================================================================================
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 MARCH 31, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ________ to ________.
Commission File Number 1-13852
CET ENVIRONMENTAL SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 33-0285964
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7032 SOUTH REVERE PARKWAY, ENGLEWOOD, CO 80112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (720) 875-9115
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 .
------ -----
As of May 1, 2002, 5,757,792 shares of common stock, no par value per share,
were outstanding.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CET ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
MARCH 31,
2002 DECEMBER 31,
ASSETS (UNAUDITED) 2001
------------ ------------
CURRENT ASSETS:
Cash ............................................................. $ 1,853,273 $ 469,939
Accounts receivable, less allowance for doubtful accounts of
$48,545 in 2002 and $63,753 in 2001 .......................... 4,469,055 7,171,579
Contracts in process, less allowance for doubtful accounts of
$8,944 in 2002 and $38,944 in 2001 ........................... 259,980 1,751,874
Retention receivable ............................................. 70,252 65,288
Other receivables ................................................ 227,104 19,233
Inventories ...................................................... 15,372 15,838
Land under development ........................................... 261,273 185,350
Prepaid expenses ................................................. 155,662 228,260
------------ ------------
Total Current Assets .................................... 7,311,971 9,907,361
------------ ------------
EQUIPMENT AND IMPROVEMENTS:
Field equipment .................................................. 216,705 1,210,037
Vehicles ......................................................... 316,494 316,494
Furniture & fixtures ............................................. 75,378 75,378
Office equipment ................................................. 421,205 421,205
Leasehold improvements ........................................... 49,862 49,862
------------ ------------
1,079,644 2,072,976
Less allowance for depreciation and amortization ................. (865,757) (1,267,959)
------------ ------------
Equipment and improvements, net ......................... 213,887 805,017
------------ ------------
OTHER ASSETS:
Deposits ......................................................... 13,505 123,368
------------ ------------
$ 7,539,363 $ 10,835,746
============ ============
</Table>
The accompanying notes are an integral part of these statements.
1
CET ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
MARCH 31,
2002 DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) 2001
------------ ------------
CURRENT LIABILITIES:
Accounts payable ................................................ $ 1,090,833 $ 3,341,708
Accrued expenses ................................................ 351,319 143,520
Accrued contract costs .......................................... -- 49,570
Accrued payroll and benefits .................................... 125,974 101,124
Notes payable - current ......................................... 24,893 98,466
------------ ------------
Total current liabilities .............................. 1,593,019 3,734,388
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES ................................... -- --
STOCKHOLDERS' EQUITY:
Common stock (no par value) - authorized 20.0 million shares;
5,757,792 and 5,976,549 shares issued and outstanding in 2002
and 2001, respectively ...................................... 8,419,407 8,506,007
Paid-in capital ................................................. 104,786 104,786
Accumulated deficit ............................................. (2,577,849) (1,509,435)
------------ ------------
Total stockholders' equity ............................. 5,946,344 7,101,358
------------ ------------
$ 7,539,363 $ 10,835,746
============ ============
</Table>
The accompanying notes are an integral part of these statements.
2
CET ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
QUARTER ENDED
--------------------------------
MARCH 31, MARCH 31,
2002 2001
------------ ------------
PROJECT REVENUE ........................................................... $ 1,032,274 $ 4,066,120
PROJECT COSTS:
Direct ........................................................... 771,729 3,242,606
Indirect ......................................................... 246,395 269,888
------------ ------------
1,018,124 3,512,494
------------ ------------
Gross profit ............................................ 14,150 553,626
------------ ------------
OPERATING EXPENSES:
Selling .......................................................... 33,591 39,102
General and administrative ....................................... 665,945 530,418
------------ ------------
699,536 569,520
------------ ------------
Operating loss .......................................... (685,386) (15,894)
------------ ------------
OTHER INCOME (EXPENSE):
Loss on sale of equipment ........................................ (383,761) (2,026)
Interest income (expense), net ................................... (269) 10,406
Other income (expense) ........................................... 1,002 19,006
------------ ------------
(383,028) 27,386
------------ ------------
Income (loss) before income taxes ....................... (1,068,414) 11,492
------------ ------------
Provision for income taxes .............................. -- --
------------ ------------
NET INCOME (LOSS) ......................................................... $ (1,068,414) $ 11,492
============ ============
Earnings (loss) per common share .......................................... $ (0.18) $ 0.00
============ ============
Weighted average number of common shares outstanding ...................... 5,847,725 6,254,562
============ ============
Earnings (loss) per common share - assuming dilution ...................... $ (0.18) $ 0.00
============ ============
Weighted average number of fully diluted common shares outstanding ........ 5,847,725 6,274,319
============ ============
</Table>
The accompanying notes are an integral part of these statements.
