UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended March 31, 2005.
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission File No: 000-30045
CATUITY INC.
(Exact Name of Registrant as specified in its charter)
Delaware 38-3518829
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2711 E. Jefferson Avenue
Detroit, MI 48207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(313) 567-4348
Indicate by check mark whether the registrant (1) has filed all reports
required 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 ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes ( ) No ( X )
Indicate the number of shares outstanding of each of the issuer's classes
of stock as of the latest practical date: Common stock outstanding 778,184
shares as of April 30, 2005.
1
CATUITY INC.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - March 31, 2005 and December 31, 2004 3
Consolidated statements of operations - Three months ended March 31, 2005 and 2004 4
Consolidated statements of cash flows - Three months ended March 31, 2005 and 2004 5
Notes to Consolidated Financial Statements - March 31, 2005 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 3. Controls And Procedures 11
PART II. OTHER INFORMATION 13
Item 1. Legal Proceedings 13
Item 2. Unregistered Sales of Equity Securities and use of proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits 13
SIGNATURES AND CERTIFICATIONS 14
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CATUITY INC.
CONSOLIDATED BALANCE SHEETS
----------------------------------------
MARCH 31, 2005 DECEMBER 31, 2004
ASSETS (Unaudited)
------
CURRENT ASSETS:
Cash and cash equivalents $1,755,238 $2,560,683
Accounts receivable, less allowance of $5,000 at 24,852 36,211
March 31, 2005 and December 31, 2004
Restricted cash 113,423 116,012
Prepaid expenses and other 116,891 127,429
----------- ----------
Total current assets 2,010,404 2,840,335
Property and equipment, net 142,526 162,780
Other assets 80,870 --
----------- ----------
Total assets $2,233,800 $3,003,115
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $171,296 $150,584
Accrued compensation 78,806 317,433
Other accrued expenses 152,190 87,474
Trust liability 89,208 91,722
----------- ----------
Total current liabilities 491,500 647,213
SHAREHOLDERS' EQUITY:
Common stock - $.001 par value; Authorized - 778 778
6,666,667 shares: issued and outstanding -
778,184 at March 31, 2005 and December 31, 2004
Preferred stock - $.001 par value; Authorized - -- --
666,667 shares
Additional paid-in capital 36,589,586 36,603,127
Shareholder loans (66,745) (79,533)
Foreign currency translation adjustment 77,950 96,656
Accumulated deficit (34,859,269) (34,265,126)
----------- ----------
Total shareholders' equity 1,742,300 2,355,902
----------- ----------
Total liabilities and shareholders' equity $2,233,800 $3,003,115
=========== ==========
See accompanying notes.
3
CATUITY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
-----------------------------
2005 2004
---------- ----------
REVENUES:
Project related $0 $218,454
Service 19,660 215,139
License 12,600 44,943
---------- ---------
Total revenues 32,260 478,536
COST OF REVENUE AND OTHER OPERATING EXPENSES:
Cost of project related 0 81,673
Cost of service 18,266 112,917
Cost of license 1,189 44,231
Sales and marketing 144,359 234,348
Research and development 131,916 306,424
General and administrative 354,927 333,498
---------- ---------
Total costs and expenses 650,657 1,113,091
---------- ---------
Operating loss (618,397) (634,555)
Interest income 24,256 30,914
---------- ---------
Net loss ($594,141) ($603,641)
========== =========
Net loss per share - basic and diluted ($0.76) ($0.78)
========== =========
Weighted average shares outstanding-basic & diluted 778,184 776,425
========== =========
See accompanying notes.
4
CATUITY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2005 2004
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(594,141) $(603,641)
Adjustments used to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 20,254 34,472
Changes in assets and liabilities:
Accounts receivable 11,359 283,111
Other assets, net 13,125 (145,676)
Deferred revenue 0 16,944
Accounts payable 20,712 7,663
Accrued expenses and other liabilities (176,425) (88,908)
---------- -----------
Net cash used in operating activities (705,116) (496,035)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment -- (36,710)
Acquisition Related (80,870) --
---------- -----------
Net cash/(used) in investing activities (80,870) (36,710)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of fractional shares related to reverse (753) 0
stock split
Issuance of common stock, net of expenses 0 5,206
---------- -----------
Net cash provided/(used) by financing activities (753) 5,206
---------- -----------
Foreign exchange effect on cash and cash equivalents (18,706) 17,522
---------- -----------
Net decrease in cash and cash equivalents (805,445) (510,017)
Cash and cash equivalents, beginning of period 2,560,683 5,768,828
---------- -----------
Cash and cash equivalents, end of period $1,755,238 $5,258,811
========== ===========
See accompanying notes.
