SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
XX Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
-- Act of 1934.
For the period ended June 30, 2003.
__ 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: 0-16128
TUTOGEN MEDICAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-3100165
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1130 MCBRIDE AVENUE, WEST PATERSON, NEW JERSEY 07424
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 785-0004
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01
(Title of Class) (Name of Each Exchange on Which Registered)
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 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 .
--- ---
As of July 31, 2003 there were outstanding 15,647,110 shares of Tutogen Medical,
Inc. Common Stock, par value $0.01.
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
INDEX
-----
PART I. Financial Information. Page
No.
ITEM 1. Financial Statements.
Consolidated Balance Sheets - June 30, 2003 1
(unaudited) and September 30, 2002.
Consolidated Statements of Operations for the 2
three and nine months ended June 30, 2003 and
2002(unaudited).
Consolidated Statements of Cash Flows for 3
the nine months ended June 30, 2003 and
2002(unaudited).
Notes to Consolidated Financial Statements 4
(unaudited).
ITEM 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations.
ITEM 4. Controls and Procedures 16
PART II. Other Information.
ITEM 6. Reports on Form 8-K 16
SIGNATURES 17
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, SEPTEMBER 30,
2003 2002
--------------- ---------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,497 $ 3,083
Accounts receivable - net 5,283 3,175
Inventories - net 10,859 9,950
Deferred income taxes 1,033 221
Other current assets 1,216 373
--------------- ---------------
22,888 16,802
PROPERTY, PLANT AND EQUIPMENT, NET 4,730 4,119
INTANGIBLE AND OTHER ASSETS, NET 33 -
DEFERRED INCOME TAXES 1,324 2,827
--------------- ---------------
TOTAL ASSETS $ 28,975 $ 23,748
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other accrued expenses $ 6,215 $ 3,982
Accrued commissions 1,726 1,390
Current portion of deferred distribution fees 610 501
Current portion of long-term debt 88 73
--------------- ---------------
8,639 5,946
OTHER LIABILITIES
Deferred distribution fees 3,155 3,181
Long-term debt 749 693
SHAREHOLDERS' EQUITY 16,432 13,928
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 28,975 $ 23,748
=============== ===============
See accompanying Notes to Consolidated Financial Statements.
1
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
--------------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
REVENUE $ 8,933 $ 5,400 $ 22,250 $ 15,744
Cost of revenue 3,621 2,182 8,987 7,422
--------------- --------------- --------------- ---------------
GROSS MARGIN 5,312 3,218 13,263 8,322
OPERATING EXPENSES
General and administrative 1,156 787 3,215 2,266
Distribution and marketing 2,384 1,823 7,145 4,561
Research and development 275 237 821 613
Depreciation and amortization 67 34 153 97
--------------- --------------- --------------- ---------------
3,882 2,881 11,334 7,537
OPERATING INCOME 1,430 337 1,929 785
OTHER (EXPENSE) INCOME (70) 21 (129) 64
INTEREST EXPENSE (13) (12) (39) (49)
--------------- --------------- --------------- ---------------
(83) 9 (168) 15
INCOME BEFORE PROVISION FOR INCOME TAXES 1,347 346 1,761 800
Income taxes 529 134 677 233
--------------- --------------- --------------- ---------------
NET INCOME $ 818 $ 212 $ 1,084 $ 567
=============== =============== =============== ===============
AVERAGE SHARES OUTSTANDING FOR BASIC
EARNINGS PER SHARE 15,647,110 15,122,693 15,442,912 15,074,675
=============== =============== =============== ===============
BASIC EARNINGS PER SHARE $ 0.05 $ 0.01 $ 0.07 $ 0.04
=============== =============== =============== ===============
AVERAGE SHARES OUTSTANDING FOR DILUTED
EARNINGS PER SHARE 16,265,537 16,170,808 16,012,301 15,973,549
=============== =============== =============== ===============
DILUTED EARNINGS PER SHARE $ 0.05 $ 0.01 $ 0.07 $ 0.04
=============== =============== =============== ===============
See accompanying Notes to Consolidated Financial Statements
2
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED JUNE 30,
--------------------------
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,084 $ 567
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 402 310
Deferred distribution fees revenue (429) 233
Deferred income taxes 692 -
Reserve for bad debts 90 -
Reserve for obsolesence (31) -
Changes in assets and liabilities:
Accounts receivable (1,990) (2,154)
Inventories (214) (2,681)
Other current assets (771) 413
Accounts payable and accrued expenses 1,641 1,959
Accrued commissions 336 753
--------------- ---------------
Net cash provided by (used in) operating activities 810 (600)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (423) (272)
Increase in patents and trade marks (36) -
--------------- ---------------
Net cash used in investing activities (459) (272)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 829 318
Proceeds from revolving credit arrangements 338 75
Repayment of revolving credit arrangements (338) (650)
Repayment of long-term debt (52) (42)
--------------- ---------------
Net cash provided by (used in) financing activities 777 (299)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 286 96
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,414 (1,075)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,083 4,352
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,497 $ 3,277
=============== ===============
---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 39 $ 49
=============== ===============
See accompanying Notes to Consolidated Financial Statements
3
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2003
(IN THOUSANDS, EXCEPT SHARE DATA)
(1) OPERATIONS AND ORGANIZATION
Tutogen Medical, Inc. along with its consolidated subsidiaries ("the
Company") is a international precision-tooled biological implant
manufacturer specializing in the sourcing, processing, marketing, and
distribution of human ("allografts") and bovine ("xenograft") tissue
implants for neuro, orthopedic, cardiovascular, reconstructive and general
surgical applications utilizing its patented Tutoplast(R) process of tissue
preservation and viral inactivation.
