Securities and Exchange Commission
Washington D. C. 20549
or
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to ___________.
Commission file number 0-20924
RECONDITIONED SYSTEMS, INC.
(Name of small business issuer in its charter)
Arizona 86-0576290
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
|
444 West Fairmont, Tempe, Arizona 85282
(Address of principal executive offices)
480-968-1772
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of each class
Common stock, no par value
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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[ ].
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]
The issuer's revenues for the fiscal year ended March 31, 2003 were $11,511,058.
As of June 19, 2003, the aggregate market value of the Common Stock (based on the closing price as quoted on the Nasdaq Small Cap Market on that date) held by non-affiliates of the Registrant was approximately $1,279,210.
As of June 3, 2003, the number of shares outstanding of the Registrant's common stock was 1,363,555.
Portions of the Registrant's definitive Proxy Statement, dated July 28, 2003, are incorporated herein by reference into Part III of this Report.
Transitional Small Business Disclosure Format. Yes [ ]No[X].
There are more than 50 manufacturers of new workstations in the United States. Steelcase, Inc. ("Steelcase"), Herman Miller, Inc. ("Herman Miller"), and Haworth constitute the dominant manufacturers, controlling a majority of the market for new workstations. Steelcase, Herman Miller, and Haworth have each created a unique system for connecting panels, electrical power and telecommunications raceways, resulting in virtually no interchangeability between their respective products. Due to this lack of interchangeability of dominant manufacturer parts, the Company has generally specialized in remanufacturing and marketing workstations originally manufactured by Haworth.
The Company's executive offices are located at 444 West Fairmont, Tempe, Arizona 85282 and its telephone number is 480-968-1772.
The Company purchases used Haworth workstations from manufacturers, dealers, brokers, and end-users and transports them to one of its three manufacturing facilities located in Arizona, Georgia and New Mexico, where it disassembles and inventories the workstations by component parts, stores, and, upon receipt of purchase orders, reconditions and reassembles the workstations. The remanufacturing process includes sanding, painting, laminating, and reupholstering. Certain parts of the used Haworth workstations the Company purchases are damaged beyond repair and must be replaced with new parts purchased from Haworth dealers, clone parts which the Company purchases from various vendors, and new parts which the Company manufactures from raw materials. The Company markets these remanufactured Haworth workstations throughout the United States. Orders received by the Company range from as few as one workstation to as many as several hundred workstations.
The Company believes that workstations offer advantages over the traditional desk, free standing file, and permanent dry wall dividers common to historical office layouts since workstations enable businesses to house more people in a given space than traditional structures and are easier to move and reconfigure. In addition, workstations are designed around personal computers, and the growth in that market has contributed to the growth and acceptance of workstations. The Company believes its remanufactured Haworth workstations offer an advantage over much of its competition because they are higher quality than new workstations available in the same price range.
In August 2001, the Company opened a new manufacturing facility and retail showroom under the trade name of Total Office Interiors ("TOI") in Norcross, Georgia, a suburb of Atlanta. The primary focus of this expansion was to provide another manufacturing "hub" and sales office to market to customers in the Eastern United States. The Company modeled this new facility after its Arizona manufacturing and sales office.
In January 2002, the Company opened a satellite sales office and showroom ("spoke") in Sherman Oaks, California. The primary focus of this new sales office is to develop a TOI retail presence in the Southern California region. This office showcases the Company's remanufactured product-line, along with the other new product-lines offered by the Company's Arizona and Georgia sales offices.
On May 1, 2003, the Company purchased Beck Office Systems, Inc., a Haworth remanufacturer located in Albuquerque, New Mexico and Tucson, Arizona (see Item 7. Financial Statements - Footnote 14. Subsequent Event). The primary focus of this purchase is to increase the Company's geographic presence and gain operating synergies.
The Company carries a limited amount of work in process and finished goods inventory because it generally does not initiate the remanufacturing process until a purchase order has been received and because the remanufacturing process rarely takes more than a couple of days due to the relatively small size of most orders. However, a significant portion of the labor related to the remanufacturing process is completed at the time the used Haworth workstations are originally received and disassembled, and as a result, the value of this labor is capitalized and added to the value of the Company's inventory.
The Company currently has sufficient amounts of inventory to meet its anticipated demand. However, because there is not a principal supplier of used Haworth workstations and the supply is based upon end-user decisions regarding disposal of or enhancement to existing furniture, there can be no assurance that the Company will be able to purchase adequate levels of inventory in the future at competitive prices. Because the Company's principal line of business is the sale of remanufactured Haworth workstations, any unavailability of adequate levels of inventory at competitive prices would have a material adverse effect on the Company's business, operating results, and financial condition.
The Company also carries a number of new product-lines, including new modular office furniture, filing, lighting, and other accessories. The Company currently maintains an excellent relationship with the manufacturers of these product-lines and does not foresee any disruption in supply. In addition, if the Company did face a disruption in supply of these product-lines, the Company believes it could easily find an alternative source.
The remanufactured Haworth workstations that the Company sells generally consist of panels, worksurfaces, pedestals, overhead storage units, lateral file storage units, task lights, and electrical raceways. The Company reconditions all of these items. Components that are often damaged and need to be replaced with new or clone components include panel top caps, shelf ends for overhead storage units, worksurfaces, electrical base and top feeds, and electrical raceways. The Company sells certain auxiliary items such as chairs, file cabinets, and desks, but it usually purchases these items new from other manufacturers rather than purchasing them used and remanufacturing them.
The Company's facilities have been designed to facilitate the natural flow of used Haworth workstation components and raw materials in order to streamline the remanufacturing process through disassembly, storage, remanufacturing, and shipping. Utilizing narrow aisle storage maximizes storage capacity. The Company believes that its current facilities will be able to handle the anticipated increase in volume as a result of its plan to increase its distribution channels.
The market for workstations is highly competitive. The Company competes with new workstation manufacturers, their dealers, and other reconditioners in the sale of its remanufactured Haworth workstations. New workstation manufacturers and their dealers have certain competitive advantages over the Company including established distribution channels and marketing programs, substantial financial strength, long-term customers, ready access to all component parts, and the fact that if everything is equal (price, lead-time, etc.), most people would choose new workstations over remanufactured workstations. The Company has certain competitive advantages over new workstation manufacturers and their dealers. On orders of 100 workstations or less, the Company's pricing is usually significantly less than pricing on new "Grade A" workstations ("Grade A" workstations are considered to be those workstations manufactured by Haworth, Herman Miller and Steelcase) and the quality of the Company's remanufactured Haworth workstations exceeds that of new "Grade B" workstations. In addition, the Company can produce and install fully remanufactured Haworth workstations within two to three weeks as compared to standard lead-times of approximately six to eight weeks for the new workstation manufacturers. The Company believes that its remanufacturing services are more comprehensive than most other reconditioners. The Company has the ability to produce more remanufactured workstations and higher quality remanufactured workstations than most other reconditioners, resulting in a competitive advantage. The Company is facing increased competition from "bargain" newly manufactured product lines. There are no significant barriers to entry into the markets served by the Company. An increase in competition from existing competitors or the entry of new competitors could have a material adverse effect on the Company's business, operating results and financial condition. There can be no assurance that the Company will be able to compete successfully in the future with existing or new competitors.
