**FORM 10-QSB**

 

**Securities and Exchange Commission**

**Washington,D. C. 20549**

 

**(MarkOne)**
| **ý** |                                                                                                                                                                                                                                                                                                                                               | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**        |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                                                                                                                                                               |                                                                                          |
|       | **For the quarterly period ended   September 30, 2002**                                                                                                                                                                                                                                                                                  |
|       |                                                                                                                                                                                                                                                                                                                                               |                                                                                          |
| **OR**     |
|       |                                                                                                                                                                                                                                                                                                                                               |                                                                                          |
| **o**      |                                                                                                                                                                                                                                                                                                                                               | **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   0-16257**                                                                                                                                                                                                                                                                                                     |
|            |                                                                                                                                                                                                                                                                                                                                                    |                                                                                               |  |

 

| **Pace Medical, Inc.**                                             |
|--------------------------------------------------------------------|
| (Exact name of small  business issuer as specified in its charter) |
|                                                               |   |   |
| **Massachusetts**                                                  |   | **4-2867416** |
| (State or other  jurisdiction of  incorporation or organization)   |   | (I.R.S. Employer  identification No.) |
|                                                               |   |   |
| **391  Totten Pond Road, Waltham, Massachusetts 02451**            |
| (Address of principal  executive offices)                          |
|                                                               |   |   |
| **(781)  890-5656**                                                |
| (Issuer’s telephone  number,  including area code)            |

 

Indicate by checkmark whether the issuer (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

 

Yes ý  No o

 

Indicate thenumber of shares outstanding of each of the issuer’s classes of common equity,as of November 13, 2002.

 

3,375,870 sharesof Common Stock, par value $.01 per share

 

 

----

 

**PART I - FINANCIAL INFORMATION**

 
| **Item  1.        Financial Statements.**     |
|---------------------------------------------------------------------------------------|
|                                                                                  |
| a)     Condensed  Consolidated Balance Sheets                |
|                                                                                  |
| b)     Condensed  Consolidated Statements of Operations      |
|                                                                                  |
| c)     Condensed  Consolidated Statements of Cash Flows      |
|                                                                                  |
| d)     Notes  to Condensed Consolidated Financial Statements |

 

2

----

 

**PACE MEDICAL, INC. AND WHOLLY-OWNEDSUBSIDIARY**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

 
|                                                   |   | **SEPTEMBER 30, 2002** |      | **DECEMBER 31, 2001** |   |
|--------------------------------------------------------|--------|------------------------|-----------|-----------------------|--------|
|                                                   |   | **(Unaudited)**        |      | **(See note below)**  |   |
|                                                   |   |                   |      |                  |   |
| ASSETS                                                 |   |                   |      |                  |   |
|                                                   |   |                   |      |                  |   |
| Current assets:                                        |   |                   |      |                  |   |
| Cash and cash  equivalents                             |   | $                      | 1,113,394 |                  | $      | 1,436,366 |   |
| Accounts  receivable                                   |   | 304,652                |      | 202,450               |   |
| Inventories:                                           |   |                   |      |                  |   |
| Raw materials                                          |   | 322,728                |      | 289,381               |   |
| Work-in-process                                        |   | 137,469                |      | 35,495                |   |
| Finished goods                                         |   | 118,958                |      | 114,901               |   |
|                                                   |   | 579,155                |      | 439,777               |   |
| Other current  assets                                  |   | 13,813                 |      | 24,222                |   |
| Total current  assets                                  |   | 2,011,014              |      | 2,102,815             |   |
| Plant and  equipment, net                              |   | 27,828                 |      | 39,808                |   |
| Other assets                                           |   | 209,574                |      | 169,624               |   |
| TOTAL ASSETS                                           |   | $                      | 2,248,416 |                  | $      | 2,312,247 |   |
|                                                   |   |                   |      |                  |   |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY             |   |                   |      |                  |   |
|                                                   |   |                   |      |                  |   |
| Current  liabilities:                                  |   |                   |      |                  |   |
| Accounts payable                                       |   | $                      | 151,632   |                  | $      | 133,366 |   |
| Accrued expenses                                       |   | 14,887                 |      | 98,195                |   |
| Total current  liabilities                             |   | 166,519                |      | 231,561               |   |
|                                                   |   |                   |      |                  |   |
| Shareholders’  equity:                            |   |                   |      |                  |   |
| Common stock                                           |   | 34,009                 |      | 34,009                |   |
| Additional  paid-in capital                            |   | 3,147,150              |      | 3,147,151             |   |
| Cumulative  translation adjustment                     |   | 96,303                 |      | 16,555                |   |
| Accumulated  deficit                                   |   | (1,163,818             | )         | (1,085,282            | )      |
|                                                   |   |                   |      | 2,112,433             |   |
|                                                   |   |                   |      |                  |   |
| Less Treasury  Stock, at Cost                          |   | (31,747                | )         | (31,747               | )      |
| Total  Shareholders’ Equity                       |   | 2,081,897              |      | 2,080,686             |   |
|                                                   |   |                   |      |                  |   |
| TOTAL  LIABILITIES AND  SHAREHOLDERS’ EQUITY |   | $                      | 2,248,416 |                  | $      | 2,312,247 |   |

