SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2002
------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period ________ to ________
Commission file number 1-11988
GREG MANNING AUCTIONS, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 22-2365834
----------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
775 Passaic Avenue
West Caldwell, New Jersey 07006
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 882-0004
-------------
Check whether the Issuer (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 filing requirements for the past 90
days.
Yes X No _____
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As of November 6, 2002, Issuer had 12,703,304 shares of its Common Stock
outstanding.
GREG MANNING AUCTIONS, INC.
Table of Contents
Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at
June 30, 2002 and September 30, 2002 3
Condensed Consolidated Statements of Operations for the
three months ended September 30, 2001 and 2002 4
Condensed Consolidated Statements of Stockholders' Equity for the
three months ended September 30, 2002 5
Condensed Consolidated Statements of Cash Flows for the
three months ended September 30, 2001 and 2002 6
Condensed Consolidated Statement of Comprehensive Income for the
three months ended September 30, 2001 and 2002 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
2
PART I. FINANCIAL INFORMATION
GREG MANNING AUCTIONS, INC.
Condensed Consolidated Balance Sheets
(amounts in thousands except per share data)
June 30, September 30,
2002 2002
--------- -----------
Assets (Audited) (Unaudited)
-------
Current Assets
Cash and Cash Equivalents $ 2,169 $ 1,962
Accounts Receivable, net
Auctions and Trade Receivable 6,979 8,330
Advances to Consignors 1,164 1,343
Inventory 11,425 11,958
Deferred Tax Asset -- --
Prepaid Expenses 380 578
-------- --------
Total Current Assets 22,117 24,171
Property and Equipment, Net 948 889
Goodwill, Net 1,516 1,516
Other Purchased Intangibles, Net 1,065 1,050
Marketable Securities 76 60
Other Non-Current Assets
Deferred Tax Asset -- --
Loans Receivable - Related Party 525
Inventory 1,400 1,400
Other 226 234
-------- --------
Total Assets $ 27,348 $ 29,845
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Demand Notes Payable $ 1,400 $ 2,000
Notes Payable and Capital Leases 5,657 5,733
Payable to Third Party Consignors 2,945 2,307
Accounts Payable 4,062 7,144
Accrued Expenses 1,512 1,261
-------- --------
Total Current Liabilities 15,576 18,445
Notes Payable - Long Term 116 99
-------- --------
Total Liabilities 15,692 18,544
Stockholders' Equity
Preferred Stock, $.01 par value. Authorized
10,000 shares; none issued
Common Stock, $.01 par value
Authorized: 40,000 shares
Issued: June 30, 2002-13,072 shares 130 130
Issued: September 30, 2002-13,072 shares
Additional paid in capital 45,842 45,842
Accumulated other comprehensive income:
Unrealized loss on marketable securities
net of tax (309) (325)
Accumulated Deficit (31,459) (31,798)
Treasury stock, at cost:
368 shares at June 30 and September 30,
2002, respectively (2,548) (2,548)
-------- --------
Total Stockholders' Equity 11,656 11,301
-------- --------
Total Liabilities and Stockholders' Equity $ 27,348 $ 29,845
======== ========
See accompanying notes to condensed consolidated financial statements
3
GREG MANNING AUCTIONS, INC.
Consolidated Statements of Operations
For the Three Months Ended September 30,
(amounts in thousands except per share data)
(Unaudited)
2001 2002
-------- --------
Operating Revenues
Sales of merchandise $ 17,891 $ 24,375
Commissions earned 789 1,040
-------- --------
Total Revenues 18,680 25,415
Cost of merchandise sold 16,501 22,797
-------- --------
Gross profit 2,179 2,618
Operating Expenses
General and Administrative 1,141 1,215
Salaries and Wages 1,145 1,106
Depreciation and Amortization 362 125
Marketing 353 348
-------- --------
Total Operating Expenses 3,001 2,794
-------- --------
Operating Loss (822) (176)
-------- --------
Other Income (expense)
Interest Income 93 49
Interest Expense (196) (212)
-------- --------
Loss before income taxes (925) (339)
Provision for income taxes -- --
-------- --------
Net Loss $ (925) $ (339)
======== ========
Basic Loss per Share
Weighted average shares
outstanding 12,319 12,703
======== ========
Basic loss per share $ (0.08) $ (0.03)
======== ========
Diluted Loss per Share
Weighted average shares
outstanding 12,319 12,703
======== ========
Diluted Loss per Share $ (0.08) $ (0.03)
======== ========
See accompanying notes to condensed consolidated financial statements
4
GREG MANNING AUCTIONS, INC.