In an effort to increase the Company's ability to compete in this changing marketplace, beginning in October 1999, the Company became an authorized dealer of Teknion, a manufacturer of new modular office furniture and expanded its line of filing, seating, lighting and other office furniture accessories. In June 2000, the Company became an authorized dealer of Paoli Office Furniture, a manufacturer of executive freestanding office furniture and tables. The Company offers the Teknion and Paoli lines as an alternative to its remanufactured Haworth workstations. The Company's wholly-owned subsidiary, Beck Office Systems, is an authorized dealer of Kimball Office Furniture and National, manufacturers of new casegoods and seating.
The Company operates three retail sales offices doing business under the trade name of "Total Office Interiors," located in the metropolitan areas of Phoenix, Atlanta and Los Angeles. The Company's Arizona sales office has historically generated approximately 40-50% of the Company's total sales. For the year ended March 31, 2003, Arizona retail sales accounted for approximately 38% of the Company's total sales. In August 2001, the Company opened a new manufacturing facility and retail showroom in Georgia. The primary focus of this expansion was to provide another manufacturing hub and sales office to market to customers in the Eastern United States. The Company modeled this new facility after its Arizona manufacturing and sales office. In January 2002, the Company opened a satellite sales office in Sherman Oaks, California. The primary focus of this new sales office is to develop a retail presence in Southern California. These two new divisions accounted for 21% of the Company's total sales for the fiscal year.
On May 1, 2003, the Company purchased, as a wholly-owned subsidiary, Beck Office Systems, a Haworth remanufacturer located in Albuquerque, New Mexico, with sales offices in Albuquerque and Tucson, Arizona. Beck markets its products on a retail basis throughout the United States and Puerto Rico, but primarily in New Mexico, Arizona, Colorado and Texas.
The Company believes that its ability to grow and attain its desired profitability levels depend on its ability to attract and retain highly qualified personnel. There can be no assurance that the Company will be successful in attracting and retaining such personnel. The Company has employment agreements, which includes severance benefits, with its Chief Executive Officer (see Item 10 - Executive Compensation) and with the President of Beck Office Systems, Inc. (see Item 7. Financial Statements; Footnote 14 - Subsequent Event). None of the Company's personnel are covered by a collective bargaining agreement, and the Company has never suffered a work stoppage. The Company considers its relations with its employees to be excellent.
The Company believes that it has been operating in substantial compliance in all material respects with existing environmental laws and regulations and that the costs and effects of such compliance are not material. The Company cannot predict the nature, scope or effect of legislation or regulatory requirements that could be imposed or how existing or future laws or regulations will be administered or interpreted with respect to products or activities to which they have not previously been applied. Compliance with more stringent laws or regulations, or more vigorous enforcement policies or regulatory agencies, could require substantial expenditures by the Company and could adversely affect its business, financial condition and results of operations.
The Company's operations are also governed by laws and regulations relating to work-place safety and worker health, principally the Occupational Safety and Health Act and accompanying regulations and various state laws and regulations. The Company does not believe that future compliance with current laws and regulations will have a material adverse effect on its financial condition or results of operations.
The Company presently leases a 58,500 square foot facility in Tempe, Arizona that houses its corporate offices, remanufacturing operation, warehouse space and showroom space. The current lease on the Arizona facility expires April 2006. The Company leases an 18,720 square foot remanufacturing and sales office facility in Norcross, Georgia which expires June 2004 and a 1,968 square foot sale office in Sherman Oaks, California which expires December 2004. The Company's wholly-owned subsidiary, Beck Office Systems, leases a 40,000 square foot facility in Albuquerque used for remanufacturing, warehousing and showroom space. Beck Office Systems also leases approximately 13,000 square feet of additional storage space in Albuquerque, and a 2,500 square foot sale office and warehouse in Tucson. The Company believes its existing facilities are adequate for its current and projected sales volumes. In addition, the Company believes suitable additional space will be available as needed.
The Company owns substantially all of its equipment, including its office equipment, its company vehicles and its remanufacturing equipment. The Company's equipment has been assigned as collateral for amounts borrowed under loan agreements with M&I Thunderbird Bank.
The Company has no investments or interests in real estate, real estate mortgages or securities of persons primarily engaged in real estate activities.
On March 31, 2003, the Company's lawsuit against its former independent accountant, Semple & Cooper, LLP filed on August 9, 2001 in the Superior Court of Arizona, Maricopa County (Case No. CV2001-013810) was amicably resolved between the parties by settlement and the complaint was dismissed with prejudice.
No matters were submitted to a vote of security holders during the quarter ended March 31, 2003.
The Company's Common Stock is traded on the Nasdaq Small Cap Market under the symbol "RESY." The following table sets forth the high and low closing sales price, as reported by the Nasdaq Small Cap Market, in dollars per share for the quarters then ended:
Common Stock
----------------------------------------------------
Date Low High
------------------------------- --------- ---------
June, 2001 2.86 3.48
September, 2001 2.20 4.10
December, 2001 2.23 3.00
March, 2002 2.25 2.79
June, 2002 2.17 2.50
September, 2002 1.88 2.45
December, 2002 1.55 2.10
March, 2003 1.14 2.03
|
The total number of shares of Common Stock of the Company outstanding as of June 12, 2003 was 1,363,555. As of the close of business on June 20, 2003, the number of record holders of the Company's Common Stock was 44 and the number of holders of the Company's Common Stock including beneficial holders of stock held in street name was estimated to be 300.
There were no unregistered sales of the Company's Common Stock during the period covered by this Report.
On August 15, 2002, the Company issued a 5% stock dividend to shareholders of record on August 14, 2002. On August 14, 2001, the Company issued a 5% stock dividend to shareholders of record on August 13, 2001.
