10QSB 1 sep-q.txt FORM 10QSB 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: September 30, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number: 1-14068 SEPRAGEN CORPORATION (Exact name of small business issuer as specified in its charter) California 68-0073366 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 14500 Doolittle Drive, San Leandro, California 94577 (Address of principal executive offices) (Issuer's telephone number (including area code): (510) 667-1004 (Former name, former address and former fiscal year if changed since last report: Check whether the issuer (1) has 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 issuer 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 registrant's classes of Common equity, as of the latest practicable date: November 15, 2002 ----------------- Class A Common Stock 11,311,848 Class B Common Stock 361,727 PART I - FINANCIAL INFORMATION Item 1.- Financial Statements
SEPRAGEN CORPORATION CONDENSED BALANCE SHEET (UNAUDITED) September 30, 2002 ------------ ASSETS Current Assets: Cash and cash equivalents .......................................... $ 67,375 Accounts receivable, less allowance for doubtful accounts of $45,000 ....................................................... 295,673 Notes receivable ................................................... 50,000 Inventories ........................................................ 143,735 Prepaid expenses and other ......................................... 18,000 ------------ Total current assets ............................................. 574,783 Furniture and equipment, net ....................................... 62,807 Intangible assets ............................................... 3,201 ------------ 640,791 ------------ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable ................................................... $ 539,889 Notes Payable from shareholders .................................... 253,000 Accrued payroll and benefits ....................................... 689,764 Accrued liabilities ................................................ 149,844 Interest payable ................................................... 50,930 Customer deposit ................................................... 121,435 ------------ Total current liabilities ........................................ 1,804,862 ------------ Redeemable Preferred stock, no par value - 5,000,000 shares authorized; and 175,439 convertible, preferred issued and outstanding ...................................................... 500,000 Class A common stock, no par value - 20,000,000 shares authorized; 11,311,848 shares issued and outstanding ...................................................... 15,492,506 Class B common stock, no par value - 2,600,000 shares authorized; 361,727 shares issued and outstanding ............................ 2,097,393 Accumulated deficit ................................................ (19,253,970) ------------ Shareholders' equity (deficit) .................................... (1,164,071) ------------ 640,791 ------------
The accompanying notes are an integral part of this condensed financial statement. Page 2 of 12 SEPRAGEN CORPORATION CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Revenues: Net Sales ................................... $ 582,252 $ 25,483 $ 1,224,010 $ 536,301 ------------ ------------ ------------ ------------ Cost of goods sold .......................... 270,992 14,031 654,678 316,666 Gross profit ................................ 311,260 11,452 569,332 219,635 Selling, general and administrative ......... 260,803 308,376 857,546 914,374 Research and development .................... 129,072 126,823 383,479 386,446 Total expenses ............................ 389,875 435,199 1,241,025 1,300,820 ------------ ------------ ------------ ------------ Loss from operations ...................... (78,615) (423,747) (671,693) (1,081,185) ------------ ------------ ------------ ------------ Other income ................................ -- Interest income, (expense) net .............. (4,078) 0 (11,919) 0 ------------ ------------ ------------ ------------ Net loss ................................. (82,693) (423,747) (683,612) (1,081,185) ============ ============ ============ ============ Net loss per common share, Basic and diluted ........................... $ (.01) $ (.04) $ (.06) $ (.12) ============ ============ ============ ============ ............ Weighted average shares outstanding ......... 11,673,575 9,560,241 11,673,575 8,762,741
The accompanying notes are an integral part of this condensed financial statement. Page 3 of 12 SEPRAGEN CORPORATION CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2002 2001 ----------- ----------- Cash flows from operating activities: Net Loss .......................................... $ (683,613) $(1,081,185) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation ..................................... 24,273 34,032 Amortization ..................................... 11,969 20,311 Non cash - stock compensation expense ........... 0 Changes in assets and liabilities: Accounts receivable ............................. 120,873 290,388 Notes receivable ................................ 0 Inventories ..................................... 90,523 (103,557) Prepaid expenses and other ...................... 0 1,200 Accounts payable ................................ 27,102 19,178 Accrued liabilities ............................. 