10-Q 1 a4397214.txt REXHALL INDUSTRIES 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For Quarter End March 31, 2003 Commission file number: 0-17824 REXHALL INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) California 95-4135907 (State of Incorporation) (IRS Employer Identification No.) 46147 7th Street West, Lancaster, California 93534 (Address of principal executive offices) (Zip Code) (661) 726-0565 (Registrant's telephone number, including area code) 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 --- --- 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: 5,912,700 as of April 25, 2003. ------------------------------- 1 REXHALL INDUSTRIES, INC. INDEX ----- PART I - FINANCIAL INFORMATION PAGE NUMBER Item 1. ------- Condensed Consolidated Financial Statements (Unaudited): 3 Condensed Consolidated Balance Sheets at March 31, 2003 and December 31, 2002 3 Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and March 31, 2002 (Restated) 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and March 31, 2002 (Restated) 5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. ------- Management's Discussion and Analysis of Financial Condition and Results of Operations 7-11 Item 3. ------- Quantitative and Qualitative Disclosure about Market Risks 11 Item 4. ------- Controls and Procedures 11 PART II - OTHER INFORMATION Repurchase Agreements 11 Legal Proceedings 12 Item 5. ------- Reports on Form 8K 12 Signatures 13 Certifications 14-15 2 PART I - FINANCIAL INFORMATION --------------------- Item 1. - Condensed Consolidated Financial Statements ------- REXHALL INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, 2003 December 31, 2002 -------------- ----------------- ASSETS CURRENT ASSETS Cash $ 5,021,000 $ 5,757,000 Accounts Receivables, net 2,409,000 2,251,000 Income Tax Receivable 360,000 360,000 Inventories (Note 2) 15,056,000 15,049,000 Deferred Income Taxes (Note 3) 850,000 1,003,000 Other Current Assets 250,000 139,000 Current Assets of Discontinued Operations 182,000 182,000 ----------- ----------- TOTAL CURRENT ASSETS 24,128,000 24,741,000 Property and Equipment at Cost Net of Accumulated Depreciation (Notes 2 & 7) 5,841,000 5,021,000 Property Held for Sale --- --- Other Assets 152,000 152,000 Non-Current Assets of Discontinued Operations 37,000 37,000 ----------- ----------- TOTAL ASSETS $30,158,000 $29,951,000 =========== =========== LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 3,674,000 $ 1,622,000 Chassis Vendor Line of Credit 2,032,000 3,381,000 Notes Payable and Current Portion of Long-Term Debt 36,000 36,000 Accrued Warranty 1,008,000 991,000 Accrued Legal 1,018,000 1,250,000 Accrued Dealer Incentives 527,000 638,000 Other Accrued Liabilities 1,565,000 1,750,000 Accrued Compensation and Benefits 499,000 472,000 Current Liabilities of Discontinued Operations 20,000 20,000 ----------- ----------- TOTAL CURRENT LIABILITIES 10,379,000 10,160,000 Long-Term Debt, less Current Portion 926,000 634,000 ----------- ----------- TOTAL LIABILITIES 11,305,000 10,794,000 ----------- ----------- STOCKHOLDERS' EQUITY Preferred Stock - no par value, Authorized, 1,000,000 shares; No shares outstanding at March 31, 2003 and December 31, 2002 --- --- Common Stock - no par value, Authorized, 10,000,000 shares; issued and outstanding 5,912,700 at March 31, 2003 and 6,038,000 at December 31, 2002 5,659,000 5,906,000 Retained Earnings 13,194,000 13,251,000 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 18,853,000 19,157,000 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,158,000 $29,951,000 =========== ===========
See accompanying notes to condensed consolidated financial statements 3 REXHALL INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, 2003 March 31, 2002 -------------- -------------- (RESTATED) Net Revenues $12,946,000 $17,407,000 Cost of Sales 11,344,000 16,084,000 ------------ ----------- Gross Profit 1,602,000 1,323,000 Operating Expenses: Selling, General, Administrative Expenses and Other Expenses 1,691,000 1,741,000 ------------ ----------- Income (Loss) from Continuing Operations before Income Taxes (89,000) (418,000) Income Tax Expense (Benefit) (32,000) (165,000) ------------ ----------- Income (Loss) from Continuing Operations (57,000) (253,000) Loss from Discontinued Operations --- --- Net Income (Loss) ($ 57,000) ($ 253,000) ============= ============ Basic and Diluted Income (Loss) from Continuing Operations - Per Share ($ .01) ($ .04) Basic and Diluted Loss from Discontinued Operations - Per Share ($ .00) ($ .00) ------------ ----------- Basic and Diluted Income (Loss) - Per Share (Note 5) ($ .01) ($ .04) ============= ============ Weighted Average Shares Outstanding Basic and Diluted (Note 4) 5,997,700 6,115,000 ============= ============
