SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 2002 Commission File
No. 0-1709
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RVM INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1515410
- ------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
753 W. Waterloo Road, Akron, Ohio 44314-1519
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 753-4545
NOT APPLICABLE
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(Former name, former address and former fiscal year, if
changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There were 1,937,505 shares outstanding of the Registrant's common stock as of
November 1, 2002.
1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
2002
----------------------------------------------
SEPTEMBER 30 MARCH 31
------------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 834,365 $ 195,905
Receivables:
Trade, net of allowance for doubtful accounts of $5,000 at September 30
and March 31, 2002 942,849 1,042,192
Inventories 1,846,021 1,446,316
Assets Held for sale 1,800,000 2,870,000
Deferred income taxes net of valuation allowance of $2,864,792 at September 0 0
30 and March 31, 2002
Other current assets 52,360 24,691
Current assets of discontinued operations-Ravens 8,000 17,840
Current assets of discontinued operations-Albex 618,678 1,177,062
---------- ----------
Total current assets 6,102,273 6,774,006
Property, plant and equipment, net 564,781 537,154
Other assets 6,687 6,687
Non-current assets of discontinued operations-Ravens 1,526,624 1,535,016
---------- ----------
Total assets $8,200,365 $8,852,863
========== ==========
See accompanying notes to the consolidated financial statements (unaudited).
2
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited), Continued
2002
----------------------------------------------
SEPTEMBER 30 MARCH 31
-------------- ---------------
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable - trade $ 1,829,217 $ 1,427,129
- related parties - Jacob Pollock 10,000 0
- related parties - other 62,756 0
Accrued expenses 220,371 212,744
Current portion of long-term debt 478,691 264,460
Debt in default 419,019 419,019
Current liabilities of discontinued operations - Ravens 1,437,433 1,378,470
Current liabilities of discontinued operations - Albex 1,979,413 2,149,066
------------ ------------
Total current liabilities 6,436,900 5,850,888
Long-term debt 2,974,038 3,483,579
Non-current liabilities of discontinued operations - Albex 2,400,000 2,400,000
------------ ------------
Total liabilities 11,810,938 11,734,467
------------ ------------
Shareholders' (deficit) equity:
Preferred stock, $0.01 par value; authorized shares, 300,000; none
outstanding 0 0
Common stock, $0.01 par value; authorized shares, 3,000,000; issued and
outstanding, 1,937,505 shares at September 30, 2002 and at March 31, 2002 19,376 19,376
Additional capital 7,495,804 7,495,804
Retained deficits (11,125,753) (10,396,784)
------------ ------------
Total shareholders' (deficit) equity (3,610,573) (2,881,604)
------------ ------------
Total liabilities and shareholders' deficit $ 8,200,365 $ 8,852,863
============ ============
See accompanying notes to the consolidated financial statements (unaudited).
3
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
SIX MONTHS ENDED
SEPTEMBER 30
---------------------------------------
2002 2001
------------ ------------
Net sales $ 3,789,248 $ 4,370,739
Cost of sales 3,657,411 4,092,618
------------ ------------
Gross profit 131,837 278,121
Selling, general and administrative expenses 583,765 651,823
------------ ------------
(Loss) from operations (451,928) (373,702)
Other income (expense):
Other income 0 1,553
Interest expense (12,166) (19,615)
------------ ------------
(Loss) from continuing operations before income taxes (464,049) (391,764)
Provision for income taxes 0 0
------------ ------------
(Loss) from continuing operations (464,094) (391,764)
------------ ------------
Discontinued operations:
(Loss) from operations of discontinued operations (264,875) (3,285,924)
(Loss) from sale of discontinued operations 0 (9,683,370)
------------ ------------
(Loss) on discontinuing operations (264,875) (12,969,294)
------------ ------------
Net loss $ (728,969) $(13,361,058)
============ ============
Per share data:
Basic and diluted earnings (loss) per share:
Continuing operations $ (0.24) $ (0.20)
Discontinued operations (0.14) (6.70)
------------ ------------
$ (0.38) $ (6.90)
============ ============
See accompanying notes to the consolidated financial statements (unaudited)
4
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED
SEPTEMBER 30
-------------------------------------
2002 2001
----------- -----------
Net sales $ 1,791,224 $ 1,995,321
Cost of sales 1,751,480 1,858,904
----------- -----------
Gross profit 39,744 136,417
Selling, general and administrative expenses 300,311 322,792
----------- -----------
(Loss) from operations (260,567) (186,375)
Other income (expense):
Other income 0 1,553
Interest (expense) income 349 (9,833)
----------- -----------
(Loss) from continuing operations before income taxes (260,218) (194,655)
Provision for income taxes 0 0
----------- -----------
