SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] 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
[ ] 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 1-7636
THE CATTLESALE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-1605174
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9901 IH10 West, Suite 800
San Antonio, Texas 78230-2292
(Address of principal executive office and zip code)
(210) 558-2898
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No___.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act. Yes . No X.
Applicable only to registrants involved in bankruptcy proceedings
during the preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No ___.
As of March 31, 2003, 19,577,894 shares of The CattleSale Company Common
Stock were outstanding.
THE CATTLESALE COMPANY
AND SUBSIDIARIES
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2003 and December 31, 2002 3
Consolidated Statements of Operations -
Three Months Ended March 31, 2003 and 2002 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2003 and 2002 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
---------
Certification 16
-------------
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
The CattleSale Company and Subsidiaries
(In thousands, except share data)
--------------------------------------------------------------------------------------------------------------
(unaudited)
Mar. 31, 2003 Dec. 31, 2002
Assets
Current assets:
Cash and cash equivalents $881 $1,344
Investment in limited partnership 6 6
Accounts receivable, net 210 213
Prepaid expenses and other current assets 122 139
-------------------------------------------------------------------------------------------------------
Total current assets 1,219 1,702
Fixed assets, net 137 14
Goodwill 679 --
Other assets, net 109 110
----------------------------------------------------------------------------------------------------------
$2,144 $1,826
==========================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $15 $88
Accrued expenses 262 207
----------------------------------------------------------------------------------------------------------
Total current liabilities 277 295
Deferred federal income tax 400 400
Deferred rent 38 36
Stockholders' equity:
Series A Preferred stock, $0.01 par value. Shares authorized, 500,000; 250,000
shares issued and outstanding in 2003, none 2002
(liquidation preference $2,500,000) 18 --
Series B Preferred stock, $0.01 par value. Shares authorized,
4,000,000; 2,450,000 shares issued and outstanding in 2003, none 2002
(liquidation preference $24,500,000) 648 --
Common stock, $0.01 par value. Shares authorized 50,000,000;
shares issued and outstanding 19,577,894 in 2003 and 9,984,726 in 2002. 196 100
Paid in capital 7,289 7,389
Accumulated deficit (6,722) (6,394)
-----------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,429 1,095
----------------------------------------------------------------------------------------------------------
$2,144 $1,826
==========================================================================================================
See accompanying Notes to Consolidated Financial Statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
The CattleSale Company and Subsidiaries
(Unaudited)
-------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Three Months Ended
-------------------------------------------------------------------------------------------------------------------
Mar. 31, 2003 Mar. 31, 2002
Revenue:
Sales $97 $--
Service and other -- --
-----------------------------------------------------------------------------------------------------------------
Total revenue 97 --
Cost of Sales 95 --
-------------------------------------------------------------------------------------------------------------------
Gross Profit 2 --
Operating expenses:
Selling, general and administrative 339 432
Patent Litigation Trust expenses -- 116
--------------------------------------------------------------------------------------------------------------------
Total operating expenses 339 548
--------------------------------------------------------------------------------------------------------------------
Operating loss (337) (548)
Non-operating income (expense):
Equity in loss of limited partnership -- 12
Other, net 9 64
-------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Loss before income taxes (328) (472)
Income tax -- --
--------------------------------------------------------------------------------------------------------------------
Loss before income taxes and cumulative effect of change
in accounting principle $(328) $(472)
====================================================================================================================
Cumulative effect of change in accounting principle, net of tax -- (988)
Net loss $(328) $(1,460)
==================================================================================================================
Net loss adjusted for preferred stock dividends paid
or accumulated - net loss applicable to common $(393) $(1,460)
===================================================================================================================
Basic and Diluted Loss Per Common Share:
Before cumulative effect of change in accounting principle $(.03) $(.05)
Cumulative effect of change in accounting principle -- (.10)
-------------------------------------------------------------------------------------------------------------------
Net loss per common share $(.03) $(.15)
===================================================================================================================
Average Common Shares Outstanding:
Basic and Diluted 13,715,402 9,984,726
See accompanying Notes to Consolidated Financial Statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
The CattleSale Company and Subsidiaries
(Unaudited)
(In Thousands)
Three Months Ended
Mar. 31, 2003 Mar. 31, 2002
Cash flows from operating activities:
Net loss $(328) $(1,460)
Adjustments to reconcile net loss to net
cash used in operating activities:
Cumulative effect of change in accounting principle -- 988
Depreciation and amortization 7 3
Equity in gain of a limited partnership -- (12)
Changes in assets and liabilities, net of effects of the acquisition:
Decrease in prepaids 16 46
(Increase) decrease in receivables 147 (21)
Decrease in accounts payable and accrued expenses (78) (226)
Other, net 4 (6)
------------------------------------------------------------------------------------------------------
Net cash used in operating activities (232) (688)
Cash flows from investing activities:
Acquisition costs (123) --
-------------------------------------------------------------------------------------------------------
Net cash used in investing activities (123) --
Net decrease in cash and cash equivalents (355) (688)
Cash and cash equivalents at beginning of period 1,236 2,614
----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $881 $1,926
==== ======
Cash payments for:
Interest $-- $--
Income taxes, net $-- $--
See accompanying Notes to Consolidated Financial Statements.
