FORM 10_QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2002
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- OR -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File Number 0-24542
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TECHSYS, INC.
(Exact Name of Registrant as Specified in Its Charter)
NEW JERSEY 22-3276736
- ---------------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
459 Mountain Boulevard
WATCHUNG, NEW JERSEY 07060
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(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, Including Area Code (973) 236-1919
-----------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report:
147 Columbia Turnpike, Florham Park, New Jersey 07932
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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
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Shares outstanding as of October 8, 2002, 4,883,544 shares of common
stock, no par value.
Transitional Small Business Disclosure Format: Yes ____ No X
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TECHSYS, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements ........................................... 2
Consolidated Balance Sheets
as of September 30, 2002 (unaudited)
and December 31, 2001 .......................................... 3
Consolidated Statements of Operations and Accumulated Deficit
for the Three and Nine Months Ended
September 30, 2002 (unaudited) and
September 30, 2001 (unaudited) ................................. 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2002 (unaudited) and September 30, 2001
(unaudited) .................................................... 5
Notes to Consolidated Financial Statements (unaudited).......... 7
Item 2. Management's Discussion and Analysis or Plan of Operation .... 11
Item 3. Controls and Procedures ....................................... 18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ..............................19
SIGNATURES .................................................................. 20
CERTIFICATIONS .............................................................. 21
TECHSYS, INC. AND SUBSIDIARIES
FORM 10-QSB
SEPTEMBER 30, 2002
This Report on Form 10-QSB contains "forward-looking statements" that
are based on management's assumptions, estimates and projections. When used in
this report, the words "may," "will," "expect," "anticipate," "continue,"
"estimate," "project," "intend" and similar expressions are intended to identify
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding
events, conditions and financial trends that may affect the Company's future
plans of operations, business strategy, operating results and financial
position. Current stockholders and prospective investors are cautioned that any
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors, including, without limitation, the uncertainty of the Company's ability
to raise funds necessary to continue to operate its business, to succeed in its
business strategy to develop power cell technologies, acquire companies in the
technology industry and sell licenses and generate revenue from its fuel cell
business. Such factors are described under the headings "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Item 1.
Business" in the Company's Form 10-KSB, as amended, filed with the Securities
and Exchange Commission on April 10, 2002.
PART I. FINANCIAL INFORMATION
The comparative consolidated statements of operations, balance sheets
and statements of cash flows for TechSys, Inc. and Subsidiaries (the "Company")
are presented with management's discussion and analysis of material changes in
operations on the pages which follow.
The consolidated financial statements and accompanying financial
information for the three and nine month periods ended September 30, 2002 and
September 30, 2001 are unaudited but, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments and accruals) which
the Company considers necessary for a fair presentation of the financial
position of the Company at such dates and the operating results and cash flows
for those periods. Results for the interim periods are not necessarily
indicative of results for the entire year. The interim consolidated financial
statements and the related notes should be read in conjunction with the notes to
the consolidated financial statements of the Company included in its Form
10_KSB, as amended, filed with the Securities and Exchange Commission.
2
TECHSYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS SEPT. 30, 2002 DEC. 31, 2001
-------------- -------------
(UNAUDITED)
Current Assets:
Cash and cash equivalents .............................................. $ -0- $ 258,102
Investments ............................................................ -0- 354,932
Accounts receivable, less allowance for doubtful accounts of $24,424
at September 30, 2002 and $25,925 at December 31, 2001 ........... 30,445 73,209
Amounts due from officer ............................................... -0- 295,000
Other current assets ................................................... 9,181 41,437
------------ ------------
Total current assets ............................................. 39,626 1,022,680
Investment in Technology Keiretsu, LLC ................................. 265,800 265,800
Property and equipment, at cost, less accumulated depreciation ......... 11,592 112,425
Goodwill and other intangibles, less accumulated amortization .......... 819,819 1,467,695
Other assets ........................................................... 56,656 89,448
------------ ------------
$ 1,193,493 $ 2,958,048
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit ......................................................... $ 52,800 $ 102,500
Notes payable to affiliate, net ........................................ 589,144 370,844
Accounts payable ....................................................... 1,040,073 651,309
Accrued expenses ....................................................... 342,270 313,682
------------ ------------
Total current liabilities ..................................... 2,024,287 1,438,335
------------ ------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, 5,000,000 shares authorized, none issued or outstanding -- --
Common stock, no par value, 20,000,000 shares authorized,
4,883,544 and 4,703,544 outstanding at
September 30, 2002 and December 31, 2001, respectively .......... 9,657,079 9,557,079
Paid-in capital ........................................................ 2,232,132 2,220,899
Accumulated deficit .................................................... (11,874,172) (9,397,616)
Other comprehensive loss ............................................... -0- (14,816)
Subscription receivable ................................................ (845,833) (845,833)
------------ ------------
Total stockholders' equity ....................................... (830,794) 1,519,713
------------ ------------
$ 1,193,493 $ 2,958,048
============ ============
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
3
TECHSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, 2002 SEPT. 30, 2001 SEPT. 30, 2002 SEPT. 30, 2001
-------------- -------------- -------------- --------------
Revenues from continuing operations
Dry cleaning services .............................. $ 123,914 $ 209,806 574,848 $ 813,761
Consulting services ................................ -0- -0- -0- 47,223
------------ ------------ ------------ -------------
123,914 209,806 574,848 860,984
Costs of services ....................................... 112,514 214,960 452,977 718,977
