UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-24277
Clarus Corporation
------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1972600
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification Number)
organization)
One Pickwick Plaza
Greenwich, Connecticut 06830
------------------------------------------
(Address of principal executive offices)
(Zip code)
(203) 302-2000
------------------------------------------
(Registrant's telephone number,
including area code)
3970 Johns Creek Court,
Suwanee, Georgia 30024
------------------------------------------
(former address)
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 periods 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 Act). YES X NO_
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, ($.0001 Par Value)
--------------------------------
16,474,737 shares outstanding as of August 5, 2003
INDEX
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CLARUS CORPORATION
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) -
June 30, 2003 and December 31, 2002..................................................... 1
Condensed Consolidated Statements of Operations (unaudited) -
Three and six months ended June 30, 2003 and 2002....................................... 2
Condensed Consolidated Statements of Cash Flows (unaudited) -
Six months ended June 30, 2003 and 2002................................................. 3
Notes to Unaudited Condensed Consolidated Financial Statements (unaudited) -
June 30, 2003........................................................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................... 12
Item 4. Procedures and Controls.................................................................. 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................................................ 13
Item 4. Submission of Matters to a Vote of Security Holders....................................... 13
Item 5. Other Information......................................................................... 14
Item 6. Exhibits and Reports on Form 8-K.......................................................... 14
SIGNATURE............................................................................................... 14
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLARUS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31,
2003 2002
-------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $52,041 $42,225
Marketable securities 37,079 52,885
Accounts receivable, less allowance for doubtful accounts
of $0 and $586 in 2003 and 2002, respectively -- 467
Prepaids and other current assets 1,010 1,262
Assets held for sale -- 48
--------- -----------
Total current assets 90,130 96,887
PROPERTY AND EQUIPMENT, NET 4 809
OTHER ASSETS:
Deposits and other long-term assets 60 68
--------- -----------
TOTAL ASSETS $90,194 $97,764
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $1,948 $1,936
Deferred revenue 1,169 1,248
Current portion of long-term debt -- 5,000
Liabilities to be assumed -- 220
--------- -----------
Total current liabilities 3,117 8,404
LONG-TERM LIABILITIES: -- --
Other long-term liabilities -- --
--------- -----------
Total liabilities 3,117 8,404
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value; 5,000,000 shares authorized; none issued -- --
Common stock, $.0001 par value; 100,000,000 shares authorized;
16,546,038 and 15,762,707 shares issued and 16,471,038 and 15,687,707
outstanding in 2003 and 2002, respectively 2 2
Additional paid-in capital 365,987 361,715
Accumulated deficit (275,888) (272,436)
Treasury stock, at cost (2) (2)
Accumulated other comprehensive income 98 146
Deferred compensation (3,120) (65)
--------- -----------
Total stockholders' equity 87,077 89,360
--------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $90,194 $97,764
========= ===========
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
1
CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------- ----------------------------
2003 2002 2003 2002
---- ---- ---- ----
REVENUES:
License fees $ -- $ 1,013 $ -- $ 2,486
Services fees 25 1,531 78 3,999
--------------------------- ----------------------------
Total revenues 25 2,544 78 6,485
COST OF REVENUES:
License fees -- 3 -- 17
Services fees -- 1,881 -- 3,819
--------------------------- ----------------------------
Total cost of revenues -- 1,884 -- 3,836
OPERATING EXPENSES:
Research and development -- 2,553 -- 5,182
Sales and marketing -- 3,032 -- 6,678
General and administrative 1,522 3,595 3,831 5,102
Intangible impairment loss -- 10,360 -- 10,360
Depreciation and amortization -- 2,326 761 3,673
--------------------------- ----------------------------
Total operating expenses 1,522 21,866 4,592 30,995
OPERATING LOSS (1,497) (21,206) (4,514) (28,346)
OTHER INCOME/(EXPENSE) 75 6 380 12
INTEREST INCOME 390 685 748 1,418
INTEREST EXPENSE (10) (56) (66) (112)
--------------------------- ----------------------------
NET LOSS $ (1,042) $ (20,571) $ (3,452) $ (27,028)
=========================== ============================
Loss per common share:
Basic $ (0.07) $ (1.32) $ (0.22) $ (1.73)
Diluted $ (0.07) $ (1.32) $ (0.22) $ (1.73)
Weighted average shares outstanding:
Basic 15,884 15,588 15,812 15,580
Diluted 15,884 15,588 15,812 15,580
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
SIX MONTHS
ENDED JUNE 30,
------------------------
2003 2002
-------- ---------
OPERATING ACTIVITIES:
Net loss $(3,452) $(27,028)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization on property and equipment 761 2,433
Loss/(Gain) on sale of investments -- (15)
Impairment of intangible assets -- 10,360
Noncash other (70) --
Amortization of intangible assets -- 455
Noncash sales and marketing expense -- 450
Noncash general and administrative expense 86 --
Provision for doubtful accounts (67) 3
Loss/(Gain) on disposal of assets 37 785
Changes in operating assets and liabilities:
Accounts receivable 534 1,564
Prepaid and other current assets 252 876
Assets held for Sale 48 --
Deposits and other long-term assets 8 (104)
Accounts payable and accrued liabilities 12 1,649
Deferred revenue (79) (5,227)
Liabilities to be assumed (220) --
Other long-term liabilities -- (7)
-------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,150) (13,806)
INVESTING ACTIVITIES:
Purchases of marketable securities (109,823) (20,282)
Proceeds from sale of marketable securities 125,629 2,628
Proceeds from maturity of marketable securities -- 14,140
Proceeds from sale of investments -- 200
Proceeds from sale of equipment 11 27
Purchases of property and equipment (4) (76)
-------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 15,813 (3,363)
FINANCING ACTIVITIES:
Proceeds from the exercises of stock options 1,201 136
Repayment of debt (5,000) --