The Company has not paid any cash dividends on its Common Stock during the past two fiscal years and does not intend to pay any cash dividends on its Common Stock in the foreseeable future. Future earnings, if any, will be retained to fund the development and growth of the Company's business. In addition, state corporate law may, under certain circumstances, restrict the Company's ability to pay dividends.
The statements contained in this report that are not historical facts may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended. These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, the risk that the Company may not be able to increase sales revenues, successfully integrate Beck Office Systems, Inc. into its operations and maintain profitability. In addition, the Company's business, operations and financial condition are subject to substantial other risks that are described in the Company's reports and statements filed from time to time with the Securities and Exchange Commission, including this Report.
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors and Audit Committee, we have identified four accounting principles that we believe are key to an understanding of our financial statements. These important accounting policies require management's most difficult, subjective judgments.
Revenue Recognition:
The Company recognizes a sale when its earnings process is complete. In
connection with projects that are to be installed by a customer or an agent of
the customer, the sale is recognized when the product is shipped to or
possession is taken by the customer. In connection with projects delivered
and/or installed by the Company, the sale is recognized upon completion of the
delivery when possession is taken by the customer.
Accounts Receivable:
Accounts receivable are reported at the customers' outstanding balances
less any allowance for doubtful accounts. The allowance is based upon a review
of the individual accounts outstanding and the Company's prior history of
uncollectible receivables. At March 31, 2003 and 2002, the Company established
an allowance for doubtful accounts in the amount of $40,000 and $10,500,
respectively.
Inventory:
Inventory, which is primarily composed of used office workstations and
remanufacturing supplies, is stated at the lower of average cost or market. The
Company reviews its inventory monthly and makes provisions for damaged and
obsolete inventory. The Company contemplates its ability to alter the size of
panels and other workstation components and designs projects so that the
workstations are comprised of products currently in inventory in establishing a
reserve for damaged and obsolete inventory. At March 31, 2003 and 2002, the
Company established a reserve in the amount of $50,000.
Stock-Based Compensation:
The Company has elected to follow Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees (APB 25) and the related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is recorded.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
(Statement No. 123.)
SALES REVENUE
For the Year For the Year
Ended Ended % Change in
Division March 31, 2003 March 31, 2002 Sales
-------- -------------- -------------- ----------
Wholesale $4,750,135 $3,673,660 29.30%
Arizona Retail $4,373,357 $4,353,507 0.45%
Georgia Retail $1,093,679 $284,923 283.85%
California Retail $1,293,887 $17,603 725.02%
Total Retail $6,760,923 $4,656,033 31.13%
Total Sales $11,511,058 $8,329,693 38.19%
|
The Company had sales for the fiscal year ended March 31, 2003 (the "reporting period") of $11.5 million. This compares to $8.3 million for the fiscal year ended March 31, 2002 (the "comparable period"), resulting in an increase of $3.2 million or approximately 38%. Approximately $2.1 million or 25% of this increase was contributed by the Company's newer sales offices in Georgia and California. These increases were primarily due to the new offices establishing a growing customer base. In addition, the Company's wholesale sales improved by approximately $1.1 million or 29.3%. Arizona retail sales remained relatively constant at approximately $4.4 million in the comparable and reporting periods.
Cash Flows from Operating Activities. Net cash provided by operating activities totaled approximately $32,000 for the reporting period. This compares to net cash used by operating activities of approximately $50 thousand for the comparable period. The Company's pre-tax net income, net of the allowance for bad debts, depreciation and amortization, for the reporting period was approximately $278 thousand. The company received approximately $338 thousand in income tax refunds. In addition, the Company generated positive cashflows by reducing inventory approximately $64 thousand and reduced deferred income taxes payable and accrued expenses by approximately $158 thousand. These increases were partially offset by increases accounts receivable and prepaid expenses and a reduction to accounts payable. Consistent with the increased in sales, the Company's accounts receivable and prepaid expenses increased during the reporting period by approximately $783 thousand. The Company reduced its accounts payables during the reporting period by approximately $23 thousand.
Cash Flows from Investing and Financing Activities. During the reporting period, the Company used approximately $134 thousand for the purchase of fixed assets, primarily for the construction of a showroom in the Atlanta office. Net cash used for financing activities totaled approximately $2 thousand, primarily for the purchase of treasury stock.
Expected Future Cash Flows. Cash provided by operations in the near future should closely follow operating income net of budgeted capital expenditures and merger costs associated and related expenditures with the purchase of Beck Office Systems.
In April 2003, the Company borrowed on its available line of credit with M&I Bank and a line of credit from the Company's Chairman of the Board, Scott W. Ryan to fund the purchase of Beck Office Systems, Inc. and to pay down liabilities assumed in the merger (see Note 14 of the Audited Financial Statements.) Management believes current working capital, cash reserves and cash flows from operations are adequate to fund all additional planned expenditures without the need for additional outside financing. As of the date of this report the Company has $650,000 in available borrowings on its $1,000,000 line of credit with M&I Bank (see Note 7 of the Audited Financial Statements.) Furthermore, assuming operating income remains at or above a break-even, management believes the Company will be able to eliminate the remaining $350,000 in borrowings on the line of credit by reducing current inventory levels.
SHORT TERM OUTLOOK
With the purchase of Beck Office Systems in May 2003, management's short-term focus will be to integrate Beck Office Systems into the Company and to develop and nurture operational synergies between the manufacturing facilities. Initially, the Company will focus on implementing accounting and manufacturing software systems, inventory control and turnover improvements, cost reduction and reporting standardization. Management will also continue to develop and try to build sales stability within each of its operating divisions, particularly the newer sales offices in Atlanta and Los Angeles, and the satellite sales office in Tucson.
LONG TERM OUTLOOK
Management continues to build long-term growth opportunities through product and market development projects. The Company finalized the registration of its products with the General Services Administration ("GSA"), which allows the Company to market directly to the U.S. government on open and closed bid projects. The Company is currently developing its marketing material for GSA customers. The Company also partnered with one of its suppliers to develop a line of clone replacement parts, which will reduce the Company's product costs on new replacement component parts and allow the Company to market these items to other remanufactures in the industry.
Finally, the Company will continue to seek geographic expansion through acquisitions, opening new sales offices and developing relationships with dealerships throughout the United States as opportunities present themselves.
To The Stockholders and Board of Directors of Reconditioned Systems, Inc.
We have audited the accompanying balance sheets of Reconditioned Systems, Inc. as of March 31, 2003, and the related statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material respects, the financial position of Reconditioned Systems, Inc. as of March 31, 2003, and the results of its operations, stockholders' equity, and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The financial statements of Reconditioned Systems, Inc. as of March 31, 2002 were audited by other auditors whose report dated May 6, 2002, expressed an unqualified opinion on those statements.
