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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
- --- Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2002
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
COMMISSION FILE NUMBER 000-29883
IMPRESO, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2849585
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
652 SOUTHWESTERN BOULEVARD
COPPELL, TEXAS 75019
(Address of principal executive offices)
(972) 462-0100
(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 the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest practicable date.
Class of Common Stock Shares outstanding at January 13, 2003
--------------------- --------------------------------------
$0.01 Par Value 5,278,780
IMPRESO, INC. AND SUBSIDIARIES
FORM 10-Q
NOVEMBER 30, 2002
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
-----------
Item 1. Interim Consolidated Financial Statements:
Interim Consolidated Balance Sheets at November 30,
2002 (Unaudited) and August 31, 2002 1
Interim Consolidated Statements of Operations for the
Three Months Ended November 30, 2002 and 2001
(Unaudited) 3
Interim Consolidated Statements of Cash Flows for the
Three Months Ended November 30, 2002 and 2001
(Unaudited) 4
Notes to Interim Consolidated Financial Statements 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 11
Item 4. Controls and Procedures 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
IMPRESO, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
ASSETS
November 30 August 31,
2002 2002
-------------- --------------
Current assets:
Cash and cash equivalents $ 206,333 $ 202,809
Trade accounts receivable, net of allowance for doubtful accounts
of $515,010 at November 30, 2002 and August 31, 2002 13,248,659 15,863,549
Inventories 39,605,763 34,111,015
Prepaid expenses and other 182,591 226,065
Deferred income tax assets 524,150 513,950
-------------- --------------
Total current assets 53,767,496 50,917,388
-------------- --------------
Property, plant and equipment, at cost 27,876,383 27,712,994
Less-Accumulated depreciation (12,139,808) (11,773,895)
-------------- --------------
Net property, plant and equipment 15,736,575 15,939,099
-------------- --------------
Other assets 111,105 115,377
-------------- --------------
Total assets $ 69,615,176 $ 66,971,864
============== ==============
The accompanying notes are an integral part of these consolidated
financial statements.
1
IMPRESO, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
November 30 August 31,
2002 2002
-------------- --------------
Current liabilities:
Accounts payable $ 15,096,748 $ 16,301,801
Accrued liabilities 2,630,597 3,702,838
Current maturities of long-term debt 1,128,405 1,122,614
Line of credit 22,633,669 17,861,824
Current maturities of prepetition debt 7,859 7,784
-------------- --------------
Total current liabilities 41,497,278 38,996,861
Deferred income tax liability 962,958 948,601
Long-term debt, net of current maturities 10,191,937 10,372,474
Long-term portion of prepetition debt, net of current maturities 235,324 237,316
-------------- --------------
Total liabilities 52,887,497 50,555,252
-------------- --------------
Stockholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares authorized;
0 shares issued and outstanding -- --
Common Stock, $.01 par value; 15,000,000 shares authorized;
5,292,780 issued and 5,278,780 outstanding 52,928 52,928
Treasury Stock (14,000 shares, at cost) (38,892) (38,892)
Additional paid-in capital 6,353,656 6,347,209
Retained earnings 10,359,987 10,055,367
-------------- --------------
Total stockholders' equity 16,727,679 16,416,612
-------------- --------------
Total liabilities and stockholders' equity $ 69,615,176 $ 66,971,864
============== ==============
The accompanying notes are an integral part of these consolidated
financial statements.
2
IMPRESO, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
November 30,
2002 2001
--------------- ---------------
Net sales $ 31,842,729 $ 25,401,360
Cost of sales 28,598,347 22,802,742
--------------- ---------------
Gross profit 3,244,382 2,598,618
--------------- ---------------
Other expenses and income:
Selling, general and administrative 2,370,089 2,098,774
Interest expense 483,639 452,494
Litigation Settlement -- (1,005,452)
Other income, net (106,697) (149,975)
--------------- ---------------
Total other expense and income 2,747,031 1,397,841
--------------- ---------------
Income before income tax expense 497,351 1,200,777
--------------- ---------------
Income tax expense:
Current 188,574 432,760
Deferred 4,157 2,088
--------------- ---------------
Total income tax expense 192,731 434,848
--------------- ---------------
Net income $ 304,620 $ 765,929
=============== ===============
Net income per share (basic and diluted) $ 0.06 $ 0.15
=============== ===============
Weighted average shares outstanding 5,278,780 5,278,780
=============== ===============
The accompanying notes are an integral part of these consolidated
financial statements.