(Loss) from continuing operations (260,218) (194,655)
----------- -----------
Discontinued operations:
(Loss) from discontinued operations (115,462) (1,750,203)
(Loss) from sale of discontinued operations 0 (1,351,984)
----------- -----------
(Loss) on discontinuing operations (115,462) (3,102,187)
----------- -----------
Net loss $ (375,680) $(3,296,842)
=========== ===========
Per share data:
Basic and diluted earnings (loss) per share:
Continuing operations $ (0.13) $ (0.10)
Discontinued operations (0.06) (1.60)
----------- -----------
$ (0.19) $ (1.70)
=========== ===========
See accompanying notes to the consolidated financial statements (unaudited)
5
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
SIX MONTHS ENDED SEPTEMBER 30
----------------------------------------
2002 2001
-------------------- -----------------
Cash flows from operating activities
Net (loss)........................................................................$ (728,969) $(13,361,058)
Net loss from discontinued operations............................................. 264,875 12,969,294
Adjustments to reconcile net (loss) from continuing operations to net cash
(used in) provided by operating activities of continuing operations:
Depreciation and amortization................................................... 67,010 84,407
Loss on sale of fixed assets.................................................... 0 0
Increase (decrease) in allowance for doubtful accounts.......................... (21,000)
Increase (decrease) in cash from changes in:
Receivables..................................................................... 99,343 147,942
Inventories..................................................................... (399,705) 135,834
Other assets.................................................................... (27,669) (10,478)
Accounts payable................................................................ 464,855 182,801
Accrued expenses and other current liabilities.................................. 7,626 (71,052)
------------ ------------
Net cash (used in) provided by operating activities of continuing
operations.................................................................... (252,634) 56,690
------------ ------------
Cash flows from investing activities of continuing operations:
Capital expenditures.............................................................. (94,637) (8,597)
Proceeds from sale of fixed assets.............................................. 506,074 0
------------ ------------
Net cash (used in) investing activities of continuing operations................ 411,437 (8,597)
------------ ------------
Cash flows from financing activities of continuing operations:
(Payments on) long-term debt...................................................... (3,237) (3,022)
Proceeds on line of credit debt................................................... 214,001 (3,237,808)
(Payments on) long term notes payable - bank, net................................. (506,074) (35,214)
Proceeds from notes payable to related parties.................................... 10,000 18,056
------------ ------------
Net cash provided by (used by) financing activities of continuing
operations.................................................................... (285,310) (3,257,988)
------------ ------------
Cash flows (used in) continuing operations........................................... (126,507) (3,209,895)
Cash flows provided by discontinued operations....................................... 764,967 2,749,760
Net increase in cash and cash equivalents............................................ 638,460 (460,135)
Cash and cash equivalents at beginning of period..................................... 195,905 1,108,115
------------ ------------
Cash and cash equivalents at end of period...........................................$ 834,365 $ 647,980
============ ============
See accompanying notes to the consolidated financial statements (unaudited)
6
RVM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The information in this report reflects all adjustments, which are, in the
opinion of management, necessary for a fair statement of the results for
the interim periods presented for RVM Industries, Inc. ("the Company"). All
adjustments other than those described in this report are, in the opinion
of management, of a normal and recurring nature. These consolidated
financial statements include the accounts of RVM's wholly owned
subsidiaries: Ravens, Inc. ("Ravens") now know as Waterloo Holding Company,
Albex Aluminum, Inc. ("Albex") and Signs and Blanks, Inc ("SABI"). All
significant intercompany accounts and transactions have been eliminated.
Certain amounts for the quarter ended September 30, 2001 have been
reclassified for comparative purposes to conform with the presentation in
the consolidated financial statements for the quarter ended September 30,
2002.
2. GOING CONCERN OF THE COMPANY
The accompanying unaudited consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. As of March 31, 2002 the Company was in violation of certain of
its covenants related to its FirstMerit Bank, N.A. ("FirstMerit"). The
Company restructured the debt with FirstMerit on April 5, 2002 and Mr.
