FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2003
PACIFIC STATE BANCORP
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
California 61-1407606
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1889 W. March Lane, Stockton, CA 95207
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (209) 943-7400
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 registrant classes
of common stock, as of the latest practicable date:
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]
Title of Class Shares outstanding as of May 8, 2003
--------------------- ---------------------------------------
Common Stock 837,820
No Par Value
PART I
ITEM 1. FINANCIAL STATEMENTS
PACIFIC STATE BANCORP
Consolidated Balance Sheet
March 31 December 31,
Assets 2003 2002
- ------ ------------- -------------
(Unaudited)
Cash and due from banks $ 10,637,933 $ 18,465,668
Federal funds sold 16,188,000 5,000,000
Investment securities (market value of $12,167,153 in 2003 and
$12,764,300 in 2002) 12,173,866 12,767,400
Loans, less allowance for loan losses of $1,419,052 in 2003 and
$1,306,309 in 2002 140,123,622 133,965,914
Other real estate 129,989 48,704
Bank premises and equipment, net 7,158,868 6,429,899
Accrued interest receivable and other assets 3,494,907 3,462,899
------------- -------------
Total assets $ 189,907,185 $ 180,140,484
============= =============
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Non-interest bearing $ 39,151,416 $ 30,697,547
Interest bearing 128,012,859 127,442,460
------------- -------------
Total deposits 167,164,275 158,140,007
Borrowed funds 5,000,000 5,000,000
Accrued interest payable and other liabilities 1,053,570 680,615
------------- -------------
Mandatorily redeemable cumulative trust preferred securities of
subsidiary grantor trust 5,000,000 5,000,000
Total liabilities 178,217,845 168,820,622
Shareholders' equity
Preferred stock - no par value; 2,000,000 shares authorized;
none issued and outstanding -- --
Common stock - no par value; 12,000,000 shares authorized;
shares issued and outstanding 837,820 in 2003 and 806,437 in
2002 6,885,445 6,915,534
Retained earnings 4,810,052 4,404,078
Accumulated other comprehensive(loss) income (6,157) 250
------------- -------------
Total shareholders' equity 11,689,340 11,319,862
------------- -------------
Total liabilities and shareholders' equity $ 189,907,185 $ 180,140,484
============= =============
See notes to unaudited condensed consolidated financial statements
2
PACIFIC STATE BANCORP
Consolidated Statement of Income
(Unaudited)
For the Three Months Ended
March 31,
---------------------------
2003 2002
------------ ------------
Interest income:
Interest and fees on loans $ 2,386,784 $ 1,845,408
Interest on Federal funds sold 42,915 14,730
Interest on investment securities
Taxable 70,287 91,287
Exempt from Federal income taxes 47,985 71,964
------------ ------------
Total interest income 2,547,971 2,023,389
Interest expense:
Interest on deposits 664,109 707,741
Interest on borrowings 31,340 338
Interest on mandatorily redeemable trust preferred securities 57,634 --
------------ ------------
Total interest expense 753,083 708,079
------------ ------------
Net interest income 1,794,888 1,315,310
Provision for loan losses 122,000 76,500
------------ ------------
Net interest income after provision for loan losses 1,672,888 1,238,810
------------ ------------
Non-interest income:
Service charges 151,558 106,606
Other fee income 146,070 145,076
Rental income from other real estate 4,860 2,250
Gain from sale of loans 233,839 143,072
------------ ------------
Total non-interest income 536,327 397,004
Other expenses:
Salaries and employee benefits 768,161 585,808
Occupancy 154,397 131,938
Furniture and equipment 123,292 144,578
Professional fees 99,965 95,412
Postage, stationery and supplies 58,322 40,708
Other 375,203 333,138
------------ ------------
Total other expenses 1,579,340 1,331,582
------------ ------------
Income before income taxes 629,875 304,232
Income tax expense 223,900 104,000
------------ ------------
Net income $ 405,974 $ 200,232
============ ============
Basic earnings per share $ 0.49 $ 0.26
============ ============
Diluted earnings per share $ 0.47 $ 0.25
============ ============
Weighted average common shares outstanding 823,395 771,696
Weighted average common and common equivalent shares
outstanding 859,556 814,262
See notes to unaudited condensed consolidated financial statements
3
PACIFIC STATE BANCORP
Statement of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
2003 2002
------------ ------------
Cash flows from operating activities:
Net income $ 405,974 $ 200,232
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 122,000 76,500
Deferred loan origination fees and costs, net 18,339 (16,797)
Depreciation and amortization 194,721 (43,874)
Net gain on sale of available-for-sale investment
securities (2,116) --
Decrease in accrued interest receivable and other assets (112,000) (589,320)