3
CET ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
QUARTER ENDED
---------------------------------
MARCH 31, MARCH 31,
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................................. $ (1,068,414) $ 11,492
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization ............................................ 64,869 108,043
Loss on disposal of equipment ............................................ 383,761 2,026
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable ...................... 2,702,524 (1,230,296)
Decrease (Increase) in contracts in process ..................... 1,491,894 1,822,090
Decrease (Increase) in income tax, retention and other
receivables ............................................. (70,335) (73,605)
Decrease (Increase) in prepaid expenses ......................... 72,598 98,385
Decrease (Increase) in inventory and deposits ................... 110,329 2,936
Increase (decrease) in accounts payable ......................... (2,250,875) (388,540)
Increase (decrease) in accrued expenses and income taxes ........ 183,079 (169,994)
------------ ------------
Net cash provided by (used in) operating activities ............. 1,619,430 182,537
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Land under development ............................................................ (75,923) --
------------ ------------
Net cash provided by (used in) investing activities ............. (75,923) --
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes ................................................................. (73,573) (86,860)
Payments on capital lease obligations ............................................. -- (24,192)
Payments on repurchases of common stock ........................................... (86,600) (8,504)
------------ ------------
Net cash provided by (used in) financing activities ...................... (160,173) (119,556)
------------ ------------
INCREASE (DECREASE) IN CASH ....................................................... 1,383,334 62,981
Cash at the beginning period ...................................................... 469,939 953,641
------------ ------------
Cash at end of period ............................................................. $ 1,853,273 $ 1,016,622
============ ============
Noncash investing and financing activities:
Note receivable given in exchange for equipment ................................... $ 142,500 $ --
============ ============
</Table>
The accompanying notes are an integral part of these statements.
4
CET ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 1. BASIS OF PRESENTATION. The accompanying unaudited financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial statements and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
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 management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. The consolidated balance sheet at
December 31, 2001 has been derived from the audited consolidated
financial statements at that date. Operating results for the quarter
ended March 31, 2002 are not necessarily indicative of results that may
be expected for the year ending December 31, 2002. For further
information, refer to the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2001.
NOTE 2. EARNINGS PER SHARE. The Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 128, Earnings Per Share
("SFAS 128") requires the presentation of basic earnings per share
("EPS") and, for companies with potentially dilutive securities such as
convertible debt, options and warrants, diluted EPS.
In 2002, basic earnings per share data was computed by dividing net
loss by weighted average number of common shares outstanding during the
period. Diluted earnings per share computations do not give effect to
potentially dilutive securities including stock options and warrants as
their effect would have been anti-dilutive.
In 2001, basic earnings per share data was computed by dividing net
income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share was adjusted for the
assumed conversion of potentially dilutive securities including stock
options and warrants to purchase common stock.
NOTE 3. ACCOUNT RECEIVABLE -- REMEDIATION FINANCIAL, INC. -- During the third
quarter of 2000, the Company experienced problems collecting
receivables from Remediation Financial, Inc. ("RFI"), and its
affiliated partnerships Santa Clarita, LLC and LCRI Investments, LLC
the developers of the two Brownfield projects. The severity of the
problems was of such sufficiency to cause the Company to suspend work
on the Santa Clarita, CA project. Subsequently, the Company was
presented with termination notices for both projects with the Santa
Clarita termination effective October 6, 2000 and the Hercules
termination effective October 31, 2000. At December 31, 2001, the
Company had receivables of $2,021,164 for the Santa Clarita project and
$3,313,575 for the Hercules project. In February, 2002, the Company
entered into a settlement agreement with respect to the Santa Clarita
project and received $2.1 million. At March 31, 2002, the Company had a
receivable of $3,234,738 for the Hercules project. This amount
represents 72% of accounts receivable at March 31, 2002. The Company
has a secured lien on the Hercules property and management believes it
will recover most, if not all, of the related receivables. However,
failure to collect this receivable will have a material adverse effect
on the financial position and operations of the Company. Additionally,
the continued delay in collecting the receivable has an adverse effect
on the cash flow of the Company. See Item 3, Legal Proceeding in the
Company's filed Form 10K for the year ended December 31, 2001 regarding
legal actions taken against RFI and its affiliated partners for the
Hercules, CA project. There has been no significant progress in the
collection of this account receivable since year-end 2001.