 

Note:                               Thebalance sheet at December 31, 2001 has been taken from the audited financialstatements at that date.

 

See accompanyingnotes to condensed consolidated financial statements.

 

3

----

 

 

**PACE MEDICAL, INC. AND WHOLLY-OWNEDSUBSIDIARY**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

(Unaudited)

 
|                           |   | **For the Three Months  Ended September 30** |    | **For the Nine Months  Ended September 30** |   |
|--------------------------------|--------|----------------------------------------------|---------|---------------------------------------------|--------|
|                           |   | **2002**                                     |    | **2001**                                    |   | **2002** |   | **2001** |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Net Sales                      |   | $                                            | 377,627 |                                        | $      | 437,617 |   | $ | 852,147 |   | $ | 1,215,172 |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Cost of sales                  |   | 189,450                                      |    | 206,722                                     |   | 418,790 |   | 608,286 |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
|                           |   | 188,177                                      |    | 230,895                                     |   | 433,357 |   | 606,886 |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Operating  expenses            |   | 171,614                                      |    | 198,140                                     |   | 534,221 |   | 589,479 |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Income (loss)  from operations |   | 16,563                                       |    | 32,755                                      |   | (100,864 | ) | 17,407 |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Other income                   |   | 6,857                                        |    | 10,612                                      |   | 22,328 |   | 38,418 |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Net income  (loss)             |   | $                                            | 23,420  |                                        | $      | 43,367 |   | $ | (78,536 | ) | $ | 55,825 |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Net income  (loss) per share:  |   |                                         |    |                                        |   |   |   |   |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Basic                          |   | $                                            | 0.01    |                                        | $      | .01 |   | $ | (0.02 | ) | $ | .02 |   |
|                           |   |                                         |    |                                        |   |   |   |   |   |
| Diluted                        |   | $                                            | 0.01    |                                        | $      | .01 |   | $ | (0.02 | ) | $ | .02 |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

4

----

 

## **PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

(Unaudited)

 
|                                                                                                 |   | **NINE MONTHS ENDED  SEPTEMBER 30** |      |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|
|                                                                                                 |   | **2002**                            |      | **2001** |   |
|                                                                                                 |   |                                |      |   |   |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                               |   |                                |      |   |   |
| Net income  (loss)                                                                                   |   | $                                   | (78,536   | ) | $ | 55,825 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |   |                                |      |   |   |
| Depreciation and  amortization                                                                       |   | 12,664                              |      | 14,555 |   |
| Change in assets  and liabilities, net:                                                              |   | (251,416                            | )         | (79,680 | ) |
|                                                                                                 |   |                                |      |   |   |
| Net cash used in  operating activities                                                               |   | (317,288                            | )         | (9,300 | ) |
|                                                                                                 |   |                                |      |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                               |   |                                |      |   |   |
|                                                                                                 |   |                                |      |   |   |
| Purchases of  property and equipment                                                                 |   | (5,684                              | )         | (8,588 | ) |
|                                                                                                 |   |                                |      |   |   |
| NET DECREASE IN  CASH AND CASH EQUIVALENTS                                                           |   | (322,972                            | )         | (17,888 | ) |
|                                                                                                 |   |                                |      |   |   |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                                                    |   | 1,436,366                           |      | 1,252,352 |   |
|                                                                                                 |   |                                |      |   |   |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                                                          |   | $                                   | 1,113,394 |   | $ | 1,234,464 |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

5

----

 

**PACE MEDICAL, INC. AND WHOLLY-OWNEDSUBSIDIARY**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

1.             The accompanying unauditedconsolidated financial statements and these notes have been condensed and donot contain all disclosures required by generally accepted accountingprinciples.  See notes to auditedconsolidated financial statements contained in the Company’s annual report.