Increase (decrease) in accrued interest receivable and
other liabilities 372,954 (125,623)
------------ ------------
Net provided by (cash used) in operating activities 999,872 (498,882)
------------ ------------
Cash flows from investing activities:
Proceeds from matured and called available-for-sale
investment securities -- 1,865,000
Proceedsd from sale of available-for-sale investment
securities 494,134 (12,000,000)
Proceeds from principal repayments from available-for-sale
mortgage-backed securities 89,778 30,708
Proceeds from principal repayments from held-to-maturity
mortgage-backed securities 5,478 14,250
Net (increase) decrease in loans (6,349,784) 2,853,272
Acquisition or other real estate (81,285) --
Purchases of bank premises and equipment (852,261) (228,278)
Net liabilities assumed in the acquisition of CB&T branch -- 13,805,923
------------ ------------
Net cash (used in) provided by investing activities (6,693,940) 6,340,875
------------ ------------
Cash flows from financing activities:
Net increase in demand, interest-bearing and 1,181,778 5,296,557
savings deposits
Net increase (decrease) in time deposits 7,842,490 (5,032,280)
Proceeds from stock options exercised 30,065 72,541
------------ ------------
Net cash provided by financing activities 9,054,333 336,818
------------ ------------
Increase in cash and cash equivalents 3,360,265 6,178,811
Cash and cash equivalents at beginning of year 23,465,668 6,825,720
------------ ------------
Cash and cash equivalents at end of period $ 26,825,933 $ 13,004,531
============ ============
See notes to unaudited condensed consolidated financial statements
4
PACIFIC STATE BANCORP
NOTES TO UNAUDITIED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
On June 24, 2002, Pacific State Bancorp ("Bancorp") commenced
operations as a bank holding company by acquiring all of the
outstanding shares of Pacific State Bank (the "Bank") in a one bank
holding company reorganization. The new corporate structure gives
Bancorp and the Bank greater flexibility in terms of operation,
expansion, and diversification. The reorganization was approved by the
Bank's shareholders on May 9, 2002, and all required regulatory
approvals or non-disapprovals with respect to the reorganization were
obtained.
Pacific State Bancorp's subsidiaries include the Bank and Pacific State
Statutory Trust I, a Delaware statutory business trust which was formed
in June 2002 for the exclusive purpose of issuing and selling trust
preferred securities.
The Bank commenced operations in 1987 and is a California
state-chartered member bank of the Federal Reserve System. The Bank
operates seven branches in California, including two branches in
Stockton and branches in Modesto, Groveland, Arnold, Angels Camp and
Tracy. The Bank's primary source of revenue is interest and fees on
loans provided to customers who are predominately small and
middle-market businesses and individuals.
2. FINANCIAL STATEMENTS
The accounting and reporting policies of Pacific State Bancorp and its
subsidiaries (collectively, the "Company") conform with accounting
principles generally accepted in the United States and prevailing
practice within the banking industry.
The accompanying consolidated financial statements include the accounts
of Bancorp and its wholly-owned subsidiaries, Pacific State Bank and
Pacific State Statutory Trust I. Significant intercompany transactions
and balances have been eliminated in consolidation.
In the opinion of management, the unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the Company's financial
position at March 31, 2003 and December 31, 2002, the results of
operations for the three month periods ended March 31, 2003 and 2002,
and cash flows for the three month periods ended March 31, 2003 and
2002.
Certain information and footnote disclosures normally presented in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These interim financial
statements should be read in conjunction with the financial statements
and notes thereto included in the 2002 Annual Report to Shareholders.
The results of operations for the three-month period ended March 31,
2003 may not necessarily be indicative of the operating results for the
full year.
In preparing such financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ significantly from
those estimates. Material estimates that are particularly susceptible
to significant changes in the near term relate to the determination of
the allowance for loan losses and the carrying value of other real
estate.
3. COMPREHENSIVE INCOME
Other comprehensive income, net of taxes, was comprised of the
unrealized loss on available-for-sale investment securities for the
three-month periods ended March 31, 2003 and 2002 and totaled $6,407
5
and $5,055, respectively. Total comprehensive income, net of taxes, was
$399,567 and $195,177 for the three-month periods ended March 31, 2003
and 2002.