NOTE 4. EQUIPMENT DISPOSITIONS -- During the first quarter 2002, field
equipment dispositions consisted of $526,261 of net equipment disposals
for proceeds of $142,500 which consisted of a note with a lump sum
payment due in June 2002. The Company recorded a loss of $383,761 on
the equipment disposition.
5
NOTE 5. STOCK REPURCHASE -- On May 2, 2001, the Company reached an agreement
to purchase 631,514 shares of the Company's common stock from a former
Director and Executive Vice President of the Company for a maximum of
$250,000 or approximately $0.395 per share. Initially, the Company
purchased 189,454 shares for $75,000. The remaining 442,060 shares
would be purchased for a maximum of $175,000, the payment would be
contingent upon receipt of the $6.2 million of past due receivables
from RFI and its affiliated partners. Under the terms of the agreement,
5% of the proceeds from RFI as collected, up to the maximum of
$175,000, would be applied to the purchase of the stock. In February
2002, as a result of the Santa Clarita settlement with RFI and its
affiliated partners, the Company purchased 218,757 shares of common
stock for $86,600 or $0.395 per share.
NOTE 6. CONTINGENCIES -- On December 19, 2000, the Company filed an action in
the Superior Court of the State of California, County of Los Angeles
for, among other things, breach of contract and foreclosure of a
previously filed mechanics' lien/lien release bond against Santa
Clarita, LLC, an affiliated partnership of RFI, in response to
non-payment for services performed by the Company on the Porta Bella
project located in Santa Clarita, CA. In February, 2002, the Company
entered into a settlement agreement under which it received $2.1
million (See Note 3. Accounts Receivable - Remediation Financial,
Inc.).
On February 8, 2001, the Company filed an action in the Superior Court
of the State of California, County of Contra Costa for, among other
things, breach of contract, foreclosure of a previously filed
mechanics' lien, and judicial foreclosure of the deed of trust in the
amount of $10.1 million against LCRI Investments, LLC, an affiliated
partnership of RFI, in response to non-payment for services performed
by the Company on the Hercules project located in Hercules, CA. On
March 5, 2001, the Company recorded a notice of default under the
subject deed of trust in order to pursue a trustee's sale of the
subject property. The Company and LCRI Investments are engaged in
arbitration proceedings. The amount of unpaid invoices is approximately
$3.3 million. Based on the secured deed of trust, the Company believes
it will prevail in this action and will recover most, if not all,
amounts due the Company (See Note G to the Company's filed Form 10K for
the year ended December 31, 2001).
The Company, LCRI Investments, and RFI are parties to a Commercial
Insurance Premium Finance and Security Agreement under which the
Company guaranteed a $10.1 million Bond to Secure Financial Obligation
for the Hercules, CA project. The bond secures a note that requires
quarterly principal payments of $542,278 which are made by LCRI
Investments, LLC. As of March 31, 2002, LCRI Investment, LLC was in
default on their 2001 and 2002 quarterly payments. On July 11, 2001, a
letter was issued to LCRI Investments, LLC, RFI, and the Company
calling for the immediate payment of remaining principal and interest
of $7.2 million. There has been no legal action taken against the
Company for the default. Management believes the Company is entitled to
be indemnified to the extent it is ultimately obligated to make any
payments under any of these arrangements. Based on the secured deed of
trust mentioned above, management believes that any amounts paid as a
result of the guarantee will be recovered.
Since early 1998, the Company has been the subject of an investigation
by the Office of the Inspector General (OIG) of the Environmental
Protection Agency (EPA). While initially broad in scope, the focus of
the investigation appears to involve labor billing-rates to the EPA
beginning in the 1992-1994 period and selected subsequent years. The
Company has cooperated fully in all OIG inquiries and will continue to
do so when and if required. To date, no claims have been made against
the Company. In addition, independent audits by the Defense Contract
Audit Agency (DCAA), subsequent to initiation of the OIG investigation,
have not been adverse nor have resulted in claims against the Company.
