x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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06-1456680
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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One Hamden Center, 2319 Whitney Avenue, Suite 3B, Hamden, CT
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06518
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(Address of Principal Executive Offices)
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(Zip Code)
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(203) 859-6800
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(Registrant’s Telephone Number, Including Area Code)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
x
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Page
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Item 1
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3
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4
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5
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6
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7
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Item 2
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11
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Item 3
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18
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Item 4
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18
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Item 1
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18
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Item 1A
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18
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Item 2
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19
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Item 3
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19
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Item 4
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19
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Item 5
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19
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Item 6
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19
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20
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March 31,
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December 31,
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||||||
2016
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2015
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||||||
Assets:
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(In thousands, except share data)
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||||||
Current assets:
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|||||||
Cash and cash equivalents
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$ | 2,892 | $ | 4,473 | |||
Accounts receivable, net
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9,353 | 7,174 | |||||
Inventories
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9,921 | 11,296 | |||||
Deferred tax assets
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1,817 | 1,932 | |||||
Other current assets
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688 | 437 | |||||
Total current assets
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24,671 | 25,312 | |||||
Fixed assets, net
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2,552 | 2,507 | |||||
Goodwill
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2,621 | 2,621 | |||||
Deferred tax assets
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1,215 | 1,213 | |||||
Intangible assets, net of accumulated amortization of $2,861 and $2,779, respectively
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806 | 888 | |||||
Other assets
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28 | 28 | |||||
7,222 | 7,257 | ||||||
Total assets
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$ | 31,893 | $ | 32,569 | |||
Liabilities and Shareholders’ Equity:
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|||||||
Current liabilities:
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|||||||
Accounts payable
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$ | 3,948 | $ | 2,642 | |||
Accrued liabilities
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1,635 | 2,838 | |||||
Income taxes payable
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76 | 245 | |||||
Deferred revenue
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221 | 604 | |||||
Total current liabilities
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5,880 | 6,329 | |||||
Deferred revenue, net of current portion
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80 | 77 | |||||
Deferred rent, net of current portion
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186 | 189 | |||||
Other liabilities
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289 | 246 | |||||
555 | 512 | ||||||
Total liabilities
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6,435 | 6,841 | |||||
Commitments and contingencies (Note 7)
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|||||||
Shareholders’ equity:
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|||||||
Common stock, $0.01 par value, 20,000,000 shares authorized; 11,181,581 and 11,170,881 shares issued, respectively; 7,729,922 and 7,782,292 shares
outstanding, respectively
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112 | 112 | |||||
Additional paid-in capital
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29,163 | 28,921 | |||||
Retained earnings
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22,958 | 22,956 | |||||
Accumulated other comprehensive loss, net of tax
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(84) | (80) | |||||
Treasury stock, at cost, 3,451,659 and 3,388,589 shares respectively
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(26,691) | (26,181) | |||||
Total shareholders’ equity
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25,458 | 25,728 | |||||
Total liabilities and shareholders’ equity
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$ | 31,893 | $ | 32,569 |
Three Months Ended
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|||||||
March 31,
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|||||||
2016
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2015
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||||||
(In thousands, except per-share data)
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|||||||
Net sales
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$ | 14,357 | $ | 16,164 | |||
Cost of sales
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8,472 | 9,672 | |||||
Gross profit
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5,885 | 6,492 | |||||
Operating expenses:
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|||||||
Engineering, design and product development
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1,236 | 868 | |||||
Selling and marketing
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1,793 | 1,823 | |||||
General and administrative
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1,917 | 1,840 | |||||
Legal fees associated with lawsuit (Note 7)
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- | 1,744 | |||||
4,946 | 6,275 | ||||||
Operating income
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939 | 217 | |||||
Interest and other (expense) income:
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|||||||
Interest, net
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(4) | (6) | |||||
Other, net
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1 | 14 | |||||
(3) | 8 | ||||||
Income before income taxes
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936 | 225 | |||||
Income tax provision
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311 | 81 | |||||
Net income
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$ | 625 | $ | 144 | |||
Net income per common share:
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|||||||
Basic
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$ | 0.08 | $ | 0.02 | |||
Diluted
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$ | 0.08 | $ | 0.02 | |||
Shares used in per-share calculation:
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|||||||
Basic
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7,834 | 7,856 | |||||
Diluted
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7,883 | 7,876 | |||||
Dividends declared and paid per common share:
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$ | 0.08 | $ | 0.08 | |||
Three Months Ended
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|||||||
March 31,
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|||||||
2016
