10-Q 1 janus10q_93002.txt SEPTEMBER 30, 2002 QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 or [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 0-22745 Janus Hotels and Resorts, Inc. (Exact name of registrant as specified in its charter) DELAWARE 13-2572712 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2300 Corporate Blvd., N.W., Suite 232 Boca Raton, Florida 33431-8596 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (561) 997-2325 (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No | | Number of shares of common stock outstanding as of October 18, 2002: 6,350,340 1 JANUS HOTELS AND RESORTS, INC. FORM 10-Q

~~UNAUDITED~~FOR ~~CONSOLIDATED~~THE ~~BALANCE~~QUARTERLY ~~SHEETS~~PERIOD ASENDED OFSEPTEMBER ~~JUNE~~ 30, 2002 ~~AND~~Part ~~DECEMBER~~I. ~~31,~~Financial ~~2001~~Information ~~June~~Page ~~30,~~No. ~~December~~Item ~~31,~~1. ~~2002~~Financial ~~2001~~Statements ~~-----------~~Unaudited ~~------------~~Consolidated ~~ASSETS~~Balance ~~Current~~Sheets ~~assets:~~As ~~Cash~~Of ~~and~~September ~~cash equivalents $ 5~~30,~~471,111~~ $2002 7,097,345 Restricted cash 3,896,535 2,405,747 Accounts receivable 2,347,133 2,107,968 Current portion of notes receivable 345,216 2,208,716 Other current assets 184,600 196,512 ----------- ----------- Total current assets 12,244,595 14,016,288 ----------- ----------- Property and ~~equipment,~~December ~~net 85~~31,~~984,210~~ ~~87,150,167~~2001 ~~Mortgage notes receivable 2,983,284~~ 3~~,029,629~~ ~~Goodwill,~~Unaudited ~~net~~Consolidated ~~7,133,384~~Statements ~~7,133,384~~Of ~~Deferred~~Operations ~~tax~~For ~~asset~~The ~~714,000~~Three ~~60,000~~Months ~~Replacement~~Ended ~~reserve~~September 330,~~226,280~~ ~~3,415,089~~2002 ~~Other~~and ~~assets~~2001 ~~2,358,904~~4 ~~2,186,566~~Unaudited ~~-----------~~Consolidated ~~-----------~~Statements ~~$114,644,657~~Of ~~$116,991,123~~Operations ~~===========~~For ~~===========~~The ~~LIABILITIES~~Nine ~~AND~~Months ~~STOCKHOLDERS'~~Ended ~~EQUITY~~September ~~Current liabilities: Short-term debt $ 1~~30,~~352,960~~ $2002 ~~1,362,735~~and ~~Current~~2001 ~~maturity of accelerated long-term debt 42,266,372 42,266,372 Current portion of long-term debt~~ 5~~,431,091~~ ~~5,073,196~~Unaudited ~~Accounts~~Consolidated ~~payable~~Statements ~~2,475,414~~Of ~~2,743,269~~Cash ~~Accrued~~Flows ~~expenses~~For ~~4,121,780~~The ~~3,417,549~~Nine ~~-----------~~Months ~~-----------~~ended ~~Total~~September ~~current liabilities 55~~30,~~647,617~~ ~~54,863,121~~2002 ~~-----------~~and ~~-----------~~2001 ~~Long-term~~6 ~~debt,~~Notes ~~net~~To ofUnaudited ~~current~~Consolidated ~~portion~~Financial ~~32,860,164~~Statements ~~33,817,936~~7 ~~Deferred~~Item ~~tax liabilities~~ 2~~,282,000~~. ~~2,282,000 Minority interest - 91,113 Stockholders~~Management's ~~equity:~~Discussion ~~Preferred~~and ~~stock,~~Analysis ~~series~~Of B;Financial ~~par~~Condition ~~value $0.01 per share; 20,000 shares authorized; 3,100 shares issued~~ and ~~outstanding~~Results 31of 31Operations ~~Common~~10 ~~stock,~~Part ~~par value $0~~II.01 ~~per~~Other ~~share;~~Information ~~15,000,000~~14 ~~shares~~Signature ~~authorized;~~Page 11,804,518 and 11,804,195 shares issued, respectively 118,046 118,043 Additional paid-in capital 36,059,991 36,059,511 Accumulated deficit (9,022,952) (7,791,473) Treasury stock, 4,561,671 and 3,880,809 common shares, at cost, respectively (3,300,240) (2,449,159) ----------- ----------- Total stockholders' equity 23,854,876 25,936,953 ----------- ----------- $114,644,657 $116,991,123 =========== ===========14