(2) SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated balance sheets of the Company as of
June 30, 2003 and the unaudited results of operations for the three and
nine months ended June 30, 2003 and 2002 and the unaudited cash flows for
the nine months ended June 30, 2003 and 2002 have been prepared in
conformity with accounting principles generally accepted in the United
States of America for interim financial reporting. Accordingly, they do not
include all of the information and notes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments necessary in
order to make the financial statements not misleading have been made.
Operating results for the three and nine months ended June 30, 2003 are not
necessarily indicative of the results, which may be expected for the fiscal
year ending September 30, 2003. The interim financial statements should be
read in conjunction with the audited consolidated financial statements of
the Company for the year ended September 30, 2002.
NEW ACCOUNTING PRONOUNCEMENTS - In July 2001, the FASB issued SFAS No. 141,
"Business Combinations," and No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 supercedes APB Opinion No. 16, "Business
Combinations" and amends or supercedes a number of related interpretations
of APB 16. SFAS No. 141 eliminates the pooling-of-interests method of
accounting for business combinations, and changes the criteria to recognize
intangible assets apart from goodwill. SFAS No. 142 supercedes APB Opinion
No. 17, "Intangible Assets." Under SFAS No. 142, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed annually,
or more frequently if impairment indicators arise, for impairment. The
Company adopted the provisions of SFAS No. 141 for any business combination
that was initiated after June 30, 2001. The Company adopted SFAS No. 142
beginning in the first fiscal quarter of fiscal 2003. The adoption of SFAS
No. 142 did not have an impact on its results of operations or financial
position.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period in
which it is incurred. The provisions of SFAS No. 143 are effective for
fiscal years beginning after June 15, 2002. The Company adopted SFAS No.
143 beginning in the first fiscal quarter of fiscal 2003. The adoption of
SFAS No. 143 did not have a material impact on its results of operations or
financial position.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal
4
of Long-Lived Assets". SFAS No. 144 supercedes SFAS No. 121, "Accounting
for the impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of". The primary objectives of SFAS No. 144 were to develop one
accounting model based on the framework established in SFAS No. 121, and to
address significant implementation issues. The provisions of SFAS No. 144
are effective for fiscal years beginning after December 15, 2001. The
Company adopted SFAS No. 144 beginning in the first fiscal quarter of
fiscal 2003. The adoption of SFAS No. 144 did not have a material impact on
its results of operations or financial position.
In April 2002, the FASB issued SFAS No. 145, "RESCISSION OF FASB STATEMENTS
4, 44 AND 64, AMENDMENT OF FASB STATEMENT 13, AND TECHNICAL CORRECTIONS".
SFAS No. 145 rescinds the provisions of SFAS No. 4 that requires companies
to classify certain gains and losses from debt extinguishments as
extraordinary items, eliminates the provisions of SFAS No. 44 regarding
transition to the Motor Carrier Act of 1980 and amends the provisions of
SFAS No. 13 to require that certain lease modifications be treated as sale
leaseback transactions. The provisions of SFAS No. 145 related to
classification of debt extinguishment are effective for fiscal years
beginning after May 15, 2002. Commencing January 1, 2003, the Company will
classify debt extinguishment costs within income from operations and will
reclassify previously reported debt extinguishments as such. The provisions
of SFAS No. 145 related to lease modification are effective for
transactions occurring after May 15, 2002. The adoption of SFAS No. 145 did
not have a material impact on its results of operations.
In June 2002, the FASB issued SFAS No. 146, "ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES". SFAS No. 146 nullifies
Emerging Issues Task Force ("EITF") No. 94-3, "Liability Recognition for
certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in as Restructuring)". The principal
difference between SFAS No. 146 and EITF No. 94-3 relates to its
requirements for recognition of a liability for a cost associated with an
exit or disposal activity. SFAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF No. 94-3, a liability for an exit cost
was recognized at the date of an entity's commitment to an exit plan. SFAS
No. 146 is effective for exit and disposal activities that are initiated
after December 31, 2002. The provisions of SFAS No. 146 did not have a
material impact on its financial position or results of operations.
On December 31, 2002, the FASB issued SFAS No. 148, "ACCOUNTING FOR
STOCK-BASED COMPENSATION-TRANSITION AND DISCLOSURE, which amends SFAS No.