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2015
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(In thousands)
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|||||||
Net income
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$ | 625 | $ | 144 | |||
Foreign currency translation adjustment, net of tax
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(4) | (9) | |||||
Comprehensive income
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$ | 621 | $ | 135 |
Three Months Ended
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|||||||
March 31,
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|||||||
2016
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2015
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||||||
(In thousands)
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|||||||
Cash flows from operating activities:
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|||||||
Net income
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$ | 625 | $ | 144 | |||
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
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|||||||
Share-based compensation expense
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145 | 142 | |||||
Depreciation and amortization
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324 | 361 | |||||
Deferred income tax provision (benefit)
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115 | (1) | |||||
Foreign currency transaction gains
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(2) | (13) | |||||
Changes in operating assets and liabilities:
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|||||||
Accounts receivable
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(2,179) | (1,711) | |||||
Inventories
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1,375 | 1,040 | |||||
Prepaid income taxes
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- | 368 | |||||
Other current and long term assets
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(252) | (186) | |||||
Accounts payable
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1,305 | 3,633 | |||||
Accrued liabilities and other liabilities
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(1,677) | (1,025) | |||||
Net cash (used in) provided by operating activities
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(221) | 2,752 | |||||
Cash flows from investing activities:
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|||||||
Capital expenditures
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(221) | (188) | |||||
Net cash used in investing activities
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(221) | (188) | |||||
Cash flows from financing activities:
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|||||||
Payment of dividends on common stock
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(623) | (623) | |||||
Purchases of common stock for treasury
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(510) | (1,020) | |||||
Net cash used in financing activities
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(1,133) | (1,643) | |||||
Effect of exchange rate changes on cash and cash equivalents
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(6) | (3) | |||||
(Decrease) Increase in cash and cash equivalents
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(1,581 | ) | 918 | ||||
Cash and cash equivalents, beginning of period
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4,473 | 3,131 | |||||
Cash and cash equivalents, end of period
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$ | 2,892 | $ | 4,049 | |||
Supplemental schedule of non-cash investing activities:
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|||||||
Capital expenditures funded by accounts payable
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66 | - |
March 31,
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December 31,
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2016
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2015
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(In thousands)
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|||||||
Raw materials and purchased component parts
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$ | 5,711 | $ | 6,627 | |||
Work-in-process
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1 | 1 | |||||
Finished goods
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4,209 | 4,668 | |||||
$ | 9,921 | $ | 11,296 |
Three months ended
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|||||||
March 31,
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2016
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2015
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||||||
(In thousands)
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|||||||
Balance, beginning of period
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$ | 277 | $ | 287 | |||
Warranties issued
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80 | 40 | |||||
Warranty settlements
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(74) | (71) | |||||
Balance, end of period
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$ | 283 | 256 |
Three months ended
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|||||||
March 31,
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2016
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2015
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||||||
(In thousands, except per share data)
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|||||||
Net income
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$ | 625 | $ | 144 | |||
Shares:
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|||||||
Basic: Weighted average common shares outstanding
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7,834 | 7,856 | |||||
Add: Dilutive effect of outstanding options and restricted stock units as determined
by the treasury stock method
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49 | 20 | |||||
Diluted: Weighted average common and common equivalent shares outstanding
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7,883 | 7,876 | |||||
Net income per common share:
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|||||||
Basic
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$ | 0.08 | $ | 0.02 | |||
Diluted
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$ | 0.08 | $ | 0.02 |
Balance at December 31, 2015
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$ | 25,728 | |
Net income
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625 | ||
Issuance of deferred stock units, net of relinquishments
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150 | ||
Share-based compensation expense
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145 | ||
Foreign currency translation adjustment
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(4) | ||
Reversal of deferred tax asset in connection with stock options forfeited
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(53) | ||
Purchase of common stock for treasury
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(510) | ||
Dividends declared and paid on common stock
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(623) | ||
Balance at March 31, 2016
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$ | 25,458 |
Three months ended
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Three months ended
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Change
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|||||||||||||||||||||
March 31, 2016
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March 31, 2015
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$ | % | ||||||||||||||||||||
Food safety, banking and POS
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$ | 3,137 | 21.8% | $ | 2,222 | 13.8% | $ | 915 | 41.2% | ||||||||||||||
Casino and gaming
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5,438 | 37.9% | 5,581 | 34.5% | (143) | (2.6%) | |||||||||||||||||
Lottery
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2,935 | 20.4% | 4,031 | 24.9% | (1,096) | (27.2%) | |||||||||||||||||
Printrex
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155 | 1.1% | 707 | 4.4% | (552) | (78.1%) | |||||||||||||||||
TSG
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2,692 | 18.8% | 3,623 | 22.4% | (931) | (25.7%) | |||||||||||||||||
$ | 14,357 | 100% | $ | 16,164 | 100% | $ | (1,807) | (11.2%) | |||||||||||||||
International *
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$ | 2,531 | 17.6% | $ | 4,154 | 25.7% | $ | (1,623) | (39.1%) | ||||||||||||||
*
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International sales do not include sales of products made to domestic distributors or other domestic customers who may in turn ship those products to international destinations.
