SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
--------------------
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter 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 0-22710
ATEC GROUP, INC.
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3673965
---------------------------------------------------------------------
State or other jurisdiction of (I.R.S. Employer
corporation or organization) Identification Number)
69 Mall Drive, Commack, New York 11725
---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (631) 543-2800
------------------
---------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
As of the close of business on September 30, 2002, there were 8,284,971 shares
of the Registrant's Common Stock outstanding.
ATEC GROUP, INC.
----------------
TABLE OF CONTENTS
PART I Financial Information Page
------ --------------------- ----
Item 1. Financial Statements..............................................1-8
Item 2. Managements Discussion & Analysis of
Financial Condition and Results of Operations....................9-12
Item 3. Quantitative and Qualitative Disclosures about Market...........12-13
Item 4. Controls and Procedures............................................13
PART II Other Information Required in Report
------- ------------------------------------
Item 1. Legal Proceedings..................................................14
Item 2. Changes in Securities and use of Proceeds..........................14
Item 3. Defaults Upon Senior Securities....................................14
Item 4. Submission of Matters to a Vote of Security Holders................14
Item 5. Other Information..................................................14
Item 6. Exhibits and Report on Form 8k.....................................14
Signatures Page...............................................................15
Certifications.............................................................16-22
PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements.
------------------------------
ATEC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED AUDITED
ASSETS 30-Sep-02 30-Jun-02
------------ ------------
Current Assets
Cash $ 2,012,080 $ 1,382,722
Accounts receivable, net 2,977,493 3,166,078
Inventories 620,431 602,792
Deferred taxes 401,493 401,493
Other current assets 712,456 858,682
------------ ------------
Total currrent assets 6,723,953 6,411,767
------------ ------------
Property and equipment, net 250,033 290,040
Goodwill, net 864,961 864,961
Other assets 191,313 235,182
------------ ------------
$ 8,030,260 $ 7,801,950
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Revolving inventory line of credit $ 248,581 $ 368,292
Accounts payable 1,281,130 1,114,071
Accrued expenses 755,984 585,795
Deferred income - 26,976
Other current liabilities 314,269 654,182
------------ ------------
Total liabilities 2,599,964 2,749,316
Stockholders' equity
Preferred stocks 835,582 835,582
Common stock 74,361 73,435
Additional paid-in capital 12,177,070 11,815,397
Discount on preferred stock (742,740) (742,740)
Retained earnings (deficit) (6,174,684) (6,219,452)
Treasury stock at cost (739,293) (709,588)
------------ ------------
Total stockholders' equity 5,430,296 5,052,634
------------ ------------
$ 8,030,260 $ 7,801,950
============ ============
1
ATEC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30
2002 2001
------------ ------------
Net sales $ 9,645,696 $ 12,048,185
Cost of sales 7,881,104 9,713,694
------------ ------------
Gross profit 1,764,592 2,334,491
------------ ------------
Operating expenses
Selling and administrative 1,735,533 2,186,899
------------ ------------
Total operating expenses 1,735,533 2,186,899
------------ ------------
Income from operations 29,059 147,592
------------ ------------
Other income (expense)
Interest income 7,170 14,498
Miscelleneous income 12,039 -
------------ ------------
Total other (expense) income 19,209 14,498
------------ ------------
Income (loss) before provision for income taxes 48,268 162,090
taxes
Provision [benefit] for income taxes 3,500 64,800
------------ ------------
Net income (loss) $ 44,768 $ 97,290
============ ============
Net earnings (loss) per share-basic and
diluted $ 0.01 $ 0.01
============ ============
Weighted average number of shares-basic 7,867,044 7,088,444
============ ============
Weighted average number of shares-diluted 7,867,044 7,088,444
============ ============
2
ATEC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30
2002 2001
----------- -----------
Net cash provided by (used in) operating
activities $ 297,024 $ (682,602)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (560) (2,043)
----------- -----------
Net cash (used in) provided by investing activities (560) (2,043)
----------- -----------
