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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended March 31, 2005
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________________ to ______________________
Commission File Number: 0-24176
Marisa Christina, Incorporated
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-3216809
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8101 Tonnelle Avenue, North Bergen, New Jersey 07047-4601
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201)-758-9800
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(Registrant's telephone number, including area code)
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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]
The number of shares outstanding of the Company's Common Stock on May 12,
2005 was 7,295,065.
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -- March 31, 2005 (Unaudited) and
December 31, 2004 2
Consolidated Statements of Operations -- Three months ended March 31, 2005 and
2004 (Unaudited) 3
Consolidated Statements of Cash Flows -- Three months ended March 31, 2005 and
2004 (Unaudited) 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Item 4. Controls and Procedures 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits 13
SIGNATURE 14
Section 302 Certifications 15
Section 906 Certifications 17
PART I: FINANCIAL INFORMATION
ITEM I: CONSOLIDATED FINANCIAL STATEMENT
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
MARCH 31, DECEMBER 31,
2005 2004
(UNAUDITED) (1)
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,028,839 5,438,218
Trade accounts receivable, less allowance for doubtful accounts
of $180,000 in 2005 and $192,381 in 2004 3,379,899 1,994,327
Inventories 1,289,570 1,199,675
Prepaid expenses and other current assets 264,641 166,885
------------ -----------
Total current assets 7,962,949 8,799,105
Property and equipment, net 213,450 236,651
Other assets 67,512 80,094
------------ -----------
Total assets $ 8,243,911 9,115,850
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 499,156 892,792
Income taxes payable 22,600 22,600
Accrued expenses and other current liabilities 281,706 385,861
------------ -----------
Total current liabilities 803,462 1,301,253
------------ -----------
Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 1,000,000 shares;
none issued -- --
Common stock, $0.01 par value. Authorized 15,000,000 shares;
issued 8,586,769 shares 85,868 85,868
Additional paid-in capital 31,664,680 31,664,680
Accumulated deficit (20,148,960) (19,773,673)
Accumulated other comprehensive loss (56,863) (58,002)
Treasury stock, 1,291,704 common shares at cost (4,104,276) (4,104,276)
------------ -----------
Total stockholders' equity 7,440,449 7,814,597
Commitments and contingencies
------------ -----------
Total liabilities and stockholders' equity $ 8,243,911 9,115,850
============ ===========
(1) Accounts were derived from the audited consolidated balance sheet as of
December 31, 2004.
See accompanying notes to consolidated financial statements.
2
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended March 31, 2005 and 2004
(Unaudited)
2005 2004
----------- ---------
Net sales $ 4,866,796 5,620,896
Cost of goods sold 3,457,164 4,198,500
----------- ---------
Gross profit 1,409,632 1,422,396
Selling, general, and administrative expenses 1,809,067 1,848,206
----------- ---------
Operating loss (399,435) (425,810)
Other income, net 1,572 33,599
Interest income, net 22,911 8,282
----------- ---------
Loss before income tax expense (benefit) (374,952) (383,929)
Income tax expense (benefit) 335 (107,734)
----------- ---------
Net loss $ (375,287) (276,195)
=========== =========
Basic and diluted net loss per common share $ (0.05) (0.04)
=========== =========
See accompanying notes to consolidated financial statements.
3
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 2005 and 2004
(Unaudited)
2005 2004
----------- -----------
Cash flows from operating activities:
Net loss $ (375,287) (276,195)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 36,613 36,970
Bad debt expense 3,596 45,000
Deferred income taxes -- (112,419)
Changes in assets and liabilities:
Trade accounts receivable (1,389,168) (2,165,039)
Inventories (89,895) 658,590
Prepaid expenses and other assets (85,174) 153,233
Trade accounts payable (393,636) (641,563)
Accrued expenses and other current liabilities (103,084) 137,847
----------- -----------
Net cash used in operating activities (2,396,035) (2,163,576)
Cash flows used by investing activities --
acquisitions of property and equipment (13,344) (59,908)
----------- -----------
Net decrease in cash and cash equivalents (2,409,379) (2,223,484)
Cash and cash equivalents at beginning of year 5,438,218 4,845,410
----------- -----------
Cash and cash equivalents at end of year $ 3,028,839 2,621,926
=========== ===========
See accompanying notes to consolidated financial statements.
4
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2005
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Marisa Christina, Incorporated and its wholly owned
subsidiaries (the Company). Significant intercompany accounts and
transactions are eliminated in consolidation.