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Three months ended
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Three months ended
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Change
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|||||||||||||||||||||
March 31, 2016
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March 31, 2015
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$ | % | ||||||||||||||||||||
Domestic
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$ | 2,918 | 93.0% | $ | 1,979 | 89.1% | $ | 939 | 47.4% | ||||||||||||||
International
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219 | 7.0% | 243 | 10.9% | (24) | (9.9%) | |||||||||||||||||
$ | 3,137 | 100.0% | $ | 2,222 | 100.0% | $ | 915 | 41.2% |
Three months ended
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Three months ended
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Change
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|||||||||||||||||||||
March 31, 2016
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March 31, 2015
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$ | % | ||||||||||||||||||||
Domestic
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$ | 3,303 | 60.7% | $ | 2,079 | 37.3% | $ | 1,224 | 58.9% | ||||||||||||||
International
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2,135 | 39.3% | 3,502 | 62.7% | (1,367) | (39.0%) | |||||||||||||||||
$ | 5,438 | 100.0% | $ | 5,581 | 100.0% | $ | (143) | (2.6%) |
Three months ended
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Three months ended
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Change
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|||||||||||||||||||||
March 31, 2016
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March 31, 2015
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$ | % | ||||||||||||||||||||
Domestic
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$ | 2,935 | 100.0% | $ | 3,939 | 97.7% | $ | (1,004) | (25.5%) | ||||||||||||||
International
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- | -% | 92 | 2.3% | (92) | (100.0%) | |||||||||||||||||
$ | 2,935 | 100.0% | $ | 4,031 | 100.0% | $ | (1,096) | (27.2%) |
Three months ended
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Three months ended
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Change
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|||||||||||||||||||||
March 31, 2016
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March 31, 2015
|
$ | % | ||||||||||||||||||||
Domestic
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$ | 136 | 87.7% | $ | 637 | 90.1% | $ | (501) | (78.6%) | ||||||||||||||
International
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19 | 12.3% | 70 | 9.9% | (51) | (72.9%) | |||||||||||||||||
$ | 155 | 100.0% | $ | 707 | 100.0% | $ | (552) | (78.1%) |
Three months ended
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Three months ended
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Change
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|||||||||||||||||||||
March 31, 2016
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March 31, 2015
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$ | % | ||||||||||||||||||||
Domestic
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$ | 2,534 | 94.1% | $ | 3,376 | 93.2% | $ | (842) | (24.9%) | ||||||||||||||
International
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158 | 5.9% | 247 | 6.8% | (89) | (36.0%) | |||||||||||||||||
$ | 2,692 | 100.0% | $ | 3,623 | 100.0% | $ | (931) | (25.7%) |
Three months ended
March 31,
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Percent
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Percent of
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Percent of
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||||||||||||||
2016
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2015
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Change
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Total Sales – 2016
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Total Sales - 2015
|
|||||||||||||
$ | 5,885 | $ | 6,492 | (9.3%) | 41.0% | 40.2% |
Three months ended
March 31,
|
Percent
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Percent of
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Percent of
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||||||||||||||
2016
|
2015
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Change
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Total Sales – 2016
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Total Sales - 2015
|
|||||||||||||
$ | 1,236 | $ | 868 | 42.4% | 8.6% | 5.4% |
Three months ended
March 31,
|
Percent
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Percent of
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Percent of
|
||||||||||||||
2016
|
2015
|
Change
|
Total Sales – 2016
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Total Sales – 2015
|
|||||||||||||
$ | 1,793 | $ | 1,823 | (1.6%) | 12.5% | 11.3% |
Three months ended
March 31,
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Percent
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Percent of
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Percent of
|
||||||||||||||
2016
|
2015
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Change
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Total Sales – 2016
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Total Sales – 2015
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|||||||||||||
$ | 1,917 | $ | 1,840 | 4.2% | 13.4% | 11.4% |
Three months ended
March 31,
|
Percent
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Percent of
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Percent of
|
||||||||||||||
2016
|
2015
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Change
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Total Sales – 2016
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Total Sales – 2015
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|||||||||||||
$ | - | $ | 1,744 | (100%) | -% | 10.8% |
Three months ended
March 31,
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Percent
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Percent of
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Percent of
|
||||||||||||||
2016
|
2015
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Change
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Total Sales – 2016
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Total Sales – 2015
|
|||||||||||||
$ | 939 | $ | 217 | 332.7% | 6.5% | 1.3% |
·
|
We reported net income of $625,000.
