10QSB 1 tenq3-04.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _______________to______________ Commission file number 000-12196 NVE Corporation (Exact name of registrant as specified in its charter) Minnesota 41-1424202 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 11409 Valley View Road, Eden Prairie, Minnesota 55344 (Address of principal executive offices) (952) 829-9217 (Issuer's telephone number) 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 [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Common Stock, $.01 Par Value - 4,369,335 shares outstanding as of January 16, 2004 Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] PART I--FINANCIAL INFORMATION Item 1. Financial Statements. NVE CORPORATION BALANCE SHEET DECEMBER 31, 2003 Current assets: Cash $ 1,339,343 Investment securities 5,360,466 Accounts receivable, net of allowance for uncollectible accounts of $15,000 1,152,991 Inventories 1,189,010 Prepaid expenses and other assets 108,086 ------------ Total current assets 9,149,896 Fixed assets: Machinery and equipment 3,431,309 Leasehold improvements 365,187 ------------ 3,796,496 Less accumulated depreciation 2,218,158 ------------ Total fixed assets 1,578,338 ------------ Total assets $10,728,234 ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 394,892 Accrued payroll and other 630,529 Deferred revenue 420,338 Capital lease obligations 146,267 ------------ Total current liabilities 1,592,026 Capital lease obligations, less current portion 116,684 ------------ Total liabilities 1,708,710 Shareholders' equity: Common stock 43,438 Additional paid-in capital 12,415,214 Accumulated other comprehensive income 50,310 Accumulated deficit (3,489,438) ------------ Total shareholders' equity 9,019,524 ------------ Total liabilities and shareholders' equity $10,728,234 ============
SEE ACCOMPANYING NOTES. NVE CORPORATION STATEMENT OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
Three Months Ended December 31 2003 2002 ------------------------------ Revenue Contract research and development $ 1,633,361 $ 1,673,502 Product sales 1,484,766 565,633 License revenue - 97,917 ------------ ------------ Total revenue 3,118,127 2,337,052 Cost of sales 1,907,029 1,424,507 ------------ ------------ Gross profit 1,211,098 912,545 Expenses Research and development 230,671 327,472 Selling, general & administrative 464,264 420,862 ------------ ------------ Total expenses 694,935 748,334 ------------ ------------ Income from operations 516,163 164,211 Interest income 46,716 58,454 Interest expense (6,107) (9,210) Other income 20,384 20,706 ------------ ------------ Net income $ 577,156 $ 234,161 ============ ============ Net income per share-basic $ 0.13 $ 0.06 ============ ============ Net income per share-diluted $ 0.12 $ 0.05 ============ ============ Weighted average shares outstanding: Basic 4,334,092 4,159,718 Diluted 4,831,540 4,466,199
SEE ACCOMPANYING NOTES. NVE CORPORATION STATEMENT OF OPERATIONS NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
Nine Months Ended December 31 2003 2002 ----------------------------- Revenue Contract research and development $ 4,949,879 $ 4,843,268 Product sales 3,852,282 1,707,633 License revenue - 293,751 ------------ ------------ Total revenue 8,802,161 6,844,652 Cost of sales 5,554,726 4,273,553 ------------ ------------ Gross profit 3,247,435 2,571,099 Expenses Research and development 711,913 944,330 Selling, general & administrative 1,390,818 1,324,302 ------------ ------------ Total expenses 2,102,731 2,268,632 ------------ ------------ Income from operations 1,144,704 302,467 Interest income 140,184 154,134 Interest expense (20,705) (32,108) Other income 53,867 62,193 ------------ ------------ Net income $ 1,318,050 $ 486,686 ============ ============ Net income per share-basic $ 0.31 $ 0.12 ============ ============ Net income per share-diluted $ 0.28 $ 0.11 ============ ============ Weighted average shares outstanding: Basic 4,241,791 4,118,523 Diluted 4,739,239 4,425,004
SEE ACCOMPANYING NOTES. NVE CORPORATION STATEMENT OF CASH FLOWS NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
Nine Months Ended Dec. 31 2003 2002 ------------ ------------ OPERATING ACTIVITIES Net income $ 1,318,050 $ 486,686 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 381,919 370,398 Changes in operating assets and liabilities: Accounts receivable (124,701) (89,757) Inventories (348,234) (334,078) Prepaid expenses and other 62,234 (119,641) Accounts payable and accrued expenses 89,008 63,795 Deferred revenue (469,289) (483,279) ------------ ------------ Net cash provided by (used in) operating activities 908,987 (105,876) INVESTING ACTIVITIES Purchases of fixed assets (774,110) (383,377) Sales (purchases) of investment securities 477,074 (5,583,414) ------------ ------------ Net cash used in investing activities (297,036) (5,966,791) FINANCING ACTIVITIES Net proceeds from sale of common stock 246,071 6,224,766 Repayment of note payable and capital lease obligations (114,447) (323,868) ----------- ------------ Net cash provided by financing activities 131,624 5,900,898 ----------- ------------ Increase (decrease) in cash 743,575 (171,769) Cash and cash equivalents at beginning of period 595,768 537,258 ----------- ------------ Cash and cash equivalents at end of period $1,339,343 $ 365,489 =========== ============
