U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2002
[ ] TRANSITION REPORT 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 0-13732
COMTREX SYSTEMS CORPORATION
---------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-2353604
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
102 Executive Drive, Moorestown, NJ 08057-4246
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(Address of principal executive offices)
(856) 778-0090
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
------- -------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at January 31, 2003
----- -------------------------------
Common Stock, par value $.003 1,417,120
Transitional Small Business Disclosure Form (check one):
Yes No X
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COMTREX SYSTEMS CORPORATION
TABLE OF CONTENTS
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements, Unaudited
Unaudited Consolidated Balance Sheets
at December 31, 2002 and March 31, 2002 3
Unaudited Consolidated Statement of Operations
for the three months and nine months ended
December 31, 2002 and 2001 4
Unaudited Consolidated Statements of Cash Flows
for the nine months ended December 31, 2002 and 2001 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 13
Item 3. Controls and Procedures 17
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
Exhibit Index 21
Exhibits 22
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
(Unaudited)
December 31, March 31,
2002 2002
----------- -----------
Current assets:
Cash and cash equivalents $ 102,330 $ 143,245
Accounts receivable, net of reserve of
$71,460 and $100,055 as of December 31, 2002
and March 31, 2002, respectively 1,972,208 2,529,557
Note receivable -- 3,146
Inventories 1,425,789 1,452,386
Prepaid expenses and other 137,379 98,293
----------- -----------
Total current assets 3,637,706 4,226,627
----------- -----------
Property and equipment:
Land 156,244 156,244
Building 312,656 312,656
Machinery, equipment, furniture and leasehold 2,142,678 1,970,002
----------- -----------
2,611,578 2,438,902
Less - accumulated depreciation (1,725,382) (1,596,268)
----------- -----------
Net property and equipment 886,196 842,634
----------- -----------
Other assets:
Purchased and capitalized software and design,
net of amortization of $395,045 as of both
December 31, 2002 and March 31, 2002 948,598 715,397
Goodwill, net of amortization of $122,152 as of
both December 31, 2002 and March 31, 2002 489,761 489,761
----------- -----------
Total other assets 1,438,359 1,205,158
----------- -----------
TOTAL ASSETS $ 5,962,261 $ 6,274,419
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Revolving line of credit loan $ 573,876 $ 850,000
Accounts payable 529,522 313,814
Current portion of long term debt 133,132 76,972
Income and V.A.T. payable 167,751 114,791
Accrued expenses 129,513 150,974
Deferred revenue 243,844 778,067
Customer deposits 2,000 2,000
----------- -----------
Total current liabilities 1,779,638 2,286,618
----------- -----------
Long term debt, net of current portion 487,825 386,154
----------- -----------
Shareholders' equity:
Preferred stock, $1 par value, 1,000,000
shares authorized, none outstanding -- --
Common stock, $.003 par value, 10,000,000
shares authorized, 1,417,120 and 1,417,120
issued and outstanding as of
December 31, 2002 and March 31, 2002, respectively 4,252 4,252
Additional paid-in capital 5,999,654 5,999,654
Foreign currency translation adjustment 41,872 ( 14,333)
Accumulated deficit ( 2,350,980) ( 2,387,926)
----------- -----------
Total shareholders' equity 3,694,798 3,601,647
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,962,261 $ 6,274,419
=========== ===========
The accompanying notes are an integral part of these
financial statements.
3
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(These statements are unaudited.)
Three months ended Nine months ended
December 31, December 31,
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net sales $ 1,821,846 $ 1,620,232 $ 4,975,681 $ 5,044,738
Costs and expenses
Cost of sales 820,672 762,335 2,246,561 2,411,540
Administrative 220,870 209,651 605,151 722,625
Research and development 19,964 15,733 62,849 61,372
Sales and marketing 216,588 190,236 639,618 634,242
Customer support 402,751 346,858 1,151,420 1,084,189
Depreciation and amortization 43,766 62,552 121,142 177,088
----------- ----------- ----------- -----------
1,724,611 1,587,365 4,826,741 5,091,056
----------- ----------- ----------- -----------
Income (loss) from operations 97,235 32,867 148,940 (46,318)
Interest expense, net (14,099) (23,781) (39,878) (70,357)
----------- ----------- ----------- -----------
Income (loss)
before income taxes 83,136 9,086 109,062 (116,675)
Provision for income taxes 32,240 13,870 72,116 47,490
----------- ----------- ----------- -----------
Net income (loss) $ 50,896 $ (4,784) $ 36,946 $ (164,165)
=========== =========== =========== ===========
Basic earnings per share:
Net income (loss) $ .04 $ .00 $ .03 $ (.12)
=========== =========== =========== ===========
Diluted earnings per share:
Net income (loss) $ .04 $ .00 $ .03 $ (.12)
=========== =========== =========== ===========
The accompanying notes are an integral part of these
financial statements.
4
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(These statements are unaudited.)
Nine months ended
December 31,
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 36,946 $(164,165)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities -
Depreciation and amortization 121,142 177,088
Deferred income taxes -- 32,560
Provisions for losses on accounts
receivable (28,595) 146
Provisions for losses on inventories (59,318) 964
Foreign currency translation adjustment 41,026 4,772
(Increase) decrease in -
Accounts receivable 744,548 513,309
Inventories 120,377 188,944
Prepaid expenses and other (31,797) 8,053
Increase (decrease) in -
Accounts payable 169,570 (482,460)
Accrued expenses (24,660) (37,085)
Income and V.A.T. taxes payable 39,311 78,784
Customer deposits -- 4,734
Deferred revenue (612,219) (269,715)
--------- ---------
Net cash provided by (used in)
operating activities 516,331 55,929
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale (purchases) of property and equipment:
Purchases of property and equipment (185,802) (97,190)
Purchases of software and capitalized
software and design (237,112) (244,786)
--------- ---------
Net cash provided by (used in)
investing activities (422,914) (341,976)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit, net (276,124) 323,880
Increase in (payments on) debt 141,792 (117,335)
Proceeds from issuing equity securities -- 1,180
--------- ---------
Net cash provided by (used in)
financing activities (134,332) 207,725
--------- ---------
Net increase (decrease) in cash (40,915) (78,322)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 143,245 164,866
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 102,330 $ 86,544
========= =========
The accompanying notes are an integral part of these
financial statements.
