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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 quarterly period ended November 30, 2002
or
THE SECURITIES EXCHANGE ACT OF 1934
[ ]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 1-9681
JENNIFER CONVERTIBLES, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2824646
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
419 Crossways Park Drive, Woodbury, New York 11797
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 496-1900
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 registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
As of January 10, 2003 5,710,558 shares of the issuer's common
stock, par value $.01, were outstanding.
Index
Part I - Financial Information
Item 1. - Financial Statements (unaudited)
Consolidated Balance Sheets at November 30, 2002
(Unaudited) and August 31, 2002 .......................... 2
Comparative Consolidated Statements of Operations
(Unaudited) for the thirteen weeks ended
November 30, 2002 and November 24, 2001...................... 3
Comparative Consolidated Statements of Cash Flows
(Unaudited) for the thirteen weeks ended
November 30, 2002 and November 24, 2001...................... 4
Notes to Unaudited Consolidated Financial Statements ........ 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9
Item 3 - Quantitative and Qualitative Disclosures about
Market Risk............................................. 12
Item 4 - Controls and Procedures.................................. 12
Part II - Other Information....................................... 13
Item 1 - Legal Proceedings........................................ 13
Item 2 - Changes in Securities and Use of Proceeds................ 13
Item 3 - Defaults Upon Senior Securities.......................... 13
Item 4 - Submission of Matters to a Vote of Security Holders...... 13
Item 5 - Other Information........................................ 13
Item 6 - Exhibits and Reports on Form 8-K......................... 13
JENNIFER CONVERTIBLES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share data)
ASSETS November 30,2002
(Unaudited) August 31, 2002
Current assets:
Cash and cash
equivalents $15,399 $15,973
Investments 993 0
Accounts receivable 782 475
Merchandise inventories 13,935 13,348
Due from private company,
net of reserves of
$4,745 and $4,754 at
November 30, 2002 and August 31,
2002, respectively 3,925 3,696
Deferred tax asset 2,220 1,950
Prepaid expenses and
other current assets 712 801
Total current assets 37,966 36,243
Store fixtures, equipment and
leasehold improvements,
at cost, net 4,175 4,231
Deferred lease costs and
other intangibles, net 167 195
Goodwill, at cost, net 1,796 1,796
Deferred tax asset 412 412
Other assets (primarily
security deposits) 734 748
$45,250 $43,625
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $14,775 $14,037
Customer deposits 8,331 7,689
Accrued expenses and other current
liabilities 6,616 6,955
Due to Private Company 700 500
Total current liabilities 30,422 29,181
Deferred rent and allowances 4,239 4,358
Total liabilities 34,661 33,539
Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $.01 per
share, authorized 1,000,000 shares
Series A convertible preferred -
10,000 shares issued and
outstanding (liquidation preference
$5,000)
Series B convertible preferred -
26,664 shares issued and
outstanding (liquidation
preference $133)
Common stock, par value $.01 per
share, authorized 10,000,000
shares; issued and outstanding
5,704,058 shares at
November 30, 2002 and
August 31, 2002 57 57
Additional paid in capital 27,482 27,482
Accumulated (deficit) (16,950) (17,453)
10,589 10,086
$45,250 $43,625
See notes to the consolidated financial statements.
2
JENNIFER CONVERTIBLES INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share data)
(Unaudited)
Thirteen weeks ended
November 30, November 24,
2002 2001
Revenue:
Net sales $ 34,698 $ 34,119
Revenue from service contracts 2,377 318
37,075 34,437
Cost of sales, including store
occupancy, warehousing, delivery and
service costs 24,555 23,730
Selling, general and
administrative expenses 11,540 10,678
Depreciation and amortization 424 418
36,519 34,826
Operating income (loss) 556 (389)
Interest income 41 58
Interest expense - 6
Income (Loss) before income taxes 597 (337)
Income taxes 94 85
Net income (loss) $503 ($422)
Basic income (loss) per common share $0.09 ($0.07)
Diluted income (loss) per common share $0.06 ($0.07)
Weighted average common shares
outstanding basic income (loss) per share 5,704,058 5,704,058
Effect of potential common share
issuance:
Stock options 647,077 -
Convertible preferred stock 1,443,164 -
Weighted average common shares
outstanding diluted income (loss) per
share 7,794,299 5,704,058
See notes to the consolidated financial statements.
