U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended December 31, 2002.
[ ] Transition report pursuant to Section 13 or 15(d) of the Exchange act for
the transition period from to
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Commission File Number: 0-20316
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Avitar, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 06-1174053
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
65 Dan Road, Canton, Massachusetts 02021
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(Address of principal executive offices) (Zip Code)
(781) 821-2440
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(Issuer's telephone number)
(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. [x]Yes [ ]No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
COMMON STOCK: 65,288,605
AS OF FEBRUARY 12, 2003
Transitional Small Business Disclosure Format
(Check One): [ ] Yes ; [x] No
Page 1 of 22 pages
Exhibit Index appears on page 20
TABLE OF CONTENTS
Page
PART I: FINANCIAL INFORMATION 3
Item 1 Consolidated Financial Statements
Balance Sheet 4
Statements of Operations 5
Statement of Stockholders' Equity 6
Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis or Plan of Operation 11
Item 3 Procedures and Controls 14
PART II: OTHER INFORMATION 15
Item 2 Changes in Securities and Use of Proceeds 16
Item 6 Exhibits and Reports on Form 8-K 16
SIGNATURES 16
CERTIFICATIONS 18
EXHIBIT INDEX 20
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Avitar, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 2002
(Unaudited)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $215,459
Accounts receivable 951,511
Inventories 750,206
Prepaid expenses and other 78,811
----------
Total current assets 1,995,987
PROPERTY AND EQUIPMENT, net 386,157
GOODWILL, net 2,139,555
OTHER ASSETS 207,950
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Total $4,729,649
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 435,062
Accounts payable 1,780,128
Accrued expenses 1,319,304
Deferred revenue 69,100
Current portion of long-term debt 20,618
----------
Total current liabilities 3,624,212
LONG TERM DEBT, LESS CURRENT PORTION 1,244,623
----------
Total liabilities 4,868,835
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COMMITMENTS
STOCKHOLDERS' EQUITY:
Series A, B, C and D convertible preferred
stock, $.01 par value; authorized 5,000,000
shares; 236,202 shares issued and outstanding 2,361
Common Stock, $.01 par value; authorized
100,000,000 shares; 63,051,241 shares issued
and outstanding 630,513
Additional paid-in capital 42,339,496
Accumulated deficit (43,111,556)
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Total stockholders' equity (139,186)
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Total $ 4,729,649
============
See accompanying notes to consolidated financial statements.
Avitar, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
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THREE MONTHS ENDED DECEMBER 31,
--------------------------------------------------
2002 2001
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SALES $1,873,799 $3,242,414
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OPERATING EXPENSES
Cost of sales 1,190,167 1,637,841
Selling, general and administrative 1,344,248 1,508,918
Research and development 273,128 392,155
Amortization of goodwill -- 77,498
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Total operating expenses 2,807,543 3,616,412
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LOSS FROM OPERATIONS (933,744) (373,998)
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OTHER INCOME (EXPENSE)
Interest expense and financing costs (76,123) (20,575)
Other income (expense) 1,095 16,167
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Total other expense (75,028) (4,408)
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NET LOSS $(1,008,772) $(378,406)
============= ============
BASIC AND DILUTED NET LOSS PER SHARE (Note 6): $(0.02) $(0.01)
======== ========
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING 49,959,035 38,769,464
============= ============
See accompanying notes to consolidated financial statements.
5
Avitar, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
Three Months Ended December 31, 2002
(Unaudited)
Preferred Stock Common Stock
Additional
Shares Amount Shares Amount paid-in capital
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Balance at September 30, 2002 1,775,330 $17,752 44,674,215 $446,742 $41,769,112
Sale of common stock and warrants -- -- 625,000 6,250 118,750
Issuance of common stock for services -- -- 227,778 2,278 47,722
Issuance of common stock for interest on
long term debt 198,864 1,989 41,761
Conversion of Series B and Series C
preferred stock into common stock (1,539,133) (15,391) 15,308,794 153,088 (137,697)
Payment of preferred stock dividend,
Series B preferred stock 5 -- -- -- 14
Issuance of common stock and warrants
for settlement of financial consultant fees 2,016,590 20,166 499,834
Net loss -- -- -- -- --
- --------------------------------------- ---------- ---------- ------------- ---------- -------------
Balance at December 31, 2002 236,202 $2,361 63,051,241 $630,513 $42,339,496
- --------------------------------------- ---------- ---------- ------------- ---------- -------------
Avitar, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
Three Months Ended December 31, 2002
(Unaudited)(continued
Accumulated
deficit
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Balance at September 30, 2002 ($42,102,770)
Sale of common stock and warrants --
Issuance of common stock for services --
Issuance of common stock for interest on
long term debt
Conversion of Series B and Series C
preferred stock into common stock --
Payment of preferred stock dividend,
Series B preferred stock (14)
Issuance of common stock and warrants
for settlement of claim financial consultatant fees
Net loss (1,008,772)
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Balance at December 31, 2002 ($43,111,556)
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See accompanying notes to consolidated financial statements.