Proceeds from issuance of common stock related to employee
stock purchase plan -- 78
-------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,799) 214
-------- ---------
Effect of exchange rate change on cash (48) 3
CHANGE IN CASH AND CASH EQUIVALENTS 9,816 (16,952)
CASH AND CASH EQUIVALENTS, Beginning of Period 42,225 55,628
-------- ---------
CASH AND CASH EQUIVALENTS, End of Period $52,041 $38,676
======== =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
-------- ---------
Cash paid for interest $0 $56
======== =========
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
CLARUS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Clarus
Corporation and subsidiaries ("Clarus" or the "Company," which may be referred
to as "we," "us," or "our") for the three and six months ended June 30, 2003 and
2002, have been prepared in accordance with accounting principles generally
accepted in the United States of America and instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information in notes required by accounting principles generally accepted in the
United States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the unaudited condensed consolidated financial
statements have been included. The results of the three and six months ended
June 30, 2003 are not necessarily indicative of the results to be obtained for
the year ending December 31, 2003. These interim financial statements should be
read in conjunction with the Company's audited consolidated financial statements
and footnotes thereto included in the Company's Form 10-K for the fiscal year
ended December 31, 2002, filed with the Securities and Exchange Commission.
NOTE 2. SIGNIFICANT EVENTS
As part of our previously announced strategy to limit operating losses and
enable the Company to redeploy its assets and use its substantial cash and cash
equivalent assets to enhance stockholder value, on December 6, 2002, we sold
substantially all of our electronic commerce business, which represented
substantially all of our revenue-generating operations and related assets.
On May 26, 2003, the Company assigned all of its right, title and interest in
and to the eMarket application software, including the source code relating
thereto ("eMarket") to Litemark, Inc., a Georgia corporation ("Litemark"). In
connection with such assignment the Company received consideration consisting of
1,000,000 shares of the common stock of Litemark and a two-year royalty equal to
a percentage of all gross revenues received by Litemark solely as a result of
the licensing or selling of the object code and/or source code of eMarket to
third parties. The Company did not record any gain/loss on this transaction as
the eMarket application had no carrying value, and the Litemark shares were
assigned a $0 fair value.
NOTE 3. EARNINGS PER SHARE
Basic and diluted net loss per share were computed in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," using
the weighted average number of common shares outstanding. The diluted net loss
per share for the three and six months ended June 30, 2003 and 2002 does not
include the effect of potentially dilutive common stock equivalents, calculated
using the treasury stock method, as their impact would be antidilutive. In
addition, the diluted net loss per share excludes the effect of 500,000 shares
of restricted common stock discussed in note 4, as their impact would be
antidilutive.
NOTE 4. STOCK-BASED COMPENSATION
The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations. As such,
compensation expense is measured on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. Such compensation
expense is recorded on a straight-line basis over the related vesting period.
SFAS 123, "Accounting for Stock-Based Compensation", permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS 123 allows entities to continue
to apply the provisions of APB Opinion No. 25 and provide pro forma net income
(loss) and pro forma net income (loss) per share disclosures for employee stock
option grants as if the fair-value-based method defined in SFAS 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosures required by SFAS 123.
In April 2003, the Company granted 500,000 shares of restricted stock to Warren
B. Kanders, the Executive Chairman of the Board. The shares vest in 10 years or
earlier upon satisfaction of various conditions including performance based
conditions relating to the price of the Company's common stock. Deferred
compensation of $3,140,000 was recorded at the date of grant, of which $78,500
was amortized to compensation expense during the three months ended June 30,
2003.
Had compensation cost been determined consistent with the provisions of SFAS No.
123, the Company's pro forma net loss and net loss per share in accordance with
SFAS No. 123 for the three and six-month periods ended June 30, 2003 and 2002
would have been as follows (in thousands, except per share amounts):
4
3 months ended 6 months ended
June 30, June 30,
2003 2002 2003 2002
-------------------------- ------------------------
Net loss, as reported...................................................... $(1,042) $(20,571) $(3,542) $(27,028)
Add stock-based employee compensation expense included in reported
net loss, net of tax.................................................... 81 18 84 196
Deduct total stock-based employee compensation expense determined
under fair-value based method for all awards, net of tax................ (1,255) (87) (1,255) (478)
-------- --------- -------- --------
Pro forma net loss......................................................... $(2,216) $(20,640) $(4,713) $(27,310)
======== ========= ======== =========
Basic and diluted net loss per share:
As reported................................................................ $ (.07) $(1.32) $(0.22) $(1.73)
Add stock-based employee compensation expense included in reported
net loss, net of tax.................................................... $ 0.01 $ 0.00 $ 0.01 $ 0.01
Deduct total stock-based employee compensation expense determined
under fair-value based method for all awards, net of tax $ (.08) $(0.01) $(0.08) $(0.03)
------- ------- ------- -------
Pro forma basic and diluted net loss per share.......................... $ (.14) $(1.33) $(0.29) $(1.75)
======= ======= ======= =======
NOTE 5. RESTRUCTURING AND RELATED COSTS
During 2002 and 2001, the Company's management approved restructuring plans to
reorganize and reduce operating costs. During the first quarter of 2002, the
Company determined that amounts previously charged during 2001 of approximately
$202,000 that related to employee separation and related charges were no longer
required and this amount was credited to sales and marketing expense in the
accompanying consolidated statement of operations during calendar 2002.