Renzi, Bernardi, Suarez & Co.
Philadelphia, Pennsylvania
May 9, 2003
RECONDITIONED SYSTEMS, INC.
BALANCE SHEETS
March 31, 2003 and 2002
2003 2002
---- ----
ASSETS
Current Assets:
Cash and cash equivalents (Notes 1, 2 and 3) $1,274,132 $1,377,234
Accounts receivable (Notes 1, 3 and 7) 1,349,365 625,430
Notes receivable (Note 3 and 4) 150,000 150,000
Corporation income tax receivable 0 338,249
Deferred tax asset, net (Note 11) 48,285 62,982
Inventory (Notes 1 and 7) 1,343,157 1,407,923
Prepaid expenses and other current assets (Note 11) 186,166 148,790
------- -------
Total current assets 4,351,105 4,110,608
--------- ---------
Property and Equipment, net: (Note 1, 6 and 7) 318,817 391,341
------- -------
Other Assets (Note 7):
Refundable deposits and other 67,034 66,463
------ ------
Total Assets $4,736,956 $4,568,412
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable (Note 3) $553,400 $576,615
Customer deposits 157,414 84,631
Accrued compensation and benefits 234,862 174,040
Other accrued expenses and current liabilities 34,038 24,293
------ ------
Total current liabilities 979,714 859,579
------- -------
Stockholders' Equity:
Common stock, no par value; 100,000,000 shares authorized, 1,607,231 and
1,547,517 shares issued, respectively and 1,254,055 and 1,194,608
shares outstanding, respectively 4,937,873 4,805,258
Retained earnings/(accumulated deficit) (314,327) (230,247)
--------- ---------
4,623,546 4,575,011
Less: treasury stock, 353,176 and 352,909 shares
respectively, at cost (866,304) (866,178)
--------- ---------
3,757,242 3,708,833
--------- ---------
Total Liabilities and Stockholders' Equity $4,736,956 $4,568,412
========== ==========
|
The Accompanying Notes are an Integral Part of the Financial Statements
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended March 31, 2003 and 2002
2003 2002
---- ----
Sales $11,511,058 $8,329,693
Cost of sales 8,993,136 6,915,237
--------- ---------
Gross profit 2,517,922 1,414,456
--------- ---------
Selling & administrative expenses 2,498,230 1,901,257
Severance charges (Note 8) 0 42,708
Lawsuit and legal disputes (Note 9) (23,937) 93,533
-------- ------
Income (loss) from operations 43,629 (623,042)
Other income (expense):
Interest income 22,631 54,436
Other 777 326
--- ---
Net income (loss) before income taxes 67,037 (568,280)
Provision for income taxes (expense) benefit
(Note 11) (16,760) 284,185
-------- -------
Net income (loss) $50,277 $(284,095)
======= ==========
Earnings (loss) per share (Notes 1 and 13):
Basic $0.04 $ (0.24)
===== ========
Diluted $0.04 $ (0.24)
===== ========
Weighted average number of shares outstanding:
Basic 1,253,032 1,192,394
========= =========
Diluted 1,370,730 1,192,394
========= =========
|
The Accompanying Notes are an Integral Part of the Financial Statements
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended March 31, 2003 and 2002
Common Stock Common Stock Retained
Shares Amount Earnings Treasury
(Deficit) Stock Total
---------------------------------- -------------- ----------------- ---------------- -------------- --------------
Balance at March 31, 2001 1,174,250 $4,588,844 $267,460 $(757,869) $4,098,435
Purchase of Treasury
Shares (40,500) - - (112,025) (112,025)
Transfer of shares to ESP
Plan 3,522 242 - 8,379 8,621
Retirement of shares from
ESP Plan (841) (2,103) (2,103)
Stock Dividend 58,177 216,172 (213,612) (2,560) -
Net loss - - (284,095) - (284,095)
-------------- ----------------- ------------------ ------------ --------------
Balance at March 31, 2002 1,194,608 $4,805,258 $(230,247) $(866,178) $3,708,833
Purchase of Treasury
Shares (1,435) - - (2,904) (2,904)
Transfer of shares to
ESP Plan 3,317 (1,806) - 7,888 6,082
Retirement of shares from
ESP Plan (2,149) 64 - (5,110) (5,046)
Stock Dividend 59,714 134,357 (134,357) - -
Net loss - - 50,277 - 50,277
-------------- ----------------- ----------------- ------------- --------------
Balance at March 31, 2003 1,254,055 $4,937,873 $(314,327) $(866,304) $3,757,242
============== ================= ================== ============ ==============
|
The Accompanying Notes are an Integral Part of the Financial Statements
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 2003 and 2002
2003 2002
---- ----
Cash Flows from Operating Activities:
Cash received from customers $10,787,900 $8,948,330
Cash paid to suppliers and employees (11,114,442) (8,975,076)
Income taxes received/(paid) 336,186 (72,305)
Interest received 22,631 49,336
------ ------
Net cash provided/(used) by
operating activities 32,275 (49,715)
------ --------
Cash Flows from Investing Activities:
Investments in short-term notes
receivable - (100,000)
Purchase of property and equipment (132,938) (254,900)
Other (571) (32,028)
----- --------
Net cash used by investing
activities (133,509) (386,928)
--------- ---------
Cash Flows from Financing Activities:
Purchase of Treasury Stock (2,904) (31,925)
Transfers to/from ESP Plan 1,036 6,518
----- -----
Net cash used by financing
activities (1,868) (25,407)
------- --------
Decrease in cash and cash
Equivalents (103,102) (462,050)
Cash and cash equivalents at beginning of
Period 1,377,234 1,839,284
--------- ---------
Cash and cash equivalents at end of period $1,274,132 $1,377,234
========== ==========
|
The Accompanying Notes are an Integral Part of the Financial Statements
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended March 31, 2003 and 2002
2003 2002
---- ----
Reconciliation of Net Income/(Loss) to Net Cash
Provided/(Used) by Operating Activities:
Net Income/(Loss) $50,277 $(284,095)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 205,462 115,641
Provision for doubtful accounts 22,000 (16,500)
Non-cash portion of officer note buy-out (Note 5) - (5,100)
Changes in assets and liabilities:
Accounts receivable (745,935) 618,311
Inventory 64,766 26,396
Prepaid expenses and other assets (37,376) 149
Income taxes receivable 338,249 (293,508)
Deferred income taxes receivable 14,697 (62,982)
Accounts payable and accrued expenses 120,135 (148,027)
------- ---------
Net cash provided by operating activities $32,275 $(49,715)
======= =========
|
Non-Cash Investing and Financing Activities:
During the year ended March 31, 2003, the Company engaged in the following non-cash investing and financing activities:
o On August 15, 2002, the Company issued a 5% stock dividend to shareholders of record on August 14, 2002.