3
IMPRESO, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
November 30,
2002 2001
-------------- --------------
Cash Flows From Operating Activities:
Net income $ 304,620 $ 765,929
Adjustments to reconcile net income to net
cash used in operating activities-
Depreciation and amortization 365,913 292,651
Provision for Losses of Receivables -- 54,922
Provision for Losses of Inventory 40,000 --
Increase in Deferred income taxes 4,157 2,088
Decrease in trade accounts receivable, net 2,614,890 2,103,139
(Increase) decrease in inventory (5,534,748) 2,365,715
Decrease (increase) in prepaid expenses and other 47,746 (181,129)
Decrease in accounts payable (1,205,053) (4,968,628)
(Decrease) increase in accrued liabilities (1,072,241) 691,060
-------------- --------------
Net cash (used in) provided by operating activities (4,434,716) 1,125,747
Cash Flows From Investing Activities:
Additions to property, plant and equipment (163,389) (59,166)
-------------- --------------
Net cash used in investing activities (163,389) (59,166)
Cash Flows From Financing Activities:
Net borrowing (payments) on line of credit 4,771,845 (226,187)
Principal payments on prepetition debt (1,917) (1,841)
Principal payments on post-petition debt (174,746) (909,756)
Warrant Issued 6,447 21,079
-------------- --------------
Net cash provided by (used in) financing activities 4,601,629 (1,116,705)
-------------- --------------
Net Increase (decrease) in cash and cash equivalents 3,524 (50,124)
Cash and cash equivalents, beginning of year 202,809 211,352
-------------- --------------
Cash and cash equivalents, end of year $ 206,333 $ 161,228
============== ==============
The accompanying notes are an integral part of these consolidated
financial statements.
4
IMPRESO, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS:
Impreso, Inc., a Delaware corporation (referred to collectively with its
subsidiaries as the "Company"), is the parent holding company of TST/Impreso,
Inc. ("TST"), a manufacturer and distributor to dealers and other resellers of
paper and film products for commercial and home use in domestic and
international markets, and Hotsheet.com, Inc., the owner and operator of the
Hotsheet.com web portal. Currently, TST has one wholly owned subsidiary,
TST/Impreso of California, Inc., which was formed to support the activities of
the paper converting segment of the Company's business.
2. INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:
In the opinion of management, the unaudited Interim Consolidated Financial
Statements of the Company include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position as of November 30, 2002, and its results of operations for
the three months ended November 30, 2002 and November 30, 2001. Results of the
Company's operations for the interim period ended November 30, 2002, may not be
indicative of results for the full fiscal year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations promulgated by the Securities and Exchange
Commission (the "SEC").
The unaudited Interim Consolidated Financial Statements should be read in
conjunction with the audited Consolidated Financial Statements and accompanying
notes of the Company and its subsidiaries, included in the Company's Form 10-K
(the "Company's Form 10-K"), for the fiscal year ended August 31, 2002 ("Fiscal
2002"). Accounting policies used in the preparation of the unaudited Interim
Consolidated Financial Statements are consistent in all material respects with
the accounting policies described in the Notes to Consolidated Financial
Statements in the Company's Form 10-K.
3. INVENTORIES:
Inventories are stated at the lower of cost (principally on a first-in,
first-out basis) or market and include material, labor and factory overhead.