4. NEW ACCOUNTING PRONOUCEMENTS
In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation--Transition and Disclosure--an amendment of
SFAS Statement No. 123. This Statement amends SFAS No. 123, Accounting
for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of
accounting for stock-based compensation. In addition, this Statement
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the
method of accounting for stock-based compensation and the effect of the
method used on reported results. The transition guidance and annual
disclosure provisions of SFAS No. 148 are effective for fiscal years
ending after December 15, 2002. The interim disclosure provisions are
effective for financial reporting containing financial statements for
interim periods beginning after December 15, 2002. Because the Company
accounts for the compensation cost associated with its stock option
plan under the intrinsic value method, the alternative methods of
transition will not apply to the Company. The additional disclosure
requirements of the Statement are included in these interim
consolidated financial statements. In management's opinion, the
adoption of this Statement did not have a material impact on the
Company's consolidated financial position or results of operations.
On April 30, 2003, the FASB issued Statement No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. This
Statement amends and clarifies the accounting for derivative
instruments by providing guidance related to circumstances under which
a contract with a net investment meets the characteristics of a
derivative as discussed in Statement 133. The Statement also clarifies
when a derivative contains a financing component. The Statement is
intended to result in more consistent reporting for derivative
contracts and must be applied prospectively for contracts entered into
or modified after June 30, 2003, except for hedging relationships
designated after June 30, 2003. In management's opinion, adoption of
this Statement is not expected to have a material effect on the
Company's consolidated financial position or results of operations.
5. STOCK-BASED COMPENSATION
At March 31, 2003, the Company had two stock-based employee
compensation plans, the Pacific State Bancorp 1997 Stock Option Plan
and the Pacific State Bancorp 1987 Stock Option Plan (the "Plans"). The
Company accounts for these plans under the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted
under these plans had an exercise price equal to the market value of
the underlying common stock on the date of grant.
Pro forma adjustments to the Company's consolidated net earnings and
earnings per share are disclosed during the years in which the options
become vested. The following table illustrates the effect on net income
and earnings per share if the Company had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation.
6
For the Three Months Ended
March 31,
--------------------------
2003 2002
-------- --------
Net income, as reported $405,974 $200,232
Deduct: Total stock-based employee
compensation expense determined
under the fair value based method
for all awards, net of related tax effects 9,552 7,477
-------- --------
Pro forma net income $396,422 $192,755
-------- --------
Basic earnings per share - as reported $ 0.49 $ 0.26
Basic earnings per share - pro forma $ 0.48 $ 0.25
Diluted earnings per share - as reported $ 0.47 $ 0.25
Diluted earnings per share - pro forma $ 0.46 $ 0.24
Weighted average fair value of options
granted during the quarter $ 3.66
The fair value of each option is estimated on the date of grant using
an option-pricing model with the following assumptions:
For the Three Months
Ended March 31, 2002
--------------------
Dividend yield N/A
Expected volatility 12.45% to 12.80%
Risk-free interest rate 4.87% to 5.39%
Expected option life 5 years
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Overview
- --------
Pacific State Bancorp (`the Company") is a holding company with one bank
subsidiary, Pacific State Bank, (the "Bank"), and a subsidiary trust, Pacific
State Statutory Trust I. Pacific State Bancorp was organized on June 24, 2002
and acquired all the then issued and outstanding shares of Pacific State Bank
under a plan of reorganization approved by the Bank's shareholders on May 9,
2002. The Bank is a California state chartered bank. The Bank operates seven
branches in California, including two branches in Stockton, and branches in
Modesto, Groveland, Arnold, Angels Camp and Tracy. The Bank's primary source of
revenue is interest and fees on loans provided to customers who are
predominately small to middle-market businesses and middle-income individuals.
Pacific State Statutory Trust I is a statutory business trust formed in June
2002 for the exclusive purpose of issuing and selling trust preferred
securities.
Earnings Summary
- ----------------
The Company reported net income for the first quarter of 2003 of $405,974, or
$0.49 basic earnings per common share and $0.47 diluted earnings per common
equivalent share, compared to net income of $200,232 or $0.26 basic earnings per
common share and $0.25 diluted earnings per common equivalent share for the
first quarter of 2002. Return on average assets annualized for the three months
7
ended March 31, 2003 and 2002 were .90 % and .64%, respectively. Net earnings
increased 102.75% for the three months ended March 31, 2003 compared to the same
period in 2002 due primarily to the increase in interest and fees on loans and
gain on sales of loans. Return on average common equity annualized was 14.05%
for the first quarter of 2003, compared with 8.56% for the first quarter of
2002.