2 JANUS HOTELS AND RESORTS, INC.

UNAUDITED CONSOLIDATED ~~STATEMENTS~~BALANCE SHEETS AS OF ~~OPERATIONS~~SEPTEMBER ~~FOR~~30, ~~THE~~2002 ~~THREE~~AND ~~MONTHS~~DECEMBER ~~ENDED~~31, ~~JUNE~~2001 September 30, ~~2002~~December ~~AND~~31, ~~2001~~ 2002 2001 ----------- ------------- ~~Revenues~~ASSETS Current assets: ~~Room~~Cash and ~~related~~cash ~~services~~equivalents $ 72,~~558~~881,~~999~~122 $ 87,~~320~~097,~~527~~345 ~~Food~~Restricted ~~and~~cash ~~beverage~~1,533,449 2,~~608~~405,~~312~~747 Accounts receivable 2,~~548~~907,~~463~~374 ~~Management~~2,107,968 ~~fees~~Current ~~760~~portion of notes receivable 108,~~072~~716 ~~844~~2,~~174~~208,716 Other ~~230~~current assets 186,~~204~~562 ~~264~~196,~~722~~512 ----------- ----------- Total ~~revenues~~current 11assets 7,~~157~~617,~~587~~223 1114,~~977~~016,~~886~~288 ----------- ----------- ~~Operating~~Property ~~expenses: Direct: Room~~ and ~~related~~equipment, ~~services~~net 182,~~849~~975,~~307~~496 287,~~161~~150,~~121~~167 ~~Food~~Mortgage ~~and~~notes ~~beverage~~receivable 12,~~947~~960,~~994~~111 13,~~993~~029,~~162~~629 ~~Selling~~Goodwill, ~~and~~net ~~general 603~~7,~~864~~133,384 ~~531~~7,~~799~~133,384 ~~----------~~Deferred tax asset -~~---------~~ ~~Total~~60,000 ~~direct~~Replacement ~~expenses~~reserve 42,~~401~~265,~~165~~263 43,~~686~~415,~~082~~089 Other assets 1,924,369 2,186,566 ----------- ----------- ~~Occupancy~~$104,875,846 ~~expenses~~$116,991,123 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt $ 1,~~360~~057,~~963~~626 $ 1,~~525~~362,~~729~~735 ~~Selling~~Current maturity of accelerated long-term debt - 42,266,372 ~~general~~Current ~~and~~portion ~~administrative~~of ~~expenses~~long-term 2debt 38,~~904~~468,~~150~~229 35,~~024~~073,~~399~~196 ~~Depreciation~~Accounts ~~986~~payable 1,~~906~~839,798 ~~983~~2,~~297~~743,269 ~~Amortization~~Accrued 46expenses 2,~~130~~128,721 883,~~007~~417,549 ----------- ----------- Total ~~operating~~current ~~expenses~~liabilities 943,~~699~~494,~~314~~374 1054,~~307~~863,~~514~~121 ----------- ----------- ~~Operating~~Long-term ~~income~~debt, 1net of current portion 30,~~458~~982,~~273~~543 133,~~670~~817,~~372~~936 ~~Other~~Deferred ~~income~~tax ~~(expense):~~liabilities ~~Interest expense (1~~3,~~649~~834,~~093)~~000 (12,~~711~~282,~~232)~~000 ~~Interest~~Minority ~~income~~interest ~~98,827~~- ~~105~~91,~~616~~113 ~~Gain~~Stockholders' ~~(loss)~~equity: ~~from~~Preferred ~~sale~~stock, ofseries ~~property~~B; -par ~~(770,733)~~value ~~----------~~$0.01 ~~----------~~per ~~Income~~share; ~~(loss)~~20,000 ~~from~~shares ~~continuing~~authorized; ~~operations~~3,100 ~~before~~shares ~~income~~issued ~~taxes~~ and ~~minority~~outstanding ~~interest~~31 ~~(91,993)~~31 ~~(705~~Common stock,~~977)~~ ~~Provision~~par ~~(credit)~~value ~~for~~$0.01 ~~income~~per ~~taxes~~share; ~~(672~~15,000~~) (133~~,000) ~~----------~~shares ~~----------~~authorized; ~~Income~~11,804,518 ~~(loss)~~and ~~from~~11,804,195 ~~continuing~~shares ~~operations~~issued, ~~before~~respectively ~~minority interest 580~~118,~~007~~046 ~~(572~~118,~~977)~~043 ~~Minority~~Additional ~~interest~~ paid-in ~~(209~~capital 36,~~270)~~059,991 ~~----------~~36,059,511 ~~----------~~Accumulated ~~Income~~deficit (~~loss~~5,214,892) ~~from continuing operations 580,007~~ (~~363~~7,~~707~~791,473) ~~Gain~~Treasury onstock, ~~disposal of discontinued operations~~5,454,178 ~~net~~and ~~of taxes 17~~3,~~415 17~~880,~~414~~809 ~~----------~~common ~~----------~~shares, ~~Net~~at ~~income (loss) 597~~cost,~~422~~ respectively (~~346~~4,~~293~~398,247) ~~Less preferred dividend requirement 58~~(2,~~125 58~~449,~~125~~159) ----------- ----------- ~~Net~~Total ~~income~~stockholders' ~~(loss)~~equity ~~applicable to common stock $ 539~~26,~~297~~564,929 ~~$ (404~~25,~~418)~~936,953 ~~========== ========== Basic income (loss) per common share: Income (loss) from continuing operations $ 0.07 $ (0.05) Gain on disposal of discontinued operations~~ - - ----- ------ ~~Net income (loss) $ 0.07 $ (0.05) ====== ======= Diluted income (loss) per common share: Income (loss) from continuing operations $ 0.07 $ (0.05) Gain on disposal of discontinued operations~~ - - ----- ------ ~~Net income (loss)~~ $ ~~0.07 $ (0.05) ====== ======= Weighted average common shares: Basic 7~~104,~~242~~875,~~691~~846 7$116,~~973~~991,~~505~~123 ========= ==~~=======~~ ~~Diluted 7,242,691 7,973,505~~ ========= ==~~=======~~

