10QSB 2 cor0788.txt VIEW SYSTEMS, INC. FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB |X| Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 |_| TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ___________ Commission File Number 0-30178 ------- VIEW SYSTEMS, INC. ----------------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in Its Charter) Florida 59-2928366 ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 925 West Kenyon Avenue, Englewood, Colorado 80110 ---------------------------------------- (Address of Principal Executive Offices) (303) 783-9153 ------------------------------------------------- (Issuer's Telephone Number, Including Area Code) ----------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 No ___ --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes X No ___ --- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 12,322,620 shares of common stock as of March 31, 2001. Transitional Small Business Disclosure Format (check one): Yes ___ No x --- Table of Contents PART I. Financial Information Item I. Financial Statements Consolidated Balance Sheet.....................................................1 Consolidated Statement of Operations...........................................2 Consolidated Statement of Stockholder's Equity.................................3 Consolidated Statement of Cash Flows...........................................4 Notes to Consolidated Financial Statements.....................................5 Item II. Management Discussion and Analysis...................................7 PART II. Other Information Item I. Legal Proceedings....................................................10 Item II. Changes In Securities...............................................10 Item III. Defaults Upon Senior Securities....................................10 Item IV. Submission of Matters To A Vote of Security Holders.................10 Item V. Other Information....................................................11 Item VI. Exhibits And Reports On Form 8-K....................................11 ITEM 1. FINANCIAL STATEMENTS
VIEW SYSTEMS, INC. CONSOLIDATED BALANCE SHEET ASSETS March 31, December 31, 2001 2000 ----------- ------------ (Unaudited) CURRENT ASSETS: Cash $ 49,503 $ 265,245 Accounts receivable (net) 357,091 155,017 Inventory 123,195 95,339 ---------- ---------- Total current assets 529,789 515,601 ---------- ---------- PROPERTY AND EQUIPMENT: Equipment 386,286 382,609 Leasehold improvements 20,261 20,261 ---------- ---------- 406,547 402,870 Less accumulated depreciation 91,005 79,814 ---------- ---------- Net value of property and equipment 315,542 323,056 ---------- ---------- OTHER ASSETS: Goodwill 866,099 894,383 Investments 28,000 28,000 Due from affiliated entity 105,552 105,552 Due from stockholders - 20,000 Deposits 780 832 ---------- ---------- Total other assets 1,000,431 1,048,767 ---------- ---------- TOTAL ASSETS $1,845,762 $1,887,424 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 450,292 $ 401,247 Note payable - bank 27,083 42,083 Notes payable 110,000 110,000 Accrued interest payable 24,750 22,000 Other accrued liabilities 1,477 31,951 Due to stockholder 11,847 2,090 ---------- ---------- Total current liabilities 625,449 609,371 ---------- ---------- STOCKHOLDERS' EQUITY: Common stock - par value $0.001 50,000,000 shares authorized, 12,041,031 shares issued and outstanding 12,041 - 11,481,031 shares issued and outstanding - 11,481 Additional paid-in capital 7,588,942 7,364,502 Accumulated deficit ( 6,380,670) ( 6,097,930) ---------- ---------- Total stockholders' equity 1,220,313 1,278,053 ---------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,845,762 $1,887,424 ========== ==========
See Accompanying Notes - 1 -
VIEW SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED March 31, March 31, 2001 2000 -------------- -------------- (Unaudited) (Unaudited) REVENUE: Sales of security systems $ 341,709 $ 17,900 Sales of assembled electronic components 9,512 92,512 ---------- --------- Total sales 351,221 110,412 Cost of goods sold 143,910 60,395 ---------- --------- GROSS PROFIT ON SALES 207,311 50,017 ---------- --------- OPERATING EXPENSES: Advertising and promotion 577 10,418 Amortization 28,284 27,281 Depreciation 11,191 12,890 Dues and subscriptions 720 820 Insurance 7,503 2,633 Interest 5,756 6,190 Investor relations 33,084 33,865 Miscellaneous expense 7,380 1,699 Office expenses 26,277 36,216 Professional fees 114,331 96,378 Rent 40,006 27,985 Repairs and maintenance 3,441 4,493 Research and development - 63,765 Salaries and benefits 173,706 131,040 Sales promotions 17,119 26,513 Taxes - other 6,930 4,205 Travel 8,559 16,905 Utilities 5,187 2,985 ---------- --------- Total operating expenses 490,051 506,281 ---------- --------- NET LOSS FOR THE THREE MONTHS $( 282,740) $( 456,264) =========== ========== LOSS PER SHARE: Basic $( 0.02) $( 0.06) =========== ========== Diluted $( 0.02) $( 0.06) =========== ==========