The unaudited consolidated financial statements do not include all
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America. For further information, such as
the significant accounting policies followed by the Company, refer to the
notes to the Company's audited consolidated financial statements, included
in its annual report on Form 10-K for the year ended December 31, 2004.
In the opinion of management, the unaudited consolidated financial
statements include all necessary adjustments (consisting of normal,
recurring accruals) for a fair presentation of the financial position,
results of operations and cash flows for the interim periods presented.
The results of operations for the three months ended March 31, 2005 and
2004 are not necessarily indicative of the operating results to be
expected for a full year.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) REVENUE AND RECEIVABLES
Revenue is recognized when title and risk of ownership transfers to
the customer, which is when the product is shipped to the customer.
Allowances are provided for estimated uncollectible receivables
based on review of specific accounts and historical experience.
Allowances and credits, which are given to customers in connection
with sales incentives and promotional activities, are recognized as
reductions of sales when the related sales revenue is earned and
recognized. As of March 31, 2005 and December 31, 2004, the
Company's reserves for sales allowances were $543,000 and
$1,031,000, respectively. Such amounts are recorded as reductions to
accounts receivable.
(b) STOCK OPTION PLAN
The Company applies the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related
interpretations including FASB Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation, an interpretation
of APB Opinion No. 25, issued in March 2000, to account for its
fixed-plan stock options. Under this method, compensation expense is
recorded on the date of grant only if the current market price of
the underlying stock exceeded the exercise price. SFAS No. 123,
Accounting for Stock-Based Compensation, established accounting and
disclosure requirements using a fair-value-based method of
accounting for stock-based employee compensation plans. As allowed
by SFAS No. 123, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and has
adopted only the disclosure requirements of SFAS No. 123.
(Continued)
5
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2005
(Unaudited)
The following table illustrates the effect on net loss if the
fair-value-based method had been applied to all outstanding and
unvested awards for the three months ended March 31, 2005 and 2004:
2005 2004
----------- ---------
Net loss, as reported $ (375,287) (276,195)
Deduct total stock-based employee compensation
expense determined under fair-value-based method
for all rewards, net of tax (17,500) (36,000)
----------- ---------
Pro forma net loss $ (392,787) (312,195)
=========== =========
Diluted net loss per weighted average common share:
As reported $ (0.05) (0.04)
Pro forma $ (0.05) (0.04)
=========== =========
(c) COMPREHENSIVE LOSS
Comprehensive loss was ($374,148) and ($273,720) for the three
months ended March 31, 2005 and 2004, respectively. Comprehensive
loss includes the Company's net loss and the change in the foreign
currency translation adjustment for the respective three-month
periods.
(d) RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2004, the FASB issued SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123(R)), which addresses the
accounting for share-based payment transactions in which an
enterprise receives employee services in exchange for (a) equity
instruments of the enterprise of (b) liabilities that are based on
the fair value of the enterprise's equity instruments or that may be
settled by the issuance of such equity instruments. SFAS No. 123(R)
requires an entity to recognize the grant-date fair-value of stock
options and other equity-based compensation issued to employees in
the income statement. The revised statement requires that an entity
account for those transactions using the fair-value-based method,
and eliminates an entity's ability to account for share-based
compensation transactions using the intrinsic value method of
accounting. The Company is required to adopt SFAS No. 123(R) as of
January 1, 2006. Adoption is not expected to have a material impact
on the Company's results of operations.
(3) INVENTORIES
Inventories at March 31, 2005 and December 31, 2004 consist of the
following:
2005 2004
----------- ---------
Piece goods $ 38,120 31,815
Finished goods 1,251,450 1,167,860
----------- ---------
$ 1,289,570 1,199,675
=========== =========
6
MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2005
(Unaudited)
(4) CREDIT FACILITY
The Company has a $17.5 million line of credit facility with a finance
company, which may be utilized for commercial letters of credit, banker's
acceptances, commercial loans and letters of indemnity. Borrowings under
the facility are secured by certain of the Company's assets, primarily
trade accounts receivable and inventory, and bear interest at the prime
rate plus 0.75%. The Company is required to pay an annual commitment fee
of $50,000. The credit facility contains various covenants that require
minimum levels of working capital and net tangible worth.