General and administrative expenses ..................... 411,427 734,152 1,250,518 1,653,940
Research and development ................................ (91,803) 425,000 727,800 425,000
Write-off of goodwill and other intangibles ............. 576,478 -0- 576,478 -0-
Depreciation and amortization ........................... 13,386 19,145 52,508 46,336
Impairment of investment ................................ -0- 799,451 -0- 799,451
Loss on sale of business ................................ 146,953 -0- 146,953 -0-
Interest income, net .................................... -0- (108,194) (5,830) (145,667)
Write-off of in-process research and development
acquired ............................................ -0- 1,010,000 -0- 1,010,000
------------ ----------- ------------ -------------
Total costs and expenses ................................ 1,168,955 3,094,514 3,201,404 4,508,037
------------ ------------ ------------ -------------
Loss from continuing operations ......................... (1,045,041) (2,884,708) (2,626,556) (3,647,053)
Benefit for income taxes ................................ -0- -0- (56,625) (226,500)
Loss from operations .................................... (1,045,041) (2,884,708) (2,569,931) (3,420,553)
Income from discontinued operations, less applicable
income taxes of $56,625 and $226,500 for the nine
months ended September 30, 2002 and 2001, respectively -0- -0- 93,375 373,500
------------ ------------ ------------ -------------
Net loss ................................................ (1,045,041) (2,884,708) (2,476,556) (3,047,053)
Accumulated deficit
Beginning of period ................................ (10,829,131) (5,485,230) (9,397,616) (5,322,885)
------------ ------------ ------------ -------------
End of period ...................................... $(11,874,172) $ (8,369,938) $(11,874,172) $ (8,369,938)
============ ============ ============ =============
Basic and diluted (loss) income per share:
Continuing operations .............................. $ (.21) $ (.65) $ (.54) $ (.83)
Discontinued operations ............................ -0- -0- .02 .09
------------ ------------ ------------ -------------
Net loss per share ................................. $ (.21) $ (.65) $ (.52) $ (.74)
============ ============ ============ =============
Basic and diluted weighted average shares
outstanding ........................................ 4,992,675 4,449,196 4,802,079 4,100,687
============ ============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
4
TECHSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPT. 30,
2002 2001
-------------- -------------
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net loss ....................................................... $(2,476,556) $(3,047,053)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization .................................. 58,007 58,943
Provision for doubtful accounts ................................ 3,758 4,880
Impairment of investment ....................................... -0- 799,451
Income from discontinued operations ............................ (150,000) (600,000)
Assignment of notes receivable ................................. 295,000 -0-
Stock based compensation expense ............................... 11,233 224,317
Sale of business ............................................... (196,953) -0-
Write-off of in-process research and development
acquired ................................................... -0- 1,010,000
Write-off of goodwill and other intangibles .................... 576,478 -0-
Changes in operating assets and liabilities, net of effects from
acquisition/sale of businesses:
Accounts receivable ..................................... 49,018 6,769
Other assets ............................................ 65,048 205,940
Accounts payable ........................................ 396,914 247,788
Accrued expenses ........................................ 28,578 122,230
----------- -----------
Net cash used in operating activities ................................ (1,339,475) (966,735)
----------- -----------
Cash Flows From Investing Activities:
Repayment of notes receivable .................................. -0- 527,000
Amounts repaid by consulting customers ......................... 150,000 1,879,891
Loans from affiliate ........................................... 513,300 -0-
Business acquisitions .......................................... (57,913) (440,732)
Proceeds from sale of business ................................. 50,000 -0-
Proceeds from sale of U.S. Government securities ............... -0- 500,000
Proceeds from sales of investments ............................. 354,932 -0-
Loss on sale of investment ..................................... 14,816 -0-
Purchases of property and equipment ............................ (11,364) (5,911)
Repayments from officer ........................................ -0- 35,000
Sale of property and equipment ................................. 17,302 -0-
----------- -----------
Net cash provided by investing activities ............................ 1,031,073 2,495,248
----------- -----------
Cash Flows from Financing Activities:
Repayment of amounts due under line of credit .................. (49,700) -0-
Proceeds from private placement ................................ 100,000 -0-
----------- -----------
Net Proceeds provided by financing activities ........................ 50,300 -0-
----------- -----------
Net (decrease) increase in cash and cash equivalents ................. (258,102) 1,528,513
Cash and cash equivalents, beginning of year ......................... 258,102 32,447
----------- -----------
Cash and cash equivalents, end of period ............................. $ -0- $ 1,560,960
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes ..................................... $ 10,913 $ 9,863
=========== ===========
Cash paid for interest ......................................... $ 4,114 $ 4,414
=========== ===========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
5
Non-Cash Disclosures:
In 2002, the Company issued warrants to purchase 20,000 shares of the
Company's common stock to members of its Board of Advisors in
consideration of professional services valued at $11,233 utilizing the
Black-Scholes option pricing model.
In 2002, the Company completed a private placement of 100,000 shares of
its common stock to an unrelated third-party equity investor for a
purchase price of $100,000.
In 2002, the Company assigned its interests in promissory notes with an
outstanding principal balance of $295,000 in exchange for a corresponding
reduction in amounts due affiliates.
In 2001, the Company issued 780,000 shares of common stock valued at
$1,021,800 in connection with the acquisition of the Company's fuel cell
subsidiaries.
In 2001, the Company issued to a financial services provider warrants to
purchase 100,000 shares of the Company's common stock valued at $99,038 in
consideration of professional services rendered in connection with the
acquisition of the Company's fuel cell subsidiaries.
In 2001, the Company issued a promissory note for $725,866 in connection
with the acquisition of the Company's fuel cell subsidiaries.
In 2001, the Company issued to outside consultants warrants to purchase
110,000 shares of the Company's common stock in consideration of
professional services valued at $125,279.
6
TECHSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF BUSINESS:
TechSys, Inc. (the "Company") is in the business of identifying and
accelerating the commercialization of proprietary power producing products
utilizing various unique fuel cell technologies and investing in and acquiring
technology businesses based in emerging markets.