See notes to unaudited consolidated financial statements. 3 JANUS HOTELS AND RESORTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE ~~SIX~~THREE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2002 AND 2001 2002 2001 ---------- ----------- Revenues: Room and related services $13 9,~~189~~215,~~445~~941 $15 9,~~089~~738,~~805~~786 Food and beverage 42,~~747~~616,~~653~~488 42,~~805~~663,~~442~~174 Management fees 1739,~~415,814~~409 1906,~~616,609~~371 Other ~~411~~269,~~677~~163 ~~497~~338,~~196~~911 ---------- ---------- Total revenues 1912,~~764~~841,~~589~~001 2213,~~009~~647,~~052~~242 ---------- ---------- Operating expenses: Direct: Room and related services 32,~~336~~248,~~448~~790 42,~~049~~291,~~530~~061 Food and beverage 32,~~639~~156,~~951~~332 32,~~806~~208,~~154~~489 Selling ~~and general 1~~647,~~151,712~~837 1570,~~044,144~~319 ---------- ---------- Total direct expenses 85,~~128~~052,~~111~~959 85,~~899~~069,~~828~~869 ---------- ---------- Occupancy expenses 21,~~806~~644,~~399~~423 31,~~230~~668,~~386~~214 ~~Selling,~~General ~~general~~ and administrative expenses 53,~~639~~126,~~008~~159 53,~~715~~127,~~220~~825 Depreciation 1992,~~960,740~~409 1976,~~949,827~~617 Amortization 9236,~~261~~280 ~~175~~96,~~965~~301 ---------- ---------- Total operating expenses 1810,~~626~~852,~~519~~230 1910,~~971~~938,~~226~~826 ---------- ---------- Operating income 1,~~138~~988,~~070~~771 2,~~037~~708,~~826~~416 Other income (expense): Interest expense (31,~~292~~378,~~128~~377) (31,~~430~~712,~~080~~321) Interest income ~~219~~110,~~589~~091 ~~278~~194,~~371~~416 Gain ~~(loss)~~from debt settlement 5,787,088 - Gain from sale of property ~~- (770~~58,~~733)~~827 - Other ~~(49~~48,~~590)~~094 - ---------- ---------- Income ~~(loss)~~ from continuing operations before income taxes ~~and minority interest (1~~6,~~984~~614,~~059)~~494 (1,~~884~~190,~~616)~~511 Provision ~~(credit)~~ for income taxes ~~(834~~2,778,000) ~~(629~~500,000) ---------- ---------- Income ~~(loss)~~ from continuing operations ~~before minority interest (1~~3,~~150~~836,~~059)~~494 (1690,~~255,616)~~511 ~~Minority interest - (206,455) ---------- ---------- Income (loss) from continuing operations (1,150,059) (1,049,161)~~ Gain on disposal of discontinued operations, net of taxes 3429,~~830~~691 346,~~829~~138 ---------- ---------- Net income ~~(loss) (1~~3,~~115~~866,~~229)~~185 (1696,~~014,332)~~649 Less preferred dividend requirement ~~116~~58,~~250~~125 ~~116~~58,~~250~~125 ---------- ---------- Net income ~~(loss)~~ applicable to common stock $(1 3,~~231~~808,~~479)~~060 $(1 638,~~130,582)~~524 ========== ========== Basic income ~~(loss)~~ per common share: Income ~~(loss)~~ from continuing operations $ (0.~~17)~~55 $ (0.~~14)~~08 Gain on disposal of discontinued operations - - ------ ------ Net income ~~(loss)~~ $ (0.~~17)~~55 $ (0.~~14)~~08 ====== ====== Diluted income ~~(loss)~~ per common share: Income ~~(loss)~~ from continuing operations $ (0.~~17)~~55 $ (0.~~14)~~08 Gain on disposal of discontinued operations - - ------ ------ Net income ~~(loss)~~ $ (0.~~17)~~55 $ (0.~~14)~~08 ====== ====== Weighted average common shares: Basic 76,~~325~~889,~~365~~075 87,~~209~~923,~~401~~386 ========= ========= Diluted 76,~~325~~889,~~365~~075 87,~~209~~923,~~401~~386 ========= =========

See notes to unaudited consolidated financial statements. 4 JANUS HOTELS AND RESORTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF ~~CASH~~OPERATIONS ~~FLOWS~~ FOR THE ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2002 AND 2001 2002 2001 ----------- ----------- ~~Operating activities~~Revenues: ~~Net~~Room ~~income~~and ~~(loss)~~related services $(122,~~115~~405,~~229)~~386 $(124,~~014~~828,~~332)~~591 ~~Adjustments~~Food ~~to reconcile net income to net cash provided by (used in) operating activities: Depreciation~~ and ~~amortization~~beverage 17,~~960~~364,~~740~~141 17,~~949~~468,~~827~~616 ~~Amortization~~Management offees ~~intangible assets 93~~2,~~500~~155,223 ~~175~~2,~~965~~522,980 ~~Deferred~~Other ~~taxes (654~~680,~~000)~~840 ~~(494~~836,~~000)~~107 ~~Minority Interest~~ ---------- ~~(206,455) Loss on sale of property~~ ---------- ~~770,733~~Total ~~Loss~~revenues ~~on note settlement 49~~32,605,590 35,656,294 ---------- ~~Changes~~---------- inOperating ~~operating~~expenses: ~~assets~~Direct: Room and ~~liabilities:~~related ~~Accounts~~services ~~receivable (239~~5,~~165)~~585,238 ~~(380~~6,~~682)~~340,591 ~~Other~~Food ~~current~~and ~~assets~~beverage 115,~~912 8~~796,~~686~~283 ~~Replacement reserve 188~~6,~~809 495~~014,~~489~~643 ~~Other~~Selling ~~asset (265~~1,~~838) (375~~799,~~431)~~549 ~~Accounts payable and accrued expenses 922~~1,~~263 206~~614,~~005~~463 ---------- ---------- ~~Net~~Total ~~cash~~direct ~~provided~~expenses ~~by operating activities 952~~13,~~582~~181,070 113,~~135~~969,~~805~~697 ---------- ---------- ~~Investing~~Occupancy ~~activities:~~expenses ~~Purchases~~4,450,822 of4,898,600 ~~property~~General and ~~equipment~~administrative ~~(794~~expenses 8,~~783)~~765,167 (18,~~406~~843,~~325)~~045 ~~Deposit~~Depreciation on2,953,149 ~~property held for sale - (1~~2,~~650~~926,~~000)~~444 ~~Collections~~Amortization ~~of notes receivable 56~~128,~~345~~541 46272,~~346~~266 ---------- ---------- ~~Net~~Total ~~cash~~operating ~~used~~expenses ~~in investing activities (738~~29,~~438)~~478,749 (330,~~009~~910,~~979)~~052 ---------- ---------- ~~Financing~~Operating ~~activities~~income 3,126,841 4,746,242 Other income (expense): ~~Dividends~~Interest ~~paid~~expense (~~116~~4,~~250~~670,505) (~~116~~5,~~250~~142,401) ~~Decrease~~Interest ~~(Increase)~~income in329,680 ~~restricted~~472,787 ~~cash~~Gain ~~(263~~from debt settlement 5,~~878~~787,088 Gain (loss) ~~538,389~~from ~~Repurchase~~sale of ~~common~~property ~~stock~~58,827 (~~851~~770,~~081~~733) Other (~~728~~1,~~444~~496) ~~Redemption~~---------- ~~of common stock~~ ---------- Income (~~189,593~~loss) ~~Proceeds~~ from ~~short-term~~continuing ~~borrowings~~operations ~~1,300,174~~before ~~2,992,574~~income ~~Repayments~~taxes ofand ~~short-term~~minority ~~borrowings~~interest (14,~~309~~630,~~949~~435 (694,105) Provision (credit) for income taxes 1,~~947~~944,000 (129,000) ~~Proceeds~~---------- ~~from long~~-~~term~~--------- ~~borrowings~~Income -(loss) ~~497,266~~from ~~Repayments~~continuing ofoperations ~~long-term~~before ~~borrowings~~minority ~~(599~~interest 2,~~877)~~686,435 (1565,~~393,912~~105) ~~Other~~Minority ~~483~~interest - (206,455) ---------- ---------- ~~Net~~Income ~~cash~~(loss) ~~used~~from incontinuing ~~financing~~operations ~~activities (1~~2,~~840~~686,~~378)~~435 (~~347~~358,~~099~~650) Gain on disposal of discontinued operations, net of taxes 64,521 40,967 ---------- ---------- ~~Decrease~~Net inincome ~~cash and cash equivalents~~ (~~1,626,234~~loss) (2,~~221~~750,~~273)~~956 ~~Cash and cash equivalents~~(317,683) ~~beginning~~Less ofpreferred ~~period~~dividend 7requirement 174,~~097,345~~375 8174,~~244,481~~375 ---------- ---------- ~~Cash~~Net ~~and~~income ~~cash~~(loss) ~~equivalents,~~applicable ~~end~~to ofcommon ~~period~~stock $ 52,~~471~~576,~~111~~581 $ 6(492,~~023,208~~058) ========== ========== ~~Supplemental~~Basic ~~disclosure~~income of(loss) ~~cash~~per ~~flow~~common ~~data~~share: ~~Interest~~Income ~~paid~~(loss) from continuing operations $ ~~1,585,161~~0.35 $ ~~3,430,080~~(0.07) ~~==========~~Gain ~~==========~~on ~~Taxes~~disposal ~~paid~~of discontinued operations 0.01 0.01 ----- ------ Net income (loss) $ ~~104,020~~0.36 $ ~~205,958~~(0.06) =====~~=====~~ ======~~====~~ ~~Noncash~~Diluted ~~investing~~income ~~and~~(loss) ~~financing~~per ~~transactions~~common share: ~~Conversion~~Income (loss) from continuing operations $ 0.35 $ (0.07) Gain on disposal of ~~preferred~~discontinued ~~stock~~operations to0.01 ~~long~~0.01 -~~term~~---- ~~debt~~------ Net income (loss) $ -0.36 $~~13,688,080~~ (0.06) ===== ====== Weighted average common shares: Basic 7,178,337 8,113,015 ========= ========= ~~Acquisition~~Diluted of7,178,337 ~~minority interest through a note $ - $ 600~~8,~~000~~113,015 ========== ==========

See notes to unaudited consolidated financial statements. 5 JANUS HOTELS AND RESORTS, INC.

