UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------- -------------
COMMISSION FILE NUMBER: 000-49606
-------------------------------------
SEGMENTZ, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 03-0450326
(STATE OR OTHER JURISDICTION OF (I.R.S.EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
18302 HIGHWOODS PRESERVE PARKWAY SUITE 100
TAMPA, FL 33647
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(813) 989-2232
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
The Registrant has 13,667,380 shares of its common stock issued and outstanding
as of November 13, 2003
The Registrant has 1,188,819 shares of its preferred stock issued and
outstanding as of November 13, 2003
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
===============================================================================
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS
SEGMENTZ, INC.
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
Segmentz, Inc.
Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
CONTENTS
Financial Statements:
Balance Sheet..................................................1
Statements of Operations.......................................2
Statement of Changes in Stockholders' Equity...................3
Statements of Cash Flows.......................................4
Notes to Financial Statements...............................5-10
Segmentz, Inc.
Balance Sheet
September 30, 2003 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,875,739
Accounts receivable, net of allowance of $245,489 2,516,284
Prepaid expenses 908,709
---------------
Total current assets 5,300,732
Equipment, net of accumulated depreciation 607,807
Advances to Murphy Surf Air 2,213,230
Other assets 475,479
Loans and advances 39,314
---------------
$ 8,636,562
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 613,241
Accrued salaries and wages 128,500
Accrued expenses, other 333,400
Obligation due under factoring arrangement 1,137,596
Short term portion of long term debt and other short term debt 718,636
Advances from shareholder 165,998
---------------
Total current liabilities 3,097,371
---------------
Long term liabilities 200,770
Stockholders' equity:
Convertible preferred stock, 10,000,000 shares
Authorized, 1,188,819 shares issued and outstanding 1,188,819
Common stock, $.001 par value; 40,000,000 shares
authorized; 13,609,713 shares issued and
outstanding, 13,610
Additional paid-in capital 4,059,495
Stock payable 20,000
Retained earnings 56,497
---------------
Total stockholders' equity 5,338,421
---------------
$ 8,636,562
===============
The accompanying notes are an integral part of the financial statements. 1
Segmentz, Inc.
Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
Sept 30, Sept 30, Sept 30, Sept 30,
2003 2002 2003 2002
-----------------------------------------------------------------------
Revenues:
Operating revenue $ 3,776,245 $ 2,207,782 $ 9,976,636 $ 6,077,057
Consulting and other revenue 250,000 9,648 257,641 73,294
-----------------------------------------------------------------------
4,026,245 2,217,430 10,234,277 6,150,351
-----------------------------------------------------------------------
Expenses:
Cost of services 2,860,157 1,736,559 7,435,884 4,685,204
General and administrative
expenses 1,092,846 354,785 2,339,182 1,179,736
-----------------------------------------------------------------------
3,953,003 2,091,344 9,775,066 5,864,940
-----------------------------------------------------------------------
Income before taxes 73,242 126,086 459,211 285,411
Income tax expense 21,200 0 133,500 0
-----------------------------------------------------------------------
Net income $ 52,042 $ 126,086 $ 325,711 $ 285,411
=======================================================================
Basic earnings per
common share $ .01 $ .02 $ .04 $ .04
=======================================================================
Basic weighted average common
shares outstanding 9,912,511 6,502,913 7,878,469 6,502,913
=======================================================================
Diluted earnings per
common share $ .00 $ .01 $ .04 $.03
=======================================================================
Diluted weighted average
common shares outstanding 11,113,950 8,905,417 9,077,939 8,936,892
=======================================================================
The accompanying notes are an integral part of the financial statements. 2
Segmentz, Inc.
Statement of Changes in Stockholders' Equity
Nine Months Ended September 30, 2003 (Unaudited)
Preferred Stock
-----------------------------------
Shares Amount
-----------------------------------
--------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002 1,188,819 $ 1,188,819
Series C redeemable convertible preferred and common stock
Issuance of stock
Net income
--------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2003 1,188,819 $ 1,188,819
==========================================================================================================================
The accompanying notes are an integral part of the financial statements.
Common Stock Stock Payable Additional Retained Earnings
------------ -------------- Paid-In (Accumulated
Shares Amount Preferred Common Capital Deficit) Total
-------------------------------------------------------------------------------------------------
6,752,913 $ 6,753 $ 13,820 $ 16,180 $ 2,847 $ (269,214) $ 959,205
18,000 18 6,180 (6,180) 37,427 37,445
6,838,800 6,839 (10,000) 4,019,221 4,016,060
325,711 325,711
-------------------------------------------------------------------------------------------------
13,609,713 $ 13,610 $ 20,000 $ 0 $ 4,059,495 $ 56,497 $5,338,421
=================================================================================================
3
Segmentz, Inc.
STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
------------------------------
2003 2002
------------------------------
OPERATING ACTIVITIES
Net income $ 325,711 $ 285,411
------------------------------
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Change in allowance for doubtful accounts 108,845 107,687
Depreciation and amortization 105,789 67,680
Non-cash expense relating to
issuance of stock and warrants 37,935
Valuation on deferred tax asset (38,700)
Changes in:
Accounts and other trade receivables (393,838) (739,978)
Prepaid expenses and other current assets (548,166) 54,340
Other assets (450,915)
Accounts payable (93,166) 392,860
Accrued expenses 172,367 (126,197)
Accrued salaries 121,730
------------------------------
Total adjustments (978,119) (243,608)
-------------------------------
Net cash provided by operating activities (652,408) 41,803
------------------------------
INVESTING ACTIVITIES
Purchases of equipment (488,397) 11,215
Loans, advances, and other receivables (13,703) (35,333)
-------------------------------
Net cash used in investing activities (502,100) (24,118)
-------------------------------
FINANCING ACTIVITIES
Decrease in net obligations incurred under
factoring arrangements (571,501) (299,975)
Advances to Murphy Surf Air (1,427,430)
Proceeds and payments on debt, net 1,034,227 263,902
Proceeds from issuance of note payable 50,000
Proceeds from sale of common stock 10,000
Redemption of preferred stock (10,127)
Net proceeds from the issuance of equity 3,991,193
------------------------------
Net cash provided by financing activities 3,026,489 13,800
------------------------------
NET INCREASE IN CASH 1,871,981 31,485
CASH, BEGINNING OF PERIOD 3,758 39,489
------------------------------
CASH, END OF PERIOD $ 1,875,739 $ 70,974
==============================
The accompanying notes are an integral part of the financial statements. 4
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
1. SIGNIFICANT ACCOUNTING PRINCIPLES
BASIS OF PRESENTATION
In the opinion of management, all adjustments consisting of normal recurring
adjustments necessary for a fair statement of (a) the financial position at
September 30, 2003, (b) the results of operations for the three month and nine
month periods ended September 30, 2003 and 2002, and (c) cash flows for the nine
month periods ended September 30, 2003 and 2002, have been made.
The unaudited financial statements and notes are presented as permitted by Form
10-QSB. Accordingly, certain information and note disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been omitted. The
accompanying financial statements and notes should be read in conjunction with
the audited financial statements and notes of the Company for the fiscal year
ended December 31, 2002. The results of operations for the nine-month period
ended September 30, 2003 are not necessarily indicative of those to be expected
for the entire year.
In April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities". SFAS No. 149 clarifies under what circumstances a contract with an
initial net investment meets the characteristics of a derivative as discussed in
Statement No. 133. It also specifies when a derivative contains a financing
component that warrants special reporting in the Statement of Cash Flows. SFAS
No. 149 amends certain other existing pronouncements in order to improve
consistency in reporting these types of transactions. The new guidance is
effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. SFAS No. 149 did not have
a material effect on the Financial Statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". It
establishes classification and measurement standards for three types of
freestanding financial instruments that have characteristics of both liabilities
and equity. Instruments within the scope of SFAS 150 must be classified as
liabilities within the company's Financial Statements and be reported at
settlement date value. The provisions of SFAS 150 are effective for (1)
instruments entered into or modified after May 31, 2003 and (2) pre-existing
instruments as of July 1, 2003. On October 29, 2003, the FASB voted to
indefinitely defer the effective date of SFAS 150 for mandatorily redeemable
instruments as they relate to minority interests in consolidated finite-lived
entities through the issuance of FASB Staff Position (FSP) 150-3. The adoption
of SFAS 150, as modified by FSP 150-3, is not expected to have a material effect
on the Financial Statements.
5
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
1. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
STOCK BASED COMPENSATION
In December 2002, FASB issued Statement of Financial Accounting Standards No.
148 (SFAS 148"), Accounting for Stock-Based Compensation-Transition and
Disclosure. SFAS 148 amends current disclosure requirements and requires
prominent disclosures on 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. This statement is effective for financial
reports containing financials statements for interim periods beginning after
December 15, 2002. The Company currently intends to continue to account for its
stock-based compensation awards to employees and directors under the accounting
prescribed by Accounting Principles Board No. 25.