Jacob Pollock guaranteed $3,250,000 of the debt. The Company is in default
as of March 31, and September 30, 2002 on payment of interest and principle
of debentures in the amount of $419,019. The Company's liabilities exceed
its assets and it no longer conducts its Albex and Ravens operations. These
facts raise substantial doubt as to the Company's ability to continue as a
going concern for a reasonable period of time.
3. DISPOSITIONS
In August 2001, the Company's Board of Directors approved a plan to
shutdown Albex. Accordingly, the results of operations for Albex have been
presented as a discontinued operation in the accompanying unaudited
consolidated financial statements for all periods presented. The estimated
loss on disposal of the discontinued operations of Albex has been
determined based on management's estimated loss related to the write-down
of impaired property, plant, and equipment and estimated losses from
operations during the phase-out period. For the six month period ended
September 30, 2001, the loss from operations amounted to $9,477,387 of
which $7,348,370 was the estimated loss on the disposal of Albex.
On December 19, 2001, the Company sold the Albex extrusion building,
machinery and equipment to an unrelated third party. The cash received of
$4,250,000 from that sale was used to pay down secured debt. The Company
signed a letter of intent in October 2001 to sell the cast house land,
building and equipment. The sale was completed in July 2002 and the cash
from the sale of $506,074 were used to pay down the debt to FirstMerit.
7
RVM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. DISPOSITIONS, (CONTINUED)
On November 14, 2001, the Company sold the operating assets and liabilities
of Ravens. Accordingly, the results of operations for Ravens have been
presented as a discontinued operation in the accompanying unaudited
consolidated financial statements for all periods presented. The estimated
loss of disposal of the discontinued operations of Ravens was not
determined during the three month and the six-month period ended September
30, 2001. The statements presented for Ravens do not include any of
management's estimated loss on the sale of Ravens' operations, severance
costs, and other costs incurred to sell the operations of Ravens. For the
full year ended March 31, 2002, the Company's loss on the discontinued
operations of Ravens was $4,492,745, of which the operating loss to
November 14, 2001 was $3,726,745.
4. DISCONTINUED OPERATIONS
The dispositions of Ravens and Albex represent disposal of segments under
SFAS 144. Accordingly, the revenue, costs and expenses, assets and
liabilities and cash flows have been segregated in the unaudited
Consolidated Statements of Income, unaudited Consolidated Balance Sheet and
unaudited Consolidated Statement of Cash Flows.
The following summarizes the results of discontinued operations.
Six Months Six Months Three Months Three Months
Ended 9/30/02 Ended 9/30/01 Ended 9/30/02 Ended 9/30/01
------------- ------------- ------------- -------------
Net sales
Albex $ 120,000 $ 6,941,050 $ 60,000 $ 2,325,370
Ravens 0 11,202,437 0 4,789,610
------------ ------------ ------------ ------------
120,000 18,143,487 60,000 7,114,980
------------ ------------ ------------ ------------
Pre tax operating loss
Albex (3,097) (1,427,258) 36,195 (763,122)
Ravens (240,522) (1,069,825) (166,936) (664,223)
------------ ------------ ------------ ------------
(243,619) (2,497,083) (130,741) (1,427,345)
------------ ------------ ------------ ------------
(Interest expense) (187,843) (768,916) (52,470) (329,269)
Other income (loss) 110,307 (19,925) 69,801 (6,441)
Gain (loss) on sale of
discontinued operations 0 (9,683,370) 0 (1,351,984)
Income tax benefit 56,280 0 (2,052) 0
------------ ------------ ------------ ------------
Loss from discontinued
operations $ (264,875) $(12,969,294) $ (115,462) $ (3,102,187)
------------ ------------ ------------ ------------
8
RVM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. FINANCIAL OBLIGATIONS
On April 5, 2002, FirstMerit amended the Company's revolving note
agreement. The amended agreement extends the maturity of the revolving note
from March 31, 2002 to March 31, 2003, reduces the interest rate from
FirstMerit's prime rate plus .75% to FirstMerit's prime rate plus .50%, and
amends the maximum outstanding balance of the revolving loan to $350,000.
On August 30, 2002 FirstMerit amended the revolving loan to $500,000. The
Company owed $423,258 under this agreement at September 30, 2002.
The Company paid off all other loans to FirstMerit and entered into a new
agreement on April 5, 2002 that replaced those loans with a single loan of
$3,540,977. Interest on the loan was fixed at 6.0%. Interest only payments
are due until October 2002 and monthly interest and principle payments made
on a twenty year amortization schedule thereafter. The note matures with
all remaining principal due on March 31, 2007.