Condensed Consolidated Statement of Stockholders' Equity
July 1, 2002 to September 30, 2002
(amounts in thousands)
(Unaudited)
Unrealized
Additional Gain(Loss) Total
Common Stock Paid-In on Marketable Accumulated Treasury Stockholders'
Shares $ Capital Securities Deficit Stock Equity
------------ -------- ----------- -------------- ------------ -------- ------------
Balance, June 30, 2002 13,072 $ 130 45,842 $ (309) $(31,459) $ (2,548) $ 11,656
Common shares issued relating to
acquisition of GMD, net of
expenses
Unrealized loss from
Marketable securities (16) (16)
Common shares sold
for cash
Net Loss, September 30,2002 (339) (339)
-------- -------- -------- -------- -------- -------- --------
Balance, September 30,2002 13,072 $ 130 $ 45,842 $ (325) $(31,798) $ (2,548) $ 11,301
======== ======== ======== ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements
5
GREG MANNING AUCTIONS, INC.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended September 30,
(amounts in thousands)
(Unaudited)
2001 2002
--------- --------
Cash flows from operating activities:
Net Loss $ (925) $ (339)
Adjustments to reconcile net loss
to net cash from operating activities:
Depreciation and amortization 362 100
Provision for bad debts 3 17
Common Stock issued for services 95 --
(Increase) decrease in assets:
Auctions receivable 924 (1,368)
Advances to consignors 137 (179)
Other 250 --
Inventory 3,253 (533)
Prepaid expenses and deposits (9) (198)
Other assets (51) (6)
Increase (decrease) in liabilities:
Payable to third-party consignors (1,393) (639)
Accounts payable (362) 3,082
Accrued expenses and other liabilities (129) (253)
Advance from Related Party (90) --
------- -------
2,065 (316)
Cash flows from investing activities
Capital expenditures for property and
equipment (49) (25)
Loans Receivable - Related Party (525)
------- -------
(49) (550)
Cash flows from financing activities:
Net proceeds from (repayment of)
demand notes payable (4,150) 600
Net proceeds from (repayment of )
loans payable (6) 59
Proceeds from sale of Common Shares 1,400 --
------- -------
(2,756) 659
Net change in cash and cash equivalents (740) (207)
Cash and cash equivalents:
Beginning of period 2,158 2,169
------- -------
End of period $ 1,418 $ 1,962
======= =======
See accompanying notes to condensed consolidated financial statements
6
GREG MANNING AUCTIONS, INC.
Condensed Consolidated Statements of Comprehensive
Income (Loss)
For the Three Months Ended September 30,
(amounts in thousands)
(Unaudited)
2001 2002
-------- -------
Net Loss $ (925) $ (339)
Other Comprehensive Income (Loss)
Unrealized loss on securities, (86) (16)
net of tax -------- -------
$ (1,011) $ (355)
======== =======
See accompanying notes to condensed consolidated financial statements.
7
Notes to Condensed Consolidated Financial Statements
(amounts in thousands except per share amounts or as noted)
(1) Organization, Business and Basis of Presentation
Greg Manning Auctions, Inc. together with its wholly-owned subsidiaries,
Ivy and Mader Philatelic Auctions, Inc., Greg Manning Galleries, Inc., Teletrade
Inc., Spectrum Numismatics International, Inc., Kensington Associates L.L.C. and
Greg Manning Direct, Inc. (the "Company") is an eCommerce and collectibles
company as well as a public auctioneer of collectibles, including rare stamps,
stamp collections and stocks, sports trading cards and memorabilia, fine art and
coins. The Company conducts both in-person event auctions and electronic
auctions via the Internet and touch-tone telephone. The Company accepts property
for sale at auctions from sellers on a consignment basis, and earns a commission
on the sale.
The accompanying condensed consolidated balance sheets as of June 30, 2002
and September 30, 2002 and related condensed consolidated statements of
operations, stockholders' equity, cash flows and comprehensive income for the
three month periods ended September 30, 2001 and 2002 have been prepared from
the books and records maintained by the Company, in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, which are
of a normal recurring nature, considered necessary for a fair presentation have
been included. For further information, refer to the consolidated financial
statements and disclosures thereto in the Company's Form 10-K for the year ended
June 30, 2002 filed with the Securities and Exchange Commission. The results of
operations for such periods are not necessarily indicative of the results
expected for the full fiscal year or for any future period.
(2) Summary of Certain Significant Accounting Policies
Revenue Recognition
The Company accounts for revenue recognition in accordance with Staff Accounting
Bulletin No. 101, ("SAB 101"), which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements, and Emerging
Issues Task Force ("EITF") Issue No. 99-19 "Reporting Revenue Gross as a
Principal vs. Net as an Agent" which provides guidance on the recognition of
revenue gross as a principal versus net as an agent.
The Company derives revenues from two primary sources:
1. Auction Revenue:
Revenue is recognized when the collectibles are sold at auction and is
represented by an auction commission received from the buyer and seller. Auction
commissions represent a percentage of the hammer price at auction sales as paid
by the buyer and the seller. Such amounts of revenue are recorded on a net basis
as commission revenue.
The Company also sells its own inventory at auction. Revenue of owned
inventory is recognized when sold at auction. Such amounts of revenue are
recorded on a gross basis as sales of merchandise. Additionally, the Company is
entitled to auction commissions paid by the buyer. Sales returns have not been
material.
8
2. Private Treaty Sales:
Private treaty sales represent sales of consigned property and sales of
owned inventory.
Private treaty sales of consigned property occur when an owner of property
arranges with the Company to sell such consigned property to a third party at a
privately negotiated price. In such a transaction, the owner may set selling
price parameters for the Company, or the Company may solicit selling prices for
the owner, and the owner may reserve the right to reject any selling price. The
Company does not guarantee a fixed price to the owner, which would be payable
regardless of the actual sales price ultimately received. The Company recognizes
as private treaty revenue an amount equal to a percentage of the sales price.