Restructuring and related charges of $8.6 million were expensed during 2002. The
charges for 2002 were comprised of $4.6 million for employee separation and
related costs for 183 employees and $4.0 million for facility closures and
consolidation costs.
The facility closures and consolidation costs for 2002 relate to the abandonment
of the Company's leased facilities in Suwanee, Georgia; Limerick, Ireland;
Maidenhead, England; and near Toronto, Canada. Total facilities closure and
consolidation costs include remaining lease liabilities, construction costs and
brokerage fees to sublet the abandoned space, net of estimated sublease income.
The estimated costs of abandoning these leased facilities, including estimated
costs to sublease, were based on market information trend analysis provided by a
commercial real estate brokerage firm retained by the Company. The Company
incurred a charge in the fourth quarter 2002 of $2.1 million for facility
closure and consolidation costs as a result of the termination of its lease for
the facility in Suwanee, Georgia.
The following is a reconciliation of the components of the accrual for
restructuring and related costs, the amounts charged against the accrual during
2002 and 2003 and the balance of the accrual as of June 30, 2003:
SIX MONTHS ENDED JUNE 30, 2003
---------------------------------------------
BALANCE ACCRUALS BALANCE BALANCE
DECEMBER DURING EXPENDITURES ADJUSTMENTS DECEMBER 31, EXPENDITURES JUNE 30,
31, 2001 2002 DURING 2002 DURING 2002 2002 DURING 2003 2003
-------- --------- ------------ ----------- ------------ ------------ --------
(in thousands)
Employee separation
costs $680 $4,645 $(4,196) $(202) $927 $(614) $313
Facility closure costs 1,209 3,905 (4,977) -- 137 (2) 135
-------- --------- ------------ ----------- ------------ ------------ --------
Total restructuring and
related costs $1,889 $8,550 $(9,173) $(202) $1,064 $(616) $448
======== ========= ============ =========== ============ ============= =======-
The accrual for restructuring and related costs is included in accounts payable
and accrued liabilities in the accompanying consolidated balance sheets.
NOTE 6. COMPREHENSIVE INCOME (LOSS)
The Company utilizes SFAS No. 130 "Reporting Comprehensive Income." SFAS 130
establishes standards for reporting and presentation of comprehensive income
(loss) and its components of net income (loss) and "Other Comprehensive Income
(Loss)." "Other Comprehensive Income (Loss)" refers to revenues, expenses and
gains and losses that are not included in net income (loss) but rather are
recorded directly in stockholders' equity. The components of comprehensive loss
for the three and six months ended June 30, 2003 and 2002 were as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2003 2002 2003 2002
-------------- --------------- ------------- --------------
(in thousands)
Net loss $ (1,042) $ (20,571) $(3,452) $(27,028)
Increase in unrealized gain on marketable securities 37 18 98 (164)
Foreign currency translation adjustments - 87 - 3
-------------- --------------- ------------- --------------
Comprehensive loss $(1,005) $(20,466) (3,354) (27,189)
============== =============== ============= ==============
5
NOTE 7. CONTINGENCIES
The Company is a party to various pending judicial and administrative
proceedings described more fully in Part I, Item 3 of the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31, 2002,
and Part II, Item 1 of this Quarterly Report on Form 10-Q. After reviewing the
proceedings that are currently pending (including the probable outcomes,
reasonably anticipated costs and expenses, availability and limits of insurance
coverage), we do not believe that any liabilities that may result from these
proceedings are reasonably likely to have a material adverse effect on our
liquidity, financial condition or results of operations. However, the results of
complex legal proceedings are difficult to predict. An unfavorable resolution of
the proceedings that are currently pending could adversely affect the Company's
business, results of operations, liquidity or financial condition.
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51." This
interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the interpretation. The interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. The application of this interpretation did not
have a material effect on the Company's consolidated financial statements.
In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation," to
provide alternative methods of transition for a voluntary change to the fair
value method of accounting for stock-based employee compensation. In addition,
this statement amends the disclosure requirements of SFAS 123 to require
prominent disclosures in both annual and interim financial statements. Certain
of the disclosures are required for quarterly financial reporting and are
included in the notes to these condensed consolidated financial statements.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107
and a rescission of FASB Interpretation No. 34." This interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. Interpretation No. 45
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the interpretation are
applicable to guarantees issued or modified after December 31, 2002 and are not
expected to have a material effect on the Company's financial statements. The
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002. The Company does not currently
have any guarantees requiring disclosure in the notes to these condensed
consolidated financial statements. Accordingly the application of this
interpretation did not have a material effect on the Company's consolidated
financial statements.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities." SFAS 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The provisions of SFAS
146 are effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. The adoption of SFAS 146
did not have a material impact on the Company's consolidated financial
statements.