The changes in operating assets and liabilities resulting from the acquisition
transaction are not considered in determining net cash provided from operating
activities.
5
THE CATTLESALE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
by The CattleSale Company (the "Company") (formerly known as Dynacore Holdings
Corporation) in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the information furnished
reflects all adjustments which are necessary for a fair statement of the results
of the interim periods presented. All adjustments made in the interim statements
are of a normal recurring nature.
It is recommended that these statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2002.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
The results for the three months ended March 31, 2003, are not necessarily
indicative of the results to be expected for the full year. The results include
those of the acquired subsidiaries (Note 3) from February 25, 2003 through March
31, 2003.
2. Summary of Significant Accounting Policies Applicable Subsequent to
December 31, 2002
The Company, under contract with cattle sellers and approved buyers, brokers
cattle throughout the United States. The purchase price typically is payable in
three installments:
A non-refundable consignment fee is paid by the seller at the time the
consignment contract is made. This consignment fee is recognized as revenue when
received;
A non-refundable deposit of approximately $40 per head of cattle is
paid by the buyer and immediately paid to the seller upon the consummation of
the sales transaction. The Company defers any revenue recognition on the partial
payment until the cattle is delivered; and
The balance of the purchase price is due when the delivery of the
cattle is made. The Company recognizes the revenue of the full sale at this
point.
The Company records revenue at the gross amount received from the buyers. The
amounts paid to the sellers and commissions paid to the regional representatives
are then recorded as costs of sales and selling costs, respectively. This is the
policy of the previous management of the acquired subsidiaries who had
determined that the following circumstances support this position:
a. The Company enters into a separate contract with the seller and the buyer
to purchase and sell the cattle, respectively. According to the terms of
the contracts, the Company maintains the right to remove a sale from its
web site at any time and reserves the right to refuse a bid at any time.
b. The Company takes title to the cattle during the period in which the
cattle are removed from the seller's property but before they are loaded
onto the buyer's property.
6
c. The Company has the risks and rewards of ownership, such as the risk of
loss for collection, delivery, or returns.
The Company's management is currently reviewing the issue of whether to record
revenue at the gross amount received, versus recording only the net retained as
commission revenue, based on the Company's current method of operations and
structuring of the transactions. Management does not believe that given the
volume of transactions, the results for the three months ended March 31, 2003 as
reported are misleading should it be determined that recording the net amount
received was more appropriate.
Earnings per share is calculated on the assumption that accumulated undeclared
dividends on the Preferred Stock will be paid in cash or common stock. It is
possible that the Company could require the holders of the preferred stock to
accept additional preferred stock with a fair value lower than the cash
dividend.
3. Acquisition
Background
From the time it emerged from bankruptcy in December 2000 through December 31,
2002, the Company had no significant revenue or cash producing activities and
was actively seeking a merger or acquisition partner.
Acquisition of Interests
On February 25, 2003, the Company acquired all of the beneficial interests (the
"Interests") in two limited liability companies owned by AEI Environmental, Inc.
("AEI"), CS Livestock Commissions Co. LLC and CS Auction Production Co. LLC
(collectively, the "Subsidiaries"), pursuant to an Acquisition Agreement of even
date therewith (the "Acquisition Agreement"). After the acquisition was
consummated, the Company changed its name from "Dynacore Holdings Corporation"
to "The CattleSale Company."
