U.S. Securities and Exchange Commission
Washington D. C., 20549
Form 10-QSB
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2002
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from__________ to ___________.
Commission file number 0-20924
Reconditioned Systems, Inc.
(Exact name of small business issuer as specified in its charter)
Arizona 86-0576290
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
444 West Fairmont, Tempe, Arizona 85282
(Address of principal executive offices)
480-968-1772
(Issuer's telephone number)
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(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: as of January 30, 2003, the number of
shares outstanding of the Registrant's common stock was 1,254,421.
Transitional Small Business Disclosure Format. Yes [ ] No [X] .
Item 1
- ------
PART 1 - FINANCIAL STATEMENTS
RECONDITIONED SYSTEMS, INC.
Unaudited Financial Statements
December 31, 2002
RECONDITIONED SYSTEMS, INC.
BALANCE SHEETS
December 31, 2002 and 2001
(Unaudited)
2002 2001
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $1,031,512 $1,369,431
Accounts receivable - trade, net of allowance for
doubtful accounts of approximately $24,000 and
$16,000, respectively 1,585,583 569,950
Note receivable 150,000 150,000
Inventory 1,349,184 1,368,017
Prepaid expenses and other current assets 281,567 261,436
------- -------
Total current assets 4,397,846 3,718,834
--------- ---------
Property and Equipment, net: 359,976 342,748
------- -------
Other Assets:
Refundable deposits 31,528 27,356
Other 77,010 22,963
------ ------
108,538 50,319
------- ------
Total Assets $4,866,360 $4,111,901
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $643,895 $265,998
Customer deposits 170,414 88,404
Accrued expenses and other current liabilities 309,863 217,582
------- -------
Total current liabilities 1,124,172 571,984
--------- -------
Stockholders' Equity:
Common stock, no par value; 100,000,000 shares authorized, 1,607,231 and
1,548,395 issued, respectively and 1,254,421 and 1,193,671
outstanding, respectively $4,938,758 $4,805,410
Retained earnings/(Accumulated deficit) (330,628) (396,495)
--------- ---------
4,608,130 4,408,915
Less: treasury stock, 352,810 and 354,724 shares
respectively, at cost (865,942) (868,998)
--------- ---------
3,742,188 3,539,917
--------- ---------
Total Liabilities and Stockholders' Equity $4,866,360 $4,111,901
========== ==========
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF INCOME
For the Three and Nine Month Periods Ended December 31, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
2002 2001 2002 2001
---- ---- ---- ----
Sales $3,621,136 $1,536,958 $8,608,641 $6,351,425
Cost of sales 2,693,887 1,502,687 6,723,797 5,341,825
--------- --------- --------- ---------
Gross profit 927,249 34,271 1,884,844 1,009,600
Selling & administrative expenses 691,872 462,105 1,837,920 1,366,648
Legal dispute (note 4) 6,774 35,404 21,087 76,530
Severance charges (Note 5) 0 42,708 0 42,708
- ------ - ------
Income (loss) from operations 228,603 (505,946) 25,837 (476,286)
Other income (expense):
Interest income 5,560 10,326 18,627 46,286
Other 1,140 20 837 (20,343)
----- -- --- --------
Net income (loss) before provision for income taxes
235,303 (495,600) 45,301 (450,343)
Income tax expense (83,825) 0 (11,325) 0
-------- - -------- -
Net income (loss) $151,478 $(495,600) $33,976 $(450,343)
======== ========== ======= ==========
Basic earnings (loss) per share (Notes 1 and 2) $0.12 $(0.42) $0.03 $(0.38)
===== ======= ===== =======
Basic weighted average number
of shares outstanding 1,249,821 1,191,972 1,252,778 1,181,435
========= ========= ========= =========
Diluted earnings (loss) per common
and common equivalent share
(Notes 1 and 2) $0.11 $(0.42) $0.02 $(0.38)
===== ======= ===== =======
Diluted weighted average number
of shares outstanding 1,353,946 1,191,972 1,372,958 1,181,435
========= ========= ========= =========
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Year Ended March 31, 2002 and the Nine Month Period Ended
December 31, 2002
(Unaudited)
Common Stock Common Stock Retained
Shares Amount Earnings Treasury
(Deficit) Stock Total
- ---------------------------------- -------------- ----------------- ---------------- -------------- --------------
