U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
___ 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 1-10932
-------
INDEX DEVELOPMENT PARTNERS, INC.
--------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 13-3487784
-------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
125 Broad Street, 14th Floor, New York, New York 10004
------------------------------------------------------
(Address of principal executive offices)
(212) 742-2277
--------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: as of November 11, 2002, issuer had
outstanding 7,894,552 shares of Common Stock, $.01 par value per share.
INDEX DEVELOPMENT PARTNERS, INC. AND SUBSIDIARIES
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
as of September 30, 2002 (Unaudited) 3
Consolidated Condensed Statements of Operations (Unaudited)
for the Three and Nine Months Ended September 30, 2002 and 2001 4
Consolidated Condensed Statements of Cash Flows (Unaudited)
for the Nine Months Ended September 30, 2002 and 2001 5
Notes to Consolidated Condensed Financial Statements
(Unaudited) 6-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-19
Item 3. Controls and Procedures 20
Part II. Other Information
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 4. Submission of Matters for a Vote at Security Holders
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Certification Pursuant to 18 U.S.C. Section 1350 23
Certification Pursuant to Rule 13a-14 and 15d-14 Under the
Securities Exchange Act of 1934, as Amended 24
2
Part I. Financial Information
Item 1. Financial Statements
INDEX DEVELOPMENT PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
Unaudited
September 30,
ASSETS 2002
-----------------
Current assets:
Cash and cash equivalents $ 504,643
Accounts receivable (net of allowances of $9,387) 72,351
Prepaid expenses and other current assets 76,151
-----------------
Total current assets 653,145
-----------------
Property and equipment - net 114,018
Security deposits 285,111
Other assets 372,391
-----------------
Total assets $ 1,424,665
=================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 905,677
Accrued expenses 65,815
Deferred consulting fees and non compete 93,750
-----------------
Total current liabilities 1,065,242
-----------------
Deferred subscription revenue 776,957
-----------------
Total liabilities 1,842,199
-----------------
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares,
7,880 issued and outstanding 79
Common stock, $.01 par value; authorized 40,000,000
shares, 7,894,552, issued and outstanding 78,945
Additional paid-in capital 33,410,579
Warrants 770,842
Accumulated deficit (34,677,979)
-----------------
Total stockholders' deficit (417,534)
-----------------
Total liabilities and stockholders' deficit $ 1,424,665
=================
See Notes to Consolidated Condensed Financial Statements
3
INDEX DEVELOPMENT PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
3 Months Ended September 30, 9 Months Ended September 30,
--------------------------------- -----------------------------------
2002 2001 2002 2001
------------- ------------- -------------- ---------------
Operating expenses:
General and administrative $ 324,617 $ 472,013 $ 783,880 $ 2,121,933
Depreciation and amortization 23,055 99,009 80,490 357,747
------------- ------------- -------------- ---------------
Total operating expenses 347,672 571,022 864,370 2,479,680
------------- ------------- -------------- ---------------
Gain on sale of furniture and fixtures - 20,355 70,871 20,355
Impairment of investments (2,678,546) - (2,678,546)
Gain on disposition of investments - - 84,926 -
------------- ------------- -------------- ---------------
Operating loss from continuing operations (347,672) (3,229,213) (708,573) (5,137,871)
Investment and other income (Note 2) 2,964 19,214 11,858 87,488
------------- ------------- -------------- ---------------
Net loss from continuing operations (344,708) (3,209,999) (696,715) (5,050,383)
------------- ------------- -------------- ---------------
Discontinued operations (Note 3)
------------- ------------- -------------- ---------------
Gain from discontinued operations 569,568 2,482,247 1,554,674 329,853
------------- ------------- -------------- ---------------
Net income (loss) $ 224,860 $ (727,752) $ 857,959 $ (4,720,530)
============= ============= ============== ===============
Basic income (loss) per common share:
Continuing operations ($0.05) ($0.36) ($0.10) ($0.57)
Discontinued operations $0.07 $0.28 $0.20 $0.04
------------- ------------- -------------- ---------------
Net basic income (loss) per share $0.02 ($0.08) $0.10 ($0.53)
============= ============= ============== ===============
Average number of common shares used in computing
basic income (loss) per common share 7,894,552 8,909,661 7,890,806 8,957,109
Dilutive income (loss) per common share:
Continuing operations ($0.05) ($0.36) ($0.10) ($0.57)
Discontinued operations $0.07 $0.28 $0.18 $0.04
------------- ------------- -------------- ---------------
Net dilutive income (loss) per share $0.02 ($0.08) $0.08 ($0.53)
============= ============= ============== ===============
Average number of common shares used in computing
dilutive income (loss) per common share 8,637,948 8,909,661 8,634,202 8,957,109
See Notes to Consolidated Condensed Financial Statements
4
INDEX DEVELOPMENT PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
9 Months Ended September 30,
2002 2001
---------------------- ---------------------
Cash flows from operating activities:
Net income (loss) $ 857,959 $ (4,720,530)
Reconciliation of net income (loss) to net cash used in
operating activities:
Gain from discontinued operations (1,554,674) (329,853)
---------------------- ---------------------
Loss from continuing operations (852,512) (5,050,383)
Gain on sale of assets (70,871) -
Gain on diposition of investments (84,926) -
Depreciation and amortization 80,490 357,747
Stock option and warrant transactions (7,574) (47,213)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 16,577 -
Prepaid expenses and other current assets 78,401 86,206
Security deposits 87,434 1,114
Increase (decrease) in:
Accounts payable and accrued expenses (188,706) 623,322
---------------------- ---------------------
Net cash used in operating activities (785,890) (4,029,207)
---------------------- ---------------------
Cash flows from investing activities:
Purchase of property and equipment (40,543) (549,943)
Proceeds from sale of investments 84,926 -
Proceeds from sale of assets 70,871 -
---------------------- ---------------------
Net cash provided by (used in) investing activities 115,254 (549,943)
---------------------- ---------------------
Cash flows from financing activities:
Receivables financing - (292,729)
Preferred stock dividends (118,200) (78,800)
---------------------- ---------------------