Such amounts of revenue are recorded on a net basis as commission revenue and
are recognized when sold.
Private treaty sales of owned inventory occur when the Company sells its
goods directly to a customer either wholesale or retail. Revenue with respect to
private treaty revenues is recognized when delivered or released to the customer
for acceptance or to a common carrier for delivery. Such amounts of revenue are
recorded on a gross basis as sales of merchandise. Sales returns have not been
material.
The Company does not provide any guarantee with respect to the
authenticity of property offered for sale at auction. Each lot is sold as
genuine and as described by the Company in the catalogue. When however, in the
opinion of a competent authority mutually acceptable to the Company and the
purchaser, a lot is declared otherwise, the purchase price will be refunded in
full if the lot is returned to the Company within a specified period. In such
event, the Company will return such lot to the consignor before a settlement
payment has been made to such consignor for the lot in question. To date,
returns have not been material. Large collections are generally sold on an "as
is" basis.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts
of its wholly owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation. Investment in equity-method investee is
accounted for the equity method of accounting since the Company owns more than
20% of the entity, but less than majority owned and not otherwise controlled by
the Company.
Accounts Receivable
Accounts receivable consists of auction or trade receivables and
consignor advances.
Auction or trade receivables represent sales made to customers for which
short-term credit extensions are granted, which generally are not extended
beyond 90 days.
Advances to consignors represent advance payments, or loans, to the
consignor prior to the auction sale, collateralized by the items received and
held by the Company for the auction sale and the proceeds from such sale.
Interest on such amounts is generally charged at an annual rate of 12%. Such
advances generally are not outstanding for more than six months from the date of
the note.
As of June 30 and September 30, 2002, the allowance for doubtful accounts
included in auction receivables was approximately $1,077 and $1,065,
respectively.
9
Intangible Assets
Goodwill
Effective July 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS"), No. 142, "Goodwill and Other Intangible Assets".
SFAS 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized, but instead be tested for impairment at least
annually in accordance with the provisions of Statement 142. Statement 142 also
requires that intangible assets with estimable useful lives be amortized over
their respective estimated useful lives to their estimated residual values, if
any, and reviewed for impairment in accordance with SFAS Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of". Upon adoption, the Company re-evaluated the future estimated
useful lives of its intangible assets that have an indefinite life.
SFAS 142 is effective for the Company for fiscal 2003. Accordingly, the
Company no longer amortizes its goodwill and is required to complete a two-step
test for impairment annually. The first step of the goodwill impairment test,
used to identify potential impairment, compares the fair value of a reporting
unit with its carrying amount, including goodwill. If the carrying amount of the
reporting unit exceeds its fair value, the second step of the goodwill
impairment test must be performed to measure the amount of the impairment loss,
if any.
The Company evaluates the recoverability of goodwill and intangible
assets using undiscounted cash flows which determines if the carrying value of
goodwill and other intangibles are impaired. The amount of impairment is
measured based on discounted future cash flows using the Company's average cost
of funds. For the period ended September 30, 2002, the Company performed this
analysis with assistance from an independent valuation expert. The tests the
Company performed compared the expected future discounted cash flows for a
five-year period, to the carrying amount of the long-lived assets resulting from
purchase business combinations. In performing these analyses, the Company uses
the best information available in the circumstances including reasonable and
supportable assumptions and projections. Based on a review of the analyses
prepared by an independent valuation expert and its own reviews, management has
concluded that the fair value exceeded the carrying value as of September 30,
2002 and therefore no impairment existed at that date. Because the Company
satisfied the requirements of the first step of the impairment test, the second
step of the impairment is not necessary. In the future, the Company will be
required to complete the impairment test annually. Total accumulated
amortization at June 30, and September 30, 2002 was approximately $6,936.
10
The following table presents the transitional disclosures required by SFAS 142:
(Dollars in thousands, except per share data)
September 30,
2002 2001
- -------------------------------------------------------------------------
Reported net income (loss) $ (339) $ (925)
Add back: Amortization of goodwill -- 131
------- -------
Adjusted net income (loss) $ (339) $ (794)
======= =======
BASIC EARNINGS(LOSS) PER COMMON SHARE:
Reported net income (loss) $ (0.03) $ (0.08)
Add back: Amortization of goodwill -- 0.01
------- -------
Adjusted net income (loss) $ (0.03) $ (0.07)
======= =======
DILUTED EARNINGS(LOSS) PER COMMON SHARE:
Reported net income (loss) $ (0.03) $ (0.08)
Add back: Amortization of goodwill -- 0.01
------- -------
Adjusted net income (loss) $ (0.03) $ (0.07)
Other Purchased Intangibles
At September 30, 2002 and 2001, acquired intangible assets were comprised of the
following (in thousands):
2002 Estimated
Useful Lives Gross Carrying Accumulated Net Book
(Years) Amount Amortization Value
- -------------------------------------------------------------------------------
Trademarks 16 $ 3,000 $(2,030) $ 970
Customer Lists 1,105 (1,025) 80
- ---------------------------- ------- ------- -------
$ 4,105 $(3,055) $ 1,050
======= ======= =======
2002 Estimated
Useful Lives Gross Carrying Accumulated Net Book
(Years) Amount Amortization Value
- -------------------------------------------------------------------------------
Trademarks 20 $ 3,000 $ (437) $ 2,563
Customer Lists 1,105 (730) 375
- ---------------------------- ------- ------- -------
$ 4,105 $(1,167) $ 2,938
======= ======= =======
11
All of the Company's intangible assets are subject to amortization. Amortization
expense for acquired intangible assets was $15 and $84 for the periods ended
September 30, 2002, and 2001, respectively.