Balance at March 31, 2001 1,174,250 $4,588,844 $267,460 $(757,869) $4,098,435
Purchase of Treasury
Shares (40,500) - - (112,025) (112,025)
Transfer of shares to
ESPP Plan 3,522 242 - 8,379 8,621
Retirement of shares from
ESPP Plan (841) - - (2,103) (2,103)
Stock Dividend 58,177 216,172 (213,612) (2,560) -
Net income (loss) - - (284,095) - (284,095)
-------------- ----------------- ------------------ ------------ --------------
Balance at March 31, 2002 1,194,608 $4,805,258 $(230,247) $(866,178) $3,708,833
Transfer of shares to
ESPP Plan 2,248 (921) - 5,346 4,425
Retirement of shares from
ESPP Plan (2,149) 64 - (5,110) (5,046)
Stock Dividend 59,714 134,357 (134,357) - -
Net income - - 33,976 - 33,976
-------------- ----------------- ------------------ ------------ --------------
Balance at December 31,
2002 1,254,421 $4,938,758 $(330,628) $(865,942) $3,742,188
-------------- ----------------- ------------------ ------------ --------------
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
For the Three and Nine Month Periods Ended December 31, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
2002 2001 2002 2001
---- ---- ---- ----
Cash and cash equivalents used by operating activities $(60,608) $(78,196) $(219,711) $(158,984)
--------- --------- ---------- ----------
Cash and cash equivalents used by investing activities:
Purchase of property and equipment (14,208) (37,045) (125,390) (168,334)
Other 375 (1,200) - (114,460)
--- ------- - ---------
(13,833) (38,245) (125,390) (282,794)
Cash and cash equivalents provided/(used) by financing
activities (1,352) 2,128 (621) (28,075)
------- ----- ----- --------
Decrease in cash and cash equivalents (75,793) (114,313) (345,722) (469,853)
Cash and cash equivalents at beginning of period 1,107,305 1,483,744 1,377,234 1,839,284
--------- --------- --------- ---------
Cash and cash equivalents at end of period $1,031,512 $1,369,431 $1,031,512 $1,369,431
========== ========== ========== ==========
Non-cash transactions
- ---------------------
During the quarter ended December 31, 2001, the Company purchased 30,000 shares
of treasury stock in exchange for a $75,000 note receivable from an officer and
$5,100 in unpaid accrued interest on said note.
During the nine months ended December 31, 2002 and 2001, the Company issued a 5%
stock dividend to shareholders of record on August 14, 2002 and shareholders of
record on August 13, 2001, respectively.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Note 1.
Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
Basis of Presentation:
- ----------------------
The unaudited financial statements include only the accounts and
transactions of the Company.
Interim Financial Statements:
- -----------------------------
The unaudited interim financial statements include all adjustments
(consisting of normal recurring accruals), which, in the opinion of
management, are necessary. Operating results for the nine months ended
December 31, 2002 are not necessarily indicative of the results that
may be expected for the entire year ending March 31, 2003. These
financial statements have been prepared in accordance with the
instructions to Form 10-QSB and do not contain certain information
required by generally accepted accounting principles in the United
States. These statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form
10-KSB for the year that ended March 31, 2002.
Earnings (Loss) Per Common and Common Equivalent Share:
- -------------------------------------------------------
Basic earnings (loss) per share include no dilution and are computed by
dividing income (loss) available to common stockholders by the weighted
average number of shares outstanding for the period.
Diluted earnings per share amounts are computed based on the weighted
average number of shares actually outstanding plus the shares that
would be outstanding assuming the exercise of dilutive stock options,
all of which are considered to be common stock equivalents. The number
of shares that would be issued from the exercise of stock options has
been reduced by the number of shares that could have been purchased
from the proceeds at the average market price of the Company's stock.
