| **UNITED  STATES  SECURITIES AND EXCHANGE COMMISSION** |   | OMB  APPROVAL                                          |
|--------------------------------------------------------|--------|--------------------------------------------------------|
| OMB Number: 3235-0416                                  |
| **Washington,  D.C. 20549**                            |   | Expires: December 31, 2005                             |
|                                                   |   | Estimated average burden  hours per response:   174.00 |
| **FORM  10-QSB**                                       |   |

****

**(Mark One)**

 
|   | ý                                            | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                 |
|--------|---------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **For the Quarterly Period Ended March 31, 2003** |
|   |                                              | **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 0-30185**

 

**Gasel Transportation Lines, Inc.****** (Exact name ofregistrant as specified in its charter)
| **Ohio**                                                   | **31-1239328**                     |
|------------------------------------------------------------|------------------------------------|
| (State of incorporation)                                   | (IRS Employer  Identification No.) |
| **County Road 10, Route 4, Box 181A, Marietta, OH  45750** |
| (Address of principal  executive offices)                  |
| **(740) 373-6479**                                         |
| (Registrant’s telephone  number, including area code) |

** **

----

 

(Former name, former addressand former fiscal year, if changed since last report)

 

 

### **APPLICABLEONLY TO CORPORATE ISSUERS**

State the number of shares outstanding of each ofthe issuer’s classes of common equity, as of the latest practicable date:

As of May 19, 2003, therewere 9,877,966 common shares, no par value issued and outstanding, with 7,900of them held in the treasury.

Transitional Small Business Disclosure Format (Checkone): Yes o No ý

 

 

----

 

 

 

 

 
| **PART 1 — FINANCIAL INFORMATION**                                                                |   |
|--------------------------------------------------------------------------------------------------------|--------|
|                                                                                                   |   |
| **Item 1. Financial Statements.**                                                                      |   |
| ** **

                                                                                      |   |
| TABLE  OF CONTENTS                                                                                     |   |
|                                                                                                   |   |
|                                                                                                   |   |
|                                                                                                   |   |
|                                                                                                   |   |
|                                                                                                   |   |
|                                                                                                   |   |
| CONSOLIDATED FINANCIAL STATEMENTS                                                                      |   |
|                                                                                                   |   |
|                                                                                                   |   |
| Consolidated Balance Sheet  At March 31, 2003 (Unaudited)                                              | 3      |
|                                                                                                   |   |
| Statements of  Consolidated Operations for the  Three Months Ended March 31, 2003 and 2002 (Unaudited) |   |
| 5                                                                                                      |
|                                                                                                   |   |
| Statements of  Consolidated Cash Flows for the  Three Months Ended March 31, 2003 and 2002 (Unaudited) |   |
| 6                                                                                                      |
|                                                                                                   |   |
| Notes to  Consolidated Financial Statements                                                            | 8      |

 

 

 

 

2

----

 

GASELTRANSPORTATION LINES, INC.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 
|                                        |   | **March 31,  2003** |       |
|---------------------------------------------|--------|---------------------|------------|
| **ASSETS**                                  |   | **(Unaudited)**     |       |
|                                        |   |                |       |
| Current Assets                              |   |                |       |
| Cash & Cash Equivalents                 |   | $                   | 44,768     |   |
| Accounts Receivable-Trade, Net of           |   |                |       |
| Allowance of $74,000                        |   | 1,715,109           |       |
| Inventory                                   |   | 166,402             |       |
| Prepaid Expenses and Other Current Assets   |   | 309,442             |       |
|                                        |   |                |       |
| Total Current Assets                        |   | 2,235,721           |       |
|                                        |   |                |       |
| Property and Equipment                      |   |                |       |
| Land and Buildings                          |   | 770,054             |       |
| Tractors                                    |   | 11,794,086          |       |
| Trailers                                    |   | 4,567,702           |       |
| Shop Equipment                              |   | 405,285             |       |
| Office Equipment                            |   | 218,820             |       |
|                                        |   | 17,755,947          |       |
| Less Accumulated Depreciation               |   | 9,529,140           |       |
|                                        |   |                |       |
| Net Property and Equipment                  |   | 8,226,807           |       |
|                                        |   |                |       |
| Trailers – Held for Sale               |   | 443,258             |       |
|                                        |   |                |       |
| Other Assets                                |   |                |       |
| Goodwill                                    |   | 353,438             |       |
| Mortgage Receivable, Net of Current Portion |   | 169,267             |       |
| Other                                       |   | 116,190             |       |
|                                        |   |                |       |
| Total Other Assets                          |   | 638,895             |       |
|                                        |   |                |       |
| TOTAL ASSETS                                |   | $                   | 11,544,681 |   |
|                                        |   |                |       |

 

 

 

Seeaccompanying notes to consolidated financial statements.