Net cash used in financing activities (118,200) (371,529)
---------------------- ---------------------
Net cash provided by discontinued operations 2,035 1,955,474
---------------------- ---------------------
Net decrease in cash and cash equivalents (786,801) (2,995,205)
Cash and cash equivalents, beginning of period 1,291,444 4,694,476
---------------------- ---------------------
Cash and cash equivalents, end of period $ 504,643 $ 1,699,271
====================== =====================
See Notes to Consolidated Condensed Financial Statements
5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated condensed financial statements include the accounts
of Index Development Partners, Inc. and its subsidiaries (collectively, the
"Company") (see Note 2). Such financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America for interim financial reporting and with the instructions
to Form 10-QSB. Accordingly, they do not include all of the information and
footnotes as required by accounting principles generally accepted in the
United States of America for annual financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary in order to make the financial statements not
misleading have been included. Operating results for the three and nine
months ended September 30, 2002 and 2001 are not necessarily indicative of
the results that may be expected for the year. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report for the year ended December 31,
2001 on Form 10-KSB.
In June 2001, the Financial Accounting Standards Board ("FASB")
approved the final standards resulting from its business combinations
project. The FASB issued Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations," and No. 142, "Goodwill and Other
Intangible Assets," in July 2001. SFAS No. 141 is effective for any
business combination accounted for by the purchase method that is completed
after June 30, 2001. SFAS No. 142, which includes the requirements to test
goodwill and intangible assets with indefinite lives for impairment, rather
than amortize them, will be effective for fiscal years beginning after
December 15, 2001. The adoption of SFAS No. 141 and No. 142 did not have a
material impact on the financial position, results of operations, or cash
flows of the Company.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations and costs associated with the retirement of
tangible long-lived assets. The Company is required to implement SFAS
No.143 on January 1, 2003, and has not yet determined the impact that this
statement will have on its results of operations or financial position.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 replaces SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," and establishes accounting and
reporting standards for impairment of long-lived assets and long-lived
assets to be disposed of by sale. This standard applies to all long-lived
assets, including discontinued operations. SFAS No. 144 requires that
assets to be disposed of by sale be measured at the lower of carrying
amount or fair value less cost to sell. SFAS No. 144 also broadens the
reporting of discontinued operations to include all components of an entity
with operations that can be distinguished from the rest of the entity that
will be eliminated from the ongoing operations of the entity in a disposal
transaction. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001. SFAS No.144 was used to account for the discontinuance
of our Print Publications operations. (See Note 4.)
6
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." This statement eliminates the automatic
classification of gain or loss on extinguishment of debt as an
extraordinary item of income and requires that such gain or loss be
evaluated for extraordinary classification under the criteria of Accounting
Principles Board No. 30, "Reporting Results of Operations." This statement
also requires sales-leaseback accounting for certain lease modifications
that have economic effects that are similar to sales-leaseback
transactions, and makes various other technical corrections to existing
pronouncements. This statement will be effective for the Company for the
year ending December 31, 2003, with the effective date for certain
provisions of SFAS No. 145 being May 15, 2002. The adoption of this
statement will not have a material effect on our results of operations or
financial position or cash flows of the Company.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which changes the rules for
how companies must account for costs associated with exit or disposal
activities. The provisions of the new standard are effective for exit or
disposal activities initiated after December 31, 2002, with early
application encouraged. The Company believes that the adoption of SFAS 146
will not have a material impact on the financial position, results of
operations, or cash flows of the Company.
2. NAME CHANGE
In April 2002, the Board of Directors authorized an amendment to the
Company's certificate of incorporation to change the Company's name to
"Index Development Partners, Inc.," subject to stockholder approval at the
Company's annual meeting held on June 18, 2002. At the annual meeting, the
Company's stockholders approved the name change, which became effective
that day. Effective June 26, 2002, the Company's common stock began trading
on the OTC Bulletin Board under the symbol "IXDP."
In May 1993, the Company had changed its name to "Individual Investor
Group, Inc.," to align its corporate name with the name of its flagship
business, publication of the monthly magazine Individual Investor.
Beginning in the third quarter of 2000, the Company sold its major media
properties, including Individual Investor magazine and
individualinvestor.com, and currently the Company's sole focus is on the
development and licensing of proprietary stock indexes, including the
America's Fastest Growing Companies(SM) family of stock indexes. The
Company therefore believed it was appropriate to change its name to Index
Development Partners, Inc., to align its corporate name with its current
mission.
3. INVESTMENTS
On June 2, 1999, the Company, Kirlin Holding Corp ("Kirlin") and
Venture Highway, Inc. (at the time a wholly-owned subsidiary of Kirlin),
entered into an agreement pursuant to which the Company acquired 3,308,688
newly issued shares (adjusted to reflect subsequent stock splits) of common
stock of VentureHighway, representing 19.9% of the then-outstanding shares
of common stock (the other 80.1% of which immediately after the transaction
were held by Kirlin). The purchase price was paid in the form of a credit
for VentureHighway to use to purchase advertising in the Company's
magazines and web sites during the 30 months ended December 31, 2001. The
investment was valued at the fair market value at the date of the
transaction of approximately $2.6 million.