Diluted earnings (loss) per share for the three and nine month periods
ended December 31, 2001 include no dilution, as inclusion of stock
options would have been anti-dilutive.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Note 2.
Stock Dividend
- --------------------------------------------------------------------------------
On June 27, 2002, the Company declared a five percent stock dividend to
shareholders of record as of August 14, 2002. On August 15, 2002, the Company
issued 59,714 share of common stock in conjunction with this dividend.
Accordingly, amounts equal to the fair market value (based on quoted market
prices) of the additional shares have been charged to retained earnings and
common stock. Earnings (loss) per common share, weighted average shares
outstanding, and all stock options have been restated to reflect the five
percent stock dividend.
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Note 3.
Earnings (Loss) Per Share
- --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
December 31, December 31,
2002 2001 2002 2001
---- ---- ---- ----
Basic EPS
Net Income (Loss) $151,478 $(495,600) $33,976 $(450, 343)
======== ========== ======= ===========
Weighted average number of shares outstanding 1,249,821 1,191,972 1,252,778 1,181,435
========= ========= ========= =========
Basic earnings (loss) per share $0.12 $(0.42) $0.02 $(0.38)
===== ======= ===== =======
Diluted EPS
Net Income (Loss) $151,478 $(495,600) $33,976 $(450, 343)
======== ========== ======= ===========
Weighted average number of shares outstanding 1,249,821 1,191,972 1,252,799 1,181,435
Effect of dilutive securities:
Stock options 104,125 0 120,159 0
------- - ------- -
Total common shares + assumed conversions 1,353,946 1,191,972 1,372,958 1,181,435
========= ========= ========= =========
Per Share Amount $0.11 $(0.42) $0.02 $(0.38)
===== ======= ===== =======
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Note 4.
Legal Dispute
- --------------------------------------------------------------------------------
In June 2001, the Company's former independent accountant, Semple & Cooper, LLP
("Semple"), resigned as a result of a fee dispute. In addition, Semple indicated
they were not independent with respect to their audits of the Company's
financial statements for the fiscal years ended March 31, 1999 and 2000, and
therefore, were withdrawing their opinions related to those audits. On August 9,
2001, the Company commenced a lawsuit against Semple & Cooper, LLP in the
Superior Court of Arizona, Maricopa County (Case No. CV2001-013810) for breach
of contract, malpractice, injurious falsehood and defamation. The complaint
seeks monetary damages, including punitive damages, and an injunction requiring
Semple & Cooper, LLP to retract and withdraw its injurious falsehoods and
defamatory statements against the Company.
On September 19, 2001, Semple & Cooper, LLP filed an answer and counterclaim for
breach of contract and defamation in response to the above-mentioned lawsuit.
The counterclaim seeks monetary damages, including punitive damages and an
injunction requiring the Company to retract alleged defamatory statements the
Company made against Semple & Cooper, LLP.
For the nine month periods ended December 31, 2002 and 2001, the Company
incurred $21,087 and $76,530 in costs associated with this dispute,
respectively. As the lawsuit is still pending, the Company anticipates it will
incur additional costs, however, those costs cannot be estimated at this time.
The Company has elected to charge these expenses to operating expenses, as
incurred. A trial date has been set for February 25, 2003.
- --------------------------------------------------------------------------------
Note 5.
Severance Charges
- --------------------------------------------------------------------------------
In response to decreased sales volume and increased operating losses, the
Company made personnel cuts during the three month period ended December 31,
2001. In connection with the lay-offs, the Company incurred $42,708 in severance
charges.
Item 2. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations
- ---------------------
The statements contained in this report that are not historical facts may
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbors created thereby.
These forward-looking statements involve risks and uncertainties, including, but
not limited to, the risk that Reconditioned Systems, Inc. (the "Company") may
not be able to maintain consistent sales volumes, the risk that the U.S. economy
may not recover in the short-term, the risk that the Company's newer divisions
will not achieve profitability and the risk that the Company may not maintain
profitability. In addition, the Company's business, operations and financial
condition are subject to substantial risks that are described in the Company's
reports and statements filed from time to time with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 2002.