 

2.             In the opinion of the Company, theaccompanying unaudited condensed financial statements contain all adjustments,all of which are normal and recurring, necessary to present fairly thefinancial position of the Company and its wholly-owned subsidiary as ofSeptember 30, 2002 and the results of their operations for the three and ninemonths ended September 30, 2002 and September 30, 2001 and their cash flows forthe nine months ended September 30, 2002 and September 30, 2001.

 

3.             The Company prepares its financialinformation using the same accounting principles as for its annual financialstatements except that no physical inventories were taken during either of theperiods ended September 30, 2002 or 2001. Cost of sales for such periods was calculated primarily using standardcost methods.

 

4.             The results of operations for thethree and nine months ended September 30, 2002 are not necessarily indicativeof the results to be expected for the full year.

 

5.             The denominator used to determinebasic net income (loss) per share includes the weighted average common sharesoutstanding during the quarter.  Thedenominator used to determine diluted net income per share includes the sharesused in the calculation of basic net income per share plus the weighted averageoptions outstanding during the period using the treasury-stock method.

 
|                                |   | **For the  three months ended September 30, 2002** |   |
|-------------------------------------|--------|----------------------------------------------------|--------|
|                                |   | **Income  (Loss)  (Numerator)**                    |   | **Shares  (Denominator)** |   | **Per Share  Amount** |   |
|                                |   |                                               |   |   |   |   |   |
| Net Income (Loss)                   |   | $                                                  | 23,420 |   |   |   |   |   |
|                                |   |                                               |   |   |   |   |   |
| Weighted-average shares outstanding |   | —                                             |   | 3,354,870 |   |   |   |
|                                |   |                                               |   |   |   |   |   |
| Basic net income (loss) per share   |   | 23,420                                             |   | 3,354,870 |   | $ | 0.01 |   |
|                                |   |                                               |   |   |   |   |   |
| Effect of dilutive securities       |   | —                                             |   | 9,242 |   |   |   |
|                                |   |                                               |   |   |   |   |   |
| Diluted net income (loss) per share |   | $                                                  | 23,420 |   | 3,364,112 |   | $ | 0.01 |   |

 

6

----

 
|                                 |   | **For the three months ended September 30, 2001** |   |
|--------------------------------------|--------|---------------------------------------------------|--------|
|                                 |   | **Income (Loss)  (Numerator)**                    |   | **Shares  (Denominator)** |   | **Per Share  Amount** |   |
|                                 |   |                                              |   |   |   |   |   |
| Net Income  (Loss)                   |   | $                                                 | 43,367 |   |   |   |   |   |
|                                 |   |                                              |   |   |   |   |   |
| Weighted-average  shares outstanding |   | —                                            |   | 3,354,870 |   |   |   |
|                                 |   |                                              |   |   |   |   |   |
| Basic net income  (loss) per share   |   | $                                                 | 43,367 |   | 3,354,870 |   | $ | 0.01 |   |
|                                 |   |                                              |   |   |   |   |   |
| Effect of  dilutive securities       |   | —                                            |   | 2,669 |   |   |   |
|                                 |   |                                              |   |   |   |   |   |
| Diluted net  income (loss) per share |   | $                                                 | 43,367 |   | 3,357,539 |   | $ | 0.01 |   |

