UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-Q
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/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period from __________ to ___________
Commission file number 0-21555
______________________
AMASYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-1812385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 Seminary Road
Suite 800
Alexandria, Virginia 22311
(Address of principal executive offices)
Registrant's Telephone number including area code
(703) 797-8111
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 / / No /X/
As of November 14, 2002, 2,207,350 shares of the Common Stock of
the registrant were outstanding.
AMASYS CORPORATION
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Balance Sheets 3
at September 30, 2002
and June 30, 2002
Statements of Operations 4
for the Three Months Ended
September 30, 2002 and 2001
Statements of Cash Flows 5
for the Three Months Ended
September 30, 2002 and 2001
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis 9
of Financial Condition and Results
of Operations
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES
11
AMASYS Corporation
Balance Sheets
September 30 June 30
2002 2002
-----------------------------
Assets
Current assets:
Cash and cash equivalents $ 12,364 $ 13,071
----------- --------------
Total current assets 12,364 13,071
Note receivable - related party 908,954 914,954
Investments in common stock 679,909 733,449
----------- -------------
Total assets $ 1,601,227 $ 1,661,474
=========== ==============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 45,249 $ 23,962
----------- -------------
Total current liabilities 45,249 23,962
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; 196,000 Series A shares issued and outstanding
1,960 1,960
Common stock, $0.01 par value; 20,000,000 shares
authorized; 2,207,350 shares issued and outstanding 22,073 22,073
Other comprehensive income (loss) 242,082 251,794
Retained earnings 1,289,863 1,361,685
----------- -------------
Total stockholders' equity 1,555,978 1,637,512
----------- -------------
Total liabilities and stockholders' equity $1,601,227 $ 1,661,474
=========== =============
See accompanying notes.
AMASYS Corporation
Statements of Operations
Three months ended September 30
2002 2001
----------------------------------
Other income:
Interest income $ 22,799 $ 23,724
----------------------------------
Total other income 22,799 23,724
----------------------------------
Costs and expenses:
Professional services 46,065 56,221
General and administrative 4,728 4,683
Amortization - 8,338
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Total costs and expenses 50,793 69,242
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Operating loss (27,994) (45,518)
Equity in (losses) earnings (43,828) 14,348
Interest expense - (52,413)
----------------------------------
Loss before income taxes (71,822) (83,583)
Provision for income taxes - -
----------------------------------
Net loss $ (71,822) $ (83,583)
==================================
Per share data:
Net loss per share:
Basic $ (.03) $ (.04)
==================================
Diluted $ (.03) $ (.04)
==================================
Weighted average number of shares:
Basic 2,207,350 2,207,350
==================================
Diluted 2,207,350 2,207,350
==================================
See accompanying notes.
AMASYS Corporation
Statements of Cash Flows
Three months ended September 30
2002 2001
---------------------------------
Operating activities
Net loss $ (71,822) $ (83,583)
Adjustments to reconcile (loss) net loss to net cash used
in operating activities:
Equity in losses (earnings) 43,828 (14,348)
Accrued interest on note payable - 52,413
Amortization - 8,338
Changes in operating assets and liabilities:
Interest receivable and other current assets - (7,900)
Accounts payable and accrued expenses 21,287 39,815
---------------------------------
Net cash used in operating activities (6,707) (5,265)
Financing activities
Proceeds from note receivable 6,000 6,000
---------------------------------
Net cash provided by financing activities 6,000 6,000
Net (decrease) increase in cash and cash equivalents (707) 735
Cash and cash equivalents at beginning of period 13,071 2,252
---------------------------------
Cash and cash equivalents at end of period $ 12,364 $ 2,987
=================================
See accompanying notes.
AMASYS CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2002
1. Basis of Presentation
The accompanying interim financial statements of AMASYS
Corporation (the "Company" or "AMASYS") are unaudited, but in
the opinion of management reflect all adjustments (consisting
only of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results of
operations for any interim period are not necessarily
indicative of results for the full year. The balance sheet at
June 30, 2002 has been derived from the 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. These financial statements should be read in
conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 2002 ("2002 Form 10-K"),
filed with the Securities and Exchange Commission on September
30, 2002.