~~Three~~UNAUDITED ~~Months~~CONSOLIDATED ~~Ended~~STATEMENTS ~~Six~~OF ~~Months~~CASH ~~Ended~~FLOWS FOR THE NINE MONTHS ENDED SEPTEBER 30, 2002 AND 2001 2002 2001 ---------- ---------- Operating activities: Net income (loss) $ 2,750,956 $ (317,683) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 2,953,149 2,926,444 Amortization of intangible assets 128,541 272,266 Deferred taxes 1,612,000 (86,000) Minority Interest - (206,455) Debt settlement (5,787,088) - (Gain) loss on sale of property (58,827) 770,733 Loss on note settlement 99,590 - Minority interest settlement (98,094) - Changes in operating assets and liabilities: Accounts receivable (799,406) (617,849) Other current assets 9,950 (19,742) Replacement reserve 1,145,523 366,606 Other asset (303,181) (245,471) Accounts payable and accrued expenses 186,343 (4,291) ---------- ---------- Net cash provided by operating activities 1,839,456 2,838,558 ---------- ---------- ~~June~~Investing ~~30,~~activities: ~~June~~Purchases 30of property and equipment (1,195,810) ~~June~~(2,005,315) 30Proceeds from sale of property 2,577,908 ~~June~~2,375,000 30Purchase of hotel property - (1,700,000) ~~2002~~Collections ~~2001~~of ~~2002~~notes ~~2001~~receivable 266,018 69,518 ---------- ---------- Net cash provided by (used in) investing activities 1,648,116 (1,260,797) ----------- ----------- ~~Net~~Financing ~~income~~activities: Dividends paid (~~loss~~174,375) ~~applicable~~(174,375) toDecrease ~~common~~(Increase) ~~stock:~~in Asrestricted ~~reported~~cash ~~$539~~2,~~297~~676,208 $(~~404~~176,~~418~~749) $Repurchase of common stock (1,~~231~~949,~~479~~088) $(1728,~~130~~444) Redemption of common stock - (189,~~582~~593) ~~Goodwill~~Proceeds ~~amortization~~from short-term borrowings 34,919,843 ~~net~~2,992,574 Repayments of ~~tax~~short-term borrowings (1,724,952) (2,992,574) Proceeds from long-term 29borrowings - 497,~~170~~266 Repayments of long-term 58borrowings (41,~~340~~451,914) (1,846,436) Other 483 - ---------- ---------- Net cash used in financing activities (7,703,795) (2,618,331) ---------- ---------- ~~Adjusted~~Decrease ~~net~~in ~~income~~cash ~~(loss)~~and ~~$539,297~~cash $equivalents (~~375~~4,~~248~~216,223) $(1,~~231~~040,~~479~~570) Cash and cash equivalents, beginning of period 7,097,345 8,244,481 ---------- ---------- Cash and cash equivalents, end of period $(1 2,~~072~~881,~~242)~~122 $ 7,203,911 ========== ========== Supplemental disclosure of cash flow data: Interest paid $ 3,085,775 $ 5,142,401 ========== ========== ~~Basic~~Taxes ~~and~~paid ~~diuted~~$ ~~earnings~~104,020 ~~(loss)~~$ ~~per~~205,958 ~~common~~========== ~~share~~========== Noncash investing and financing transactions: AsConversion ~~reported~~of $preferred ~~0.07~~stock $to ~~(0.05)~~long-term debt $ ~~(0.17)~~- $13,688,080 ~~(0.14)~~ ===== ====== ====== ====== AsAcquisition ~~adjusted~~of $minority ~~0.07~~interest $through ~~(0.05)~~a note $ ~~(0.17)~~- $ ~~(0.13)~~600,000 ===== ====== ====== ======

See notes to unaudited consolidated financial statements. 6 JANUS HOTELS AND RESORTS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1 -- Unaudited interim financial statements: The consolidated financial statements included herein have been prepared by Janus Hotels and Resorts, Inc. (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted as permitted by such rules and regulations. The Company believes the disclosures included herein are adequate; however, these consolidated statements should be read in conjunction with the financial statements and the notes thereto for the year ended December 31, 2001 previously filed with the Securities and Exchange Commission on Form 10-K. In the opinion of management, these unaudited, consolidated financial statements contain all of the adjustments (normal and recurring in nature) necessary to present fairly the consolidated financial position of the Company at September 30, 2002 and the consolidated results of operations and cash flows for the three-month and nine-month periods ended September 30, 2002 and 2001. The results of operations for the periods presented may not be indicative of those that may be expected for the full year. Note 2 -- Organization: As of September 30, 2002, the continuing operations of the Company were comprised primarily of the operation of thirteen hotels and a hotel management company, which manages hotels for unrelated parties. Note 3 - Mortgage notes receivable: The mortgage note receivable for the sale of the Ramada Inn Kent hotel was satisfied on March 29, 2002 by a cash payment of $1,819,249 and short-term notes totaling $246,500, which were paid off as of September 30, 2002. Note 4 - Goodwill On January 1, 2002, the Company adopted Statement of Financial Accounting Standard No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". In accordance with SFAS 142, the Company discontinued goodwill amortization and tested goodwill for impairment as of January 1, 2002 determining that no impairment loss was necessary. The Company will continue to test goodwill for impairment at least annually. Goodwill was $7,133,384 as of September 30, 2002, and was unchanged for the quarter and nine months then ended. The following table presents net income on a comparable basis, after adjustment for goodwill amortization:

7 Note 5 - Accelerated long-term debt: Commencing November 1, 2001, the Company withheld scheduled principal, interest and escrow payments with respect to four mortgage loans totaling $42,266,372, which were collateralized by hotel properties in the vicinity of Cleveland, Ohio, in order to induce the lender to engage in discussions regarding a reduction in debt service costs. Management believed that the fixed interest rate on the loans was in excess of current market rates and repayment of the notes was creating a deficit cash flow based on current economic conditions. The Company finalized a settlement agreement with the lender on August 2, 2002, and closed on short-term financing with The Provident Bank ("Provident") on July 31, 2002. The Company expects to have long-term financing in place by the end of the fourth quarter of 2002. Under the settlement agreement with the lender, the loans were assigned to Provident for a payment of $38,511,554, inclusive of a forbearance fee of $180,000 and miscellaneous costs. The Company and the lender exchanged mutual releases. The sources of the funds for this payment were as follows: Loan from Provident $33,500,000 Payment by Company 3,522,454 Replacement reserve 1,489,100 ---------- Total $38,511,554 ========== The payment by the Company was made from funds set aside representing suspended payments. Provident modified the terms of