Avitar, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED DECEMBER 31,
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,008,772) ($378,406)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 54,196 47,020
Amortization of goodwill -- 77,498
Common stock for services 50,000
Common stock for interest on long-term debt 43,750
Gain from sale of equity investment -- (13,391)
Changes in operating assets and liabilities:
Accounts receivable 192,485 134,261
Inventories (227,772) (196,720)
Prepaid expenses and other current assets 94,951 46,611
Other assets 14,560 9,592
Accounts payable and accrued expenses 387,597 305,847
Deferred revenue 34,100 (352,102)
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Net cash used in operating activities (364,905) (319,790)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,360) (41,286)
Proceeds from sale of equity investment -- 24,391
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Net cash used in investing activities (3,360) (16,895)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable and long-term debt (44,480) (50,840)
Sales of common stock, preferred stock and warrants 125,000 661,001
Stock subscription receivable -- 35,000
Exercise of stock options and warrants -- 33,750
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Net cash provided by financing activities 80,520 678,911
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (287,745) 342,226
CASH AND CASH EQUIVALENTS, beginning of the period 503,204 245,409
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CASH AND CASH EQUIVALENTS, end of the period $215,459 $587,635
=========== ======================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period:
Income taxes $ -- $ --
Interest $12,058 $7,302
See accompanying notes to consolidated financial statements.
AVITAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===============================================================================
1. BASIS OF PRESENTATION
Avitar, Inc. (the "Company" or "Avitar") through its wholly-owned
subsidiary Avitar Technologies, Inc. ("ATI") develops, manufactures,
markets and sells diagnostic test products and proprietary hydrophilic
polyurethane foam disposables fabricated for medical, diagnostics, dental
and consumer use. During the first quarter of Fiscal 2003, the Company
continued the development and marketing of innovative point of care oral
fluid drugs of abuse tests, which use the Company's foam as the means for
collecting the oral fluid sample. United States Drug Testing Laboratories,
Inc. ("USDTL"), a wholly-owned subsidiary of Avitar, operates a certified
laboratory and provides specialized drug testing services primarily
utilizing hair and meconium as the samples. Through its wholly-owned
subsidiary, BJR Security, Inc. ("BJR"), the Company provides specialized
contraband detection and education services.
The accompanying consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles
for interim financial information, the instructions to Form 10-QSB and
Regulation S-B (including Item 310(b) thereof). Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
the Company's management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended December 31,
2002 are not necessarily indicative of the results that may be expected for
the full fiscal year ending September 30, 2003. The accompanying
consolidated financial statements should be read in conjunction with the
audited financial statements of the Company for the fiscal year ended
September 30, 2002.
The Company's consolidated financial statements have been presented on
the basis that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The Company has suffered recurring losses from operations and has
a working capital deficit as of December 31, 2002 of $1,628,225. The
Company raised net proceeds aggregating approximately $2,590,000 during the
fiscal year ended September 30, 2002 from the sale of stock and the
exercise of options and warrants. In addition, the Company received net
proceeds of approximately $1,127,000 from a long-term note payable. During
the three months ended December 31, 2002, the Company raised approximately
$125,000 from the sale of common stock. Based upon cash flow projections,
the Company believes the anticipated cash flow from operations and most
importantly, the proceeds from future equity financings will be sufficient
to finance the Company's operating needs until the operations achieve
profitability. There can be no assurances that forecasted results will be
achieved or that additional financing will be obtained. The financial
statements do not include any adjustments relating to the recoverability
and classification of asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern.