123, "ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. (Under
the fair value based method, compensation cost for stock options is
measured when options are issued). In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require more prominent and more
frequent disclosures in financial statements of the effects of stock-based
compensation. The transition guidance and annual disclosure provisions of
SFAS No. 148 are effective for fiscal years ending after December 15, 2002.
The interim disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning after
December 15, 2002. The Company adopted SFAS No. 148 beginning in the second
fiscal quarter of fiscal 2003 and such disclosures are included herein.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends SFAS
No. 133 for certain decisions made by the Board as part of the Derivatives
Implementation Group (DIG) process
5
and is effective for contracts entered into or modified after June 30,
2003. In addition, SFAS No. 149 should be applied prospectively. The
provisions of SFAS No. 149 that relate to SFAS No. 133 Implementation
Issues that have been effective for fiscal quarters that began prior to
June 15, 2003, should continue to be applied in accordance with their
respective effective dates. The Company believes that the adoption of SFAS
No. 149 will not have an impact on the results of operations or financial
position.
In June 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
to improve the accuracy of securities issuers' accounting for such
financial instruments. For earlier transactions, the provisions of SFAS No.
150 take effect at the start of the first interim period beginning after
June 15, 2003. The Company believes that the adoption of SFAS No. 150 will
not have a material impact on the results of operations or financial
position.
(3) PRO FORMA NET INCOME
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - TRANSITION AND DISCLOSURE, an amendment of SFAS No. 123."
SFAS No. 148 amends SFAS No. 123 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, SFAS No. 148
amends the disclosure requirements of SFAS No. 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 following table reconciles net income and basic and diluted earnings
per share (EPS), as reported, to pro-forma net income and basic and diluted
EPS, as if the Company had expensed the fair value of stock options as
permitted by SFAS No. 123, as amended by SFAS No. 148, since it permits
alternative methods of adoption.
Nine Months Ended
June 30,
2003 2002
---- ----
Net Income, as reported: $1,084 $567
Pro-forma, expense as if stock options were
charged against net income 86 45
----- ----
Pro-forma net income using the fair value method $998 $522
Basic EPS:
As reported 0.07 0.04
Pro forma using the fair value method 0.06 0.03
Diluted EPS:
As Reported 0.07 0.04
Pro forma using the fair value method 0.06 0.03
The fair value of each option is estimated on the date of grant using the
Black-Scholes option- pricing model with the following weighted average
assumptions; expected volatility of 45% and 10% for 2003 and 2002
respectively, risk-free interest rate of 1.13% and 4.69% for 2003 and 2002
respectively, and an expected life of three years. A dividend yield of zero
has been assumed.
6
(4) INVENTORIES
Major classes of inventory at June 30, 2003 and September 30, 2002 were as
follows:
June 30, September 30,
2003 2002
Raw materials $ 2,365 $ 1,868
Work in process 2,664 3,209
Finished goods 7,560 6,630
----- -----
12,589 11,707
Less reserves for obsolescence 1,730 1,757
----- -----
$ 10,859 $ 9,950
========= ========
(5) INCOME TAXES
The Company has incurred net operating losses through June 30, 2003 of
approximately $17 million, generated from its U.S. and German operations of
$8 million and $9 million, respectively. These net operating losses are the
primary component of the Company's net deferred tax asset of $2.4 million
as of June 30, 2003, generated from its U.S. and German operations. A full
valuation allowance had been provided on all but $135,000 of the U.S.
deferred tax asset and no valuation allowance has been provided on its
German operations in the Company's consolidated financial statements. The
Company establishes valuation allowances in accordance with the provisions
of FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES. The Company
continually reviews the adequacy and necessity of the valuation allowance
and recognizes these benefits only as reassessment, based on recent
developments including income from new contracts, indicates that it is more
likely than not that the benefits will be realized. As of June 30, 2003 the
Company continues to record the existing valuation allowance on its U.S.
operations and has not provided a valuation allowance on its German
operations based upon future taxable income projections.
(6) SEGMENT DATA
The Company operates principally in one industry providing specialty
surgical products and tissue processing services. These operations include
two geographically determined segments: the United States and Europe
("International"). The accounting policies of these segments are the same
as those described in the summary of significant accounting policies. The
Company evaluates performance based on profit or loss from operations
before income taxes, not including non-recurring and foreign exchange gains
or losses. The Company accounts for inter-segment sales and transfers at
contractually agreed-upon prices.
The Company's reportable segments are strategic business units that offer
products and services to different geographic markets. They are managed
separately because of the differences in these markets as well as their
physical location.