Estimated amortization expense on an annual basis for the succeeding five years
is as follows (in thousands):
Twelve Month Period Ended
September 30, Amount
- -------------------------------------------------
2003 $ 62
2004 62
2005 62
2006 62
2007 62
Thereafter 740
-------
Total $ 1,050
=======
Investments
The Company accounts for marketable securities pursuant to the Statement
of Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Under this statement, the Company's marketable
securities with a readily determinable fair value have been classified as
available for sale and are carried at fair value with an offsetting adjustment
to Stockholders' Equity. Net unrealized gains and losses for temporary changes
in fair value of marketable securities are credited or charged to a separate
component of Stockholders' Equity.
Marketable securities available for sale as of June 30, and September 30,
2002 is as follows:
Market Unrealized
Cost Value Gain (Loss)
---- ----- -----------
June 30, 2002 Common Stock $ 385 $ 76 $ (309)
===== ====== ======
September 30, 2002 Common Stock $ 385 $ 60 $ (325)
===== ====== ======
Earnings (loss) per common and common equivalent share
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share is computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding during the period increased to include the number of additional
common shares that would have been outstanding if the dilutive potential common
shares had been issued. The dilutive effect of the outstanding options would be
reflected in diluted earnings per share by application of the treasury stock
method. There is no dilutive effect to these options for the three months ended
September 30, 2001 and 2002.
12
Comprehensive Income
Comprehensive income as defined includes all changes in equity (net
assets) during a period from non-owner sources. Accumulated other comprehensive
income, as presented on the accompanying consolidated balance sheet consist of
the net unrealized gains (losses) on securities, net of tax.
New Accounting Pronouncements
Effective July 1,2002, the Company adopted the Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets". This statement is effective for the Company on July 1, 2002 (see
intangible assets discussion above).
Effective July 1,2002, the Company adopted the SFAS issued No. 143,
"Accounting for Asset Retirement Obligations," which is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The adoption
of SFAS 143 did not have a significant impact on its financial statements.
Effective July 1,2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment Or Disposal of Long Lived Assets," which is effective for
financial statements issued for fiscal years beginning after December 15, 2001.
There was no impact from the adoption of this statement.
In April 2002, the FASB issued SFAS No. 145, "rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. SFAS No. 145 provides guidance for income statement classification
of gains and losses of debt and accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. SFAS No.
145 requires that gains and losses from extinguishment of debt be classified as
extraordinary items only if they meet the criteria in Accounting Principles
Board Opinion No. 30 ("Opinion No. 30"). SFAS No. 145 is effective for years
beginning after December 15, 2002. The Company is evaluating the impact of SFAS
No. 145.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses financial accounting and
reporting for costs associated with exit or disposal activities and supersedes
EITF Issue 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)." SFAS 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is incurred.
Under Issue 94-3, a liability for an exit cost as defined in EITF 94-3 was
recognized at the date of an entity's commitment to an exit plan. SFAS 146 also
establishes that the liability should initially be measured and recorded at fair
value. SFAS No. 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. The Company is evaluating the
impact of SFAS No. 146.
13
(3) Inventories
Inventories as of June 30, 2002 consisted of the following:
Current Non-current Total
-------- ----------- -------
Stamps $ 692 $ 100 $ 792
Sports Collectibles 1,208 500 1,708
Coins 9,438 350 9,788
Art 50 250 300
Other 37 200 237
------- ------- -------
$11,425 $ 1,400 $12,825
======= ======= =======
Inventories as of September 30, 2002 consisted of the following:
Current Non-current Total
-------- ----------- -------
Stamps $ 459 $ 100 $ 559
Sports Collectibles 965 500 1,465
Coins 10,465 350 10,815
Art 45 250 295
Other 24 200 224
------- ------- -------
$11,958 $ 1,400 $13,358
======= ======= =======
The above inventory amounts reflect net realizable (LCM) allowances of
approximately $2,432 and $2,305 at June 30 and September 30, 2002, respectively.
The non-current inventory represents an estimate of total inventory, which is
not expected to be sold within one year.
Inventories are stated at the lower of cost or market. In instances
where bulk purchases are made, the cost allocation is based on the relative
market values of the respective goods. The Company has agreements with certain
suppliers to share the net profits or losses attributable to the sale of
specific items of inventory.
(4) Related-party Transactions
Certain directors of the Company provide legal, computer and consulting
services to the Company. Such expenditures were approximately $90 and $129 for
the three months ended September 30, 2001 and 2002, respectively.
Included in Accounts Receivable at September 30 and June 30, 2002 is
approximately $41 which is due from Collectibles Realty Management (CRM) and
will be collected in the ordinary course of business.
For the three months ended September 30, 2001 and 2002, purchases of
approximately $1,874 and $2,782, respectively were made to a former stockholder
of Spectrum, who is a current stockholder of the Company. Additionally
consulting fees in the amount of $9 and $233 were paid to this party in the
quarters ended September 30, 2001 and 2002 respectively.