5
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of business:
Comtrex Systems Corporation ("Comtrex" or "the Company") is a Delaware
corporation, initially incorporated in New Jersey in April, 1981. Comtrex
designs, develops, assembles, markets, sells and provides services for computer
software, electronic terminals and turn-key systems for restaurants, both table
and quick service. The Company's hardware and software systems provide
transaction processing, operational controls and management information, both
in-store and on an enterprise level. The Company markets its products through a
network of authorized distributors in Canada, France, Belgium, Portugal,
Holland, Ireland and Australia, and through a wholly-owned subsidiary in the
United Kingdom. In the United States, the Company markets its products through a
network of dealers and through its own direct sales offices.
In April, 1996, Comtrex acquired the operations of a distributor in
Atlanta, Georgia and engaged in the direct sale and service of its products in
both the Atlanta metropolitan area and in the southeast United States. In
October, 1997, Comtrex acquired its distributor in the United Kingdom and
engaged in the direct sale and service of its products throughout the U.K. In
June, 1999, Comtrex acquired its dealer in Pontiac, Michigan and engaged in the
direct sale and service of its products in the Detroit metropolitan area and in
the mid-western United States. Hereinafter, Comtrex and its subsidiary are
referred to as the Company.
Basis of presentation:
The accompanying consolidated financial statements have been prepared
by the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to the rules and regulations of the SEC. In the
opinion of the Company's management, all adjustments necessary for a fair
presentation of the accompanying unaudited consolidated financial statements are
reflected herein. All such adjustments are normal and recurring in nature. All
significant intercompany transactions and balances have been eliminated. Interim
results are not necessarily indicative of the results for the full year or for
any future interim periods. For more complete financial information, these
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements included in the Company's Annual Report on
Form 10-KSB for the fiscal year ended March 31, 2002, as filed with the SEC.
Reverse Stock Split:
On February 12, 2001, the shareholders approved a one for three
reverse stock split, effective as of February 14, 2001 with the filing of a
Certificate of Amendment to the Company's Certificate of Incorporation with the
Secretary of State of the State of Delaware. All amounts herein reflect such
reverse stock split.
Foreign currency translation:
Adjustments resulting from translating foreign functional currency
financial statements into U.S. dollars are included in the foreign currency
translation adjustment in shareholders' equity.
Goodwill:
Implementation of Statement of Financial Accounting Standards No. 142,
effective with the beginning of the current fiscal year, resulted in the
elimination of amortization of goodwill for the current, and future, fiscal
years. See Note 9.
6
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
2. INVENTORIES:
Inventories include the cost of materials, labor and overhead and are
valued at the lower of cost (first-in, first-out) or market as follows:
December 31, March 31,
2002 2002
------------- -----------
Raw materials $ 612,545 $ 601,850
Work-in-process 5,730 1,033
Finished goods 879,393 980,700
Reserve for excess and obsolete inventory (71,879) (131,197)
----------- -----------
$ 1,425,789 $ 1,452,386
=========== ===========
3. INCOME TAXES:
The Company has net operating loss carryforwards for federal income tax
purposes of approximately $2,600,000, which begin to expire in 2004. Such loss
carryforwards result in deferred tax assets of approximately $1,000,000, which
have been offset by a valuation allowance of equal amount. During the quarter
ended December 31, 2002, the valuation account was not affected.
The components of the provision for income taxes for the nine months
ended December 31, 2002 consist of current expense (foreign) of $69,744, and
current expense (U.S.) of $2,372, respectively.
4. EARNINGS PER SHARE DISCLOSURE:
In the quarter ended December 31, 1997, the Company adopted Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 specifies the computation, presentation and disclosure requirements for
earnings per share ("EPS"). It replaces the presentation of primary and fully
diluted EPS with basic and diluted EPS. Basic EPS excludes all dilution. It is
based upon the weighted average number of common shares outstanding during the
period. Diluted EPS reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.
A reconciliation of the basic and diluted EPS for the three and nine
months ended December 31, 2002 and 2001 is as follows:
Three months ended
December 31, 2002
-----------------------------------
Income Shares Per Share
--------- --------- ---------
Net income $ 50,896
Basic EPS:
Income available to common shareholders 50,896 1,417,120 $ 0.04
Effect of dilutive securities, options and
warrants -
Diluted EPS:
Income available to common shareholders $ 50,896 1,417,120 $ 0.04
7
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
4. EARNINGS PER SHARE DISCLOSURE: (CONTINUED)
Nine months ended
December 31, 2002
-------------------------------------------------
Income Shares Per Share
---------- --------- ---------
Net income $ 36,946
Basic EPS:
Income available to common shareholders 36,946 1,417,120 $ 0.03
Effect of dilutive securities, options and
warrants 9
Diluted EPS:
Income available to common shareholders $ 36,946 1,417,129 $ 0.03
Three months ended
December 31, 2001
---------------------------------------------------
Income(Loss) Shares Per Share
------------ --------- ---------
Net income(loss) ($ 4,784)
Basic EPS:
Income (loss) available to common shareholders ( 4,784) 1,417,120 $ 0.00
Effect of dilutive securities, options and
warrants
Diluted EPS:
Income(loss) available to common shareholders ($ 4,784) 1,417,120 $ 0.00
There is no dilutive effect from stock options or warrants because
there was a net loss for the three months ended December 31, 2001.