During the year ended March 31, 2002, the Company engaged in the following non-cash investing and financing activities:
o On November 27, 2001 the Company purchased 30,000 shares of treasury stock in exchange for a $75,000 note receivable from an officer and $5,100 in unpaid accrued interest on said note.
o On August 14, 2001, the Company issued a 5% stock dividend to shareholders of record on August 13, 2001.
The Accompanying Notes are an Integral Part of the Financial Statements
RECONDITIONED SYSTEMS, INC.
Nature of Business:
Reconditioned Systems, Inc. ("RSI" or the "Company"), is a corporation
which was incorporated in the State of Arizona in March 1987. The
principal business purpose of the Company is the remanufacturing and
sale of office workstations comprised of panel systems to customers
located throughout the country. In addition, the Company markets new
workstations, filing, seating, lighting and other office furniture
accessories. The Company markets its products primarily in the
continental United States.
Pervasiveness of Estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Revenue Recognition:
The Company recognizes a sale when its earnings process is complete. In
connection with projects that are to be installed by a customer or an
agent of the customer, the sale is recognized when the product is
shipped to or possession is taken by the customer. In connection with
projects delivered and/or installed by the Company, the sale is
recognized upon completion of the delivery when possession is taken by
the customer.
Cash and Cash Equivalents:
The Company considers all highly liquid debt instruments and money
market funds purchased with an initial maturity of three (3) months or
less to be cash equivalents.
Accounts Receivable - Trade:
Accounts receivable are reported at the customers' outstanding balances
less any allowance for doubtful accounts. The allowance is based upon a
review of the individual accounts outstanding and the Company's prior
history of uncollectible receivables. At March 31, 2003 and 2002, the
Company has established an allowance for doubtful accounts in the
amount of $40,000 and $10,500, respectively.
Inventory:
Inventory, which is primarily composed of used office workstations and
remanufacturing supplies, is stated at the lower of average cost or
market. The Company reviews its inventory monthly and makes provisions
for damaged and obsolete items. The Company contemplates its ability to
alter the size of panels and other workstation components and designs
projects so that the workstations are comprised of products currently
in inventory in establishing its obsolescence reserve. At March 31,
2003 and 2002, the Company had established a reserve for damaged and
obsolete inventory in the amount of $50,000.
Property and Equipment:
Property and equipment are recorded at cost. Major renewals and
improvements are charged to the asset accounts while replacements,
maintenance and repairs, which do not improve or extend the lives of
respective assets, are expensed. At the time property and equipment are
retired or otherwise disposed of, the assets and related depreciation
accounts are relieved of applicable amounts. Gains or losses from
retirements or sales are credited or charged to income. Depreciation is
generally provided for on the straight-line basis over the following
estimated useful lives of the assets:
Years
Office furniture and equipment 3 - 7
Machinery and equipment 5 - 7
Leasehold improvements 3
Vehicles 3 - 5
Showroom furniture 1 - 2
|
Long-Lived Assets:
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets in question may not be recoverable.
This standard did not have a material effect on the Company's results
of operations, cash flows or financial position.
Deferred Income Taxes:
Deferred income taxes are provided on an asset and liability method,
whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax basis.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, there is uncertainty of using the operating
losses in future periods. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date
of enactment.
Stock-Based Compensation:
The Company has elected to follow Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees (APB 25) and the
related interpretations in accounting for its employee stock options.
Under APB 25, because the exercise price of employee stock options
equals the market price of the underlying stock on the date of grant,
no compensation expense is recorded. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (Statement
No. 123).
Stock-Based Compensation (Continued):
During 1999, the Company adopted an Employee Stock Purchase Plan (the
"Plan"). Under this plan, employees may purchase shares of the
Company's common stock, subject to certain limitations, at 85% of its
market value. Purchases are limited to 10% of an employee's eligible
compensation, up to a maximum of $25,000 per year. An aggregate of
200,000 shares of the Company's common stock are authorized and
available for sale to eligible employees. During the years ended March
31, 2003 and 2002, 1,168 and 2,681 shares were issued to employees
under the Plan, respectively. These outstanding shares were adjusted
for the 5% stock dividends issued on August 15, 2002 and August 14,
2001 to 1,552 and 2,931, respectively.
Earnings Per Common and Common Equivalent Share:
Basic earnings per share include no dilution and are computed by
dividing income available to common stockholders by the weighted
average number of shares outstanding for the period.
Diluted earnings per share amounts are computed based on the weighted average number of shares actually outstanding plus the shares that would be outstanding assuming the exercise of dilutive stock options, all of which are considered to be common stock equivalents. The number of shares that would be issued from the exercise of stock options has been reduced by the number of shares that could have been purchased from the proceeds at the average market price of the Company's stock. In addition, certain outstanding options are not included in the computation of diluted earnings per share because their effect would be antidilutive.
Advertising:
All direct advertising costs are expensed as incurred. The Company
charged to operations $202,245 $146,693 in advertising costs for the
years ended March 31, 2003 and 2002, respectively.
Shipping costs:
Shipping costs include freight and mailing charges associated with
delivery of goods from the company's warehouse to customer's designated
locations. The company's policy is to classify shipping costs as part
of cost of goods sold in the statement of operations.
Recent Accounting Pronouncements:
In June 2001 and August 2001, the FASB issued the following statements:
FASB 141 - Business Combinations FASB 142 - Goodwill and other Intangible Assets FASB 143 - Accounting for Asset Retirement Obligations FASB 144 - Accounting for the Impairment or Disposal of Long-Lived Assets FASB 148 - Accounting for Stock-Based Compensation - Transition and Disclosure
These FASB statements did not have a material impact on the Company's financial position or results of operations.
The Company maintains cash balances at various financial institutions. Deposits not to exceed $100,000 at the financial institutions are insured by the Federal Deposit Insurance Corporation. As of March 31, 2003, the Company had approximately $1,200,000 of uninsured cash.
In addition, the Company specializes in remanufacturing one particular original equipment manufacturer's (OEM) line of office workstations. The business is dependent upon a readily available supply of new parts, as well as used product.