14
During the three months ended September 30, 2001 and 2002, the Company
paid Mr. Manning approximately $28 and $0, respectively, of debt guarantee fees.
On June 17, 2002, the Company entered into an employment agreement with
Mr. Roberts, a director of the Company. In connection with the employment
agreement, the Company made available to Mr. Roberts a non-interest bearing loan
in the amount of $600. The loan is required to be repaid on an annual basis in
three equal installments commencing February 18, 2006; provided that if Mr.
Roberts is employed by the Company on the date that an installment is due, that
installment payment will be forgiven, and that if his employment is terminated
for death, disability, without cause or with good reason (as defined), then the
entire loan will be forgiven at the date of termination. If Mr. Roberts'
employment terminates for cause or without good reason, then the outstanding
amount of the loan will accelerate and be due and payable within 30 days of the
date of termination. An aggregate of $525 has been disbursed under the loan
agreement through the balance sheet date.
The Company has entered into an amendment to the employment agreement with
Mr. Roberts. Under the terms of the amendment, the employment term has been
extended for an additional three years, to February 18, 2008; Mr. Roberts is
entitled to receive a salary of $500 for the sixth year, $550 for the seventh
year, and $600 for the eighth year; and Mr. Roberts was granted an additional
500,000 stock options, which are exercisable at $2.00 per share and vest over
four years.
The Company had entered into an employment agreement with Mr. Greg
Manning, Chief Executive Officer of the Company, which expired June 2002. Mr.
Manning is continuing to perform under the terms of his old contract and the
parties expect a new agreement to be entered into by the completion of the
second fiscal quarter.
(5) Debt
The Company has a revolving credit agreement with Auctentia, S.A., a
wholly owned subsidiary of Afinsa to provide the Company with a credit facility
of up to $2,000. Borrowings under this facility bear interest at an annual rate
of 8%. The agreement also provides that any borrowings not repaid in accordance
with the terms of the agreement may be converted into GMAI stock at the
discretion of Afinsa. The agreement expires in April 2003. At June 30 and
September 30, 2002, borrowing under this facility totaled $1,400 and $2,000,
respectively.
Spectrum has a note payable collateralized by specific coin inventory with
an interest rate of 9% with quarterly payments of $500 commencing April 2002
until the note is repaid in June 2003. Total borrowing under this note totaled
$1,450 at June 30 and $1,000 at September 30, 2002.
Additionally Spectrum obtained a secured loan from a privately held
capital coin fund for $4,500, which is due December 31, 2003. This loan is
collateralized by certain inventories and bears interest at a rate of 10% per
annum. Total borrowing under this line of credit totaled $4,000 at June 30 and
$4,500 at September 30, 2002.
There is an advance from a consignor which was, upon settlement,
converted to a demand loan bearing an interest rate of 8% per annum in the
amount of $140 at June 30, 2002 and September 30,2002.
The remaining notes payable consist of capital leases for the purchase of
equipment and they carry interest rates ranging from 13% to 21%. Total
borrowings under the leases totaled $183 and $192 at June 30, 2002 and September
30, 2002.
15
(6) Major Customers
The Company had one major customer that accounted for approximately 18% of
total revenue during the three months ended September 30, 2002 and 3% of
accounts receivable at September 30, 2002. Such customer has certain supply and
sales agreements with the Company. Major customers are considered to be those
that accounted for more than 10% of sales.
(7) Stock Option Exchange Offer
On July 2, 2002, the Company commenced a tender offer to certain eligible
employees to exchange outstanding options to purchase shares of the Company's
common stock granted under the GMAI 1997 Stock Incentive Plan that had an
exercise price of $2.00 or more, for new options to purchase shares of the
Company's common stock to be granted under the 1997 Plan on or about February 4,
2003. The offer expired on July 30, 2002. Pursuant to the terms and conditions
of the offer, the Company accepted for exchange on July 31, 2002 tendered old
options exercisable for a total of 1,380,375 shares of common stock and canceled
all such old options. Subject to the terms and conditions of the offer, the
Company expects to grant new options to purchase a total of 1,380,375 shares of
common stock on or about February 4, 2003. The exercise price of the new options
will be the closing price of the Company's common stock as reported on the
NASDAQ National Market on the date of grant.
(8) Supplementary Cash Flow Information
Following is a summary of supplementary cash flow information:
Three Months Ended
September 30,
(in thousands)
2001 2002
------- ------
Interest paid $ 331 $ 212
Income taxes paid 16 -
Summary of significant non-cash transactions:
Issuance of shares
related to the acquisition
of GMD. 95 $ -
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, without limitation, statements regarding the
Company's expectations, beliefs, intentions or future strategies that are
signified by the words "expects", "anticipates", "intends", "believes", or
similar language. All forward-looking statements included in this document are
based on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking statements.
Actual results could differ materially from those projected in the
forward-looking statements. In evaluating the Company's business, prospective
investors should carefully consider the information set forth below, and in the
Company's Form 10-K, and in its Proxy Statement, filed with the Securities and
Exchange Commission on October 25, 2002 in addition to the other information set
forth herein. The Company cautions investors that its business and financial
performance are subject to substantial risks and uncertainties.