The Company accounts for its stock option plan under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock-based employee compensation
cost is reflected in net income. During the nine months ended September 30, 2003
and 2002 there were options granted to two certain officers. The impact of the
provisions of APB 25 and FASB 123 were not material in the period ended
September 30, 2003, in which each officer received 250,000 options to purchase
shares of the Company's common stock at a strike price of $1.20 for a period of
five years from the date of the agreement, September 4, 2003. The pro forma net
income resulting from application of the fair value based method prescribed by
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," appears below:
Three months ended September 30, Nine months ended September 30,
--------------------- --------------- ---------------- ------------------
2003 2002 2003 2002
--------------------- --------------- ---------------- ------------------
Net income, as reported $ 52,042 $ 126,086 $ 325,711 $ 285,411
Total stock-based employee compensation expense
determined
under fair value based method, net of related
tax effects 1,200 - 1,200 -
--------------------- --------------- ---------------- ------------------
Pro forma net income $ 50,842 $ 126,086 $ 324,511 $ 285,411
6
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
1. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Three months ended September 30, 2003 Nine Months ended September 30, 2003
--------------------- -------------------- ------------------- -------------------
Earnings per common share:
Basic - as reported $ .01 $ .02 $ .04 $ .04
--------------------- -------------------- ------------------- -------------------
Basic - pro forma $ .01 $ .02 $ .04 $ .04
--------------------- -------------------- ------------------- -------------------
Diluted - as reported $ .00 $ .01 $ .04 $ .03
--------------------- -------------------- ------------------- -------------------
Diluted - pro forma $ .00 $ .01 $ .04 $ .03
2. SALE OF ACCOUNTS RECEIVABLE
During the second quarter of 2002, the Company entered into an agreement with a
factoring company to provide for the borrowing against eligible receivables of
up to eighty percent (80%) of the face value of such receivables. The Company
maintains any advances under this agreement as liabilities in its balance sheet
and any receivables, net of allowances for losses, as assets. The borrowing
against eligible receivables is not a true sale and the company keeps all
balances due from customers net of allowances for doubtful accounts as assets,
and all amounts advanced by its factoring company that are due as liabilities,
pursuant to Statements of Financial Accounting Standards ("SFAS") No. 140
"Accounting for transfers and servicing of financial assets and extinguishment
of liabilities," such amounts are not sold without recourse and therefore
reported in accordance with provisions of applicable rules and guidelines.
7
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
3. ADVANCES TO MURPHY SURF AIR
In September 2002, the Company entered into an Agency agreement with Murphy Surf
Air, a fifty plus year old airfreight forwarder, to provide local pickup and
delivery for the Company to support its expansion to Midwestern and Southeastern
markets in Chicago, Louisville and Lexington KY, Cincinnati, Nashville and
Knoxville TN and Atlanta. Murphy Surf Air filed for protection under Chapter 11
USC in March 2003 and the Company provided advances to Murphy in excess of
amounts due under the agency agreement to ensure continued services to customers
in those markets, including certain account receivable that provide for offset
rights.
The Company made an offer during this period to purchase certain assets of
Murphy Surf Air, primarily those assets that were held as chattel by the secured
lender, Fifth Third bank, including accounts receivable, equipment, leasehold
improvements and supporting assets that are currently utilized to deliver
services through our organization. The Company believes that the purchase of
these assets does not represent a "significant subsidiary" as defined in
Regulation S-B, Regulation 210.01. Although there may be risks associated with
the purchase of these assets, the Company has not reserved specifically for
losses that may occur consequential to this purchase. The Company will continue
to examine the value of assets to be purchased to determine what reserves, if
any, are needed to adequately mitigate any potential losses that might result
from such asset purchase, including accounts receivable associated with this
relationship.
4. INCOME TAXES
Income tax expense for the nine months ended September 30, 2003 and 2002 is
based on the Company's estimate of the effective tax rate expected to be
applicable for the full year. The effective tax rate of 29.0 percent for the
nine months ended September 30, 2003 differs from the statutory rate because of
the effects of utilizing a net operating loss carryover, permanent differences,
and adjustments to the valuation allowance on deferred tax assets.
5. EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing earnings available to
common shareholders by the weighted average number of common shares outstanding
or payable during each period. Diluted EPS is similarly calculated, except that
the denominator includes common shares that may be issued subject to existing
rights with dilutive potential.
8
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
6. STOCKHOLDERS' NOTE
The Company has agreed to provide a stockholder up to $100,000, secured by
preferred shares of the Company, $21,000 of which has been drawn at period end.
This note bears interest at six percent annually and is payable upon demand. As
of September 30, 2003 no demand for payment has been made on the outstanding
balance
7. TERM NOTE
The Company currently owes $350,000 to a Corporation, due on August 20, 2004,
bearing interest at twelve percent, plus warrants that provide for the purchase
of shares of the Company's common stock at a price of $1.01 per share, such
warrants being callable at par if the Company's shares trade at $1.66 for twenty
consecutive trading days. This term note provides for payment of interest
monthly, with a balloon payment of principal on the due date. The Company's
Chief Executive Officer and the Company's President have personally guaranteed
the Company's performance under this obligation.
8. SEGMENT INFORMATION
Historically the Company has had two reportable segments; truck hauling and
warehouse operations, although the Company continues to provide these two
services, the warehousing segment has become an immaterial component of
providing overall third party logistical support to our customers and no longer
meets the criteria for a reportable segment. Therefore, for the nine months
ended September 30, 2003 the Company has only one reportable segment.
