FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File No. 1-11768
RELIV' INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 37-1172197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
136 Chesterfield Industrial Boulevard,
P.O. Box 405, Chesterfield, Missouri 63006
(Address of principal executive offices) (Zip Code)
(636) 537-9715
(Registrant's telephone number, including area code)
Registrant 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 and
has been subject to such filing requirements for the past 90 days.
APPLICABLE ONLY TO CORPORATE ISSUERS:
COMMON STOCK 9,555,295 outstanding Shares as of June 30, 2000
<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
The following consolidated financial statements of the
Registrant are attached to this Form 10-Q:
1. Interim Balance Sheet as of June 30, 2000 and Balance Sheet as of
December 31, 1999.
2. Interim Statements of Operations for the three and six month
periods ending June 30, 2000 and June 30, 1999.
3. Interim Statements of Cash Flows for the six month periods ending
June 30, 2000 and June 30, 1999.
The Financial Statements reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of results for the periods
presented.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Financial Condition
Current assets of the Company increased during the first six months of
2000, to $10,775,000 from $8,497,000 as of December 31, 1999. Cash and cash
equivalents remained relatively constant at $1,539,000 at June 30, as compared
to $1,532,000 on December 31, 1999. Inventory increased by $477,000 to
$5,182,000 as of June 30, 2000. The increase in the Company's inventory is due
to sales growth in the network marketing segment, particularly in the United
States, along with additional inventory required for the primary contract
packaging customer. Accounts receivable has increased to $2,750,000 from
$794,000 as of December 31, 1999. The increase is primarily due to the Company
implementing a "full turnkey" operation for its primary contract packaging
customer. This means the Company is responsible for purchasing all ingredients
and packaging for this customer's product. Previously, the Company only
purchased a portion of the ingredients. Trade accounts payable has also
increased as a result of this "turnkey" arrangement.
The Company purchased $237,000 of property, plant and equipment during
the first six months of 2000, as compared to $886,000 during the first six
months of 1999. This is the result of the Company's decision to reduce the
emphasis on the manufacturing and packaging business.
<PAGE>
Current liabilities increased by $1,725,000 from $8,307,000 as of
December 31, 1999 to $10,032,000 as of June 30, 2000. The primary component of
the increase was in trade accounts payable. Trade accounts payable increased by
$1,422,000 from $3,994,000 as of December 31, 1999 to $5,416,000 as of June 30,
2000. This increase is related to the change to a "full turnkey" program as
discussed earlier.
Long-term debt increased by $28,000 from $4,991,000 as of December 31,
1999 to $5,019,000 as of June 30, 2000. The Company issued a series of private
placement notes totaling $220,000 as part of the capital investment required to
fund the Company's upcoming entry into the Philippines.
Stockholders' equity increased from $6,819,000 as of December 31, 1999
to $7,024,000 as of June 30, 2000, as the result of the net income for the first
six months of 2000. However, equity declined by $138,000 as the result of the
foreign currency translation adjustment at June 30, 2000 as compared to December
31, 1999. The Australian, New Zealand and Canadian dollars weakened against the
US dollar over the course of the first half of 2000.
The Company's working capital balance has improved to a balance of
$744,000 as of June 30, 2000, up from $190,000 as of December 31, 1999. The
current ratio has also improved slightly to 1.07 as of June 30, 2000. The
Company's line of credit is formula-based and provides a borrowing arrangement
based on a percentage of accounts receivable and inventory up to a maximum
borrowing limit. As of December 31, 1999, the Company had borrowed more than the
amount allowed under the collateral calculation, but has obtained a waiver to
allow it to borrow the maximum amount under the line through September 30, 2000.
Management believes that the Company's internally generated funds together with
the loan agreement will be sufficient to meet working capital requirements in
2000.
Results of Operations
The Company had net income of $177,000, or $.02 per share ($.02 per
share diluted), for the quarter ended June 30, 2000, compared to a net loss of
$367,000, or $.04 per share ($.04 per share diluted), for the same period in
1999. The Company expected net sales to decline as the result of the reduction
in the manufacturing and packaging business, but net sales and profits in the
network marketing segment improved, led by the introduction of a new product in
the United States. For the six months ended June 30, 2000, the Company had net
income of $340,000, as compared to a net loss of $300,000 in the first six
months of 1999.