(2) GOING CONCERN:
The accompanying consolidated interim financial statements have been
prepared assuming the Company is a going concern which assumption contemplates
the realization of assets and satisfaction of liabilities in the normal course
of business. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amount of
liabilities that might be necessary should the Company be unable to continue as
a going concern. Continuation of the Company as a going concern is dependent on
the Company raising capital or achieving profitable operations.
(3) LOSS PER SHARE:
Basic loss per share represents net loss divided by the weighted
average shares outstanding. Diluted loss per share represents net loss divided
by the weighted average shares outstanding adjusted for the incremental dilution
of outstanding stock options and warrants, if dilutive.
For the three and nine months ended September 30, 2002, the basic and
diluted weighted average common shares outstanding were 4,992,675 and 4,802,079,
respectively. For the three and nine months ended September 30, 2001, the basic
and diluted weighted average common shares outstanding were 4,449,196 and
4,100,687, respectively. As of September 30, 2002, there were 2,116,100
outstanding stock options issued to employees, officers and Directors of the
Company as well 2,794,000 warrants issued to employees, Directors and
non-employees which were excluded from the calculation of diluted net loss per
share for the period because the effect would be antidilutive.
(4) RELATED PARTY TRANSACTIONS:
As of September 30, 2002, the Company had advanced an aggregate of
$355,022 to Gold Crown Insurance, Ltd. ("Gold Crown") formerly TechTron, Inc.
("TechTron"), net of repayments. Most of the outstanding shares of Gold Crown
are owned by Alvin S. Trenk, Chairman of the Company, Martin G. Jacobs, M.D., a
Director of the Company and Steven L. Trenk, Chief Executive Officer and a
Director of the Company (collectively "Certain Executive Officers"). The Company
obtained promissory notes from Gold Crown in a principal amount equal to the
aggregate amount of the advances, the majority of which bear interest at a rate
of 8% per annum and are payable upon demand.
In connection with the Company's acquisition of majority interests in
its fuel cell subsidiaries (See Note 6 to the Consolidated Financial
Statements), the Company issued a promissory note in the principal amount of
$725,866, which was assigned to Gold Crown (the "Gold Crown Note"). The
7
Gold Crown Note was issued in connection with the Company's purchase and
cancellation of certain notes of Fuel Cell Companies, Inc. ("FCCI") which were
secured by FCCI's interests in its former subsidiaries and certain other assets
of FCCI. The Gold Crown Note bears an interest rate of 8% and was due and
payable on or before October 29, 2001. Gold Crown has agreed to extend the
maturity date of the Gold Crown Note to December 31, 2002.
As of September 30, 2002, Gold Crown had advanced $513,300 to the
Company to fund the Company's operations. The Company issued promissory notes to
Gold Crown in the principal amount equal to the aggregate amount of the
advances. The promissory notes bear interest at a rate of 8% per annum and are
payable upon demand. The notes are secured by the Company's majority interests
in its fuel cell subsidiaries and certain other assets.
In 1998 and 1997, respectively, the Company loaned $350,000 and
$35,000 to the Company's Chief Executive Officer. The Company's Chief Executive
Officer executed promissory notes for these advances, the majority of notes
bearing interest at a rate imputed by the Internal Revenue Service for
instruments having a majority of one or more years (4.33% to 5.58%). The Company
subsequently received principal payments aggregating $90,000 as partial
repayment of principal amounts due the Company under the promissory notes. In
September 2002, Gold Crown agreed to accept the promissory notes as partial
repayment by the Company of amounts due on the Gold Crown Note. As a result, the
Company assigned all of its interest in the promissory notes to Gold Crown.
Amounts due from Gold Crown have been offset to amounts due to Gold Crown as of
September 30, 2002 and December 31, 2001 in the accompanying Consolidated
Balance Sheets.
On January 29, 1998 the Company received approximately $2,665,000
from Upper Manhattan Dialysis Center, Inc. ("UMDC"), a former consulting
customer of the Company, in connection with UMDC's sale of substantially all of
its assets to Renal Research Institute, LLC ("RRI"). In April 2001, the Company
received an additional payment of $600,000 from UMDC as repayment of all
remaining amounts due from UMDC as well as amounts assigned to the Company by
Certain Executive Officers. Accordingly, the Company recorded $600,000 in
additional revenues related to payments from UMDC not previously recorded as
receivables due to realization uncertainties. In April 2002, the Company
received an additional payment of $150,000 from UMDC assigned to the Company by
Certain Executive Officers. Such revenues are included in income from
discontinued operations. No future payments are anticipated from UMDC.
(5) SALE OF DRY CLEANING BUSINESS:
On September 17, 2002, the Company sold substantially all of the
assets of its subsidiary dry cleaning operations to SLF Enterprises, Inc.
("SLF") an Arizona corporation. The Company did not sell Valet's cash and
hospitality business accounts receivable. Net proceeds from the sale were
$49,700 in cash, which was paid directly to its line of credit lender, which
held a security interest in the assets included in the sale.
In connection with the transaction, SLF issued a promissory note in
the amount of $30,500 to a company owned by the Chairman of the Company. This
promissory note was issued as repayment of amounts paid by the Chairman's
company to purchase automobiles on behalf of SLF that were financed by Valet.
8
The Company recognized a net loss from the sale of business related
to this transaction of $146,953 which represents the cash consideration of
$50,000 less net fixed assets of $71,906, $6,454 of non-excluded business
assets, write-off of net goodwill of $107,143 and $11,450 in expenses relating
to the transaction.
(6) FUEL CELL COMPANY ACQUISITIONS:
The Company and Fuel Cell Companies, Inc., a privately held Nevada
corporation ("FCCI"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which the Company was to merge a wholly-owned subsidiary
of the Company with and into FCCI in a stock-for-stock transaction (the
"Merger"). The Merger Agreement was terminated as discussed below.