 

 
|                                 |   | **For the nine months ended September 30, 2002** |    |
|--------------------------------------|--------|--------------------------------------------------|---------|
|                                 |   | **Income (Loss)  (Numerator)**                   |    | **Shares  (Denominator)** |   | **Per Share  Amount** |   |
|                                 |   |                                             |    |   |   |   |   |
| Net Income  (Loss)                   |   | $                                                | (78,536 | ) |   |   |   |   |
|                                 |   |                                             |    |   |   |   |   |
| Weighted-average  shares outstanding |   | —                                           |    | 3,354,870 |   |   |   |
|                                 |   |                                             |    |   |   |   |   |
| Basic net income  (loss) per share   |   |                                             | (78,536 | ) | 3,354,870 |   | $ | (0.02 | ) |
|                                 |   |                                             |    |   |   |   |   |
| Effect of  dilutive securities       |   | —                                           |    | — |   |   |   |
|                                 |   |                                             |    |   |   |   |   |
| Diluted net  income (loss) per share |   | $                                                | (78,536 | ) | 3,354,870 |   | $ | (0.02 | ) |

 

 
|                                 |   | **For the nine months ended September 30, 2001** |   |
|--------------------------------------|--------|--------------------------------------------------|--------|
|                                 |   | **Income (Loss)  (Numerator)**                   |   | **Shares  (Denominator)** |   | **Per Share  Amount** |   |
|                                 |   |                                             |   |   |   |   |   |
| Net Income  (Loss)                   |   | $                                                | 55,825 |   |   |   |   |   |
|                                 |   |                                             |   |   |   |   |   |
| Weighted-average  shares outstanding |   | —                                           |   | 3,375,870 |   |   |   |
|                                 |   |                                             |   |   |   |   |   |
| Basic net income  (loss) per share   |   | $                                                | 55,825 |   | 3,375,870 |   | $ | 0.01 |   |
|                                 |   |                                             |   |   |   |   |   |
| Effect of  dilutive securities       |   | —                                           |   | 10,109 |   |   |   |
|                                 |   |                                             |   |   |   |   |   |
| Diluted net  income (loss) per share |   | $                                                | 55,825 |   | 3,385,979 |   | $ | 0.01 |   |

 

7

----

 

6.                 The Company has adopted theprovisions of SFAS No. 130,  “ReportingComprehensive Income”.  Comprehensiveincome includes net income (loss)  andforeign currency translation adjustments. Comprehensive income for the three and nine months ended September 30,2002 and 2001 is as follows:

 
|                             |   | **Three Months Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|----------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                             |   | **2002**                              |   | **2001**                             |   | **2002** |   | **2001** |   |
|                             |   |                                  |   |                                 |   |   |   |   |   |
| Net Income  (Loss)               |   | $                                     | 23,420 |                                 | $      | 43,367 |   | $ | (78,536 | ) | $ | 55,825 |   |
|                             |   |                                  |   |                                 |   |   |   |   |   |
| Currency  Translation Adjustment |   | 34,136                                |   | 36,944                               |   | 79,748 |   | (564 | ) |
|                             |   |                                  |   |                                 |   |   |   |   |   |
| Total                            |   | $                                     | 57,556 |                                 | $      | 80,311 |   | $ | 1,212 |   | $ | 55,261 |   |

 

8

----

 

**Item 2.**                    Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

** **

**PACE MEDICAL, INC. AND WHOLLY-OWNEDSUBSIDIARY**

 

**MANAGEMENT’S DISCUSSION AND ANALYSISOF**

### **FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

## **FinancialCondition**

As of September30, 2002, the Company had cash and cash equivalents of $1,113,394 and workingcapital of $1,844,495.   Working capitaldecreased $26,759 since December 31, 2001 owing to a decrease in overall salesrevenue.

 

The Companyexpects to maintain a sound financial base for the balance of fiscal 2002.  Management continues to believe that thecurrent level of working capital, coupled with the flexibility of the Company’scost structure, should suffice to ensure that on-going operations are financedadequately.

 

**Financial Results - Three Monthsended September 30, 2002 versus Three Months ended September 30, 2001**

 

Sales in the thirdquarter of 2002 decreased 14% from the sales posted in the third quarter of2001.  The decrease in sales was causedby lower volume of products being shipped to our domestic OEM customers.

 

The Company’smargins in the third quarter decreased from those seen in 2001 (from 53% in2001 to 50% in 2002).   It should benoted that pricing has continued to remain firm on all products.

 

Operating expenseswere $171,614 in the three months ended September 30, 2002 versus $198,140 inthe three months ended September 30, 2001. The decrease was due to decreasedadministration and marketing related expenses. Management anticipates some increase in its operating expendituresduring the balance of 2002.  This levelwill also suffice to maintain the Company’s research and development efforts indeveloping new products in the temporary pacing field.