 

3

----

GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 

 
|                                                 |   | **March 31,  2003** |   |
|------------------------------------------------------|--------|---------------------|--------|
| **LIABILITIES  AND STOCKHOLDERS' EQUITY (DEFICIT)**  |   | **(Unaudited)**     |   |
|                                                 |   |                |   |
| Current Liabilities                                  |   |                |   |
| Cash Overdraft                                       |   | $147,275            |   |
| Notes Payable                                        |   | 1,387,902           |   |
| Accounts Payable-Trade                               |   | 736,347             |   |
| Accrued Brokerage, Contract Labor,                   |   |                |   |
| Interest and Other Expenses                          |   | 663,445             |   |
| Accrued Payroll Taxes                                |   | 286,955             |   |
| Current Portion of Long Term Debt                    |   | 5,238,937           |   |
|                                                 |   |                |   |
| Total Current Liabilities                            |   | 8,460,861           |   |
|                                                 |   |                |   |
| Long Term Debt, Net of Current Portion               |   | 4,219,413           |   |
|                                                 |   |                |   |
| Total Liabilities                                    |   | 12,680,274          |   |
|                                                 |   |                |   |
| Redeemable Warrants                                  |   | 50,000              |   |
|                                                 |   |                |   |
| Stockholders' Equity (Deficit)                       |   |                |   |
| Common Stock, no par value, 10,000,000               |   |                |   |
| shares authorized, 9,421,206 issued                  |   |                |   |
| and 9,413,306 outstanding                            |   | 2,465,168           |   |
| Additional Paid in Capital                           |   | 116,786             |   |
| Accumulated Deficit                                  |   | (3,749,714          | )      |
| Less: Treasury Stock, at cost, 7,900 shares          |   | (17,833             | )      |
| Total Stockholders' Equity (Deficit)                 |   | (1,185,593          | )      |
|                                                 |   |                |   |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |   | $11,544,681         |   |

 

 

 

 

See accompanying notes to consolidated financial statements.

 

4

----

GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARIES

STATEMENTS OF CONSOLIDATEDOPERATIONS

 
|                                         |   | **Three  Months Ended March 31,** |      |
|----------------------------------------------|--------|-----------------------------------|-----------|
|                                         |   | **2003**                          |      | **2002** |   |
|                                         |   | **(Unaudited)**                   |      | **(Unaudited)** |   |
| Revenues                                     |   |                              |      |   |   |
| Freight Income                               |   | $                                 | 3,494,125 |   | $ | 3,690,524 |   |
| Training School Revenue                      |   | 140,371                           |      | 140,322 |   |
|                                         |   | 3,634,496                         |      | 3,830,846 |   |
| Cost of Revenue                              |   | 3,342,117                         |      | 3,233,447 |   |
|                                         |   |                              |      |   |   |
| Gross Profit                                 |   | 292,379                           |      | 597,399 |   |
|                                         |   |                              |      |   |   |
| Operating Expenses                           |   |                              |      |   |   |
| Garage Expenses                              |   | 79,394                            |      | 71,742 |   |
| General and Administrative                   |   |                              |      |   |   |
| Expenses                                     |   | 510,430                           |      | 436,837 |   |
|                                         |   | 589,824                           |      | 508,579 |   |
|                                         |   |                              |      |   |   |
| Operating Income (Loss)                      |   | (297,445                          | )         | 88,820 |   |
|                                         |   |                              |      |   |   |
| Other Income (Expense)                       |   |                              |      |   |   |
| Other Income                                 |   | 6,586                             |      | 73,793 |   |
| Interest Income                              |   | 5,876                             |      | -- |   |
| Interest Expense                             |   | (310,045                          | )         | (297,900 | ) |
| Loss on Asset Disposals                      |   | (124,701                          | )         | -- |   |
| Impairment Loss                              |   | (81,145                           | )         | -- |   |
|                                         |   | (503,429                          | )         | (224,107 | ) |
| (Loss) Before                                |   |                              |      |   |   |
| Tax Provision                                |   | (800,874                          | )         | (135,287 | ) |
|                                         |   |                              |      |   |   |
| Provision for Income Taxes                   |   | --                                |      | -- |   |
|                                         |   |                              |      |   |   |
| Net (Loss)                                   |   | $                                 | (800,874  | ) | $ | (135,287 | ) |
|                                         |   |                              |      |   |   |
| Basic (Loss) Per Share                       |   | $                                 | (.107     | ) | $ | (.056 | ) |
|                                         |   |                              |      |   |   |
| Diluted (Loss) Per Share                     |   | $                                 | (.107     | ) | $ | (.056 | ) |
|                                         |   |                              |      |   |   |
| Weighted Average Common  Shares Outstanding: |   |                              |      |   |
|                                         |   |                              |      |   |   |
| Basic                                        |   | 7,456,356                         |      | 2,405,066 |   |
| Diluted                                      |   | 7,456,356                         |      | 2,405,066 |   |

 

 

 

 

See accompanying notes to consolidated financial statements.

 

5

----

 

GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARY

STATEMENTS OF CONSOLIDATEDCASH FLOWS

 
|                                      |   | **Three  Months Ended March 31,** |   |
|-------------------------------------------|--------|-----------------------------------|--------|
|                                      |   | **2003**                          |   | **2002** |   |
|                                      |   | **(Unaudited)**                   |   | **(Unaudited)** |   |
|                                      |   |                              |   |   |   |
| Cash Flows From Operating Activities      |   |                              |   |   |   |
| Net (Loss)                                |   | $(800,874                         | )      | $(135,287 | ) |
| Adjustments to reconcile net (loss)       |   |                              |   |   |   |
| to cash provided by operating activities: |   |                              |   |   |   |
| Depreciation and Amortization             |   | 510,802                           |   | 547,598 |   |
| Loss on Disposal of Equipment             |   | 124,701                           |   |   |   |
| Impairment Loss                           |   | 81,145                            |   | -- |   |
| (Increase) Decrease in:                   |   |                              |   |   |   |
| Accounts Receivable-Trade                 |   | 231,156                           |   | (524,312 | ) |
| Inventory                                 |   | --                                |   | (127 | ) |
| Prepaid Expenses and Other Assets         |   | 148,234                           |   | 67,787 |   |
| Increase (Decrease) in:                   |   |                              |   |   |   |
| Accounts Payable and Accrued Expenses     |   | 27,011                            |   | (82,586 | ) |
| Net Cash Provided by                      |   |                              |   |   |   |
| Operating Activities                      |   | 322,175                           |   | (126,927 | ) |
|                                      |   |                              |   |   |   |
| Cash Flows From Investing Activities      |   |                              |   |   |   |
| Purchases of Property and Equipment       |   | --                                |   | (46,200 | ) |
| Net Cash Used by                          |   |                              |   |   |   |
| Investing Activities                      |   | --                                |   | (46,200 | ) |
|                                      |   |                              |   |   |   |
| Cash Flows From Financing Activities      |   |                              |   |   |   |
| Line of Credit, Net                       |   | (501,707                          | )      | 478,824 |   |
| Repayment of Mortgage Receivable          |   | 1,839                             |   | -- |   |
| Payment on Notes Payable-Related Party    |   | (13,558                           | )      | (14,044 | ) |
| Principal Payments on Long                |   |                              |   |   |   |
| Term Borrowing                            |   | (292,719                          | )      | (456,115 | ) |
| Principal Payments Under                  |   |                              |   |   |   |
| Capital Lease Agreements                  |   | (135,206                          | )      | (99,260 | ) |
| Proceeds from Issuance of Common Stock    |   | 611,194                           |   | -- |   |
| Net Cash Used by Financing Activities     |   | (330,157                          | )      | (90,595 | ) |
|                                      |   |                              |   |   |   |
| Net Increase (Decrease) in Cash           |   | (7,982                            | )      | (263,722 | ) |

 

 

 

 

See accompanying notes to consolidated financial statements.

 

6

----

 

GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS (continued)

 
|                                                                                                       |   | **Three  Months Ended March 31,** |     |
|------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|----------|
|                                                                                                       |   | **2003**                          |     | **2002** |   |
|                                                                                                       |   | **(Unaudited)**                   |     | **(Unaudited)** |   |
|                                                                                                       |   |                              |     |   |   |
| Net Increase (Decrease) in Cash                                                                            |   | (7,982                            | )        | (263,722 | ) |
|                                                                                                       |   |                              |     |   |   |
| Net Cash & Cash Equivalents                                                                            |   |                              |     |   |   |
| (Overdraft)-January 1                                                                                      |   | (94,525                           | )        | (393,436 | ) |
|                                                                                                       |   |                              |     |   |   |
| Net Cash & Cash Equivalents                                                                            |   |                              |     |   |   |
| (Overdraft)-March 31                                                                                       |   | $                                 | (102,507 | ) | $ | (657,158 | ) |
|                                                                                                       |   |                              |     |   |   |
| The net cash and cash  equivalents (overdraft) are presented in the balance sheet as follows at  March 31: |   |
|                                                                                                       |   |                              |     |   |   |
| Cash and Cash Equivalents                                                                                  |   | $                                 | 44,768   |   | $ | 33,355 |   |
| Cash Overdraft                                                                                             |   | (147,275                          | )        | (690,513 | ) |
|                                                                                                       |   |                              |     |   |   |
| Net Cash & Cash Equivalents                                                                            |   |                              |     |   |   |
| (Overdraft)-March 31                                                                                       |   | $                                 | (102,507 | ) | $ | (657,158 | ) |
|                                                                                                       |   |                              |     |   |   |
| Supplemental Disclosures:                                                                                  |   |                              |     |   |   |
|                                                                                                       |   |                              |     |   |   |
| Interest Paid                                                                                              |   | $                                 | 370,708  |   | $ | 272,605 |   |
|                                                                                                       |   |                              |     |   |   |
| Non-Cash Investing and Financing Activities                                                                |   |                              |     |   |   |
|                                                                                                       |   |                              |     |   |   |
| Purchases of Property                                                                                      |   |                              |     |   |   |
| and Equipment with                                                                                         |   |                              |     |   |   |
| Direct Financing                                                                                           |   | $                                 | 451,500  |   | $ | -- |   |

 

 

 

 

See accompanying notes to consolidated financial statements.

 

7

----

GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited)

 

 

**NOTE 1 – BASIS OF PRESENTATION**

 

The accompanying unaudited consolidated financial statements of GaselTransportation Lines, Inc., and its subsidiaries (the “Company”) have beenprepared in accordance with accounting principles generally accepted in theUnited States of America and with the instructions to form 10-QSB.  Accordingly, they do not include all theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements.  Inthe opinion of management, all adjustments considered necessary for a fairpresentation (consisting of normal recurring accruals) have been included.  Operating results for the three month periodended March 31, 2003, are not necessarily indicative of the results that may beexpected for the year ending December 31, 2003.  For further information, refer to the consolidated financialstatements and footnotes thereto included in the Company’s Report on Form10-KSB for the year ended December 31, 2002.

 

**NOTE 2 – GOING CONCERN**

 

The accompanying financial statements have been prepared in conformitywith generally accepted accounting principles, which contemplate continuationof the Company as a going concern. The following factors raise substantialdoubt about the ability of the Company to continue as a going concern for areasonable period of time.

 

The Company has sustained losses of $800,874 for the three months endedMarch 31, 2003, $1,761,555 in 2002, $870,583 in 2001 and $1,045,402 in2000.  At March 31, 2003, currentliabilities exceeded current assets by approximately $6.2 million.  The Company had an accumulated deficit of$3,749,714 at March 31, 2003.