Inventories consisted of the following:
November 30, August 31,
2002 2002
--------------- ---------------
Finished goods $ 20,227,816 $ 19,059,199
Raw materials 19,124,046 14,684,869
Supplies 942,535 1,011,967
Work-in-process 105,082 108,695
Allowance for Obsolete Inventory (793,715) (753,715)
--------------- ---------------
Total inventories $ 39,605,764 $ 34,111,015
=============== ===============
5
4. LONG -TERM DEBT AND LINE OF CREDIT:
The following is a summary of long-term debt and line of credit: November 30, August 31,
2002 2002
------------- -------------
Line of Credit with a commercial financial corporation under revolving credit
line, maturing May 2004, secured by inventories, trade accounts receivable,
equipment, goodwill associated with TST's trademark "IMPRESO" (no value on
financial statements), and a personal guarantee by the trustee of a trust which
is a principal stockholder of the Company, interest payable monthly at prime
plus .25% (5% at November 30, 2002). $ 22,633,669 $ 17,861,824
Note payable to a commercial financial corporation, secured by real property,
payable in monthly installments of $15,151 (including interest at 7.75%, or 4.5%
above the 11th District cost of funds rate, whichever is greater; 7.75% at
November 30, 2002), maturing August 2008. 1,652,422 1,657,436
Note payable to a commercial financial corporation, secured by real property and
equipment, payable in monthly installments of $4,457 (including interest at
8.50%), maturing December 2009. 277,370 284,546
Note payable to a commercial financial corporation, secured by real property and
equipment, payable in monthly installments of $10,843 (including interest at
8.50%), maturing August 2010. Revolving lender's blanket lien subordinated to
note's collateral. 733,658 749,987
Note payable to a commercial financial corporation, secured by real property,
payable in monthly installments of $2,834 (including interest at 5.5%), maturing
November 2010. 216,745 222,213
Notes payable to various commercial financial corporations, secured by
equipment, interest rates ranging from 1.9% to 11.17%, maturing at various dates
from December 2002 through July 2005. 439,828 449,858
Notes payable to a commercial financial corporation, secured by real property
and a personal guarantee by the trustee of a trust which is a principal
stockholder of the Company, payable in monthly installments of $21,407
(including interest at 8%), maturing May 2011. 2,109,162 2,130,905
Acquisition note payable, unsecured, payable in quarterly installments of
$15,000 (including interest at 8%), maturing April 2006. 225,000 225,000
Acquisition note payable, secured by equipment, payable in monthly
installments of $16,024, no interest, maturing May 2003. 352,145 368,169
6
Note payable to a commercial financial corporation, secured by real property and
a personal guarantee by the trustee of a trust which is a principal stockholder
of the Company, payable in monthly installments of $22,827 (including a fixed
schedule for interest, 7.0% at November 30, 2002), maturing March 2007. 3,172,895 3,184,468
Note payable to a commercial financial corporation, secured by equipment,
payable in monthly installments of $17,857 (including interest at a variable
rate equal to 30 day Commercial Paper plus 350 basis points, 5.22% at November
30, 2002), maturing February 2009. 1,369,383 1,410,714
Acquisition notes payable, unsecured, payable in monthly installments of
$16,666, maturing February 2007. 771,733 811,792
Prepetition-
Note payable to a commercial financial corporation, secured by real property and
equipment and a personal guarantee by the trustee of a trust which is a
principal stockholder of the Company, payable in monthly installments of $1,461
(including interest at 4%), maturing June 2023. 243,184 245,100
------------- -------------
Total 34,197,194 29,602,012
------------- -------------
Less Current Maturities (23,769,933) (18,992,222)
------------- -------------
Long-Term Debt $ 10,427,261 $ 10,609,790
============= =============
Prepetition amount listed above represents the renegotiated amounts and terms
under the 1993 plan of reorganization.
In April 2002, TST amended its revolving line of credit to increase the line
from $22 million to $25 million. The amended revolving credit line is limited to
the lesser of $25 million or a percentage of eligible trade accounts receivable
and inventories, as defined. The remaining borrowing capacity under the
revolving credit line was $2.0 million as of November 30, 2002.
The line of credit, as amended, has restrictive covenants requiring the
maintenance of a minimum tangible net worth and working capital requirements, as
defined in the agreement. One of the notes payable contains restrictive
covenants on current and debt to worth ratios, and the payment of cash
dividends. As of November 30, 2002, the Company was in compliance with all
covenants.