No loss provision has been made at March 31, 2002 as a result of the
investigation as the probable outcome is unknown.
The Company is party to various legal actions arising out of the normal
course of its business. Management believes that the ultimate
resolution of such actions, except as previously disclosed, will not
have a material adverse effect on the Company's financial position,
results of operations, and liquidity of the Company.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This Quarterly Report on Form 10-QSB contains forward-looking
statements (as such term is defined in the private Securities Litigation Reform
Act of 1995), and information relating to the Company that is based on beliefs
of management of the Company, as well as assumptions made by and information
currently available to management of the Company. When used in this Report, the
words "estimate," "project," "believe," "anticipate," "intend," "expect," and
similar expressions are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events based on currently available information and are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in such forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company does not undertake any obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2002 COMPARED TO QUARTER ENDED MARCH 31, 2001
PROJECT REVENUE. Project revenues were $1.0 million in 2002, down $3.1
million from $4.1 million in 2001. The decrease in revenues largely reflects the
substantial completion of work orders from the EPA. The Company's contract with
the EPA expired on January 8, 2002 and EPA related revenues were only $335,000
during the period, as compared with $3.7 million in the first quarter of 2001.
The reduction in EPA revenues were partially offset with increases in
water/waste water revenues of $0.2 million and other commercial revenues of $0.2
million over the year earlier period.
DIRECT COSTS. Direct costs were $0.8 million in 2002, down $2.5 million
from $3.2 million in 2001. The decrease in total dollars is commensurate with
the decrease in project revenues noted above. As a percentage of revenues,
direct costs for 2002 were 75%, down from 80% in 2001. The decrease is the
result of approximately $224,000 of direct cost savings due from negotiated
settlements with the Company's vendors. Without these vendor settlements, direct
costs for 2002 would have been 96%. This increase, over the year earlier period,
is due from EPA revenues that were comprised primarily of trailing costs, which
by their nature, have no profit margin. In addition, two water/wastewater
projects during the period incurred difficulties that nearly eliminated
anticipated profit margins.
INDIRECT COSTS. Indirect project costs were $246,000 in 2002, a slight
decrease of $24,000 from $270,000 in 2001. As a percentage of revenue, indirect
costs for 2002 were 24%, up from 7% in 2001. The increase is the result of costs
incurred to close-out the EPA contract which expired on January 8, 2002.
SELLING AND GENERAL & ADMINISTRATIVE COSTS. Selling and General and
Administrative costs were $700,000 in 2002, up $130,000 from $570,000 in 2001.
This increase is the result of additional legal expenses relating to the RFI and
its affiliated partners litigation and employee severance costs as a result of
the EPA contract expiration.
OTHER INCOME (EXPENSE). Other expenses, net of other income, amounted
to a net loss of $383,000, the bulk of which arose from the loss on equipment
dispositions of $384,000. In the year earlier period, other income of $19,000
and interest income of $10,000, net of other expenses, resulted in other income
of $27,000.
NET INCOME (LOSS). A Net loss of $1,068,414 was recorded during the
current period compared to the net income of $11,492 for the year earlier
period. The loss in 2002 was the result of the expiration of the EPA contract
and reduced profit margins on the water/waste water projects.
7
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of liquidity and capital resources historically
have been net cash provided by operating activities, funds available under its
financing arrangements, and proceeds from offerings of equity securities. In the
past, these sources have been sufficient to meet its needs and finance the
Company's business. The Company can give no assurance that the historical
sources of liquidity and capital resources will be available for future
development and acquisitions, and it may be required to seek alternative
financing sources not necessarily favorable to the Company.
During the third quarter of 2000, the Company experienced problems
collecting receivables from RFI and its affiliated partnerships for work
performed at Brownfields projects located at Santa Clarita and Hercules, CA. The
severity of the problems caused the Company to suspend work on the Santa
Clarita, CA project. Subsequently, the Company was presented with termination
notices for both the projects, with the Santa Clarita termination effective
October 6, 2000 and the Hercules termination effective October 31, 2000. At
December 31, 2001 receivables from the Santa Clarita project were approximately
$2.0 million while those arising from the Hercules project were $3.3 million for
a total of $5.3 million or 74% of total accounts receivable.