The Company acquired certain assets of FCCI including FCCI's equity
interests in SOFC Energy, Inc. ("SOFC Energy"), Micro Fuel Cell Systems, Inc.
("MFCS") and Clean Power Industries, Inc. (" CPI") both by foreclosing upon the
collateral securing certain notes of FCCI and in connection with the Exchange
Agreement discussed below. The Company purchased and canceled notes (the "FCCI
Notes") of FCCI for loans in the aggregate principal amount of $700,000,
together with accrued interest thereon. The FCCI Notes were secured by FCCI's
interests in its former subsidiaries and certain other assets of FCCI. The loans
to FCCI were made by a New York lender (the "Lender") of which the Company's
Chairman is a founding partner. The Company issued to the Lender a promissory
note in the principal amount of $725,866, representing principal plus accrued
interest on the FCCI Notes as of the date of the transaction. The promissory
note has an interest rate of 8% and was due and payable on or before October 29,
2001. In connection with the transaction, the Lender assigned all of its
interest in the promissory note to Gold Crown (the "Gold Crown Note"). Gold
Crown has agreed to extend the maturity date of the Gold Crown Note to December
31, 2002.
On August 2, 2001, the Company, FCCI and certain executive officers
of FCCI entered into an Exchange Agreement dated July 31, 2001 (the "Exchange
Agreement") pursuant to which the Merger Agreement was terminated by mutual
consent and the Company acquired certain assets of FCCI including the capital
stock of MFCS, SOFC Energy and CPI owned by FCCI including all such capital
stock previously owned, directly or indirectly, by the executive officers of
FCCI, representing approximately 77%, 90% and 100% of the outstanding equity of
MFCS, SOFC Energy and CPI, respectively. In October 2002, the Company converted
payments made by the Company to JPL (hereafter defined) on MFCS's behalf to
additional equity in MFCS. As a result, the Company increased its ownership in
MFCS from 77% to 91% of the outstanding equity of MFCS. As a result of the
Company's acquisition of majority interests in MFCS, SOFC Energy and CPI, the
Company is in the fuel cell technology development business.
SOFC Energy was a company strategically partnered with Adelan, Ltd.
("Adelan"), which is located in Birmingham, England. SOFC Energy, a Solid Oxide
Fuel Cell commercialization company, developed proprietary systems and products
related to the portable, automotive, residential, and commercial sectors
utilizing Adelan's Solid Oxide Fuel Cell technology. As a result of the
strategic relationship with Adelan, SOFC Energy held worldwide exclusive rights
to all exploitation of Adelan's Solid Oxide Fuel Cell technologies related to
Adelan's Solid Oxide Fuel Cell fuel processing and its patents pending. Early
commercialization applications where Solid Oxide Fuel Cells are expected to find
dominant and competitive positions include portable and stationary power systems
and auxiliary power units for trucks, automobiles and recreational vehicles.
9
MFCS is a company enrolled in the Technology Affiliates Program with
the California Institute of Technology ("CalTech"), and the Jet Propulsion
Laboratory ("JPL"), a federally funded research and development facility managed
by CalTech for the National Aeronautics and Space Administration ("NASA"). As a
result of the affiliate relationships with JPL and CalTech, MFCS holds exclusive
rights to all exploitation of the micro DMFC technologies that are currently
patent pending to JPL and CalTech. To date, JPL and CalTech have filed the first
patent for micro DMFC related technologies and processes. Micro DMFCs produce
electricity from the simple components of methanol, water and air. The DMFC
converts the energy in methanol into an electric current, and will be used to
power portable electronic devices such as laptop computers, cell phones, PDAs
and other small electronic communication and entertainment devices.
Pursuant to the Exchange Agreement, the Company issued 780,000 shares
of its common stock to FCCI with an approximate value of $1,021,800, or $1.31
per share, which was the fair market value of the Company's common stock on the
date of the transaction. The 780,000 shares represent consideration paid by the
Company to secure the additional equity interests in SOFC Energy and MFCS held
by FCCI's executive officers and to secure certain non-competition covenants of
FCCI and its executive officers and agreements necessary for the Company to
properly consummate the transaction. The Company recorded $699,188 in
capitalized transaction costs relating to the transaction through September 30,
2002.
The following unaudited pro forma summary presents information as if
the acquisition had occurred at the beginning of the respective periods:
Nine Months Ended
Sept. 30, 2002 Sept. 30, 2001
Revenues $ 574,848 $ 860,984
Loss from continuing operations $ (2,626,556) $ (2,516,772)
Pro forma loss per share $ (.55) $ (.54)
============ ============
The pro forma information is not necessarily indicative of the
results that would have occurred had the acquisition taken place at the
beginning of the respective periods.
(7) NEW ACCOUNTING PRONOUNCEMENTS:
Effective January 1, 2002, the Company adopted SFAS No. 142. This
accounting standard requires that goodwill and certain intangible assets
resulting from business combinations entered into prior to June 30, 2001 no
longer be amortized, but instead be reviewed for recoverability. Any write-down
of goodwill value is charged to results of operations as a cumulative change in
accounting principle upon the adoption of the new accounting standard if the
recorded value of goodwill and certain intangibles exceeds its fair value. The
adoption of SFAS No. 142 eliminated $22,796 in amortization of goodwill in 2002
relating to its subsidiary dry cleaning operation. In connection with the
Company's sale of its subsidiary dry cleaning operations in September, 2002, the
Company wrote-off $107,143 of remaining goodwill associated with the business.