Results of Operations (Amounts in thousands except as noted or per share
information)
General
The Company operates in one segment consisting of various collectibles,
which are summarized in the accompanying table:
For the Three Months Ended
------------------------------------------------
September 30, Percentages
------------------ ------------------
2001 2002 2001 2002
------ ------ ------ ------
Aggregate Sales 22,972 29,209 100% 100%
====== ====== ====== ======
By Source:
A. Auction 5,082 4,834 22% 17%
B. Sales of Inventory 17,890 24,375 78% 83%
------ ------ ------ ------
22,972 29,209 100% 100%
====== ====== ====== ======
By Market:
Philatelics 1,505 2,924 7% 10%
Numismatics 17,429 25,284 76% 87%
Sports Collectibles 980 899 4% 3%
Diamond -- -- 0% 0%
Art 6 16 0% 0%
Other Collectibles 3,052 86 13% 0%
------ ------ ------ ------
22,972 29,209 100% 100%
====== ====== ====== ======
Aggregate sales consist of the aggregate proceeds realized from the sale
of property, which include the Company's commissions when applicable. Property
sold by the Company is either consigned to it by the owner of the property, or
is owned by the Company directly. Aggregate sales of the Company's inventory are
classified as such without regard as to whether the inventory was sold at
auction or directly to a customer. Aggregate sales by auction and by private
treaty represent the sale of property consigned by third parties.
The Company's revenues are represented by the sum of (a) the proceeds from
the sale of the Company's inventory, and (b) the portion of sale proceeds from
auction or private treaty that the Company is entitled to retain after remitting
the sellers' share, consisting primarily of commissions paid by sellers and
buyers. Generally, the Company earns a commission from the seller of 5% to 15%
(although the commission may be slightly lower on high value properties) and a
commission of 10% to 15% from the buyers.
17
The Company's operating expenses consist of the cost of sales of the
Company's inventory and general and administrative expenses and marketing
expenses for the three months ended September 30, 2001 and 2002. General and
administrative expenses are incurred to pay employees and to provide support and
services to those employees, including the physical facilities and data
processing. Marketing expenses are incurred to promote the services of the
Company to sellers and buyers of collectibles through advertising and public
relations, producing and distributing its auction catalogs and conducting
auctions.
Three months ended September 30, 2002
Compared with the three months ended September 30, 2001
The Company recorded an increase in net revenues of approximately $6,735
(36%) from approximately $18,680 for the three months ended September 30, 2001
to approximately $25,415 for the three months ended September 30, 2002.
Sales of owned inventory increased during the current period by
approximately $6,484 (36%) and also showed an increase in commissions earned of
approximately $251 (32%), reflecting a increase in sales of consigned material.
The majority of the increase in sales of owned inventory was the result of
increased coin sales of $9,284 which included approximately $4,600 of sales to
its major customer with the remaining increase reflecting a general increase in
the market for collectible coins. This increase was offset by a decrease of
sales of $2,507 reflecting the sale of the comic book and movie poster division
in the quarter ended September 30, 2001.
Gross profit increased approximately $439 (20%) from approximately $2,179
for the three months ended September 30, 2001 to approximately $2,618 for the
three months ended September 30, 2002. Gross profit margins decreased from 12%
to 10% for the three months ended September 30, 2001 and 2002, respectively.
The Company's operating expenses decreased approximately $207 (7%) during
the three months ended September 30, 2002 as compared to the same period in the
prior year. Marketing expenses decreased approximately $5 (2%), depreciation and
amortization decreased approximately $237 (65%), salaries and wages decreased
approximately $39 (3%) and general and administrative expenses increased
approximately $74 (6%). These decreases reflect the execution of the Company's
strategic plan to complete changes to the infrastructure of the Company to react
to current market conditions experienced by the Company.
These decreased costs, in combination with revenue increases, had the
effect of decreasing operating costs as a percentage of operating revenue from
16% during the three months ended September 30, 2001 to 11% for the same period
ended September 30, 2002. As compared to aggregate sales, these costs decreased
from 13.1% in September 2001 to 9.6% in 2002.
Interest expense (net of interest income) for the three months ended
September 30, 2002 increased approximately $60 from approximately $103 to
approximately $163.
The Company's effective tax rates for the three month periods ended
September 30, 2001 and 2002 were approximately 0%, respectively. The rate is
based on a full valuation allowance provided for all deferred tax attributes.
This rate may change during the remainder of 2003 if operating results or
acquisition related costs differ significantly from current projections.
The Company's decrease in operating losses of approximately $646, coupled
with a increase in interest expense net of interest income of approximately $60,
resulted in a decrease in net losses before
18
income taxes of approximately $586 for the current three month period, from
approximately $925 to approximately $339 for the three months ended September
30, 2001 and 2002, respectively.
Liquidity and Capital Resources
At September 30, 2002, the Company's working capital position was
approximately $5,726, compared to approximately $6,541 as of June 30, 2002.This
net decrease of approximately $850 was primarily due to increases in auction
receivable of approximately $1,316, inventory of approximately $533 and advances
to consignors of approximately $179. These were offset by increases in demand
notes payable of approximately $ 740 as additional funds were borrowed and by
increases in amounts payable of $1,392 which was reflective of the increase in
sales of coins.