Critical Accounting Policies
- ----------------------------
Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses. In consultation with our Board of Directors and Audit Committee, we
have identified four accounting principles that we believe are key to an
understanding of our financial statements. These important accounting policies
require management's most difficult, subjective judgments.
Revenue Recognition:
- --------------------
The Company recognizes a sale when its earnings process is complete. In
connection with projects that are to be installed by a customer or an agent of
the customer, the sale is recognized when the product is shipped to or
possession is taken by the customer. In connection with projects delivered
and/or installed by the Company, the sale is recognized upon completion of the
delivery when possession is taken by the customer.
Accounts Receivable:
- --------------------
Accounts receivable are reported at the customers' outstanding balances
less any allowance for doubtful accounts. The allowance is based upon a review
of the individual accounts outstanding and the Company's prior history of
uncollectible receivables. At December 31, 2002 and 2001, the Company
established an allowance for doubtful accounts in the amount of $24,000 and
$16,000, respectively.
Inventory:
- ----------
Inventory, which is primarily composed of used office workstations and
remanufacturing supplies, is stated at the lower of average cost or market. The
Company reviews its inventory monthly and makes provisions for damaged and
obsolete inventory. The Company contemplates its ability to alter the size of
panels and other workstation components and designs projects so that the
workstations are comprised of products currently in inventory in establishing a
reserve for damaged and obsolete inventory. At December 31, 2002 and 2001, the
Company established a reserve in the amount of $50,000.
Stock-Based Compensation:
- -------------------------
The Company has elected to follow Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees (APB 25) and the related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is recorded.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
(Statement No. 123.)
Results of Operations
- ---------------------
SALES REVENUE
- -------------
Sales for the reporting and comparable periods by Division were as follows:
Three Months Three Months Nine Months Nine Months
Ended December Ended December Ended December Ended December
31, 2002 31, 2001 % Change 31, 2002 31, 2001 % Change
Division in Sales in Sales
- ----------------- ------------------ ---------------- ------------ ---------------- ---------------- -------------
Wholesale $1,358,019 $583,991 132.54% $3,428,228 $2,493,642 37.48%
Arizona Retail $1,456,687 $905,761 60.82% $3,314,662 $3,710,662 (10.67)%
Georgia Retail $422,195 $47,206 794.37% $946,302 $147,121 543.21%
California
Retail $384,235 $0 - $919,449 $0 -
Total Retail Sales $2,263,117 $952,967 137.48% $5,180,413 $3,857,783 34.28%
Total Sales $3,621,136 $1,536,958 135.60% $8,608,641 $6,351,425 35.54%
Sales revenues the three month period ended December 31, 2002 (hereinafter the
"reporting quarter") were the strongest ever reported by the Company. Divisional
sales revenues for the reported quarter increased sharply over those reported
for the three month period ended December 31, 2001 (hereinafter the "comparable
quarter") for all of the Company's divisions. These increases were primarily due
to a few large sales, not an overall increase in general sales activity. Due to
the strength of the sales revenues during the reporting quarter, the Company's
sales revenues for the nine month period ended December 31, 2002 (hereinafter
the "reporting period") improved 35.5% over the nine month period ended December
31, 2001 (hereinafter the "comparable period").
Approximately $110 thousand of the sales revenues reported for the Arizona
Retail division were direct-bill sales revenues. These revenues represent new
product sales revenues billed directly to the Company's customer by the new
product manufacturer. The manufacturer bills the customers at the manufacturer's
cost to the Company plus the Company's margin. The Company reported these sales
revenues at the net margin due from the manufacturer, with no associated product
costs on the sales. Had the Company billed the customer, these sales would have
resulted in approximately $850 thousand of sales revenue with approximately $740
thousand in product costs, resulting in an overall gross margin of approximately
13%.