7
A summary of the operations and assets by segment as of and for the three
months ended June 30, 2003 and 2002, respectively are as follows:
2003 INTERNATIONAL UNITED STATES CONSOLIDATED
Gross revenue $ 5,151 $ 6,700 $ 11,851
Less - intercompany (2,918) - (2,918)
-------- -------- --------
Total revenue - third party $ 2,233 $ 6,700 $ 8,933
======== ======== ========
Depreciation and amortization $ 122 $ 60 $ 182
======== ======== ========
Interest expense $ 12 $ 1 $ 13
======== ======== ========
Net income $ 807 $ 11 $ 818
======== ======== ========
Capital expenditures $ 201 $ 73 $ 274
======== ======== ========
Total assets $ 11,953 $ 31,956 $ 43,909
Less intercompany advances - (14,934) (14,934)
-------- -------- --------
$ 11,953 $ 17,022 $ 28,975
======== ======== ========
2002 INTERNATIONAL UNITED STATES CONSOLIDATED
Gross revenue $ 3,872 $ 3,565 $ 7,437
Less - intercompany (2,037) - (2,037)
-------- -------- --------
Total revenue - third party $ 1,835 $ 3,565 $ 5,400
======== ======== ========
Depreciation and amortization $ 140 $ 170 $ 310
======== ======== ========
Interest expense $ 11 $ 1 $ 12
======== ======== ========
Net income $ 266 $ (54) $ 212
======== ======== ========
Capital expenditures $ 67 $ 56 $ 123
======== ======== ========
Total assets $ 10,991 $ 30,257 $ 41,248
Less intercompany advances - (17,952) (17,952)
-------- -------- --------
$ 10,991 $ 12,305 $ 23,296
======== ======== ========
8
A summary of the operations and assets by segment as of and for the nine
months ended June 30, 2003 and 2002, respectively are as follows:
2003 INTERNATIONAL UNITED STATES CONSOLIDATED
Gross revenue $ 11,431 $ 15,508 $ 26,939
Less - intercompany (4,689) - (4,689)
-------- -------- --------
Total revenue - third party $ 6,742 $ 15,508 $ 22,250
======== ======== ========
Depreciation and amortization $ 277 $ 125 $ 402
======== ======== ========
Interest expense $ 36 $ 3 $ 39
======== ======== ========
Net income $ 956 $ 128 $ 1,804
======== ======== ========
Capital expenditures $ 301 $ 122 $ 423
======== ======== ========
Total assets $ 11,953 $ 31,956 $ 43,909
Less intercompany advances - (14,934) (14,934)
-------- -------- --------
$ 11,953 $ 17,022 $ 28,975
======== ======== ========
2002 INTERNATIONAL UNITED STATES CONSOLIDATED
Gross revenue $ 9,950 $ 10,559 $ 20,509
Less - intercompany (4,765) - (4,765)
-------- -------- --------
Total revenue - third party $ 5,185 $ 10,559 $ 15,744
======== ======== ========
Depreciation and amortization $ 73 $ 61 $ 134
======== ======== ========
Interest expense $ 45 $ 4 $ 49
======== ======== ========
Net income $ 443 $ 124 $ 567
======== ======== ========
Capital expenditures $ 138 $ 134 $ 272
======== ======== ========
Total assets $ 10,991 $ 30,257 $ 41,248
Less intercompany advances - (17,952) (17,952)
-------- -------- --------
$ 10,991 $ 12,305 $ 23,296
======== ======== ========
9
(7) RECLASSIFICATION
Certain reclassifications have been made to the 2002 financial statements
to conform to the 2003 presentation.
(8) EXCLUSIVE LICENSE AND DISTRIBUTION AGREEMENT
In April 2003, the Company entered into an Exclusive License and
Distribution Agreement ("Agreement") with Centerpulse Spine-Tech ("CST")
redefining the terms governing its relationship. Effective with this
agreement, CST will continue to market the Tutoplast(R) products for the
spine market, however, CST will become a "stocking distributor", whereby
CST will purchase the spine products from the Company and invoice the
customers directly. It is expected that the impact of the terms of this
Agreement will not have a material effect on revenues or net income for
this fiscal year.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(IN THOUSANDS)
RESULTS OF OPERATIONS
REVENUE AND COST OF REVENUE
Revenues for the three months ended June 30, 2003, increased 65% to $8,933 from
$5,400 for the comparable period. The increase in revenue was partially
attributable to the one-time shipment of $1.9 million of inventory as the result
of a renegotiated U.S. Distribution Agreement with Centerpulse Spine-Tech
("CST"), signed in April 2003 whereby Spine-Tech has become a "stocking
distributor". This new arrangement is expected to have a negative near-term
effect on the Company's annual revenues of approximately $5.0 to $6.0 million as
CST is now purchasing the Company's spine products and invoicing the customer
directly. Previously, the Company invoiced the customer and paid CST a
significant marketing fee included in operating expenses. However, the new
arrangement will significantly reduce the Company's risk of inventory (excess
production and obsolescence) and the risk of slow accounts receivable
collections (slow-paying class of customer, i.e., hospitals and doctors). The
new agreement also eliminates all marketing fees paid to CST currently included
in operating expenses. The end result should be a reduction in gross margins of
approximately 8% to 10% (as a result of invoicing CST directly versus the
end-user customer), the elimination of all marketing fees paid to CST, and an
expected improvement in operating efficiencies. All of these effects are
expected to result in an improvement in net income and cash flow.