Interest income for the three months ended March 31, 2003 was $2.5 million
compared to $2.0 million for the same period in 2002, an increase of 25.9%. The
increase was due to an increase in loan volume of $38.3 million from March 31,
2002 to March 31, 2003. Interest expense increased 6.7% for the three months
ended March 31, 2003 compared to March 31, 2002 primarily due to interest
related to the Company's trust preferred securities issued in June of 2002. The
net interest income for the three months ended March 31, 2003 increased by
$480,000 from the three months ended March 31, 2002 due primarily to the
significant increase in interest income offset by the slight increase in
interest expense.
Non-interest income increased from $107,000 to $152,000 for the three months
ended March 31, 2002 and 2003, respectively. The increase was primarily due to
an increase of $45,000 in service charges due to the increase in the number of
accounts from the purchase of the assets and liabilities of the Stockton branch
of California Bank & Trust. Other income also increased by $91,000 from
increases in the gain on sale of loans. The Company considers the marketing and
selling of government guaranteed loans to be core products. Other income derived
from the gain on sale is considered core earnings.
Non-interest expense increased from $1.3 million in 2002 to $1.6 million in 2003
or 18.6%. Salaries and benefits increased 31.1% from $586,000 for the first
quarter in 2002 to $768,000 in the first quarter 2003. The 18.6% increase in
non-interest expense is consistent with the 31.6% increase in total assets from
the first quarter end 2002 to first quarter end 2003 and the related growth in
the Bank's branch system.
Balance Sheet Analysis
- ----------------------
Total assets increased by 31.6% from March 31, 2002 to March 31, 2003. Total
deposits averaged $160.4 million during the three months ended March 31, 2003
compared to $116.9 million in 2002. Principal sources of liquidity are cash and
due from banks, federal funds sold and investment securities. At quarter end
March 31, 2003 these items represented $39.3 million or 23.5% of total deposits
compared to $34.1 million or 25.5% of total deposits at March 31, 2002. Other
sources of liquidity are maturing loans, a borrowing line from the Federal
Reserve Discount Window and federal funds borrowing lines from correspondent
banks. Effective October 3, 2002 the Bank established a borrowing line with the
Federal Home Loan Bank of San Francisco. It is the opinion of management that
these sources of liquidity are sufficient to meet the needs of the Company at
present levels.
Shareholders' equity increased $369,000 to $11.7 million, or 6.1% of assets, at
March 31, 2003 from $11.3 million or 6.3% of assets at December 31, 2002. The
increase in the shareholders' equity was due to net income for the three months
ended March 31, 2003, and to the exercise of 21,436 stock options, offset by the
repurchase of 9,303 shares for $158,151.
INVESTMENT SECURITIES
Available-for-sale
- ------------------
March 31, 2003
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
U.S. Government agencies $ 2,021,929 $ 35,767 $ (17,846) $ 2,039,850
U.S. Treasury bill 2,023,884 2,996 -- 2,026,880
Obligations of states and political
subdivisions 5,595,577 43,417 (96,977) 5,542,017
Mortgage-backed securities 427,949 2,295 (11,447) 418,797
8
Corporate Bonds 1,232,650 36,346 (4,097) 1,264,899
Federal Reserve Bank Stock 335,100 -- -- 335,100
Farmer Mac Home Administration Stock 9,820 -- -- 9,820
Federal Home Loan Bank stock 250,000 -- -- 250,000
----------- ----------- ----------- -----------
Total $11,896,909 $ 120,821 $ (130,367) $11,887,363
=========== =========== =========== ===========
Held-to-Maturity:
- -----------------
March 31, 2003
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
Mortgage-backed securities $ 286,504 $ 341 $ (7,055) $ 279,790
=========== =========== =========== ===========
LOANS
Outstanding loans are summarized below:
March 31, December 31,
2003 2002
------------- -------------
Commercial $ 35,980,853 $ 30,938,399
Agriculture 9,783,206 9,287,655
Real estate 53,864,897 53,159,804
Real estate-construction 29,868,487 33,887,183
Installment 11,798,587 7,734,199
------------- -------------
Total loans 141,296,030 135,007,240
Deferred loan fees 246,644 264,983
Allowance for loan losses (1,419,052) (1,306,309)
------------- -------------
Total net loans $ 140,123,622 $ 133,965,914
============= =============
Changes in the allowance for loan losses were as follows:
Three Months Ended
March 31,
2003 2002
----------- -----------
Balance, beginning of period $ 1,306,309 $ 1,171,608
Provision charged to operations 122,000 76,500
Losses charged to allowance (9,799) (10,463)
Recoveries 542 --
----------- -----------