3
JENNIFER CONVERTIBLES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Thirteen weeks ended
November 30, November 24,
2002 2001
Cash flows from operating activities:
Net income (loss) $503 ($422)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 424 418
Deferred rent (119) (154)
Deferred tax benefit (270) (164)
Recovery of amounts due from Private Company (9) (15)
Deferred income 0 1,827
Changes in operating assets and liabilities:
Merchandise inventories (587) 660
Prepaid expenses and other current assets 89 19
Accounts receivables (307) (100)
Due from Private Company, net (20) (257)
Other assets, net 14 16
Accounts payable trade 738 (4,677)
Customer deposits 642 626
Accrued expenses and other payables (339) (86)
Net cash provided by (used in)
operating activities 759 (2,309)
Cash flows from investing activities:
Investments (993) 0
Capital expenditures (340) (170)
Net cash (used in) investing activities (1,333) (170)
Net (decrease) in cash and cash equivalents (574) (2,479)
Cash and cash equivalents at beginning of
period 15,973 11,155
Cash and cash equivalents at end of period $15,399 $8,676
Supplemental disclosure of cash flow
information:
Income taxes paid during the period $510 $365
Interest paid $0 $6
See notes to consolidated financial statements.
286:
287:
4
JENNIFER CONVERTIBLES, INC.
For the Thirteen Weeks Ended November 30, 2002
(In thousands except for share amount)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Jennifer Convertibles, Inc. and its subsidiaries (the "Company")
have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by accounting
principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals plus other
adjustments referred to in Note 3) considered necessary for a
fair presentation have been included. The operating results for
the thirteen-week period ended November 30, 2002 are not
necessarily indicative of the results that may be expected for
the fiscal year ending August 30, 2003.
The balance sheet as of August 31, 2002 has been derived from the
audited financial statements as such date but does not include
all of the information and footnotes required by accounting
principles generally accepted in the United States of America for
complete financial statements.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual
Report on Form 10-K/A for the year ended August 31, 2002.
NOTE 2: MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost
(determined on the first-in, first-out method) or market and are
physically located, as follows:
11/30/02 8/31/02
Showrooms $ 6,406 $ 6,553
Warehouses 7,529 6,795
$13,935 $13,348
Vendor discounts and allowances in respect to merchandise
purchased by the Company are included as a reduction of inventory
and cost of sales.
5
JENNIFER CONVERTIBLES, INC.
For the Thirteen Weeks Ended November 30, 2002
(In thousands except for share amount)
NOTE 3: REVENUE RECOGNITION
Sales are recognized upon delivery of the merchandise to the
customer. A minimum deposit of 50% is typically required upon
placing a non-financed sales order. The Company also finances
sales and sells financed receivables on a non-recourse basis to a
finance company. The Company neither retains any interests in nor
services the sold receivables. The selling price of the
receivables represents the amount due from the customer less a
fee. Fees paid to the finance company are included in selling,
general and administrative expenses.
The Company also derives revenues from the sale of service
contracts related to lifetime protection plans. Prior to an
amendment to the Company's Warehouse Agreement with a related
private company (the "Private Company"), as described below, the
Company was responsible for providing services related to
separately priced fabric protection plans. Accordingly, in the
Consolidated Statement of Operations for the thirteen weeks ended
November 24, 2001, fabric protection revenue was deferred and
amortized into income in proportion to the costs expected to be
incurred.