5. SUPPLEMENTAL CASH FLOW INFORMATION:
Three Months Ended
November 30,
2002 2001
----------- -----------
Cash paid during the period for:
Interest $ 483,639 $ 452,494
Income taxes $ 376,878 $ 134,606
7
6. CRITICAL ACCOUNTING POLICIES
The Company has identified significant accounting policies that, as a result of
the judgments, uncertainties, uniqueness and complexities of the underlying
accounting standards and operations involved, could result in material changes
to its financial condition or results of operations under different conditions
or using different assumptions. The Company's most critical accounting policies
are related to the following areas: revenue recognition, long-lived assets and
concentrations of credit risks. Details regarding the Company's use of these
policies and the related estimates are described in the Company's Form 10-K for
the fiscal year ended August 31, 2002 filed with the SEC. There have been no
material changes to the Company's critical accounting policies that impacted the
Company's financial condition or results of operations in the three months ended
November 30, 2002 ("First Quarter 2003").
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED NOVEMBER 30, 2002 AND
NOVEMBER 30, 2001
Net Sales---Net sales increased from $25.4 million in the three months ended
November 30, 2001 ("First Quarter 2002"), to $31.8 million for the First Quarter
2003, an increase of 25.4% as a result of sales to new customers due to the
acquisition of United Computer Supplies, Inc. ("United") and fewer competitors
in the marketplace.
Gross Profit---Gross profit increased from $2.6 million in the First Quarter
2002 to $3.2 million in the First Quarter 2003, an increase of approximately
24.9%. The increase in gross profit was primarily the result of increased sales.
Our gross profit margin remained stable at 10.2% for the First Quarters of 2003
and 2002.
Selling, General and Administrative Expenses--- SG&A expenses for First Quarter
2003 were $2.4 million, or 7.4% of net sales, as compared to $2.1 million, or
8.2% of net sales for First Quarter 2002. SG&A expense increased in dollars in
the First Quarter 2003 as compared to the First Quarter 2002 due primarily to
the integration of new personnel from the acquisition of United. SG&A decreased
as a percentage of net sales in the First Quarter of 2003 due to our acquisition
of United's customers and leveraging existing fixed costs.
Interest Expense---Interest expense increased from $452,000 in the First Quarter
2002 to $484,000 in the First Quarter 2003, an increase of $31,000, or
approximately 6.9%. The increase in interest expense was the result of increased
borrowings to finance increased inventory.
Other Expense (Income)---On October 16, 2001, TST received approximately $1
million in a United States class action lawsuit involving international and
domestic manufacturers' alleged attempt to fix jumbo roll thermal facsimile
paper prices in the United States. TST was not a named plaintiff and did not
participate in the lawsuit. The award is reported as other income in First
Quarter 2002. The award skews net income results for First Quarter 2003 as
compared to First Quarter 2002. If this other income is excluded from the
results for First Quarter 2002, First Quarter 2003 reflects an increase in net
income from operations as compared to the corresponding period of the prior
year.
8
Income Taxes---Our income tax expense for the First Quarter 2003 decreased to
$193,000, as compared to $435,000 for the corresponding period of the prior
year. The decrease resulted primarily from the effect of the litigation
settlement in the First Quarter 2002.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $12.3 million at November 30, 2002 from $11.9
million at August 31, 2002. This represented an increase of 2.9%.
Borrowings under TST's line of credit increased from $17.8 million at August 31,
2002 to $22.6 million at November 30, 2002, an increase of $4.8 million, or
26.7%. The increased borrowing primarily resulted from TST's increasing
inventory.
In April 2002, TST entered into an agreement with a bank for a two-year renewal
of its revolving line of credit. The new agreement increases the line from $22
million to $25 million. The loan is secured by, among other things, inventory,
trade receivables, equipment and a personal guarantee of Marshall Sorokwasz, our
Chairman of the Board and President, and Trustee of a trust which is a principal
shareholder of our Company. Available borrowings under this line of credit,
which accrues interest at the prime rate of interest plus .25% (5.0% at November
30, 2002), are based upon specified percentages of eligible accounts receivable
and inventories. As of November 30, 2002, there was a $2.0 million borrowing
capacity remaining under the $25 million revolving line of credit. The revolving
credit line will mature in May 2004.
