on future operations.
Critical Accounting Policies
____________________________
The preparation of our financial statements in conformity
with accounting principles generally accepted in the U.S.
requires management to make judgments, assumptions and estimates
that affect the amounts reported in our financial statements and
accompanying notes. Actual results could differ materially from
those estimates. The following are critical accounting policies
important to our financial condition and results presented in the
financial statements and require management to make judgments and
estimates that are inherently uncertain:
Our inventories are stated at the lower of cost or market.
Cost is determined using a weighted-average approach, which
approximates the first-in first-out method. If the cost of the
inventories exceeds their expected market value, provisions are
recorded for the difference between the cost and the market
value. These provisions are determined based on significant
estimates. Inventories consist of currently marketed products
and pre-launch product candidates, which we expect to
commercialize in the near term.
We are currently involved in certain legal proceedings as
discussed in Item 1, "Legal Proceedings," in part II - Other
Information. As of September 13, 2002, Igene believes that it is
not probable that this dispute will result in an unfavorable
outcome to Igene. Accordingly, no liability has been reflected
in the September 30, 2002 balance sheet.
We recognize revenue from product sales when there is
persuasive evidence that an arrangement exists, delivery has
occurred, the price is fixed and determinable, and collectibility
is reasonably assured. Allowances are established for estimated
uncollectible amounts, product returns and discounts.
Item 4. Controls and Procedures
Based on their most recent review, which was completed
within 90 days of the filing of this report, the Igene's
principal executive officer and principal financial officer have
concluded that Igene's disclosure controls and procedures are
effective to ensure that information required to be disclosed by
Igene in the reports that it files or submits under the
Securities Exchange Act of 1934, as amended, is accumulated and
communicated to Igene's management, including its principal
executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure and are
effective to ensure that such information is recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms. There were no significant changes in
Igene's internal controls or in other factors that could
significantly affect those controls subsequent to the date of
their evaluation.
-18-
IGENE Biotechnology, Inc.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Archer Daniels Midland, Inc. ("ADM") has sued Igene,
alleging patent infringement and requesting injunctive
relief as well as an unspecified amount of damages (suit
filed July 21, 1997, U.S. District Court, Baltimore, MD).
Igene has filed a $300,450,000 counterclaim concerning the
theft of trade secrets (counter claim filed August 4, 1997).
The court denied ADM's request for preliminary injunctive
relief. Mediation efforts during 1999 did not resolve this
dispute, which has been returned to the court for a judicial
disposition. Presently, a stay on all discovery remains in
effect while a court-appointed expert analyzes the yeast
products of both parties. Igene believes that it is not
probable that this dispute will result in an unfavorable
outcome to Igene. Accordingly, no liability has been
reflected in the September 30, 2002 balance sheet.
Nonetheless, should ADM prevail, Igene could be liable for
damages, and Igene could also lose the right to use a
particular strain of yeast. However, Igene expects that
this will not affect Igene's ability to make and sell its
product, AstaXin(R). The Company had expenses of $-0- in the
nine months ended September 30, 2002 and 2001 relating to
this on-going litigation.
Item 2. Changes in Securities and Use of Proceeds.
Limitation on Payment of Dividends
__________________________________
Dividends on Common Stock are currently prohibited because
of the preferential rights of holders of Preferred Stock.
The Company has paid no cash dividends on its Common Stock
in the past and does not intend to declare or pay any
dividends on its Common Stock in the foreseeable future.
Sales of Unregistered Securities
________________________________
On July 17th 2002, Igene issued and sold $300,000 in
aggregate principal amount of it's 8% convertible debentures
to certain directors of Igene. These debentures are
convertible into shares of Igene's common stock at $.03 per
share based on the market price of Igene shares at the time
the debentures were agreed to. In consideration of the
commitment to purchase the 8% convertible debenture, these
directors also received an aggregate of 10,000,000 warrants
to purchase common stock at $.03 per share. These
debentures, if not converted earlier, become due on July
17th 2012. Igene believes that the issuance and sale of the
convertible debentures is exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended,
based on, among other things, the fact that the purchasers
of the securities were directors of the company at the time
of purchase.
During the course of 2000 and 2001, Fermic, Igene's
manufacturing agent, earned 5,043,019 shares of common stock
as part of the manufacturing agreement in exchange for
manufacturing services provided under that agreement. They
are able to earn up to 20,000,000 shares throughout the
course of the contract. The 5,043,019 shares were earned at
an average price of $.06 per share over the period and
issued at the end of 2001. During the nine months ended
September 30, 2002, Fermic earned an additional 3,064,496,
shares, which have been issued pursuant to the manufacturing
agreement at an average price of $.035 per share or
$109,124, which has been included as cost of manufacturing.