 

On May 5, 2003, the Company received notification from one of itscreditors that it was in default on a $924,221 note payable and that past duepayments and late charges in the amount of $97,037 were due and payableimmediately or the creditor would demand payment in full on the outstandingnote balance or seek collection through the seizure of collateral.

 

On May 19, 2003, the Company filed petitions under Chapter 11 of theBankruptcy laws.  This generally delayspayment of liabilities incurred prior to filing those petitions while theCompany develops a plan of reorganization that is satisfactory to its creditorsand allows it to continue operations. The carrying amounts of assets and liabilities are unaffected by theproceeding, but liabilities are presented according to the status of thecreditors.

 

 

8

----

GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

**NOTE 2 – GOING CONCERN**(Continued)

 

In addition to seeking protection from creditors and reorganizationunder Chapter 11, the Company continues to develop and implement correctiveactions designed to increase revenues and decrease costs to generate positiveearnings and cash flows from its operations.

 

Management has set in motion a plan to change its sales mix to increasethe freight volume, rates and margins via the addition of large national shippersout of its Columbus, Ohio terminal and inbound from its primary traffic lane inthe northeastern United States.

 

The Company installed freight brokerage and owner operator programslate in 2002 and early in 2003.  Theseprograms are expected to provide incremental revenues and contributions toprofits without additional cash outlays.

 

To improve its equity deficit, the Company raised approximately $.9million between December, 2002 and March, 2003, in equity capital through theissuance of restricted stock.

 

In addition, management continues to pursue an aggressivegrowth-through-acquisition strategy.

 

In an effort to mitigate certain external conditions that couldadversely affect the Company’s financial performance, cost containment programscontinue to be installed, particularly for major operating costs.

 

The financial statements do not includeany adjustments relating to the recoverability and reclassification of recordedasset amounts or the amounts and classifications of liabilities that might be necessaryshould the Company be unable to continue as a going concern.  The Company’s continuation as a goingconcern is dependent upon its ability to obtain additional funding and toincrease its revenues and equipment productivity, while containing costs.  No assurance can be given that the Companywill be successful in these efforts.

 

 

 

9

----

GASELTRANSPORTATION LINES, INC.

AND ITSSUBSIDIARIES

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

**NOTE 3 – PROPERTY ANDEQUIPMENT**

 

Property and equipment are recorded atcost.  For financial reporting purposes,the cost of such property is depreciated principally by the straight-linemethod over the estimated useful lives of 3-10 years for tractors and trailers,40 years for buildings and 3-10 years for shop and office equipment.  Amortization of equipment purchased undercapitalized lease obligations is included in depreciation expense.  For tax reporting purposes, accelerateddepreciation or application cost recovery methods are used.  Gains and losses are recognized in the yearof disposal.  Tires purchased withtractors and trailers are being capitalized as part of the cost of suchequipment, with replacement tires being inventoried and expensed when placed inservice.

 

The company reviews long-lived assetsto assess recoverability using undiscounted cash flows.  When necessary, charges for impairments oflong-lived assets are recorded for the amount by which the present value of futurecash flows is less than the carrying value of these assets.

 

**NOTE 4 – TRAILERS -HELD FOR SALE**

 

The Company returned 32 trailers heldunder capital lease to the lessor during 2003. The lease payments will continue while the lessor attempts to sell thetrailers. The trailers are expected to be sold within one year.  The carrying amounts of these assets andliabilities included in the disposal group at March 31, 2003, are as follows:

 
| Trailers held under capital lease                  |   |     |   |
|----------------------------------------------------|--------|----------|--------|
| now held for sale, net of accumulated depreciation |   | $443,258 |   |
|                                               |   |     |   |
| Capital lease obligation                           |   | $456,995 |   |

 

 

10

----

 

GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

** **

**NOTE 5 - SUBSEQUENT EVENTS**

 

Factoring Agreement.  On April 10, 2003, the Company entered into a one year factoringagreement with Systran Financial Services Corporation (Systran) whereby theCompany may finance trade receivables. The agreement includes the Company presenting, on a monthly basis, aminimum anticipated volume of bills for financing through Systran in the amountof $1,000,000.  In addition, the Companymay receive an advance rate of 90% on eligible receivables financed with a 10%deposit withheld and subsequently paid to the Company as receivables arecollected.  The factoring agreementincludes a rate of interest equal to 2% above the prime rate and replaces theexisting line of credit arrangement with CitiCapital.  The new credit limit is $3,500,000, which is an increase of$1,500,000 compared to the Company’s existing facility with CitiCapital.

 

On May 1, 2003, proceeds of $1.3 million were used to repay theexisting line of credit with CitiCapital in the amount of $1.2 million, and$100,000 was disbursed to one of the Company’s lenders having certaincollateral rights to the Company’s trade accounts receivable

 

Notes Payable.  OnMay 5, 2003, the Company received notification from one of its creditors thatit was in default on a note payable and that past due payments and late chargesin the amount of $97,037 were payable immediately.  As a result, at March 31, 2003, the Company reclassified thelong-term portion of this obligation in the amount of $615,774 to currentliabilities.

 

Chapter 11.  On May 19,2003, the Company filed petitions under Chapter 11 of the Bankruptcy laws.  This generally delays payment of liabilitiesincurred prior to filing those petitions while the Company develops a plan ofreorganization that is satisfactory to its creditors and allows it to continueoperations.  The carrying amounts ofassets and liabilities are unaffected by the proceeding, but liabilities arepresented according to the status of the creditors.