7
During the fourth quarter 2000, the Company became aware of an other
than temporary decline in the value of its Venture Highway investment and
adjusted the carrying value to estimated fair market value. Accordingly,
the Company reduced the carrying value of its investments by approximately
$2.6 million during the fourth quarter of the year ended December 31, 2000.
During the quarter ended March 31, 2002 the Company received a partial
distribution from Venture Highway of approximately $85,000. This amount has
been recorded as a gain on disposition of investments. The Company has not
accrued for any additional recoveries and will record such amounts, if any,
when received.
On May 4, 2000, the Company and Tradeworx, Inc. ("Tradeworx") entered
into an agreement pursuant to which the Company acquired 1,045,000 newly
issued shares of common stock of Tradeworx, representing at the time a 7%
stake (with warrants to acquire up to 10.5%), on a fully diluted basis, of
Tradeworx. The purchase price was paid for in the form of a credit for
Tradeworx to use to purchase advertising in the Company's magazines and
websites during the 24 months ending August 1, 2002. The investment and the
deferred advertising revenues were recorded at the fair market value at the
date of the transaction of approximately $1.1 million.
During the quarter ended September 30, 2001 the Company became aware
of an other than temporary decline in the value of its Tradeworx investment
and adjusted the carrying value to estimated fair market value.
Accordingly, the Company reduced the carrying value of its investments by
approximately $1.1 million during the third quarter ended September 30,
2001.
On February 23, 2000, the Company and Pricing Dynamics Solutions, Inc.
("Pricing Dynamics") entered into an agreement pursuant to which the
Company acquired 1,166,667 newly issued shares of common stock of Pricing
Dynamics, representing at the time a 3.3% stake (on a fully-diluted basis)
of Pricing Dynamics (constituting 7.4% of the then-outstanding shares). The
purchase price was paid in the form of a credit for Pricing Dynamics to use
to purchase advertising in the Company's magazines and web sites during the
21 months ending December 31, 2001. The investment and the deferred
advertising revenues were recorded at the fair market value at the date of
the transaction of approximately $1.5 million.
During the quarter ended September 30, 2001 the Company became aware
of an other than temporary decline in the value of its Pricing Dynamics
investment and adjusted the carrying value to estimated fair market value.
Accordingly, the Company reduced the carrying value of its investments by
approximately $1.5 million during the third quarter ended September 30,
2001.
4. DISCONTINUED OPERATIONS
In May 2002, the Company transferred the assets of its remaining print
publication, Individual Investor's Special Situations Report newsletter, to
an unrelated third party, who assumed the deferred subscription liability
of the newsletter (see Note 10). As a result of the transaction, the
Company discontinued its Print Publications operations. The operating
results relating to Print Publications operations have been segregated from
continuing operations and reported within a separate line item on the
consolidated condensed statements of operations as discontinued operations.
8
In November 2001, the Company assigned to Telescan, Inc., certain of
the Company's internet assets, including the domain name
www.individualinvestor.com, in exchange for the 1,063,531 shares of the
Company's Common Stock owned by Telescan and the Company subsequently
discontinued its Online Services operations. The operating results relating
to Online Services operations have been segregated from continuing
operations and reported within a separate line item on the consolidated
condensed statements of operations as discontinued operations.
The gain from discontinued operations consisted of the following
components:
PRINT PUBLICATIONS
Three Months Ended Sept.30, Nine Months Ended Sept. 30,
--------------------------- --------------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues and other income $ 523,882 $ 711,647 $ 1,471,306 $ 4,896,945
Gain discontinued operations $ 547,578 $ 2,730,770 $ 1,514,925 $ 945,929
ONLINE SERVICES
Three Months Ended Sept.30, Nine Months Ended Sept. 30,
--------------------------- --------------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues and other income $ 21,990 $ 63,901 $ 21,990 $ 914,134
Gain (loss) discontinued operations $ 21,990 ($248,523) $ 39,749 ($616,076)
Net current assets at September 30, 2002 related to the Print
Publications and Online Services discontinued operations are approximately
$35,000 and $22,000, respectively. The approximate $22,000 receivable and
revenues for the three months ended September 30, 2002 relates to the sale
of a proprietary domain name. Net current liabilities at September 30, 2002
related to the Print Publications and Online Services discontinued
operations are approximately $275,000 and $331,000, respectively. All
long-term liabilities are related to the discontinued Print Publications
segment.
5. STOCK OPTIONS
In April 2002, the Company's board of directors and its chief
executive officer, Jonathan Steinberg, agreed that between April 16, 2002
and December 31, 2002, Mr. Steinberg would receive no cash salary and
instead would be granted a ten-year option to purchase the Company's Common
Stock at an exercise price of $0.05 per share (the fair market value of the
Common Stock on the date of the grant), vesting in bimonthly installments,
each installment of which would have a Black-Scholes value (calculated on
the April 2002 grant date) equal to the amount of cash salary that Mr.