81,467 (45,056) Accrued payroll and benefits .................... 250,024 199,965 Interest payable ................................ 11,918 0 Customer deposits ............................... 20,113 171,400 ----------- ----------- Net cash used in operating activities ......... (45,351) (493,324) ----------- ----------- Cash flows from investing activities: Acquisition of fixed assets ....................... (2,196) (94,009) ----------- ----------- Net cash used by investing .................... (2,196) (94,009) Cash flows from financing activities: Proceeds from issuance of common stock ............ 691,699 Proceeds from exercise of warrants ................ 0 Proceeds from issuance of notes payable ........... 38,000 135,000 Payment of notes payable to shareholders Payment of notes payable .......................... (25,000) Net cash provided by financing activities ......... 38,000 801,699 ----------- ----------- Net increase (decrease) in cash ............... (9,547) 214,366 ----------- ----------- Cash and cash equivalents at the beginning of the period .............................................. 76,922 82,166 ----------- ----------- Cash and cash equivalents at the end of the period .. 67,375 $ 296,532 =========== =========== Supplemental disclosures of cash information: Interest expense .............................. 11,919 State income tax .............................. 800 Conversion of Note receivable into Common Stock 50,000
The accompanying notes are an integral part of these condensed financial statements. Page 4 of 12 SEPRAGEN CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS NINE MONTH PERIOD ENDED SEPTEMBER 30, 2002 Note 1 - Basis of Presentation These condensed financial statements have been presented on a going concern basis. Sepragen, ("the Company") has incurred recurring losses and cash flow deficiencies from operations that raise substantial doubt about its ability to continue as a going concern. As of September 30, 2002, the Company had an accumulated deficit of $19,253,970. The Company will be required to conduct significant research, development and testing activities which, together with expense to be incurred for manufacturing, the establishment of large marketing and distribution presence and other general and administrative expenses, are expected to result in operating losses for the foreseeable future. Accordingly, there can be no assurance that the Company will ever achieve profitable operations. The Company will have to obtain additional financing to support its operating needs beyond December 31, 2002. The Company is currently pursuing alternative funding sources to meet its cash flow needs, including private debt and equity financing. Management intends to use such funding to further its marketing effort and expand sales. It is uncertain, however, whether the Company will be successful in such pursuits. No adjustments have been made to the accompanying condensed financial statements for this uncertainty. Note 2 - Interim Financial Reporting The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-QSB. Accordingly, certain information and footnotes required by generally accepted accounting principles in the United States of America have been condensed or omitted. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. These interim statements should be read in conjunction with the financial statements and the notes thereto, included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. Note 3 - Notes Payable Between April and September 2002, the Company received proceeds from convertible notes payable of $38,000 from a shareholder. Note 4 - Series A Preferred Stock On September 1, 1998, we sold 175,439 shares of Series A Preferred Stock. Our Series A Preferred Stock provides for both 7.5% dividend and liquidation preferences. The dividend is payable from time to time at the election of our Board of Directors subject to our retaining sufficient earnings and profits. On any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the holders of series A Preferred Shares shall receive, out of the assets of the Company, the sum of $2.86 per series A Preferred Share, plus an amount equal to any dividend accrued and unpaid on those series A Preferred Shares, before any payment shall be made or any assets distributed to the holders of Common Stock. Note 5 - Segment Reporting The company has two operating segments based on the nature of the customer's industry, the biotech and food (dairy) and beverage segments. The chief operating decision-maker is the Company's Chief Executive Officer who regularly reviews segment performance. There was no revenue in the nine months ended September 30, 2002 from the food and beverage segment. Selling, general and administrative expenses are not allocated to individual segments. There are no significant assets that are identifiable to a segment. Note 6 - Loss per Share Basic loss per share is calculated using the weighted average number of common shares outstanding in the period. Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using the "treasury stock" method and convertible securities using the "if converted" method. The assumed exercise of options and warrants and assumed conversion of convertible securities have not been included in the calculation of diluted loss at September 30, 2002 per share as the effect would be anti-dilutive. Page 5 of 12 Note 7 - Intangible Assets:
A. Intangible assets consist of the following: September 30, 2002 --------------------------------------------------------- Weighted Gross Net Average Intangible Accumulated Intangible Life Assets Amortization Assets (Years) ------------ ------------ ------------ ------------ Goodwill 0 0 0 Other Intangibles 194,018 190,817 3,201 7 ------------ ------------ ------------ Total $ 194,018 $ 190,817 $ 3,201 ============ ============ ============
December 31, 2001 --------------------------------------------------------- Weighted Gross Net Average Intangible Accumulated Intangible Life Assets Amortization Assets (Years) ------------ ------------ ------------ ------------ Goodwill 0 0 0 Other Intangibles 194,018 178,059 15,959 7 ------------ ------------ ------------ Total $ 194,018 $ 178,059 $ 15,959 ============ ============ ============
The Company adopted SFAS 142 on January 1, 2002. The Company does not have goodwill, therefore is not affected by the new rules. Under the new rules companies are no longer permitted to amortize intangible assets with indefinite lives; instead they will be subject to periodic tests for impairment. SFAS 12 supercedes APB Opinion #17, Intangible Assets. In accordance with SFAS 142 the Company also performed an impairment test of its intangible assets and determined that no write-down was necessary. Below is a reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of amortization expense for goodwill and the Company's trade name, net of income tax. Nine Months Ended September 30, 2002 2001 ------------ ------------ Reported net income (loss) $ (683,612) $ (1,081,185) Goodwill and Company trade name amortization, net of tax 0 0 ------------ ------------ Adjusted net income (loss) $ (683,612) $ (1,081,185) ============ ============ Reported diluted earnings (loss) per share $ (0.06) $ ( 0.12) Goodwill and Company trade name amortization, net of tax 0.0 0.0 ------------ ------------ Adjusted diluted earnings (loss) per share $ (0.06) $ ( 0.12) ============ ============ Estimated amortization expense for each of the next two years ended December 31, is as follows: 2002 (12 months) $ 15,959 2003 0 Total $ 15,959 Page 6 of 12 Item 2. Management's Discussion and Analysis. Critical Accounting Policies Application of our accounting policies requires management to make judgments and estimates about the amounts reflected in the financial statements. Management uses historical experience and all available information to make these estimates and judgments, although differing amounts could be reported if there are changes in the assumptions and estimates. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, inventory allowances, restructuring costs, impairment costs, depreciation and amortization, sales discounts and returns, warranty costs, taxes and contingencies. Management has identified the following accounting policies as critical to an understanding of our financial statements and/or as areas most dependent on management's judgment and estimates. Revenue Recognition--We generally recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or readily determinable, and collectibility is probable. Sales are recorded net of sales returns and discounts. We recognize revenue in accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." Impairment of Long-Lived Assets--We continually review the recoverability of the carrying value of long-lived assets using the methodology prescribed in Statement of Financial Accounting Standards (SFAS) 144, "Accounting for the Impairment and Disposal of Long-Lived Assets." We also review long-lived assets and the related intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Upon such an occurrence, recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows to which the assets relate, to the carrying amount. If the asset is determined to be unable to recover its carrying value, then intangible assets, if any, are written down first, followed by the other long-lived assets to fair value. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending on the nature of the assets. Deferred Tax Asset Valuation Allowance--We record a deferred tax asset in jurisdictions where we generate a loss for income tax purposes. Due to volatility in the industry within which we operate, we may record a valuation allowance against these deferred tax assets in accordance with SFAS 109, "Accounting for Income Taxes," when, in management's judgment, the deferred tax assets may not be realized in the foreseeable future. Inventories--Our inventories are stated at the lower of cost (first-in, first-out method, or standard costing method) or market. Slow moving and obsolete inventory are written off quarterly. To calculate the write-off amount, we compare the current on-hand quantities with both the projected usages for a two-year period and the actual usage over the past 12 months. On-hand quantities greater than projected usage are calculated at the standard unit cost. The engineering and purchasing departments review the initial list of slow-moving and obsolete items to identify items that have alternative uses in new or existing products. These items are then excluded from the analysis. The remaining amount of slow-moving and obsolete inventory is then written off. Additionally, non-cancelable open purchase orders for parts we are obligated to purchase where demand has been reduced may be reserved. Reserves for open purchase orders where the market price is lower than the purchase order