The Company has amended its warehouse agreement with the Private
Company, whereby, effective June 23, 2002, the Private Company
became the sole obligor on all lifetime fabric and leather
protection plans sold by the Company or the Private Company on
and after such date through August 28, 2004 and assumed all
performance obligations and risk of loss thereunder. The Company
has no obligation with respect to such plans. The Private
Company receives a monthly payment of $50 subject to an
adjustment payable by the Company 11 months after the month of
sale based on the volume of sales of the plans. In addition,
for a payment of $400 (payable $50 per month beginning three
months after the date of the agreement) to be made by the
Company, the Private Company also assumed responsibility to
service and pay any claims related to sales made by the Company
or the Private Company prior to June 23, 2002. Accordingly, the
Company has no obligations for any claims filed after June 23,
2002 and revenue from the sale of fabric protection plans is
recognized upon delivery of the merchandise.
NOTE 4: GOODWILL
Goodwill consists of the excess of cost of the Company's
investments in certain subsidiaries over the fair value of net
assets acquired. The Company has performed the required
impairment tests and has determined that there is no impairment
of the Company's goodwill.
6
JENNIFER CONVERTIBLES, INC.
For the Thirteen Weeks Ended November 30, 2002
(In thousands except for share amount)
NOTE 5: SHORT-TERM INVESTMENTS
Short-term investments consist of corporate bonds with maturities
less than one year from the balance sheet date. The Company has
classified its investments as Available-for-Sale securities.
Accordingly, such investments are reported at fair market value,
with resultant unrealized gains and losses reported as a separate
component of shareholders' equity.
NOTE 6: CONTINGENCIES
The Derivative Litigation
Beginning in December 1994, a series of six actions were
commenced as derivative actions on the Company's behalf against
certain present and former officers and directors of the Company,
the Private Company and others.
The complaints in each of these actions assert various acts of
wrongdoing by the defendants, as well as claims of breach of
fiduciary duty by the Company's present and former officers and
directors. The Company had entered into settlement agreements
with respect to the derivative litigation, subject, in the case
of certain of those agreements, to court approval of the
settlement by a certain date. Such court approval was not
obtained by such date, and in July 1998, the Private Company
exercised its option to withdraw from the settlement.
On July 6, 2001, the Private Company and the Company entered into
a series of agreements designed to settle the derivative action
among the Private Company, certain of our current and former
officers and directors and certain of our former accounting firms
and the Company. Effectiveness of the agreements is subject to
certain conditions, including court approval and receipt by the
Company of a fairness opinion or appraisal. The Company also
entered into an Interim Operating Agreement designed to implement
certain of the provisions of the settlement agreement prior to
court approval. However, there can be no assurance that the
court will approve the settlement or that a settlement will
occur. Please see the Company's Annual Report on Form 10-K/A for
the year ended August 31, 2002 for a more complete description of
the terms of the proposed settlement.
7
JENNIFER CONVERTIBLES, INC.
For the Thirteen Weeks Ended November 30, 2002
(In thousands except for share amount)
NOTE 7: TRANSACTIONS WITH THE PRIVATE COMPANY
Included in the Consolidated Statements of Operations are the
following amounts charged by and to the Private Company:
Thirteen weeks ended
November 30, November 24,
2002 2001
Net Sales:
Royalty income $31 $33
Warehouse income, net 176 160
Delivery charges 471 417
$678 $610
Revenue from Service
Contracts:
Fabric Protection fees, net ($33) $19
Selling, General and
Administrative Expenses:
Advertising reimbursement ($377) ($377)
Royalty expense 100 100
($277) ($277)
8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and accompanying notes
filed as part of this report.
Forward-Looking Information
Except for historical information contained herein, this
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act
of 1995, as amended. These statements involve known and unknown
risks and uncertainties that may cause our actual results or
outcome to be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements. Factors that might cause such differences
include, but are not limited to the risk factors set forth under
the caption "Risk Factors" in our Annual Report on Form 10-K/A
for the fiscal year ended August 31, 2002. In addition to
statements, which explicitly describe such risks and
uncertainties, investors are urged to consider statements labeled
with the terms "believes," "belief," "expects," "intends,"
"plans" or "anticipates" to be uncertain and forward-looking.