We believe that the funds available under the loans encumbering our California,
Texas, Pennsylvania, Illinois and West Virginia plants, the revolving credit
facility, cash and cash equivalents, trade credit and internally generated funds
will be sufficient to satisfy our requirements for working capital and capital
expenditures for at least the next twelve months. Such belief is based on
certain assumptions, including the continuation of current operations and no
extraordinary adverse events, and there can be no assurance that such
assumptions are correct. In addition, expansion of our operations due to an
increased demand for products TST manufactures or significant growth of
Hotsheet.com, Inc. may require us to obtain additional capital to add new
operations or manufacturing facilities. If that should occur, we anticipate that
the funds required would be generated through securities offerings or additional
debt. There can be no assurance that any additional financing will be available
if needed, or, if available, will be on acceptable terms.
As of November 30, 2002, we did not own derivative or other financial
instruments for trading or speculative purposes. We do not use financial
instruments and, therefore, the implementation of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" did not have a material impact on our financial position or results
operations.
INVENTORY MANAGEMENT; RAW MATERIALS OF TST
We believe that it is necessary for TST to maintain a large inventory of
finished goods and raw materials to adequately service its customers. In recent
years inventory levels had been increased to facilitate the introduction of new
brands and expanded product lines. At the beginning of Fiscal 2002, management
implemented a program to reduce inventory. From August 31, 2001 to August 31,
2002, TST reduced its inventory levels by $4.35 million. This is in addition to
the depletion of $3 million of inventory acquired in the purchase of the assets
of United. Although inventories rose in the First Quarter 2003, management
intends to continue reducing inventory levels through the fiscal year ending
August 31, 2003 ("Fiscal 2003"). However, downward pressures on raw material
prices could compress the market for our existing inventory and have a material
adverse effect on the results of operations of TST, or restrain management's
attempts at reducing inventory.
9
In recent years we have depended primarily on international vendors of raw
materials. One of the largest vendors from Asia has suffered a financial crisis
and this has created supply disruption and a tighter raw material market for the
Company. The Company in recent months has shifted its supply chain from
international to domestic sources, which historically charge higher prices for
raw materials. This shift could have a material adverse effect on the results of
operation by making our finished goods pricing uncompetitive.
TST bears the risk of increases in the prices charged by its suppliers and
decreases in the prices of raw materials held in its inventory. If prices for
products held in its finished goods inventory decline, if prices for raw
materials required by it increase, or if new technology is developed that
renders obsolete products distributed and held in inventory by TST, the
Company's business could be materially adversely affected.
TST purchases raw paper, coated thermal facsimile paper, coated technical paper,
carbon and carbonless paper (consisting of a wide variety of weights, widths,
colors, sizes and qualities), transparency film, packaging and other supplies in
the open market from a number of different companies around the world. We
believe that TST has adequate sources of raw material supplies to meet the
requirements of its business. We believe that TST has a good relationship with
all of its current suppliers.
MARKET CONDITIONS OF TST
The primary product produced by the Company's recent acquisitions are continuous
feed business forms. Management believes that the market for business forms,
which declined in 2002, will continue to decline in 2003.
September 11, 2001's impact on the economy also impacted the net sales of TST;
however, the exact impact on the results of operations is not ascertainable.
Although net sales in Fiscal 2002, as compared to Fiscal 2001, increased
approximately 28%, the Company expected net sales to have been significantly
higher due to the acquisition of United in March 2002 and reduction in the
market place of competing distributors of the Company's products. Management
believes that the slowed economy will continue to effect the Fiscal 2003 results
of operations.
If selling prices for products manufactured by us cannot increase in relation to
raw material cost increases, or if prices for products manufactured by us
decline as a result of market pressures, our results of operations could be
materially adversely affected.
Although TST has specialized in select markets and has emphasized service and
long-term relationships to meet customer needs more effectively, there are no
long-term contractual relationships between it and any of its customers. Four
customers accounted for more than 41% of TST's sales in the First Quarter 2003.
There can be no assurance that purchases by these customers will remain at
significant levels. TST may in the future be dependent on these or other
significant customers. The loss of any other significant customer could
materially adversely affect our financial position, results of operations and
cash flows.