Steinberg otherwise would have received. Pursuant to that agreement, in
April 2002, Mr. Steinberg was granted such an option for an aggregate of
approximately 3.6 million shares, vesting bimonthly between April 30, 2002
and December 31, 2002, in installments of between approximately
208,000-216,000 shares. If all options granted April 2002 were to vest, the
average consideration per share the Company would have received (i.e., the
amount of salary the Company would have saved) by granting the option would
be slightly above $0.045 per share. In the event that any such option is
exercised, the average consideration per share the Company would have
received thus would be slightly above $0.095 (the sum of the approximately
$0.045 in saved salary, plus the $0.05 exercise price the Company would
receive) - an amount that is more than 90% greater than the fair market
value of the Common Stock on the date of the grant. Together with a similar
grant to another employee in lieu of foregoing a portion of his salary, the
total number of options granted to employees during the second quarter of
2002 is 3,713,985 options. On July 31, 2002, the Company granted a director
an option to purchase 30,000 shares of the Company's common stock at an
exercise price of $0.04 per share. The fair value of this option grant was
approximately $800. The total number of options granted by the Company
during the three and nine months ended September 30, 2002 is 30,000 and
3,743,985 shares, respectively.
9
During the three and nine months ended September 30, 2002, no options
were exercised; 516,984 and 571,651 options, respectively, were canceled;
and 380,650 and 415,650 options, respectively, expired.
In May 2001, the Stock Option Committee, pursuant to the Company's
2000 Performance Equity Plan, awarded 223,000 shares of authorized but
unissued Common Stock in the aggregate to certain employees subject to the
terms of a restricted stock agreement. 194,000 of these shares were
cancelled during 2001 and an additional 19,000 were cancelled in March 2002
upon the termination of employment of the respective employees. The
restriction period on the remaining 10,000 shares expired in May 2002.
6. INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share for the three and nine months
ended September 30, 2002 and 2001, respectively, is computed by dividing
the net income (loss), after deducting accrued dividends on cumulative
convertible preferred stock, by the weighted average number of shares of
Common Stock outstanding during the applicable period. Diluted net income
(loss) per common share for the three and nine months ended September 30,
2002 and 2001, respectively, is computed by dividing net income (loss) by
the weighted average number of shares of Common Stock and common equivalent
shares during the applicable period. Common equivalent shares consist of
the incremental shares of Common Stock issuable upon the exercise of stock
options, warrants and other securities convertible into shares of Common
Stock. The exercise of stock options, warrants and other securities
convertible into shares of Common Stock were not assumed in the computation
of diluted loss per common share, as the effect would have been
antidilutive. The exercise of stock options and warrants were not assumed
in the computation of diluted income per common share because the
respective exercise prices of such securities were in excess of the value
of the Common Stock during the applicable period.
10
The computation of net income (loss) applicable to common shareholders
is as follows:
Three Months Ended Sept.30, Nine Months Ended Sept. 30,
--------------------------- --------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net income (loss) $ 224,860 ($727,752) $ 857,959 ($4,720,530)
Preferred stock dividends (39,400) (39,400) (118,200) (118,200)
------------ ------------ ------------ ------------
Net income (loss) applicable to
common shareholders $ 185,460 ($767,152) $ 739,759 ($4,838,730)
============ ============ ============ ============
Fully diluted net income (loss) applicable to common shareholders is
$224,860 and ($727,752) for the three month period ended September 30, 2002
and 2001, respectively, and $857,959 and ($4,720,530) for the nine month
period ended September 30, 2002 and 2001, respectively.
7. SEGMENT INFORMATION
The Company's business segments previously were focused on providing
research and analysis of investment information to individuals and
investment professionals through two operating segments: Print Publications
and Online Services. The Company's Print Publications segment was
discontinued in connection with the May 2002 sale of assets of Individual
Investor's Special Situations Report, a financial investment newsletter
(see Note 4). Previously, the Company's Print Publications segment also
reflected the publication of Individual Investor, a personal finance and
investment magazine (between approximately October 1988 and July 2001) and
Ticker, a magazine for investment professionals (between approximately
October 1996 and September 2000). The Company's Online Services segment was
discontinued subsequent to the sale in November 2001 of certain assets
related to individualinvestor.com and previously also reflected operation
of InsiderTrader.com (between approximately November 1998 and September
2000).
The financial statements for the three and nine months ended September
30, 2001 have been restated to show the results of Print Publications and
Online Services as a discontinued operation (See Note 4). The restated
financials have been prepared consistent with the way such data is utilized
by Company management in evaluating operating results. As a result of the
discontinuance of the Company's Print Publications and Online Services
segment, the Company now operates with one segment, Index Development and
Licensing. No revenues have been generated to date from this segment.
8. COMMITMENTS AND CONTINGENCIES
The Company leases office space in New York City under an operating
lease that expires on March 31, 2004. The Company also subleases its former
office space in New York City under an operating lease that expires March
1, 2005. In May 2001, the Company commenced a sublease of a portion of its
headquarters office space to an unrelated third party and in January 2002,
the Company commenced a sublease of another portion of it headquarters
office space to a different unrelated third party. The Company retains
approximately 11% of its headquarters office space. The Company subleases
its former office space to an unrelated third party. All of the above
leases and subleases provide for yearly escalation of lease payments as
well as real estate tax increases. Operating expense increases, however,
are not available to be passed along to the subleases. General and
administrative expenses for the three and nine months ended September 30,
2002 include approximately $120,000 of operating cost increases related to
the lease of the Company's office space. The Company incurred additional
leasehold expenses of approximately $41,000 in connection with the January
2002 sublease.
The Company has an outstanding letter of credit totaling approximately
$249,000 related to the security deposit for the Company's New York City
corporate office space. The Company has received letters of credit from its
sublease tenants in the aggregate amount of approximately $145,000.