10
(8) TRANSFER OF RIGHTS:
On August 20, 2002, the Company signed an agreement (the "Agreement")
with an unrelated third party ("Purchaser") whereby the Company agreed to
transfer the Company's interests in its technology rights under the Freedom
License Agreement (herewith defined) to the Purchaser in exchange for a
percentage share of future revenues derived from the Adelan technology. In
connection with the Agreement, the Purchaser made an initial payment of $30,000
to the Company to be paid by the Company to Adelan under the terms of the
Freedom License Agreement. This payment was treated as an advance payment
against future revenues due the Company under the Agreement. In connection with
the Agreement, the Purchaser assumed responsibility for the development and
funding of the research and development work performed by Adelan. The Agreement
is subject to the preparation and execution of definitive documents.
On September 17, 2002, the Company and Adelan terminated the
agreement between the Company's subsidiary Freedom Cell Power Corp. and Adelan,
(the "Freedom License Agreement") by mutual consent and agreed to the
distribution of certain intellectual property rights between Adelan and the
Company. As a result of the termination of the Company's contractual
relationship with Adelan, the Company wrote-off $576,478 in net goodwill and
other intangibles associated with the Company's original purchase of SOFC
Energy, Inc. in July 2001.
(9) OTHER ITEMS:
On April 8, 2002, the Company received a letter from Nasdaq
indicating that the Company was not in compliance with the minimum equity and
net tangible assets standards for continued listing on the Nasdaq Small Cap
Market set forth in Marketplace Rule 4310 (c) (2) (B). The Company appealed the
Nasdaq Staffing determination relating to continued listing pursuant to
Marketplace Rule 4815 (b) and was granted a temporary exception from the minimum
equity standard subject to meeting certain conditions. On August 28, 2002, the
Company's stock began trading on the OTC Bulletin Board.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2002 Compared with Nine Months Ended
September 30, 2001.
Valet-USA, Inc. ("Valet"), a wholly-owned subsidiary of TechSys, Inc.
(the "Company"), provided dry cleaning services primarily to the hospitality
industry in the Phoenix, Arizona area. A general downturn in the economy as well
as the results of the terrorist events of September 11, 2001 adversely effected
the travel and related industries and negatively impacted the Company's
hospitality dry cleaning business. As a result, Valet's hospitality dry cleaning
operations revenue decreased by 33% for the nine months ended September 30, 2002
as compared to the same period in 2001.
11
On September 17, 2002, the Company sold substantially all of the
assets of its subsidiary dry cleaning operation to SLF Enterprises, Inc.
("SLF"), an Arizona Corporation. The Company did not sell Valet's cash and
hospitality business accounts receivable. Net proceeds from the sale were
$49,700 in cash, which was paid directly to Valet's line of credit lender, which
held a security interest in the assets included in the sale.
In connection with the transaction, SLF issued a promissory note in
the amount of $30,500 to a company owned by the Chairman of the Company. This
promissory note was issued as repayment of amounts paid by the Chairman's
company to purchase automobiles on behalf of SLF that were financed by Valet.
The Company recognized a net loss from the sale of business related
to this transaction of $146,953, which represents the cash consideration of
$50,000 less net fixed assets of $71,906, $6,454 of non-excluded business
assets, write-off of net goodwill of $107,143 and $11,450 in expenses relating
to the transaction.
In August 2001, the Company acquired certain assets of Fuel Cell
Companies, Inc. ("FCCI") including FCCI's equity interests in SOFC Energy, Inc.
("SOFC Energy"), Micro Fuel Cell Systems, Inc. ("MFCS") and Clean Power
Industries, Inc. ("CPI"). The Company acquired approximately 77%, 90% and 100%
of the outstanding equity of MFCS, SOFC Energy and CPI, respectively. As a
result of the Company's acquisition of majority interests in MFCS, SOFC Energy
and CPI, the Company is in the fuel cell technology development business. In
connection with this acquisition, the Company purchased and canceled notes (the
"FCCI Notes") of FCCI for loans in the aggregate principal amount of $700,000,
together with accrued interest thereon. The FCCI Notes were secured by FCCI's
interests in its former subsidiaries and certain other assets of FCCI. The loans
to FCCI were made by a New York lender (the "Lender") in which the Company's
Chairman is a founding partner. The Company issued to the Lender a promissory
note in the principal amount of $725,866, representing principal plus accrued
interest on the FCCI Notes as of the date of the transaction. The promissory
note has an interest rate of 8% and was due and payable on or before October 29,
2001. In connection with the transaction, the Lender assigned all of its
interest in the promissory note (the "Gold Crown Note") to Gold Crown Insurance,
Ltd. ("Gold Crown") formerly TechTron, Inc. Most of the outstanding shares of
Gold Crown are owned by Alvin S. Trenk, Chairman of the Company, Martin G.
Jacobs, M.D., a Director of the Company and Steven L. Trenk, Chief Executive
Officer and a Director of the Company (collectively "Certain Executive
Officers"). Gold Crown has agreed to extend the due date of the Gold Crown Note
to December 31, 2002.
REVENUES
The Company's dry cleaning operation revenues were $574,848 and
$813,761 for the nine months ended September 30, 2002 and 2001, respectively. Of
these amounts, approximately $456,865 and $679,677 or 79% and 84% in 2002 and
2001, respectively, related to dry cleaning services provided to hotel
customers. The remaining $117,983 and $134,084 in 2002 and 2001, respectively,
related to retail dry cleaning services. The decrease of $238,913 relates in
part to the terrorist events of September 11, 2001 and their adverse impact on
the hospitality industry serviced by Valet, a general down turn in the economy
as well as the sale of the Company's dry cleaning operations on September 17,
2002. With the sale of the Company's dry cleaning operations, the Company does
not presently have continuing operations that provide the Company with revenues.