See accompanying notes to condensed consolidated financial statements 4 REXHALL INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, 2003 March 31, 2002 -------------- -------------- (Restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (Loss) (57,000) ($ 253,000) Adjustments to reconcile net income (loss) to net cash provided by (used in) Operating Activities: Net loss from discontinued operations --- --- Depreciation and amortization 90,000 95,000 Gain on sale of property, plant and equipment --- (34,000) Provision for deferred income taxes --- --- (Increase) decrease in: Accounts receivable (158,000) (2,291,000) Inventories (7,000) 1,650,000 Income tax receivable --- (165,000) Increase (decrease) in: Accounts payable 2,052,000 (60,000) Accrued Warranty 17,000 118,000 Accrued legal (232,000) (81,000) Accrued dealer incentives (111,000) (38,000) Other assets and liabilities (116,000) 743,000 ----------- ----------- Net cash provided by (used in) operating activities 1,478,000 (316,000) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (910,000) (129,000) Proceeds from sale of property and equipment --- 159,000 ----------- ----------- Net cash provided by (used in) investing activities (910,000) 30,000 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments on long-term debt (9,000) (9,000) Repayments on short-term notes --- (105,000) Repayments on line of credit (1,349,000) (2,859,000) Proceeds from redevelopment agency 300,000 --- Proceeds from loan receivable on exercise of stock options --- 3,000 Repurchase and retirement of stock (247,000) --- ----------- ----------- Net cash used in financing activities (1,305,000) (2,970,000) ----------- ----------- NET CASH FLOWS FROM DISCONTINUED OPERATIONS --- 130,000 NET INCREASE (DECREASE) IN CASH (737,000) (3,126,000) BEGINNING CASH BALANCE 5,757,000 8,662,000 ----------- ----------- ENDING CASH BALANCE $5,020,000 $5,536,000 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid during the period $ 52,000 $ 18,000
See accompanying notes to condensed consolidated financial statements 5 REXHALL INDUSTRIES, INC. Notes to the Condensed Consolidated Financial Statements March 31, 2003 and 2002 1. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements 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. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, they include all adjustments, consisting of normal accruals, necessary to present fairly the information set forth herein in accordance with accounting principles generally accepted in the United States of America for interim reporting. For further information refer to the Financial Statements and footnotes included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 2002. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. 2. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation of inventory at the lower of cost or market, the allowance for doubtful accounts, deferred income tax asset valuation allowances, and the valuation of the company's long lived assets. Considerable management judgment is necessary to estimate these and other amounts. Accordingly, actual results could vary significantly from management estimates. 3. Income Taxes Income tax expense is based upon the estimated effective tax rate for the entire fiscal year. The effective tax rate is subject to on going evaluation by management. 4. Stock Split In July of 2002 the Company carried out a 2-for-1 split. All historical share and per share data are presented on a post-split basis. 5. Earnings Per Share Basic earnings per share represent net earnings divided by the weighted-average number of common shares outstanding for the period. Basic and diluted earnings per share are the same for all periods presented as the company has no potentially dilutive securities outstanding. 6 6. Inventory March 31, 2003 March 31, 2002 -------------- -------------- (RESTATED) Raw Materials $ 8,561,000 $ 4,635,000 Work-in-Progress 2,253,000 2,111,000 Finished Goods 4,255,000 4,150,000 ------------ ------------ Total $15,069,000 $10,896,000 =========== =========== 7. Property & Equipment In January 2003, the Company completed the purchase of 12.48 acres of land adjacent to its headquarters in Lancaster, California. The Company paid $564,448 in cash and issued a promissory note for $300,000, for a total of $864,448. The agreement with the City of Lancaster will allow the promissory note to be forgiven in total or in part based upon a formula for providing jobs. The Company plans to build a new facility on this land so that it can produce its own diesel chassis with a new motorhome concept to be built on that chassis. Item 2. - Management Discussion and Analysis of Financial Condition and Results ------- of Operations. All statements in this discussion and analysis which relate to future sales, costs, capital expenditures or earnings are "Forward-Looking Statements" and should be read subject to the assumptions contained in the section "Forward-Looking Statements". Critical Accounting Policies ---------------------------- In the ordinary course of business, management has made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. Management believes that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results and require the most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Valuation of Inventory The Company values inventories at the lower-of-cost or market using the first-in, first-out (FIFO) method. Adjustments to the value of inventory are recorded based upon damage, deterioration, obsolescence and changes in market value. In determining market value, management has considered its current replacement cost ensuring it does not exceed net realizable value (i.e., estimated selling price in the ordinary course of business less estimated costs of completion and disposal). Management has evaluated the current level of inventories considering the order backlog and other factors in assessing estimated selling prices and made adjustments to cost of goods sold for estimated decrease in the net realizable value of inventory. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual results. 8 Revenue Recognition The Company derives revenue primarily from the sale of motorhomes to dealers across the United States. Revenue is recognized when title of the motorhome transfers to the dealer. This generally occurs upon shipment. Most dealers have floor plan financing arrangements with banks or other financing institutions under which the lender advances all, or substantially all, of the purchase price of the motorhome. The loan is collateralized by a lien on the purchased motorhome. As is customary in the industry, the Company has entered into repurchase agreements with these lenders. In general, the repurchase agreements provide that in the event of default by the dealer on its agreement to the lending institution, the Company will repurchase the financed motorhome. Revenues are shown net of repurchases. The Company specifically reserves the gross margin for known repurchase obligations quarterly and at fiscal year end. Revenues are also generated from the service of motorhomes and from shipment or installation of parts and accessories. Legal Accrual The Company's current estimated range of liability related to some of the pending litigation is accrued based on claims for which it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because of the uncertainties related to both the amount and range of loss on the remaining pending litigation, management is unable to make a reasonable estimate of the liability that could result from an unfavorable outcome. As additional information becomes available, management will assess the potential liability related to the pending litigation and revise the estimates. Such revisions in the estimates of the potential liability could materially impact the results of operation and financial position. Results of Operations --------------------- Comparison of the three months ended March 31, 2003 to the three months ended March 31, 2002. Revenues - 2003 compared with 2002 ---------------------------------- Net revenues from continuing operations for the first quarter ended March 31, 2003 were $12,946,000 as compared to $17,407,000 for the first quarter in 2002. This represents a 26% decrease from the prior year. Net units sold for the quarter ended March 31, 2003 were 152 compared to 216 for the quarter ended March 31, 2002, a 30% decrease. The decrease in net revenues is primarily attributed to the failure of the Company to secure new retail dealers for the product line and lagging sales in the gas unit product. Gross Profit - 2003 compared with 2002 -------------------------------------- Gross profit from continuing operations increased to $1,602,000 from $1,323,000 for the same quarter in 2002, which is an increase of $279,000 or 21%. Gross margin was 12.4% in 2003 as compared to 7.6% in 2002. The increase in gross margin was primarily attributable to decreases in labor and material costs for the period. Management views this increased margin as a positive sign, but there are no assurances due to the uncertain direction of the RV industry fundamentals and competition within the industry. 9 Selling, General, Administrative and Other Expenses - 2003 compared with 2002 ----------------------------------------------------------------------------- Selling, General, Administrative and Other Expenses from continuing operations decreased by approximately $50,000 from the first quarter of 2002 to the first quarter of 2003. Selling, general, administrative and other expenses increased to 13.1% as a percentage of sales when compared to 10.0% for the quarter ended March 31, 2002. The increase is primarily related to continued increases in warranty expense. Income Taxes - 2003 compared to 2002 ------------------------------------ Income tax benefit from continuing operations was $32,000 for the quarter ended March 31, 2003 as compared to income tax benefit of $165,000 in the first quarter of 2002. Income taxes are provided based upon the estimated effective tax rate for the entire fiscal year applied to the pre-tax income for the period. The effective tax rate is subject to ongoing evaluation by management. Financial Condition, Capital Resources and Liquidity ---------------------------------------------------- The Company has relied primarily on internally generated funds, trade credit and debt to finance its operations and expansions. As of March 31, 2003, the Company had working capital of $13,749,000, compared to $14,580,000 at December 31, 2002. The $831,000 decrease in working capital is primarily due to a $736,000 decrease in cash and $703,000 increase in accounts payable partially offset by a $484,000 decrease in accrued liabilities. Capital expenditures