 

No tax provisionwas recorded for the three months ended September 30, 2002 owing to theCompany’s ability to use net operating loss carry forwards in both the U.S. andUnited Kingdom.

 

Net income for thequarter was $23,420 or $0.01 per share versus net income of  $43,367 or $0.01 per share for thecomparable period in 2001.

 

9

----

 

**Financial Results - Nine Months endedSeptember 30, 2002 versus Nine Months ended September 30, 2001**

 

Sales in the ninemonths ended September 30, 2002 decreased 30% from the amount posted in thenine months ended in September 30, 2001.  This decrease is due to a decrease in our domestic OEM business.

 

The Company’smargins for the year-to-date period increased 1% from those of last year (from50% in 2001 to 51% in 2002).  Thisoccurred due to a change in the product mix and unfavorable productionvariances.

 

Operating expenseswere lower for the nine months ended September 30, 2002 versus the nine monthsended September 30, 2001.  Managementanticipates some increase in its operating expenditures during the balance of 2002.  This level will also suffice to maintain theCompany’s research and development efforts in developing new products in thetemporary pacing field.

 

No tax benefit wasrecorded for the nine months ended September 30, 2002 owing to uncertaintyregarding the Company’s ability to use net operating loss carry forwards inboth the U.S. and U.K.

 

Net loss for thenine months was $78,536 or $0.02 per share, versus net income of  $55,825 or $0.02 per share for thecomparable period in 2001.

 

**Factors That May Affect FutureResults**

 

From time to time,information provided by the Company or statements made by its employees maycontain “forward-looking” information which involves risks anduncertainties.  In particular,statements contained in this report which are not historical facts (includingbut not limited to the Company’s expectations regarding business strategy,pricing, anticipated operating results, operating expenses and anticipatedworking capital) may be “forward-looking” statements.  The Company’s actual results may differ from those stated in anyforward-looking statements.  Factorsthat may cause such differences include, but are not limited to, risksassociated with the introduction of new products, development of markets fornew products offered by the Company, personnel requirements, the Company’srelationships with distributors and OEM’s, the economic health of such OEM’s,government regulation, competition and general economic conditions.

 

10

----

 

## **Item 3.**                    Controls and Procedures

 

The Company’s President and Chief Executive Officer has conducted anevaluation of the effectiveness of disclosure controls and procedures pursuantto Exchange Act Rule 13a-14.  Based onthat evaluation, the President and Chief Executive Officer concluded that thedisclosure controls and procedures are effective in ensuring that all materialinformation required to be filed in this quarterly report has been made knownto him in a timely fashion. There have been no significant changes in internalcontrols, or in factors that could significantly affect internal controls,subsequent to the date the President and Chief Executive Officer completed hisevaluation.

 

**PART II - OTHER INFORMATION**

 

**Item 6.****                    Exhibitsand Reports on Form 8-K**

 

(a)                                  Exhibits:

 

99.1 Certificationpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.

 

(b)           Reports on Form8-K:  None

 

11

----

 

**SIGNATURES**

 

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|                           | PACE MEDICAL, INC.         |   |
|--------------------------------|----------------------------|--------|
|                           | (Registrant)               |   |
|                           |                       |
|                           |                       |
| Date:   November 13, 2002 | /s/ Ralph E. Hanson        |
|                           | Ralph E. Hanson, President |
|                           | and Treasurer              |

 

12

----

 

**CERTIFICATION**

 

 

I, Ralph E. Hanson, certify that:

 

1.             I havereviewed this quarterly report on Form 10-QSB of Pace Medical, Inc.;

 

2.                                     Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                     Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                     Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have:

 

a)             designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)            evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)             presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.                                     Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)             all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

13

----

 

b)            any fraud, whether ornot material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.                                     Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
|   | Date: November 13, 2002                                                                 |
|--------|-----------------------------------------------------------------------------------------|
|   |                                                                                    |
|   |                                                                                    |
|   | /s/ Ralph E. Hanson                                                                     |
|   | Ralph E. Hanson,                                                                        |
|   | President and Treasurer  (principal executive officer and  principal financial officer) |

 

14

----