2. Note Payable
The Company entered into a Note Payable Agreement dated June
21, 1996 with the Pension Benefit Guaranty Corporation
("PBGC"). The note accrued interest at the rate of 9% per
annum compounded semi-annually. The note was to be paid prior
to its maturity on December 31, 2006 from any proceeds received
by the Company from PBGC's pro-rata share of the proceeds of
any and all sales of the Company's stock positions in Comtex
News Network, Inc. ("Comtex") and Analex Corporation ("Analex")
and value received from the 10% Senior Subordinated Note issued
by Comtex to the Company on May 16, 1995. If neither of the
above two events were to occur prior to December 31, 2006, the
note would be considered cancelled.
The Note was issued pursuant to the Third Joint Plan of
Reorganization of Infotechnology, Inc. and Questech Capital
Corporation dated January 26, 1994, which was confirmed by
order of the United States Bankruptcy Court dated June 24,
1994.
On February 15, 2002, the Company paid $189,998 to PBGC in full
satisfaction for the note payable, pursuant to an agreement
reached on February 1, 2002. The difference between the
carrying amount of the debt at the date of payment and the
amount paid was recorded as an extraordinary gain on the income
statement during the third quarter of fiscal year 2002.
3. Net loss per Share
The following table sets forth the computation of basic and
diluted earnings per share:
Three months ended
September 30,
2002 2001
-------------------------
Numerator:
Net loss $ (71,822) $ (83,583)
=========================
Denominator:
Denominator for basic earnings
per share - weighted average
Shares 2,207,350 2,207,350
Effect of dilutive securities:
Stock options - -
Convertible preferred stock - -
-------------------------
Denominator for diluted earnings per share 2,207,350 2,207,350
=========================
Basic earnings per share $ (.03) $ (.04)
Diluted earnings per share $ (.03) $ (.04)
4. Investment in Common Stock
The following information presents condensed balance sheet
information as of September 30, 2002 and June 30, 2002 and
condensed income statement information for each of the three
months ended September 30, 2002 and 2001 for the Company's
investment in Comtex, which is accounted for using the equity
method:
September 30 June 30
2002 2002
----------------------------
(in thousands)
Current assets $ 1,729 $ 2,144
Other assets 3,397 3,456
Current liabilities 2,315 2,551
Long-term liabilities 980 948
4. Investment in Common Stock (continued)
Three months ended
September 30
2002 2001
-------------------------
(in thousands)
Revenues $ 2,431 $ 3,464
Gross profit 1,560 2,386
Net (loss) income (267) 69
5. Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of the following:
Three months ended September 30
2002 2001
-------------------------------
Net loss $ (71,822) $ (83,583)
Unrealized (loss) gain on
investment (9,712) 234,416
------------------------------
$ (81,534) $ 150,833
==============================
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's principal business is the maintenance of its
equity interests in Comtex News Network, Inc. ("Comtex") and
Analex Corporation ("Analex") and the Company's income is
derived from equity and interest income related to these
investments. The Company owns 2,153,437 shares of common
stock of Comtex (SEC File No. 0-10541). Comtex trades on
the OTC Electronic Bulletin Board under the symbol CMTX.
More information concerning the operations of Comtex can be
found in its own filings with the Securities and Exchange
Commission. The Company owns 138,739 shares of the common
stock of Analex Corporation (SEC File No. 0-5404), which
trades on the OTC Electronic Bulletin Board under the symbol
ANLX. More information concerning the operations of Analex
can be found in its own filings with the Securities and
Exchange Commission.
The Company accounts for its investment in Comtex using the
equity method, whereby the Company records its share of
income or loss reported by Comtex based on its ownership
interest. The Company also has a note receivable from
Comtex, which bears interest at 10%. The Company's
investment in Analex was accounted for using the equity
method through March 2000. Due to a change in control at
Analex in March 2000, in which a group of investors assumed
control of Analex, the investment has since been accounted
for pursuant to SFAS 115 Accounting for Certain Investments
in Debt and Equity Securities. The Analex investment
balance at each reporting period is reported based on the
stock's trading value with any increases or decreases being
presented as unrealized gains or losses in the statement of
stockholders' equity. No investments have been made since
the initial acquisition of interests of Comtex and Analex in
1996, nor has there been any interests nor dividends
received. During February 2002, the Company's CEO exercised
his options to acquire 2,540,503 shares of Comtex stock
owned by the Company, which resulted in proceeds of
$254,000. A portion of the Analex investment was sold in
February and May 2002.