The Company, through the Subsidiaries, is now in the business of providing
auction trading services to producers of beef and dairy cattle which is
accessible by the internet at the website www.cattlesale.com. The cattlesale.com
website was one of the first sites offering a neutral cattle trading exchange
and providing information and cost efficiencies to the cattle industry for each
stage of the production cycle. Management believes that the CattleSale products
and services reduce transaction costs and improve information flow and market
efficiencies in cattle production.
The amount of consideration paid by the Company for the Interests in the
Subsidiaries was determined by negotiation, based on a mutual assessment by the
Company and AEI of the value of the Subsidiaries' business and the real value of
the Company's Common Stock. Further, the acquisition was structured to avoid
causing a negative impact on the Company's net operating loss carry-forward.
The Company did not expend any cash in acquiring the Interests. Rather, the
consideration for the Interests consisted of:
o 1,323,000 shares of Series B Convertible Redeemable Preferred Stock
(the "Series B Preferred Stock") having the principal terms described below
under the heading "Preferred Stock;" and
o 9,593,168 shares of Common Stock, which equaled forty-nine percent
(49%) of the outstanding shares of Common Stock, on a fully-diluted basis,
immediately subsequent to the closing.
Dividend to Shareholders
Upon the purchase of the Interests in the Subsidiaries, the Company declared a
dividend payable to its Common Stock holders of record on February 24, 2003 (the
7
"Record Holders"). The dividend was payable in .02503 of a share of Series A
Convertible Redeemable Preferred Stock (the "Series A Preferred Stock") and
..11287 of a share of Series B Preferred Stock per share of Common Stock. An
aggregate of 250,000 shares of Series A Preferred Stock and 1,127,000 shares of
Series B Preferred Stock were so issued (collectively, the "Dividend Shares").
The Series A Preferred Stock has the principal terms described below under the
heading "Preferred Stock." The Dividend Shares were issued in escrow, as
described below under the heading "Escrow of Dividend Shares." Additional
paid-in-capital was reallocated to the Preferred Stock at an amount equal to the
par value of the common shares into which the Preferred Stock would be
convertible.
Escrow of Dividend Shares
The Dividend Shares are being held in escrow by Asher B. Edelman, in the
capacity of escrow agent for the benefit of the Record Holders, until such time
as the Dividend Shares have been registered for sale under the Securities Act of
1933, as amended. The Company intends to file a registration statement with the
Securities and Exchange Commission registering the Dividend Shares, and the
shares issued to AEI at the closing, as soon as practicable; however, the
Company cannot anticipate when such a registration will become effective and the
Dividend Shares released from escrow. During the period the Dividend Shares are
held in escrow, the escrow agent has the power to vote the Dividend Shares on
any matter submitted to the vote of the Company's shareholders.
Preferred Stock
The rights and preference of the Series A Preferred Stock and the Series B
Preferred Stock (collectively, the "Preferred Stock"), which each have a par
value of $.01 per share, are as follows:
Dividends. Dividends accrue and are cumulative from the date of
issuance in an annual amount equal to 2.5% per year per share, based on the $10
per share liquidation preference, payable semi-annually, when, as and if
declared by the Board of Directors. Dividends are payable in cash, shares of
Preferred Stock (valued at $10 per share) or shares of Common Stock (valued, (x)
if there is a market for the Common Stock, at the average price of a share of
Common Stock during the last thirty (30) days of trading, or (y) if there is not
a market for the Common Stock, at $1.38 per share), or any combination thereof.
Conversion. Each share of Preferred Stock is convertible at any time
at the option of the holder into 7.25 shares of Common Stock.
Redemption. At any time after the earlier of:
o a merger or consolidation effecting the sale in one or a series of
related transactions of all or substantially all of the Company's assets or a
sale of more than fifty percent (50%) of the Company's outstanding voting
securities, or
o the realization by the Company of aggregate net proceeds in excess of
$10,000,000 in connection with the sale of Common Stock pursuant to a public
offering registered under the Securities Act of 1933, as amended (a "Qualified
Public Offering"),
the Preferred Stock will be redeemed by the Company for cash in an amount equal
to the liquidation preference of $10 per share, plus accrued and unpaid
dividends as of the redemption date; provided, however, that (i) the redemption
of the Series B Preferred Stock will be subject to the rights and preferences of
the Series A Preferred Stock, and (ii) not more than forty percent (40%) of the
net offering proceeds of the Qualified Public Offering will be applied to the
redemption of the Preferred Stock.