Cash flows from financing activities:
Purchase of common stock (29,705) -
Stock issued for services 362,599 -
----------- -----------
Net cash (used in) provided by financing activities 332,894 0
----------- -----------
Net increase (decrease) in cash 629,358 (684,645)
Cash and cash equivalents - Beginning of period 1,382,722 1,555,020
----------- -----------
Cash and cash equivalents - End of period $ 2,012,080 $ 870,375
=========== ===========
3
ATEC GROUP, INC
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDING SEPTEMBER 30, 2002
Common Value Series Value Additional
Shares Common Preferred Preferred Paid-In
Issued Stock Issued Stock Capital
----------- ----------- ---------- ----------- -----------
Balance at June 30, 2002 7,304,971 $ 73,435 424,429 $ 835,582 $11,815,397
Purchase of Treasury Stock
Shares issued for services 980,000 $ 926 $ 361,673
Net Income for the Six months Ended
September 30, 2002
---------------------------------------------------------------------
Balance at September 30, 2002 8,284,971 $ 74,361 424,429 $ 835,582 $12,177,070
=====================================================================
Discount on Retained Treasury Stock Total
Preferred Earnings ------------------------- Stockholders'
Stock (Deficit) Shares Amount Equity
----------- ----------- ----------- ----------- -----------
Balance at June 30, 2002 ($742,740) ($6,219,452) 378,345 ($709,588) $ 5,052,634
Purchase of Treasury Stock 82,300 ($29,705) (29,705)
Shares issued for services 362,599
Net Income for the Six months Ended
September 30, 2002 $ 44,768 44,768
----------------------------------------------------------------------
Balance at September 30, 2002 ($742,740) ($6,174,684) 460,645 ($739,293) $ 5,430,296
======================================================================
4
ATEC GROUP, INC. AND SUBSIDIARIES
FORM 10Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Condensed Consolidated Financial Statements
The accompanying interim unaudited consolidated financial statements include the
accounts of Atec Group, Inc. and its subsidiaries that are hereafter referred to
as (the "Company"). All intercompany accounts and transactions have been
eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles in the United States of America for complete
financial statements. In the opinion of management, such interim statements
reflect all adjustments (consisting of normal recurring accruals) necessary to
present fairly the financial position and the results of operations and cash
flows for the interim periods presented. The results of operations for these
interim periods are not necessarily indicative of the results to be expected for
the full year. These financial statements should be read in conjunction with the
audited consolidated financial statements and footnotes included in the
Company's report on Form 10-K for the year ended June 30, 2002.
5
2. Equity Securities
Capital Stock
The Company's capital stock consists of the following:
Shares
Issued
Shares and
September 30, 2002 Authorized Outstanding Amount
---------- ----------- ----------
Preferred Stocks:
Series A cumulative convertible 29,233 8,371 $ 837
Series B convertible 12,704 1,458 145
Series C convertible 350,000 309,600 309,600
Series J convertible 105,000 105,000 525,000
----------- -------
Total preferred 424,429 $ 835,582
=========== ==========
Common Stock 70,000,000 8,327,689 $ 74,361
=========== ==========
The 424,429 shares of preferred stock, which are outstanding, may be converted
into approximately 134,000 shares of our common stock.
3. Computation of Earnings Per Share
Earnings per share are based on the weighted average number of common and common
equivalent shares outstanding.
4. Goodwill
The Company adopted Financial Accounting Standard Board (FASB) number 142
(SFAS142) effective July 1, 2001. SFAS142 changes the accounting for goodwill
from an amortization method to an impairment-only approach. Under SFAS142,
goodwill will be tested annually and whenever events or circumstances occur
indicating that goodwill might be impaired.
6
5. Income Taxes
The Company's income tax provision consists of the following:
Current tax provision (benefit) 2002 2001
---------- ----------
Federal $ - $ -
State - -
---------- ----------
- -
---------- ----------
Deferred tax provision (benefit)
Federal 55,100
State 9,700
----------
64,800
---------- ----------
Income tax provision (benefit) $ - $ 64,800
========== ==========
The deferred tax benefit results from differences in recognition of
expenses for tax and financial statement purposes and for minimum tax provision
for the various state and local taxing authorities where the Company and its
subsidiaries are subject to tax. The Company has deferred tax assets consisting
of the following temporary difference.