<PAGE>
Net sales decreased to $15,187,000 in the second quarter of 2000 as
compared to $18,962,000 in the second quarter of the prior year. The decrease
was primarily due to the decrease in sales by the Company's manufacturing and
packaging services segment. Sales in this portion of the business decreased to
$4,373,000 in the second quarter of 2000, as compared to $9,122,000 in the prior
year. However, net sales in the network marketing segment improved to
$10,814,000 in the second quarter of 2000, as compared to $9,840,000 in the
second quarter of 1999. Network marketing sales in the United States increased
by 7% from $8,671,000 in the second quarter of 1999 to $9,247,000 in the second
quarter of 2000. The increase in US sales was due primarily to the introduction
of a new product, Reliv ReversAge (TM), a nutritional product. Additionally,
sales in the Company's international subsidiaries improved overall. Sales in the
foreign subsidiaries of Australia, New Zealand, Canada, Mexico and the United
Kingdom overall increased by 34% from $1,169,000 in the second quarter of 1999
to $1,566,000 in the second quarter of 2000, led by sales increases in Mexico of
150% and in Australia of 20%. In Australia, a new GST tax was instituted on July
1, 2000 and this led to advance purchases by distributors in the month of June
in order to avoid the new tax. Also, sales commenced in the Company's new
operation in the country of Colombia in April of 2000.
The Company also provides manufacturing and packaging services,
including blending, processing and packaging food products in accordance with
specifications provided by its customers. Net sales decreased to $4,373,000 in
the second quarter of 2000 from $9,122,000 in the prior year. Through the first
six months of the year, net sales in this segment had declined from $15,331,000
in 1999 to $8,891,000 in 2000. This decrease follows the Company's decision to
place less emphasis on this business. The Company's sales to third party
customers primarily consist of the Company purchasing raw materials,
customer-specified packaging materials and selling a finished product to the
customer. For the second quarter of 2000, cost of goods sold for these sales
were 93% of net sales. Even under optimal operating efficiencies, the gross
margin for unrelated customers is substantially less than margins obtained in
the sales of the network marketing products. The Company has eliminated its
unprofitable business in this segment and is continuing to take steps to improve
margins with its remaining customer. As a result, this segment showed its first
quarterly profit ever of $ 137,000.
Cost of products sold for the network marketing segment as a percentage
of net sales improved from 17.1% in the second quarter of 1999 to 15.2%. A
by-product of the increased business for unrelated customers is the purchasing
power it provides the Company on the materials it uses to manufacture the
network marketing products. This, coupled with a price increase on some of the
Company's network marketing products in the first quarter of 2000 accounts for
the improvement.
Distributor royalties and commissions as a percentage of network
marketing sales decreased slightly from 37% in the second quarter of 1999 to 36%
in the second quarter of 2000. These expenses are governed by the distributor
agreements and are directly related to the level of sales. The Company pays a
percent of sales up to 18% in royalties and as much as 45% in commissions. A
portion of this decreased percentage is due the Company allowing distributors in
the United States to purchase individual cans of the products at their specified
discount level. This change went into effect in February 2000. Previously,
distributors had to pay full retail price through the Direct Select program to
buy individual cans of product.
<PAGE>
During the second quarter of 2000, the Company closed its Canadian
administrative office facility and has replaced it with a smaller distribution
center. All customer service, sales and marketing support, accounting and other
administrative services for the Canadian operation are being provided from the
corporate office in Chesterfield, Missouri. All of the expenses incurred with
closing the Canadian facility, including severance payments to the office and
sales staff, were incurred during the second quarter. The Company incurred
approximately US$70,000 in expenses to close the office.
Interest expense increased from $140,000 in the second quarter of 1999
to $158,000 in the second quarter of 2000. This increase is due the greater
reliance on the line of credit, along with higher interest rates.
Safe Harbor Provision of the Private Securities Litigation Act of 1995 and
Forward Looking Statements.
The statements contained in Item 2 (Management's Discussion and
Analysis of Financial Condition and Results of Operation) that are not
historical facts may be forward-looking statements (as such term is defined in
the rules promulgated pursuant to the Securities Exchange Act of 1934) that are
subject to a variety of risks and uncertainties. The forward-looking statements
are based on the beliefs of the Company's management, as well as assumptions
made by, and information currently available to the Company's management.