Results of Operations
Prior to an amendment to the Company's warehouse agreement with
the Private Company, the Company was responsible for providing
services related to separately priced fabric protection plans.
Accordingly, in the Consolidated Statement of Operations for the
thirteen weeks ended November 24, 2001, fabric protection revenue
was deferred and amortized into income in proportion to the costs
expected to be incurred.
The Company has amended its warehouse agreement with the Private
Company whereby, effective June 23, 2002, the Private Company
became the sole obligor on all lifetime fabric and leather
protection plans sold by the Company or the Private Company on or
after such date through August 28, 2004 and assumed all
performance obligations and risk of loss thereunder. The Company
has no obligation with respect to such plans. The Private Company
receives a monthly payment of $50,000 subject to an adjustment
payable by the Company 11 months after the month of sale based on
the volume of sales of the plans. In addition, for a payment of
$400,000 (payable $50,000 per month beginning three months after
the date of the agreement) to be made by the Company, the Private
Company also assumed responsibility to service and pay any claims
related to sales made by the Company or the Private Company prior
to June 23, 2002. Accordingly, the Company has no obligations for
any claims filed after June 23, 2002 and revenue from the sale of
fabric protection plans is recognized upon delivery of the
merchandise.
Net sales include merchandise sales and home delivery income of
$34,020,000 and $33,508,000 and income from the Private Company
of $678,000 and $611,000 for the thirteen-week periods ended
November 30, 2002 and November 24, 2001 respectively. Net sales
9
of merchandise and home delivery income increased 1.5% in the thirteen-week
period ended November 30, 2002, up $511,000 from the thirteen-week period
ended November 24, 2001. Revenue from service contracts increased
647.4% in the thirteen-week period ended November 30, 2002 to
$2,377,000, from $318,000 for the thirteen-week period ended
November 24, 2001 due to the warehouse agreement amendment.
We have opened nine stores since the thirteen-week period ended
November 24, 2001, which has resulted in additional sales.
Cost of sales, as a percentage of revenue was 66.2% for the
thirteen week period ended November 30, 2002 as compared to 68.9%
for the thirteen-week period ended November 24, 2001. This is
primarily a result of the change in recognition of fabric
protection revenue as described above.
Selling, general and administrative expenses were $11,540,000
during the thirteen-week period ended November 30, 2002 compared
to $10,678,000 for the thirteen-week period ended November 24,
2001. Selling, general and administrative expenses as a
percentage of revenue was 31.1% for the thirteen-week period
ended November 30, 2002 as compared to 31.0% for the thirteen-
week period ended November 24, 2001. This increase can be
attributed to the increase in legal fees associated with the
Interim Operating Agreement as well as an increase in promotional
costs associated with our private label card business.
Net income for the thirteen weeks ended November 30, 2002 was
$503,000 compared to a $422,000 net loss for the thirteen-week
period ended November 24, 2001. The principle reason for the
variance was the change in how we recognized revenue from the
sale of fabric protection plans.
Liquidity and Capital Resources
As of November 30, 2002, we had an aggregate working capital of
$7,544,000 compared to an aggregate working capital of $7,062,000
at August 31, 2002 and had available cash and cash equivalents of
$15,399,000 compared to $15,973,000 at August 31, 2002. The
decrease in cash and cash equivalents is a result of cash used in
investments in the amount of $1,333,000 which is comprised of
$993,000 for short-term investments and $340,000 in capital
expenditures partially offset by $759,000 in cash provided from
operating activities. Unless the U.S. economy continues to
worsen, we anticipate continued positive operating cash flow
through the end of fiscal 2003.