September 31 June 30
2002 2001
---------- ----------
Net operating loss carry forward $1,879,341 $1,879,341
Allowance for bad debts 134,836 134,836
---------- ----------
Total deferred tax assets 2,014,177 2,014,177
Less: Valuation allowance for deferred tax assets 1,612,684 1,612,684
---------- ----------
Total $ 401,493 $ 401,493
========== ==========
7
6. Segment Information
The Company is comprised of four business segments. These segments
consist of the technology integration services (TIS), Business to Business (B to
B), software and manufacturing divisions. Set forth below is net sales, net
income (loss), capital expenditures, depreciation and identifiable assets of
these segments.
FOR THREE MONTHS ENDING
SEPTEMBER 30.
2002 2001
------------ ------------
Net sales:
TIS $ 4,637,383 $ 4,580,852
B to B 5,008,313 7,195,749
Software - -
Manufacturing 271,584
Elimination of
intersegment revenues -
------------ ------------
$ 9,645,966 $ 12,048,185
============ ============
Net Income (loss):
TIS $ (121,534) $ (156,643)
B to B 377,581 829,499
Software - (23,715)
Manufacturing - (93,341)
Corporate (211,279) (458,510)
------------ ------------
$ 44,768 $ 97,290
============ ============
Depreciation:
TIS $ 20,815 $ 33,898
B to B 2,609 2,609
Software - -
Manufacturing - 722
Corporate 17,143 6,797
------------ ------------
$ 40,567 $ 44,026
============ ============
Capital additions:
TIS $ 560 $ 2,043
B to B - -
Software - -
Manufacturing - -
Corporate - -
------------ ------------
$ 560 $ 2,043
============ ============
Identifiable assets:
TIS $ 3,537,426 $ 3,708,618
B to B 2,362,953 4,260,477
Software - 3,853
Manufacturing - 941,223
Corporate 2,129,881 1,203,597
------------ ------------
$ 8,030,260 $ 10,117,768
============ ============
8
Item 2 - Managements Discussion and Analysis of Financial Condition and Results
of operations.
-------------
ATEC Group, Inc. and Subsidiaries
Overview
ATEC Group, Inc. (Atec, our, we or us") is a one-stop provider of a
full line of information technology products and services to businesses,
professionals, government and educational institutions. We offer multiple
solutions to our clients that we believe generate loyalty and improve our
ability to seek higher margins. We have developed several core competencies,
including system design, networking, server-based computing, help desk,
e-commerce, ASP and Internet/Intranet solutions.
Results of Operations
Three months ended September 30, 2002, compared to three months ended September
30, 2001.
--------
Revenues
--------
Our revenues for the first quarter ended September 30, 2002 declined to $9.6
million from $12 million for the prior year, a decrease of approximately 19%.
This decrease is attributable to a significant decline in hardware sales due to
continued weakness in the PC industry. Revenues are generated by our sales of
computer hardware and software, and related support services. Gross margin for
the period decreased to $1.7 million for September 30, 2002 from $2.3 million
for the comparable 2001 quarter, a 26% decrease due to decreased sales. Gross
margins as a percentage of revenues for the quarter were 18% as compared to 19%
for the prior year.
Selling, general and administrative expenses.
---------------------------------------------
Selling, general and administrative expenses for the three months ended,
September 30, 2002, decreased to $1.7 million as compared to $2.2 million for
the comparable period in 2001. The decrease is primarily for compensation
expense and consulting fees.
Net Income
----------
As a result of the above, our net income was $44,768 for the three months ended
September 30, 2002 compared to net income of $97,290 for the 2001 quarter. For
the September 30, 2002 quarter, net income per share was $.01 compared to a net
income per share of $.01 in the prior year. Average diluted shares outstanding
were 7,867,044 for 2002 and 7,088,444 for 2001.
Liquidity and capital resources.