In February, 2002, the Company reached a settlement agreement with
respect to the Santa Clarita project and received $2.1 million. The Company
continues to pursue recovery efforts with respect to Hercules receivables (See
Item 3. Legal Proceedings and Notes G and S to the Consolidated Financial
Statements in the Company's filed Form 10K for the year ended December 31,
2001). The delay in collecting the aforementioned receivable on a timely basis
has adversely effected the Company's cash flow.
In 2001, the Company elected not to bid on a new contract with the EPA.
Under terms of the prior contract, the fourth and final option year expired on
January 8, 2002. The Company will complete the EPA work-orders awarded up to the
date of expiration. Management believes it will require an additional six months
to finish those work-orders and to complete final administrative procedures.
Personnel levels will be reduced in conjunction with the completion of
work-orders. The Seattle operations were closed in December 2001 with related
assets disposed. For the year ended December 31, 2001, EPA revenues were
approximately $12.3 million or 87% of total revenues.
Management will attempt to replace EPA activities by focusing on
water/wastewater projects, Brownfields developments, and other environmental
activities. The Company has signed a pre-development agreement with a Colorado
municipality to redevelop a commercial real-estate project. The project would
entail purchasing subject property, demolition and environmental remediation,
and construction of new affordable housing units and other related structures.
The completed project is estimated at $10 million to $20 million and the Company
is currently negotiating financing for this project. At this time, no estimate
can be made as to the amount and timing of revenues. At best, the projects are
anticipated to generate nominal, if any, revenues for the current year. There
can be no assurance that final redevelopment project plans or financing will be
approved. In addition, there can be no assurance that this redevelopment project
or any other effort will be successful in offsetting the loss of EPA revenues.
Management believes that potential future cash flows from operations,
the collection of receivables related to the Hercules project, and funds
available under the $1.0 million line of credit with Compass Bank will be
sufficient to fund the Company's immediate needs for working capital. In
addition, management believes that it will be successful in renewing the line of
credit with Compass Bank in June 2002. However, there can be no assurance that
the line of credit with Compass Bank will be renewed. In the event the line of
credit is not renewed and alternate financing sources cannot be found, the
Company's financial position, operating activities, and liquidity could be
adversely affected.
The Company's working capital decreased to $5.7 million as of March 31,
2002, down $0.5 million from $6.2 million as of December 31, 2001. The change in
working capital is the net result of a decrease in current assets of $2.6
million and a decrease in current liabilities of $2.1 million. The decrease in
current assets results from collections of combined receivables of $4.2 million
and a increase in cash of $1.4 million and a combined other current assets of
$0.2 million. The decrease in current liabilities results primarily from payment
of accounts payable and accrued liabilities of $2.0 million and notes of $0.1
million.
8
The Company's cash and cash equivalents increased approximately $1.4
million to $1.9 million at March 31, 2002 from $0.5 million at December 31,
2001. The increase in cash and cash equivalents results from cash provided by
operating activities of $1.6 million as a result of a net loss of $1.1 million,
a decrease in combined receivables of $4.2 million, $0.1 million increase in
combined other current assets, $0.4 million of depreciation and loss on disposal
adjustments to net income, and a decrease in accounts payable and accrued
expenses of $2.0 million. Cash used in investing activities of $0.1 million
results primarily from cash paid for land under development. Cash used in
financing activities of $0.2 million results primarily from payments of notes
and the repurchase of the Company's common stock.
9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 19, 2000, the Company filed an action in the Superior Court
of the State of California, County of Los Angeles for, among other
things, breach of contract and foreclosure of mechanics' lien/lien
release bond against Santa Clarita, LLC, an affiliated partnership of
RFI, in response to non-payment for services performed by the Company
on the Porta Bella project located in Santa Clarita, CA. In early
February 2002, the Company entered into a settlement agreement under
which it received a total of $2.1 million, which approximates the value
of the receivables related to the project.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
10
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.
CET ENVIRONMENTAL SERVICES, INC.
Dated: May 13, 2002 By: /s/ Steven H. Davis
--------------------------------------------
Steven H. Davis, President, and Chief
Executive Officer
By: /s/ Dale W. Bleck
--------------------------------------------
Dale W. Bleck, Chief Financial Officer
11