the original loans by (i) reducing the aggregate outstanding principal balance to $33,500,000, (ii) changing the interest rate to a variable rate of the prime rate plus one half of one percent (.50%), (iii) requiring monthly principal payments based upon a 20 year amortization schedule, and (iv) changing the maturity date to August 1, 2003. The four loans continue to be cross-defaulted and cross-collateralized, meaning that if the Company fails to make payments with respect to any single property, all four loans will become immediately due and payable. Provident also required and received personal guaranties from the Company's majority stockholders, Louis S. Beck and Harry G. Yeaggy, Chairman of the Board / Chief Executive Officer and Vice Chairman of the Company, respectively. The payoff in accordance with the settlement agreement and the forgiveness of accrued interest and late fees, net of certain closing costs, resulted in a pre-tax gain of approximately $5,787,000 in the third quarter of 2002. No currently payable federal taxes will result from this transaction as the Company has sufficient net operating losses that will be utilized. The settlement agreement triggered a test for recoverability of the Cleveland properties by the Company under the provisions of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("FAS 144"). The Company has determined that there is no impairment of the properties based on the test specified in FAS 144 and has obtained concurrence from its independent auditors. Until long-term financing is obtained, the $33,500,000 loan from Provident will be classified as short-term debt in the balance sheet. Note 6 - Sale of property: On August 15, 2002, the Company disposed of a hotel property located in Lafayette, Indiana. The hotel was sold for cash of $2,577,908 and resulted in a gain of $58,827. Note 7 - Minority interest: On June 7, 2002, JI Subsidiary, Inc., which was 90% owned by the Company, was dissolved. The amount due to minority stockholders was disbursed to the Company's transfer agent in July 2002. Note 8 - Income taxes: For the quarter and nine months ended September 30, 2002, the Company used an effective tax rate of 42% for federal and state income taxes. 8 Note 9 - Litigation: The Company is a party to various legal proceedings. In the opinion of management, these actions are routine in nature and will not have a material adverse effect on the Company's consolidated financial statements. Note 10 - Stockholders' equity: During the nine months ended September 30, 2002, the Company purchased a total of 1,573,369 shares of its common stock in private and open market purchases for $1,949,088. 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Significant Accounting Policies For a description of critical accounting policies, including those which involve varying degrees of judgement, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. Overview The operations of the Company are comprised primarily of the operations of owned hotels and the Company's management of hotels owned by third parties. In the discussion that follows, "comparable hotels" means only those hotels owned and operated by the Company since January 1, 2001 and still owned and operated as of September 30, 2002. The Company had net income of $3,866,185 for the three months ended September 30, 2002 compared to net income of $696,649 for the three months ended September 30, 2001. This change is attributable primarily to the after tax effect of the gain from debt settlement. Excluding the gain from debt settlement, net income for the three months ended September 30, 2002 would have been $510,097. The Company had net income of $2,750,956 for the nine months ended September 30, 2002 compared to a net loss of $317,683 for the nine months ended September 30, 2001. This change is attributable primarily to the item mentioned previously for the third quarter, partially offset by lower year-to-date results at several hotel properties and increased insurance costs. Excluding the gain from debt settlement, the results for the nine months ended September 30, 2002 would have been a net loss of $605,132. Three Months Ended September 30, 2002 Compared to the Three Months Ended September 30, 2001 Room and related services revenue decreased 5.4% to $9,215,941 in 2002 from $9,738,786 in 2001. For comparable hotels: (i) the average daily room rate decreased to $66.06 for 2002 from $70.36 in 2001; (ii) occupancy increased in 2002 to 69.7% from 68.3% in 2001; and (iii) room and related services revenue decreased 4.4% from $9,634,845 in 2001. The Company selectively lowered room rates in order to maintain occupancy rates at or near 2001 levels. Food and beverage revenues are principally a function of the number of guests who stay at each owned hotel, local walk-in business and catering sales. These revenues decreased 1.8% to $2,616,488 in 2002 from $2,663,174 in 2001. For comparable hotels, food and beverage revenues increased 0.6% from $2,599,951 in 2001. Management fee income decreased 18.4% to $739,409 in 2002 from $906,371 in 2001. This decrease is primarily due to a significant short-term management agreement that expired August 31, 2001. Excluding this agreement, management fee income increased 8.7% from $680,003 in 2001. Total direct operating expenses decreased 0.3% to $5,052,959 in 2002 from $5,069,869 in 2001 but increased as a percentage of room and related services and food and beverage revenues to 42.7% from 40.9%. Total direct operating expenses increased 1.7% for comparable hotels. Occupancy expenses decreased 1.4% to $1,644,423 from $1,668,214 in 2002. At comparable hotels, occupancy expenses increased 0.8%. General and administrative expenses decreased 0.1% to $3,126,159 in 2002 from $3,127,825 in 2001 but increased as a percentage of total revenues to 24.3% from 22.9%. For comparable hotels, general and administrative expenses increased 2.0%. Depreciation increased by $15,792 in 2002 from $976,617 in 2001. For comparable hotels, depreciation increased $49,350. Interest income decreased to $110,091 in 2002 from $194,416 in 2001. This decrease is due to lower available funds and reduced interest rates. Interest expense decreased to $1,378,377 in 2002 from $1,712,321 in 2001. The decrease was attributable to traditional amortization and the lower principal balances and interest rate on the debt for the four properties in the vicinity of Cleveland, Ohio, which is discussed under the caption "Liquidity and Capital Resources" that follows. 