Accordingly, these statements are subject to significant risks, uncertainties
and contingencies which could cause the Company's actual growth, results,
performance and business prospects and opportunities in 2000 and beyond to
differ materially from those expressed in, or implied by, any such
forward-looking statements. Wherever possible, words such as "anticipate",
"plan", "expect," "believe", "estimate", and similar expressions have been used
to identify these forward-looking statements, but are not the exclusive means of
identifying such statements. These risks, uncertainties and contingencies
include, but are not limited to, the Company's ability to continue to attract,
maintain and motivate its distributors, changes in the regulatory environment
affecting network marketing sales and sales of food and dietary supplements and
other risks and uncertainties detailed in the Company's other SEC filings.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The Company's earnings and cash flow are subject to fluctuations due to
changes in foreign currency rates as it has several foreign subsidiaries and
continues to explore expansion into other foreign countries. As a result,
exchange rate fluctuations may have an effect on its sales and the Company's
gross margins. Accounting practices require that the Company's results from
operations be converted to U.S. dollars for reporting purposes. Consequently,
the reported earnings of the Company in future periods may be significantly
affected by fluctuations in currency exchange rates, generally increasing with a
weaker U.S. dollar and decreasing with a strengthening U.S. dollar. Products
manufactured by the Company for sale to the Company's foreign subsidiaries are
transacted in U.S. dollars. As the Company's foreign operations expand, its
operating results will be subject to the risks of exchange rate fluctuations and
the Company may not be able to accurately estimate the impact of such changes on
its future business, product pricing, results of operations or financial
condition.
<PAGE>
The Company also is exposed to market risk in changes in interest rates
on its long-term debt arrangements and commodity prices in some of the raw
materials it purchases for its manufacturing needs. However, neither presents a
risk that would have a material effect on the Company's results of operations or
financial condition.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
In May 1998, the former sales/general manager of the Company's Canadian
subsidiary filed a lawsuit claiming unlawful termination and breach of contract.
The individual had been terminated by the Company in March, 1998. The Company
believes the claim is without merit and intends to vigorously defend itself. The
Company has engaged Canadian counsel to defend this suit. The probable outcome
of this matter is uncertain, and a range of loss cannot reasonably be estimated.
However, management believes that the final outcome will not have a material
adverse effect on the financial position or results of operations of the
Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting was held on May 25, 2000. At such meeting
the Company's Board of Directors was re-elected.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
(b) The Company has not filed a Current Report during the
quarter covered by this report.
* Also incorporated by reference the Exhibits filed as part of
the S-18 Registration Statement of the Registrant, effective
November 5, 1985, and subsequent periodic filings.
<PAGE>
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.
Dated: August 14, 2000 RELIV' INTERNATIONAL, INC.
By: /s/ Robert L. Montgomery
---------------------------------
Robert L. Montgomery, President,
Chief Executive Officer and
Principal Financial Officer
<PAGE>
Reliv International, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30 December 31
2000 1999
------------ ------------
(unaudited) (see notes)
Assets
Current assets:
Cash and cash equivalents ..................... $ 1,539,151 $ 1,531,700
Accounts and notes receivable, less allowances
of $3,500 in 2000 and $430,000 in 1999 ...... 2,750,480 794,037
Note receivable from officer .................. 59,250 164,250
Inventories
Finished goods ........................ 2,717,023 1,826,748
Raw materials ......................... 1,966,544 2,402,006
Sales aids and promotional materials .. 498,595 476,708
------------ ------------
Total inventories .......... 5,182,162 4,705,462
Refundable income taxes ....................... 853,223 855,178
Prepaid expenses and other current assets ..... 250,420 304,734
Deferred income taxes ......................... 140,464 141,236
------------ ------------
Total current assets ............................ 10,775,150 8,496,597
Other assets:
Goodwill, net of accumulated amortization of
$91,969 in 2000 and $65,692 in 1999 ......... 433,569 459,846
Other assets .................................. 981,082 1,013,130
------------ ------------
Total other assets .............................. 1,414,651 1,472,976
Property, plant and equipment:
Land ................................ 829,222 829,222
Building ............................ 8,382,982 8,384,105
Machinery & equipment ............... 3,933,966 3,870,695
Office equipment .................... 487,064 454,729
Computer equipment & software ....... 1,905,936 1,823,832
------------ ------------
15,539,170 15,362,583
Less: Accumulated depreciation .................. (5,045,174) (4,560,338)
------------ ------------
Net property, plant and equipment ..... 10,493,996 10,802,245
------------ ------------
Total assets .................................... $ 22,683,797 $ 20,771,818
============ ============
See notes to financial statements.