--------------------------------
Our cash position was $2,012,080 at September 30, 2002, an increase of $629,358
as compared to June 30, 2002. Our working capital at September 30, 2002 was
$4,123,989 as compared to a working capital of $3,662,451 at June 30, 2002. Net
cash provided by operating activities was $297,024 and cash provided by
financing activities was $332,894. Cash used for investing activities totaled
$560 for the purchase of property and equipment.
9
Critical Accounting Policies
The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make judgments, assumptions and estimates that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Note 1 to the consolidated financial statements in the
Annual Report on Form 10-K for the fiscal year ended June 30, 2002 describes the
significant accounting policies and methods used in the preparation of the
consolidated financial statements. Estimates are used for, but not limited to,
the accounting for the allowance for doubtful accounts, inventory allowances,
and goodwill impairments. Actual results could differ from these estimates. The
following critical accounting policies are impacted significantly by judgments,
assumptions and estimates used in the preparation of the consolidated financial
statements.
The allowance for doubtful accounts is based on our assessment of the
collectibility of specific customer accounts and the aging of the accounts
receivable. If there is a deterioration of a major customer's credit worthiness
or actual defaults are higher than our historical experience, our estimates of
the recoverability of amounts due us could be adversely affected.
Inventory purchases and commitments are based upon future demand
forecasts. If there is a sudden and significant decrease in demand for our
products or there is a higher risk of inventory obsolescence because of rapidly
changing technology and customer requirements, we may be required to increase
our inventory allowances and our gross margin could be adversely affected.
We perform goodwill impairment tests on an annual basis and between
annual tests in certain circumstances. In assessing the recoverability of the
Company's goodwill, the Company must make various assumptions regarding
estimated future cash flows and other factors in determining the fair values of
the respective assets. If these estimates or their related assumptions change in
the future, the Company may be required to record impairment charges for these
assets in future periods. Any such resulting impairment charges could be
material to the Company's results of operations.
Issues And Uncertainties
The following issues and uncertainties, among others, should be considered in
evaluating the Company's financial outlook.
The computer industry is characterized by a number of potentially
adverse business conditions, including pricing pressures, evolving distribution
channels, market consolidation and a decline in the rate of growth in sales of
personal computers. Heightened price competition among various hardware
manufacturers may result in reduced per unit revenue and declining gross profit
margins. As a result of the intense price competition within our industry, we
have experienced increasing pressure on our gross profit and operating margins
with respect to our sale of products. Our inability to compete successfully on
the pricing of products sold, or a continuing decline in gross margins on
products sold due to adverse industry conditions or competition, may have a
material adverse effect on our business, financial condition and results of
operations.
An integral part of our strategy is to increase our value-added
services revenue. These services generally provide higher operating margins than
those associated with the sale of products. This strategy requires us, among
other things, to attract and retain highly skilled technical employees in a
competitive labor market, provide additional training to our sales
representatives and enhance our existing service management system. We cannot
predict whether we will be successful in increasing our focus on providing
10
value-added services, and the failure to do so may have a material adverse
effect on our business, results of operations and financial condition.
To date, our revenues have been based primarily upon sales in the New
York Metropolitan area and Albany, New York. Our strategy, encompassing the
expansion of service offerings and the expansion of existing offices, has
challenged and will continue to challenge our senior management and
infrastructure. We cannot predict our ability to respond to these challenges. If
we fail to effectively manage our planned growth, there may be a material
adverse effect on our business, results of operations and financial condition.
The success of our strategy depends in large part upon our ability to
attract and retain highly skilled technical personnel and sales representatives,
including independent sales representatives, in a very competitive labor market.
Our ability to grow our service offerings has been somewhat limited by a
shortage of qualified personnel, and we cannot assure you that we will be able
to attract and retain such skilled personnel and representatives. The loss of a
significant number of our existing technical personnel or sales representatives,
difficulty in hiring or retaining additional technical personnel or sales
representatives, or reclassification of our sales representatives as employees
may have a material adverse effect on our business, results of operations and
financial condition.