 

 

 

11

----

**Item 2.Management’s Discussion and Analysis or Plan of Operation.**

OVERVIEW

 

The following discussion should be read in conjunction with the FinancialStatements, including footnotes, contained herein. The discussion is qualified in its entirety by the foregoing.  Historical results of operations and thepercentage relationships among any amounts in the Financial Statements, and anytrends that may appear to be inferable therefrom, should not be taken asnecessarily indicative of trends of operations or results of operations for anyfuture periods.

 

Except for certain historical information contained herein, the followingdiscussion contains forward-looking statements that involve risks, assumptionsand uncertainties which are difficult to predict. All statements, other thanstatements of historical fact, are statements that could be deemedforward-looking statements, including any projections of earnings, revenues, orother financial items, any statement of plans, strategies, and objectives ofmanagement for future operations; any statements concerning proposed newservices or developments; any statements regarding future economic conditions orperformance; and any statements of belief and any statement of assumptionsunderlying any of the foregoing.  Words such as “believe,” “may,” “could,”“expects,” “hopes,” “anticipates,” and “likely,” and variations of these words,or similar expressions, are intended to identify such forward-lookingstatements.  The Company’s actual results could differ materially from thosediscussed here. Factors that could cause or contribute to such differencesinclude, but are not limited to, adverse changes in general economic conditions,including adverse conditions to the companies that are the Company’s core ofshippers, fuel prices, driver costs, the ability to finance equipment, interestrates, the ability to borrow working capital, the amount of freight available forhauling, particularly in the areas where the Company terminals are located and inthe areas where the Company is looking for backhauls, and other factors.  The Companydoes not assume, and specifically disclaims, any obligation to update anyforward-looking statement contained in this discussion.

 

The interim financial information for the quarters ended March 31, 2003, andMarch 31, 2002, are un-audited.  The statements included reflect all adjustments

 

 

12

 

that the Company considers necessary for a fair presentation of the results ofoperations for the interim periods covered and of the financial condition of theCompany at the date of the interim balance sheet.  The results of the interimperiods are not necessarily indicative of the results for the entire year.

 

RESULTS OF OPERATIONS

 

THREE MONTHS ENDED MARCH 31, 2003.

 

Freight revenues for the three months ended March 31, 2003, were $3,494,125, adecrease of $196,399 (5.3%) from the $3,690,524 for the first quarter of 2002.Training school revenues for the first quarter of 2003 were $140,371, an increase of only$49 from the $140,322 in revenues for the same period in 2002.  The decrease infreight revenues was primarily attributable to a reduction in the number of total power units in service by thirteen (13), including seven (7) company trucks and six (6) owner/operators.

 

Training school revenue remained essentially identical to the previous year’s revenue.  These revenues have not returned to the level of 2001 when it was operating a school in Lima, Ohio, with a partner that decided in late 2001 to acquire its own equipment and develop its own curriculum, acquire a school operating permit, and operate a school without the Company.  The Company has opened another school in the Lima, Ohio market, but the revenues have not reached the levels of 2001.

 

In addition, student enrollment locally and nationwide continue at lower levels than in 2001, in large part due to the unavailability of federal funding to finance the prospective students.

 

Equipment operating expenses increased in the first quarter of 2003 to $3,342,117 from $3,233,447 for the same quarter of 2002.  This was an increase of $108,670 (3.4%) from the prior year despite the fact that operating revenues decreased from the prior year.  The increase in expenses was primarily due to the sharp increase in fuel prices at the pump from a low of $1.07 per gallon in January 2002 to a peak of $ 1.71 per gallon in March of 2003, and an increase in equipment maintenance costs related to equipment age.

 

Operating expenses increased $81,245 (15.6%) to $589,824 for the first quarterof 2003 compared to $508,579 for the like period of 2002. The increases inoperating costs were almost entirely due to an increase in the general and administrative expenses of the Company that resulted from increases in payroll related taxes as the Company converted to preparing its own payroll in mid-2002 versus using an outside Professional Employer Organization and increased data processing expenses related to the replacement and updating of  its older equipment.

 

Operating income for the first quarter of 2003 was a loss of  ($297,445) compared toincome of $88,820 for the first quarter of 2002, a decrease of $386,265 (435.9%).The percentage of operating income to total revenues went down to minus (8.2%) for

 

13

 

the first quarter of 2003 from 2.3% in the quarter ended March 31, 2002 primarily due to revenue efficiencies lost with the significant operating cost increases in fuel and equipment maintenance expenses and with increased general and administrative costs.

 

The results were that the Company had a net loss after provision for incometaxes for the first quarter of 2003 of ($800,874) compared to a net loss of($135,287) for the first quarter of 2002, which is an increase in the loss of $665,587 (492%)from the prior year.

 

CAPITAL AND LIQUIDITY

 

The deficit earnings for the years 2000, 2001, and the year 2003 to date have caused the Company tobe in a severe need of working capital throughout the past couple of years. At March 31, 2003, the current liabilities exceeded current assets by approximately $6.2 million and the accumulated deficit had reached $3,749,714.  Stockholders equity was a negative $1,185,593.

 

Although the Company had reduced its deficit cash position to approximately $100,000 from the deficit of $657,158 at the end of the first quarter of 2002, the reduction was as the result of additional financing from bank debt and from the sale of 7,000,000 common shares in a Regulation S offering, and not the result of improved operations.  The continued operating losses of the Company and the already precarious cash position have been a matter of great concern and one that the Company does not believe that it can rectify without seeking judicial aid.