10 In 2002, the Company recorded a gain of $5,787,088 from the settlement of mortgage debt as described under the caption "Liquidity and Capital Resources" that follows. The Company used an effective tax rate of 42% for federal and state taxes to calculate its tax provision for the three months ended September 30, 2002. Nine months Ended September 30, 2002 Compared to the Nine months Ended September 30, 2001 Room and related services revenue decreased 9.8% to $22,405,386 in 2002 from $24,828,591 in 2001. For comparable hotels: (i) the average daily room rate decreased to $62.95 for 2002 from $66.41 in 2001; (ii) occupancy increased in 2002 to 59.8% from 59.5% in 2001; and (iii) room and related services revenue decreased 5.0% from $23,584,879 in 2001. Food and beverage revenues decreased 1.4% to $7,364,141 in 2002 from $7,468,616 in 2001. For comparable hotels, food and beverage revenues decreased 0.6% from $7,405,393 in 2001. Management fee income decreased 14.6% to $2,155,223 in 2002 from $2,522,980 in 2001. This decrease is primarily due to the expiration on August 31, 2001 of a significant short-term management agreement, lower operating results at managed properties and lower construction supervision fees. Total direct operating expenses decreased 5.7% to $13,181,070 in 2002 from $13,969,697 in 2001 but increased as a percentage of room and related services and food and beverage revenues to 44.3% from 43.3%. Total direct operating expenses decreased 1.8% for comparable hotels. Occupancy expenses decreased 9.1% to $4,450,822 in 2002 from $4,898,600 in 2001. At comparable hotels, occupancy expenses decreased 2.6%. General and administrative expenses decreased 0.9% to $8,765,167 in 2002 from $8,843,045 in 2001 but increased as a percentage of total revenues to 26.9% from 24.8%. For comparable hotels, general and administrative expenses increased 2.4%. This increase was attributable to higher wage, professional, health insurance and general insurance costs. Depreciation increased by $26,705 in 2002 from $2,926,444 in 2001. For comparable hotels, depreciation increased $156,551. Interest income decreased to $329,680 in 2002 from $472,787 in 2001. This decrease is due to lower available funds and reduced interest rates. Interest expense decreased to $4,670,505 in 2002 from $5,142,401 in 2001. The decrease was attributable to traditional amortization. In 2002, the Company recorded a gain of $5,787,088 from the settlement of mortgage debt as described under the caption "Liquidity and Capital Resources" that follows. There was no minority interest expense in 2002 because during 2001 the Company acquired the minority interest in Kings Dominion partnership and sold the Days Inn Pompano hotel. The Company has used an effective tax rate of 42% for federal and state taxes to calculate its tax provision for the nine months ended September 30, 2002. Liquidity and Capital Resources Total assets decreased to $104,875,846 at September 30, 2002 from $116,991,123 at December 31, 2001. Net cash provided by operating activities decreased to $1,839,456 in the nine months ended September 30, 2002 from $2,838,558 in the nine months ended September 30, 2001. The decrease is primarily the result of the lower operating income for the nine months ended September 30, 2002. Net cash provided by investing activities was $1,648,116 in the nine months ended September 30, 2002 compared to cash used in investing activities of $1,260,797 in the nine months ended September 30, 2001. This change is 11 principally attributable to the lower capital expenditures in 2002 and the purchase of a hotel property in 2001. The Company plans to spend an additional $431,000 on capital improvements during the remainder of 2002. Net cash used in financing activities was $7,703,795 in the nine months ended September 30, 2002 compared to $2,618,331 used in financing activities in the nine months ended September 30, 2001. The change is the result of the repayment on long-term borrowings described below, the repayment of the mortgage on the property sold in Lafayette, Indiana, and traditional amortization. The mortgage note receivable for the sale of the Ramada Inn Kent hotel was satisfied on March 29, 2002 by a cash payment of $1,819,249 and short-term notes totaling $246,500, which were paid off as of September 30, 2002. Settlement of the mortgage note resulted in a loss of $99,590, which is included in Other income (expense) for the nine months ended September 30, 2002. Commencing November 1, 2001, the Company withheld scheduled principal, interest and escrow payments with respect to four mortgage loans totaling $42,266,372 which were collateralized by hotel properties in the vicinity of Cleveland, Ohio, in order to induce the lender to engage in discussions regarding a reduction in debt service costs. Management believed that the fixed interest rate on the loans was in excess of current market rates and repayment of the notes was creating a deficit cash flow based on current economic conditions. The Company finalized a settlement agreement with the lender on August 2, 2002, and closed on short-term financing with The Provident Bank ("Provident") on July 31, 2002. The Company expects to have long-term financing in place by the end of the fourth quarter of 2002. Under the settlement agreement with the lender, the loans were assigned to Provident for a payment of $38,511,554, inclusive of a forbearance fee of $180,000 and miscellaneous costs. The Company and the lender exchanged mutual releases. The sources of the funds for this payment were as follows: Loan from Provident $33,500,000 Payment by Company 3,522,454 Replacement reserve 1,489,100 ---------- Total $38,511,554 ========== The payment by the Company was made from funds set aside representing suspended payments. Provident modified the terms of the original loans by (i) reducing the aggregate outstanding principal balance to $33,500,000, (ii) changing the interest rate to a variable rate of the prime rate plus one half of one percent (.50%), (iii) requiring monthly principal payments based upon a 20 year amortization schedule, and (iv) changing the maturity date to August 1, 2003. The four loans continue to be cross-defaulted and cross-collateralized, meaning that if the Company fails to make payments with respect to any single property, all four loans will become immediately due and payable. Provident also required and received personal guaranties from the Company's majority stockholders, Louis S. Beck and Harry G. Yeaggy, Chairman of the Board / Chief Executive Officer and Vice Chairman of the Company, respectively. The payoff in accordance with the settlement agreement and the forgiveness of accrued interest and late fees, net of certain closing costs, resulted in a pre-tax gain of approximately $5,787,000 in the third quarter of 2002. No currently payable