The Company experienced a decrease in cash flow from investing activities
for the three months ended September 30, 2002 of approximately $550. This was
primarily attributable to a loan to a related party of $525 and the acquisition
of property and equipment and other purchased intangibles during the prior year.
The Company experienced an increase in cash flow from financing activities
for the three months ended September 30, 2002 of approximately $3,415. This was
primarily attributable to the increase in demand notes payable of approximately
$740 for the three months ended September 30, 2002 as compared to a repayment of
demand notes payable of $4,150 and the proceeds from the sale of Common stock of
$1,400 for the three months ended September 30,2001.
The Company's need for liquidity and working capital is expected to
increase as a result of any proposed business expansion activities. In addition
to the need for such capital, and to enhance the Company's ability to offer cash
advances to a larger number of potential consignors of property (which
management believes is an important aspect of the marketing of an auction
business). In addition, the Company will likely require additional working
capital in the future in order to further expand its sports trading card and
sports memorabilia auction business as well as to acquire collectibles for sale
in the Company's business.
Management believes that the Company's cash flow from ongoing operations
supplemented by the Company's working capital credit facilities will be adequate
to fund the Company's working capital requirements for the next 12 months.
However, to complete any of the Company's proposed expansion activities or to
make any significant acquisitions, the Company may consider exploring financing
alternatives including increasing its working capital credit facilities or
raising additional debt or equity capital.
The decision to expand, the desired rate of expansion, and the areas of
expansion will be determined by management and the Board of Directors only after
careful consideration of all relevant factors. This will include the Company's
financial resources and working capital needs, and the necessity of continuing
its growth and position in its core business area of stamp auctions.
Risk Factors
From time to time, information provided by the Company, including but not
limited to statements in this report, or other statements made by or on behalf
of the Company, may contain "forward-looking" information within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements involve a number of risks and
uncertainties. The Company's actual results could differ materially from those
discussed in the forward-looking statements. The cautionary statements set forth
below identify important factors
19
that could cause actual results to differ materially from those in any
forward-looking statements made by or on behalf of the Company:
o The Company incurred a net loss of $13,177 for the fiscal year ended
June 30, 2002. The Company is seeking to reduce operating expenses,
optimize profitability and align resources with long-term business
growth strategies, as well as to explore new sources of collectibles
in an effort to increase margins and revenues from commissions. There
can be no assurance, however, that these steps (or any others) will
result in a significant improvement in the Company's financial
condition, on either a short or long-term basis particularly in light
of generally unfavorable economic conditions and changes in the
collectibles marketplace.
o There can be no assurance that the proposed transactions with Afinsa
Bienes Tangibles, S.A. and Auctentia, S.A., as previously disclosed,
will be consummated, or if consummated, on the terms disclosed. If the
transactions are not consummated, the Company will be required to
obtain new sources of financing to replace its current credit
facility, which expires shortly. If the Company fails to do so on a
timely basis and upon satisfactory terms, the Company's operations and
cash flow could be materially and adversely affected.
o If the revenue of the Company fails to offset operating expenses in
the future, the Company may be required to fund future operations
through the sale of additional common stock, which could cause the
market price of the stock to decline, as well as have a dilutive
effect on the value of the common stock currently outstanding.
o At times there may be a limited supply of collectibles available for
sale by the Company, and such supply varies from time to time. While
the Company generally has not experienced a lack of collectibles that
has prevented it from conducting appropriately sized auctions on an
acceptable schedule, no assurance can be given that the Company will
be able to obtain consignments of suitable quantities of collectibles
in order to conduct auctions of the size, and at the times, the
Company may desire in the future. The Company's inability to do so
would have a material adverse effect on the Company.
o The development and success of the Company's business has been and
will continue to be dependent substantially upon its President,
Chairman and Chief Executive Officer, Greg Manning. The unavailability
of Mr. Manning, for any reason, would have a material adverse effect
upon the business; operations and prospects of the Company if a
suitable replacement were not engaged.
o The development and success of Spectrum Numismatics, Inc's business
has been and will continue to be dependent substantially upon its
President, Greg Roberts. The unavailability of Mr. Roberts, for any
reason, would have a material adverse effect upon the business;
operations and prospects of the Company if a suitable replacement were
not engaged.
o The business of selling stamps, coins, and other collectibles at
auction and in retail sales is highly competitive. The Company
competes with a number of auction houses and collectibles companies
throughout the United States and the world. While the Company believes
that there is no dominant company in the stamp
20
auction or collectibles business in which it operates, there can be no
assurances that other companies with greater financial and other
resources and name recognition will not enter the market.
o The Company may be adversely affected by the loss of a major customer.
o The Company may be adversely affected by the costs and other effects
associated with (i) legal and administrative cases and proceedings;
(ii) settlements, investigations, claims and changes in those items;
and (iii) adoption of new, or changes in, accounting policies and
practices and the application of such policies and practices.
o The Company intends to consider appropriate acquisition candidates as
described in "Future Planned Expansion" herein. There can be no
assurance that the Company will find or consummate transactions with
suitable acquisition candidates in the future.
o The Company's operations may be adversely affected by governmental
regulation and taxation of the Internet, which is subject to change. A
number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may
result in there being enacted laws concerning various aspects of the
Internet, including online content, user privacy, access charges,
liability for third-party activities, and jurisdictional issues. These
laws could harm our business by increasing the Company's cost of doing
business or discouraging use of the Internet.