 

Because of this lack of liquidity, and then the loss of approximately $200,000 in liquidity resulting from (1) receivables that were lost due to the filing of bankruptcy petitions by the debtors and (2) from payment of $100,000 to a secured creditor holding a cross collateral position that had to be paid when the Company switched its accounts receivable lender, the Directors of the Company have determined to cause the Company to be reorganized under Chapter 11 of the United States Bankruptcy Code.

 

Management believes that by reorganizing it can get its operating expenses in line with operating revenues so that it will be able to manage its cash flow and, hopefully, with the other changes being implemented, reverse its loss trend and get back to operating profitably.  However, until the Company completes arrangements in the Bankruptcy Court with its secured lenders, there can be no assurances that it will be able to operate profitably or be able to remain in business.

 

Management continues to adjust its corrective actions to bring profits and cash flow positive.  Currently, there is a strong push to improve gross revenues and rates with additional Columbus, Ohio-based outbound customers and replacing discounted inbound brokered freight with direct freight business.

 

14

 

Key strategic actions required to put the Company in a profitable formula would include increasing its power units by 20%, which it intends to accomplish by adding owner operators, with a commensurate increase in its trailer pool, as well as replacing its shorter 48’ trailers with the longer, now industry-preferred, 53’ trailers.

 

In early May, the Company also closed a receivables-based line of credit agreement with Systran Financial Services, a division of Textron Financial Corporation, that significantly increases its cash flow through higher advance rates with lower financing costs, and expands its available credit by $ 1.5 million.

 

In April 2003, the Company returned to the cost advantages of outsourcing its payroll and related tax processing.  Additional cost decreases are expected to continue with the relocation of the Columbus offices to less expensive rental facilities, which the Company completed in late 2002.  Equipment productivity improvements are also expected from the Company’s strategic shift of the majority of its revenue equipment from its Marietta, Ohio home base to Columbus, Ohio where there are significantly more freight opportunities.

 

Management continues to seek growth opportunities to expand the number of power units and trailers it is operating in order to reach an amount that will generate enough income to support its fixed costs and generate a profit.  The Company was near completing an asset acquisition in late April 2003 that would have increased the number of power units by approximately 65, but the problems with cash flow that surfaced at that time caused that transaction to be put off at least temporarily until the sellers see how the Company performs in reorganization.  In the meantime, the Company needs to be able to operate more of its already owned equipment that has been inoperable because of either a lack of drivers or a lack of funds to fix equipment breakdowns, and it is hopeful that this can be accomplished with the reorganization.   The Company is also going to make a more concerted effort to hire additional owner/operators.

 

**Item 3.Controls and Procedures.**

(A)  The Company maintains controls andprocedures designed to ensure that information required to be disclosed in thereports that it files or submits under the Securities Exchange Act of 1934 isrecorded, processed, summarized and reported within the time periods specifiedin the rules and forms of the Securities and Exchange Commission.  Based upon their evaluation of thosecontrols and procedures performed within 90 days of the filing date of thisreport, the president and chief executive officer and the vice president andchief financial officer concluded that the disclosure controls and procedureswere adequate.

 

(B)  The Company made no significant changes inits internal controls or in other factors that could significantly affect thesecontrols subsequent to the date of the evaluation of those controls by thechief executive officer and chief financial officer.

 

15

 

### **PART II — OTHER INFORMATION**

**Item 1.Legal Proceedings.**

During the first quarter of 2003, the Company was named as a defendantin two (2) law suits filed for collection of payables that were incurred in theordinary course of business.  TheCompany has entered into payment schedules on each of these actions and nojudgments have been entered on these actions pending completion of payment ofthe amounts claimed.

In addition, the Company was named as a respondent in a claim filedwith the American Arbitration Association for payment of amounts due on apromissory note issued by the Company in the acquisition of EagleTransportation, Inc., an amount claimed by one of the owners of EagleTransportation, Inc., Ron Flowers, for expense reimbursement in connection withhis employment, and an amount claimed to be due under the purchaseagreement.  The Company claimed offsetsfor some of these amounts, and the parties have reached agreement to settle theclaims for a $45,000 payment from the Company, which is an amount equal toapproximately what the Company has reflected in its statements as being due onthe promissory note in connection with its original purchase of EagleTransportation.

**Item 2.Changes in Securities.**

(A)  The following table setsforth information relating to sales of unregistered securities made by theCompany during the last quarter of 2002 and through the 2nd of April, 2003, thedate of the completion of the offering.  All of the sales were forcash.  There were no underwriting commissions paid.  The securitieswere sold to Starz Investments Limited, a Belize corporation, pursuant to acontract entitled Regulation S Stock Purchase Agreement, under which it was topurchase the shares at a discount of 65% of the closing bid price on the dayprior to a sale. The offering was made in reliance upon Regulation S adoptedunder The Securities Act of 1933, as amended (the “Act”), and resale of theshares is restricted in accordance with the provisions of Regulation S, whichrestricts resale for a period of one year after the purchase dates in theUnited States or to any person who is not a U.S. Person as defined inRegulation S.