8
Registration of Shares
The Company intends to file a registration statement with the Securities and
Exchange Commission registering the shares issued to AEI and the Dividend Shares
as soon as practicable.
Fair Market Values
The following table summarizes the estimated fair values of the assets and
liabilities of the Subsidiaries at the date of acquisition. The Company is in
the process of finalizing the purchase price allocation; however, no significant
changes are anticipated.
Current Assets $ 147
Property, Plant & Equipment 130
Goodwill 679
-----
Total Assets Acquired 956
Current Liabilities Assumed 171
Net Assets Acquired $785
The total transaction value was $785 which included Common Stock valued at $96,
Series B Preferred Stock valued at $566 and $123 of transaction costs. The
combined value of the Common and Preferred Stock was based on the closing price
of the Common Stock for several days before and after the announcement of the
terms of the transaction. as the Company's pre-merger shareholders were to
receive a dividend of a proportionate amount of the Preferred Stock. This value
was then adjusted to reflect (i) a dividend of Dynacore Patent Litigation Trust
(the "Trust") units of beneficial interest (the "Trust units") to the Company's
pre-merger shareholders, and (ii) that the Series A Preferred Stock received by
the Company's pre-merger shareholders had liquidation preferences superior to
those of the Series B Preferred Stock. The value allocated to the Trust units
was based on the relative quoted price of the Company's Common Stock and the
Trust units when market quotations for the Trust units were first available. The
combined value of the Common and Preferred Stock was allocated to the Common
Stock to the extent of its par value with the remainder allocated to the
Preferred Stock because of the substantial liquidation preference of the
Preferred Stock compared to the Common Stock.
4. Liquidity
As of March 31, 2003, the Company had cash and cash equivalents of approximately
$0.9 million.
While the Company has a loan receivable from the Dynacore Patent Litigation
Trust ( the "Trust") of approximately $794 plus accrued interest of
approximately $90, virtually the only source of recovery would be from net
proceeds of the patent litigation (Note 5) which the Trust most likely will not
receive.
Despite its cash saving measures, the Company does not believe that it will have
sufficient cash resources to satisfy its cash requirements for 2003 without an
infusion of additional cash. While the Company is actively exploring various
opportunities, there can be no assurance that additional capital will be
available or that the Company will be able to fulfill its obligations.
5. Patent Litigation
The Company believes that the patents it owned prior to their transfer to the
Trust covered most products introduced by various suppliers to the networking
industry and certain types of dual-speed technology introduced by various
industry leaders and had asserted one or both of the patents in four suits
brought in the United States District Court for the Eastern District of New York
(the "Brooklyn Suits") and two suits brought in the United States District Court
for the Southern District of New York (the "Manhattan Suits"). These actions
were transferred to the Trust for prosecution on behalf of the owners of the
9
Trust units. The Company is obligated to lend the Trust up to $1 million to
pursue the patent litigation. As of March 31, 2003, the outstanding principal
amount owed to the Company by the Trust was approximately $794 with accrued
interest of approximately $90.
The Brooklyn Suits were dismissed on appeal on February 15, 2002. On August 19,
2002 and February 3, 2003, the Trust settled the Manhattan Suits against,
respectively, Motorola, Inc. and Eastman Kodak Company. The remaining defendants
in the Manhattan Suits received summary judgment in their favor on February 11,
2003. The Trust filed a timely appeal to reverse this ruling. If the judgment is
not vacated, the Trust will be precluded from further pursuing these cases.
6. Commitments and Contingencies
From time to time, the Company is a defendant in lawsuits generally incidental
to its business. The Company is not currently aware of any such suit which, if
decided adversely to the Company, would result in a material liability.
7. Non-Operating Income (Expense)
(In thousands)
Quarter Ended
03/31/03 03/31/02
Interest earned $1 $8
Imputed interest 8 14
Equity in gain of limited partnership -- 12
Foreign currency gains -- 42
-- --
$9 $76
== ===
8. Accounts Receivable
The Company has a receivable from Vugate, Inc., the buyer of its
videoconferencing business (MINX), consisting of a note with a remaining face
value of $240 that is payable only from certain Vugate cash flows. This note is
carried on the balance sheet at $192, which represents the present value of the
estimated payments at a discount rate of 12.5% per annum. The Company calculates
imputed interest income at 12.5% per annum on the adjusted balance on a
prospective basis. While the Company currently believes that the receivable is
fully collectible, it is reasonably possible that the note will be collected at
a slower or faster rate than estimated or that a portion of the note will turn
out to be uncollectible.