9. EQUITY FUNDING
On July 9, 2003, the Company closed a private placement pursuant to which the
Company issued a total of 2,673,334 shares of its' common stock, par value
$0.001 per share, and warrants to purchase up to 1,336,667 shares of its' common
stock, par value $0.001 per share, for $1.25 per share for a period of 5 years,
to 58 accredited investors. The Company received $2,005,000 in consideration for
the issuance of the securities, less placement agent fees and other offering
costs associated with the private placement. The securities were issued pursuant
to the exemption from registration provided by Rule 506 of Regulation D,
promulgated under the Securities Act of 1933, as amended. The Company incurred
offering costs of approximately $310,000 in cash and 267,333 shares of common
stock, in addition to 133,667 warrants to purchase stock at a strike price of
$1.25 per share, in connection with this offering These investors purchased the
securities for investment purposes and the securities they received were marked
with the appropriate restrictive legend.
9
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
9. EQUITY FUNDING (CONTINUED)
The Company entered into discussions with several institutional investors that
resulted in those investors making an investment in the Company under an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended. These investors purchased 3,743,999 shares of common stock,
par value $0.001 per share, and warrants to purchase up to 2,724,499 shares of
our common stock, par value $0.001 per share, for $1.40 per share for a period
of 5 years, to several institutional investors. The Company received $2,810,000
in connection with this offering and incurred offering costs approximating
$510,000 in cash and 300,000 options to purchase common stock at a strike price
of $1.40 per share. Any securities purchased pursuant to this offering will be
marked with the appropriate restrictive legend.
10. SOFTWARE SALE
The Company sold rights to its operational software package, "TRUCKS," providing
the buyer with code, books and information to enable development of a marketable
software product or service that may be sold to transportation companies. The
Company received $250,000 in connection with this rights sale, in addition to
potential royalty revenues that may result from sales of any products developed
utilizing this software and rights to free upgrades, in the Company's sole
discretion that allow the Company to continue to utilize the software code and
methods in operational capacities. Any costs incurred pursuant to the
development of this software have been expensed in prior periods.
11. SUBSEQUENT EVENTS
On October 1, 2003, Segmentz, Inc. completed the acquisition of 100% of the
capital stock of Bullet Freight Systems of Miami, Inc., Bullet Freight Systems
of Palm Beach, Inc., Bullet Freight System, Inc., Bullet Courier Service, Inc.,
Bullet Freight Systems of Orlando, Inc. and B.C.S. Transportation Systems, Inc.
(collectively, the "Acquired Companies") for cash consideration of $225,000,
225,000 shares of Segmentz, Inc. restricted common stock and conditional
payments that could total $400,000 over a five (5) year period (the
"Consideration"), pursuant to terms and conditions of a Stock Purchase Agreement
dated September 30, 2003 (the "Stock Purchase Agreement"). The Consideration was
paid for out of existing cash on hand. This transaction was not considered the
purchase of a "Significant Subsidiary," as defined in Regulation S-B Rule
210.01.
Upon Completion of the Company's private placement offerings, it entered into
negotiations with its Chief Executive Officer to repurchase all outstanding
shares of preferred stock owned by him at a price of $.58 per share. This
transaction resulted in a reduction of the possible number of outstanding shares
of common stock by 440,000 shares based on the conversion rate of 1:1 of this
series of preferred stock. The Company has paid $240,000 to date in connection
with this transaction, and expects to close on November 17, 2003.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements. This Form 10-QSB includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, included or incorporated
by reference in this Form 10-QSB which address activities, events or
developments which the Company expects or anticipates will or may occur in the
future, including such things as future capital expenditures (including the
amount and nature thereof), finding suitable merger or acquisition candidates,
expansion and growth of the Company's business and operations, and other such
matters are forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results or developments will conform with
the Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which are
beyond the control of the Company.
This Form 10-QSB contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified by the use of
predictive, future-tense or forward-looking terminology, such as "believes,"
"anticipates," "expects," "estimates," "plans," "may," "will," or similar terms.
These statements appear in a number of places in this filing and include
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of operations for its
limited history; (ii) the Company's business and growth strategies; and, (iii)
the Company's financing plans. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements as a result of
various factors. Factors that could adversely affect actual results and
performance include, among others, the Company's limited operating history,
potential fluctuations in quarterly operating results and expenses, government
regulation, technology change and competition. Consequently, all of the
forward-looking statements made in this Form 10-QSB are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequence to or
effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
GENERAL
Segmentz, Inc. is a third party logistics provider of transportation and
management services to its target client base, ranging from mid-sized to Fortune
100(TM) companies, through its network of terminals in the Southeast and Midwest
United States. The Company's services include:
DOMESTIC TRANSPORTATION- The Company arranges truckload and less-than-truckload
(L-T-L) transportation utilizing company equipment, dedicated owner operator
fleet, a nationwide agent network and extensive contract carriers throughout all
48 continental states, Mexico and Canada. Revenues from Domestic Transportation
represented approximately 42% of total revenues for the nine month period ended
September 30, 2003.