The Company estimates that the fair value of all financial instruments at March 31, 2003 and 2002 as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheets. The estimate fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
Estimated fair values of the Company's financial instruments (all of which are held for non-trading purposes), are as follows:
March 31, 2003 March 31, 2002
-------------- --------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ----------- ----------
Cash and cash equivalents $1,274,132 $1,274,132 $1,377,234 $1,377,234
Accounts receivable $1,349,365 $1,349,365 $ 625,430 $ 625,430
Short-term note receivable $ 150,000 $ 150,000 $ 150,000 $ 150,000
Accounts payable $ 553,400 $ 553,400 $ 576,615 $ 576,615
|
As of March 31, 2003 and 2002, the Company held an interest in a note receivable from American Business Financial Services, Inc. in the amount of $150,000, which matures on December 4, 2003 and December 4, 2002, respectively. The uncollateralized note is held for investment purposes and accrues interest quarterly at an annual rate of 7.0% and 8.25%, respectively.
Property and equipment by major classifications are as follows:
March 31, 2003 March 31, 2002
-------------- --------------
Office furniture and equipment $382,282 $331,596
Machinery and equipment 242,229 227,065
Leasehold improvements 102,011 47,806
Showroom furniture 76,263 64,931
Vehicles 67,447 67,447
------ ------
870,233 738,845
Accumulated depreciation (551,415) (347,504)
-------- --------
$318,817 $391,341
======== ========
|
Depreciation expense for the years ended March 31, 2003 and 2002 totaled $205,462 and $112,061, respectively.
As of March 31, 2003, the Company had a $1,000,000 line of credit agreement with M&I Thunderbird Bank. Under this agreement, interest is payable at the bank's base rate. Borrowings on the line of credit may not exceed seventy-five percent (75%) of eligible accounts receivables and thirty percent (30%) of eligible inventory up to $300,000. The line of credit is collateralized by accounts receivable, inventory, property and equipment, and intangibles which total $4,736,956. The agreement contains various covenants by the Company, including covenants that the Company will maintain certain net worth thresholds and ratios, will meet certain debt service coverage ratios, and will not enter into or engage in various types of agreements or business activities without approval from M&I Thunderbird Bank. The line of credit matures on July 31, 2003.
As of March 31, 2003, the Company had no outstanding borrowings on the line of credit and was in compliance with all of the covenants of the agreement.
In response to decreased sales volume and the Company's reported losses during the year ended March 31, 2002, the Company made personnel cuts during the quarter ended December 31, 2001. In connection with the lay-offs, the Company incurred $42,708 in severance charges.
On March 31, 2003, the Company's lawsuit against its former independent accountant, Semple & Cooper, LLP filed on August 9, 2001 in the Superior Court of Arizona, Maricopa County (Case No. CV2001-013810) was amicably resolved between the parties by settlement and the complaint was dismissed with prejudice.
The Company leases remanufacturing, warehouse, showroom and office space in Arizona, Georgia and California, as well as certain equipment under non-cancelable operating lease agreements expiring at various times through April 2006. Certain of the lease agreements require the Company to pay property taxes, insurance and maintenance costs.
Future minimum lease payments were as follows at March 31, 2003:
March 31, Amount
2004 $507,364
2005 443,229
2006 392,155
2007 32,728
----------
$1,375,476
|
Rent expense under operating lease agreements for the years ended March 31, 2003 and 2002 was approximately $460,000 and $350,000, respectively.
The provision for income taxes consist of the following for the years ended March 31, 2003 and 2002:
For the Year Ended
March 31, 2003 March 31, 2002
-------------- --------------
Federal
Current (Benefit) $2,063 $(221,203)
Deferred (Benefit) 7,993 (13,102)
----- --------
$10,056 (234,305)
------- ---------
State
Current 0 0
Deferred (Benefit) 6,704 (49,880)
----- --------
6,704 (49,880)
----- --------
Tax Expense (Benefit) $16,760 $(284,185)
======= ==========
|
The Company's income tax provisions/(benefit) differ from the amounts computed by applying the federal statutory income tax rate to income before income taxes. Reconciliation to the statutory federal income tax rate is as follows:
For the Year Ended
March 31, 2003 March 31, 2002
-------------- --------------
Income tax at statutory effective rate $22,861 $ 0
Adjustments:
NOL Carryforward/carryback (6,101) (238,745)
State taxes, net of federal benefit 0 (45,440)
Alternative minimum tax carryforward 0 0
- -
Income Tax Expense (Benefit) $16,760 $(284,185)
======= ==========
|
Significant components of the Company's deferred tax assets and liabilities are as follows:
For the Year Ended
March 31, 2003 March 31, 2002
-------------- --------------
Deferred tax assets:
Net operating loss carryforwards $72,850 $ 99,942
Less valuation allowance 0 0
- -
Deferred tax asset $72,850 $ 99,942
------- --------
Deferred tax liability:
Property and equipment related $24,565 $ 36,960
------- --------
Net deferred tax asset $48,285 $62,982
======= =======
|
Summary of valuation allowance:
Balance at April 1, 2002 $ 0
Addition for the year ended March 31, 2003 0
------------
Balance at March 31, 2003 $ 0
=============
|
Realization of the net deferred tax assets is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards. Although realization is not assured, management believes that it is more likely than not that the net deferred tax assets will be realizable. The amount of the net deferred tax asset considered realizable could be reduced in the near term if actual future taxable income is lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable temporary differences.
During the year ended March 31, 1997, the Board of Directors issued 300,000 common stock options to certain officers and directors with an exercise price of $1.00 per share. During the year ended March 31, 2000, 100,000 of the options were cancelled. The remaining options were subsequently readjusted following the 5% stock dividends issued on August 15, 2001 and August 14, 2002. As of March 31, 2003, these options total 220,500 shares with an exercise price of $0.91 per share.
During the year ended March 31, 1998, the Board of Directors approved the 1997 Employee Stock Option Plan. The Plan authorizes the Company to grant incentive stock options to key employees of the Company. 55,125 shares of common stock are reserved for issuance pursuant to this Plan.
During the year ended March 31, 1999, the Board of Directors issued 6,300 common stock options to certain key employees under the 1997 Employee Stock Option Plan with an exercise price of $3.00. To date, 1,050 of these options have been forfeited. The remaining options were subsequently readjusted following the 5% stock dividends issued on August 15, 2001 and August 14, 2002. As of March 31, 2003, these options total 5,788 with an exercise price of $2.72 per share.
During the year ended March 31, 2000, the Board of Directors issued 4,000 common stock options to certain officers and directors with an exercise price of $2.63. These options were subsequently readjusted to 4,410 options at an exercise price of $2.39 per share. In addition, during the year ended March 31, 2000, the Board of Directors issued 4,907 common stock options to certain key employees under the 1997 Employee Stock Option Plan with an exercise price of $2.63. To date, 1,402 of these options have been forfeited. The remaining options were subsequently readjusted to 3,864 at an exercise price of $2.39 per share.