SEE ACCOMPANYING NOTES. NVE CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 1. INTERIM FINANCIAL INFORMATION The accompanying unaudited financial statements of NVE Corporation (the "Company") are consistent with accounting principles generally accepted in the United States and reporting with SEC regulations. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the financial statements. Although we believe that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed financial statements be read in conjunction with the audited financial statements and the notes included in our latest annual financial statements included in our report on Form 10-KSB. The results of operations for the three and nine month periods ended December 31, 2003 are not necessarily indicative of the results that may be expected for the full year ending March 31, 2004. 2. NATURE OF BUSINESS We develop, manufacture, and sell "spintronics" devices, a nanotechnology which relies on electron spin rather than electron charge to acquire, store, and transmit information. 3. REVENUE RECOGNITION Revenue from product sales to direct customers is recognized upon shipment. Revenue from licensing and technology development programs, which is nonrefundable and for which no significant future obligations exist, is recognized when the license is signed. Revenue from licensing and technology development programs, which is refundable, recoupable against future royalties, or for which future obligations exist, is recognized when we have completed our obligations under the terms of the agreements. Revenue from royalties is recognized upon the shipment of product from our technology license partners to direct customers. Certain research and development activities are conducted for third parties and such revenue is recognized as the services are performed. 4. EARNINGS PER SHARE We calculate our income per share pursuant to Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share. Basic earnings per share is computed based upon the weighted average number of common shares issued and outstanding during each year. Diluted net income per share amounts assume conversion, exercise or issuance of all potential common stock instruments (stock options, warrants and convertible preferred stock). Potentially dilutive securities including warrants and stock options are excluded from diluted earnings per share during net loss periods because these securities would be anti-dilutive. 5. INVESTMENTS We classify and account for debt and equity securities in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. The Company's entire portfolio is classified as available for sale; thus, securities are recorded at fair market value and any associated unrealized gain or loss, net of tax, is included as a separate component of shareholders' equity, "Accumulated other comprehensive income." 6. COMPREHENSIVE INCOME The components of comprehensive income are as follows:
Three months Nine months ended December 31 ended December 31 2003 2002 2003 2002 -------- -------- ---------- -------- Net income $577,156 $234,161 $1,318,050 $486,686 Change in unrealized gains (24,146) 1,557 (22,911) 92,671 -------- -------- ---------- -------- Comprehensive income $553,010 $235,718 $1,295,139 $579,357 ======== ======== ========== ========
7. INVENTORIES Inventories consisted of the following at December 31, 2003: Raw materials $ 388,864 Work-in-process 628,592 Finished goods 426,554 ----------- 1,444,010 Less obsolescence reserve (255,000) ----------- $1,189,010 ===========
8. STOCK-BASED COMPENSATION We have adopted the disclosure-only provisions of SFAS Nos. 123 and 148, Accounting for Stock-Based Compensation, but apply Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for our plans. Under APB No. 25, when the exercise price of employee stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized. Pro forma information regarding net income and income per share is required by SFAS Nos. 123 and 148, and has been determined as if we had accounted for our employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using the Black- Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 2.7% for the three months ended December 31, 2003 and 2002, expected volatility of 55%, a weighted-average expected life of the options of four to seven years, and no dividend yield. Option valuation models were developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options. The pro forma information is as follows:
Three Months Ended Dec. 31 2003 2002 ------------ ------------ Net income applicable to common shares: As reported $ 577,156 $ 234,161 Pro forma adjustment for stock options (83,590) (164,710) ------------ ------------ Pro forma net income $ 493,566 $ 69,451 ============ ============ Earnings per share: Basic - as reported $ 0.13 $ 0.06 Basic - pro forma $ 0.11 $ 0.02 Diluted - as reported $ 0.12 $ 0.05 Diluted - pro forma $ 0.10 $ 0.02