5
CATUITY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Catuity Inc.
(the "Company") have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for annual
financial statements and notes. The balance sheet at December 31, 2004 has been
derived from the consolidated audited financial statements at that date but does
not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring items) considered necessary for a fair presentation have been
included. Operating results, for the three month period ended March 31, 2005 are
not necessarily indicative of the results that may be expected for any
subsequent quarter or for the entire year ended December 31, 2005. The
accompanying interim, consolidated financial statements should be read in
conjunction the consolidated financial statements and footnotes included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 2004.
Certain prior year amounts have been reclassified to conform with the current
year presentation.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued Statement of Financial Accounting Standards
No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)") which requires the
measurement of all employee share-based payments to employees, including grants
of employee stock options, using a fair-value-based method and the recording of
such expense in the consolidated statement of operations. The accounting
provisions of SFAS 123(R) are effective for reporting periods beginning after
December 15, 2005. We will adopt SFAS 123(R) effective as of the first quarter
of 2006. The pro forma disclosures previously permitted under SFAS 123 no longer
will be an alternative to financial statement recognition. As a result, because
SFAS 123(R) requires the expensing of stock options, it will have an adverse
effect on our reported financial results. However, we have not yet assessed the
level of impact to be able to quantify the adverse effect.
3. COMPREHENSIVE INCOME/ (LOSS)
Comprehensive income/(loss) is summarized as follows:
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2005 2004
--------- ---------
Net loss $(594,141) $(603,641)
Foreign currency translation (18,706) 17,522
--------- ---------
Total comprehensive loss $(612,847) $(586,119)
========= =========
6
4. STOCK BASED COMPENSATION
The Company accounts for stock-based awards issued to employees under the
intrinsic value method in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and has adopted
the disclosure-only alternative of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123").
Had compensation costs for stock-based awards issued to employees been
determined consistent with SFAS No.123, the Company's net loss and net loss per
share would have been reported as follows:
THREE MONTHS ENDED
MARCH 31,
----------------------------
2005 2004
--------- ---------
Net loss as reported ($594,141) $(603,641)
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards
(2,644) (16,957)
--------- ---------
Pro forma net loss ($596,795) $(620,598)
========= =========
Net loss per share: basic and diluted- as reported ($0.76) $(0.78)
========= =========
Pro forma basic and diluted loss per share ($0.77) $(0.80)
========= =========
5. COMMITMENTS AND CONTINGENCIES
During December 2004 the Company's R&D team, located in Sydney Australia,
vacated its existing office space and relocated to a new office building.
Although there has been no formal claim filed and no legal proceedings have been
instituted, the Company believes it is possible for the Company to have an
outstanding monetary obligation if the lease agreement related to the vacated
space that expired in December 2003, is determined to have been extended for an
additional 4 year period. The Company believes that at the time the office space
was vacated, there was only a month-to-month rental agreement in effect. If, in
the future a claim is filed, and a legal determination is subsequently made that
a long-term lease did in fact exist, then the Company could be obligated to pay
the landlord for some amount of rental losses, which can not be estimated at
this time.
In December 2004, the Company entered into employment agreements with 3
employees. Under each of the three agreements, in the event employment is
terminated (other than voluntarily by the employee or by the Company for cause),
the Company is committed to make a one-time severance payment equal to 30% of
annual salary or approximately $80,000 in total.
6. ACQUISITION
On March 17, 2005, the Company announced an agreement to purchase all of the
outstanding shares of Loyalty Magic Pty. Ltd., an Australian company located in
Melbourne for A$5.5 million ($4.35 million USD based on the foreign exchange
rate in effect on the day before the signing of the agreement). This represents
a significant step in the Company's turnaround plan toward profitability.
Loyalty Magic was both cash flow positive and profitable in its fiscal year
ended June 30, 2004 and expects continued growth in 2005 and beyond. Of the
A$5.5 million purchase price, which excludes acquisition related costs,
approximately 35% will be issued in new Catuity shares with the remainder to be
paid in cash. Loyalty Magic's management team and A&B Venture Fund Company Pty
Ltd. will hold the majority of the shares. Catuity will undertake a capital
raising, anticipated to be approximately A$6 million ($4.6 million USD based on
the exchange rate at March 31, 2005), in order to pay the cash portion of the
transaction and to provide additional working capital. The combined company will
have approximately a 40-person team serving existing customers in Australia, New
Zealand, and North America. The acquisition of Loyalty Magic and associated
capital raise, which is subject to shareholder approval, is expected to close
following Catuity's Annual Shareholder Meeting.