As of March 31, 2005, there were no borrowings outstanding and
approximately $79,200 of commercial letters of credit were outstanding
under the credit facility. Available borrowings at March 31, 2005 were
approximately $3.9 million. The arrangement expires on June 14, 2006 and
is cancelable by either party with 90 days' written notice. The Company
expects to have sufficient financing to meet its working capital needs
throughout 2005.
(5) NET LOSS PER COMMON SHARE
Basic and diluted net loss per common share is based on the weighted
average number of common shares outstanding, which was 7,295,065 for the
three months ended March 31, 2005 and 2004. The effect of stock options
outstanding during the three months ended March 31, 2005 and 2004 was not
included in the computation of diluted net income per common share because
the effect would have been antidilutive.
(6) LEGAL PROCEEDINGS
The Company is involved, from time to time, in litigation and proceedings
arising out of the ordinary course of business. There are no pending
material legal proceedings or environmental investigations to which the
Company is a party or to which the property of the Company is subject.
7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with Marisa Christina's
consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. The statements
regarding Marisa Christina in this document that are not historical in nature,
particularly those that utilize terminology such as "may," "will," "should,"
"likely," "expects," "anticipates," "estimates," "believes" or "plans," or
comparable terminology, are forward-looking statements based on current
expectations about future events, which Marisa Christina has derived from
information currently available. These forward-looking statements involve known
and unknown risks and uncertainties that may cause our results to be materially
different from results implied in such forward-looking statements. Those risks
include, among others, risks associated with the apparel industry, the
dependence on senior management, maintaining sufficient working capital
financing, price pressures and other competitive factors and a softening of
retailer or consumer acceptance of the Company's products leading to a decrease
in anticipated revenues and gross profit margins.
OVERVIEW
Over the past four years, the Company has undertaken a number of initiatives to
focus resources, improve profitability and return the Company to its core
business and history of success. These initiatives had returned the Company to
profitable operations in 2001 and 2002, but softer demand for the Company's
product in 2003 and 2004 led to operating losses. The softer retail economy has
hurt margins during this period as customers required greater discounts and
markdowns to move the product at the retail level. The Company has reduced
selling, general and administrative expenses by $3.2 million over the last four
years, primarily related to the closing of two unprofitable divisions, but also
related to reducing operating costs commensurate with the size of the business.
Over most of the past four years, the Company's focus has been to eliminate
unprofitable lines and reduce operating cost. During 2003, the senior management
sharpened its focus on rebuilding the volume of the core business. In this
regard, the sales function was restructured by hiring a new group of highly
experienced people and realigning the sales function by dividing it into the
Company's three main distribution channels (i.e., department stores, specialty
stores and private label customers). The Company's new sales leadership is
establishing tools to analyze profitability by customer for each of its selling
location in order to provide merchandise mixes for each retail location based on
their consumer profile.
While the Company's plans for the future are not dependent on one single
strategy, the possible failure of a large number of new initiatives could have
an adverse impact on profitability. In addition, the Company's results are
heavily dependent upon demand for its Fall and Holiday product lines. In 2004,
sales of Fall and Holiday products represented 57% of the Company's net sales.
Should the Company's customers not react positively to styles offered by the
Company for the 2005 Fall and Holiday seasons or should the retail economy not
improve, the Company may not be able to return to profitable operations in 2005.
Management believes the Company's balance sheet is strong. Cash at March 31,
2005 was over $3.0 million and total liabilities were approximately $800
thousand. At March 31, 2005, the Company had no outstanding long-term debt and
available borrowing of $3.9 million under a line of credit arrangement. During
2004, the Company had no borrowings outstanding under the line of credit. In
addition, the Company has a Federal tax loss carryforward of approximately $20
million, which can be utilized in various amounts through 2024. This should
meaningfully limit the amount of cash taxes the Company will owe on its taxable
earnings, which may enhance future cash flows.
8
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are those that are both important to the
presentation of the Company's financial condition and results of operations and
require management's most difficult, complex or subjective judgments. The
Company's most critical accounting policies relate to estimates related to
allowances for uncollectible receivables, customer sales allowances, valuation
of inventories and valuation of deferred tax assets.
RECEIVABLES
Allowances are provided for estimated uncollectible receivables based on review
of specific accounts and historical experience. Allowances and credits, which
are given to customers in connection with sales incentives and promotional
activities, are recognized as reductions of sales when the related sales revenue
is earned and recognized. Events or changes in market conditions that adversely
impact our customers or the Company's ability to generate sales, could impact
management's estimates of uncollectible receivables or require the Company to
offer greater sales incentives, which could negatively impact sales or profits
in the future. As of March 31, 2005, the Company has allowances for bad debts of
$180,000 and reserves for sales allowances of $543,000.