2. INVENTORIES
At December 31, 2002, inventories consist of the following:
Raw Materials $234,118
Work-in-Process 166,958
Finished Goods 349,130
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Total $750,206
========
3. MAJOR CUSTOMERS
Customers in excess of 10% of total sales are:
Three Months Ended December 31,
2002 2001
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Customer A $ * $1,590,820
Customer B 330,364 *
Customer C 404,950 *
*Customer was not in excess of 10% of total sales.
4. Settlement Agreement
As of September 30, 2002 the Company recorded a liability of $520,000
with a corresponding charge to equity to reflect the fair value of the cost
associated with a Settlement Agreement for compensation to the Estate and
successors of a financial advisor who provided services to the Company from
1998 to 2001directly related to the raising of capital through issuance of
equity instruments. On December 11, 2002, the Company settled this
liability and issued 2,016,590 shares of common stock and warrants to
purchase 1,176,679 shares of common stock at exercise prices ranging from
$0.23 to $0.35 per share with expiration dates in October 2003 and December
2003. The Company recorded an offsetting increase of $520,000 to
stockholders' equity for the fair value of the shares and warrants issued.
5. Common and Preferred Stock
During the quarter ended December 31, 2002, the Company sold 625,000
shares of the Company's common stock and received proceeds of approximately
$ 125,000. In connection with the sale of the common stock, the Company
issued to the holders of the common stock warrants to purchase 625,000
shares of the Company's common stock at an exercise price of $.30 per share
which expire in three years. For the three months ended December 31, 2002,
the Company issued 2,244,368 shares of the Company's common stock for
services and the settlement of the liability described in Note 4. As
payment of the $43,750 of interest due on the long-term note to Global
Capital Funding Group, LP, the Company issued 198,864 shares of the
Company's common stock.
For the three months ended December 31, 2002, holders of Series A, B
and C convertible preferred stock converted 1,539,133 shares of preferred
stock into 15,308,794 shares of the Company's common stock thereby
eliminating a majority of the Series B preferred stock. Preferred stock
dividends related to the Series B convertible preferred stock for the three
months ended December 31, 2002 amounted to $14. As of December 31, 2002,
the total amount of unpaid and undeclared dividends was $1,524, which
reflected the decrease related to the reduction of Series B preferred stock
from the conversion.
6. EARNINGS PER SHARE
The following data show the amounts used in computing earnings per
share:
2002 2001
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Net loss $( 1,008,772) $( 378,406)
Less:
Preferred Stock Dividends ( 14) ( 93,616)
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Net loss available to common
Shareholders used in basic and
diluted EPS $( 1,008,786) $( 472,022)
============= =============
Weighted average number of
common shares outstanding 49,959,035 38,769,464
================ ==============
7. SUBSEQUENT EVENTS
Since December 31, 2002, holders of Series C convertible preferred
stock converted 91,667 shares of preferred stock into 2,200,000 shares of
the Company's common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the notes thereto appearing
elsewhere in this report.
Results of Operations
Revenues
Sales for the three months ended December 31, 2002 were $1,873,799 compared
to $3,242,414 for the corresponding period of the prior year. The reduction of
$1,368,615, or approximately 42%, for the three months ended December 31, 2002
reflected the decrease of approximately $1,600,000 in sales of its OralScreenTM
products to one major customer that was obligated to fulfill the initial terms
of its product purchase agreement with Avitar during the quarter ended December
31, 2001; partially offset by an increase of approximately $200,000 in sales of
products and services to other customers.
Operating Expenses
Cost of sales for the three months ended December 31, 2002 were
approximately 64% of sales compared to the cost of sales of approximately 51% of
sales for the three months ended December 31, 2001. The change for the first
quarter of Fiscal 2003 is mainly the result of the decrease in sales described
above.
Selling, general and administrative expenses for the three months ended
December 31,2002 decreased $ 164,670, or approximately 11%, to $1,344,248 from
$1,508,918 for the corresponding period of the prior year. The decrease for the
three-month period ended December 31, 2002 primarily resulted from the reduction
in sales and marketing expenses.