6
In August 2001, the FASB issued SFAS 143 "Accounting for Asset Retirement
Obligations." SFAS 143 addresses financial accounting and reporting obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The company adopted SFAS 143 on January 1, 2003. The
adoption of SFAS 143 did not have a material impact on the Company's
consolidated financial statements.
NOTE 9. RELATED PARTY TRANSACTIONS
In 2003, we entered into an oral agreement with Kanders & Company pursuant to
which we subleased approximately 1,989 square feet in Greenwich, Connecticut for
$9,572 a month (subject to increases every three years). In June 2003, this
agreement with Kanders & Company was terminated as the underlying lease held by
Kanders & Company for the Greenwich property was voluntarily terminated. Clarus
has been reimbursed by Kanders & Company in the aggregate amount of $102,000,
which represents all out-of-pocket expenses incurred by Clarus in connection
with the Greenwich property. Kanders & Company is owned and controlled by the
Company's Executive Chairman, Warren B. Kanders.
During the three and six month periods ended June 30, 2003, the Company expensed
$48,000 and $57,000, respectively, to Kanders Aviation LLC, an affiliate of the
Company's Executive Chairman, Warren B. Kanders, for reimbursement of expenses
relating to use of its aircraft for travel required by directors and officers of
the Company. This travel related to Board meetings and the closing of the
Atlanta facility. As of June 30, 2003, 30,000 of this expense remained
outstanding and is included in accounts payable and accrued liabilities.
As of June 30, 2003, the Company had outstanding accounts receivables of $71,000
from Kanders & Company and Kanders Aviation. Both of these companies are owned
and controlled by Warren B. Kanders, the Company's Executive Chairman. The
expenses relate to travel as discussed above and general and administrative
costs incurred by the Company on behalf of Kanders & Co.
NOTE 10. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements, including information
about or related to our future results, certain projections and business trends.
Assumptions relating to forward-looking statements involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control. When
used in this report, the words "estimate," "project," "intend," "believe,"
"expect" and similar expressions are intended to identify forward-looking
statements. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any or all of the assumptions could
prove inaccurate, and we may not realize the results contemplated by the
forward-looking statements. Management decisions are subjective in many respects
and susceptible to interpretations and periodic revisions based upon actual
experience and business developments, the impact of which may cause us to alter
our business strategy or capital expenditure plans that may, in turn, affect our
results of operations. In light of the significant uncertainties inherent in the
forward-looking information included in this report, you should not regard the
inclusion of such information as our representation that we will achieve any
strategy, objectives or other plans. The forward-looking statements contained in
this report speak only as of the date of this report, and we have no obligation
to update publicly or revise any of these forward-looking statements.
These and other statements, which are not historical facts, are based largely
upon our current expectations and assumptions and are subject to a number of
risks and uncertainties that could cause actual results to differ materially
from those contemplated by such forward-looking statements. These risks and
uncertainties include, among others, our planned effort to redeploy our assets
to enhance stockholder value following the sale of substantially all of our
revenue generating operations and assets, and the risks and uncertainties set
forth in the section headed "Factors That May Affect Our Future Results" of Part
I of our Annual Report on Form 10-K, as amended, for the fiscal year ended
December 31, 2002 and described below. The Company cannot guarantee its future
performance.
7
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
The Company's discussion of financial condition and results of operations are
based on the consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these consolidated financial statements require management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
consolidated financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting periods. The Company continually
evaluates its estimates and assumptions including those related to revenue
recognition, allowance for doubtful accounts, impairment of long-lived assets,
and contingencies and litigation. The Company bases its estimates on historical
experience and other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from these estimates.
The Company believes the following critical accounting policies include the more
significant estimates and assumptions used by management in the preparation of
its consolidated financial statements.
- - The Company has recognized revenue from two primary sources, software
licenses and services. Revenue from software licensing and services
fees is recognized in accordance with Statement of Position ("SOP")
97-2, "Software Revenue Recognition," and SOP 98-9, "Software Revenue
Recognition with Respect to Certain Transactions" and related
interpretations. The Company recognized software license revenue when:
persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the fee is fixed or determinable; and (4) collectibility
is probable.
- - The Company maintains allowances for doubtful accounts based on
expected losses resulting from the inability of the Company's customers
to make required payments.
- - The Company had significant long-lived assets, primarily intangibles,
as a result of acquisitions completed during 2000. During 2002, the
Company evaluated the carrying value of its long-lived assets,
including intangibles, according to Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" and
SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets." Prior to 2002, the Company periodically evaluated the carrying
value of its long-lived assets, including intangibles, according to
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of." During the fourth quarter of
2001, the Company's evaluation of the performance of the SAI/Redeo
companies compared to initial projections, negative economic trends and
a decline in industry growth rate projections indicated that the
carrying value of these intangible assets exceeded management's revised
estimates of future undiscounted cash flows. This assessment resulted
in a $36.8 million impairment charge to goodwill based on the amount by
which the carrying amount of these assets exceeded fair value. As a
result of a change in the Company's strategic direction during the
second quarter of 2002, the Company determined that remaining goodwill
and intangible assets should be tested for further impairment, as a
result of such tests, the Company recorded an additional impairment
charge to goodwill of $6.7 million and an impairment charge to
intangible assets of $3.6 million during the three months ended June
30, 2002. The Company recorded no amortization expense related to
intangible assets with definite lives during the three and six months
ended June 30, 2003. As a result of adopting SFAS 142, the Company did
not record amortization expense related to goodwill during 2002.