Balance, end of period $ 1,419,052 $ 1,237,645
=========== ===========
The following table summarizes non-performing assets of the Bank as of the dates
indicated:
March 31, December 31,
2003 2002
---------- ----------
Non-performing Assets:
Non-accrual loans $ 219,000 $ 199,000
Accruing loans past due 90 days or more -- --
---------- ----------
Total non-performing loans 219,000 199,000
Other real estate owned 130,000 49,000
---------- ----------
Total non-performing assets $ 349,000 $ 248,000
========== ==========
Non-performing assets as a percentage of:
Total loans .25% .19%
Total assets .18% .14%
9
DEPOSITS
Deposits consisted of the following:
March 31, December 31,
2003 2002
------------ ------------
Non-interest bearing $ 39,443,334 $ 30,697,547
Savings 5,096,081 6,574,174
Money markets 36,505,368 35,964,405
NOW Accounts 14,401,503 15,640,384
Time, $100,000 or more 34,279,126 37,589,426
Other time 37,730,781 31,674,071
------------ ------------
$167,456,193 $158,140,007
============ ============
The Company's and the Bank's capital amounts (in thousands) and risk-based
capital ratios are presented below.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------- ------------------- -------------------
Minimum Minimum Minimum Minimum
Amount Ratio Amount Ratio Amount Ratio
Company
As of March 31, 2003:
Total capital
(to risk weighted assets) $ 15,848 10.86% $ 11,671 8.00% N/A N/A
Tier I capital
(to risk weighted assets) $ 14,429 9.89% $ 5,835 4.00% N/A N/A
Tier I capital
(to average assets) $ 14,429 7.96% $ 7,254 4.00% N/A N/A
Pacific State Bank
As of March 31, 2003, 2002:
Total capital
(to risk weighted assets) $ 16,135 11.10% $ 11,630 8.00% $ 14,537 10.00%
Tier I capital
(to risk weighted assets) $ 14,716 10.12% $ 5,815 4.00% $ 8,722 6.00%
Tier I capital
(to average assets) $ 14,716 8.13% $ 7,239 4.00% $ 9,106 5.00%
As of December 31, 2002:
Total capital
(to risk weighted assets) $ 15,882 10.95% $ 11,608 8.00% $ 14,509 10.00%
Tier I capital
(to risk weighted assets) $ 14,576 10.05% $ 5,804 4.00% $ 8,706 6.00%
Tier I capital
(to average assets) $ 14,576 8.74% $ 6,673 4.00% $ 8,400 5.00%
*The leverage ratio consists of Tier I capital divided by quarterly average
assets. The minimum leverage ratio is 3 percent for banking organizations that
do not anticipate significant growth and that have well-diversified risk,
excellent asset quality and in general, are considered top-rated banks.
10
ITEM 4. Controls and Procedures.
The Company's Chief Executive Officer and Chief Lending Officer, based
on their evaluation within 90 days prior to the date of this report of the
Company's disclosure controls and procedures (as defined in Exchange Act Rule
13a--14(c)), have concluded that the Company's disclosure controls and
procedures are adequate and effective for purposes of Rule 13a--14(c) in timely
alerting them to material information relating to the Company required to be
included in the Company's filings with the SEC under the Securities Exchange Act
of 1934.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of their evaluation.
Part II - Other Information
Item 1. Legal Proceedings
There are no pending material legal proceedings to which the Company is a party
or to which any of its property is subject.
Item 2. Changes in Securities and Use of Proceeds - 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 - See List of Exhibits
SIGNATURES
Pursuant to the requirements of Securities and Exchange Act of 1934, the Company
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Pacific State Bancorp
Date: May 15, 2003 BY: /s/ STEVEN A. ROSSO
-------------------
Steven A. Rosso
President, Chief Executive Officer
and Acting Chief Financial Officer
11
I, Steven A. Rosso certify that:
1. I have reviewed this quarterly report on Form 10-Q of Pacific State
Bancorp (the registrant);
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. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and 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 my conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors:
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. 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 my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003
/s/ STEVEN A. ROSSO
-------------------
Steven A. Rosso
President, Chief Executive Officer, and
Acting Chief Financial Officer
12
LIST OF EXHIBITS
3.1 Articles of Incorporation. Incorporated by reference from Exhibit 3.1
filed with the Company's Registration Statement No. 333-84908 on Form
S-4EF (the "S-4").
3.2 Bylaws. Incorporated by reference from Exhibit 3.2 filed with the S-4.
10.6 1997 Stock Option Plan, as amended. Incorporated by reference to the
Company's Post-Effective Amendment No. 1 to its Registration Statement
No. 333-91196.
99.1 Certification pursuant to section 906 of the Sarbanes-Oxley Act.
13