We continue to fund the operations of certain of our limited
partnership licensees whose results are included in our
consolidated financial statements, some of which continue to
generate operating losses. Any such losses have been consolidated
in our consolidated financial statements. It is our intention to
continue to fund these operations in the future and, if the new
settlement agreements discussed in our Annual Report on Form 10-
K/A for the year ended August 31, 2002, are approved, we will
acquire 100% of such limited partnerships. Our receivables from
the Private Company and the unconsolidated licensees had been
substantially reserved in prior years and continue to be
reserved. There can be no assurance that the reserved amount of
such receivables a total of $4,745,000 as of November 30, 2002,
will be collected.
10
Starting in 1995, we entered into agreements with the Private
Company that permits us to offset our current monthly obligations
to one another in an amount up to $1,000,000. Amounts in excess
of $1,000,000 are paid in cash. Based on the payment terms of these
offset agreements, current obligations of the Private Company and the
unconsolidated licensees as of November 30, 2002, were
paid. Additionally, as part of such agreements, the Private
Company, in November 1995, agreed to assume certain liabilities
owed to us by the unconsolidated licensees. Our receivables from
the Private Company and the unconsolidated licensees, which arose
in fiscal 1996 and prior years, had been reserved.
In March 1996, we executed a Credit and Security Agreement with
our principal supplier, Klaussner Furniture Industries, Inc.,
which extended the payment terms for merchandise shipped from 60
days to 81 days. Since February 1999, we have not exceeded these
81-day payment terms. As of November 30, 2002, there were no
amounts owed to Klaussner that violated these extended terms. On
December 11, 1997, the Credit and Security Agreement was modified
to include a late fee of .67% per month for invoices paid by us
beyond the normal 60-day terms. This provision became effective
in January 1998. As part of the Credit and Security Agreement,
we granted to Klaussner a security interest in all of our assets
including the collateral assignment of our leasehold interests,
our trademarks and a licensee agreement to operate our business
in the event of our default. We expect, as a result of our
positive performance, that such security interest will be
released in fiscal 2003.
We opened three stores, and had no store closings during the
thirteen weeks ended November 30, 2002. We spent $340,000 for
capital expenditures during the thirteen-week period and we
anticipate capital expenditures approximating $700,000 during the
balance of fiscal 2003 to support the opening of new stores. As
previously disclosed, Klaussner has agreed to lend us up to
$150,000 per new store, for up to 10 new stores. To date, we
have not borrowed pursuant to this arrangement and we currently
intend to fund any expansion with internally generated capital.
Unless the U.S. economy worsens, we anticipate generating
positive operating cash flow for the year ending August 30, 2003.
In the opinion of management, this positive cash flow will be
adequate to fund operations during the current and next fiscal
year.
11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. Our principal
executive officer and principal financial officer, after
evaluating the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-
14(c)) within 90 days prior to the filing of this report, have
concluded that, based on such evaluation, our disclosure controls
and procedures were adequate and effective to ensure that
material information relating to us, including our consolidated
subsidiaries, was made known to them by others within those
entities, particularly during the period in which this Quarterly
Report on Form 10-Q was being prepared.
Changes in Internal Controls. 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, nor were there any significant deficiencies or
material weaknesses in our internal controls. Accordingly, no
corrective actions were required or undertaken.
12
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
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 Filed on Form 8-K
(a) Exhibits filed with this report:
None.
(b) Reports on Form 8-K:
None.
13
JENNIFER CONVERTIBLES, INC.
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.
JENNIFER CONVERTIBLES, INC.
January 14, 2003 By: /s/ Harley J. Greenfield
Harley J. Greenfield, Chairman of
the Board and Chief Executive
Officer
January 14, 2003 By: /s/ Rami Abada
Rami Abada, Chief Financial Officer
And Chief Operating Officer
14
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Harley J. Greenfield, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Jennifer Convertibles, 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 annual
report; and
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 officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
January 14, 2003 /s/ Harley J. Greenfield
Harley J. Greenfield, Chief Executive Officer
15
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Rami Abada, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Jennifer Convertibles, 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; and
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 officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
January 14, 2003 /s/ Rami Abada
Rami Abada, Chief Financial Officer and Chief
Operating Officer
16