EXPEDITING SERVICES- The Company provides local pickup and delivery services on
a tight or irregular time schedule through its agent relationships on an
overnight or two day basis. Revenues from Expediting Services represented
approximately 40% of total revenues for the nine month period ended September
30, 2003.
DEDICATED DELIVERY SERVICES- The Company provides its customers with a seamless
solution for time-definite ground transportation to become a cost effective and
highly reliable extension of the customers' own distribution system. Revenues
from Dedicated Delivery Services represented approximately 18% of total revenues
for the nine month period ended September 30, 2003.
RESULTS OF OPERATIONS
The following analysis of the financial condition of the Company as of September
30, 2003 and the results of operations for the period ended September 30, 2003,
should be read in conjunction with the Consolidated Financial Statements and
footnote disclosures. It should be understood that the following information is
qualified in its entirety by the foregoing and other, more detailed financial
information appearing elsewhere herein.
11
Historical results of operations and the percentage relationships among any
amounts included in the Statement of Operations of Segmentz, Inc. and any trends
which may appear to be inferable there from, should not be taken as being
necessarily indicative of trends of operations or results of operations for any
future periods.
These and other statements, which are not historical facts, are based largely on
current expectations and assumptions of management and are subject to a number
of risks and uncertainties that could cause actual results to differ materially
from those contemplated by such forward-looking statements.
Assumptions and risks related to forward-looking statements include that we are
pursuing a growth strategy that relies in part on the completion of acquisitions
of companies in the non-asset based logistics segment of the transportation
industry, as well as the integration of third party brokers and agents into our
back office, contact and support resources.
Assumptions relating to forward-looking statements involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control. When
used in this Quarterly Report, the words "estimates", "projects", and "expect"
and similar expressions are intended to identify forward-looking statements.
Although we believe that assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in the forward-looking
information will be realized.
Management decisions are subjective in many respects and susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impacts of which may cause us to alter our business strategy,
which may in turn, affect our results of operations. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as our representation that
statements contained in this Report speak only as of the date of this Report,
and we do not have any obligation to publicly update or revise any of these
forward-looking statements.
Such statements may include, but are not limited to, projections of revenues,
income, or loss, capital expenditures, plans for future operations, financing
needs or plans, the impact of inflation and plans relating to the foregoing.
Statements in the Company's Form 10-QSB, including Notes to the Financial
Results of Operations, which may describe factors, among others, that could
contribute to or cause such differences.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2002.
Revenues increased approximately $1,809,000, or 82%, to approximately $4,026,000
for the three months ended September 30, 2003 as compared to approximately
$2,217,000 for the period ended September 30, 2002. This increase was primarily
due to (i) increase in core service offerings and client acceptance of these
offerings, (ii) enhanced agent services and alliances resulting from these
offerings, (iii) the results of cross-marketing and selling efforts to capture
larger opportunities within our current client base, (iv) various expansion into
related business lines and contract based freight relationships, specifically
the opening of our contract freight facility in Evansville, IN and our four year
relationship with a national logistics company to provide services for a Fortune
500(TM) manufacturing firm, and (v) sale of the rights to the Company's software
code for $250,000.
Costs of services provided, which consist primarily of payment for trucking
services, fuel, insurance, and other direct costs increased by approximately
$1,123,000 or 65%, to approximately $2,860,000 for the three months ended
September 30, 2003, as compared to approximately $1,737,000 for the three months
ended September 30, 2002. As a percentage of revenues trucking and transport
related services of fuel, insurance, and other direct costs are aggregated as
cost services and amounted to 71% of related revenues for the three months ended
September 30, 2003, as compared to 78% of revenues for the three months ended
September 30, 2002. This increase was primarily based upon (i) corresponding
increase in sales, and (ii) sustained efforts to increase margin, increase of
break-point effect (resulting from increase in revenue in warehouse, L-T-L and
expedited transportation business and lower fixed cost burden spread over
greater sales volume) and technology enabling movement of expenses to specific
burden levels that combined to increase gross profit margins.
12
Gross profit increased by approximately $686,000, or 143%, to approximately
$1,166,000 for the three months ended September 30, 2003, as compared to
approximately $480,000 for the three months ended September 30, 2002. This
increase is primarily attributed to (i) break-point effect (resulting from
increase in revenue in warehouse, L-T-L and expedited transportation business
and lower fixed cost burden spread over greater sales volume) and technology
enabling movement of expenses to specific burden levels that combined to
increase gross profit margins, and (ii) sale of the rights to the Company's
software code for $250,000.