INVENTORIES
Inventories are stated at the lower of cost, by the first-in, first-out method,
or market. In assessing the market value of its inventories, particularly those
with slower turnover, the Company considers the estimated sales value less costs
to dispose and a reasonable profit margin and assesses the likelihood of
realizing the recorded amounts of inventory. Changes in market conditions could
impact the Company's ability to achieve sales at the estimated selling prices
and could negatively impact the carrying value of the Company's inventory.
VALUATIONS OF DEFERRED TAX ASSETS
Deferred income taxes arise from temporary differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements.
Management makes an assessment of the realizability of the Company's deferred
tax assets. In making this assessment, management considers whether it is more
likely than not that some or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the period in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities and projected future taxable income of the Company in
making this assessment. A valuation allowance is recorded to reduce the total
deferred income tax assets to its net realizable value. The Company's deferred
tax assets related primarily to a U.S. net operating loss carryforward of
approximately $30 million which can be utilized over the next twenty years.
During the quarter ended September 30, 2004, the Company reassessed the recovery
of its deferred tax assets in accordance with the provisions of SFAS No. 109,
Accounting for Income Taxes. In making its' assessment, management determined
that operating results for the three-year period ended December 31, 2004 would
not be sufficient to support a conclusion that recovery of the deferred tax
assets is more likely than not. While management believes the Company will
achieve profitable operations in future years that will enable the Company to
recover a substantial portion of its deferred tax assets, the Company presently
does not have sufficient objective evidence to support management's belief.
Accordingly, the Company increased its valuation allowance for deferred tax
assets by approximately $6.4 million to $11.3 million during the quarter ended
September 30, 2004. The Company, as of December 31, 2004 and March 31, 2005, had
a full valuation allowance for its deferred tax assets. If the Company is able
to realize taxable income in the future, the valuation allowance could be
reduced.
9
RESULTS OF OPERATIONS
The following table sets forth the Company's operating results for the three
months ended March 31, 2005 and 2004:
PERCENTAGE PERCENTAGE
OF NET OF NET
2005 SALES 2004 SALES
----------- ---------- ----------- ----------
Net sales $ 4,866,796 100.0% $ 5,620,896 100.0%
----------- ----- ----------- -----
Gross profit 1,409,632 29.0% 1,422,396 25.3%
Selling, general, and administrative expenses 1,809,067 37.2% 1,848,206 32.9%
----------- ----- ----------- -----
Operating (loss) (399,435) (8.2%) (425,810) (7.6%)
Other income, net 1,572 -- 33,599 0.6%
Interest income, net 22,911 0.5% 8,282 0.2%
Income tax expense (benefit) 335 -- (107,734) (1.9%)
----------- ----- ----------- -----
Net (loss) $ (375,287) (7.7%) $ (276,195) (4.9%)
=========== ===== =========== =====
THREE MONTHS ENDED MARCH 31, 2005 (2005) COMPARED WITH THREE MONTHS ENDED MARCH
31, 2004 (2004)
Net sales. Net sales decreased 13.4% from $5.6 million in 2004, to $4.9 million
in 2005, primarily as a result of lower sales to department stores.
Gross profit. Gross profit decreased 0.9% from $1.4 million in 2004, to $1.4
million in 2005. As a percentage of net sales, gross profit increased from 25.3%
in 2004 to 29.0% in 2005. Higher sales to department stores in 2004 resulted in
a lower gross profit percentage in 2004 as such sales have higher markdown
allowances.
Selling, general and administrative expenses. Selling, general and
administrative expenses (SG&A) decreased 2.1% as a result of continuous cost
reduction initiatives including reduced sales commissions and bad debt expenses.
As a percentage of net sales, SG&A increased from 32.9% in 2004 to 37.2% in
2005.
Interest income, net. Interest income, net increased from $8,282 in 2004 to
$22,911 in 2005 as a result of higher average invested cash balances and higher
interest rates.
Income tax expense/benefit. Income tax benefit changed from a benefit of
$107,734 in 2004 to an expense of $335 in 2005. The Company, as of March 31,
2005, had a full valuation allowance for its deferred tax assets. While
management believes the Company will achieve profitable operations in future
years that will enable the Company to recover a substantial portion of its
deferred tax assets, the Company presently does not have sufficient objective
evidence to support management's belief.