o The Company's business will be adversely affected if use of the
Internet by consumers, particularly purchasers of collectibles, does
not continue to grow. A number of factors may inhibit consumers from
using the Internet. These include inadequate network infrastructure,
security concerns, inconsistent quality of service and a lack of
cost-effective high-speed service. Even if Internet use grows, the
Internet's infrastructure may not be able to support the demands
placed on it by this growth and its performance and reliability may
decline. In addition, many Web sites have experienced service
interruptions as a result of outages and other delays occurring
throughout the Internet infrastructure. If these outages or delays
occur frequently in the future, use of the Internet, as well as use of
the Company's Web sites, could grow more slowly or decline.
o In addition, the tax treatment of the Internet and electronic commerce
is currently unsettled. A number of proposals have been made that
could result in Internet activities, including the sale of goods and
services, being taxed. The U.S. Congress has passed the Internet Tax
Information Act, which placed a three-year moratorium on new state and
local taxes on Internet commerce and is currently considering
extending such moratorium. There may, however, be enacted in the
future laws that change the federal, state or local tax treatment of
the Internet in a way that is detrimental to our business.
o Some local telephone carriers claim that the increasing popularity of
the Internet has burdened the existing telecommunications
infrastructure and that many areas with high Internet use are
experiencing interruptions in telephone service. These carriers
21
have petitioned the Federal Communications Commission to impose access
fees on Internet service providers. If these access fees are imposed,
the cost of communicating on the Internet could increase, and this
could decrease the demand for the Company's services and increase its
cost of doing business.
o The Company holds rights to various Web domain names. Governmental
agencies typically regulate domain names. These regulations are
subject to change. The Company may not be able to acquire or maintain
appropriate domain names in all countries in which it or its
affiliates do business. Furthermore, regulations governing domain
names may not protect the Company's trademarks and similar proprietary
rights. The Company may be unable to prevent third parties from
acquiring domain names that are similar to, infringe upon or diminish
the value of the Company's trademarks and other proprietary rights.
o The Company cannot accurately forecast revenues of its business. The
Company may experience significant fluctuations in its quarterly
operating results. Future fluctuations in operating results or revenue
shortfalls could adversely affect the success of the Company.
o The popularity of collectibles could decline. This could affect the
market value of inventory the Company currently holds or may hold in
the future.
o The Company's future results of operations could be adversely affected
by changes in accounting standards promulgated by the Financial
Accounting Standards Board, the Securities and Exchange Commission,
and the American Institute of Certified Public Accountants.
This list should not be considered an exhaustive statement of all-potential
risks and uncertainties.
22
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of the Company due to adverse
changes in financial market prices, including interest rate risk, foreign
currency exchange rate risk, investment risk, commodity price risk and other
relevant market rate or price risks.
The Company currently has no activities that would expose it to interest
rate or foreign currency exchange rate risks.
Investment Risk. The Company maintains investments in equity instruments of
public and privately held companies for business and strategic purposes. These
investments are included in marketable securities and other long-term assets and
are accounted for under the cost method when ownership is less than 20% and the
Company does not have the ability to exercise significant influence over
operations. For these investments, the Company's policy is to regularly review
the assumptions underlying the operating performance and cash flow forecasts in
assessing the carrying values. The Company identifies and records impairment
losses on long-lived assets when events and circumstances indicate that such
assets might be impaired.
Commodity Price Risk. The Company may, at times, be exposed to commodity price
risk on certain inventory products. The Company historically and currently has
not experienced any significant commodity price risks.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. Within 90 days prior to the date of
this report, the Company carried out an evaluation, under the supervision and
with the participation of the Company's management, including the Company's
Chief Executive Officer along with the Company's Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14.
Based upon the foregoing, the Company's Chief Executive Officer along with
the Company's Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective. 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 completed its
evaluation.
23
GREG MANNING AUCTIONS, INC.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
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
Exhibit 99.1: Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
filed herewith.
Exhibit 99.2: Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
filed herewith.
(b) Reports on Form 8-K
None
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
GREG MANNING AUCTIONS, INC.
Dated: November 6, 2002
/s/ Greg Manning
-----------------------------------
Greg Manning
Chairman and Chief Executive Officer
/s/ Larry Crawford
.. -----------------------------------
Larry Crawford
Chief Financial Officer
25
GREG MANNING AUCTIONS, INC.
SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATION
I, Greg Manning, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Greg Manning
Auctions, Inc.;
2. Based on my knowledge, this annual 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 financial statements, and other financial
information included in this annual 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 officer 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 we 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 officer 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 function):
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 officer and I have indicated in this
quarterly 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 our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Dated: November 6, 2002
/s/ Greg Manning
--------------------------------
Greg Manning, President and Chief
Executive Officer
26
I, Larry Crawford, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Greg Manning
Auctions, Inc.
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 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 officer 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 we have:
d) 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;
e) 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
f) 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 officer 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 function):
b) 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 officer and I have indicated in this
quarterly 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 our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Dated: November 6, 2002
/s/ Larry Crawford
-----------------------------------
Larry Crawford, Executive Vice President
and Chief Financial Officer
27