Selling, general and administrative expenses increased by approximately
$738,000, or 208%, to approximately $1,093,000 for the three months ended
September 30, 2003, up from approximately $355,000 for the three months ended
September 30, 2002. This increase was in large part due to: (i) expenses
associated with new technology and customer service initiatives, (ii)
implementation of new technology and reclassification of expenses as support to
a particular line of business, as opposed to cost of services previously (iii)
increase in sales and support costs associated therewith and (iv) enhanced
selling and marketing costs to capture contract based freight revenues.
The Company realized income from continuing operations before interest, taxes,
depreciation and amortization (EBITDA) of approximately $257,000 for the three
months ended September 30, 2003, compared with income from continuing operations
before interest, taxes, depreciation and amortization (EBITDA) of $221,000 for
the three months ended September 30, 2002.
The income tax provision was approximately $21,200 for the three months ended
September 30, 2003, compared with no provision for income taxes for the three
months ended September 30, 2002. Differences between the effective tax rate used
for 2003 and 2002, as compared to the statutory rate, are primarily due to a net
operating loss carryover, permanent differences and adjustments to the deferred
tax asset valuation allowance.
The Company earned approximately $52,000 for the three months ended September
30, 2003, compared to approximately $126,000 for three months ended September
30, 2002. This was primarily due to the increased Selling, General and
Administrative costs resulting from the Company's expansion and technology
implementation expenses incurred in preparation for supporting the Company's
growth plans.
Basic earnings per share from continuing operations for the three months ended
September 30, 2003 decreased by $.01 to $.01 per share, as compared with $.02
per share for the three months ended September 30, 2002.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2002.
Revenues increased approximately $4,084,000, or 66%, to approximately
$10,234,000 for the nine months ended September 30, 2003 as compared to
approximately $6,150,000 for the nine months ended September 30, 2002. This
increase was primarily due to (i) increase in core service offerings and client
acceptance of these offerings, (ii) enhanced agent services and alliances
resulting from these offerings, (iii) various expansion into related business
lines and contract based freight relationships, specifically the opening of our
contract freight facility in Evansville, IN and our four year relationship with
a national logistics company to provide services for a Fortune 500(TM)
manufacturing firm, (iv) continued growth in all sectors, product types and
geography of our business for the first nine months of this year, and (v) sale
of the rights to the Company's software code for $250,000.
Costs of services provided, which consist primarily of payment for trucking
services, fuel, insurance, and other direct costs increased by approximately
$2,751,000 or 59%, to approximately $7,436,000 for the nine months ended
September 30, 2003, as compared to approximately $4,685,000 for the nine months
ended September 30, 2002. As a percentage of revenues trucking and transport
related services of fuel, insurance and other direct costs are aggregated as
cost services and amounted to 73% of related revenues for the nine months ended
September 30, 2003, as compared to 76% for the nine months ended September 30,
2002. This increase was primarily due to corresponding increase in sales.
Gross profit increased by approximately $1,333,000, or 91%, to approximately
$2,798,000 for the nine months ended September 30, 2003, as compared to
approximately $1,465,000 for the nine months ended September 30, 2002. This
increase is primarily attributed to (i) coincidental increase in sales, and (ii)
sale of the rights to the Company's software code for $250,000.
13
Selling, general and administrative expenses increased by approximately
$1,159,000, or 98%, to approximately $2,339,000 for nine months ended September
30, 2003, up from approximately $ 1,180,000 for the nine months ended September
30, 2002. This increase was in large part due to: (i) expenses associated with
new technology and customer service initiatives, (ii) implementation of new
technology and reclassification of expenses as support to a particular line of
business, as opposed to cost of services previously (iii) increase in sales and
support costs associated therewith and (iv) enhanced selling and marketing costs
to capture contract based freight revenues.
The income tax provision was approximately $134,000 for the nine months ended
September 30, 2003, compared with no provision for the nine months ended
September 30, 2002. Differences between the effective tax rate used for 2003 and
2002, as compared to the statutory rate, are primarily due to a net operating
loss carryover, permanent differences and adjustments to the deferred tax asset
valuation allowance.
The Company earned approximately $326,000 for the nine months ended September
30, 2003, compared to approximately $285,000 for nine months ended September 30,
2002. This was primarily due to increased sales, strong margins and offset
increase in Selling, General & Administrative expenses resulting from the
Company's preparation and support of ongoing growth initiatives.
Basic earnings per share from continuing operations for the nine months ended
September 30, 2003 and 2002 were $.04 per share. Diluted earnings per share from
continuing operations for the nine months ended September 30, 2003 increased
$.01 per share to $.04 per share, when compared with $.03 per fully diluted
share for the nine months ended September 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash of approximately $1,876,000 at September 30, 2003, compared
with cash balances of approximately $4,000 at December 31, 2002. This change of
approximately $1,872,000 was a result of completion of the Company's private
placement offering, reduction of outstanding moneys owed by the Company to
vendors and creditors and deployment of capital in antipcipation of the
acquisition of the assets of Murphy Surf Air from bankruptcy, as well as
preparation for the acquisition of Bullet Air Freight.