during the first quarter of 2003 were $910,000. This number includes the property purchased in Note 7. Management anticipates lower levels of capital expenditures for the remaining quarters of 2002 related to efficiency improvement initiatives and refurbishment of the production facilities and related production equipment. Significant increases are expected to be incurred when the Company begins construction of the new facility, which is anticipated in the fourth quarter of this year. As of March 31, 2003 the Company has a $2,500,000 line of credit with a bank that can be used for working capital purposes secured by equipment, inventory and receivables. The interest rate is the prime rate (4.25% at March 31, 2003). The line expires on September 27, 2003. Under this line of credit, $711,000 has been set aside as an irrevocable standby letter of credit for the Company to meet the requirements for self-insurance established by the Department of Industrial Relations which regulates worker's compensation insurance in California. At March 31, 2003, no amounts were outstanding under the line of credit agreement. The line of credit contains various covenants. The Company was in compliance with such covenants as of March 31, 2003. The Company has a line of credit with a chassis vendor, Ford Motor Credit Company ("FMCC"), with a $5,000,000 limit. Borrowings under the line bear interest at an annual rate of prime plus 1% (5.25% at March 31, 2003). All borrowings are secured by the Ford merchandise. The outstanding balance at March 31, 2003 was $2,032,000. The Company anticipates that it will be able to satisfy its ongoing cash requirements through 2003, including payments related to the expansion plans at the California facility, primarily with cash flows from operations, supplemented, if necessary, by borrowings under its revolving credit agreement. 10 New Accounting Pronouncements In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 145 (SFAS No. 145), Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB No. 13 and Technical Corrections. The Statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, which required all gains and losses from extinguishment of debt to be aggregated and classified as an extraordinary item (net of related income tax effect), if material. The criteria in APB Opinion No. 30 will now be used to classify those gains and losses. Also SFAS No. 64 amended SFAS No. 4 and is no longer necessary because of this rescission. In July 2002, the FASB issued Statement No. 146, Accounting for Exit or Disposal Activities. The Statement was the second and final phase of the project to replace SFAS No. 121 and focuses on the accounting for costs associated with a disposal activity. The first phase was completed in August 2001 with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Statement will be effective for disposal activities initiated after December 31, 2002, with early application encouraged. In October 2002, the FASB issued Statement No. 147, Acquisitions of Certain Financial Institution. The Statement applies to all acquisitions except those between mutual enterprises (which will be a separate project). The guidance related to (1) the application of the purchase method of accounting, is effective for acquisitions for which the date of acquisition is on or after October 1, 2002 and (2) accounting for the impairment or disposal of certain long-term customer-relationship intangible assets is effective on October 1, 2002. In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 clarifies the requirements of SFAS No. 5, Accounting for Contingencies, relating to a guarantor's accounting for, and disclosure of, the issuance of certain types of guarantees. For certain guarantees issued after December 31, 2002, FIN 45 requires a guarantor to recognize, upon issuance of a guarantee, a liability for the fair value of the obligations it assumes under the guarantee. Guarantees issued prior to January 1, 2003, are not subject to liability recognition, but are subject to expanded disclosure requirements. The disclosure requirements of FIN 45 are effective immediately and are included in Note 7. The initial recognition and measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company has not yet determined what effect, if any, the new recognition and measurement provisions will have on the Company's future financial results. In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (SFAS No. 148), amending FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company is required to adopt SFAS No. 143 and 146 on January 1, 2003. However, the new pronouncements are not expected to have an effect on the Company's financial position or operating performance. 