The U.S. revenue increased to $6,700 from $3,565 or 88% for the same period last
year. The revenue increase was primarily due to the aforementioned one-time
shipment of inventory of $1.9 million and an increase in the demand for the
Company's Tutoplast(R) bone products for spinal and dental applications sold by
Centerpulse Spine-Tech and Centerpulse Dental, the Company's marketing partners.
These products contributed to an additional $1.0 million of revenue. This
increase was fueled by the improved sales of the Tutoplast(R) specialty graft,
the Puros(TM) Symmetry(TM) PLIF Allograft System and the C-graft. International
revenue increased to $2,233 from $1,835 or 22% for the same period last year.
The increase in international revenue was due to an overall increase in the
European and international distributor business.
Revenues for the nine months ended June 30, 2003 increased 41% to $22,250 from
$15,744 for the comparable period. The increase in revenue primarily occurred
from the U.S. operation as its revenue increased 47% to 15,508 from $10,559 for
the same period last year. Incremental Centerpulse revenues and the one-time
shipment of inventory of $1.9 million contributed the entire increase in
revenue. International revenue increased to $6,742 from $5,185 or 30% for the
same period last year.
Gross margin for the three and nine months ended June 30, 2003 were 59% and 60%,
respectively as compared to 60% and 53%, respectively for the comparable periods
last year. The higher gross margin was primarily due to a favorable mix of low
cost of revenue on the spinal revenues and a decrease in product development and
manufacturing costs from a year ago.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 47% and 42% for the three and nine
months ended
11
June 30, 2003, from the comparable periods last year. Third quarter expenses
increased due to a higher provision for bad debts ($90), foreign exchange
variance ($75), added staffing at the Alachua, Florida facility ($69), travel
expenses ($58), and other expenses ($77). Year-to-date expenses increased due to
added staffing at the Alachua, Florida facility ($253), foreign exchange
variance ($235), higher travel ($101), higher provision for bad debts ($90),
telephone expenses ($47), legal fees ($28), rent ($26), investor
relations/banker ($24) and other expenses ($145). As a percentage of revenues
for year-to-date, General and Administrative expenses remained relatively
constant at 14% in 2003 and 2002.
DISTRIBUTION AND MARKETING
Distribution and marketing expenses increased 31% and 57% for the three and nine
months ended June 30, 2003, from the comparable periods last year. The increase
was primarily due to marketing fees due under the agreements with Centerpulse
Spine and Dental as a result of the increase in revenues of the Company's
Tutoplast bone products for spinal and dental applications. Such fees increased
$48 and $1,478 for the three and nine months ended June 30, 2003,respectively.
The balance of the increase was due to increased sales efforts Internationally.
As a percentage of revenues for year-to-date, Distribution and Marketing
expenses increased from 29% in 2002 to 32% in 2003.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 16% and 34% for the three and nine
months ended June 30, 2003, from the comparable periods last year. The increase
was due to increased development efforts in the Spine, Dental and Ligament
product areas. As a percentage of revenues, Research and Development expenses
remained relatively constant at 4% in 2003 and 2002.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense, for the three months ended June 30, 2003
increased from $34 to $67. This is mainly because of the new addition of new
technical equipments in our international operation. As a percentage of
revenues, Depreciation and Amortization expenses remained relatively constant at
less than 1% compared in 2003 and 2002.
OTHER (EXPENSE) INCOME
Other expense increased for the three and nine months ended June 30, 2003, due
to unfavorable foreign exchange losses as the result of the continued weakening
of the dollar against the euro.
INTEREST EXPENSE
Interest expense remained flat for the quarter ended June 30, 2003 and decreased
20% for the nine months ended June 30, 2003 for the comparable period last year.
The decrease was due to lower revolving credit balances from the International
operation.
INCOME TAXES
The effective tax rate remained at 39% for the three months ended June 30, 2003
and 2002. For the nine months ended June 30, 2003 and 2002, the effective tax
rate was 38% and 29% due to a higher proportion of income from the International
operation.
12
NET INCOME
Net income for the three and nine months ended June 30, 2003 totaled $818 or
$0.05 basic and diluted earnings per share and $1,084 or $0.07 basic and diluted
earnings per share as compared to a net income of $212 or $0.01 basic and
diluted earnings per share and net income of $567 or $0.04 basic and diluted
earnings per share for the same periods last year.
For the nine-month period ended June 30, 2003, the dollar (average for nine
months) has weakened against the euro approximately 19% as compared to the
comparable period last year. In view of our European manufacturing operations,
the weakening of the dollar has unfavorably impacted earnings year-to-date by
approximately $665.