An additional $18 is receivable from other parties.
As of March 31, 2003, the Company had a $794 receivable from the Trust plus $90
of accrued interest. The collection of the receivable is solely dependent upon
the success or favorable settlement of the Patent Litigation. In view of the
summary judgment granted to the defendants in the Patent Litigation on February
11, 2003, an allowance for the full amount of the receivable was recorded as of
March 31, 2003. The Company has not recorded the accrued interest as income.
9. Accrued Expenses
(In thousands)
Mar. 31, 2003 Dec. 31, 2002
Salaries, commissions, and other benefits $56 $50
Accrued professional fees 197 136
Other 9 21
--------------------------------------------------------------------------
$262 $207
==========================================================================
10
10. Pro Forma Financial Information (Unaudited)
The accompanying unaudited condensed pro forma statement of operations of the
Company for the period ended March 31, 2003 gives effect to the acquisition of
the Interests as if it had occurred on January 1, 2003.
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition of the Interests
been consummated as of January 1, 2003, nor is the information necessarily
indicative of future operating results.
The CattleSale Company and Subsidiaries
Pro Forma Statement of Operations
For the three months ended March 31, 2003
($'s in 000's)
Pro
As Reported Adjustments Forma
Sales Revenue 97 540 (1) 637
Cost of Sales 95 530 (1) 625
----------------- ---------------- ----------------
Gross Profit 2 10 12
Selling, general and administrative expenses 339 131 (1) 470
5 (2) 5
----------------- ---------------- ----------------
Operating loss (337) (126) (463)
Non-operating income (expense):
Interest income 1 -- 1
Other, net 8 -- 8
Loss before income taxes
Income taxes (benefit) -- -- --
Net loss $(328) $ (126) $(454)
====== ======= ======
Cumulative dividend on preferred stock (65) (169) (4)
Net loss available to common shareholders $(393) $(623)
====== ======
Net loss per common share $(.03) $(.03) (3)
====== ======
Average common shares outstanding:
Basic and Fully Diluted 13,715,402 19,577,894 (3)
11
Notes to the Pro Forma Statement of Operations
(1) Reflects the actual results of the Interests for the period January 1, 2003
through February 24, 2003.
(2) Reflects amortization expense on the fair value of the Interests' fixed
assets acquired for the period January 1, 2003 through February 24, 2003.
(3) Assumes 19,577,894 shares of common stock were outstanding for the entire
period of January 1, 2003 through March 31, 2003.
(4) Assumes 2,700,000 shares of preferred stock were outstanding for the entire
period of January 1, 2003 through March 31, 2003.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (for the three months ended March 31,
2003 and 2002) ($ in thousands)
Results of Operations
The following is a summary of the Company's sources of revenue:
Quarter Ended
03/31/03 03/31/02
Sales:
U.S. $97 $--
Other: -- --
-- --
Total revenue $97 $--
=== ===
For the three month period ended March 31, 2003, the Company reported a net loss
of $328, an operating loss of $337 and recorded revenue of $97, yielding a gross
profit of $2 and a gross profit margin of approximately 2%. The Company also
reported non-operating income of approximately $9, consisting of interest income
of $1 and imputed interest of $8.
For the three month period ended March 31, 2002, the Company reported a net loss
of $1,460 and an operating loss of $548. The Company reported non-operating
income (expense) of approximately $76, consisting of interest income of $8,
imputed interest of $14, a foreign currency transaction gain of $42 (primarily
related to the liability for the pension benefits and other post employment
obligations for all employees of the Company's German subsidiary) and a gain in
the equity of a limited partnership of $12.
Financial Condition
During the first three months of 2003, the Company's cash and cash equivalents
decreased approximately $355 as a result of the payment of current operating
expenses for the first three months of 2003 and transaction costs of $123
associated with the acquisition described in Note 3 to the Company's
consolidated financial statements.
As of March 31, 2003, the Company had cash and cash equivalents of approximately
$0.9 million.