GROSS MARGIN
- ------------
The Company's gross profit margins improved significantly from the comparable
quarter to the reporting quarter from 2% to 26%, respectively. Gross margin
percentages for the reporting period improved from 16% in the comparable period
to 22% in the reporting period. These increases were primarily due to increased
sales and the effect of fixed overhead cost absorption. In addition, the Company
reported approximately $110 thousand in direct-bill sales revenues during the
reporting quarter. These sales were reported at the net amount payable to the
Company from the manufacturer. The Company's gross margin for the reporting
quarter without the effect of these direct-bill sales was approximately 23%.
OPERATING EXPENSES
- ------------------
The Company's selling and administrative expenses, net of legal disputes and
severance charges, decreased from 35.2% of sales in the comparable quarter to
19.3% for the reporting quarter. This improvement is primarily a result of
increased sales revenues and the result of fixed cost absorption. The Company's
selling and administrative expenses, net of legal disputes and severance
charges, for the reporting and comparable periods remained relatively constant
at 21.4% and 21.5%, respectively. Although the Company's sales revenues
increased 35%, costs associated with the Company's new Georgia and California
sales office facilities increased the Company's total selling and administrative
expenses and as such, the selling and administrative expenses as a percentage of
sales remained consistent with the comparable period.
OTHER INCOME AND EXPENSES
- -------------------------
The Company's other income and expenses, which consists primarily of interest
income decreased from approximately $10 thousand in the comparable quarter and
$26 thousand in the comparable period to approximately $7 thousand and $19
thousand in the reporting quarter and period, respectively. This decrease was
primarily as a result of lower returns on our cash investments.
Income Taxes
- ------------
As of December 31, 2002, the Company accrued an income tax expense of $11,325.
As a result of losses reported for the two previous quarters, the Company had
recorded an income tax benefit as of September 30, 2002 of $72,500. This income
tax benefit was reversed in the reporting quarter, resulting in an income tax
expense for the quarter of $83,825. As of March 31, 2002, the Company had a
remaining net operating loss carryforward of approximately $99,942.
Financial Condition and Liquidity
- ---------------------------------
As of December 30, 2002, the Company's cash and cash equivalents totaled
$1,031,512. In addition, the Company's net worth and working capital totaled for
the reporting period were $3,742,188 and $3,273,674, respectively. This compares
to net worth of $3,539,917 and working capital of $3,146,850 for the comparable
period. The Company has no long-term debt and $1,000,000 available on its line
of credit through M&I Thunderbird Bank.
Cash Flows from Operating Activities. The Company used approximately $220,000
for operating activities during the reporting period. The Company's pre-tax net
income, net of depreciation and amortization, for the reporting period was
approximately $212,000. The Company received approximately $336,000 in income
tax refunds. In addition, the Company generated positive cashflows by reducing
inventory approximately $59,000 and increasing accounts payable and accrued
expenses by approximately $264,000. These increases were primarily a result of
increased sales, purchases and customer deposits. Consistent with the increase
in sales, the Company's accounts receivable and prepaid expenses increased
during the reporting period by approximately $1,091,000. The Company's average
day's sales increased from approximately $27,000 per day for the quarter ended
September 30, 2002 to approximately $40,000 per day for the reporting quarter.
Collection of accounts receivable improved during the reporting quarter. The
average days receivables decreased from 42 days for the quarter ended September
30, 2002 to 35 days for the quarter ended December 31, 2002.
Net cash used by operating activities for the comparable period totaled
approximately $159,000. The negative cashflows resulting from the Company's net
loss for the comparable period were partially offset by a reduction in the
Company's accounts receivables. Reduced sales volumes and improved collections,
resulted in reducing the Company's accounts receivable by approximately $650
thousand.
Cash Flows from Investing and Financing Activities. During the reporting period,
the Company used approximately $125,000 for capital expenditures and
approximately $600 for employee stock purchase transactions.