12
For the nine months ended September 30, 2002 and 2001, respectively,
the Company recorded $150,000 and $600,000 in additional revenues related to
payments from Upper Manhattan Dialysis Center, Inc. ("UMDC") not previously
recorded due to realization uncertainties. Such amounts have been included in
income from discontinued operations in the accompanying Consolidated Statements
of Operations.
COST OF SERVICES
Cost of services was $452,977 and $718,977 or 79% and 88% of revenues
attributable to the Company's dry cleaning business in 2002 and 2001,
respectively. Cost of services is mostly comprised of $315,014 and $497,879 in
salaries and other payroll expenses as well as $51,587 and $80,376 for supplies
for the nine months ended September 30, 2002 and 2001, respectively. The
decrease of $266,000 is related primarily to the corresponding decrease in
revenues for the period, a decrease in salaries and other payroll expenses from
a reduction in staff as well as the sale of the Company's dry cleaning operation
on September 17, 2002.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $1,250,518 for the nine
months ended September 30, 2002, as compared to $1,653,940 for the nine months
ended September 30, 2001. The decrease of $403,422 is related primarily to the
reversal in 2002 of certain expenses accrued by the Company as well as the value
of warrants issued in 2001 to outside consultants in consideration of
professional services valued at $125,279.
RESEARCH AND DEVELOPMENT
The Company's fuel cell operation research and development costs for
the nine months ended September 30, 2002 totaled $727,800 as compared to
$425,000 for the period of acquisition through September 30, 2001. Payments made
by the Company to Adelan and JPL in 2002, each as hereafter defined, under their
respective agreements totaled $537,800 and $190,000, respectively. In addition,
the Company granted common stock and warrants to Adelan in 2002 valued at
$184,603. These shares and warrants were subsequently returned to the Company by
Adelan, canceled and the charges relating to their issuance reversed.
WRITE-OFF OF GOODWILL AND OTHER INTANGIBLES
On September 17, 2002, the Company and Adelan terminated the Freedom
License Agreement by mutual consent. As a result, the Company recorded a charge
of $576,478 representing the value of goodwill and other intangibles associated
with the Company's original purchase of SOFC Energy, Inc. in July 2001.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense for the nine months ended
September 30, 2002 and 2001 totaled $58,007 and $58,943, respectively, of which
$5,499 and $12,607 is included in cost of services.
13
IMPAIRMENT OF INVESTMENT
In 2001, the Company recorded an impairment charge of $799,451
relating to its 3% equity interest in Technology Keiretsu, LLC ("TK"). The
charge was recorded by the Company based on analysis of current market
conditions and discussions with TK management.
LOSS OF SALE OF BUSINESS
The Company recognized a net loss from the sale of its subsidiary dry
cleaning operation of $146,953 representing $50,000 cash consideration less the
value of net fixed assets of $71,906, $6,454 of non-excluded business assets,
write-off of net goodwill of $107,143 and $11,450 in expenses relating to the
transaction.
INTEREST INCOME, NET
Net interest income was $5,830 and $145,667 for the nine months ended
September 30, 2002 and 2001, respectively. The decrease of $139,837 relates to
the decrease in cash and cash equivalents available for investment by the
Company.
WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT ACQUIRED
The Company recorded $1,010,000 of in-process research and
development costs in 2001 in connection with the Company's acquisition of
majority interests in MFCS and SOFC Energy. The value of the in-process research
and development acquired was based on an analysis performed by the Company's
third party valuation consultant.
INCOME TAXES
All of the Company's deferred tax assets as of September 30, 2002
have been offset by a valuation allowance as a result of the Company's operating
results.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a negative net cash flow of $258,102 for the nine
months ended September 30, 2002. Net cash used in operating activities of
$1,339,475 related primarily to the Company's net loss of $2,476,556 offset by a
write-off of goodwill and other intangibles of $576,478 relating to the
termination of the Freedom License Agreement with Adelan. Net cash provided by
investing activities of $1,031,073 reflects proceeds from the sale of the
Company's investments of $354,932, amounts received from the Company's former
consulting customer of $150,000 and $513,300 advanced to the Company by Gold
Crown. Net cash provided by financing activities of $50,300 related to $100,000
representing proceeds from a private placement of the Company's common stock
offset by $49,700 in payments of amounts due on Valet's line of credit.
14
On September 17, 2002, the Company sold substantially all of the
assets of its subsidiary dry cleaning operations to SLF Enterprises, Inc.
("SLF"), an Arizona Corporation. The Company did not sell Valet's cash and
hospitality accounts receivable. Net proceeds from the sale were $49,700 in
cash, which was paid directly to Valet's line of credit lender which held a
security interest in the assets included in the sale.
In connection with the transaction, SLF issued a promissory note in
the amount of $30,500 to a company owned by the Chairman of the Company. This
promissory note was issued as repayment of amounts paid by the Chairman's
company to purchase automobiles on behalf of SLF that were financed by Valet.
The Company recognized a net loss from the sale of business related
to this transaction of $146,953, which represents the cash consideration of
$50,000 less net fixed assets of $71,906, $6,454 of non-excluded business
assets, write-off of net goodwill of $107,143 and $11,450 in expenses relating
to the transaction.
As of September 30, 2002, the Company had advanced $355,022 to Gold
Crown, net of repayments. Most of the outstanding shares of Gold Crown are owned
by Alvin S. Trenk, Chairman of the Company, Martin G. Jacobs, M.D., a Director
of the Company and Steven L. Trenk, Chief Executive Officer of the Company. The
Company obtained promissory notes from Gold Crown in a principal amount equal to
the aggregate amount of the advances, the majority of which bear interest at a
rate of 8% per annum and are payable upon demand.