11
9. MAGAZINE SALE
On July 9, 2001, the Company completed the transactions (the "Magazine
Sale") contemplated by an agreement ("Agreement") with The Kiplinger
Washington Editors, Inc. ("Kiplinger"), the publisher of Kiplinger's
Personal Finance Magazine ("KPFM"). Pursuant to the Agreement, the Company,
among other things:
-- sold to Kiplinger the subscriber list to the Company's Individual
Investor magazine ("II");
-- agreed, until July 9, 2006, not to use the name "Individual Investor"
for print periodical publishing or list rental purposes, except in
connection with the Company's Individual Investor's Special Situations
Report newsletter ("SSR"); and
-- agreed to provide certain consulting services to Kiplinger until July
9, 2002.
In return, Kiplinger:
-- agreed to provide II subscribers with KPFM, at no additional cost to
II subscribers, for the number of issues of II that such subscribers
have paid for but have not been served, representing approximately
$2.6 million of deferred subscription liability of the Company; and
-- paid the Company $3.5 million in cash, a portion of which was placed
in escrow to secure certain obligations. All escrow balances less
approximately $30,000 were returned to the Company by the end of
January 2002.
In connection with this transaction, the Company reduced its employee
headcount by approximately 90% in order to focus on its stock index
licensing operations.
10. NEWSLETTER SALE
On May 17, 2002, the Company sold Horizon Publishing Company
("Horizon"), an unrelated third party, assets related to the Company's
Individual Investor's Special Situations Report newsletter ("SSR") and
Horizon agreed to provide SSR subscribers with one or more Horizon
investment related newsletters, at no additional cost to SSR subscribers,
for the number of issues of SSR that such subscribers have paid for but
have not been served, representing approximately $0.1 million of deferred
subscription liability of the Company. In connection with this transaction,
the Company discontinued publication of SSR.
12
11. SUBSEQUENT EVENT
The Board of Directors on November 6, 2002 approved the issuance of
180,000 options to various employees other than Mr. Steinberg as
follows, 25,000 shares vesting December 31, 2002, 25,000 shares vesting
March 31, 2003 and 130,000 shares vesting in equal installments on November
6, 2003, 2004 and 2005, respectively, subject to continuing employment.
Effective November 8, 2002, Gregory Barton, President and Chief
Financial Officer resigned and accepted employment with an unrelated third
party.
13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Important Notice Concerning "Forward-looking Statements" in this Report
1. "Forward-looking Statements." Certain parts of this Report describe
historical information (such as operating results for the three and nine months
ended September 30, 2002 and September 30, 2001, respectively), and the Company
believes the descriptions to be accurate. In contrast to describing the past,
various sentences of this Report indicate that the Company believes certain
results are likely to occur after September 30, 2002. These sentences typically
use words or phrases like "believes," "expects," "anticipates," "estimates,"
"projects," "will continue" and similar expressions. Statements using those
words or similar expressions are intended to identify "forward-looking
statements" as that term is used in Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements include, but are not limited to, projections of
operating results for periods after September 30, 2002, concerning either a
specific segment of the Company's business or the Company as a whole. For
example, projections concerning the following are forward-looking statements:
net revenues, operating expenses, net income or loss, gross margins, royalties,
marketing expenses, sales expenses, and general and administrative expenses.
Except to the extent that a statement in this Report is describing a historical
fact, each statement in this Report is deemed to be a forward-looking statement.
2. Actual Results May Be Different than Projections. Due to a variety of
risks and uncertainties, however, actual results may be materially different
from the results projected in the forward-looking statements. These risks and
uncertainties include those set forth in Item 2 (entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations") of
Part I hereof, in Exhibit 99 hereof and elsewhere in this Report, and in Item 1
(entitled "Business") of Part I and in Item 7 (entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations") of Part II of
the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2001, filed with the Securities and Exchange Commission.
3. The Company Has No Duty to Update Projections. The forward-looking
statements in this Report are current only on the date this Report is filed.
After the filing of this Report, the Company's expectations of likely results
may change, and the Company might come to believe that certain forward-looking
statements in this Report are no longer accurate. The Company shall not have any
obligation, however, to release publicly any corrections or revisions to any
forward-looking statements contained in this Report, even if the Company
believes the forward-looking statements are no longer accurate.
Three and Nine Months Ended September 30, 2002 as Compared to the Three and Nine
Months Ended September 30, 2001
In May 2002, the Company discontinued its Print Publications operations
after selling the assets of its remaining print publication, Individual
Investor's Special Situations Report newsletter, to an unrelated third party.
The operating results relating to Print Publications operations have been
segregated from continuing operations and reported within a separate line item
on the consolidated condensed statements of operations as discontinued
operations.
14
In November 2001, the Company assigned certain of the Company's internet
assets, including the domain name www.individualinvestor.com, to an unrelated
third party and the Company subsequently discontinued its Online Services
operations. The operating results relating to Online Services operations have
been segregated from continuing operations and reported as a separate line item
on the consolidated condensed statements of operations as discontinued
operations.
Consequently, the financial statements for the three and nine months ended
September 30, 2001 have been restated to conform to the September 30, 2002
financial presentation whereby there is only one segment in continuing
operations, the Index Licensing and Development segment.