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VIEW SYSTEMS, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD JANUARY 1, 2000 TO MARCH 31, 2001 Additional Total Common Paid-In Accumulated Stockholders' Stock Capital Deficit Equity ----- ------- ----------- ------------- Balances at January 1, 2000 $ 7,167 $ 5,334,342 $( 3,893,648) $ 1,447,861 Sale of common stock 857 509,918 - 510,775 Stock options exercised 85 845 - 930 Net loss for the three months ended March 31, 2000 - - ( 456,264) ( 456,264) -------- ------------ ------------- ------------ Balances at March 31, 2000 (Unaudited) 8,109 5,845,105 ( 4,349,912) 1,503,302 Sale of common stock 1,986 938,179 - 940,165 Stock options exercised 3 49 - 52 Issuance of common stock (employee and other compensation) 1,383 581,169 - 582,552 Net loss for the period of April 1, 2000 to December 31, 2000 - - ( 1,748,018) ( 1,748,018) -------- ------------ ------------- ------------ Balances at December 31, 2000 11,481 7,364,502 ( 6,097,930) 1,278,053 Sale of common stock 500 199,500 - 200,000 Issuance of common stock for services 60 24,940 - 25,000 Net loss for the three months ended March 31, 2001 - - ( 282,740) ( 282,740) -------- ------------ ------------ ------------ Balances at March 31, 2001 (Unaudited) $ 12,041 $ 7,588,942 $( 6,380,670) $ 1,220,313 ====== ========== ============ ============= - 3 -
VIEW SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED March 31, March 31, 2001 2000 -------------- --------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $( 282,740) $( 456,264) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 39,475 40,171 Stock issued for services 25,000 - Changes in operating assets and liabilities: Accounts receivable ( 202,074) 6,165 Inventory ( 27,856) ( 5,449) Deposit 52 - Accounts payable 49,045 ( 48,047) Accrued interest 2,750 2,750 Other accrued liabilities ( 30,474) 15,904 ----------- ----------- Net cash used in operating activities ( 426,822) ( 444,770) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 3,677) ( 22,743) Funds advanced to affiliated entities - 10,278 ----------- ----------- Net cash used in investing activities ( 3,677) ( 12,465) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Funds advanced from (to) shareholders 29,757 ( 20,000) Repayment of note payable - bank ( 15,000) ( 1,616) Proceeds from sales of stock 200,000 511,705 ----------- ----------- Net cash provided by financing activities 214,757 490,089 ----------- ----------- NET DECREASE /(INCREASE) IN CASH ( 215,742) 32,854 CASH AT BEGINNING OF PERIOD 265,245 89,150 ----------- ----------- CASH AT END OF PERIOD $ 49,503 $ 122,004 ============ ============
- 4 - VIEW SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations ------------------- View Systems, Inc. (the "Company") designs and develops computer software and hardware used in conjunction with surveillance capabilities. The technology utilizes the compression and decompression of digital inputs. Operations, from formation to June 30, 1999, have been devoted primarily to raising capital, developing the technology, promotion, and administrative function. As of July 1, 1999 the Company was no longer considered to be in the development stage. Basis of Consolidation ---------------------- The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Real View Systems, Inc. ("Real View"), Xyros Systems, Inc. ("Xyros") and Eastern Tech Manufacturing, Inc. ("ETMC"). All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates ---------------- Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from the estimates that were used. Revenue Recognition ------------------- The Company and its subsidiaries recognize revenue and the related cost of goods sold upon shipment of the product. Inventories ----------- Inventories are stated at the lower of cost or market. Cost is determined by the last-in-first-out method (LIFO). Property and Equipment ---------------------- Property and equipment is recorded at cost and depreciated over their estimated useful lives, using the straight-line and accelerated depreciation methods. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from the respective accounts, and the resulting gain or loss is included in the results of operations. The useful lives of property and equipment for purposes or computing depreciation are as follows: Equipment 5-7 years Software tools 3 years Repairs and maintenance charges which do not increase the useful lives of assets are charged to operations as incurred. Depreciation expense for the years ended March 31, 2001 and 2000 amounted to $11,191 and $12,890 respectively. - 5 - VIEW SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 Imairment of Long-Lived Assets ------------------------------ Long-lived assets and identifiable intangibles (including goodwill) to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount should be addressed. Impairment is measured by comparing the carrying value to the estimated undiscounted future cash flows expected to result from use of the assets and their eventual disposition. Income Taxes ------------ Deferred income taxes are recorded under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences, measured by enacted tax rates, attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the rate change becomes effective. Valuation allowances are recorded for