7
7. MANAGEMENT PLANS
In early 2004, management determined it was necessary to substantially revise
its corporate strategy away from the smart card market and began work on a new
strategic plan. Prior to the Target Corporation decision to discontinue issuing
smart cards, the Company had focused its efforts on licensing its smart card
based loyalty software to large retailers in North America. From its strategic
planning efforts, the Company determined that its business focus should be on
providing a hosted or customized software solution for tier two chain retailers
(and their partners) and on providing services to retailers, merchant service
providers, and POS equipment manufacturers for their needs at the point of sale.
As a result, the Company's market focus is on tier two retailers with
approximately 50 to 250 stores, and in particular, pharmacy chains, home
improvement, auto services and other chain retailers looking to improve customer
retention, add new customers, and increase each customer's average spend amount.
The Company also determined that it needed to become active in the mergers and
acquisitions market as a means to provide growth in as short a period of time as
possible. As a result, in the middle of 2004, the Company began an active effort
to identify companies that would represent an appropriate business fit with
Catuity's business, provide positive cash-flow, and profits from their
operations. (See Note 6 for information on the acquisition that is currently
pending.)
8. SUBSEQUENT EVENT
On April 4, 2005, the Nasdaq staff (the "Staff") notified Catuity Inc. (the
"Company") that it had determined that, for the period ended December 31, 2004
the Company was out of compliance with Nasdaq Marketplace Rule 4310(c)(2)(B)
(the "Nasdaq Rule") for continuous listing on the Nasdaq Small Cap Market. That
Nasdaq Rule requires Nasdaq Small Cap Market companies to maintain a minimum of
$2,500,000 in stockholders' equity, or $35,000,000 market value of listed
securities, or $500,000 of net income from continuing operations for the most
recently completed fiscal year or two of the three most recently completed
fiscal years in order to maintain the listing of their securities on the Nasdaq
Small Cap Market. On April 19, 2005, Catuity submitted a plan to Nasdaq staff
describing how the Company will achieve and sustain compliance with the
$2,500,000 shareholder equity minimum and all other continuous listing
requirements. The Staff is in the process of reviewing the Company's plan.
As of March 31, 2005 Catuity is in compliance with all of Nasdaq's seven
continuous listing requirements except the requirement to maintain either
$2,500,000 in stockholders' equity, or $35,000,000 market value of listed
securities, or have $500,000 of net income in 2004 or in two of its past three
fiscal years. The Company expects to achieve compliance with the one Nasdaq
continuous listing requirement it is not in compliance with by maintaining a
minimum of $2,500,000 in stockholder's equity upon completion of the acquisition
of Loyalty Magic and the capital raise.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Catuity provides technology-based solutions to retailers that are designed to
increase the profit they receive from their customers at the Point of Sale
(POS). Today, the Company sells a hosted, ASP-based system that enables the
processing of member-based loyalty programs that can deliver customized
discounts, promotions, rewards and points-based programs designed to help
retailers find, keep and profit from their best customers. The Company also
enables gift card solutions. In late 2004, the Company introduced the first
version of its new loyalty software, the Catuity Advanced Loyalty System (CALS).
The system enables robust and highly customizable programs which work on a
retailer's payment terminals, Electronic Cash Registers and on their internal
store networks. Catuity also offers IT services to retailers to support their
POS systems maintenance and custom development needs for both the deployment of
our technology solution and those of third parties which also touch the point of
sale.
As previously disclosed throughout 2004, in February 2004, Target Corporation
decided to discontinue its issuance of smart cards and phase out its
participation in the Visa Smart Rewards platform. Catuity's loyalty software was
one of the principal drivers of the Smart Rewards program that had been, and was
being, developed by Visa for retailers. Targets decision resulted in Visa
ceasing operation of the Smart Rewards program in October 2004. This decision
has had a significant negative impact on the Company's revenues.
On March 17, 2005, the Company announced an agreement to purchase all of the
outstanding shares of Loyalty Magic Pty. Ltd., an Australian company located in
Melbourne for A$5.5 million ($4.35 million USD based on the foreign exchange
rate in effect on the day before the signing of the agreement). This represents
a significant step in the Company's turnaround plan toward profitability.