Nine months ended
December 31, 2001
--------------------------------------------------
Income(Loss) Shares Per Share
------------ --------- ---------
Net income(loss) ($ 164,165)
Basic EPS:
Income (loss) available to common shareholders ( 164,165) 1,416,972 ($ 0.12)
Effect of dilutive securities, options - Diluted EPS:
Income (loss) available to common shareholders ($ 164,165) 1,416,972 ($ 0.12)
There is no dilutive effect from stock options or warrants because
there was a net loss for the nine months ended December 31, 2001.
5. SEGMENT INFORMATION:
In the fiscal year ended March 31, 1999, the Company adopted Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. SFAS 131 supersedes SFAS 14, "Financial
Reporting for Segments of a Business Enterprise", replacing the "industry
segment" approach with the "management" approach. The management approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Company's
reportable segments. The Company has two reportable segments: the United States
and the United Kingdom.
8
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
5. SEGMENT INFORMATION: (CONTINUED)
Three months ended Nine Months Ended
December 31, December 31,
2002 2001 2002 2001
------------------------- -------------------------
Net sales:
United States, domestic $ 655,377 $ 587,565 $ 1,936,291 $ 1,998,198
United States, export 277,445 325,021 798,760 1,183,580
United Kingdom 1,081,989 745,374 2,838,656 2,311,220
Transfers between segments ( 192,965) ( 37,728) ( 598,026) ( 448,260)
----------- ----------- ----------- ----------
Net sales $ 1,821,846 $ 1,620,232 $ 4,975,681 $ 5,044,738
=========== =========== =========== ===========
Three months ended Nine Months Ended
December 31, December 31,
2002 2001 2002 2001
-------------------------- -------------------------
Income (loss) before income taxes:
United States ($ 90,086) ($ 87,656) ($ 197,568) ( 246,886)
United Kingdom 158,189 61,494 346,844 171,055
Corporate 15,033 35,248 ( 40,214) ( 40,844)
----------- ----------- ----------- ----------
Income (loss) before
income taxes $ 83,136 $ 9,086 $ 109,062 ($ 116,675)
=========== =========== =========== ==========
Depreciation and amortization:
United States $ 23,648 $ 38,365 $ 64,390 $ 112,809
United Kingdom 23,382 17,087 56,816 42,979
Corporate ( 3,264) 7,100 ( 64) 21,300
----------- ----------- ----------- ----------
$ 43,766 $ 62,552 $ 121,142 $ 177,088
=========== =========== =========== ==========
December 31, 2002 March 31, 2002
----------------- --------------
Identifiable assets:
United States $ 4,180,914 $ 4,516,551
United Kingdom 2,158,699 2,285,735
Corporate 340,998 340,998
Eliminations ( 718,350) ( 868,865)
----------- -----------
Total assets $ 5,962,261 $ 6,274,419
=========== ===========
Long lived assets:
United States $ 175,243 $ 228,803
United Kingdom 710,953 613,831
----------- ------------
$ 886,196 $ 842,634
=========== ===========
9
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
6. COMPREHENSIVE INCOME:
In the fiscal year ended March 31, 1999, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for the reporting and displaying of
comprehensive income and its components in the Company's consolidated financial
statements. Comprehensive income is defined in SFAS 130 as the change in equity
(net assets) of a business enterprise during the period from transactions and
other events and circumstances from non-owner sources. It includes all changes
in equity during a period except those resulting from investments by owners and
distributions to owners. The Company's comprehensive income is comprised of net
income and foreign currency translation adjustments. Comprehensive income (loss)
is $64,221 and $808 for the quarters ended December 31, 2002 and 2001,
respectively, and $93,151 and ($162,649) for the nine months ended December 31,
2002 and 2001, respectively. The difference from net income as reported is the
tax effected change in the foreign currency translation adjustment component of
shareholders' equity.
7. BANK LOAN, LINE OF CREDIT:
At December 31, 2002, the Company was advanced $493,000 against a line
of credit facility with Fleet National Bank (the "Bank"). The loan bears
interest at the Bank's prime rate (4.25 percent at December 31, 2002) and is
collateralized by substantially all domestic assets of the Company.
In October of 2002, the Company entered into a credit facility with the
Bank, replacing the prior facility originally scheduled to expire on September
30, 2002 and subsequently extended through October of 2002. The new credit
facility provides the Company with the availability of a total amount of
$1,250,000 for borrowings and the issuance of Irrevocable Letters of Credit and
expires on September 30, 2003. Outstanding borrowings bear interest at either
the Bank's prime rate of interest, or three percent above the Euro-Rate
interest, at the Company's option. The credit facility is collateralized by
substantially all domestic assets of the Company. The previous facility with the
Bank provided the Company with the availability of a total amount of $1,500,000.
All other terms and conditions remained essentially the same.
The current credit facility, as did the previous facility, requires
that the Company maintain certain financial covenants as a condition of the
loan. Compliance with these covenants is reported to the Bank on a quarterly
basis. As of December 31, 2002, the Company believes it was in compliance with
all financial covenants. As of September 30, 2002, the Company was in default
under the debt service covenant, which requires cash flows from operating
activities to be equal to or greater than 125 percent of the Company's debt
service, including interest and taxes. The Company was, therefore, in technical
default on the loan and the entire amount of the outstanding loan may still be
immediately callable as a consequence of such prior technical defaults. Based on
its negotiations and ongoing relationship with the Bank, management believes
that the credit facility will continue to be available to the Company throughout
its scheduled term. The terms of any renewal of the credit facility will be
dependent on the Company's ability to comply with all terms of the credit
facility in future quarterly reports to the Bank.