During the year ended March 31, 2001, the Board of Directors issued 5,000 common stock options to certain officers and directors with an exercise price of $3.00. The Board also issued 10,112 common stock options to certain key employees under the 1997 Employee Stock Option Plan with an exercise price of $3.00, of which 3,792 have been forfeited. These options were subsequently readjusted to 5,512 and 6,968 options, respectively, with an exercise price of $2.72.
During the year ended March 31, 2003, the Board of Directors issued 15,000 common stock options to certain directors with an exercise price of $2.30.
Following is a summary of the status of the outstanding stock options for employees, officers and directors during the year ended March 31, 2003 and 2002:
Weighted Average
Number of Options Exercise Price
----------------- --------------
Outstanding as of March 31, 2001 230,319 $1.25
Granted 0 3.00
Exercised 0 0
Forfeited 0 0
Adjustment for 5% stock dividend - August 15, 2001 11,516 (.06)
------ -----
Outstanding as of March 31, 2002 241,835 $1.19
Granted 15,000 2.30
Exercised 0 0
Forfeited (6,556) 0
Adjustment for 5% stock dividend - August 14, 2002 11,764 (.05)
------ -----
Outstanding as of March 31, 2003 262,043 $1.16
======= =====
|
Information relating to the stock options at March 31, 2003, summarized by exercise price, is as follows:
Range Weighted Average Weighted Weighted Average of Shares under Remaining Life Average Exercisable Exercise Price Exercise Price Option (Years) Exercise Price Shares -------------- ------------ ----------------- -------------- ----------- ---------------- $1.00 - $2.00 220,500 3.39 $0.91 220,500 $0.91 $2.01 - $2.50 23,274 5.30 $2.33 8,274 $2.39 $2.51 - $3.00 18,268 3.00 $2.72 11,301 $2.72 |
All stock options issued have an exercise price not less than the fair market value of the Company's common stock on the date of grant. In accordance with accounting for such options utilizing the intrinsic value method, there is no related compensation expense recorded in the Company's financial statements for the years ended March 31, 2003 and 2002. Had compensation cost for stock-based compensation been determined based on the fair value of the options at the grant dates consistent with the method of SFAS 123, the Company's net income (loss) and earnings (loss) per share would have been reduced to the pro forma amounts presented below:
Year Ended Year Ended
March 31,2003 March 31,2002
------------- -------------
Net income (loss):
As reported $50,277 $(284,095)
Pro forma $37,299 $(295,187)
Earnings (loss) per share:
Basic:
As reported $0.04 $(0.24)
Pro forma $0.03 $(0.25)
Diluted:
As reported $0.04 $(0.24)
Pro forma $0.03 $(0.25)
|
The fair value of option grants is estimated as of the date of grant utilizing the Black-Scholes option-pricing model with the following weighted average assumptions for grants in 2003 and 2002: expected remaining life of options of 5.00 years in 2003 and 6.25 years in 2002, expected volatility of 31%, risk-free interest rates of 5%, and a 0% dividend yield. The weighted average fair value at date of grant for options granted during 2003 approximated $0.84.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued)
For the years ended March 31, 2003 and 2002, the following data shows amounts used in computing earnings per share and the effect on income and the weighted average number of shares of dilutive potential common stock.
March 31,
2003 2002
---- ----
Basic EPS
Net income (loss) $50,277 $(284,095)
======= ==========
Weighted average number of shares outstanding 1,253,032 1,192,394
Basic earnings (loss) per share $0.04 $(0.24)
===== =======
Diluted EPS
Net income (loss) $50,277 $(284,095)
======= ==========
Weighted average number of shares outstanding 1,253,032 1,192,394
Effect of dilutive securities:
Stock options 117,698 0
------- -
Total common shares + assumed conversions 1,370,730 1,192,394
Diluted earnings (loss) per share $0.04 $(0.24)
===== =======
|
Effective May 1, 2003, Reconditioned Systems, Inc., an Arizona corporation ("RSI") completed its acquisition of Beck Office Systems, Inc., a New Mexico corporation ("Beck"), by means of a merger of Beck with and into RSI Acquisition Sub, Inc., a New Mexico corporation and wholly-owned subsidiary of RSI formed in order to effect the acquisition. The merger was accomplished pursuant to the Agreement and Plan of Merger dated April 24, 2003 and entered into by the respective corporations and certain others and a copy of which was filed as an attachment to the articles of merger with the New Mexico State Corporation Commission on April 29, 2003.
Beck specializes in the remanufacturing of modular office furniture originally manufactured by Haworth, Inc. In addition, Beck retails numerous new office furniture lines. Beck was founded by Daniel and Marjorie Beck in 1983 and now employs approximately 60 employees. Beck is headquartered in Albuquerque, New Mexico and also has a sales office in Tucson, Arizona. Included within the assets acquired from Beck are office, showroom, plant and equipment, located in Albuquerque and Tucson. RSI intends to continue to utilize the assets of Beck in the same manner that they were utilized prior to the merger.
In consideration for the merger which is intended to qualify as a tax free reorganization under Section 368 of the Internal Revenue Code, RSI paid $200,000 in cash and 125,000 shares of restricted RSI common stock, 14,000 shares of which shall revert to RSI in the event the post-closing audit of Beck does not confirm a total stockholders' equity of at least $500,000. The cash portion of the merger consideration was funded through borrowings from Scott W. Ryan, the registrant's Chairman of the Board under a $200,000 note payable dated April 25, 2003. The issuance of RSI common stock was made without general solicitation or advertising pursuant to Section 4(2) of the Securities Act of 1933.
The terms of the merger are fully described in the Agreement and Plan of Merger, which was filed an exhibits to the 8-K filed on May 5, 2003.
On December 13, 2002 the Registrant's former principal independent accountant,
Moffitt & Company, PC resigned. Moffitt & Company, PC's reports on the Company's
financial statements for the years ended March 31, 2002 and 2001 did not contain
an adverse opinion or disclaimer of opinion, and were not modified as to
uncertainty, audit scope or accounting principles. There were no disagreements
with Moffitt & Company, PC on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. On December 13,
2002, the Registrant appointed Renzi, Bernardi, Suarez & Company as the
principal independent accountant.
(See the Registrant's filings on Form 8-K December 13, 2002.)