- - The Company is a party to various pending judicial and administrative
proceedings described more fully in Part I, Item 3 of the Company's
Annual Report on Form 10-K, as amended, for the fiscal year ended
December 31, 2002 and Part II, Item 1 of this Quarterly Report on Form
10-Q. After reviewing the proceedings that are currently pending
(including the probable outcomes, reasonably anticipated costs and
expenses, availability and limits of insurance coverage), we do not
believe that any liabilities that may result from these proceedings are
reasonably likely to have a material adverse effect on our liquidity,
financial condition or results of operations. However, the results of
complex legal proceedings are difficult to predict. An unfavorable
resolution of the proceedings that are currently pending could
adversely affect the Company's business, results of operations,
liquidity or financial condition.
Sources of Revenue
Prior to December 6, 2002, the Company's revenue consisted of license fees and
services fees. License fees were generated from the licensing of the Company's
suite of software products. Services fees were generated from consulting,
implementation, training, content aggregation and maintenance support services.
Following the sale of substantially all of the Company's operating assets, the
Company's revenue consists solely of the recognition of deferred service fees
that are recognized ratably over the maintenance term. This revenue will
continue to decrease during 2003 and will be fully recognized by year-end. Prior
to a redeployment of the Company's assets, the Company's earnings will consist
of interest, dividend and other investment income from short-term investments
that is reported as interest income in the Company's statement of operations.
Revenue Recognition
The Company historically recognized revenue from two primary sources, software
licenses and services. Revenue from software licensing and services fees was
recognized in accordance with SOP 97-2, "Software Revenue Recognition," and SOP
98-9, "Software Revenue Recognition with Respect to Certain Transactions" and
related interpretations. The Company recognizes software license revenue when:
(1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)
the fee is fixed or determinable; and (4) collectibility is probable.
8
Cost of Revenues and Operating Expenses
Cost of license fees included royalties and software duplication and
distribution costs. The Company recognized these costs as the applications were
shipped.
Cost of services fees included personnel related expenses and third-party
consulting fees incurred to provide implementation, training, maintenance,
content aggregation, and upgrade services to customers and partners. These costs
were recognized as they were incurred for time and material arrangements and
were recognized using the percentage of completion method for fixed price
arrangements.
Research and development expenses consisted primarily of personnel related
expenses and third-party consulting fees. The Company accounted for software
development costs under Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed." The Company charged research and development costs related to new
products or enhancements to expense as incurred until technological feasibility
was established, after which the remaining costs were capitalized until the
product or enhancement was available for general release to customers. The
Company defined technological feasibility as the point in time at which a
working model of the related product or enhancement exists. Historically, the
costs incurred during the period between the achievement of technological
feasibility and the point at which the product is available for general release
to customers were not material.
Sales and marketing expenses consisted primarily of personnel related expenses,
including sales commissions and bonuses, expenses related to travel, customer
meetings, trade show participation, public relations, promotional activities,
regional sales offices, and advertising.
General and administrative expenses consist primarily of personnel related
expenses for financial, administrative and management personnel, fees for
professional services, board of director fees and the provision for doubtful
accounts. During 2002, the Company allocated the total cost of its information
technology function and costs related to the occupancy of its corporate
headquarters, to each of the functional areas. Information technology expenses
included personnel related expenses, communication charges, and software
support. Occupancy charges include rent, utilities, and maintenance services.
Restructuring and Related Costs
See "Restructuring and Related Costs" Note 5 of the Notes to the Unaudited
Condensed Consolidated Financial Statements
OVERVIEW
AS PART OF OUR PREVIOUSLY ANNOUNCED STRATEGY TO LIMIT OPERATING LOSSES AND
ENABLE THE COMPANY TO REDEPLOY ITS ASSETS AND USE ITS SUBSTANTIAL CASH AND CASH
EQUIVALENT ASSETS TO ENHANCE STOCKHOLDER VALUE, ON DECEMBER 6, 2002 WE SOLD
SUBSTANTIALLY ALL OF OUR ELECTRONIC COMMERCE BUSINESS, WHICH REPRESENTED
SUBSTANTIALLY ALL OF OUR REVENUE-GENERATING OPERATIONS AND RELATED ASSETS. THE
INFORMATION APPEARING BELOW, WHICH RELATES TO PRIOR PERIODS, IS THEREFORE NOT
INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR ANY SUBSEQUENT PERIODS. THE
CURRENT THREE-MONTH AND SIX-MONTH PERIODS PRIMARILY REFLECT, AND FUTURE PERIODS
PRIOR TO A REDEPLOYMENT OF ASSETS ARE EXPECTED TO PRIMARILY REFLECT, GENERAL AND
ADMINISTRATIVE EXPENSES ASSOCIATED WITH THE CONTINUING ADMINISTRATION OF THE
COMPANY AND ITS EFFORTS TO REDEPLOY ITS ASSETS.