At December 31, 2002, the Company's UK subsidiary was advanced $80,876
against a line of credit facility of (pound)150,000 (approximately $240,000).
The loan bears interest at the bank's base rate (4.00 percent at December 31,
2002) plus two percent and is collateralized by substantially all assets of the
subsidiary. The Company is not a guarantor on this line of credit. This facility
was renewed in December of 2001 through December 3, 2002, and subsequently
extended through January 31, 2003. The Company expects this facility to be
renewed during the month of January, 2003 to extend through December of 2003.
10
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
8. LONG TERM DEBT:
On January 2, 2003, the Company entered into separate Subordinated
Convertible Note Agreements (together the "Loans") with two individuals. Under
the Loans, those two individuals, who are Jeffrey C. Rice, President, Chief
Executive Officer and a director of the Company, and Steven D. Roberts, Managing
Director of the Company's U.K. subsidiary (Comtrex Systems, LTD) and a director
of the Company, have each loaned the Company $50,000.00. These Loans are
reflected on the Consolidated Balance Sheets of the Company as of December 31,
2002 under long term debt. Each of these Loans is represented by a Subordinated
Convertible Note, and bears interest at the rate of six percent (6%) per annum.
Interest on the Loans is due monthly, and the principal amount of the Loans is
due on the fifth anniversary of the Loans. The indebtedness under the Loans is
subordinate to all senior indebtedness of the Company, whether outstanding on
the date of the Loans or thereafter created, incurred or assumed, in respect of
borrowed money from any bank, savings and loan, insurance company or other
financial institution. The principal amount of the Loans is convertible at any
time at the election of the lenders into shares of the Company's common stock at
a conversion price of $0.25 per share in minimum amounts of $5,000.00, or 20,000
shares. The Loans also contain standard anti-dilution provisions. The proceeds
of the Loans will be utilized for general corporate purposes, including but not
limited to a reduction in the amounts outstanding under the Company's line of
credit facility with Fleet National Bank, the Company's primary lender.
9. GOODWILL AND OTHER INTANGIBLE ASSETS:
Effective as of April 1, 2002, the beginning of the current fiscal
year, the Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 changes the
accounting for goodwill from an amortization method to an impairment-only
approach. Under SFAS 142, amortization of goodwill to earnings ceased for the
current, and future, fiscal years. Instead, the carrying value of goodwill must
be evaluated for impairment on at least an annual basis.
In addition, SFAS 142 requires that the Company identify reporting
units for the purposes of assessing potential future impairments of goodwill,
reassess the useful lives of other existing recognized intangible assets and
cease amortization of intangible assets with an indefinite useful life. An
intangible asset with an indefinite useful life should be tested for impairment
in accordance with the guidance in SFAS 142. SFAS 142 requires the Company to
complete a transitional goodwill impairment test six months from the date of
adoption and to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.
Aside from goodwill, the Company has no intangible assets with an
indefinite useful life. During the quarter ended June 30, 2002, the first
interim quarter after adoption of SFAS 142, the Company reassessed the useful
lives of its intangible assets, principally capitalized software and development
expenses. The Company believes the useful life of such assets is not currently
impaired. The Company's policy is to amortize capitalized software and
development expenses on a product-by-product basis using the faster of the
straight-line method, over the estimated useful life of the software, or based
upon units of sale. Amortization begins when the software is available for
general release to customers. The weighted-average amortization period is
expected to be six years. During the quarter and nine month period ended
December 31, 2002, the Company developed $83,064 and $237,112, respectively, of
capitalized software. No residual value is expected after amortization. No
amortization expense was incurred during either the quarter or nine month period
ending December 31, 2002. The aggregate amortization expense for the current
fiscal year and for fiscal years 2004, 2005, 2006, 2007, 2008 and 2009 is
estimated to be $20,000, $160,000, $160,000, $160,000, $160,000, $160,000 and
$140,000, respectively.
11
COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
9. GOODWILL AND OTHER INTANGIBLE ASSETS: (CONTINUED)
The Company had $489,761 of goodwill on its balance sheet as of March
31, 2002 and as of December 31, 2002. Amortization of goodwill was $7,671,
$23,013 and $30,684 for the quarter ended December 31, 2001, the nine month
period ended December 31, 2001 and the fiscal year ended March 31, 2002,
respectively. The components of goodwill on the Company's balance sheet are: a)
$340,998 related to the acquisition of the Company's U.K. subsidiary; and b)
$148,763 related to the Company's domestic subsidiary, Comtrex Michigan. Based
on management's evaluation of a variety of factors and considerations, the
Company does not believe the goodwill related to the Company's U.K. subsidiary
is currently impaired. Based on management's evaluation, the Company does not
believe the goodwill related to Comtrex Michigan is currently impaired. The
Company intends to continue to evaluate the carrying value of both components of
goodwill on its balance sheet during the course of each fiscal year, rather than
as a single event on an annual basis.