deferred tax assets when it is more likely than not that such deferred tax assets will not be realized. Research and Development ------------------------ Research and development costs are expensed as incurred. Equipment and facilities acquired for research and development activities that have alternative future uses are capitalized and charged to expense over the estimated useful lives. Advertising ----------- Advertising costs are charged to operations as incurred. Monetary Transactions --------------------- Nonmonetary transactions are accounted for in accordance with Accounting Principles Board Opinion No. 29 Accounting for Nonmonetary Transactions which requires the transfer or distribution of a nonmonetary asset or liability to be based, generally, on the fair value of the asset or liability that is received or surrendered, whichever is more clearly evident. Financial Instruments --------------------- For most financial instruments, including cash, accounts receivable, accounts payable and accruals, management believes that the carrying amount approximates fair value, as the majority of these instruments are short-term in nature. Net Loss Per Common Share ------------------------- Basic net loss per common share ("Basic EPS") is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share ("Diluted EPS") is computed by dividing net loss available to common stockholders by the weighted average number of common shares and dilutive potential common share equivalents then outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants. The calculation of the net loss per share available to common stockholders for the years ended March 31, 2001 does not include potential shares of common stock equivalents, as their impact would be antidilutive. - 6 - VIEW SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2001 Segment Reporting ----------------- The company has determined that it does not have any separately reportable operating segments as of March 31, 2001. 2. FINANCIAL CONDITION Since its inception, the Company has incurred significant losses and as of March 31, 2001 had an accumulated deficit of $6.4 million. The Company believes that it will incur operating losses for the foreseeable future. There can be no assurance that the Company will be able to generate sufficient revenues to achieve or sustain profitability in the future. However, the Company believes that its current cash and cash equivalents, along with sales revenue and anticipated equity infusions, will be sufficient to sustain operations through March 31, 2002. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion should be read and reviewed in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company's Annual Report on Form 10-QSB for the year ended December 31, 2000. In addition to historical information, this Form 10-QSB contains forward -looking statements that involve risks and uncertainties, such as statements of the Company's plans and expectations. The Company's actual results could differ materially from management's expectations. Since start-up of operations in September 1998, we have devoted most of our resources to the development, sale and marketing of digital video surveillance and security products. We have generated limited revenues from our security products to date, but are rapidly expanding our sales and distribution network. At the same time we are working on delivering new products to market and enhancing and upgrading our product line. Until we more fully develop our product line and our sales and distribution network, we expect our operating losses to continue. We have provided contract manufacturing services since May, 1999, when we acquired ETMC. ETMC had provided such services for more than 15 years and had an established customer base. We have continued the contract manufacturing business line, while increasing ETMC's manufacturing capacity to permit production of our products. Three Months Ended March 31, 2001 Compared With the Three Ended Months Ended March 31, 2000 Revenue For the three months ended March 31, 2001, revenues from sales of our products increased $323,809 or 1,809% to $341,709 from $17,900 in the same period last year, and revenues from sales of our services decreased $83,000 or 90% to $9,512 from $92,512 in the same period last year. Of the $351,221 in total revenue during the three month period ended March 31, 2001, $341,709 or 97% was derived from sales of systems and $9,512 or 3% from sales of contract manufacturing services. The ratio of security systems sales to contract manufacturing is increasing. Gross Profit Gross profit on sales for the three months ended March 31, 2001, increased $157,294 or 314% to $207,311 compared with $50,017 in same period last year. Gross profit margin for the three - 7 - months ended March 31, 2001, was 59% compared with 45% in the same period last year. Because of low net sales we achieved in the period last year ended March 31, 2000, we do not believe gross profit margin comparisons are meaningful at this stage of our operations. Operating Expenses Operating expenses for the three months ended March 31, 2001, decreased to $490,051, compared with $506,281 for the comparable period in 2000. The decrease is principally due to decreased expenditures in R & D and increases in salaries and professional fees. As a result of the foregoing, net loss was $(282,740) for the three months ended March 31, 2001, compared to a net loss of $(456,264) for the three months ended March 31, 2000. Costs and Expenses Costs of Products and Services Sold. The cost of products and services sold, was $143,910 for the three months ended March 31, 2001, and represented 41% of revenue for the period, compared to $60,395 for the three months ended March 31, 2000 which represents 55% of revenues for that period. Because of our low sales volume in the same period last year, we do not consider the costs of goods sold in the same period last year to be a good measure of our true costs of goods sold. As our product sales increase and account for a larger percentage of our overall sales, we expect that our costs of goods and services sold will decline and stabilize as a percentage of total revenue. We anticipate that our profit margins on sales of security systems will exceed our profit margins on sales of services. We are continually working on engineering changes in our security products that we expect will lower component costs for these products. We do not determine our inventory on a quarterly basis, instead we do it on an annual basis. Therefore, our cost of goods sold calculations are based on estimates of inventory used in products sold. Research and Development Expense. We spent $0 on research and development for the three months ended March 31, 2001, as compared with $63,765 in the same period last year. Our R&D expenditures in the three months ended March 31, 2001, represented 0% of gross profit margin for this period. We are working on introducing additional products to the market in 2001. We expect continued heavy expenditures in this area, evidencing our commitment to develop industry leading video management and identification products. Salaries and Benefits. We spent $173,706 on salaries and benefits for the three months ended March 31, 2001, as compared with $131,040 in the same period last year. We have increased expenditure on salaries and fees for sales and marketing personnel, including consultants, and we incurred $17,119 on sales and promotional expenses for the three month period ended March 31, 2001, as compared with $26,513 in the same period a year ago. Net Operating Loss. We incurred approximately $(282,740) of net operating loss carry forwards for the three-month period ended March 31, 2001, which may be used to offset taxable income and income taxes in future years. LIQUIDITY AND CAPITAL RESOURCES Since the start-up of our operations in 1998, we have funded our cash requirements primarily through equity transactions. We received $6,987,259 since inception through the issuance of our common stock. We are not currently generating cash from our operations in sufficient amounts to finance our business and will continue to need to raise capital from other sources. We used the proceeds from these sales of equity to fund operating activities, including, product development, sales and marketing, and to invest in the acquisition of technology, assets and business. As of March 31, 2001, we had total assets of $ 1,845,762, a decrease of approximately $42,000 over last year's $1,887,424 at December 31, 2000. Total liabilities were $625,449, at March 31, 2001, resulting in stockholders' equity of $1,220,313, a decrease of $57,740 from the December 31, 2000 balance of $1,278.053. - 8 - During the three months ended March 31, 2001, our cash decreased from $265,245 at December 31, 2000, to $49,503 at March 31, 2001. Net cash used in operating activities was $426,822 for the three months ended March 31, 2001, including decreases in accounts receivable of $202,074, increases in inventory of $27,856, and increases in accounts payable of $49,045. Net cash generated from financing activities during the three months ended March 31, 2001 was $214,757, consisting of proceeds received from sales of stock of $200,000, plus 29,757 advanced from stockholders, less payments on $15,000 made on a promissory note to Columbia Bank with an outstanding principal balance of $27,083 at March 31, 2001. As a result of the foregoing, at March 31, 2001 we had negative working capital of $95,660, including $357,091 in net trade accounts receivable and $123,195 in inventory. We have provided and may continue to provide payment term extensions to certain of our customers from time to time. As of March 31, 2001 we have not granted material payment term extensions. Our inventory balance at March 31, 2001, was estimated to be $123,195. We do not take inventory on a quarterly basis, and we made inventory estimates based on annual inventory determinations. With expected increased product sales, we will need to make increased inventory expenditures. However, the terms of our product sales requires a twenty five percent (25%) deposit on order. In addition, we endeavor to keep inventory levels low. Therefore, we do not believe that increased product sales, associated materials purchases and