Expenses for research and development for the three months ended December
31, 2002 amounted to $273,128 versus $392,155 for the corresponding period of
the prior year. The decrease of $119,027, or approximately 30%, primarily
reflects the reduction in development costs of the reading instrument for the
Company's OralScreen products.
For the three months ended December 31, 2002, no amortization of goodwill
was recorded compared to $77,498 for the three months ended December 31, 2001.
The change is a result of the recent changes in the accounting for goodwill.
Other Income and Expense
Interest expense and financing costs were $76,123 for the three months
ended December 31, 2002 compared to $20,575 incurred during the three months
ended December 31, 2001. The increase resulted primarily from interest expense
on the proceeds received from a short-term note in June 2002 and the long-term
loan completed in August 2002.
For the three months ended December 31, 2002, other income amounted to
$1,095 compared to other income of $16,167 for the three months ended December
31, 2001. The quarter ended December 31, 2001 included approximately $13,000
from the sale of an equity investment.
Net Loss
Primarily as a result of the factors described above, the Company had a net
loss of $1,008,772 for the three months ended December 31, 2002, as compared to
net loss of $378,406 for the three months ended December 31, 2001. The loss per
share was $.02 per basic and diluted share for the three months ended December
31, 2002. The loss per share was $.01 per basic and diluted share for the three
months ended December 31, 2001.
Financial Condition and Liquidity
At December 31, 2002 and September 30, 2002 the Company had working capital
deficiencies of $1,628,225 and $901,757, respectively, and cash and cash
equivalents of $215,459 and $503,204 respectively. Net cash used in operating
activities during the three months ended December 31, 2002 amounted to $364,905
resulting primarily from a net loss of $1,008,772, an increase in inventories of
$227,772; partially offset by depreciation and amortization of $54,196, common
stock for services and interest of $93,750, a decrease in accounts receivable of
$192,485, a decrease in prepaid expenses and other current assets of $94,951, a
decrease in other assets of $14,560, increases in accounts payable and accrued
expenses of $387,597 and an increase in deferred income of $34,100. Net cash
provided by financing and investing activities during the three months ended
December 31, 2002 amounted to $77,160 proceeds from the sale of common stock and
warrants of $125,000; offset in part by the repayment of notes payable and long
term debt of $44,480 and purchases of property and equipment of $3,360.
Since October 2002, the Company received proceeds of approximately $125,000
from the sale of 625,000 shares of the Company's common stock and warrants to
purchase 625,000 shares of the Company's common stock at exercise prices of $.30
per share for a period of three years. The Company plans to raise sufficient
capital from sales of equity and/or debt securities to reach profitability and
expand the Company's business. The Company plans to use the proceeds from these
financings to provide working capital and capital equipment funding to operate
the Company, to expand the Company's sales and marketing efforts, to further
develop and enhance the ORALscreen drug screening systems and to explore
applications for its oral fluid technology in the in-vitro diagnostic testing
market. However, there can be no assurance that these financings will be
achieved.
For the balance of fiscal year 2003, the Company's cash requirements are
expected to include primarily the funding of operating losses, the payment of
outstanding accounts payable, the repayment of certain notes payable, the
funding of operating capital to grow the Company's drugs of abuse testing
products and services and the continued funding for the development and
enhancement of the ORALscreen product line.
The Company believes that a significant opportunity exists for its
ORALscreen products in the drugs-of-abuse testing market. However, during the
first quarter of Fiscal 2003, the Company was capital constrained and therefore,
was restricted in its ability to invest in the resources necessary to increase
its revenues during this period. With a portion of the additional capital
described above, the Company feels that it will be able to employ the necessary
resources to realize revenue growth during the remainder of Fiscal 2003. Based
on current sales, expense and cash flow projections, the Company believes that
the current level of cash and cash-equivalents on hand and most importantly, a
portion of the anticipated net proceeds from the financing mentioned above would
be sufficient to fund operations until the Company achieves profitability. There
can be no assurance that the Company will consummate the above-mentioned
financing, or that any or all of the net proceeds sought thereby will be
obtained. Once the Company achieves profitability, the longer-term cash
requirements of the Company to fund operating activities, purchase capital
equipment, expand the existing business and develop new products are expected to
be met by the anticipated cash flow from operations and proceeds from the
financings described above. However, because there can be no assurances that
sales will materialize as forecasted, management will continue to closely
monitor and attempt to control costs at the Company and will continue to
actively seek the needed additional capital.