The following table provides a reconciliation of the reported net
income and net income that would have been reported, exclusive of the
amortization of goodwill recognized, during the reporting periods presented
herein:
Three months ended Nine Months Ended
December 31, December 31,
2002 2001 2002 2001
-------------------------- --------------------------
Reported net income (loss) $ 50,896 ($ 4,784) $ 36,946 ($ 164,165)
Add back: goodwill amortization - 7,671 - 23,013
Adjusted net income (loss) ($ 50,896) $ 2,887 $ 36,946 ($ 141,152)
=========== ========== =========== =========
Basic (and diluted) earnings
per share:
Reported net income (loss) $ .04 $ .00 $ .03 ($ .12)
Goodwill amortization - .00 - .02
Adjusted net income (loss) $ .04 $ .00 $ .03 ($ .10)
=========== ========== =========== =========
12
Item 2. Management's Discussion and Analysis or Plan of Operation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Form 10-QSB contains 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. Forward-looking statements can often be identified by
their use of words such as "may", "will", "expects", "plans", "estimates",
"intends", "believes" or "anticipates", and variations or negatives of these
words. In addition, any statements that refer to expectations, projections or
other characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements. The matters discussed in
this Form 10-QSB that are forward-looking statements are based on current
management expectations that involve a number of risks and uncertainties.
Potential risks and uncertainties include, without limitation, the impact of
economic conditions generally and in the intelligent point-of-sale terminal
industry; and the risk of unavailability of adequate capital or financing.
Further information is contained in the Item 1 section of the Company's Annual
Report on Form 10-KSB for the fiscal year ended March 31, 2002, as filed with
the SEC.
Liquidity and Capital Resources
As of December 31, 2002, the Company had total current assets of
$3,637,706, including cash and cash equivalents of $102,330, as compared to
$4,226,627 of total current assets and $143,245 of cash and cash equivalents as
of March 31, 2002. The Company had current liabilities of $1,779,638, resulting
in a current ratio of 2.0 as of December 31, 2002, compared to $2,286,618 and
1.8, respectively, as of March 31, 2002.
Cash and cash equivalents decreased by $40,915 during the first nine
months of fiscal year 2003. Operating activities generated $516,331 of cash, as
compared with cash generated of $55,929 for the corresponding prior year period.
Investing activities consumed $422,914 during the first nine month period of
fiscal year 2003 and $134,332 was consumed by financing activities. This
compares with a consumption of $341,976 by investing activities and $207,725
provided by financing activities in the corresponding nine month period of the
prior fiscal year.
The Company reported net income of $50,896 for the three month period
ended December 31, 2002 and net income for the nine month period of $36,946. The
Company has net operating loss carryforwards of approximately $2,600,000 for
federal income tax purposes, which do not begin to expire until 2004.
The financial statements of Comtrex U.K. are translated into U.S.
dollars for financial reporting purposes. Revenues and expenses are translated
at an average exchange rate during the fiscal year, and the assets and
liabilities of Comtrex U.K. are translated at the actual rate of exchange as of
the end of each fiscal quarter. As a consequence of a difference in the exchange
rate used during fiscal year 2003 and the exchange rate as of March 31, 2002,
differences between accounts on the consolidated balance sheets as of December
31, 2002 and March 31, 2002 do not involve cash outlay to the extent they are
merely the result of a differing rate of exchange. Between March 31, 2002 and
December 31, 2002, the asset valuations of Comtrex U.K. increased approximately
11% when expressed in U.S. dollars. The following analysis relates to the
changes in the Company's balance sheet accounts on a cash flow basis.
A decrease in accounts receivable of $744,548 was the overwhelming
contributor to positive cash flow during the nine month period ended December
31, 2002. An increase in accounts payable of $169,570, depreciation and
amortization expense of $121,142 and a decrease in inventories of $120,377 also
provided positive contributions to cash flow for the period. The quarterly
depreciation and amortization contribution is expected to increase by
approximately $20,000 during the fourth quarter of the current fiscal year and
increase dramatically, by approximately $40,000 during each quarter, during the
next fiscal year. Implementation of Statement of Financial Accounting Standards
No. 142, effective with the beginning of the current fiscal year, resulted in
the elimination of amortization of goodwill for the current, and future, fiscal
years. Note 9 to the Consolidated Financial Statements covers in detail both the
expected software amortization expenses over the next several years and the
Company's goodwill.
13
Liquidity and Capital Resources (continued)
The positive cash flows were offset by combined decreases in accrued
and prepaid expenses of $56,457, combined reductions in inventory and
receivables reserves of $87,913 and by the substantial decrease in deferred
revenues of $612,219.
The decrease in accounts receivable is a result of continued aggressive
collection efforts, while the increase in accounts payable is largely a result
of timing. A significant negative contribution to cash flow from operating
activities was a decrease in deferred revenue. Deferred revenue is principally
comprised of prepayments on maintenance contracts in the Company's U.K.
subsidiary and its District Offices in Atlanta and Michigan, many of which are
billed on either an annual or semi-annual basis. The decrease of $612,219 is the
result of three quarters' recognition of such deferred revenue and is of a
recurring nature, and not necessarily indicative of any trend representing a
decline in maintenance revenue or billings. The Company renders invoices for
annual and semi-annual maintenance contracts at the beginning of its fourth
fiscal quarter, which will result in a significant increase in deferred revenue
during the three month period ending March 31, 2003.
Investing activities consumed $422,914 of cash during the nine month
period ended December 31, 2002, through a combination of $185,802 of purchased
property and equipment and $237,112 of capitalized software and design.
Substantially all of the increase in purchased property and equipment relates to
the Company's U.K. subsidiary. During the quarter ended June 30, 2002, the
Company's U.K. subsidiary invested approximately $100,000 in hardware and
$50,000 in software in an upgrade of its information technology infrastructure.
This investment will be amortized on a straight-line basis over a three year
period. The capitalized software and design relate to continued development of
the Company's next generation point-of-sale product, the Odyssey POS/2100.