RESULTS OF OPERATIONS
Revenues
Total Revenues. Total revenues for the three months ended June 30, 2003
decreased to $25,000 from $2.5 million during the same period in 2002. Total
revenues for the six months ended June 30, 2003 decreased to $78,000 from $6.5
million during the same period in 2002. The decrease in total revenues in both
periods resulted primarily from the sale of substantially all of the Company's
operating assets, discussed above.
9
License Fees. As a result of the sale of substantially all of the Company's
operating assets, discussed above, the Company did not recognize any license fee
revenue during 2003. License fees were $1.0 million or 39.8% of total revenues
for the three months ended June 30, 2002. License fees were $2.5 million or
38.3% of total revenues for the six months ended June 30, 2002.
Services Fees. Services fees decreased to $25,000 or 100% of total revenues for
the three months ended June 30, 2003, from $1.5 million or 60.2% of total
revenues for the same period in 2002. Services fees decreased to $78,000 or
100.0% of total revenues for the six months ended June 30, 2003, from $4.0
million or 61.7% of total revenues for the same period in 2002. This decrease is
primarily attributable to the sale of substantially all of the Company's
operating assets, discussed above.
Cost of Revenues
Total Cost of Revenues. As a result of the sale of substantially all of the
Company's operating assets, the Company did not record any cost of revenues
during 2003. Cost of revenues were $1.9 million and $3.8 million during the
three and six months ended June 30, 2002.
Cost of License Fees. As a result of the sale of substantially all of the
Company's operating assets, the Company did not record any cost of license fees
during 2003. Cost of license fees was $3,000 during the three months ended June
30, 2002 and $17,000 for the six months ended June 30, 2002.
Cost of Services Fees. As a result of the sale of substantially all of the
Company's operating assets, the Company did not record any cost of services fees
during 2003. Cost of services fees were $1.9 million during the three months
ended June 30, 2002 and $3.8 million during the six months ended June 30, 2002.
Research and Development Expense
As a result of the sale of substantially all of the Company's operating assets,
the Company did not record any research and development expenses during 2003.
Research and development expenses were approximately $2.6 million or 100.4% of
total revenues during the three months ended June 30, 2002 and $5.2 million or
89.6% of total revenues during the six months ended June 30, 2002.
Sales and Marketing
As a result of the sale of substantially all of the Company's operating assets,
the Company did not record any sales and marketing expenses during 2003. Sales
and marketing expenses were $3.0 million during the second quarter in 2002 and
$6.7 million during the six months ended June 30, 2002.
General and Administrative
General and administrative expenses decreased to $1.5 million during the quarter
ended June 30, 2003 from $3.6 million during the same period in 2002. General
and administrative expenses decreased to $3.8 million during the six months
ended June 30, 2003 from $5.1 million during the same period in 2002. The
decrease in general and administrative expenses for the three and six months
ended June 30, 2003 was primarily attributable to the reduction in expenses due
to the company's change in strategic direction as discussed earlier.
Depreciation and Amortization
Depreciation and amortization decreased to $0 in the quarter ended June 30, 2003
from $2.3 million in the same period of 2002. Depreciation and amortization
decreased to $761,000 in the six months ended June 30, 2003 from $3.7 million in
the same period of 2002. The decrease is primarily attributable to the sale of
substantially all of the Company's operating assets, the write-down of certain
assets related to the Company's Maidenhead, England, Limerick, Ireland and
Suwanee, Georgia facilities during 2002 and the write-off of intangible assets
with definite lives during 2002.
Other Income
For the three months ended June 30, 2003, the Company recorded a gain of $75,000
from the extinguishment of debt and disposal of assets. For the three months
ended June 30, 2002, the Company recorded other income of $6,000. For the six
months
10
ended June 30, 2003, the Company recorded a loss on disposal of assets and a
gain from the early extinguishments of debt of $380,000. For the six months
ended June 30, 2002, the Company recorded other income of $12,000 which was
comprised of losses on foreign currency and realized gains and losses on
marketable securities.
Interest Income
Interest income decreased to $390,000 in the three months ended June 30, 2003
from $685,000 in the same period of 2002. Interest income decreased to $748,000
for the six months ended June 30, 2003 from $1.4 million for the same period of
2002. The decrease in interest income was due to lower levels of cash and cash
equivalents available for investment and a lower rate of return on investments.
Interest Expense
Interest expense was $10,000 and $56,000 for the three months ended June 30,
2003 and 2002, respectively. Interest expense for the six months ended June 30,
2003 was $66,000 compared to $112,000 during the same period of 2002. In March
of 2000, the Company entered into a $5.0 million borrowing arrangement with an
interest rate of 4.5% with Peachtree Equity Partners L.P., assignee of Wachovia
Capital Investments, Inc. The interest expense in 2003 and 2002 is related to
this agreement. The debt was repaid on April 17, 2003.