CRITICAL ACCOUNTING POLICIES
The Company's significant accounting policies are more fully described in Note 2
to the consolidated financial statements in the annual report. However, certain
of the accounting policies are particularly important to the portrayal of the
financial position and results of operations and require the application of
significant judgment by management; as a result, they are subject to an inherent
degree of uncertainty. In applying those policies, management uses its judgment
to determine the appropriate assumptions to be used in the determination of
certain estimates. Those estimates are based on historical experience, terms of
existing contracts, observance of trends in the industry, information provided
by customers and information available from other outside sources, as
appropriate. The Company's critical accounting policies include:
INVENTORIES. Inventories are valued at the lower of cost (weighted average
basis) or market. Work in process and finished goods includes costs attributable
to direct labor and overhead. Reserves for slow moving and obsolete inventories
are provided based on historical experience and current product demand. The
adequacy of these reserves are evaluated quarterly.
REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE. Revenue on product sales is
recognized when persuasive evidence of an arrangement exists, the price is fixed
and final, delivery has occurred and there is a reasonable assurance of
collection of the sales proceeds. Oral or written purchase authorizations are
generally obtained from customers for a specified amount of product at a
specified price. Customers are provided with a limited right of return.
Reasonable and reliable estimates of product returns are made in accordance with
SFAS No. 48 and of allowances for doubtful accounts based on significant
historical experience. Revenue from service sales is recognized when the service
procedures have been completed or applicable milestones have been achieved.
Revenue from distribution fees include nonrefundable payments received as a
result of exclusive distribution agreements between the Company and independent
distributors. Distribution fees under these arrangements are recognized as
revenue as products are delivered.
FOREIGN CURRENCY TRANSLATION. The financial position and results of operations
of the Company's foreign subsidiary is measured using local currency (Euro) as
the functional currency. Assets and liabilities of the foreign subsidiary are
translated at the rate of exchange in effect at the end of the period. Revenues
and expenses are translated at the average exchange rated for the period.
Foreign currency translation gains and losses not impacting cash flows are
credited to or charged against other comprehensive income (loss). Foreign
currency translation gains and losses arising from cash transactions are
credited to or charged against current earnings.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, the Company has working capital of $14.2 million as compared
to September 30,
13
2002 of $10.9 million. The Company maintains current working capital credit
lines totaling (euro)1.8 million Euros (approximately $1.9 million) with several
German banks and a $1.0 million credit line with a U.S. bank. At June 30, 2003,
the Company had no borrowings against these lines.
The Company has experienced a positive cash flow of $1,414 for the nine months
ended June 30, 2003 as compared to a negative cash flow of $1,075 for the same
period in 2002.
The Company's ability to generate positive operational cash flow is dependent
upon increasing processing revenues through increased recoveries by tissue banks
in the U.S. and Europe, and the development of additional markets and surgical
applications worldwide. While the Company believes that it continues to make
progress in both these areas, there can be no assurances that changing
governmental regulations will not have a material adverse effect on the results
of operations and cash flow.
Future minimum rental payments required under leases that have initial or
remaining noncancelable lease terms in excess of one year as of June 30, 2003
are as follows:
2004 $ 357
2005 125
2006 33
2007 7
--------------
$ 522
==============
Long-term debt consists of senior debt, 5.75% interest until March 30, 2008 when
terms are renegotiable, due 2008. Future minimum payments as of June 30, 2003
are as follows:
2004 $ 88
2005 88
2006 88
2007 88
2008 485
--------------
$ 837
==============
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 supercedes APB Opinion
No. 16, "Business Combinations" and amends or supercedes a number of related
interpretations of APB 16. SFAS No. 141 eliminates the pooling-of-interests
method of accounting for business combinations, and changes the criteria to
recognize intangible assets apart from goodwill. SFAS No. 142 supercedes APB
Opinion No. 17, "Intangible Assets." Under SFAS No. 142, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed annually, or
more frequently if impairment indicators arise, for impairment. The Company
adopted the provisions of SFAS No. 141 for any business combination that is
initiated after June 30, 2001. The provisions of SFAS No.
14
142 are effective for fiscal years beginning after December 15, 2001. The
Company adopted SFAS No. 142 beginning in the first fiscal quarter of fiscal
2003. The adoption of SFAS No. 142 did not have a material impact on its results
of operations or financial position. In August 2001, the FASB issued SFAS No.
143, "Accounting for Asset Retirement Obligations". SFAS No. 143 requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. The provisions of SFAS No. 143
are effective for fiscal years beginning after June 15, 2002. The Company
adopted SFAS No. 143 beginning in the first fiscal quarter of fiscal 2003. The
adoption of SFAS No. 143 did not have a material impact on its results of
operations or financial position.
SFAS No. 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG LIVED ASSETS"
was to develop one accounting model based on the framework established in SFAS
No. 121, and to address significant implementation issues. The provisions of
SFAS No. 144 are effective for fiscal years beginning after December 15, 2001.
The Company adopted SFAS No. 144 beginning in the first fiscal quarter of fiscal
2003. The adoption of SFAS No. 144 did not have a material impact on its results
of operations or financial position.