Initial installations of this product were performed in September of 2002 and it
was the Company's intention to cease capitalization of work on this project as
of October 1, 2002. These initial installations were made before completion of
several planned features, principally a credit card authorization interface and
certain quick service related features. Initial sales efforts indicated that
these additional features were mandatory. Therefore, the Board of Directors of
the Company determined to continue capitalization of the entire software effort
until such time as the overall product was ready for general release. The
Company expects to complete this development during the month of January, 2003
and release the entire functionality in February, 2003. The software will be
amortized over the faster of a straight-line basis over a six year period or the
estimated yearly units of sale. Amortization will begin during the middle of the
fourth quarter of the current fiscal year. Detailed information concerning
expected software amortization expense is included in Note 9 to the Consolidated
Financial Statements.
Financing activities consumed a net of $134,332, through a combination
of payments of $276,124 under the Company's lines of credit and a net increase
in borrowings during the fiscal year, through December 31, 2002, of $141,792.
In addition to borrowings by the Company's U.K. subsidiary, in
conjunction with its acquisition of the aforementioned property and equipment,
the Company also borrowed $100,000 in the form of Subordinated Convertible Note
Agreements (the "Loans") from two of its directors. This amount is reflected
under long term debt, with no current component, on the Company's Consolidated
Balance Sheets. Detailed information on this transaction is included in Note 8
to the Consolidated Financial Statements and in the Company's filing on Form 8-K
made with the SEC on January 3, 2003. These funds will be utilized for general
corporate purposes, including but not limited to a reduction in the amounts
outstanding under the Company's line of credit facility with Fleet National Bank
(the "Bank"), the Company's primary lender. As reported in the Company's filings
both on Forms 10-QSB and Form 10-KSB, beginning as of June 30, 2001, the Company
has been unable to consistently meet the debt service covenant under its credit
facility with the Bank, which requires cash flows from operating activities
equal to or greater than 125 percent of the Company's debt service, including
interest and taxes. As a consequence, the Company has been, at various times, in
technical default on this facility, resulting in the possibility that the entire
amount of the borrowings could become immediately payable. As of December 31,
2002, the Company believes it was in compliance with all terms under its credit
facility with the Bank, which compliance would not have been possible without
the Loans.
14
Liquidity and Capital Resources (continued)
Adjustments resulting from translating foreign functional currency
financial statements into U.S. dollars are included in the consolidated
statements of cash flows as an adjustment to reconcile net income to cash used
in operating activities. For the nine month period ended December 31, 2002,
these adjustments had the effect of a cash provision of $41,026 on the
consolidated cash flows. On the consolidated balance sheets, these adjustments
are recorded in a currency translation adjustment in shareholders' equity. As a
result of changes in the exchange rate between the pound sterling and the U.S.
dollar, this adjustment to shareholders' equity increased from a negative impact
of $14,333 as of March 31, 2002, to a positive impact of $41,872 as of December
31, 2002.
In February of 2001, the Company's wholly-owned subsidiary in the U.K.,
Comtrex Systems Corporation LTD, signed a line of credit agreement with National
Westminster Bank PLC. The agreement calls for borrowings of up to (pound)150,000
(approximately $240,000), and was renewed in December of 2001 through December
3, 2002 and subsequently extended through January 31, 2003. The Company expects
this facility to be renewed during the month of January, 2003 to extend through
December of 2003. Borrowings bear interest at the bank's base rate (4.00 percent
as of December 31, 2002) plus 2 percent and are collateralized by substantially
all assets of the subsidiary. The Company is not a guarantor on this line of
credit.
In October of 2002, the Company entered into a credit facility with
Fleet National Bank (the "Bank"), replacing an existing facility originally
scheduled to expire on September 30, 2002 and subsequently extended through
October of 2002. The new credit facility provides the Company with the
availability of a total amount of $1,250,000 for borrowings and the issuance of
Irrevocable Letters of Credit and expires on September 30, 2003. Outstanding
borrowings bear interest at either the Bank's prime rate of interest, or three
percent above the Euro-Rate interest, at the Company's option. The credit
facility is collateralized by substantially all domestic assets of the Company.
The previous facility with the Bank provided the Company with the availability
of a total amount of $1,500,000. All other terms and conditions remained
essentially the same. The current credit facility, as did the previous facility,
also requires that the Company maintain certain financial covenants as a
condition of the loan. Compliance with these covenants is reported to the Bank
on a quarterly basis. As of December 31, 2002, the Company believes it was in
compliance with all terms under the credit facility.
The Company believes that its cash balance, together with the continued
availability of its lines of credit, provides the Company with adequate
liquidity to finance its projected operations for the foreseeable future. While
Management believes that the Fleet National Bank credit facility will continue
to be available to the Company, the continued availability through the term of
the facility will be dependent on the Company's ability to comply with all terms
of the credit facility in future quarterly reports to the Bank. Loss of either
of the Company's lines of credit would have an adverse affect on the normal
operating activities of the Company. As of December 31, 2002, the Company had no
material commitments for capital expenditures.
Results of Operation
Net sales during the first nine months of fiscal year 2003 decreased
very slightly, by 1%, to $4,975,681, as compared with corresponding sales of
$5,044,738 during the first nine months of fiscal year 2002. For the comparable
quarters ended December 31, sales increased by 12%, to $1,821,846 from
$1,620,232 for fiscal years 2003 and fiscal year 2002, respectively. Results of
operations of the Company's U.K. distributor, acquired as of October 2, 1997,
are consolidated in both quarters.
The Company reported net income of $36,946 for the current nine month
period, or $.03 per share, as compared with a loss of $164,165, or $.12 per
share, for the comparable prior year period. During the quarter ended December
31, 2002 the Company reported net income of $50,896, or $.04 per share, as
compared with a net loss of $4,784, negligible on a per share basis, for the
third quarter of the prior fiscal year.