The computer industry is characterized by intense competition. We
directly compete with local, regional and national systems integrators,
value-added resellers and distributors as well as with certain computer
manufacturers that market through direct sales forces and/or the Internet. The
computer industry has recently experienced a significant amount of consolidation
through mergers and acquisitions, and manufacturers of personal computers may
increase competition by offering a range of services in addition to their cu
rrent product and service offerings. In the future, we may face further
competition from new market entrants and possible alliances between existing
competitors. Moreover, additional suppliers and manufacturers may choose to
market products directly to end users through a direct sales force and/or the
Internet rather than or in addition to channel distribution, and may also choose
to market services, such as repair and configuration services, directly to
end-users. Some of our competitors have or may have, greater financial,
marketing and other resources, and may offer a broader range of products and
services, than us. As a result, they may be able to respond more quickly to new
or emerging technologies or changes in customer requirements, benefit from
greater purchasing economies, offer more aggressive hardware and service pricing
or devote greater resources to the promotion of their products and services. We
may not be able to compete successfully in the future with these or other
current or potential competitors.
Our business is dependent upon our relationships with major
manufacturers and distributors in the computer industry. Many aspects of our
business are affected by our relationships with major manufacturers, including
product availability, pricing and related terms, and reseller authorizations.
The increasing demand for personal computers and ancillary equipment has
resulted in significant product shortages from time to time, because
manufacturers have been unable to produce sufficient quantities of certain
products to meet demand. In addition, many manufacturers have adopted "just in
time" manufacturing principles that can reduce the immediate availability of a
wide range of products at any one time. We cannot predict that manufacturers
will maintain an adequate supply of these products to satisfy all the orders of
our customers or that, during periods of increased demand, manufacturers will
provide products to us, even if available, or at discounts previously offered to
us. In addition, we cannot assure you that the pricing and related terms offered
by major manufacturers will not adversely change in the future. Our failure to
obtain an adequate supply of products, the loss of a major manufacturer, the
deterioration of our relationship with a major manufacturer or our inability in
the future to develop new relationships with other manufacturers may have a
material adverse effect on our business, financial condition and results of
operations. On May 3, 2002, the Hewlett-Packard Company and Compaq Computer
Corporation merged. ATEC sells the products of both companies and we believe
that we have strong relationships with both companies. While we do not believe
that there will be a material adverse effect on our business, financial
condition and results of operations as a result of this merger, there can be no
assurance that such a material adverse effect will not occur.
11
The markets for our products and services are characterized by rapidly
changing technology and frequent introduction of new hardware and software
products and services. This may render many existing products and services
noncompetitive, less profitable or obsolete. Our continued success will depend
on our ability to keep pace with the technological developments of new products
and services and to address increasingly sophisticated customer requirements.
Our success will also depend upon our abilities to address the technical
requirements of our customers arising from new generations of computer
technologies, to obtain these new products from present or future suppliers and
vendors at reasonable costs, to educate and train our employees as well as our
customers with respect to these new products or services and to integrate
effectively and efficiently these new products into both our internal systems
and systems developed for our customers. We may not be successful in
identifying, developing and marketing product and service developments or
enhancements in response to these technological changes. Our failure to respond
effectively to these technological changes may have a material adverse effect on
our business, financial condition and results of operations.
Rapid product improvement and technological change characterize the
computer industry. This results in relatively short product life cycles and
rapid product obsolescence, which can place inventory at considerable valuation
risk. Certain of our suppliers provide price protection to us, which is intended
to reduce the risk of inventory devaluation due to price reductions on current
products. Certain of our suppliers also provide stock balancing to us pursuant
to which we are able to return unsold inventory to a supplier as a partial
credit against payment for new products. There are often restrictions on the
dollar amount of inventory that we can return at any one time. Price protection
and stock balancing may not be available to us in the future, and, even if
available, these measures may not provide complete protection against the risk
of excess or obsolete inventories. Certain manufacturers have reduced the period
for which they provide price protection and stock balancing rights. Although we
maintain a sophisticated proprietary inventory management system, we cannot
assure you that we will continue to successfully manage our existing and future
inventory. Our failure to successfully manage our current or future inventory
may have a material adverse effect on our business, financial conditions and
results of operations.