While the Company has a loan receivable from the Dynacore Patent Litigation
Trust (the "Trust") of approximately $794 plus accrued interest of approximately
$90, virtually the only source of recovery would be from net proceeds of certain
patent litigation which the Trust most likely will not receive.
Despite its cash saving measures, the Company does not believe that it will have
sufficient cash resources to satisfy its cash requirements for 2003 without an
infusion of additional cash. While the Company is actively exploring various
opportunities, there can be no assurance that additional capital will be
available or that the Company will be able to fulfill its obligations.
12
Restructuring Costs
(In thousands)
During the three months ended March 31, 2003 and 2002, the Company did not incur
any restructuring costs. Restructuring charges are not recorded until specific
employees are determined (and notified of termination) by management in
accordance with its overall restructuring plan.
Cautionary Statement Regarding Risks and Uncertainties
This Quarterly Report on Form 10-Q contains "forward-looking statements" about
the business, financial condition and prospects of the Company which are
intended to be covered by the safe harbors created by Section 27A of the
Securities Act of 1993, as amended and Section 21E of the Securities Exchange
Act of 1934. All statements that are not historical facts, including statements
about management's beliefs or expectations, are forward looking statements. When
used in this Quarterly Report on Form 10-Q, the words "believes," "estimates,"
"plans," "expects," "will," "may," "intends" and "anticipates," and similar
expressions as they relate to the Company or its management, are intended to
identify forward-looking statements.
The Company's actual results could differ materially from those indicated by the
forward looking statements because of various risks and uncertainties,
including, without limitation, changes in competition, economic conditions, new
product development, changes in tax and other governmental rules and regulations
applicable to the Company and other risks indicated in the Company's filings
with the Securities and Exchange Commission and normal business uncertainty.
These risks and uncertainties are beyond the ability of the Company to control,
and in many cases, the Company cannot predict the risks and uncertainties that
could cause its actual results to differ materially from those indicated by the
forward-looking statements.
While management believes that its assumptions are reasonable at the time
forward looking statements were made, it is impossible to predict the actual
outcome of numerous factors, and, therefore, undue reliance should not be placed
on such statements. Forward looking statements speak only as of the date they
are made and the Company does not undertake the obligation to update such
statements in light of new information or future events that involve inherent
risks and uncertainties.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
None.
Item 4. Controls and Procedures
(a) Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including Phillip P. Krumb, the Company's interim
chief executive officer and chief financial officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, Mr. Krumb
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
filings with the Securities and Exchange Commission.
(b) There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect the Company's
internal controls subsequent to the date the Company carried out this
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification of interim Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K filed during the quarter ended March 31, 2003
Form 8-K dated and filed February 19, 2003 disclosed under
Item 5 the approval by the Company's Board of Directors of the acquisition of
limited liability company interests in CS Livestock Commissions Co. LLC and CS
Auction Production Co., LLC.
Form 8-K dated February 25, 2003 and filed on March 2, 3003
reported under Item 2 the consummation of the acquisition of limited liability
company interests in CS Livestock Commissions Co. LLC and CS Auction Production
Co., LLC.
Subsequent to March 31, 2003, additional Reports were filed as follows:
Form 8-K dated April 10, 2003 and filed on April 14, 2003
reported under Item 5 the termination of the employment of the Company's then
Chief Executive Officer and the appointment of an interim Chief Executive
Officer.
Form 8-K dated and filed on April 24, 2003 provided under Item
5 disclosures in accordance with Regulation FD.
Form 8-K/A dated February 25, 2003 and filed on April 25, 2003
amended the Form 8-K dated February 25, 2003 to include Item 7 - Financial
Statements, Pro Forma Financial Information and Exhibits required in connection
with the acquisition of limited liability company interests in CS Livestock
Commissions Co. LLC and CS Auction Production Co., LLC.
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE CATTLESALE COMPANY
(Registrant)
DATE: May 20, 2003 /s/ Phillip P. Krumb
--------------------
Phillip P. Krumb
Chief Financial Officer
(Chief Accounting Officer)
Exhibit 99.1
CERTIFICATION
I, Phillip P. Krumb, Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The CattleSale
Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I am the registrant's sole certifying officer and I am responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. I am the registrant's sole certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. I am the registrant's sole certifying officer and I have indicated
in this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 20, 2003
/s/ Phillip P. Krumb
--------------------
Name: Phillip P. Krumb
Titles: Interim Chief Executive Officer
and Chief Financial Officer