|
·
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We recorded depreciation, amortization, and share-based compensation expense of $469,000.
|
·
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Accounts receivable increased $2,179,000, or 30%, due to the increase and timing of sales during the first quarter of 2016.
|
·
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Inventories decreased $1,375,000, or 12%, due to the sell through of inventory on hand during the first quarter of 2016.
|
·
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Other current and long-term assets increased, $252,000, or 54%, due largely to advance payments made in the first quarter 2016 for annual ERP software maintenance expenses.
|
·
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Accounts payable increased $1,305,000, or 49%, due to increased inventory purchases towards the end of the first quarter 2016.
|
·
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Accrued liabilities and other liabilities decreased $1,677,000 due primarily to the payment of 2015 annual bonuses in March 2016.
|
·
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We reported net income of $144,000.
|
·
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We recorded depreciation, amortization, and share-based compensation expense of $503,000.
|
·
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Accounts receivable increased $1,711,000, or 19%, due to the timing of sales during the first quarter of 2015.
|
·
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Inventories decreased $1,040,000, or 9%, due to the sell through of inventory on hand during 2015 compared to the increased stocking levels of our new food safety and Printrex products in the first quarter of 2014.
|
·
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Prepaid income taxes declined $368,000, or 90%, due to the receipt of a refund during the first quarter of 2015 that resulted from an overpayment of federal income taxes in 2014.
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·
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Other current and long-term assets increased, $186,000, or 36%, due largely to advance payments made in the first quarter 2015 for annual ERP software maintenance expenses.
|
·
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Accounts payable increased $3,633,000, or 154%, due to unpaid legal fees related to the AD lawsuit as well as increased inventory purchases to support a higher level of sales.
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·
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Accrued liabilities and other liabilities decreased $1,025,000 due primarily to the payment of 2014 annual bonuses in March 2015 and lower accruals for uninvoiced legal fees related to the AD lawsuit.
|
Financial Covenant
|
Requirement/Restriction
|
Calculation at March 31, 2016
|
Operating cash flow / Total debt service
|
Minimum of 1.25 times
|
76.6 times
|
Funded Debt / EBITDA
|
Maximum of 3.0 times
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0 times
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Period
|
Total Number of Shares Purchased
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Approximate Dollar Value of Shares that May Yet Be Purchased under the Stock Repurchase Program
|
||||||||||||
January 1, 2016 – January 31, 2016
|
- | $ | - | - | $ | 5,000,000 | ||||||||||
February 1, 2016 – February 29, 2016
|
- | - | - | $ | 5,000,000 | |||||||||||
March 1, 2016 – March 31, 2016
|
63,070 | 8.09 | 63,070 | $ | 4,490,000 | |||||||||||
Total
|
63,070 | $ | 8.09 | 63,070 |
Exhibit 10.1
|
Amendment No. 2 to Lease Agreement between Bomax Properties, LLC and TransAct, dated January 2014, 2016 (1).
|
|
Exhibit 10.2
|
2014 Equity Incentive Plan Time-based Restricted Stock Unit Agreement.
|
|
Exhibit 31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Exhibit 31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Exhibit 32.1
|
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL Instance Document.
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
TRANSACT TECHNOLOGIES INCORPORATED
|
|
(Registrant)
|
|
/s/ Steven A. DeMartino
|
|
May 5, 2016
|
Steven A. DeMartino
|
President, Chief Financial Officer, Treasurer and Secretary
|
|
(Principal Financial and Accounting Officer)
|
Exhibit
|
||
10.2
|
2014 Equity Incentive Plan Time-based Restricted Stock Unit Agreement.
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL Instance Document.
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
(a)
|
[INSERT DATE] [INSERT 25% OF TOTAL]
|
1.
|
I have reviewed this quarterly report on Form 10-Q of TransAct Technologies Incorporated;
|
2.
|
Based on my knowledge, this 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 report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this 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 report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Bart C. Shuldman
|
|
Bart C. Shuldman
|
|
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of TransAct Technologies Incorporated;
|
2.
|
Based on my knowledge, this 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 report;
|
3.
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Based on my knowledge, the financial statements, and other financial information included in this 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 report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Steven A. DeMartino
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Steven A. DeMartino
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President, Chief Financial Officer, Treasurer and Secretary
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Bart C. Shuldman
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Bart C. Shuldman
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Chairman and Chief Executive Officer
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/s/ Steven A. DeMartino
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Steven A. DeMartino
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President, Chief Financial Officer, Treasurer and Secretary
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