Income Taxes
As a result of the operating losses incurred since the Company's inception, no
provision or benefit for income taxes was recorded during the three months and
six months ended June 30, 2003 and 2002, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased to $52.0 million at June 30,
2003 from $42.2 million at December 31, 2002. Marketable securities decreased to
$37.1 million at June 30, 2003 from $52.9 million at December 31, 2002. The
overall decrease in cash and cash equivalents and marketable securities is due
primarily to cash used in operating activities and repayment of indebtedness.
Cash used in operating activities was approximately $2.1 million during the six
months ended June 30, 2003. This was primarily attributable to the Company's net
loss partially offset by a decrease in accounts receivable and prepaid and other
current assets and an increase in accounts payable and accrued liabilities. Cash
used in operating activities was approximately $13.8 million during the six
months ended June 30, 2002. The cash used was primarily attributable to the
Company's net loss and to a decrease in deferred revenue partially offset by
noncash items, an increase in accounts payable and a decrease in accounts
receivable and prepaid and other assets.
Cash provided by investing activities was approximately $15.8 million during the
six months ended June 30, 2003. The cash was provided primarily from the sale
and maturity of marketable securities partially offset by the purchase of
marketable securities. Cash used for investing activities was approximately $3.4
million during the six months ended June 30, 2002. The cash was used primarily
for purchases of marketable securities partially offset by the sale and maturity
of marketable securities.
Cash used by financing activities was approximately $3.7 million during the six
months ended June 30, 2003, compared to cash provided by financing activities of
$214,000 during the six months ended June 30, 2002. The cash used by financing
activities during the six months ended June 30, 2003 was primarily attributable
to the early repayment of debt to Peachtree Equity Partners, L.P. as mentioned
earlier. For the six month period ending June 30, 2002, cash provided by
financing was attributable to proceeds from shares issued under the employee
stock purchase plan and stock option exercises.
At June 30, 2003, the Company had net operating loss carryforwards, research and
experimentation credit, and alternative minimum tax credit carryforwards for
U.S. federal income tax purposes that expire in varying amounts beginning in the
year 2009. The Company's ability to benefit from certain net operating loss
carryforwards is limited under section 382 of the Internal Revenue Code as the
Company is deemed to have had an ownership change of greater than 50%.
Accordingly, certain net operating losses may not be realizable in future years
due to this limitation.
As part of our previously announced strategy, we are seeking to redeploy our
assets, to reduce significantly our cash expenditure rate and targeting, to the
extent practicable, our overhead expenses to the amount of our interest income
until the completion of such redeployment.
11
The following summarizes the Company's contractual obligations and commercial
commitments at June 30, 2003, and the effect such obligations are expected to
have on our liquidity and cash flow in future periods:
TOTAL 2003 2004 2005 2006 2007 THEREAFTER
------- ------ ------ ------ ------ ------ ------------
(in thousands)
Operating leases 393 189 96 96 12 -- --
------- ------ ------ ------ ------ ------ ------------
Total $393 $189 $96 $96 $12 $-- $--
======= ====== ====== ====== ====== ====== ============
The Company does not have commercial commitments under capital leases, lines of
credit, standby lines of credit, guaranties, standby repurchase obligations or
other such arrangements.
The Company does not engage in any transactions or have relationships or other
arrangements with an unconsolidated entity. These include special purpose and
similar entities or other off-balance sheet arrangements. The Company also does
not trade in energy, weather or other commodity based contracts.
Related Party Transactions
In 2003, we entered into an oral agreement with Kanders & Company pursuant to
which we subleased approximately 1,989 square feet in Greenwich, Connecticut for
$9,572 a month (subject to increases every three years). In June 2003, this
agreement with Kanders & Company was terminated as the underlying lease held by
Kanders & Company for the Greenwich property was voluntarily terminated. Clarus
has been reimbursed by Kanders & Company in the aggregate amount of $102,000,
which represents all out-of-pocket expenses incurred by Clarus in connection
with the Greenwich property. Kanders & Company is owned and controlled by the
Company's Executive Chairman, Warren B. Kanders.
During the three and six month periods ended June 30, 2003, the Company expensed
$48,000 and $57,000, respectively, to Kanders Aviation LLC, an affiliate of the
Company's Executive Chairman, Warren B. Kanders, for reimbursement of expenses
relating to use of its aircraft for travel required by directors and officers of
the Company. This travel related to Board meetings and the closing of the
Atlanta facility. As of June 30, 2003, 30,000 of this expense remained
outstanding and is included in accounts payable and accrued liabilities.
As of June 30, 2003, the Company had outstanding accounts receivables of $71,000
from Kanders & Company and Kanders Aviation. Both of these companies are owned
and controlled by Warren B. Kanders, the Company's Executive Chairman. The
expenses relate to travel as discussed above and general and administrative
costs incurred by the Company on behalf of Kanders & Co.
After the closing of the sale of the e-commerce software business, Steven
Jeffery resigned as the Company's Chief Executive Officer and Chairman of the
Board of Directors. Under Mr. Jeffery's employment agreement, he is entitled to
receive a severance payment equal to one year's salary of $250,000, payable over
one year. In addition, Mr. Jeffery entered into a three-year consulting
agreement with the Company and will receive total consideration of $250,000
payable over a term of two years. Both of these obligations were accrued as of
December 31, 2002. During the six-month period ended June 30, 2003, Mr. Jeffery
received $187,500 related to these arrangements leaving a balance of $312,500
which is included in accrued liabilities and accounts payable as of June 30,
2003.