15
Results of Operation (continued)
Export sales by the U.S. operating unit were down substantially both
during the most recent quarter and for the first nine month period. For the
quarter, export sales fell by 15%, from $325,021 during the third quarter of
fiscal year 2002 to $277,445 during the most recent quarter. For the nine month
period, export sales fell by 33%, from $1,183,580 to $798,760 for fiscal years
2002 and 2003, respectively. Prior to fiscal year 2002, the Company's
distributor in France, Restaurant Data Systems (RDS), accounted for 19%, 21% and
15% for the fiscal years 2001, 2000 and 1999, respectively. During fiscal year
2002, RDS began local sourcing, in France, of the hardware components associated
with sales of the Company's product lines. RDS accounted for 10% of Company net
sales during fiscal year 2002. During the first nine months of fiscal year 2003,
sales to RDS accounted for less than 2% of total Company net sales. Management
believes that the release for general delivery of the next generation
point-of-sale software, the Odyssey POS/2100, will positively impact export
sales by the U.S. operating unit, however, such impact will most likely not
occur during fiscal year 2003.
The reduction in overall export sales would have been even more
substantial had such sales not reflected a significant increase in transfers by
the U.S. operating unit to Comtrex U.K. During the nine month period ended
December 31, 2002, such transfers increased to $598,026 from the $448,260 during
the comparable prior nine month period, representing a 33% increase. In
addition, sales by Comtrex U.K. increased by 23%, from $2,311,220 to $2,838,656,
when comparing the first nine months of fiscal years 2002 and 2003,
respectively. All of the operating profit reported for both the current quarter
and nine month period relate to the operations of Comtrex U.K. Information
relating to the Company's operating segments is included in Note 5 to the
Consolidated Financial Statements.
Consolidated administrative expenses decreased from $722,625 to
$605,151 during the first nine month period of fiscal year 2003 when compared to
the same period of fiscal year 2002, representing a decrease from 14% to 12% of
net sales in the comparative periods. Total sales, marketing and customer
support expenses increased slightly, comparing the $1,791,038 reported for the
current nine month period, to the $1,718,431, reported for the nine month period
ended December 31, 2001, representing 36% and 34% of net sales, respectively.
Sales, marketing and customer support expenses for the third quarter of fiscal
year 2003 rose by 15% over such expenses incurred during the third quarter of
the prior fiscal year. However, the 12% increase in net sales, when comparing
the current to the prior third quarterly period, caused such expenses to remain
essentially constant as a percentage of sales, representing 34% during the most
recent quarter and 33% during the third quarter of the prior fiscal year. The
increase in sales, marketing and customer support expenses relates to
promotional and training activities associated with the introduction of the
Company's new software products.
Cost of sales during both the third quarter and first nine month period
of fiscal year 2003 were 45% of net sales, as compared to 47% and 48% of net
sales, respectively, for the comparable quarter and nine month period of the
prior fiscal year. Despite the slight decrease in cost of sales, the Company
continues to experience pricing pressures and the consequent pressure on its
gross margins as a result of an overall economic slowdown and the competitive
market.
Over the past several years, the Company has experienced a gradual
erosion in sales to U.S. customers in the sit-down dining segment of its
customer base, coupled with a gradual decline in sales through its U.S. dealer
network. The primary customer base for the Company's U.S. dealer network is the
sit-down dining segment. The Company has been engaged in the software design,
development and documentation of an entirely new suite of in-store software,
including both back office software and point-of-sale software, for the last
three fiscal years.
The initial implementation of the back office software component of
this product suite was released during the third quarter of fiscal year 2002.
The point-of-sale component, the Odyssey POS/2100, was initially installed at
several locations during the quarter ended September 30, 2002. However, these
installations of the software product were made before completion of several
planned features, principally a credit card authorization interface and certain
quick service related features. Initial sales efforts indicated that in order
for the product to effectively compete and be released for general delivery,
these additional features were mandatory. The Company expects to complete this
development during the month of February, 2003 and release the entire
functionality in March, 2003.
16
Results of Operation (continued)
Management believes that in order to effectively compete in both the
sit-down dining and quick service market segments, the Company must focus all of
its development, marketing and support activities during the foreseeable future
on continued product enhancement and follow up documentation, training and
promotional efforts relating to this next generation software suite.
Notwithstanding comparative quarterly increase in sales for the most recent
quarter, management further believes that the Company is experiencing an
accelerated decline in sales of its existing hardware and software products as
intensive training and marketing activities commenced on the new product line.
While management believes that the release of the more fully featured
next generation product suite in January will position the Company for a return
to long term growth and profitability, the ability of the Company to continue to
report profitability during the next several quarters fiscal year will depend
heavily on the acceptance, and reliability in the field, of this new product
suite. Despite the absence of several mandatory features in the point-of-sale
software, the results of the Company's promotional activities, as well as the
initial installations of the product, have to-date have been very positive.
There are currently approximately thirty installations operational with the new
point-of-sale software.
As of January 29, 2003, the Company's backlog was approximately
$225,000. Excluded from this backlog are any orders for delivery to subsidiaries
or District Offices from the parent. The Company's backlog as of February 1,
2002 was approximately $618,000. The Company expects that substantially all of
its current backlog will be shipped within the next 90 days.
Item 3. Controls and Procedures
Based on their evaluation of the Company's disclosure controls and
procedures (as defined in 17 C.F.R. Sections 240.13a-14(c) and 240.15d-14(c)) as
of a date within 90 days prior to the filing of this quarterly report, the
issuer's Chief Executive Officer (who also effectively serves as the Chief
Financial Officer) and Chief Accounting Officer concluded that the effectiveness
of such controls and procedures was adequate in timely alerting them to material
information relating to the Company required to be included in its SEC periodic
filings.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation. There were also no significant deficiencies or
material weaknesses identified for which corrective actions needed to be taken.