In connection with the anticipated purchase of the assets of Murphy Surf Air,
the Company has advanced approximately $1,427,000 against its purchase as of
September 30, 2003, in addition to accounts receivable which retain offset
rights pursuant to the agency agreement dated September 2002.
The Company has added Comdata to its financing sources as part of a desire to
reduce costs and enhance services offered for factoring fees. Comdata offers
various credit and collections services as part of its hybrid factoring
facility. The Company had outstanding balances due Comdata of approximately
$1,138,000 as of September 30, 2003.
The Company began performing contract based freight services in May 2003 as part
of a long-term contract that provides for dedicated delivery services (DDS) in
Evansville, IN. as part of the Company's continued expansion into contract based
freight opportunities. The Company is to provide staging, processing, delivery
and report integration from a regional cross-dock hub facility in Evansville,
IN. to points in Indiana and surrounding areas on behalf of a national logistics
service company for a Fortune 500(TM) manufacturing firm.
There were significant cash requirements on the Company related to preparing for
a new dedicated delivery contract. The terms of the agreement provide for the
reimbursement of virtually all costs associated with the contract, including
such expenses as overhead allocation and set-up expenses, however these expenses
are to be reimbursed evenly over the four-year contract, which from a cash-flow
basis has been a significant use of cash in the second quarter.
The Company has embarked on upgrades to technology and support infrastructure
that it believes will enhance cash flows by providing customers and customer
service representatives with access to delivery information and documentation
that will enable efficient collections of accounts receivable from customers.
There is no assurance that we will be able to obtain financing on terms
favorable to the Company or successfully implement infrastructure upgrades
pursuant to our plans.
Our strategy is to continue to expand through acquisitions and internal
development. We intend to seek, on a selective basis, acquisition of businesses
14
that have product lines or services which complement and expand our existing
services and product lines, and provide us with strategic distribution locations
or attractive customer bases. Our ability to implement our growth will depend on
a number of things, which may be beyond our control. Successful deployment of
this strategy will be dependent on our ability to identify, consummate and
assimilate such acquisitions on desirable economic terms. There can be no
assurance that we will be successful in implementing our growth strategy. Our
ability to implement our growth strategy will also be dependent upon obtaining
adequate financing. We may not be able to obtain financing on favorable terms.
CRITICAL ACCOUNTING POLICIES
PRINCIPALS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all of its wholly-owned subsidiaries. All significant intercompany
accounts and transactions are eliminated in consolidation. Prior to October
2001, the date of the merger, the financial statements are those of
Trans-Logistics, Inc., the only operating company at that time.
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
OPERATING REVENUES
Operating revenues for domestic transportation services are recognized on the
date the freight is delivered. Related costs of delivery of shipments in transit
are accrued as incurred. Revenues from dedicated delivery services are
recognized as the services are performed.
ACCOUNTS RECEIVABLE
The Company extends credit to its various customers based on the customer's
ability to pay. The Company provides for estimated losses on accounts receivable
based on bad debt experience and a review of existing receivables. Based on
management's review of accounts receivable and other receivables, an allowance
for doubtful accounts of approximately $246,000 is considered necessary as of
September 30, 2003.
ESTIMATES IN MURPHY SURF AIR ACQUISITION AND AGREEMENTS
The Company utilizes estimates in determining the value of the underlying
advances and collateral and remedies available to mitigate any losses that might
be suffered consequential to the Bankruptcy reorganization of Murphy Surf Air.
The Company made an offer during this period to purchase certain assets of
Murphy Surf Air, primarily those assets that were held as chattel by the secured
lender, Fifth Third bank, including accounts receivable, equipment, leasehold
improvements and supporting assets that are currently utilized to deliver
services through our organization. The Company believes that the purchase of
these assets does not represent a "significant subsidiary" as defined in
Regulation S-B, Regulation 210.01. Although there may be risks associated with
the purchase of these assets, the Company has not reserved specifically for
losses that may occur consequential to this purchase. The Company will continue
to examine the value of assets to be purchased to determine what reserves, if
any, are needed to adequately mitigate any potential losses that might result
from such asset purchase, including accounts receivable associated with this
relationship.
DEFERRED TAX ASSETS
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the consolidated financial
statements carrying amounts of existing assets and liabilities and their
respective income tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized as income in the period that included the enactment date.