 

16

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| **Date of Sale**  |   | **Class of  Securities**     |   | **Number of  Shares Sold** |   | **Price per  share** |   | **Total Amount  Received** |         |
|-------------------|--------|------------------------------|--------|----------------------------|--------|----------------------|--------|----------------------------|--------------|
| December 3, 2002  |   | Common  shares, no par value |   | 800,840                    |   | $                    | 0.1225 |                       | $            | 98,077.90 |   |
| December 6, 2002  |   | Common  shares, no par value |   | 647,971                    |   | $                    | 0.1225 |                       | $            | 79,351.45 |   |
| December 19, 2002 |   | Common  shares, no par value |   | 300,709                    |   | $                    | 0.1225 |                       | $            | 36,836.85 |   |
| December 19,2002  |   | Common  shares, no par value |   | 674,903                    |   | $                    | 0.1050 |                       | $            | 70,864.82 |   |
| January 10, 2003  |   | Common  shares, no par value |   | 452,458                    |   | $                    | 0.1050 |                       | $            | 47,483.09 |   |
| January 31, 2003  |   | Common  shares, no par value |   | 2,091,373                  |   | $                    | 0.1482 |                       | $            | 309,980.00 |   |
| February 18, 2003 |   | Common  shares, no par value |   | 371,052                    |   | $                    | 0.1482 |                       | $            | 55,000.00 |   |
| February 18, 2003 |   | Common  shares, no par value |   | 115,793                    |   | $                    | 0.1750 |                       | $            | 20,238.78 |   |
| March 5, 2003     |   | Common  shares, no par value |   | 715,229                    |   | $                    | 0.1995 |                       | $            | 142,688.19 |   |
| March 19, 2003    |   | Common  shares, no par value |   | 482,912                    |   | $                    | 0.1995 |                       | $            | 96,340.94 |   |
| April 02, 2003    |   | Common  shares, no par value |   | 63,218                     |   | $                    | 0.1995 |                       | $            | 12,611.99 |   |
| April 02, 2003    |   | Common  shares, no par value |   | 283,542                    |   | $                    | 0.1995 |                       | $            | 56,566.63 |   |
| Total             |   | Common  shares, no par value |   | 7,000,000                  |   |                 |   | $                          | 1,026,153.58 |   |

 
| **USE OF PROCEEDS**                                                                                         |   |   |    |
|-------------------------------------------------------------------------------------------------------------|--------|--------|---------|
| Consulting fee to 1st  SB Partners, Ltd. for preparation of offering document and arranging sale of  shares |   | $      | 92,354  |   |
| Balance of amounts due to State of Ohio for license tags for tractors  and trailers                         |   | $      | 135,000 |   |
| Reimburse PeopLease Corporation for payroll paid by it during 2002                                          |   | $      | 113,000 |   |
| Past due payroll taxes                                                                                      |   | $      | 100,000 |   |
| Settle past due vendor and insurance payables                                                               |   | $      | 52,200  |   |
| Working capital                                                                                             |   | $      | 533,599 |   |

 

 

(B)  The following table sets forth information regarding issuanceof shares made by the Company during the last quarter of 2002 and through April25, 2003, without use of an underwriter to persons in exchange for services:

 
| **Date of Sale**  |   | **Class of  Securities**     |   | **Number of  Shares   Issued** |   | **To Whom  Issued**        |   |
|-------------------|--------|------------------------------|--------|--------------------------------|--------|----------------------------|--------|
| December 11, 2002 |   | Common shares, no par  value |   | 30,000                         |   | Market Pathways(1)         |   |
| December 19, 2002 |   | Common shares, no par  value |   | 200,000                        |   | Sarah R. Speno, Trustee(2) |   |
| February 7, 2003  |   | Common shares, no par  value |   | 100,000                        |   | Sarah R. Speno, Trustee(2) |   |
| April 21, 2003    |   | Common shares, no par  value |   | 100,000                        |   | Sarah R. Speno, Trustee(2) |   |
| April 25, 2003    |   | Common shares, no par  value |   | 10,000                         |   | Douglas A. Rogers (3)      |   |
| Total             |   | Common shares, no par  value |   | 440,000                        |   |                       |   |

 

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| (1) |   | Market Pathways provided shareholder relations  services and marketing reports that it disseminated to securities  broker/dealers and as part of its compensation, it received the shares in a  non-public offering.  The shares were not registered in reliance upon  Section 4(2) of the Act in that they were not made available for sale to the  public and are restricted against resale until they are registered under the  Act or sold under an exemption from registration. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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| (2) |   | Sarah R. Speno, Trustee of The SRS Trust, received  these shares as the nominee for 1st SB Partners, Ltd., a company  that performed consulting services for the Company in the preparation of the  offering of its shares under Regulation S and in negotiating the Regulation S  Stock Purchase Agreement that the Company executed with Starz Investments,  Ltd..  The shares were not registered in reliance upon Section 4(2) of  the Act in that they were not made available for sale to the public and are  restricted against resale until they are registered under the Act or sold  under an exemption from registration. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) |   | Rogers Consulting Group/ManageSource, Douglas A.  Rogers, proprietor,  provided market  research and a report for use by the Company in providing information to the  business and broker/dealer community and as part of its compensation, Mr.  Rogers received the shares in a non-public offering.  The shares were  not registered in reliance upon Section 4(2) of the Act in that they were not  made available for sale to the public and are restricted against resale until  they are registered under the Act or sold under an exemption from  registration.                                                          |

 