Nine Months Ended Dec. 31 2003 2002 ------------ ------------ Net income applicable to common shares: As reported $ 1,318,050 $ 486,686 Pro forma adjustment for stock options (246,240) (494,129) ------------ ------------ Pro forma net income (loss) $ 1,071,810 $ (7,443) ============ ============ Earnings per share: Basic - as reported $ 0.31 $ 0.12 Basic - pro forma $ 0.25 $ 0.00 Diluted - as reported $ 0.28 $ 0.11 Diluted - pro forma $ 0.23 $ 0.00
9. TECHNOLOGY EXCHANGE AGREEMENT On April 19, 2002 the Company closed a technology exchange agreement accompanied by an investment by Cypress Semiconductor Corporation ("Cypress"). Cypress purchased 686,849 shares of NVE Common Stock for $6.228 million, which on September 5, 2003 they announced they had sold. Cypress also received a warrant for the purchase of up to 400,000 shares of Common Stock for $15.00 per share for a term of three years. Item 1. Legal Proceedings. None. Item 2. Management's Discussion and Analysis or Plan of Operation. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Some of the statements made in this Quarterly Report on Form 10-QSB, except for historical information contained in this Form 10-QSB, constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to the safe harbor provisions of the reform act. Forward-looking statements may be identified by the use of the terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue or the negatives of these terms or other variations on these words or comparable terminology. To the extent that this Form 10-QSB contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of NVE, you should be aware that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in the forward-looking statements. These differences may be caused by a variety of factors, including but not limited to adverse economic conditions, intense competition, including entry of new competitors, our ability to obtain sufficient financing to support our operations, progress in research and development activities by us and others, variations in costs that are beyond our control, adverse federal, state and local government regulations, unexpected costs, lower sales and net income, or higher net losses than forecasted, price increases for equipment, our dependence on significant suppliers, including Taiwan Semiconductor Manufacturing Corporation for foundry semiconductor wafers, our ability to meet stringent customer technical requirements, our ability to consummate additional license agreements, our ability to continue eligibility for SBIR awards, our inability to raise prices, failure to obtain new customers, the possible fluctuation and volatility of our operating results and financial condition, inability to carry out marketing and sales plans, loss of key executives, and other specific risks included in Exhibit 99.1 "Cautionary statements for purposes of the 'safe harbor' provisions of The Private Securities Litigation Reform Act," filed herewith. General We develop, manufacture, and sell "spintronics" devices, which are nanotechnology devices that rely on electron spin rather than electron charge to acquire, store, and transmit information in electronic systems. We derive revenue from three sources: 1) contract spintronics research and development (principally government contracts); 2) commercial sales of spintronic integrated circuit type sensor and coupler products; and 3) licenses for our magnetic random-access memory (MRAM) intellectual property. Critical accounting policies It is important to understand our significant accounting policies in order to understand our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. These accounting principles require us to make estimates and assumptions that affect amounts reported in our financial statements and the accompanying notes. Actual results are likely to differ from those estimates, but we do not believe such differences will materially affect our financial position or results of operations for the periods presented in this report. Revenue recognition Revenue from product sales to direct customers is recognized upon shipment. Revenue from licensing and technology development programs, which is nonrefundable and for which no significant future obligations exist, is recognized when the license is signed. Revenue from licensing and technology development programs, which is refundable, recoupable against future royalties, or for which future obligations exist, is recognized when we complete our obligations under the terms of the agreements. Revenue from royalties is recognized upon the shipment of product from our technology license partners to direct customers. Certain research and development activities are conducted for third parties and such revenue is recognized as the services are performed. Payments received from licensing and technology development programs relating to future obligations as well as prepayments for future discounts on product sales are recorded as deferred revenue. Bad Debt We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Inventory We reduce the stated value of our inventory for excess quantities or obsolescence in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional reductions in stated value may be required. Income Taxes In determining the carrying value of our net deferred tax assets, we must assess the likelihood of sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions to realize the benefit of these assets. Our management evaluates the realizability of the deferred assets quarterly and assesses the need for valuation allowances or reduction of existing allowances quarterly. THREE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2002 The table below summarizes the percentage of revenue for various items for the periods indicated:
Three months ended December 31 2003 2002 ------- ------- Revenue: Research and development 52.4 % 71.6 % Product sales 47.6 24.2 License fees - 4.2 ------- ------- Total revenue 100.0 100.0 Cost of sales 61.2 61.0 ------- ------- Gross profit 38.8 39.0 Total expenses 20.3 29.0 ------- ------- Net income 18.5 % 10.0 % ======= =======
Revenue for the three months ended December 31, 2003 was $3,118,127, an increase of 33% from revenue of $2,337,052 for the three months ended December 31, 2002. The revenue increase was primarily due to a 162% increase in commercial product sales to $1,484,766 from $565,633. Research and development revenue decreased 2% to $1,633,361 from $1,673,502 due to completion of revenue recognized under our agreement with Agilent Technologies, Inc., partially offset by increased government contract revenue. Such non-recurring revenues from Agilent were $250,000 for the three months ended December 31, 2002. Increases in commercial product sales were partially offset by an absence of license revenue due to completion of revenue recognition for payments under our MRAM license agreements. Such license revenues were $97,917 for the three months ended December 31, 2002. Gross profit remained the same at 39% for the three months ended December 31, 2003 as compared to the three months ended December 31, 2002. Research and development expenses decreased by 30% to $230,671 for the three months ended December 31, 2003 as compared to $327,472 for the three months ended December 31, 2002. The decrease was due to completion of the development of some of our commercial products. Selling, general and administrative expenses for the three months ended December 31, 2003 increased by 10% to $464,264 compared to $420,862 for the three months ended December 31, 2002. The increase was due to increased commercial selling expenditures, including new product marketing programs. Net income totaled $577,156 for the three months ended December 31, 2003 compared to $234,161 for the three months ended December 31, 2002. The increase in net income was due to higher revenues and higher commercial product margins. Diluted net income per share increased to $0.12 from $0.05. The increase in diluted net income per share was despite an increase in diluted shares to 4,831,540 from 4,466,199 due primarily to a large increase in our stock price which resulted in a larger dilutive effect from the Cypress warrant and other warrants and options. NINE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO NINE MONTHS ENDED DECEMBER 31, 2002 The table shown below summarizes the percentage of revenue for various items for the periods indicated:
Nine Months Ended December 31 2003 2002 ------- ------- Revenue: Research and development 56.2 % 70.8 % Product sales 43.8 24.9 License fees - 4.3 ------- ------- Total revenue 100.0 100.0 Cost of sales 63.1 62.4 ------- ------- Gross profit 36.9 37.6 Total expenses 21.9 30.5 ------- ------- Net income 15.0 % 7.1 % ======= =======
Revenue for the nine months ended December 31, 2003 was $8,802,161, an increase of 29% from revenue of $6,844,652 for the nine months ended December 31, 2002. The revenue increase was primarily due to increases in commercial product sales and research and development revenue. Commercial product sales increased 126% to $3,852,282 from $1,707,633. Research and development revenue increased 2% to $4,949,879 from $4,843,268 due to increased government contract revenue, partially offset by the completion of revenue recognized under our agreement with Agilent Technologies, Inc. Such revenues from Agilent were $550,000 for the nine months ended December 31, 2002. Increases in commercial product sales and research and development revenue were partially offset by an absence of license revenue due to completion of revenue recognition for payments under our MRAM license agreements. Such license revenues were $293,751 for the nine months ended December 31, 2002. Gross profit margins decreased to 37% for the nine months ended December 31, 2003 as compared to 38% for the nine months ended December 31, 2002. The decrease was due to $293,751 in license revenue and $550,000 in revenue recognized under our agreement with Agilent Technologies, Inc. for the nine months ended December 31, 2002, which have not recurred. The decrease in gross profit was mostly offset by higher commercial product margins due to successful yield improvement and wafer cost reduction programs. Research and development expenses decreased by 25% to $711,913 for the nine months ended December 31, 2003 as compared to $944,330 for the nine