price are also established. Accounts Receivable and Allowance for Doubtful Accounts--The Allowance for Doubtful Accounts is established by analyzing each account that has a balance over 90 days past due. Each account is individually assigned a probability of collection. The total amount determined to be uncollectible in the 90-days-past-due category is then reserved fully. The percentage of this reserve to the 90-days-past-due total is then established as a guideline and applied to the rest of the non-current accounts receivable balance. When other circumstances suggest that a receivable may not be collectible, it is immediately reserved for, even if the receivable is not yet in the 90-days-past-due category. Recent Pronouncements and Accounting Changes--In October 2001, the Financial Accounting Standards Board (FASB) issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" . SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144 superseded SFAS 121, and APB Opinion No. 30, "Reporting the Results of Page 7 of 12 Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001 and in general are to be applied prospectively. We adopted SFAS 144 effective January 1, 2002, which did not have a material impact on our consolidated results of operations and financial position. In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," which nullifies EITF Issue No. 94-3. SFAS 146 is effective for exit and disposal activities that are initiated after December 31, 2002 and requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, in contrast to the date of an entity's commitment to an exit plan, as required by EITF Issue 94-3. The Company will adopt the provisions of SFAS 146 effective January 1, 2003. First nine months of 2002 compared to first nine months of 2001. --------------------------------------------------------------- The management of the Company believes there is a significant potential for revenue growth in the biotech sector via sales of our existing products. The Company believes its products offer major competitive advantages over the competition - higher productivity and smaller footprint - that enable faster time to market. Thus the expansion of sales, marketing and service capability is a key focus for the management. The results stated below reflect the resource constrained operating state of the Company over the last year. Such resource constraints have impeded our ability to capitalize on the market opportunities. Despite these constraints, the Company has sold its products to several leading biotech companies which meets their current capacity and productivity needs. Our net sales have increased by $688,000 or 128% from $536,000 in the first nine months of 2001 to $1,224,000 for the comparable period in 2002. The increase was primarily due to shipment of our large stainless column that was booked in the first quarter of 2002. In addition, our net sales for the third quarter of 2001 was very low. Gross profit increased by $349,000 or 159% from $220,000 in the first nine months of 2001 to $569,000 for the comparable period in 2002. The increase in gross profit was due to higher sales. As a percentage of sales, gross profit increased by 5% from 41% in the first nine months of 2001 to 46% for the comparable period in 2002. The increase in gross profit was attributable to the higher volume resulting in lower fixed cost. Selling, general and administrative expenses decreased by $56,000 from $914,000 in the first nine months of 2001 to $858,000 for the comparable period in 2002 due to reduction of head count. Research and development expenses decreased by $3,000 from $386,000 in the first nine months of 2001 to $383,000 in the first nine months of 2002 due to completion of some projects. Overall, net loss decreased by $397,000 or 37% from $1,081,000 in the first nine months of 2001 to $684,000 for the comparable period in 2002. The decrease in loss is due to higher revenue and lower expenses. Three months ended September 30, 2002 compared to three months of ended September 30, 2001: ------------------ Focus in the biotech market has resulted in net sales increase by $557,000 from $25,000 in the third quarter of 2001 to $582,000 for the third quarter of 2002. Our gross profit increased by $300,000 from $11,000 in third quarter of 2001 to $311,000 for the third quarter of 2002. As a percentage of sales, gross profit increased by 9% from 44% in the third quarter of 2001 to 53% in the third quarter of 2002. The increase in gross profit was due to higher volume resulting in lower unit fixed cost and product mix. Belt tightening accounted for having selling, general and administrative expenses decrease by $47,000 from $308,000 in the third quarter of 2001 to $261,000 in the third quarter of 2002. Page 8 of 12 Our research and development expenses increased by $2,000 from $127,000 in the third quarter of 2001 to $129,000 in the third quarter 0f 2002. Our net loss for the third quarter decreased by $341,000 or 80% from $424,000 in the third quarter of 2001 to $83,000 in the third quarter of 2002. The decrease in loss was due to higher revenue and lower expenses. Inflation: We believe that the impact of inflation on its operations since its inception has not been material. Subsequent Event: Mr. Jon Salquist resigned his position as a director of the Company effective October 8, 2002. Liquidity and Capital Resources: -------------------------------- We used cash of $45,000 and $493,000 for