federal taxes will result from this transaction as the Company has sufficient net operating losses that will be utilized. The settlement agreement triggered a test for recoverability of the Cleveland properties by the Company under the provisions of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("FAS 144"). The Company has determined that there is no impairment of the properties based on the test specified in FAS 144 and has obtained concurrence from its independent auditors. Until long-term financing is obtained, the $33,500,000 loan from Provident will be classified as short-term debt in the balance sheet. Based upon the current prime rate of 4.75% and reduction of the principal balance from $42,266,372 to $33,500,000, the Company's monthly principal and interest payments with respect to the four properties will be $225,738, as compared to $342,227, prior to the refinancing. The amount of the monthly payment will increase or decrease if there is a change in the prime rate. Earnings before interest, taxes, depreciation and amortization ("EBITDA") decreased to $6,208,531 during the nine months ended September 30, 2002 compared to $7,944,952 for the nine months ended September 30, 2001. EBITDA is defined as operating income plus depreciation and amortization. The Company considers this definition of EBITDA to be an indicative measure of the Company's operating performance because it can be used to measure the Company's abilities to service 12 debt, fund capital expenditures and expand its business; such information should not be considered as an alternative to net income, operating profit, cash flows from operations or any other operating or liquidity measure prescribed by generally accepted accounting principles. The Company maintains a number of commercial banking relationships and maintains aggregate lines of credit totaling $6,500,000, which had $1,539,030 outstanding at September 30, 2002. The Company's contractual obligations at September 30, 2002, and the effect such obligations are expected to have on its liquidity and cash flow in future periods have not changed materially since December 31, 2001. In the nine months ended September 30, 2002, the Company purchased a total of 1,573,369 shares of its common stock in private transactions and the open market for $1,949,088 at an average price of $1.24 including broker fees. The Company's principal sources of liquidity are cash on hand (including escrow deposits and replacement reserves), cash from operations, earnings on invested cash and, when required, principally in connection with acquisitions, borrowings (consisting primarily of loans secured by mortgages on real property owned or to be acquired by the Company). The Company's continuing operations are funded through cash generated from its hotel operations. Acquisitions of hotels are expected to be financed through a combination of cash on hand, internally generated cash, issuance of equity securities and borrowings, some of which is likely to be secured by assets of the Company. Seasonality Demand at many of the Company's hotels is affected by seasonal patterns. Demand for hotel rooms in the industry generally tends to be lower during the first and fourth quarters and higher in the second and third quarters. Accordingly, the Company's revenues reflect similar seasonality. Forward Looking Statements When used in this and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases and in oral statements made with the approval of an authorized executive officer of the Company, the words or phrases "will likely result," "expects," "plans," "will continue," "is anticipated," "estimated," "project" or "outlook" or similar expressions (including confirmations by an authorized executive officer of the Company of any such expressions made by a third party with respect to the Company) are intended to identify forward-looking statements. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. All such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements, including without limitation, the impacts of the terrorist attacks of September 11, 2001 on the travel and hospitality industries; the duration and severity of the recent downturn in the economy; the availability and cost of long-term financing for the Company's hotel properties; the seasonality of the hotel business; general real estate and economic conditions; the cost and availability of capital for scheduled maintenance, renovations and expansion; government and regulatory action affecting the hotel industry; the Company's ability to generate adequate working capital to sustain its operations, described under the heading "Liquidity and Capital Resources" above; and the other risks and uncertainties set forth in the annual, quarterly and current reports of the Company. The Company has no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. ITEM 4 - CONTROLS and PROCEDURES Within 90 days of the filing of this Form 10-Q the Company completed an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that Company disclosure controls and procedures are effective to alert them on a timely basis to any material information relating to the Company that must be included in the Company's periodic reports filed with the Securities and Exchange Commission. In addition, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the aforementioned evaluation. 13 PART II--OTHER INFORMATION Items 1 to 5 None Item 6 -- Exhibits and Reports on Form 8-K. A. Exhibits The following exhibits are filed as part of this report: Exhibit No. Description 99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350 99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350 B. Reports on Form 8-K The reports on Form 8-K filed during the three months ended September 30, 2002 were as follows:

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. JANUS HOTELS AND RESORTS, INC. Dated: October 30, 2002 /s/ Richard A. Tonges ---------------- Richard A. Tonges --------------------------------------- Treasurer and Vice President of Finance (Principal Financial and Accounting Officer) 14 CERTIFICATIONS I, Louis S. Beck, Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Janus Hotels and Resorts, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 30, 2002 /s/ Louis S. Beck ---------------------------------------------- Louis S. Beck Chief Executive Officer I, Richard A. Tonges, Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Janus Hotels and Resorts, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 30, 2002 /s/ Richard A. Tonges ---------------------------------------------- Richard A. Tonges Chief Financial Officer

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