The Company entered into a short-term draw down note with FirstMerit for
$450,000 interest fixed at 7.0%. All interest and principal is due on
September 30, 2002. The Company paid off the note on September 30, 2002 and
had not borrowed against the note as of March 31, 2002.
Mr. Jacob Pollock provided a $3,250,000 personal guarantee on the above
loans to FirstMerit.
6. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are based on net income (loss) divided by
the weighted average number of common shares outstanding. The weighted
average number of common shares outstanding was 1,937,505 in 2002 and 2001.
Diluted earnings per share reflect the potential dilution that could occur
if all options or contracts to issue common stock were issued or converted.
Basic earnings per share for the Company is the same as diluted earnings
per share.
7. INVENTORIES
Inventories consist of the following:
September 30, 2002 March 31, 2002
------------------ --------------
Raw materials $1,144,099 $ 842,474
Finished goods 701,922 603,842
---------- ----------
$1,846,021 $1,446,316
========== ==========
9
RVM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. RECENT ACCOUNTING PRONOUNCEMENTS:
In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 146 "Accounting for
Costs Associated with Exit or Disposal Activities. " SFAS No. 146"
generally require companies to recognize costs associated with the exit
activities when they are incurred rather than at the date of commitment to
the exit activity or disposal plan. SFAS No. 146 is effective for exit or
disposal activities initiated after December 31, 2002. The Company elected
to implement this standard for the disposal activities of selling Ravens
assets and certain liabilities and the exiting and sale of assets of Albex
for the year ended March 31, 2002.
In June 2002, FASB issued Statement of Financial Accounting Standards No.
145 which rescinded SFAS No. 4 "Reporting Gains and Losses from
Extinguishment of Debt". SFAS No. 4 had required companies to report gains
and losses from extinguishment of debt to be classified as an extraordinary
item net of related income tax effect. The Company early adopted SFAS 145
in the reporting of its gain from the extinguishment of debt.
In August 2001, FASB issued Statement of Financial Accounting Standards
(SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets". SFAS 144 is effective for the fiscal year beginning after December
15, 2001 for the fiscal year beginning April 1, 2002 for the Company. SFAS
144 addresses financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of. The Company
elected early adaptation of SFAS 144 for the year ended March 31, 2002.
In July 2001, FASB issued Statement of Financial Accounting Standards
(SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and
Other Intangible Assets". SFAS 141 requires that the purchase method be
used for all business combinations initiated after June 30, 2001. SFAS 142
requires that goodwill no longer be amortized to earnings, but instead be
reviewed for impairment. The amortization of goodwill ceases upon adoption
of SFAS 142, which for the Company will be April 1, 2002. The Company does
not anticipate that the adoption of the new statement will have a
significant effect on earnings or the financial position of the Company.
9. CONTINGENT LIABILITIES
The Company, Ravens, Waterloo Holding and Mr. Jacob Pollock have been named
in a fraudulent suppression complaint made by Fontaine Trailer Company Inc.
(Fontaine). The complaint involves warranty issues and the amount of
warranty reserve transferred to Fontaine as part of the purchase price of
Ravens. The Company believes that the reserve was adequate to fund all
warranty claims in the future for units sold by Ravens prior to the sale of
the company.
10
RVM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. CONTINGENT LIABILITIES, (CONTINUED)
The Company and Albex in August 2001 were named as defendants in a wrongful
death and employer intentional tort claim. In cases like this where there
are many underlying facts that are disputed, it is difficult to predict a
favorable or unfavorable outcome. If the plaintiff prevails against the
Company, liability is significant, as the jury will have broad discretion
to fix the amount of damages it awards for both compensatory and punitive
damages. The Company believes in the strength of its defenses and intends
to assert them if a trial is necessary. The Company also believes any
settlement is within the limits of its insurance policies.
Albex has been named in a number of unsecured creditors claims for amounts
due. The sale of all of the assets of Albex will be used to pay down the
debt to the secured creditors. The Company notified all of Albex's
unsecured creditors that payment was not probable.
Albex has been named in a foreclosure proceeding relating to the mortgage
on the land and buildings. Albex will surrender the land and buildings to
the mortgage holder when the proceeding is completed. The mortgage holder
is a company controlled by Mr. Jacob Pollock. The mortgage on the land and
building is $2,400,000 and the appraisal for the land and buildings as of
May 3, 2001 was $1,820,000.