As a result of the rapid changes that are taking place in computer and
networking technologies, product life cycles are short. Accordingly, our product
offerings change constantly. Prices of products change, with generally higher
prices early in the life cycle of the product and lower prices near the end of
the product's life cycle. The computer industry has experienced rapid declines
in average selling prices of personal computers. In some instances, we have been
able to offset these price declines with increases in units shipped. There can
be no assurance that average selling prices will not continue to decline or that
we will be able to offset declines in average selling prices with increases in
units shipped.
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
We presently do not use any derivative financial instruments to hedge our
exposure to adverse fluctuations in interest rates, fluctuations in commodity
prices or other market risks, nor do we invest in speculative financial
instruments. Borrowings under our line of credit are at Prime plus a quarter
percent, which is adjusted monthly. Our interest income is sensitive to changes
in the general level of U.S. interest rates, particularly since the majority of
our investments are in short-term instruments.
Due to the nature of ATEC's borrowings and short-term investments, we have
concluded that there is no material risk exposure and, therefore, no
quantitative tabular disclosures are required.
12
ITEM 4 - Controls and Procedures
--------------------------------
ATEC management, including the Chief Executive Officer and Chief Financial
Officer, have conducted an evaluation of the effectiveness of disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that
evaluation, the Chairman of the Board and Chief Financial Officer concluded that
the disclosure controls and procedures are effective in ensuring that all
material information required to be filed in this quarterly report has been made
known to them in a timely fashion. There have been no significant changes in
internal controls, or in other factors that could significantly affect internal
controls, subsequent to the date the Chairman of the Board and Chief Financial
Officer completed their evaluation.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
Certain statements in this Report, and the documents incorporated by
reference herein, constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause deviations in actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied. Such factors include but are not limited to:
o risks associated with the uncertainty of future financial results;
o additional financing requirements;
o development of new products or mergers;
o the continued ability to sustain integration of future acquisitions;
o the ability to hire and retain key personnel;
o the continued development of our technical, manufacturing, sales, marketing
and management capabilities;
o relationships with and dependence on third-party suppliers;
o anticipated competition;
o uncertainties relating to economic conditions;
o uncertainties relating to government and regulatory policies; uncertainties
relating to customer plans and commitments;
o rapid technological developments and obsolescence in the industries in
which the Company competes;
o potential performance issues with suppliers and customers;
o governmental export and import policies;
o global trade policies;
o worldwide political stability and economic growth; potential entry of new,
well-capitalized competitors into the markets;
o changes in the Corporate capital structure and cost of capital;
The words "believe, expect, anticipate, intend and plan" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date the statement was made.
13
Atec Group, Inc. and Subsidiaries
Other
Information
September 30, 2002
PART II
OTHER INFORMATION
Item 1.- Legal Proceedings - None
Item 2.- Changes in Securities and use of Proceeds - In July 2002 we issued
980,000 shares of common stock to several employees and sales consultants for
services based on agreements with them. The shares were valued at $362,599.
Item 3.- Defaults Upon Senior Securities - None
Item 4.- Submission of Matters to a Vote of Security Holders - None
Item 5.- Other Information - None
Item 6.- Exhibits and Report on Form 8k - None
14
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATEC GROUP, INC.
(Registrant)
Date: November 5, 2002
By: /s/ JAMES J. CHARLES
-------------------------------------
James J. Charles,
Chief Financial Officer
(Duly authorized to sign on
behalf of registrant)
15
CERTIFICATION
-------------
I, Balwinder Singh Bathla, Chief Executive Officer of ATEC Group, Inc. (the
"Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the Registrant;
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. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant's ability to record, process,
summarize and report financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls; and
16
6. The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 5, 2002
/s/ BALWINDER SINGH BATHLA
-------------------------------
Chief Executive Officer
17
CERTIFICATION
-------------
I, James J. Charles, Chief Financial Officer of ATEC Group, Inc. (the
"Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the Registrant;
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. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant's ability to record, process,
summarize and report financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls; and
18
6. The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 5, 2002
/s/ JAMES J. CHARLES
------------------------------
Chief Financial Officer
19
Exhibits
Number Description
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
20