operations during the first nine months of 2002 and 2001, respectively. Cash used in operations in the first nine months of 2002 was the result of net loss incurred for the nine months of $684,000 offset by net non-cash expense of $36,000, and the net change in operating assets and liabilities resulting in source of cash of $603,000. Cash used in operations in the first nine months of 2001 was the result of net loss incurred for the nine months of $1,081,000 offset by net non-cash expense of $54,000, and the net change in operating assets and liabilities resulting in source of cash of $534,000. Investing activities used cash of $2,000 and 94,000 in the first nine months of 2002 and 2001 respectively. Financing activities provided cash of $38,000 and $802,000 during the first nine months of 2002 and 2001, respectively. The cash provided in the first nine months of 2002 resulted from issuance of convertible notes payable. The cash provided in the first nine months of 2001 resulted from issuance of convertible notes payable of $135,000 partially offset by $25,000 retirement of notes payable and net proceeds of $692,000 from issuance of common stock. At September 30, 2002 we had cash and cash equivalents of $67,000 as compared with $77,000 on December 31, 2001. At September 30, 2002, we had a working capital deficit of $1,230,000, as compared to working capital deficit of $580,000 at December 31, 2001. The decrease in cash in the first nine months of 2002 was a result of the aforementioned increases and decreases in cash from operating, investing and financing activities noted above. Clearly our working capital must increase significantly to fund the level of manufacturing and marketing required to meet any growth in demand for our products in the nutritional and biotech industries during the next several years. Moreover, we require additional funds to market and develop products as stated earlier. Since we do not have credit facilities, most of the required growth capital would have to come from customers and partners and equity financing. No assurance can be given, however, that the terms of any contemplated financing or alliances will be successfully negotiated or that such financing will be successful in generating the revenue required to make us profitable. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. ---------------------------------------- This report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, we caution that, while such Assumptions, or bases are believed to be reasonable and are made in good faith, assumed facts or bases almost always vary from the actual results, and the differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, we expresses expectation or belief as to future results, such expectation or belief is expressed in good faith and is believed to have a reasonable basis, but there Page 9 of 12 can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. The words "believe," "estimate," "anticipate," and similar expressions may identify forward-looking statements. OTHER INFORMATION ----------------- Item 1. Legal Proceedings Not Applicable Item 2. Defaults Upon Senior Securities Not Applicable Item 3. Submission of Matters to a vote of Security Holders Not Applicable Item 4. Other Information Not Applicable Page 10 of 12 CERTIFICATION ------------- I, Vinit Saxena, certify that: I have reviewed this quarterly report on Form 10-QSB of Sepragen Corporation; 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; 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 registrants of, and for, the periods presented in this quarterly report; 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; 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 (August 26, 2002); and presented in this quarterly report our conclusions about the effectives of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 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): all significant deficiencies in the design or operation in 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 any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and The registrant's other certifying officers and I have indicated in this annual 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. Date: 11/19/2002 Signature: /s/ VINIT SAXENA ---------- ------------------------------ Vinit Saxena Chief Executive Officer Page 11 of 12 CERTIFICATION ------------- I, Henry N. Edmunds, certify that: I have reviewed this quarterly report on Form 10-QSB of Sepragen Corporation; 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; 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 registrants of, and for, the periods presented in this quarterly report; 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; 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 (August 26, 2002); and presented in this quarterly report our conclusions about the effectives of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 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): all significant deficiencies in the design or operation in 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 any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and The registrant's other certifying officers and I have indicated in this annual 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. Date: 11/19/2002 Signature: /s/ HENRY N. EDMUNDS ---------- ------------------------------ Henry N. Edmunds Chief Financial Officer Page 12 of 12