The Company is also involved in other claims and litigation arising in the
ordinary course of business. Management believes that the outcome of such
claims will not have a material adverse effect on the Company's financial
position and the results of operations and cash flow
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
ANALYSIS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had cash and cash equivalents of $834,365 and $195,905 at September
30, 2002 and March 31, 2002, respectively. The Company could have borrowed
approximately $76,742 more on a line of credit with FirstMerit Bank on September
30, 2002. The Company owes FirstMerit at September 30, 2002 $3,015,977 on a five
year note that is secured by all of the Company's inventory, receivables and
fixed assets. See footnote 5 to the unaudited Consolidated Financial Statements
for discussion on the financial obligations of the Company.
The proceeds from the sale of the remaining assets of Albex and Ravens will be
used to fund operating expenses to close down those discontinued businesses and
to substantially reduce the secured debt.
A Company controlled by Mr. Jacob Pollock intends to purchase all of the
outstanding stock of the Company. The Company will notify all outstanding
shareholders and members of his family regarding the details of this transaction
in its Information Statement for the 2002 annual meeting of the stockholders.
The financial statements in this document have been prepared on a going concern
basis, which contemplates the realization of assets and liabilities in the
normal course of business. The financial statements do not include any
adjustments relating to the recoverability and classification of assets carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
Account Receivables (SABI only) of $942,849 reflect a decrease from year-end of
$99,343 resulting from lower sales.
Inventories (SABI only) of $ 1,846,021 increased from year-end by $399,705.
Inventories have increased due to the combination of mix of sales and
availability of lower cost material.
Capital expenditures at SABI were $94,637 mainly for equipment that improved the
operations and increased capacity for items not previously sold by SABI.
Accounts Payable (SABI only) of $1,829,217 increased $402,088 and reflects
mainly the increase in inventory for the same period. Mr. Jacob Pollock advance
the Company $40,000 to purchase capital equipment at SABI. The terms are equal
four-month payments (of which $30,000 has been repaid as of September 30, 2002)
with no interest.
Accrued expenses increased due to interest accrued but not paid on the Albex's
note to Jacob Pollock.
The Company believes that if SABI were sold along with the completion of the
sale of the remaining assets of Albex the amount received would be required to
pay down the debt owed to FirstMerit that is due March 31, 2003 and 2007. The
only alternative is to arrange new financing. The Company believes that the
potential sale of the SABI assets and liabilities and the sale of the Albex
assets will generate enough cash to pay down most of the senior secured debt.
However, certain unsecured vendors (mainly at Albex) will not be paid. As the
Company winds down operations, its shares will have little or no value to the
stockholders and it is unlikely that the Company will pay the debt to related
parties.
12
SIX MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE
SIX MONTHS ENDED SEPTEMBER 30,2001
Consolidated net sales, (SABI only), were $3,789,248 or 13.3% lower than last
year. The general slowdown of the economy caused the lower sales as government
agencies are cutting back purchases. Gross profit as a percent of net sales
decreased to 3.5% from 6.4%, due mainly to mix of product and lower selling
prices. Selling and general and administrative costs decreased 10.4% to $583,765
resulting from a reduction in corporate overheads. The Company's loss from
continuing operations was $(451,928) compared to $(373,702) in the comparable
period last year.
Discontinued operations net loss of $(264,875) resulted from interest expense on
the Albex bank debt and continuing expenses to complete the sale of the assets
of Waterloo Holding (formerly Ravens) and Albex.
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30,2001
Consolidated net sales, (SABI only), were $1,791,224 or 10.2% lower than last
year. The general slowdown of the economy caused the lower sales as government
agencies are cutting back purchases. Gross profit as a percent of net sales
decreased to 2.2% from 6.8%, due mainly to mix of product and lower selling
prices. Selling and general and administrative costs decreased 7.0% to $300,311
resulting from a reduction in corporate overheads. The Company's loss from
continuing operations was $(260,567) compared to $(186,375) in the comparable
period last year.