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2002 to the
three months ended September 30, 2001
The Company had a net loss of $72,000 during the three months
ended September 30, 2002 compared to a net loss of $84,000
during the three months ended September 30, 2001. The decrease
in net loss is due to a decrease in interest expense of $52,000
related to the extinguishment of debt during fiscal year 2002
and a decrease in operating costs and expenses of $18,000
(26.6%), offset by a decrease in equity in earnings of $58,000.
Other income. Interest income decreased slightly due to the
decrease in the average outstanding note receivable balance due
from Comtex.
Operating costs and expenses. Operating costs and expenses
decreased $18,000 (26.6%) to $51,000 during the three months
ended September 30, 2002 due to a decrease in professional
services. Professional services decreased $10,000 primarily
due to a decrease in consulting fees. In addition,
amortization decreased $8,000 because the reorganization costs
were fully amortized after the first quarter of fiscal year
2002.
Equity in earnings. Equity in earnings decreased $58,000 due
primarily to the decrease in the Company's share of earnings of
Comtex, which reported a net loss of $267,000 during the three
months ended September 30, 2002 compared to net income of
$69,000 during the same period ended 2001.
Interest expense. Interest expense decreased $52,000 due to
the retirement of the note payable during the third quarter of
fiscal year 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a deficiency in working capital of $33,000 at
September 30, 2002. The Company has had minimal operating
activity since commencing operations in 1996 and has not had
any other uses of funds. Accordingly, the Company has not
required any funding sources. The Company expects to meet its
short-term obligation through payments of principal and
interest from the note receivable from Comtex and from the
sales of interests in Analex.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, the
matters discussed in this Form 10-Q include forward-looking
statements within the meaning of Section 21E of the Securities
and Exchange Act of 1934. These forward-looking statements may
be identified by reference to a future period or by use of
forward-looking terminology such as "anticipate", "expect",
"could", "may" or other words of a similar nature. Forward-
looking statements, which the Company believes to be reasonable
and are made in good faith, are subject to certain risks and
uncertainties that could cause actual results to differ
materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company.
Item 4.
CONTROLS AND PROCEDURES
The Company's Chief Executive and Financial Officer has
concluded, based on his evaluation within 90 days prior to the
filing date of this report, that the Company's disclosure
controls and procedures (as defined in Securities Exchange Act
Rules 13a-14(c) and 15d-14(c)) are effective to ensure that
information required to be disclosed in the reports that the
Company files or submits under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange
Commission's rules and forms. There have been no significant
changes in the Company's internal controls or in other factors
that could significantly affect these controls subsequent to
the date of the foregoing evaluation.
Part II. Other Information
Items 1 - 5. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned there unto duly
authorized.
AMASYS CORPORATION
(Registrant)
Dated: November 14, 2002 By: /S/ C.W. GILLULY
____________________
C.W. Gilluly, Ed.D.
President and Chief
Executive Officer
(Principal Executive
Officer and
Principal Financial and
Accounting Officer)
CERTIFICATIONS
I, C.W. Gilluly, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
AMASYS Corporation;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report;
3. Based on my knowledge, the consolidated 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 registrant as of, and for, the periods
presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 14, 2002 /S/ C.W. GILLULY
C.W. Gilluly
President and Chief Executive Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, C.W. Gilluly, the President and Chief
Executive Officer of AMASYS Corporation (the "Company"), has
executed this certification in connection with the filing
with the Securities and Exchange Commission of the Company's
Quarterly Report on Form 10-Q for the period ending
September 30, 2002 (the "Report"). The undersigned hereby
certifies that:
(1) the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) the information contained in the Report fairly
presents, in all material respects, the financial condition
and results of operations of the Company.
Date: November 14, 2002 /S/ C.W. GILLULY
C.W. Gilluly
President and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, C. W. Gilluly, the Principal Finance
Officer of AMASYS Corporation (the "Company"), has executed
this certification in connection with the filing with the
Securities and Exchange Commission of the Company's
Quarterly Report on Form 10-Q for the period ending
September 30, 2002 (the "Report"). The undersigned hereby
certifies that:
(1) the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) the information contained in the Report fairly
presents, in all material respects, the financial condition
and results of operations of the Company.
Date: November 14, 2002 /S/ C.W. GILLULY
C.W. Gilluly
Principal Finance Officer