inventory increases, will adversely affect liquidity. We anticipate further expenditures for fiscal year 2001 of approximately $100,000 for test equipment. We are also exploring the purchase of the commercial space we are leasing in Columbia, Maryland, plus adjoining space, consisting of approximately 10,000 square feet. If we can obtain favorable terms, we would purchase the building through debt financing. Under our outstanding employment and consulting agreements, we are obligated to pay Mr. Than $96,000 per year, Mr. Lesniak $84,000 per year and Mr. Bruggeman $85,000 in salary and fees during calendar year 2001. If we terminate the employment of Mr. Than without cause or because of merger, acquisition or change in control, we will be obligated to pay him approximately $350,000 in severance payments over a three year period. We believe that cash from operations and funds available will not be sufficient to meet anticipated operating capital expenditure and debt service requirements for the next twelve months and that we will be dependent on raising additional capital through equity sales or debt financing. In this offering we are registering 600,000 shares of common stock for resale that can be obtained from the exercise of warrants held by Columbia Financial Group, LLC and Magnum Financial Group, LLC. If Columbia Financial Group, LLC and Magnum Financial Group, LLC exercise all of their warrants, we will receive $625,000 which we will use for working capital. We also have outstanding warrants with various investors with an exercise price of $.40 per share which is less than its recent market price. If the warrant holders exercise all of their warrants, at the exercise price of $.40 per share, we will receive $800,000, which we will use for additional working capital. Plan Of Operation The amount of capital that we need to raise will depend upon many factors primarily including: o the rate of sales growth and market acceptance of our product lines; o the amount and timing of necessary research and development expenditures; o the amount and timing of expenditures to sufficiently market and promote our products ; and - 9 - o the amount and timing of any accessory product introductions. We intend to use the cash raised from the private sale of shares and the exercise of warrants held by the Selling Stockholders to the following: o bring our ViewStorage, WebView and CareView products to market; o continue our product development efforts; o expand our sales, marketing and promotional activities for the SecureView line of products; and o increase our engineering, production management, quality control, and customer support staff. We operate in a very competitive industry that requires continued large amounts of capital to develop and promote our products. We believe that it will be essential to continue to raise additional capital, both internally and externally, to compete in this industry. In addition to accessing the public and private equity markets, we will pursue bank credit lines and equipment lease lines for certain capital expenditures. We currently estimate we will need between $3 million and $4 million to fully develop all of our products and launch our expanded business operations in accordance with our current business plan. RISK FACTORS AND CAUTIONARY STATEMENTS Statements within this 10-QSB which are not historical facts, including statements about strategies and expectations for new and existing products, technologies, and opportunities, are forward-looking statements that involve risks and uncertainties. Our actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements, including, but not limited to, risks detailed in our other securities filings, including our Annual Report on Form 10-KSB for the year ended December 31, 2000, and our registration statement, as amended, filed on Form SB-2. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not aware of any material pending legal proceeding against us or our property. ITEM 2. CHANGES IN SECURITIES We are not aware of any material pending legal proceeding against us or our property. - 10 - ITEM 3. DEFAULTS UPON SENIOR SECURITIES There are no changes in securities other than such changes reported in our SB-2/A filed on March 29, 2001, registration number 333-55394. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Inapplicable ITEM 5. OTHER INFORMATION Inapplicable ITEM 6. EXHIBITS AND REPORT ON FORM 8-K (A) EXHIBITS: -------- 3.1 (1) Articles of Incorporation 3.2 (1) By-laws 11. (attached to report) Statement re: Computation of Per Share Earnings -------------------------------------------------------------------------------- (1) Incorporated By Reference From Issuer's Registration Statement on Form SB-2 Filed With The Securities & Exchange Commission On January 11, 2000 (B) REPORTS ON FORM 8-K ------------------- We did not file any reports on Form 8-K during the quarter for which this report is filed. - 11 - SIGNATURES In accordance with the requirements of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. View Systems, Inc. Registrant Date: May 15, 2001 /s/ GUNTHER THAN ---------------- GUNTHER THAN PRESIDENT & CEO - 12 -