SEASONALITY
TST may be subject to certain seasonal fluctuations in that orders for products
may decline over the summer months. If the market for finished goods decreases,
then the adverse impact of the seasonal fluctuations on the Company will be
greater.
10
Hotsheet.com revenues are partially generated by retail sales which are
typically stronger during the Christmas holiday season.
FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-Q contain "forward-looking
statements" about our prospects for the future, including but not limited to our
ability to generate sufficient working capital, our ability to continue to
maintain sales to justify capital expenditures, and our ability to generate
additional sales to meet business expansion. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those projected, including availability of raw materials,
availability of thermal facsimile, computer, laser and color ink jet paper, to
the cyclical nature of the industry in which we operate, the potential of
technological changes which would adversely affect the need for our products,
price fluctuations which could adversely impact the large inventory we require,
loss of any significant customer, and termination of contracts essential to our
business. Parties are cautioned not to rely on any such forward-looking
statements or judgments in making investment decisions.
LEGAL PROCEEDINGS
On September 18, 2002, TST filed a lawsuit against a vendor in the United States
District Court for the Northern District of Texas - Dallas Division.
Simultaneously with the initiation of the lawsuit, TST requested that its
disputes with the vendor be submitted to arbitration through the American
Arbitration Association's Dallas, Texas office. TST's general claim is that the
vendor breached a Distributor Agreement entered into with TST in several
material respects, including the vendor's late delivery of paper products, the
vendor's delivery of defective product, and the vendor's failure to properly
credit TST's accounts based upon these and other alleged breaches. The vendor
responded to TST's demand for arbitration by generally denying TST's claims and
asserting a counterclaim seeking to recover disputed accounts receivable and
damages related to TST's alleged interference with the vendor's relationship
with its lender. No date has yet been set for arbitration or litigation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are not exposed to market risks such as foreign currency exchange rates, but
are exposed to risks such as variable interest rates. Market risk is the
potential loss arising from adverse changes in market prices and rates. Our
subsidiaries do not have supply contracts with any of their foreign vendors. All
foreign vendors are paid in United States currency. In addition, TST's
international sales of finished goods are insignificant. Accordingly, there are
not sufficient factors to create a material foreign exchange rate risk;
therefore, we do not use exchange commitments to minimize the negative impact of
foreign currency fluctuations.
We had both fixed-rate and variable-rate debts as of November 30, 2002. The fair
market value of long-term variable interest rate debt is subject to interest
rate risk. Generally the fair market value of variable interest rate debt will
decrease as interest rates fall and increase as interest rates rise.
The estimated fair value of our total long-term fixed rate and floating rate
debt approximates carrying value. Based upon our market risk sensitive debt
outstanding at November 30, 2002, there was no material exposure to our
financial position or results of operations.
11
ITEM 4. CONTROLS AND PROCEDURES
Within the 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 and 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 that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
SEC filings. There were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
12
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBITS
99 Certification of Chief Executive Officer and
Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
(b) No reports on Form 8-K were filed during the quarter ended
November 30, 2002.
13
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 thereunto duly authorized.
Dated: January 14, 2003
Impreso, Inc.
(Registrant)
By: /s/ Marshall Sorokwasz
------------------------------------
Marshall Sorokwasz
Chairman of the Board, Chief
Executive Officer, President, and
Director
By: /s/ Susan Atkins
------------------------------------
Susan Atkins
Chief Financial Officer
and Vice President
14
CERTIFICATION
PURSUANT TO RULE 13a-14(b) AND 15d-14
I, Marshall D. Sorokwasz, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Impreso, 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:
(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
the 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.
Date: January 14, 2003 Signature: /s/ Marshall D. Sorokwasz
-------------------------
Marshall D. Sorokwasz
Chief Executive Officer
CERTIFICATION
PURSUANT TO RULE 13a-14(b) AND 15d-14
I, Susan Atkins, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Impreso, 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:
(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
the 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.
Date: January 14, 2003 Signature: /s/ Susan Atkins
--------------------------
Susan Atkins
Chief Financial Officer
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS
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99 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.