During the comparable period, the Company used approximately $168,000 for
capital expenditures, primarily related to the purchase of vehicles and
equipment for the Georgia location. Additionally, the Company increased its
short-term notes receivable investments by $100,000 and used approximately
$30,000 to finance the purchase of treasury stock.
Expected Future Cash Flows. Additional cash provided by operations in the near
future should closely follow operating income. Management believes current cash
reserves and cash flows from operations will be adequate to fund the needs of
the Company through the end of the next fiscal year without the need for outside
financing.
Forward Looking Statements
- --------------------------
SHORT TERM OUTLOOK
- ------------------
The reporting quarter marks the first profitable quarter since the Company began
reporting losses for the quarter ended December 31, 2001. While the Company's
operating results for the reporting quarter were a significant turnaround for
the Company, management does not expect operating results for the quarter ending
March 31, 2003 to be as strong as those of the reporting quarter. The large
increase in sales was primarily a result of a few large sales within each of the
divisions. Management believes the key to continued profitability is to build
consistent results within each division. Significant fluctuation in the
Company's sales volume inhibits manufacturing efficiency and lowers the
Company's overall gross margin.
The Company's newer divisions in Georgia and California are approaching
break-even and their quarterly sales have steadily increased during the current
fiscal year. Management is hopeful that these divisions will continue to report
steady growth.
LONG TERM OUTLOOK
- -----------------
During this difficult economic environment for the industry, there have been a
number of the Company's competitors who have been forced to go out of business
and many more remain financial unstable which may result in their failure, as
well. Due to the Company's expansion and strong financial position, management
believes that when the economy recovers, the Company will be in an excellent
position to expand market share.
Finally, management continues to create long-term opportunities for growth and
increased gross margins through product and market development projects. The
Company finalized the registration of its products with the General Services
Administration ("GSA"), which will allow the Company to market directly to the
U.S. government on open and closed bid projects. The Company is currently
developing marketing material for GSA customers. The Company is also partnering
with one of its suppliers to develop a line of clone replacement parts, which
will reduce the Company's product costs on new replacement component parts and
allow the Company to market these items to other remanufacturers in the
industry.
Item 3. Controls and Procedures
- -------------------------------
Within the 90-day period prior to the filing of this Quarterly Report on 10-QSB,
an evaluation was carried out under the supervision and with the participation
of our management, including our President and Chief Executive Officer (Chief
Accounting Officer), of the effectiveness of our disclosure controls and
procedures. Based on that evaluation, our President and Chief Executive Officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in reports that we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There were no significant changes in our
internal controls or other factors that could significantly affect these
controls subsequent to the date of our management's evaluation, and there were
no corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- --------------------------
The Company is not party to any pending legal proceeding except for the
litigation with Semple & Cooper, LLC as described in the Company's 10-KSB dated
June 28, 2002.
Item 2. Changes in Securities and Use of Proceeds
- --------------------------------------------------
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) The following exhibits are filed herewith pursuant to Regulation S-B:
No. Description Reference
- --- ----------- ---------
99.1 99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 1
(1) Filed herein
(b) Reports on Form 8-K:
On December 13, 2002, the Company filed a Current Report on Form 8-K announcing
by reference under Item 4 that the Company's former principal independent
accountant, Moffitt & Company, PC resigned on December 13, 2002. Furthermore,
the Company announced the engagement of Renzi, Bernardi, Suarez & Company to
serve as the Company's principal independent accountant.
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.
Reconditioned Systems, Inc.
Date: February 13, 2003 /S/ Scott W. Ryan
___________________________________
Scott W. Ryan, Chairman
Date: February 13, 2003 /S/ Dirk D. Anderson
____________________________________
Dirk D. Anderson, CEO
(Principal Accounting Officer)
Certification
I, Dirk D. Anderson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Reconditioned
Systems, 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. I am 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 related to the registrant particularly
during the period in which this 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. I have disclosed, based on my recent evaluation, to the registrant's
auditors and the audit committee of 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. I have indicated in this quarterly report whether 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: February 13, 2003
/s/ Dirk D. Anderson
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Dirk D. Anderson