The information required by Items 9 - 11 of Part III is omitted from this Report by virtue of the fact that the Company will file with the Securities and Exchange Commission (the "SEC"), pursuant to Regulation 14A, within 120 days after the end of the fiscal year covered by this Report, a definitive proxy statement (the "Proxy Statement") relating to the Company's Annual Stockholders' Meeting to be held August 29, 2003.
Material incorporated herein by reference and location in Proxy Statement for 2003 Annual Meeting:
Item No. Item Description Proxy Statement
-------- ----------------- ---------------
9 Directors, Executive Officers, Promoters Proposal One - Election of Directors
and Control Persons; Compliance with
Section 16(a) of the Exchange Act
10 Executive Compensation Proposal One - Election of Directors
11 Security Ownership of Certain General Information - Security Owner-
Beneficial Owners and Management ship of Certain Principal Stockholders
and Management
|
None.
The following exhibits are filed herewith pursuant to Regulation S-B:
No. Description Reference
--- ----------- ---------
2.1 Agreement and Plan of Merger dated as of April 29, 2003 by and among
Reconditioned Systems, Inc. and all of the outstanding shareholders of
Beck Office Systems, Inc. 10
3.1 Articles of Incorporation of the Registrant, as amended and restated 3
3.2 Bylaws of Registrant, as amended and restated 3
4.1 Form of Common Stock Certificate 1
4.5 Registration Rights Agreements 2
*4.10 Options issued to Dirk D. Anderson 4
*4.12 Amendment to Options issued to Dirk D. Anderson 5
*4.14 Options issued to Dirk D. Anderson 5
*4.15 Options issued to Scott W. Ryan 5
*4.16 Options issued to Scott W. Ryan 5
*4.17 Options issued to Scott W. Ryan 7
*4.18 Options issued to Dirk D. Anderson 7
*4.19 Options issued to Scott W. Ryan 7
*4.20 Options issued to Dirk D. Anderson 7
10.1 Lease Agreement, dated April 12, 1990 between Boston Safe Deposit
and Trust Company, as Lessor, and Registrant as Lessee 1
10.33 Loan document between M&I Thunderbird Bank and the Registrant 6
10.34 Agreement for Conveyance and Assignment between First Capital Bank
and Registrant 8
10.35 Sublease between Iron Mountain Records Management, Inc. and Registrant 8
10.36 Lease agreement between Arden Realty Finance III, LLC and Registrant 9
23.1 Consent the Independent Public Accountants, Moffitt & Company, PC 11
23.2 Consent the Independent Public Accountants, Renzi, Bernardi and Suarez, PC 11
99.1 Certification Pursuant to 18 United States Code Section 1350,
as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, of Dirk D. Anderson, President and Chief Executive Officer of
the Company. 11
|
(1) Filed with Registration Statement on Form S-18, No.
33-51980-LA, under the Securities Act of 1933, as declared
effective on December 17, 1992
(2) Filed with Form 10-KSB on July 13, 1995
(3) Filed with Form 10-KSB on July 2, 1996
(4) Filed with Form 10-KSB on November 14, 1996
(5) Filed with 10-KSB on September 26, 1997
(6) Filed with 10-KSB on August 11, 2000
(7) Filed with 10-KSB on July 18, 2001
(8) Filed with 10-QSB on November 9, 2001
(9) Filed with 10-QSB on February 5, 2002
(10) Filed with Form 8-K on May 5, 2003
(11) Filed herein
(*) Indicates a compensatory plan or arrangement
(b) Reports on Form 8-K:
On May 5, 2003, the Registrant filed a Current Report on Form 8-K incorporated by reference under Item 4 a copy of the Agreement and Plan of Merger dated as of April 29, 2003 by and among Reconditioned Systems, Inc. and all of the outstanding shareholders of Beck Office Systems, Inc. Included under Item 5 of the same filing, the Company announced it entered into a Settlement Agreement with the registrant's former independent accountant, Semple & Cooper, LLP (`Semple") regarding the lawsuit filed in the Superior Court of Arizona, Maricopa County (Case No. CV2001-013810).
In accordance with Section 13 or 15(d) 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.
Reconditioned Systems, Inc.
Date: June 25, 2003 /s/ Dirk D. Anderson
-------------------------------------
Dirk D. Anderson, Chief Executive Officer
(Principal Finance Officer)
/s/ Kerrie A. Leach
-------------------------------------
Kerrie A. Leach, V.P. of Finance
(Principal Accounting Officer)
|
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: June 25, 2003 /s/ Scott W. Ryan
-------------------------------------
Scott W. Ryan, Chairman
/s/ Dirk D. Anderson
-------------------------------------
Dirk D. Anderson, Secretary and Treasurer
/s/ Ronald Ziegler
-------------------------------------
Ronald Ziegler, Director
|
Certification
I, Dirk D. Anderson, certify that:
1. I have reviewed this annual report on Form 10-KSB of Reconditioned Systems, Inc. (the "registrant"):
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that material information related to the registrant particularly during the period in which this 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 annual report (the "Evaluation Date"); and
c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. I have disclosed, based on my recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
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
6. I have indicated in this annual report whether 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.
Date: June 25, 2003 /s/ Dirk D. Anderson ------------------------------------ Dirk D. Anderson |
Exhibit 23.1
Moffitt & Company, P.C.
------------------------------------------------
Certified Public Accountants 5040 E. Shea Blvd., Suite 270
Scottsdale, Arizona 85254
(480) 951-1416
Fax (480) 948-3510
moffittcpas@eschelon.com
|
CONSENT OF INDEPENDENT AUDITORS
June 25, 2003
Reconditioned Systems, Inc.
444 W. Fairmont
Tempe, AZ 85282
Dear Sir or Madam:
We do hereby consent to the use in this Form 10-KSB dated June 25, 2002 of our report dated May 6, 2002 relating to the March 31, 2002 audited financial statements of Reconditioned Systems, Inc.
Sincerely,
/s/ Stanley M. Moffitt Stanley M. Moffitt, CPA Moffitt & Company, P.C. |
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the form 10KSB of Reconditioned Systems, Inc. of our report dated May 9, 2003, relating to the financial statements which appear in this Annual Report on Form 10KSB.
/s/ Renzi, Bernardi, Suarez & Co. Philadelphia, PA May 9, 2003 |
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Reconditioned Systems, Inc. (the
"Company") on Form 10-KSB for the period ending March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Dirk D.
Anderson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Reconditioned Systems, Inc. and will be retained by Reconditioned Systems, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Dirk D. Anderson Dirk D. Anderson Chief Executive Officer and Principal Accounting Officer June 25, 2003 |