USE OF ESTIMATES
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management. The respective carrying value
of certain on-balance-sheet financial instruments approximated their fair
15
values. These financial instruments include cash, notes receivable, accounts
payable, allowances for doubtful accounts receivable, and accrued expenses. Fair
values were assumed to approximate carrying values for these financial
instruments since they are short-term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand. The fair
value of the Company's debt is estimated based upon the quoted market prices for
the same or similar issues or on the current rates offered to the Company for
debt of the same remaining maturities. Historical collection rates and
individual debtor information pertaining to accounts receivable provides
guidance for making allowances based on realized and perceived trends in
collections. Currently, the Company examines accounts receivable at each period
end to determine proper allowance for doubtful accounts receivable and makes
allowances or changes in existing allowances when trends deemed to be material
to portfolio performance are realized or perceived. Although management believes
that account receivables are recorded at their net realizable value, a 10%
decline in the historical collection rate would increase the current bad debt
expense by approximately $14,600.
EARNINGS PER SHARE CALCULATIONS
Basic EPS is calculated by dividing earnings available to common shareholders by
the weighted average number of common shares outstanding or payable during each
period. Diluted EPS is similarly calculated, except that the denominator
includes common shares that may be issued subject to existing rights with
dilutive potential.
CONTINGENT LIABILITIES
The Company is party to a number of legal actions, which are not material to
operations pursuant to Item 301 of Regulation S-B
ITEM 3. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our Management, which
includes our chief executive officer and our chief financial officer, after
evaluating the effectiveness of the Company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)
and 15d-14(c)) as of a date (the "Evaluation Date") within 90 days before the
filing date of this quarterly report, have concluded that as of the Evaluation
Date, our disclosure controls and procedures were adequate and designed to
ensure that material information relating to us and our consolidated
subsidiaries would be made known to them by others within those entities.
(b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in our
internal controls or to our knowledge, in other factors that could significantly
affect our disclosure controls and procedures subsequent to the Evaluation Date.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company is involved in various civil actions as part of
its normal course of business. The Company is not party to any litigation that
is material to ongoing operations as defined in Item 301 of Regulation S-B as of
the nine months ended September 30, 2003.
16
ITEM 2. CHANGES IN SECURITIES.
The Company has sold its common and preferred shares during the past three
years. The following information is a summary of such sales as required under
Item 701 (Rule 228.701) of Regulation S-B:
Date Type of Securities Shares/Description Additional Information Amount of Securities
12/2001 Preferred A & B 1,200,805 Conversion by Related Parties $1,200,805
7/2002 Common Stock 20,000 Common Stock $ 10,000
Regulation D Exempt
10/2002 Preferred Stock 600 Series C Preferred $ 60,000
Regulation D Exempt
Common Stock 18,000 Common Stock
7/2003 Common Stock 2,675,000 Regulation D Exempt
Warrants 1,337,500 Rule 506 Private Placement $2,000,000
9/2003 Common Stock 3,743,999 4(2) Exempt $2,559,000
2,724,999 Private Placement
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has not defaulted on any securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No items have been submitted to Security Holders to be voted upon during the
period ended September 30, 2003.
ITEM 5. OTHER INFORMATION.
The Company has no other information to report for the nine months ended
September 30, 2003.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Company filed an 8-K detailing its acquisition of Bullet Freight Systems
on October 6, 2003.
31.1 Certification of CEO
31.2 Certification of CFO
32.1 Certification of compliance of Section 13(a) of CEO
32.2 Certification of compliance of Section 13(a) of President
17
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Segmentz, Inc.
Date November 14, 2003 /s/ Allan J. Marshall
Chief Executive Officer
/s/ John S. Flynn
President & Chief Financial Officer
/s/ Dennis M. McCaffrey
Chief Operating Officer
*Print the name and title of each signing officer under his signature.
18
CERTIFICATIONS*
---------------
EXHIBIT 31.1
I, Allan J. Marshall, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Segmentz, 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 have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether 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: November 14, 2003
/s/ Allan J. Marshall
Chief Executive Officer
EXHIBIT 31.2
I, John S. Flynn, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Segmentz, 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 have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether 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: November 14, 2003
/s/ John S. Flynn
President & Chief Financial Officer
EXHIBIT 32.1
WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350
Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned
Chief Executive Officer of Segmentz, Inc. (the "Company"), hereby certify, based
on my knowledge, that the Quarterly Report on Form 10-QSB of the Company for the
quarter ended September 30, 2003, (the "Report") fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 and that
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
Date: November 14, 2003
By: /s/ Allan J. Marshall
Chief Executive Officer
EXHIBIT 32.2
WRITTEN STATEMENT OF THE PRESIDENT
Pursuant to 18 U.S.C. Section 1350
Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned
President of Segmentz, Inc. (the "Company"), hereby certify, based on my
knowledge, that the Quarterly Report on Form 10-QSB of the Company for the
quarter ended September 30, 2003, (the "Report") fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 and that
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
Date: November 14, 2003
By: /s/ John S. Flynn
President