<PAGE>
Reliv International, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30 December 31
2000 1999
------------ ------------
(unaudited) (see notes)
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses:
Trade accounts payable .............. $ 5,415,553 $ 3,993,555
Distributors commissions payable .... 1,525,740 1,421,286
Sales taxes payable ................. 263,864 204,552
Interest expense payable ............ 45,060 31,871
Payroll and payroll taxes payable ... 209,681 127,800
Other accrued expenses .............. 384,474 103,548
------------ ------------
Total accounts payable and accrued expenses ..... 7,844,372 5,882,612
Income taxes payable ........................ 219,054 3,391
Borrowings under line of credit ............. 1,332,904 1,792,986
Current maturities of long-term debt and
capital lease obligations ................. 630,267 622,973
Unearned income ............................. 5,003 5,003
------------ ------------
Total current liabilities ..................... 10,031,600 8,306,965
Capital lease obligations, less current maturities 226,064 305,081
Long-term debt, less current maturities ......... 5,019,174 4,990,639
Other non-current liabilities ................... 383,279 350,415
Stockholders' equity:
Common stock, no par value; 20,000,000 shares
authorized; 9,555,295 shares issued and
outstanding as of 6/30/2000 and 9,551,102
as of 12/31/1999 ............................. 9,082,382 9,082,382
Notes receivable-officers and directors ....... (34,802) (38,217)
Accumulated deficit ........................... (1,549,288) (1,889,297)
Accumulated other comprehensive loss:
Foreign currency translation adjustment ....... (474,612) (336,150)
------------ ------------
Total stockholders' equity ...................... 7,023,680 6,818,718
------------ ------------
Total liabilities and stockholders' equity ...... $ 22,683,797 $ 20,771,818
============ ============
See notes to financial statements.
<PAGE>
Reliv International, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
2000 1999 2000 1999
-------------- -------------- -------------- ---------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales at suggested retail $20,932,750 $23,714,422 $41,800,132 $47,488,833
Less: distributor allowances on product purchases 5,745,941 4,752,259 11,524,950 10,831,359
-------------- -------------- -------------- ---------------
Net sales 15,186,809 18,962,163 30,275,182 36,657,474
Costs and expenses:
Cost of products sold 5,721,333 10,912,666 11,852,530 18,987,398
Distributor royalties and commissions 3,865,982 3,680,025 7,698,406 8,190,800
Selling, general and administrative 5,130,995 4,875,618 9,816,536 9,799,447
-------------- -------------- -------------- ---------------
Total costs and expenses 14,718,310 19,468,309 29,367,472 36,977,645
-------------- -------------- -------------- ---------------
Income from operations 468,499 (506,146) 907,710 (320,171)
Other income (expense):
Interest income 11,634 42,900 25,172 61,700
Interest expense (158,250) (140,295) (325,920) (270,693)
Other income/(expense) (33,022) 10,147 (50,875) 44,380
-------------- -------------- -------------- ---------------
Income before income taxes 288,861 (593,394) 556,087 (484,784)
Provision for income taxes 111,990 (226,289) 216,078 (184,667)
-------------- -------------- -------------- ---------------
Net income $176,871 ($367,105) $340,009 ($300,117)
============== ============== ============== ===============
Earnings per common share $0.02 ($0.04) $0.04 ($0.03)
============== ============== ============== ===============
Earnings per common share - assuming dilution $0.02 ($0.03) $0.03 ($0.03)
============== ============== ============== ===============
See notes to financial statements.
</TABLE>
<PAGE>
Reliv International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Six months ended June 30
2000 1999
----------- -----------
Operating activities:
Net income ........................................ $ 340,009 ($ 300,117)
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization ................. 562,237 528,848
Foreign currency translation (gain) loss ...... 33,905 (6,789)
(Increase) decrease in accounts and notes
receivable .................................. (1,896,612) (1,274,279)
(Increase) decrease in inventories ............ (527,902) (2,099,327)
(Increase) decrease in refundable income taxes -- (189,587)
(Increase) decrease in prepaid expenses
and other current assets .................... 50,114 (60,842)
(Increase) decrease in other assets ........... 23,538 (225,254)
Increase (decrease) in accounts payable and
accrued expenses ............................ 2,022,460 2,795,327
Increase (decrease) in income taxes payable ... 217,980 86,383
Increase (decrease) in unearned income ........ -- --
----------- -----------
Net cash provided by operating activities ......... 825,729 (745,637)
Investing activities:
Purchase of property, plant and equipment ......... (237,329) (885,685)
Repayment of loans by officers and directors ...... 33,415 3,216
----------- -----------
Net cash used in investing activities ............. (203,914) (882,469)
Financing activities:
Net borrowings (repayments) under line of credit .. (460,082) 842,562
Proceeds from long-term borrowings ................ 220,000 300,000
Principal payments on long-term borrowings ........ (227,411) (204,714)
Principal payments under capital lease obligations (35,778) (74,434)
Dividends paid .................................... -- (96,505)
Purchase of treasury stock ........................ -- (7,682)
----------- -----------
Net cash used in financing activities ............. (503,271) 759,227
Effect of exchange rate changes on cash and cash
equivalents ..................................... (111,093) 110,569
----------- -----------
Decrease in cash and cash equivalents ............. 7,451 (758,310)
Cash and cash equivalents at beginning of period .. 1,531,700 2,816,804
----------- -----------
Cash and cash equivalents at end of period ........ $ 1,539,151 $ 2,058,494
=========== ===========
See notes to financial statements
<PAGE>
Reliv' International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 2000
Note 1-- Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting priciples for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company and Subsidiaries' annual
report on Form 10-K for the year ended December 31, 1999.