Discontinued operations net loss of $(115,462) resulted from interest expense on
the Albex bank debt and continuing expenses to complete the sale of the assets
of Waterloo Holding (formerly Ravens) and Albex.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Form 10-Q are made pursuant to the safe
harbor provisions of Rule 175 promulgated under the Securities Act of 1933. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Potential risks and
uncertainties include, but are not limited to: general business and economic
conditions; the financial strength of the industries which the Company serves;
the competitive pricing environment within the markets which the Company serves;
labor disruptions; interruptions in the supply of raw materials and services; a
significant increase in the price of aluminum; continued availability of credit
from lenders and vendors; government regulations; and obsolescence of the
Company's products and manufacturing technologies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Derivative Financial Instruments
The Company does not hold or issue derivative financial instruments for any
purposes.
Interest Rate Exposure
Based on the Company's overall interest rate exposure as of and during the
quarter ended September 30, 2002 a near-term change in interest rates, based on
historical interest rate movements, would not materially affect the Company's
consolidated financial position, results of operations or cash flows.
13
ITEM 4. CONTROLS AND PROCEDURES
Within the ninety-day period preceding the filing of this quarterly report,
management, including the Chief Executive Officer/Chief Financial Officer of the
Company, conducted an evaluation of the effectiveness of disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the
Chief Executive Officer/Chief Financial Officer concluded that the disclosure
controls and procedures are effective in ensuring that all material information
required to be filed in this quarterly report has been made known to him in a
timely fashion. There have been no significant changes in internal controls, or
in factors that could significantly affect internal controls, subsequent to the
date the Chief Executive Officer/Chief Financial Officer completed his
evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, Waterloo Holding (formerly Ravens) and Mr. Jerry Pollock have been
named in a fraudulent suppression complaint made by Fontaine Trailer Company,
Inc. The complaint involves warranty issues and the amount of warranty reserve
transferred to Fontaine Trailer Company, Inc. as part of the purchase price of
Ravens. The Company believes that the reserve was adequate to fund all warranty
claims in the future for units sold by Ravens prior to the sale of the company.
The Company and Albex in August 2001 were named in a wrongful death and employer
intentional tort claim. In cases like this where there are many underlying facts
that are disputed it is difficult to predict a favorable or unfavorable outcome.
If the plaintiff prevails against the Company, liability is significant, as the
jury will have broad discretion to fix the amount of damages it awards for both
compensatory and punitive damages. The Company believes in the strength of its
defense and intends to assert them if a trial is necessary. The Company also
believes any settlement is within the limits of its insurance policies.
Albex has been named in a number of unsecured creditors claims for amounts due.
The sale of all of the assets of Albex will be used to pay down the debt to the
secured creditors. The Company had notified all of Albex's unsecured creditors
that payment was not probable.
Albex has been named in a foreclosure proceeding relating to the mortgage on the
land and buildings. Albex will surrender the land and buildings to the mortgage
holder when the proceeding is completed. The mortgage holder is a company
controlled by Mr. Jerry Pollock. The mortgage on the land and building is
$2,400,000 and the appraisal for the land and buildings as of May 3, 2001 was
$1,820,000.
The Company is involved in various claims and litigation arising in the ordinary
course of business. Management believes that the outcome of such claims will not
have a material adverse effect on the Company's financial position and results
of operations and cash flows.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Item
---------- -----
99 Section 906 Certification of
Chief Executive and Chief Financial Officer
(b) Reports on Form 8-K:
A Form 8-K was filed on July 15, 2002 naming Saltz, Shamis &
Goldfarb, Inc. as the Company's auditor.
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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.
RVM INDUSTRIES, INC.
---------------------
(Registrant)
By: /s/ Jacob Pollock
------------------------------------------------
Jacob Pollock, Director, Chief Executive
Officer/Chief Financial Officer (Principal
Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
Dated: November 12, 2002
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CERTIFICATIONS PURSUANT TO SECTION 302 THE SARBANES-OXLEY ACT OF 2002
I, Jacob Pollock, Chief Executive Officer/Chief Financial Officer of the
registrant, hereby certify that:
(1) I have reviewed the quarterly report of the registrant;
(2) Based on my knowledge, this amended quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this amended quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the issuer as of, and for, the periods presented in this amended
quarterly report;
(4) I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:
(i) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in this quarterly report was
being prepared;
(ii) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report ("Evaluation Date"); and
(iii) Presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
(5) I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the auditors and the audit committee of the board of directors
(or persons fulfilling the equivalent function): \
(i) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(ii) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) I have indicated in this report whether or not there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
By: /s/ Jacob Pollock
--------------------
Jacob Pollock, Director, Chief Executive
Officer/Chief Financial Officer
November 12, 2002
17