Any future shares earned by Fermic will be issued on a
quarterly basis. Igene relied on Section 4(2) of the
Securities Act of 1933, as amended, to issue the shares
Fermic without registration under that act. Igene relied on
the representations and warranties of Fermic made in the
manufacturing agreement in claiming the aforementioned
exemption.
-19-
IGENE Biotechnology, Inc.
PART II
OTHER INFORMATION
(continued)
Sales of Unregistered Securities (continued)
____________________________________________
On August 13, 2002, the Board of Directors, in further
attempts to ascertain a manufacturing partner, authorized
retention of the services of Mr. Martin Gerson. The
expected term of the service will be two (2) years. In
compensation for this service, Mr. Gerson was awarded
12,000,000 shares of Igene common stock. The 12,000,000
shares was issued on September 3, 2002 and expensed in the
third quarter at market value, $.025 per share, or $300,000
as compensation at the time of the award. These shares were
issued in reliance upon Rule 506 of Regulation D promulgated
under the Securities Act of 1933, based upon certifications
from Mr. Gerson that Mr. Gerson was an accredited investor
at the time the shares were acquired.
Item 3. Defaults Upon Senior Securities.
In December 1988, as part of an overall effort to contain
costs and conserve working capital, Igene suspended payment
of the quarterly dividend on its preferred stock.
Resumption of the dividend will require significant
improvements in cash flow. Unpaid dividends cumulate for
future payment or addition to the liquidation preference or
redemption value of the preferred stock. As of September
30, 2002, total dividends in arrears on Igene's preferred
stock total $236,589 ($8.96 per share) and are included in
the carrying value of the redeemable preferred stock
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders held on July 16, 2002,
the following matters were submitted to stockholders' vote
and were approved by the requisite number of votes: (1) the
election of all eight directors of the Company: Joseph C.
Abeles, John A. Cenerazzo, Stephen F. Hiu, Thomas L.
Kempner, Michael G. Kimelman, Sidney R. Knafel, Patrick F.
Monahan; and Stein G. Ulve; and (2) the ratification of the
appointment of Stegman & Company as the Company's
independent auditors for the fiscal year ending December 31,
2002.
Results of the voting were as follows:
Votes Broker
Votes Against or Votes Non-
For Withheld Abstained Votes
__________ __________ __________ __________
(1) Election of Directors
Joseph C. Abeles 55,417,268 219,650 --- ---
John A. Cenerazzo 55,417,268 219,650 --- ---
Stephen F. Hiu 55,417,268 219,650 --- ---
Thomas L. Kempner 55,417,268 219,650 --- ---
Michael G. Kimelman 55,417,268 219,650 --- ---
Sidney R. Knafel 55,417,268 219,650 --- ---
Patrick F. Monahan 55,417,268 219,650 --- ---
Stein G. Ulve 55,417,268 219,650 --- ---
(2) Ratification of Auditors 55,394,368 171,200 71,350 ---
-20-
IGENE Biotechnology, Inc.
PART II
OTHER INFORMATION
(continued)
Item 5. Other Information
In August of 2002, Joseph C. Abeles and John A. Cenerazzo
tendered their resignations from their respective positions
on the board, effective immediately.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99 - Certification of Chief Executive Officer
pursuant to 18 U.S.C. SECTION 1350.
Exhibit 99 - Certification of Chief Financial Officer
pursuant to 18 U.S.C. SECTION 1350.
(b) Reports on Form 8-K
On November 13, 2002 Igene filed an amendment to
current report on Form 8-K filed January 4, 2002
containing the audited financial statements of ProBio
Nutraceuticals relating to Igene's purchase of ProBio.
-21-
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.
IGENE Biotechnology, Inc.
_______________________________
(Registrant)
Date: November 14, 2002 By: /s/STEPHEN F. HIU
___________________________
STEPHEN F. HIU
President
Date: November 14, 2002 By: /s/EDWARD J. WEISBERGER
___________________________
EDWARD J. WEISBERGER
Chief Financial Officer
-22-
I, Stephen F. Hiu, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
IGENE Biotechnology, Inc.;
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 the
registrant 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 we 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
registrant's board of directors (or persons performing the
equivalent function): 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: November 14, 2002
/s/ STEPHEN F. HIU
____________________
STEPHEN F. HIU
President
-23-
I, Edward J. Weisberger, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
IGENE Biotechnology, Inc.;
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 the
registrant 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 we 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
registrant's board of directors (or persons performing the
equivalent function): 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: November 14, 2002
/s/ EDWARD J. WEISBERGER
___________________________
EDWARD J. WEISBERGER
Chief Financial Officer
-24-