In April 2002, the FASB issued SFAS No. 145, "RESCISSION OF FASB STATEMENTS 4,
44 AND 64, AMENDMENT OF FASB STATEMENT 13, AND TECHNICAL CORRECTIONS". SFAS No.
145 rescinds the provisions of SFAS No. 4 that requires companies to classify
certain gains and losses from debt extinguishments as extraordinary items,
eliminates the provisions of SFAS No. 44 regarding transition to the Motor
Carrier Act of 1980 and amends the provisions of SFAS No. 13 to require that
certain lease modifications is treated as sale leaseback transactions. The
provisions of SFAS No. 145 related to classification of debt extinguishment are
effective for fiscal years beginning after May 15, 2002. Commencing January 1,
2003, the Company will classify debt extinguishment costs within income from
operations and will reclassify previously reported debt extinguishments as such.
The provisions of SFAS No. 145 related to lease modification are effective for
transactions occurring after May 15, 2002. The adoption of SFAS No. 145 did not
have a material impact on its results of operations.
In June 2002, the FASB issued SFAS No. 146, "ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL ACTIVITIES". SFAS No. 146 nullifies Emerging Issues Task
Force ("EITF") No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in as Restructuring)". Provisions of SFAS No. 145 related to lease modification
are effective for transactions occurring after May 15, 2002. The adoption of
SFAS No. 145 did not have a material impact on its results of operations.
The principal difference between SFAS No. 146 and EITF No. 94-3 relates to its
requirements for recognition of a liability for a cost associated with an exit
or disposal activity. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under EITF No. 94-3, a liability for an exit cost was recognized at
the date of an entity's commitment to an exit plan. SFAS No. 146 is effective
for exit and disposal activities that are initiated after December 31, 2002. The
provisions of SFAS No. 146 did not have a material impact on its financial
position or results of operations.
On December 31, 2002, the FASB issued SFAS No. 148, "ACCOUNTING FOR STOCK-BASED
COMPENSATION-TRANSITION AND DISCLOSURE, which amends SFAS No. 123, "ACCOUNTING
FOR STOCK-BASED COMPENSATION. SFAS 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. (Under the fair value based method,
compensation cost for stock options is measured when options are issued). In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require more
15
prominent and more frequent disclosures in financial statements of the effects
of stock-based compensation. The transition guidance and annual disclosure
provisions of SFAS No. 148 are effective for fiscal years ending after December
15, 2002. The interim disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning after December 15,
2002. The Company adopted SFAS No. 148 beginning in the second fiscal quarter of
fiscal 2003 and such disclosures are included herein.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends SFAS No. 133
for certain decisions made by the Board as part of the Derivatives
Implementation Group (DIG) process and is effective for contracts entered into
or modified after June 30, 2003. In addition, SFAS No. 149 should be applied
prospectively. The provisions of SFAS No. 149 that relate to SFAS No. 133
Implementation Issues that have been effective for fiscal quarters that began
prior to June 15, 2003, should continue to be applied in accordance with their
respective effective dates. The Company believes that the adoption of SFAS No.
149 will not have an impact on the results of operations or financial position.
In June 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" to improve the
accuracy of securities issuers' accounting for such financial instruments. For
earlier transactions, the provisions of SFAS No. 150 take effect at the start of
the first interim period beginning after June 15, 2003. The Company believes
that the adoption of SFAS No. 150 will not have a material impact on the results
of operations or financial position.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13 a-14. Based
upon that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) that is required to be
included in the Company's periodic filings with the Securities and Exchange
Commission. There have been no significant changes in the Company's internal
controls or, to the Company's knowledge, in other factors that could
significantly affect those internal controls subsequent to the date the Company
carried out its evaluation.
PART II. OTHER INFORMATION
ITEM 6. REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter ended June 30,
2003.
16
CERTIFICATION
Each of the undersigned hereby certifies in his capacity as an officer of
Tutogen Medical, Inc. (the "Company") that the Quarterly Report of the Company
on Form 10-QSB for the periods ended June 30, 2003 fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 and that
the information contained in such report fairly presents, in all material
respects, the financial condition of the Company at the end of such periods and
the results of operations of the Company for such periods.
SIGNATURES
Registrant has duly caused this report to be signed on its behalf by the
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
undersigned, thereunto duly authorized.
TUTOGEN MEDICAL, INC.