Net loss. Net loss increased from ($276,195) in 2004 to ($375,287) in 2005, due
to factors discussed above.
10
SEASONALITY
The Company's business is seasonal, with a substantial portion of its revenues
and earnings occurring during the second half of the year as a result of the
Fall and Holiday selling seasons. This is due to both a larger volume of unit
sales in these seasons and traditionally higher prices for Fall and Holiday
season garments, which generally require more costly materials than the
Spring/Summer and Resort seasons. Merchandise from the Fall collection, the
Company's largest selling season and Holiday, the Company's next largest season,
is shipped in the last two fiscal quarters. Merchandise for Resort,
Spring/Summer and Early Fall, the Company's lower volume seasons, is shipped
primarily in the first two quarters. In addition, prices of products in the
Resort, Spring/Summer and Early Fall collections average 5% to 10% lower than in
other selling seasons.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $17.5 million line of credit facility with a finance company,
which may be utilized for commercial letters of credit, banker's acceptances,
commercial loans and letters of indemnity. Available borrowings at March 31,
2005 were approximately $3.9 million. Borrowings under the facility are secured
by certain of the Company's assets, primarily inventory and trade accounts
receivable, and bear interest at the prime rate plus 0.75%. The Company is
required to pay an annual commitment fee of $50,000. The credit facility
contains various covenants that require minimum levels of working capital and
net tangible worth. The Company's credit facility expires in June 2006. The
Company expects to have sufficient financing to meet its working capital needs
through 2005.
During the first quarter of 2005, the Company had capital expenditures of
approximately $13,000, primarily for upgrading computer systems. Capital
expenditures for the remainder of 2005 are expected to be approximately $87,000.
These capital expenditures will be funded by internally generated funds and, if
necessary, borrowings under the Company's credit facility. The Company's
contractual cash obligations related to operating leases as of March 31, 2005
include $398,796 in 2005, $546,344 in 2006, $547,912 in 2007, $526,491 in 2008,
$540,185 in 2009 and $2,197,746, thereafter.
OFF-BALANCE SHEET ARRANGEMENTS
The Company did not enter into any off-balance sheet arrangements during 2005 or
2004, nor did the Company have any off-balance sheet arrangements outstanding at
March 31, 2005.
EXCHANGE RATES
Although it is Company policy to contract for the purchase of imported
merchandise in United States dollars, reductions in the value of the dollar
could result in the Company paying higher prices for its products. During the
last three fiscal years, however, currency fluctuations have not had an impact
on the Company's cost of merchandise. The Company does not engage in hedging
activities with respect to such exchange rate risk.
IMPACT OF INFLATION
The Company has historically been able to adjust prices, and, therefore,
inflation has not had, nor is it expected to have, a significant effect on the
operations of the Company.
11
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's major market risk exposure is to changing interest rates. However,
interest expense has not been and is not expected to be a material expense of
the Company. The Company has implemented management monitoring processes
designed to minimize the impact of sudden and sustained changes in interest
rates. The Company's floating rate debt is based on the prime rate; however,
there were no borrowings outstanding at March 31, 2005.
Currently, the Company does not use foreign currency forward contracts or
commodity contracts and does not have any material foreign currency exposure.
All purchases from foreign contractors are made in United States dollars and the
Company's investment in its foreign subsidiary was approximately $50,000 at
March 31, 2005.
ITEM 4: CONTROLS AND PROCEDURES
As of March 31, 2005, the Company carried out, under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer and the Company's Chief Financial Officer, an evaluation of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act
of 1934. Based on that evaluation, the Company's Chief Executive Offer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information which
is required to be included in the periodic reports that the Company must file
with the Securities and Exchange Commission.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.
12
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company is involved, from time to time, in litigation and proceedings
arising out of the ordinary course of business. There are no pending material
legal proceedings or environmental investigations to which the Company is a
party or to which the property of the Company is subject.
ITEM 6: EXHIBITS
(a) Exhibits filed herewith:
Exhibit 31.1 - Section 302 Certification - Michael H. Lerner
Exhibit 31.2 - Section 302 Certification - S.E. Melvin Hecht
Exhibit 32 - Section 906 Certification
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 2005 /s/ S. E. Melvin Hecht
----------------------------------------------------
S. E. Melvin Hecht
Vice Chairman, Chief Financial Officer and Treasurer
14