Loyalty Magic was both cash flow positive and profitable in its fiscal year
ended June 30, 2004 and expects continued growth in 2005 and beyond. Of the
A$5.5 million purchase price, which excludes acquisition related costs,
approximately 35% will be issued in new Catuity shares with the remainder to be
paid in cash. Loyalty Magic's management team and A&B Venture Fund Company Pty
Ltd. will hold the majority of the shares. Catuity will undertake a capital
raising, anticipated to be approximately A$6 million ($4.6 million USD based on
the exchange rate at March 31, 2005), in order to pay the cash portion of the
transaction and to provide additional working capital. The combined company will
have approximately a 40-person team serving existing customers in Australia, New
Zealand, and North America. The acquisition of Loyalty Magic and associated
capital raise, which is subject to shareholder approval, is expected to close
following Catuity's Annual Shareholder Meeting.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND MARCH 31, 2004
REVENUE
Total revenues for the three month period ended March 31 ("first quarter")
decreased $446,000, to $32,000 in 2005 compared to $478,000 in 2004. First
quarter 2005 revenues consisted of approximately $20,000 in service revenue
related to consulting services for a client, and approximately $12,000 in
license revenue that consisted of software license fees and maintenance. First
quarter 2004 revenues consisted of approximately $218,000 in project revenue
related to software development for Visa; approximately $215,000 in service
revenue related to support services for Visa and Target; approximately $45,000
in software license fees and maintenance for a client; and maintenance fees for
Target.
COST OF PROJECT REVENUE
Cost of project revenue primarily consists of salaries, employee benefits,
related expenses and overhead for the portion of time spent by our technical
staff located in Sydney, Australia who work on software development activities
for customers. The Company did not engage in any software development activities
on behalf of customers in the first quarter of 2005 and therefore did not incur
any costs related to project revenue. Cost of project revenue was approximately
$82,000 for the first quarter of 2004.
9
COST OF SERVICE REVENUE
Cost of service revenue primarily consists of salaries, employee benefits,
related expenses and overhead for the client services and support staff, for the
portion of their time spent on service related activities. Cost of service
decreased $95,000, or 84%, in the first quarter of 2005 compared to the first
quarter of 2004, and service revenue decreased by $195,000, or 91%, over the
same period. The decrease in expenses for the three-month period was due to a
reduction in staff and also corresponded with the decrease in service revenue.
COST OF LICENSE REVENUE
Cost of license revenue primarily consists of salaries, employee benefits,
related expenses and overhead for the client support staff and the technical
staff's time spent on maintenance activities related to licensed Catuity
software. Cost of license decreased $43,000, or 98%, in the first quarter of
2005 compared to the first quarter of 2004, and license revenue decreased by
$32,000, or 71%, over the same period. The decrease in expenses for the
three-month period was due to a reduction in staff and also corresponded with
the decrease in license revenue.
SALES AND MARKETING
Sales and marketing expenses consist primarily of salaries, employee benefits,
travel, marketing, public relations and related overhead costs of the sales and
marketing team. Sales and marketing expenses decreased $90,000, or 38%, in the
first quarter of 2005 compared to the first quarter of 2004. The decrease was
principally due to reductions in staff size and lower overhead allocations.
RESEARCH AND DEVELOPMENT
Research and Development expenses consist primarily of salaries, employee
benefits and overhead cost, incurred primarily by the technical staff in Sydney
Australia. Research and development expenses decreased $174,000, or 57%, in the
first quarter of 2005 compared to the first quarter of 2004. The decrease was
due to the significant reduction in staffing that occurred in the 4th quarter of
2004 which lowered salary and related costs and overhead.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of salaries, employee
benefits, related overhead costs and professional services fees. General and
administrative expenses increased $21,000, or 6%, in the first quarter of 2005
compared to the first quarter of 2004. The increase was primarily due to higher
outside audit fees recorded in the first quarter of 2005 compared to the first
quarter 2004. This was due to a change in how the Company records audit fees,
resulting in a timing difference, rather than an increase in costs . Costs for
internal finance and administration and office overhead were approximately
$40,000 lower in the first quarter 2005 compared to the first quarter 2004.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded our operations with proceeds from the issuance of
common stock and cash collections from customers. As of March 31, 2005, the
Company had approximately $1,755,000 in cash and cash equivalents, a decrease of
$806,000 from December 31, 2004. Net cash used in operating activities was
$786,000 for the three-month period ended March 31, 2005 compared with $496,000
for the three-month period ended March 31, 2004. The increase in net loss was
the primary factor contributing to the increase in net cash used in operating
activities.
There was no cash used in investing activities for the three-month period ended
March 31, 2005 compared with cash used of $37,000 for the three-month period
ended March 31, 2004. The $37,000 used during the three month period ended March
31, 2004 primarily related to the purchase of computer hardware in the U.S.