Loss from Continuing Operations
During the three and nine month periods ended September 30, 2001, the
Company's Print Publications operations published and marketed Individual
Investor magazine, a personal finance and investment magazine, and Individual
Investor's Special Situations Report, a financial investment newsletter. On July
9, 2001, the Company completed the transactions (the "Magazine Sale")
contemplated by an agreement with The Kiplinger Washington Editors, Inc., the
publisher of Kiplinger's Personal Finance Magazine and discontinued publishing
Individual Investor magazine (see Note 9) and in May 2002 the Company sold the
assets of Individual Investor's Special Situations Report to an unrelated third
party (see Note 10). During the three and nine month periods ended September 30,
2001, the Company's Online Services operations operated
WWW.INDIVIDUALINVESTOR.COM, certain assets of which, including the domain name,
were sold to an unrelated third party in November 2001.
The Company's loss from continuing operations for the three and nine months
ended September 30, 2002 was approximately $0.3 million and $0.7 million,
respectively, an improvement of approximately $2.9 million and $4.4 million,
respectively, as compared to a loss from continuing operations for the three
months and nine months ended September 30, 2001 of approximately $3.2 million
and $5.1 million, respectively. The improvement from the prior year is primarily
due to the fact that the Company recorded an approximately $2.7 million charge
for impairment of investments in the third quarter of 2001, as compared to no
such change in the third quarter of 2002, as well as a reduction of corporate
expenses due to the downsizing of the Company. No income taxes were provided in
2002 or in 2001 due to the net loss. The basic and dilutive net loss per
weighted average common share from continuing operations for the three and nine
months ended September 30, 2002 was approximately ($0.05) and ($0.10),
respectively, as compared to approximately ($0.36) and ($0.57), respectively,
for the three and nine months ended September 30, 2001. There were approximately
1.1 million fewer common shares outstanding at September 30, 2002 as compared to
September 30, 2001.
Revenues
No revenues were recorded for the three and nine months ended September 30,
2002 and 2001 for the Company's Index Licensing and Development segment.
15
Operating Expenses
Total operating expenses for the three and nine months ended September 30,
2002 decreased approximately 39% and 65%, respectively, to approximately $0.3
million and $0.9 million, respectively, as compared to approximately $0.6
million and $2.5 million, respectively, for the three months and nine months
ended September 30 2001. The declines are attributable primarily to the
reduction of expenses following the Magazine Sale and the discontinuation of the
Online Services operations. Operating expenses for the nine months ended
September 30, 2002 (but not the three months ended September 30, 2002) have been
reduced by approximately $150,000, an amount received by the Company in the
second quarter 2002 from a business assistance program related to the September
11, 2001 disaster.
General and administrative expenses for the three and nine months ended
September 30, 2002 decreased approximately 31% and 63%, respectively, to
approximately $0.3 million and $0.8 million, respectively, as compared to
approximately $0.5 million and $2.1 million, respectively, for the three and
nine months ended September 30, 2001. The decline is primarily attributable to a
reduction in corporate headcount. General and administrative expenses for the
nine months ended September 30, 2002 (but not the three months ended September
30, 2002) have been reduced by approximately $150,000, an amount received by the
Company in the second quarter 2002 from a business assistance program related to
the September 11, 2001 disaster. General and administrative expenses for the
three and nine months ended September 30, 2002 include approximately $120,000 of
operating cost increases related to the lease of the Company's office space.
Depreciation and amortization expense for the three and nine months ended
September 30, 2002 decreased approximately 77% and 78%, respectively to
approximately $23,000 and $80,000, respectively, as compared to approximately
$99,000 and $358,000, respectively, for the three and nine months ended
September 30, 2001. The decrease is primarily due to the disposal of assets
related to the Magazine Sale and the disposition of furniture and fixtures and
computer equipment in connection with the subleases that commenced May 2001 and
January 2002, respectively.
Gain on Sale of Furniture and Fixtures
Gain on sale of furniture and fixtures for the nine months ended September
30, 2002 of approximately $71,000 represents proceeds received from the sale of
furniture and fixtures and computer equipment during the first quarter ended
March 31, 2002. Gain on sale of furniture and fixtures for the three and nine
months ended September 30, 2001 was approximately $20,000.
Gain on Disposition of Investments
Gain on disposition of investments for the nine months ended September 30,
2002 of approximately $0.1 million represents proceeds from distributions
received as a result of an investment that had previously been written off
during the quarter ended December 31, 2000. There were no comparable gains for
the three months ended September 30, 2002 or for the three and nine months ended
September 30, 2001.
16
Impairment of Investments
During the third quarter of 2001, the Company recorded an impairment of
approximately $1.1 million with respect to its investment in Tradeworx. Inc.,
acquired in May 2000 and approximately $1.5 million with respect to its
investment in Pricing Dynamics, Inc., acquired in February 2000. There were no
comparable impairments recorded in the first half of 2001 or in the three and
nine months ended September 30, 2002.
Investment and Other Income
Investment and other income for the three and nine months ended September
30, 2002 decreased to approximately $3,000 and $12,000, respectively, as
compared to approximately $19,000 and $87,000, respectively, for the three and
nine months ended September 30, 2001. The decreased income for the three and
nine months ended September 30, 2002 is due to decreased cash balances and lower
interest rates on deposits.
Discontinued Operations
Gain from discontinued operations for the three and nine months ended
September 30, 2002 was approximately $0.6 million and $1.6 million,
respectively, as compared to a gain from discontinued operations for the three
months and nine months ended September 30, 2001 of approximately $2.5 million
and $0.3 million, respectively. The gain for the three and nine months ended
September 30, 2002 is primarily the result of the recognition of deferred
consulting revenue and deferred subscription revenue in connection with the
Magazine Sale and the significant decline in expenses of discontinued operations
following the Magazine Sale. Gain from discontinued operations for the three and
nine months ended September 30, 2001 includes approximately $2.2 million from
the Magazine sale in July 2001.