months ended December 31, 2002. The decrease was due to completion of the development of some of our commercial products. Selling, general and administrative expenses for the nine months ended December 31, 2003 increased by 5% to $1,390,818 compared to $1,324,302 for the nine months ended December 31, 2002. The increase was due to increased commercial selling expenditures. Net income totaled $1,318,050 for the nine months ended December 31, 2003 compared to $486,686 for the nine months ended December 31, 2002. The increase in net income was due to higher revenues and higher commercial product margins. LIQUIDITY AND CAPITAL RESOURCES Cash plus available-for-sale securities were $6,699,809 at December 31, 2003, compared to $6,475,865 at March 31, 2003. The increase was due to net income, partially offset by investments in machinery and equipment and increases in inventories related to the growth of our commercial product sales. We expect to continue to invest in machinery, equipment, and facilities in the balance of the fiscal year and in the next fiscal year, as we continue to increase our manufacturing capacity. We believe our working capital is adequate to meet our requirements for at least the next twelve months. OUTLOOK We expect to broaden our sensor and coupler product lines, and continue to increase commercial product sales in the rest of the fiscal year ending March 31, 2004 ("Fiscal 2004"), and we expect to report a solid profit for Fiscal 2004. Possible expenses related to commercialization and market development for Cypress-manufactured MRAMs to be sold by us could decrease our quarterly profits in the next several quarters. We expect to make such expenditures, however, only if Cypress is successful in producing commercial MRAM. Item 4. Controls and Procedures. a. Evaluation of disclosure controls and procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the last day of the period covered by this quarterly report (the "Evaluation Date"). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective in timely alerting them to the material information relating to us required to be included in our periodic SEC filings. b. Changes in internal controls. There were no significant changes made in our internal controls over financial reporting (as defined in Rule 13 a-15(f) under the Exchange Act) during the period covered by this report that materially affected or are reasonably likely to materially affect our internal controls over financial reporting. PART II--OTHER INFORMATION Item 5. Other Information On December 1, 2003, we executed a lease amendment for our principal offices, located at 11409 Valley View Road, Eden Prairie, Minnesota 55344. The space consists of approximately 21,362 square feet of office, laboratory, and production space. The amendment extends through December 31, 2008 a lease that would have expired December 31, 2006. We believe this space will be adequate for our needs for the amended term of the lease. We plan to make improvements to our production space in order to increase our capacity and capabilities, and the lease extension will allow us a better financial return on such facility improvements. In consideration of the extending the term, the amendment provides us a $50,000 facility improvement allowance for calendar year 2004 and limits the base rent increases for each of calendar 2007 and 2008 to 3%. In addition to base rent, we pay operating expenses for the space including maintenance, utilities, real estate taxes and insurance. The lease amendment is filed herewith. Item 6. Exhibits and Reports on Form 8-K. a. Exhibits. 10.1 Second amendment to lease between the company and Glenborough Properties, L.P. dated December 1, 2003 (filed herewith). 10.2 First amendment to lease between the company and Glenborough Properties, L.P. dated September 18, 2002 (incorporated by reference to our Quarterly Report on Form 10-QSB for the period ended September 30, 2002). 10.3 Lease dated October 1, 1998 between the company and Glenborough Properties, L.P. (incorporated by reference to our Quarterly Report on Form 10-QSB for the period ended September 30, 2002). 31.1 Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a). 31.2 Certification by Richard L. George pursuant to Rule 13a-14(a)/15d-14(a). 32.1 Certification by Daniel A. Baker pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification by Richard L. George pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.1 Cautionary statements for purposes of the "safe harbor" provisions of The Private Securities Litigation Reform Act. b. Reports on Form 8-K. We submitted a Form 8-K on October 21, 2003 including our press release reporting results for the quarter ended September 30, 2003. This information was furnished under Item 12, Results of Operations and Financial Condition. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigneds thereunto duly authorized. NVE CORPORATION Date: January 20, 2004 By /s/ Daniel A. Baker ------------------------------------- Daniel A. Baker President and Chief Executive Officer By /s/ Richard L. George ------------------------------------- Richard L. George Chief Financial Officer