11 Forward-Looking Statements -------------------------- Our statements of our intentions or expectations are "forward-looking statements" based on assumptions and on facts known to us today. Those assumptions will become less valid over time, but we do not intend to update this report. Rexhall's business is seasonal and cyclical. Recent reports of decreased consumer confidence may reduce future sales. Most of Rexhall's competitors are substantially larger, and many of its suppliers and dealers have greater economic power, so that the volume and prices of both supplies and sales may be adversely affected by competitive action. The effect of restating the Company's financial position and results of operations may be adverse for shareholders, including possible delisting of the shares, which will seriously limit the marketability of shares and may negatively affect the company's business. Management intends to remain aware of these factors and react to them, but cannot predict their timing or significance. Item 3. - Quantitative and Qualitative Disclosure About Market Risk ------- - In the ordinary course of its business, the Company is exposed to certain market risks, including changes in interest rates. After an assessment of these risks to the Company's operations, the Company believes that its primary market risk exposures relating to interest rates (within the meaning of Regulation S-K Item 305) are not material and are not expected to have any material adverse effect on the Company's financial condition, results of operations or cash flows for the next fiscal year. Item 4. - Controls and Procedures ------- Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, we reviewed our internal controls, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation. PART II - OTHER INFORMATION ----------------- Repurchase Agreements - Motorhomes purchased by dealers, under financing agreements with third party lenders are subject to repurchase by the Company under the terms of the financing, at dealer cost and might include unpaid interest and other costs in the event of default by the dealer. During the three months ended March 31, 2003 and 2002, the Company repurchased approximately $528,000 and $1,266,000 respectively, (wholesale value) of motorhomes under these agreements. At March 31, 2003 and 2002, approximately $26,950,000 and $26,400,000, respectively, of dealer inventory was covered by repurchase agreements. Dealers do not have the contractual right to return motorhomes under any Rexhall Dealer Agreement. The repurchase agreements require the dealers to default or file for bankruptcy. There are also a number of state statutes that require the repurchasing of motorhomes whenever a dealership is terminated. 12 Legal Proceedings - The Company is a defendant in various legal proceedings from the normal course of business. In the opinion of Company management, the resolution of such matters should not have a material effect on its financial statements or results of operations. The Company has been contacted by the staff of the Securities and Exchange Commission, which has indicated that it is specifically reviewing the facts leading up to the Company's restatement of its results of operations for the first quarter ended March 31, 2002 and generally the accounting procedures and controls for the Company. The Company is cooperating fully with the staff's review and hopes to resolve the review in the near future. Item 5. - Reports on Form 8K ------- Dated January 8, 2003: Company disclosed changes in certifying accountant and Financial Statements & Exhibits. Dated March 7, 2003: Company disclosed that Beckman Kirkland & Whitney (BKW) would serve as its new independent public accountants. REXHALL INDUSTRIES, 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. Rexhall Industries, Incorporated (Registrant) By /S/ William J. Rex ---------------------------------- ----------------------------------------- (Signature and Title) William J. Rex, President, CEO, Chairman & Acting CFO Date: May 14, 2003 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant in capacities and on the dates indicated. By /S/ William J. Rex ------------------------------------ ----------------------------------------- (Signature and Title)* William J. Rex President, CEO & Acting CFO Chairman of the Board Date: May 14, 2003 By /S/ Robert A. Lopez ----------------------------------- ----------------------------------------- (Signature and Title)* Robert A. Lopez Director Date: May 14, 2003 By /S/ Frank A. Visco ------------------------------------ ----------------------------------------- (Signature and Title)* Frank A. Visco Director Date: May 14, 2003 By /S/ Dr. Dennis K. Ostrom -------------------------------- ----------------------------------------- (Signature and Title)* Dr. Dennis K. Ostrom Director Date: May 14, 2003 13 CERTIFICATIONS I, William Rex, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Rexhall Industries, 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; 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 we 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 function): 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 or not 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: May 14, 2003 -------------------------------------------------- William Rex President, Chief Executive Officer, and Acting CFO 14 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Rexhall Industries, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. REXHALL INDUSTRIES, INC. By: ---------------------------------- May 14, 2003 William J. Rex President and Chief Executive Officer, and Acting CFO