<PAGE>
Note 2-- Earnings per Share
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
2000 1999 2000 1999
----------- ----------- ----------- ------------
Numerator:
Numerator for basic and diluted
<S> <C> <C> <C> <C>
earnings per share--net income/(loss) ... $ 176,871 ($ 367,105) $ 340,009 ($ 300,117)
Denominator:
Denominator per basic earnings per
share--weighted average shares .......... 9,552,000 9,651,000 9,552,000 9,651,000
Effect of dilutive securities:
Employee stock options and other warrants 375,000 -- 375,000 --
----------- ----------- ----------- ------------
Denominator for diluted earnings per
share--adjusted weighted average shares . 9,927,000 9,651,000 9,927,000 9,651,000
=========== =========== =========== ============
Basic earnings/(loss) per share ......... $ 0.02 ($ 0.04) $ 0.04 ($ 0.03)
=========== =========== =========== ============
Diluted earnings/(loss) per share ....... $ 0.02 ($ 0.04) $ 0.03 ($ 0.03)
=========== =========== =========== ============
</TABLE>
Note 3-- Comprehensive Income
Total comprehensive income was $143,724 and $201,547 for the three months and
six months ended June 30, 2000, respectively. For the three and six months ended
June 30, 1999, comprehensive loss was $292,647 and $164,034, respectively. The
Company's only component of other comprehensive income is the foreign currency
translation adjustment.
Note 4-- Segment Information
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 2000 June 30, 1999
------------- -------------
Network Manufacturing Network Manufacturing
marketing and packaging marketing and packaging
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Net sales to external customers 10,813,596 4,373,213 9,839,828 9,122,335
Intersegment net sales -- 1,816,027 -- 1,599,654
Segment profit/(loss) 792,578 137,269 309,620 (448,291)
</TABLE>
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 2000 June 30, 1999
------------- -------------
Network Manufacturing Network Manufacturing
marketing and packaging marketing and packaging
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Net sales to external customers 21,384,572 8,890,610 21,326,943 15,330,531
Intersegment net sales -- 3,365,954 -- 3,284,913
Segment profit/(loss) 1,717,726 (8,440) 958,626 (545,036)
Segment assets 14,362,051 6,782,595 13,799,595 7,944,478
</TABLE>
<PAGE>
A reconciliation of combined operating profit for the reportable
segments to consolidated income before income taxes is as follows:
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
2000 1999 2000 1999
------------------------- -------------------------
<S> <C> <C> <C> <C>
Total profit for reportable segments 929,847 (138,671) 1,709,286 413,590
Corporate expenses (461,348) (367,476) (801,576) (733,762)
Non operating - net (21,388) 53,048 (25,703) 106,081
Interest expense (158,250) (140,295) (325,920) (270,693)
---------- ---------- ---------- ----------
Income before income taxes 288,861 (593,394) 556,087 (484,784)
========== ========== ========== ==========
</TABLE>
Note 5-- Legal Proceedings
In May 1998, the former sales/general manager of the Company's Canadian
subsidiary filed lawsuit claiming unlawful termination and breach of contract.
The individual had been terminated by the Company in March 1998. The Company
believes the claim is without merit and intends to vigorously defend itself. At
this time, the outcome of this matter is uncertain and a range of loss cannot be
reasonably estimated; however, management believes that the final outcome will
not have a material adverse effect on the financial position or results of
operations of the Company.
<PAGE>