At September 30, 2002, the remaining balance of deferred revenue related to
discontinued operations is: deferred non-compete revenue, approximately $94,000,
recognizable ratably through the second quarter of 2006; and deferred
subscription revenue, approximately $0.8 million, recognizable in decreasing
monthly amounts through the second quarter of 2011.
Net Income (Loss)
The Company recorded net income for the three and nine months ended
September 30, 2002 of approximately $0.2 million and $0.9 million, respectively,
as compared to net loss of approximately ($0.7) million and ($4.7) million,
respectively, for the three and nine months ended September 30, 2001. No income
taxes were provided in 2002 due to the net operating loss carryovers or in 2001
due to the net loss. The basic net income (loss) per weighted average common
share for the three and nine months ended September 30, 2002 was approximately
$0.02 and $0.10, respectively, as compared to approximately ($0.09) and ($0.53),
respectively, for the three and nine months ended September 30, 2001. Dilutive
net income (loss) per weighted average common share for the three and nine
months ended September 30, 2002 was approximately $0.02 and $0.08, respectively,
as compared to approximately ($0.09) and ($0.53), respectively, for the three
and nine months ended September 30, 2001.
17
Liquidity and Capital Resources
As of September 30, 2002, the Company had cash and cash equivalents
totaling approximately $0.5 million and negative working capital of
approximately $0.3 million. Net cash used in operating activities during the
three and nine months ended September 30, 2002 was approximately $199,000 and
$786,000, respectively. Net cash provided by investing activities for the three
and nine months ended September 30, 2002 was approximately $0 and $115,000,
respectively. Net cash used in financing activities during the three and nine
months ended September 30, 2002 was approximately $39,000 and $118,000,
respectively. Net cash provided by (used in) discontinued operations during the
three and nine months ended September 30, 2002 was approximately ($1,000) and
$2,000, respectively. The Company's cash and cash equivalents balance of
approximately $0.5 million at September 30, 2002 represented a decrease of
approximately $0.8 million from the December 31, 2001 balance.
The Company's continuing operations are not generating any revenues. The
Company has had discussions with a variety of parties concerning the potential
license of the Company's indexes for the creation of financial products. With
one exception, these discussions have not resulted in the Company licensing any
of its indexes. As previously reported, the Company had licensed the America's
Fastest Growing Companies(SM) Index to Nuveen Investments for the creation of an
exchange-traded fund to be sponsored by Nuveen and based upon that index. After
receiving an exemptive order it sought from the Securities and Exchange
Commission to be allowed to sponsor this fund and filing with the SEC a
registration statement, Nuveen did not take further action to have the
registration statement declared effective nor did it launch such a fund. As a
result, on November 1, 2002, the Company gave notice to Nuveen that (1) provided
that the license granted to Nuveen immediately became non-exclusive and (2)
provided that the license would be terminated effective January 30, 2003 (i.e.,
90 days from the date of the notice). There can no assurance the Company will
execute licensing agreements with respect to its indexes, that financial
products based upon such indexes would enter the market or that the Company
would derive any material revenues with respect to any such licenses. The
Company also has had discussions with a variety of parties concerning the
potential assignment of the Company's indexes to a third party, in connection
with which the Company receiving back a license to sponsor financial products
based upon the indexes. There can be no assurance the Company will execute any
such agreements or that the Company would be able to successfully sponsor
financial products based upon the indexes. If the Company were successful in
reaching such an agreement with a third party, the Company would still need to
raise external financing in order to be able to sponsor and market these
financial products, and there can be no assurance that the Company would be
successful in raising such financing.
The Company believes that its working capital and the amount it is entitled
to receive from its sublessees will be sufficient to fund its operations and
capital requirements through 2002. However, the Company will begin to face a
severe liquidity issue beginning in the first quarter of 2003 and, in all
likelihood, would need to curtail operations by the end of the second quarter of
2003 if the Company does not obtain external financing by that time since its
continuing operations would not be expected to generate significant revenues, if
any, during 2003 even if the Company were to license any of its indexes in the
near future or were to seek to sponsor financial products on its own. There can
be no assurance that the Company would be able to obtain additional capital, nor
can there be assurance as to the terms upon which the Company might be able to
obtain additional capital. Obtaining any additional capital could result in a
substantial dilution of an investor's equity investment in the Company.
18
Recent Accounting Pronouncements
In June 2001, the FASB approved the final standards resulting from its
business combinations project. The FASB issued SFAS No. 141, "Business
Combinations," and No. 142, "Goodwill and Other Intangible Assets," in July
2001. SFAS No. 141 is effective for any business combination accounted for by
the purchase method that is completed after June30, 2001. SFAS No. 142, which
includes the requirements to test goodwill and intangible assets with indefinite
lives for impairment, rather than amortize them, will be effective for fiscal
years beginning after December 15, 2001. The adoption of SFAS No. 141 and No.