17
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
On January 2, 2003, the Company entered into separate Subordinated
Convertible Note Agreements (together the "Loans") with two individuals. Under
the Loans, those two individuals, who are Jeffrey C. Rice, President, Chief
Executive Officer and a director of the Company, and Steven D. Roberts, Managing
Director of the Company's U.K. subsidiary (Comtrex Systems, LTD) and a director
of the Company, have each loaned the Company $50,000.00. Each of these Loans is
represented by a Subordinated Convertible Note, and bears interest at the rate
of six percent (6%) per annum. Interest on the Loans is due monthly, and the
principal amount of the Loans is due on the fifth anniversary of the Loans. The
indebtedness under the Loans is subordinate to all senior indebtedness of the
Company, whether outstanding on the date of the Loans or thereafter created,
incurred or assumed, in respect of borrowed money from any bank, savings and
loan, insurance company or other financial institution. The Loans also contain
standard anti-dilution provisions. The principal amount of the Loans is
convertible at any time at the election of the lenders into shares of the
Company's common stock at a conversion price of $0.25 per share in minimum
amounts of $5,000.00, or 20,000 shares. The proceeds of the Loans will be
utilized for general corporate purposes, including but not limited to a
reduction in the amounts outstanding under the Company's line of credit facility
with Fleet National Bank, the Company's primary lender.
Mr. Rice is currently the beneficial owner of 140,069 shares of common
stock of the Company, or 9.9%, which beneficial ownership includes 5,002 shares
subject to stock options previously granted. Mr. Roberts is currently the
beneficial owner of 136,002 shares of common stock of the Company, or 9.6%,
which beneficial ownership includes 2,668 shares subject to stock options
previously granted. Should all options held by each individual be exercised and
the conversion rights under the Loans be fully exercised, Mr. Rice would be the
beneficial owner of 340,069 shares of common stock, or 18.6%, and Mr. Roberts
would be the beneficial owner of 336,002 shares of common stock, or 18.4%. If
both individuals exercise their conversion rights under the Loans in full, it
would be difficult to effectuate most corporate actions requiring shareholder
approval should both individuals fail to consent to such action. The Company
does not, however, deem that a change in control of the Company has occurred
because more than 60% of the currently outstanding shares are still owned by
unrelated parties and Mr. Rice and Mr. Roberts have no understanding or
agreement to vote their holdings in the same manner.
18
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B:
Exhibit No. Description of Instrument Page No.
- ----------- ------------------------- --------
4.1 *(b) Specimen Common Stock Share Certificate
10.1 *(c) 1992 Non-Qualified Stock Option Plan of the Company
10.2 *(d) 1995 Employee Incentive Stock Option Plan of the Company
10.3 *(e) 1999 Stock Option Plan of the Company
10.4 *(f) Amended and Restated Master Advance Note between the Company
and Fleet National Bank, dated November 19, 2001
10.5 *(f) Advice of Borrowing Terms between Comtrex Systems
Corporation LTD and National Westminster Bank, PLC,
dated December 21, 2001
10.6 *(g) Subordinated Convertible Note Agreements dated January 2, 2003
entered into by Comtrex Systems Corporation and
Jeffrey C. Rice and by Comtrex Systems Corporation and
Steven D. Roberts
99.1 *(a) Certification of the Chief Executive Officer 22
99.2 *(a) Certification of the Chief Financial Officer
(or equivalent thereof) 23
- ------------
*(a) Filed herewith.
*(b) Incorporated by reference to the exhibits to the Company's Form 8-K
filed with the Securities and Exchange Commission on May 16, 1989.
*(c) Incorporated by reference to the exhibits to the Company's definitive
proxy statement filed with the Securities and Exchange Commission on
July 16, 1992.
*(d) Incorporated by reference to the exhibits to the Company's definitive
proxy statement filed with the Securities and Exchange Commission on
July 13, 1995.
*(e) Incorporated by reference to the exhibits to the Company's Form 10-KSB
filed with the Securities and Exchange Commission on June 28, 1999.
*(f) Incorporated by reference to the exhibits to the Company's Form 10-QSB
filed with the Securities and Exchange Commission on February 11, 2002.
*(g) Incorporated by reference to the exhibits to the Company's Form 8-K
filed with the Securities and Exchange Commission on January 3, 2003.
(b) Reports on Form 8-K
During the quarter ended December 31, 2002, no current reports on Form
8-K were filed by the registrant with the Securities and Exchange Commission.
On January 3, 2003, the Company filed a Form 8-K with the Securities
and Exchange Commission reporting that the Company had entered into separate
Subordinated Convertible Note Agreements (together the "Loans") with two
individuals. Under the Loans, those two individuals, who are Jeffrey C. Rice,
President, Chief Executive Officer and a director of the Company, and Steven D.
Roberts, Managing Director of the Company's U.K. subsidiary (Comtrex Systems,
LTD) and a director of the Company, have each loaned the Company $50,000.00.
Additional information related to the Loans is included in Note 8 to the
Consolidated Financial Statements included in this report.
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.
COMTREX SYSTEMS CORPORATION
(Registrant)
Date: January 31, 2003 By: /s/ Jeffrey C. Rice
-------------------- -----------------------------------
Jeffrey C. Rice
Chief Executive Officer
Date: January 31, 2003 By: /s/ Pamela M. Reci
-------------------- -----------------------------------
Pamela M. Reci
Chief Accounting Officer
20
Exhibit Index
-------------
Exhibit Page
- ------- ----
99.1 Certification of the Chief Executive Officer 22
99.2 Certification of the Chief Accounting Officer 23
21