In connection with the Company's acquisition of majority interests in
its fuel cell subsidiaries (See Note 5 to the Consolidated Financial
Statements), the Company issued a promissory note in the principal amount of
$725,866, which was assigned to Gold Crown (the "Gold Crown Note"). The Gold
Crown Note was issued in connection with the Company's purchase and cancellation
of certain notes of Fuel Cell Companies, Inc. ("FCCI") from Gold Crown which
were secured by FCCI's interests in its former subsidiaries and certain other
assets of FCCI. The Gold Crown Note has an interest rate of 8% and was due and
payable on or before October 29, 2001. Gold Crown has agreed to extend the
maturity date on the Gold Crown Note to December 31, 2002.
As of September 30, 2002, Gold Crown had advanced $513,300 to the
Company to fund the Company's operations. The Company issued promissory notes to
Gold Crown in the principal amount equal to the aggregate amount of the
advances. The promissory notes bear interest at a rate of 8% per annum and are
payable upon demand. The notes are secured by the Company's majority interests
in its fuel cell subsidiaries and certain other assets.
In 1998 and 1997, respectively, the Company loaned $350,000 and
$35,000 to the Company's Chief Executive Officer. The Company's Chief Executive
Officer executed promissory notes for these advances, the majority of notes
bearing interest at a rate imputed by the Internal Revenue Service for
instruments having a majority of one or more years (4.33% to 5.58%). The Company
subsequently received principal payments aggregating $90,000 as partial
repayment of principal amounts due under the promissory notes. In September
2002, Gold Crown agreed to accept the promissory notes as partial payment on the
Gold Crown Note. As a result, the Company assigned all of its interest in the
15
promissory notes to Gold Crown. Amounts due from Gold Crown have been offset to
amounts due to Gold Crown as of September 30, 2002 and December 31, 2001 in the
accompanying Consolidated Balance Sheets.
On April 20, 2000, MFCS entered into an agreement with the Jet
Propulsion Laboratory ("JPL") to fund certain work to be performed by JPL
through its Technology Affiliates Program, pursuant to a National Aeronautics
and Space Administration ("NASA") task order (the "JPL Task Plan"). In
connection with the agreement, JPL and certain individuals of JPL were issued
approximately 9% of the then outstanding common stock of MFCS. Funding
requirements for the projects are based on periodic costs as incurred. The total
estimated funding requirement for the projects to be completed by JPL are
estimated to be approximately $1,700,000. The Company has provided $290,000 in
funding to JPL pursuant to the JPL Task Plan from the date of the Company's
acquisition of its majority interest in MFCS through September 30, 2002.
Payments made by MFCS to JPL prior to the Company's acquisition of MFCS
aggregated $494,000.
As a result of the affiliate relationships with JPL and CalTech, MFCS
holds an option to acquire exclusive rights to the exploitation of the micro
DMFC technologies that are currently patent pending to JPL and CalTech. To date,
JPL and CalTech have filed the first patent for micro DMFC related technologies
and processes. Micro DMFCs produce electricity from the simple components of
methanol, water and air. The DMFC converts the energy in methanol into an
electric current, and will be used to power portable electronic devices such as
laptop computers, cell phones, PDAs and other small electronic communication and
entertainment devices.
On January 20, 2001, SOFC Energy entered into a license agreement
(the "Adelan Agreement") whereby SOFC Energy was granted exclusive and
irrevocable worldwide license to the existing patented inventions of Adelan,
Ltd. ("Adelan") in return for providing certain funding for the further
development and commercialization of Adelan's inventions. As part of the Adelan
Agreement, approximately 10% of the outstanding common stock of SOFC Energy was
issued to Adelan. Under the Adelan Agreement, SOFC Energy was required to fund
the research and development projects and the development of licensed products
by Adelan with quarterly payments aggregating $1,500,000 beginning April 1,
2001. The first quarterly installment of $375,000 due under the agreement was
made by SOFC Energy. The Company provided an additional $520,000 in funding to
Adelan through December 31, 2001 and an additional $120,000 in funding through
June 30, 2002 pursuant to the Adelan Agreement.
In January 2002, the Company and SOFC Energy received a notification
of default from Adelan for failure to provide developmental funding under the
Adelan Agreement. At the time of the notification, $230,000 of accrued payments
not made as of December 31, 2001 and $375,000 representing amounts due January
1, 2002 for the first quarter of 2002, were due to Adelan under the Adelan
Agreement. SOFC Energy failed to cure the default and the Adelan Agreement
terminated on February 10, 2002.
16
On February 27, 2002, the Company and Freedom Cell Power Corp.
("Freedom"), a wholly-owned subsidiary of the Company, entered into a license
agreement with Adelan (the "Freedom License Agreement") by which Freedom
acquired substantially the same rights and privileges previously granted to SOFC
Energy pursuant to the Adelan Agreement. Freedom was required to fund the
research and development projects and the development of licensed products by
Adelan by making weekly payments commencing February 28, 2002 of $20,000 through
June 30, 2002, $100,000 for each of the three months ended June 30, 2002 and
monthly payments of $125,000 for each of the six months ended December 31, 2002.
As of September 30, 2002, the Company provided $417,800 in funding to Adelan
under the Freedom License Agreement.
In connection with the Freedom License Agreement, Adelan was to
receive 200,000 shares of the Company's common stock valued at $130,000, or
$0.65 a share, which was the fair market value of the Company's stock on the
measurement date, and a warrant to purchase an additional 100,000 shares of
common stock with an exercise price of $1.00 valued at $54,603 utilizing the
Black-Scholes Option pricing model. The Company issued the shares and warrants
to Adelan under the terms of the Freedom License Agreement. However, Adelan
refused to accept delivery of the shares and warrants and returned them to the
Company. The Company canceled the shares and warrants and reversed the charge of
$184,603 to research and development costs relating to their issuance.