In the opinion of management, the rates, terms and considerations of the
transactions with the related parties described above approximate those that the
Company would have received in transactions with unaffiliated parties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our exposures to market risk since
December 31, 2002.
ITEM 4. PROCEDURES AND CONTROLS
The Company's management carried out an evaluation, with the participation of
the Company's Chief Administrative Officer and Controller, its principal
executive officer and principal financial officer, respectively, of the
effectiveness of the Company's disclosure controls and procedures. Based upon
that evaluation, the Chief Administrative Officer and Controller concluded that,
except as set forth below, as of the end of the period covered by this Form 10-Q
that the Company's disclosure controls and procedures are effective.
Except as set forth below, there have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation.
The Company notes, however, that staff reductions arising out of the
discontinuance of its operations and its effort to reduce administrative
expenses pending redeployment of its assets, has resulted in management
recognition of a deficiency in our financial reporting process and the need to
retain additional financial reporting assistance to the extent necessary. The
Company plans to retain such assistance accordingly. We believe that this matter
has not had a material impact on our financial statements.
12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various pending judicial and administrative
proceedings, which, except as set forth below, are described more fully in Part
I, Item 3 of the Company's Annual Report on Form 10-K, as amended, for the
fiscal year ended December 31, 2002. After reviewing the proceedings that are
currently pending (including the probable outcomes, reasonably anticipated costs
and expenses, availability and limits of insurance coverage), we do not believe
that any liabilities that may result from these proceedings are reasonably
likely to have a material adverse effect on our liquidity, financial condition
or results of operations. However, the results of complex legal proceedings are
difficult to predict. An unfavorable resolution of the proceedings that are
currently pending could adversely affect the Company's business, results of
operations, liquidity or financial condition.
Peachtree Equity Partners, L.P. v. Clarus Corporation:
On April 18, 2003, Peachtree Equity Partners L.P., as the assignee of a
five-year promissory note made by the Company in the amount of $5 million,
agreed to dismiss with prejudice, an action commenced by Peachtree Equity in the
Georgia state court for prepayment of the promissory note, plus interest and
attorneys fees. In connection with such dismissal, the Company made a payment to
Peachtree Equity comprised of the $5 million outstanding principal amount of the
promissory note.
During 2002, ten former employees of the Company commenced an action in the
United States District Court for the Northern District of Georgia-Atlanta
Division seeking back pay, employee benefits, interest and attorneys' fees. On
July 31, 2003, the case was dismissed without prejudice to the right of any
party to reopen the matter on or before August 15, 2004.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our annual meeting of stockholders on June 24, 2003. Of the 16,463,024
shares of common stock entitled to vote at the meeting, 14,657,320 shares of
common stock were present in person or by proxy and entitled to vote. Such
number of shares represented approximately 89% of our outstanding shares of
common stock. Listed below are the matters voted upon at our annual meeting of
stockholders and the respective voting results:
Abstained/
Voted Broker
FOR Withheld Non-Votes
---------------- --------------- ----------------
Election of Directors:
Tench Coxe 13,576,259 1,081,061 -
Burtt R. Ehrlich 13,684,924 972,396 -
Donald L. House 12,795,787 1,861,533 -
Stephen P. Jeffrey 13,033,075 1,624,245 -
Warren B. Kanders 12,536,156 2,121,164 -
Nicholas Sokolow 13,519,838 1,137,482 -
Voted Voted
FOR AGAINST Abstained
---------------- --------------- ----------------
Approval of the proposal to amend our Amended and Restated Certificate of
Incorporation to restrict certain transfers of its securities in order to
help assure the preservation of our tax net operating loss carryforwards: 10,261,523 1,235,829 11,795
Ratification of the appointment of KPMG LLP as our independent auditors for
the year ending December 31, 2003: 12,504,744 677,341 8,781
13
ITEM 5. OTHER INFORMATION
At our annual meeting of stockholders held on July 24, 2003, our stockholders
approved an amendment (the "Amendment") to our Amended and Restated Certificate
of Incorporation to restrict certain acquisitions of our securities in order to
help assure the preservation of our tax net operating loss carryforwards. The
Amendment generally restricts direct and indirect acquisitions of our equity
securities if such acquisition will affect the percentage of Clarus' capital
stock that is treated as owned by a 5% stockholder. A copy of the Amendment
filed with the Secretary of State of Delaware on July 30, 2003, accompanies our
Current Report on Form 8-K dated July 31, 2003, as Exhibit 3.1.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Exhibit
- ----- -------
31.1 Certification of Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification Principal Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
During the quarter ended June 30, 2003, the Company filed a Current Report on
Form 8-K on May 15, 2003, with respect to Items 7 and 9, relating to a press
release dated May 15, 2003, announcing the Company's earnings for the
three-month period ended March 31, 2003.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CLARUS CORPORATION
Date August 18, 2003
/s/ Nigel P. Ekern,
-------------------
Nigel P. Ekern,
Chief Administrative Officer
/s/ Susan Luckfield,
--------------------
Susan Luckfield,
Controller
14
EXHIBIT INDEX
Number Exhibit
- ------ -------
31.1 Certification of Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification Principal Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.