**Item 5.Other Information.**
| (A)    |   | On May 19, 2003, the  Company filed a Petition for Reorganization under Chapter 11of the United  States Bankruptcy Code in the United States Bankruptcy Court, Southern  District of Ohio, Eastern Division.   Only Gasel Transportation Lines, Inc. filed a Petition; the  subsidiaries, Gasel Driver Training Schools, Inc. and GTL Logistics, Inc. are  not a part of the filing.                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   | The Company  will ask the bankruptcy court to allow it  to oversee its operations as debtor in possession, subject to approval of  matters outside the ordinary course of business.  While in Chapter 11, the Company will attempt to restructure  its debt, particularly the secured debt which finances its tractors and  trailers, so that the payments are reduced to be in line with the current  market values of that equipment.  Additionally,  the Company hopes to be able to reach agreements with regard to lower  payments on its leased equipment.  It  will also be examining all of its agreements to determine if it wants to keep  them in force, terminate them or to negotiate changes in them.                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   | The Company is not  planning to terminate any employees or drivers at this time, and in fact, is  hopeful of hiring additional drivers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (B)    |   | On May 1, 2001, the  Company and its subsidiary corporation, GTL Logistics, Inc. entered into a  factoring agreement with Systran Financial Services Corporation for the sale  of their accounts receivable.  The  agreement is for a term of one year with automatic annual renewal unless  otherwise terminated, provides for borrowing amounts up to $3.5 million, provides  for the sale of the accounts receivable with full recourse, and provides the  Company with a loan equal to 90% of its qualified accounts receivable.  The terms of the agreement are guaranteed  individually by Michael J. Post and also by Gasel Driver Training Schools,  Inc.  This credit facility replaces  one with CitiCapital that had a $2 million borrowing limit and advanced only  85% of the accounts receivable. |

 

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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | The agreement commenced on  May 1, 2003, when the Company accepted its first funding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | The agreement is filed as  Exhibit 99.1 to this 10-QSB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (C)    |   | On March 1, 2003, the  Company entered into a Service Agreement with Innovative Personnel Solutions,  Inc. (“Innovative”) for the leasing of all of its employees.  Under the agreement, Innovative is  responsible for payment, processing and issuance of the paychecks and all  payroll reports and payroll taxes for the personnel leased by the Company,  including workers compensation insurance; it also allows the personnel to  participate in its group medical coverage.   The Company is responsible for the referring of its former employees  and any additional personnel to Innovative for hiring by Innovative and their  lease back to the Company.  Further,  the Company is responsible for payment to Innovative for all of the costs  associated with paying the leased personnel, plus an administrative fee.  The agreement is for a one year term and  renews automatically unless terminated by either party. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | The agreement is filed as  Exhibit 99.3 to this 10-QSB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

**Item 6.Exhibits and Reports on Form 8-K.**

(a) Exhibits:

                    99.1—SystranFinancial Services Corporation Factoring Agreement dated as of May 1, 2003.(Omitted due to technical problems.)

                    99.2—PressRelease regarding Gasel Transportation Lines, Inc. entering into agreement withSystran Financial Services Corporation for factoring receivables.

                    99.3—InnovativePersonnel Solutions, Inc. Service Agreement dated March 1, 2003.

                    99.4—Certificationof Chief Executive Officer

                    99.5—Certificationof Chief Financial Officer

(b) Reports on Form 8-K*.* There were no reports on Form 8-K filedduring the quarter for which this report is filed.

 

### **SIGNATURES**

In accordance with the requirements of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized. 
|               | Gasel Transportation  Lines, Inc.                   |   |
|--------------------|-----------------------------------------------------|--------|
|               | (Registrant)                                        |
| Date: May 20, 2003 |                                                |   | /s/ Michael J. Post |
|               | Michael J. Post,  President, Treasurer and Director |
| Date: May 20, 2003 |                                                |   | /s/ S. Gene Thompson |
|               | S. Gene Thompson, Vice  President and CFO           |

 

 

19

 

**CERTIFICATIONS**

I, Michael J. Post, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of GaselTransportation Lines, Inc.;

2. Based on my knowledge, this quarterly report does not contain anyuntrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by thisquarterly report;

3. Based on my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible forestablishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure thatmaterial information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controlsand procedures as of a date within 90 days prior to the filing date of thisquarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about theeffectiveness of the disclosure controls and procedures based on our evaluationas 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 auditcommittee of registrant’s board of directors (or persons performing theequivalent functions):

a) all significant deficiencies in the design or operation of internalcontrols which could adversely affect the registrant’s ability to record,process, summarize and report financial data and have identified for theregistrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management orother employees who have a significant role in the registrant’s internalcontrols; and

6. The registrant’s other certifying officers and I have indicated inthis quarterly report whether or not there were significant changes in internalcontrols or in other factors that could significantly affect internal controlssubsequent to the date of our most recent evaluation, including any correctiveactions with regard to significant deficiencies and material weaknesses.

Date: May 20, 2003
|   /s/ Michael J. Post                         |
|----------------------------------------------------|
| Michael J. Post, President, Treasurer and Director |

 

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I, S. Gene Thompson, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of GaselTransportation Lines, Inc.;

2. Based on my knowledge, this quarterly report does not contain anyuntrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by thisquarterly report;

3. Based on my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible forestablishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure thatmaterial information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controlsand procedures as of a date within 90 days prior to the filing date of thisquarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about theeffectiveness of the disclosure controls and procedures based on our evaluationas 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 auditcommittee of registrant’s board of directors (or persons performing theequivalent functions):

a) all significant deficiencies in the design or operation of internalcontrols which could adversely affect the registrant’s ability to record,process, summarize and report financial data and have identified for theregistrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management orother employees who have a significant role in the registrant’s internalcontrols; and

6. The registrant’s other certifying officers and I have indicated inthis quarterly report whether or not there were significant changes in internalcontrols or in other factors that could significantly affect internal controlssubsequent to the date of our most recent evaluation, including any correctiveactions with regard to significant deficiencies and material weaknesses.

 

Date: May 20, 2003
|   /s/ S. Gene Thompson              |
|------------------------------------------|
| S. Gene Thompson, Vice President and CFO |
|                                     |

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