There were no capital purchases made during the three-month period ended March
31, 2005.
Net cash used by financing activities was $750 for the three-month period ended
March 31, 2005 and related to
10
payments to shareholders for fractional shares related to the Company's reverse
stock split. Cash provided by financing for the same period in 2004 was $5,000
and related to shares of the Company's common stock purchased at fair market
value under the Company's Executive Director Stock Purchase Plan.
The Company intends to raise equity capital in 2005, anticipated to be
approximately A$6 million (or approximately $4.6 million USD), in order to fund
the cash portion of the Loyalty Magic Pty Ltd. acquisition and to provide
additional working capital. In the event the acquisition does not occur,
Catuity's Board of Directors intends to complete a smaller capital raising
effort with the objective of raising $2,000,000 USD. The acquisition is subject
to approval of shareholders and the successful completion of a capital raise
expected to be completed in the third quarter of this year. Under either capital
raising alternative, the five individual members of the Board of Directors have
indicated that their participation will amount to approximately $325,000 USD.
The Company believes that with its capital raising efforts, the significant
reductions made in the Company's operating expenses, combined with its existing
capital resources and revenue opportunities, are adequate to meet its cash
requirements for the next twelve months.
FORWARD LOOKING INFORMATION
The Management Discussion and Analysis of Financial Condition and Results of
Operations includes "forward-looking" statements within the meaning of the
Private Securities Litigation Act of 1995. This Act provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information about themselves so long as they identify these statements as
forward-looking and provide meaningful cautionary statements identifying
important factors that could cause actual results to differ from the expected
results. All statements other than statements of historical fact made in this
Form 10-Q are forward looking. In some cases, they can be identified by
terminology such as "may," "will," "should," "expect," " plan," "anticipate,"
"believe," "estimate," "predict," "potential," or "continue," the negative of
such terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. In evaluating these
statements, you should consider various factors that may cause our actual
results to differ materially from any forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee our future results, levels of
activity, performance or achievement. Moreover, neither we nor any other person
assumes liability for the accuracy and completeness of the forward-looking
statements. Various factors may cause actual performance to differ from any of
the forward-looking statements contained in the Management Discussion and
Analysis of Financial Condition and Results of Operations. These include, but
are not limited to; changes in currency exchange rates from period to period,
inflation rates in the United States and Australia, recession, and other
external economic factors over which the Company has no control; the timing and
speed with which our major customers and prospects execute their plans for the
use of our loyalty software; future development of the Company's software
products; competitive product and pricing pressures; use of internally developed
software applications; patent and other litigation risks; the risk of key staff
leaving the Company; the risk that major customers of the Company's products
reduce their requirements or terminate their arrangements with the Company;
ability to raise capital; as well as other risks and uncertainties, including
but not limited to those detailed from time to time in the Company's Securities
and Exchange Commission filings. These forward-looking statements are made only
as of the date hereof, and the Company undertakes no obligation to update or
revise the forward-looking statements, whether as a result of new information,
future events or otherwise.
ITEM 3. CONTROLS AND PROCEDURES
Management, including the Company's Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures, pursuant to Rule 13a-15 of the
Securities and Exchange Act of 1934. The Company's disclosure controls and
procedures are designed to ensure that information required to be disclosed by
the Company in its periodic SEC filings is recorded, processed and reported
within the time periods specified in the SEC filings is recorded, processed and
reported within the time periods specified in the SEC's rules and forms. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
11
all material respects, to ensure that information required to be disclosed in
the reports the Company files and submits under the Exchange Act is recorded,
processed, summarized and reported as and when required.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date the Company carried out its evaluation. There were no significant
deficiencies or material weaknesses identified in the evaluation and, therefore,
no corrective actions were taken.
12
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
(a) Exhibit Description
------- -----------
EX-31.1 Certification by Alfred H. Racine III, President and Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EX-31.2 Certification by John H. Lowry, Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EX-32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13
SIGNATURES AND CERTIFICATIONS
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.
By: /s/ Alfred H. Racine III
------------------------
Alfred H. Racine III
President and Chief Executive Officer
By: /s/ John H. Lowry
-----------------
John H. Lowry
Chief Financial Officer
Date: May 16, 2005
14
EXHIBIT INDEX
-------------
<Table>
<Caption>
Exhibit No. Description
- ----------- -----------
EX-31.1 Certification by Alfred H. Racine III, President and Chief
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
EX-31.2 Certification by John H. Lowry, Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EX-32 Certifications pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
</Table>