As a result of the Company's recurring losses from operations and working
capital deficit, the report of its independent certified public accountants
relating to the financial statements for Fiscal 2002 contains an explanatory
paragraph stating substantial doubt about the Company's ability to continue as a
going concern. Such report states that the ultimate outcome of this matter could
not be determined as the date of such report (November 26, 2002). The Company's
plans to address the situation are presented above. However, there are no
assurances that these endeavors will be successful or sufficient.
Recent Accounting Pronouncements
At December 31, 2002, the Company has two stock based compensation plans
(one employee and one non-employee director's plan). The Company accounts for
those plans under the recognition and measurement principles of APB Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. No
stock-based employee compensation cost is reflected in net loss, as the options
granted under those plans had an exercise price equal to, or greater than, the
market value of the underlying common stock on the date of the grant. In
accordance with FASB Statement No. 148, Accounting for Stock-Based Compensation
- - Transition and Disclosure, beginning in the quarter ending March 31, 2003, the
Company will adopt the disclosure requirements of FASB No. 148.
Forward-Looking Statements and Associated Risks
Except for the historical information contained herein, the matters set
forth herein are "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, Section 21E of the Securities Exchange Act of
1934 and the Private Securities Litigation Reform Act of 1995. We intend that
such forward-looking statements be subject to the safe harbors created thereby.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievement expressed or implied by such forward-looking statements. Such
factors include, but are not limited to the following: product demand and market
acceptance risks, the effect of economic conditions, results of pending or
future litigation, the impact of competitive products and pricing, product
development and commercialization, technological difficulties, government
regulatory environment and actions, trade environment, capacity and supply
constraints or difficulties, the result of financing efforts, actual purchases
under agreements and the effect of the Company's accounting policies.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and procedures
Based on their evaluation of our disclosure controls and procedures conducted
within 90 days of the date of filing this report on Form 10-KSB, our Chief
Executive Officer and the Chief Financial Officer have concluded that our
disclosure controls and procedures (as defined in Rules 13a - 14(c) and 15(d)
promulgated under the Securities Exchange Act of 1934) are effective.
(b) Changes in Internal Controls
There were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.
PART II OTHER INFORMATION
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
During the quarter ended December 31, 2002, the Company sold to private
investors 625,000 shares of the Company's common stock and received cash
proceeds of approximately $125,000. In connection with the sale of this common
stock, the Company issued to the holders of the common stock warrants to
purchase 625,000 shares of the Company's common stock at an exercise price of
$.30 per share which expire in three years. On December 11, 2002, the Company
issued 2,016,590 shares of the Company's common stock to G3 Capital, LLC as
settlement for compensation to the Estate and successors of a financial
consultant who provided services the Company from 1998 to 2001 directly related
to the raising of capital through issuance of equity instruments. Also during
the quarter ended December 31, 2002, the Company issued 27,778 shares of the
Company's common stock as payment for consulting services. The exemption for
registration of these securities is based upon Section 4(2) of the Securities
Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Document
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(b) Reports on Form 8-K:
None
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.
AVITAR, INC.
(Registrant)
Dated: February 13, 2003 /S/ Peter P. Phildius
-----------------------------------
Peter P. Phildius
Chairman and Chief
Executive Officer
(Principal Executive Officer)
Dated: February 13, 2003 /S/ J.C. Leatherman, Jr.
---------------------------
J.C. Leatherman, Jr.
Chief Financial Officer
(Principal Accounting and
Financial Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Peter P. Phildius, Chief Executive Officer, and Jay
C. Leatherman, Jr., Chief Financial Officer of Avitar, Inc each certify that:
1. We have reviewed this quarterly report on Form 10-QSB of Avitar, Inc.;
2. Based on our 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 our 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
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 have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies, if any, 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 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/ Peter P.Phildius
- ---------------------
Peter P. Phildius
Chief Executive Officer
/s/ Jay C. Leatherman, Jr
- --------------------------
Jay C. Leatherman, Jr.
Chief Financial Officer (Principal Financial and
Accounting Officer), Secretary