142 did not have a material impact on the financial position, results of
operations, or cash flows of the Company.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations and costs associated with the retirement of tangible
long-lived assets. The Company is required to implement SFAS No.143 on January
1, 2003, and has not yet determined the impact that this statement will have on
its results of operations or financial position.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 replaces SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," and establishes accounting and reporting standards
for impairment of long-lived assets and long-lived assets to be disposed of by
sale. This standard applies to all long-lived assets, including discontinued
operations. SFAS No. 144 requires that assets to be disposed of by sale be
measured at the lower of carrying amount or fair value less cost to sell. SFAS
No. 144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity that will be eliminated from the ongoing operations of the entity
in a disposal transaction. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. SFAS No.144 was used to account for the discontinuance
of our Print Publications operations. (See Note 4.)
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement eliminates the automatic classification of gain or
loss on extinguishment of debt as an extraordinary item of income and requires
that such gain or loss be evaluated for extraordinary classification under the
criteria of Accounting Principles Board No. 30, "Reporting Results of
Operations." This statement also requires sales-leaseback accounting for certain
lease modifications that have economic effects that are similar to
sales-leaseback transactions, and makes various other technical corrections to
existing pronouncements. This statement will be effective for the Company for
the year ending December 31, 2003, with the effective date for certain
provisions of SFAS No. 145 being May 15, 2002. The adoption of this statement
will not have a material effect on our results of operations or financial
position or cash flows of the Company.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which changes the rules for how
companies must account for costs associated with exit or disposal activities.
The provisions of the new standard are effective for exit or disposal activities
initiated after December 31, 2002, with early application encouraged. The
Company believes that the adoption of SFAS 146 will not have a material impact
on the financial position, results of operations, or cash flows of the Company.
19
Item 3. Controls and Procedures
Based upon the evaluation conducted by the Company's Chief Executive
Officer (who now is also the Company's principal financial officer), as of a
date within 90 days of the filing date of this quarterly report, of the
effectiveness of the Company's disclosure controls and procedures, he concluded
that, except as set forth below, (1) there were no significant deficiencies or
material weaknesses in the Company's disclosure controls and procedures, (2)
there were no significant changes in internal controls or other factors that
could significantly affect internal controls subsequent to the evaluation date
and (3) no corrective actions were required to be taken. The Company currently
employs three persons and its accounting functions are performed by former
employees on a part-time, consulting basis. Accordingly, the Company does not
have sufficient personnel to be able to maintain accounting systems and controls
that typically would be desired and maintained by larger business organizations
to ensure that all accounting entries are appropriately recorded. As a result,
the Company relies upon the personal integrity of those persons that are
performing accounting services for the Company. The Company's Chief Executive
Officer has no reason to doubt the personal integrity of those persons. Since
the date of such evaluation, the Company's former President and Chief Financial
Officer resigned and accepted employment with a third party subsequent to the
closing of the books for the quarter and prior to the filing of this quarterly
report, which has caused the Company to modify its internal controls to reflect
that the Chief Executive Officer now also functions as the Company's principal
financial officer.
20
INDEX DEVELOPMENT PARTNERS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company from time to time is involved in ordinary and routine
litigation incidental to its business; the Company currently believes that there
is no such pending legal proceeding that would have a material adverse effect on
the consolidated financial statements of the Company.
Item 2. Changes in Securities
Sales of Unregistered Securities
----------------- --------------------- ------------ -------------------------------- ---------------- -----------------------------
Date of sale Title of security Number Sold Consideration received and Exemption from If option, warrant or
description of underwriting or registration convertible security, terms
other discounts to market claimed of exercise or conversion
price afforded to purchasers
----------------- --------------------- ------------ -------------------------------- ---------------- -----------------------------
7/31/02 Options to purchase 30,000 Continued service; also, Section 4(2) Vesting in three equal
common stock Company would receive exercise installments, on date of
granted to director price upon exercise. grant, first anniversary of
date of grant and second
anniversary of date of
grant, respectively,
subject to continued
service; exercisable for a
period lasting ten years
from date of grant at
exercise price of $0.04 per
share.
----------------- --------------------- ------------ -------------------------------- ---------------- -----------------------------
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description Method of Filing
------ ----------- ----------------
3.1 Amended and Restated Certificate of Incorporation Incorporated by reference to Exhibit 3.2 to the
of Issuer, as amended through June 18, 2002 Form 10-QSB for the quarter ended June 30, 2002
3.3 By-laws of Issuer amended through April 27, 1999 Incorporated by reference to Exhibit 3.3 to the
Form 10-Q for the quarter ended June 30, 1999
99 Certain Risk Factors Filed herewith
21
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Issuer caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
DATE: November 14, 2002
INDEX DEVELOPMENT PARTNERS, INC. (Issuer)
By: /s/ Jonathan L. Steinberg
------------------------------------
Jonathan L. Steinberg,
Chief Executive Officer and Director
(and principal financial and
accounting officer)
22
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Index Development Partners, Inc. (the
"Company") on Form 10-QSB for the period ended September 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, in the respective capacities and on the date indicated below,
hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition of the Company and the results of operation of
the Company.
By: /s/ Jonathan L. Steinberg
------------------------------------
Jonathan L. Steinberg,
Chief Executive Officer and Director
(and principal financial officer)
DATE: November 14, 2002
23
CERTIFICATION PURSUANT TO RULE 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Jonathan L. Steinberg, certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the quarter
ended September 30, 2002 of Index Development Partners, Inc.
2. based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the 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 responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and I 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 me
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 of the
filing date of this quarterly report (the "Evaluation Date");
and
(c) presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based
on my evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of the 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
24
6. 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 my
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 14, 2002
By: /s/ Jonathan L. Steinberg
------------------------------------
Jonathan L. Steinberg,
Chairman and Chief Executive Officer
(and principal financial officer)
25