Date: August 8, 2003 /s/ Manfred Krueger
-------------------
President and Chief Executive Officer
Date: August 8, 2003 /s/ George Lombardi
-----------------------
Chief Financial Officer
(Principal Financial and Accounting Officer)
17
CERTIFICATION
I CERTIFY THAT:
1. I HAVE REVIEWED THIS QUARTERLY REPORT ON FORM 10-QSB OF TUTOGEN MEDICAL,
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 STATEMENT 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 THE 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 OFFICER (S) AND I ARE RESPONSIBLE FOR
ESTABLISHING AND MAINTAINING DISCLOSURE CONTROLS AND PROCEDURES (AS DEFINED
IN EXCHANGE ACT RULES 13A-15 (E) AND 15D-15 (E)) FOR THE REGISTRANT AND
HAVE:
A) DESIGNED SUCH DISCLOSURE CONTROLS AND PROCEDURES, OR CAUSED SUCH
DISCLOSURE CONTROLS AND PROCEDURES TO BE DESIGNED UNDER OUR
SUPERVISION, 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 REPORT IS BEING PREPARED;
B) EVALUATED THE EFFECTIVENESS OF THE REGISTRANT'S DISCLOSURE CONTROLS
AND PROCEDURES AND PRESENTED IN THIS REPORT OUR CONCLUSIONS ABOUT THE
EFFECTIVENESS OF THE DISCLOSURE CONTROLS AND PROCEDURES, AS OF THE END
OF THE PERIOD COVERED BY THIS REPORT BASED ON SUCH EVALUATION AND;
C) DISCLOSED IN THIS REPORT ANY CHANGE IN THE REGISTRANT'S INTERNAL
CONTROL OVER FINANCIAL REPORTING THAT OCCURRED DURING THE REGISTRANT'S
MOST RECENT FISCAL QUARTER (THE REGISTRANT'S FOURTH FISCAL QUARTER IN
THE CASE OF AN ANNUAL REPORT) THAT HAS MATERIALLY AFFECTED, OR IS
REASONABLY LIKELY TO MATERIALLY AFFECT THE REGISTRANT'S INTERNAL
CONTROL OVER FINANCIAL REPORTING; AND
5. THE REGISTRANT'S OTHER CERTIFYING OFFICERS AND I HAVE DISCLOSED, BASED ON
OUR MOST RECENT EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING, 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 AND MATERIAL WEAKNESSES 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.
CERTIFICATION PAGE 2
B) ANY FRAUD, WHETHER OR NOT MATERIAL, THAT INVOLVES MANAGEMENT OR OTHER
EMPLOYEES WHO HAVE A SIGNIFICANT ROLE IN THE REGISTRANT'S INTERNAL
CONTROLS.
DATE: AUGUST 8, 2003
BY:
NAME: /S/ GEORGE LOMBARDI
TITLE: CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY
----------------------------
CERTIFICATION
I CERTIFY THAT:
1. I HAVE REVIEWED THIS QUARTERLY REPORT ON FORM 10-QSB OF TUTOGEN MEDICAL,
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 STATEMENT 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 THE 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 OFFICER (S) AND I ARE RESPONSIBLE FOR
ESTABLISHING AND MAINTAINING DISCLOSURE CONTROLS AND PROCEDURES (AS DEFINED
IN EXCHANGE ACT RULES 13A-15 (E) AND 15D-15 (E)) FOR THE REGISTRANT AND
HAVE:
C) DESIGNED SUCH DISCLOSURE CONTROLS AND PROCEDURES, OR CAUSED SUCH
DISCLOSURE CONTROLS AND PROCEDURES TO BE DESIGNED UNDER OUR
SUPERVISION, 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 REPORT IS BEING PREPARED;
D) EVALUATED THE EFFECTIVENESS OF THE REGISTRANT'S DISCLOSURE CONTROLS
AND PROCEDURES AND PRESENTED IN THIS REPORT OUR CONCLUSIONS ABOUT THE
EFFECTIVENESS OF THE DISCLOSURE CONTROLS AND PROCEDURES, AS OF THE END
OF THE PERIOD COVERED BY THIS REPORT BASED ON SUCH EVALUATION AND;
C) DISCLOSED IN THIS REPORT ANY CHANGE IN THE REGISTRANT'S INTERNAL
CONTROL OVER FINANCIAL REPORTING THAT OCCURRED DURING THE REGISTRANT'S
MOST RECENT FISCAL QUARTER (THE REGISTRANT'S FOURTH FISCAL QUARTER IN
THE CASE OF AN ANNUAL REPORT) THAT HAS MATERIALLY AFFECTED, OR IS
REASONABLY LIKELY TO MATERIALLY AFFECT THE REGISTRANT'S INTERNAL
CONTROL OVER FINANCIAL REPORTING; AND
5. THE REGISTRANT'S OTHER CERTIFYING OFFICERS AND I HAVE DISCLOSED, BASED ON
OUR MOST RECENT EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING, 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 AND MATERIAL WEAKNESSES 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.
CERTIFICATION PAGE 2
C) ANY FRAUD, WHETHER OR NOT MATERIAL, THAT INVOLVES MANAGEMENT OR OTHER
EMPLOYEES WHO HAVE A SIGNIFICANT ROLE IN THE REGISTRANT'S INTERNAL
CONTROLS.
DATE: AUGUST 8, 2003
BY:
NAME: /S/ MANFRED K. KRUEGER
TITLE: PRESIDENT AND CEO
----------------------------