On June 27, 2002, the Company and Adelan agreed to modify the terms
of the Freedom License agreement as to amount and timing of payments to Adelan.
Beginning July 8, 2002, the Company was required to fund Adelan's operations
with bi-weekly payments of $30,000 through the earlier of Adelan's reaching
certain targets as established by the Company or until such time as the Company
received additional financing.
Freedom, through its strategic partnership with Adelan, was
developing proprietary systems and products related to the portable, automotive,
residential and commercial sectors utilizing Adelan's Solid Oxide Fuel Cell
technology. Early commercial applications where Solid Oxide Fuel cells are
expected to find dominant and competitive positions include stationary and
portable power systems and auxiliary power units for trucks, automobiles and
recreational vehicles.
On August 20, 2002, the Company signed an agreement (the "Agreement")
with an unrelated third party ("Purchaser") whereby the Company agreed to
transfer the Company's interests in its technology rights under the Freedom
License Agreement to the Purchaser in exchange for a percentage share of future
revenues derived from the Adelan technology. In connection with the Agreement,
the Purchaser made an initial payment of $30,000 to the Company to be paid by
the Company to Adelan under the terms of the Freedom License Agreement. This
payment was treated as an advance payment against future revenues due the
Company under the Agreement. In connection with the Agreement, the Purchaser
assumed responsibility for the development and funding of the research and
development work performed by Adelan. The Agreement is subject to the
preparation and execution of definitive documents.
On September 17, 2002, the Company and Adelan terminated the Freedom
License Agreement by mutual consent and agreed to the distribution of certain
intellectual property rights between Adelan and the Company. As a result of the
termination of the Company's contractual relationship with Adelan, the Company
wrote-off $576,478 in net goodwill and other intangibles associated with the
Company's original purchase of SOFC Energy, Inc. in July 2001.
17
In April 2002, the Company received $100,000 from an individual
unrelated third-party investor in exchange for 100,000 shares of the Company's
common stock. The Company received an aggregate of $513,300 in secured loans
from Gold Crown to fund the Company's operations through September 30, 2002.
The Company needs to obtain additional financing to fund the
Company's fuel cell subsidiary operations. Although the Company is actively
pursuing such financing, there can be no assurance that the Company will be able
to obtain adequate financing on terms acceptable to the Company. The Company is
currently exploring all alternative options available to the Company relative to
its fuel cell subsidiary operations including, but not limited to, alternative
business mergers and/or acquisition opportunities to replace its existing
operations.
The accompanying consolidated interim financial statements have been
prepared assuming the Company is a going concern which assumption contemplates
the realization of assets and satisfaction of liabilities in the normal course
of business. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amount of
liabilities that might be necessary should the Company be unable to continue in
existence. Continuation of the Company as a going concern is dependent on the
Company raising capital or achieving profitable operations.
In 1999, the Company arranged for a $250,000 line of credit for Valet
to fund its daily operations. The line had an interest rate of 8% per annum and
was payable on demand. The line of credit was with a company owned by the
Chairman of the Company. In connection with the Company's sale of Valet in
September, 2002, $49,700 was repaid on the line of credit and the line of credit
was terminated. As of September 30, 2002, the line of credit had a remaining
principal balance due of $52,800.
On January 29, 1998, the Company received approximately $2,665,000
from Upper Manhattan Dialysis Center, Inc. ("UMDC"), a former consulting
customer of the Company, in connection with UMDC's sale of substantially all of
its assets to Renal Research Institute, LLC ("RRI"). In April 2002 and April
2001, respectively, the Company received additional payments of $150,000 and
$600,000 from UMDC representing repayment of all remaining amounts due from UMDC
as well as amounts assigned to the Company by Certain Executive Officers.
Accordingly, as of September 30, 2002 and September 30, 2001 respectively, the
Company recorded $150,000 and $600,000 in additional revenues related to
payments from UMDC in 2002 and 2001 not previously recorded as receivables due
to realization uncertainties. Such revenues are included in income from
discontinued operations.
ITEM 3. CONTROLS AND PROCEDURES
Based on their evaluation of the Company's disclosure controls and
procedures in the 90 days prior to the date hereof, the Company's principal
executive officer and principal financial officer have determined that such
controls and procedures are effective. No significant change has occurred in the
Company's internal controls since the date of the evaluation that could
significantly affect these controls subsequent to the date of the evaluation.
18
PART II - OTHER INFORMATIONAL
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
23.4 Asset Purchase Agreement between Valet-USA, Inc. and SLF
Enterprises, Inc. dated September 17, 2002.
(b) On July 8, 2002, the Company filed a report on Form 8-K
reporting information under Item 4, Changes in Registrants
Certified Accountants and the Company's dismissal of Arthur
Andersen, LLP as the Company's independent public accountants
and the engagement of Sobel & Co., LLC to serve as the
Company's independent public accountants for the fiscal year
2002.
On August 14, 2002 the Company furnished information to the SEC
under Item 9 Regulation FD Disclosure of Form 8-K.
On August 29, 2002, the Company filed a report on Form 8-K
reporting information under Item 5 - Other Events.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TECHSYS, INC.
Date: November 14, 2002 By: STEVEN L. TRENK
-------------------------------
Steven L. Trenk
Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 2002 By: MARK N. RAAB
-------------------------------
Mark N. Raab
Chief Financial Officer
(Principal Financial and Accounting
Officer)
20
CERTIFICATIONS
I, Steven L. Trenk, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of TechSys,
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 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
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
- -------------------------------
Steven L. Trenk
Chief Executive Officer
21
CERTIFICATIONS
I, Mark N. Raab, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of TechSys,
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 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
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
- -------------------------------
Mark N. Raab
Chief Financial Officer
22