10-Q 1 cis1q0208.txt CIS CORPORATION 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended August 31, 2002 or [ ] Transition report pursuant to section 13 of 15(d) of the Securities Exchange Act of 1934 for the transition period from ------------ to --------------- Commission file number: 0-25104 ------- CONTINENTAL INFORMATION SYSTEMS CORPORATION ------------------------------------------- (Exact name of registrant as specified in its charter) New York 16-0956508 -------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation) 50 Battery Place, Suite 7F New York, New York 10280 --------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (212) 945-2080 -------------- (Registrant's telephone number, including area code) 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 ----- ------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of August 31, 2002, the registrant has 4,980,020 shares of common stock, par value $.01 per share, outstanding. CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION 3 Item 1. Financial Statements -------------------- Consolidated Balance Sheets - August 31, 2002 (unaudited) and May 31, 2002 3 Consolidated Statements of Operations - Three Months Ended August 31, 2002 and 2001 (unaudited) 4 Consolidated Statements of Cash Flows - Three Months Ended August 31, 2002 and 2001 (unaudited) 5 Notes to Consolidated Financial Statements 6-9 Item 2. Management's Discussion and Analysis of Financial Condition ------------------------------------------------------------ and Results of Operations 10-11 ------------------------- Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 ---------------------------------------------------------- Item 4. Controls and Procedures 11-12 ----------------------- PART II - OTHER INFORMATION Item 1. Legal Proceedings 13 ----------------- Item 4. Submission of Matters to a Vote of Security Holders 13 --------------------------------------------------- Item 6. Exhibits and Reports on Form 8-K 13-14 -------------------------------- SIGNATURES 15 CERTIFICATIONS 16 -2- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements -------------------- CONSOLIDATED BALANCE SHEETS In Thousands (Except Number of Shares) --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. -3- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) In Thousands (Except Per Share Information) --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. -4- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) In Thousands --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. -5- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements of Continental Information Systems Corporation ("Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended August 31, 2002 are not necessarily indicative of the results that may be expected for the year ending May 31, 2003. These statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended May 31, 2002. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has ceased daily operations and has ceased additional funding of T1Xpert, has sustained substantial operating losses and has used substantial amounts of working capital in its operations. These conditions raise substantial doubt about its ability to continue as a going concern. In view of these matters, realization of the assets of the Company is dependent upon the Company's ability to meet its financing requirements and the success of future operations. The financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. 2. T1Xpert Corp. ------------- In August 1999, the Company changed its focus to the development and commercialization of a Web-enabled electronic securities processing software platform using proprietary technology. This technology was intended to adapt to changes in the securities industry including operational changes related to increased volume, the ability to effect trades through the Internet, Electronic Crossing Networks, decimalization, expanded trading hours, various rule changes and the shift from settling trades in three days to settling trades in one day. This latter shift is commonly referred to as "T+1." The subsidiary that was formed to engage in this line of business is T1Xpert Corp. ("T1Xpert"). T1Xpert had begun developing a suite of middle and back office brokerage products and solutions. The products and solutions were designed to serve as a software platform for risk reduction for the next generation of real time systems and in preparation for T+1. T1Xpert expended approximately $6.2 million from its inception in August 1999 through May 31, 2002. Prior to September 11, 2001, T1Xpert had begun work on a software development project for a global investment bank, at the bank's premises (where T1Xpert maintained a satellite office) located in the immediate vicinity of the World Trade Center. This project was canceled as a result of the terrorist attacks of September 11, 2001 against the United States of America. As previously reported on December 27, 2001, the Company ceased active operations and additional funding of product development at T1Xpert for several reasons. The Company's contract with the global investment bank was delayed and subsequently cancelled due to the events of September 11th. Despite this, T1Xpert intended to continue product development and seek a replacement investment banking customer. However, the ability of the Company to obtain necessary financing during the economic environment post-September 11, 2001 was greatly hampered. The Company made claims under its existing policies of insurance for compensation in order to continue operations. Efforts to date to collect under the Company's insurance policies have been unsuccessful. The Company continues to pursue its claims under its insurance policies and has filed a lawsuit against its insurer. No assurance can be given that such efforts will be successful. -6- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company is seeking other strategic opportunities going forward to maximize shareholder value after the suspension of active operations of T1Xpert. Such opportunities may include, but are not limited to, a business combination with another entity. Under the terms of any such opportunity, current shareholders may suffer substantial dilution of their interests. There can also be no assurance that the Company will be successful in its efforts to find such strategic opportunities or, if it does, that any such new business combination will be successful. Risks and Uncertainties ----------------------- The Company is now considering various strategic alternatives without the use of additional Company funds to continue T1Xpert's product development. These alternatives include the sale of T1Xpert or finding a strategic partner to undertake commercialization of T1Xpert's products. Although the product still needs further development, the original development team has been disbanded, thus there is no client currently scheduled to use the product. Therefore, a sale would likely be of limited value. Potential strategic partners would ideally need to have the ability to continue development and would most likely require that a client be found for the product before being willing to invest. To date T1Xpert has not found a client willing to be a beta client on terms favorable to T1Xpert. T1Xpert is further hampered in its marketing efforts as a result of its cessation of activities and lack of marketing personnel. If T1Xpert is successful in finding a strategic partner, it will likely result in a substantial dilution of the Company's interest in T1Xpert. While the Company has been pursuing these alternatives, to date it has been unsuccessful. There can be no assurance that the Company will be successful in any of its efforts, in which case no value is likely to be realized from its T1Xpert subsidiary. The Company is seeking other strategic opportunities going forward to maximize shareholder value after the cessation of operations of T1Xpert. Such opportunities may include, but are not limited to, a business combination with another entity. Under the terms of any such opportunity, current shareholders may suffer substantial dilution of their interests. There can also be no assurance that the Company will be successful in its efforts to find such strategic opportunities or, if it does, that any such new business combination will be successful. 3. Net Income (Loss) Per Share --------------------------- Earnings (loss) per share are calculated in accordance with Financial Accounting Standard No. 128 (SFAS 128), Earnings per Share, which specifies standards for computing and disclosing net income or loss per share. Basic and diluted net loss per share for the three months ended August 31, 2002 and 2001, was computed based on the weighted average number of shares of common stock outstanding during the periods. As of August 31, 2002, the Company had issued and outstanding options to purchase 66,477 shares of common stock (see Note 7). The effect of these options is anti-dilutive in the computation of diluted net loss per share. 4. 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 revenue and expenses during the reporting periods. Actual results could differ from those estimates. 5. Concentration of Credit Risk ---------------------------- Financial instruments which potentially subject the Company to credit risk consist principally of cash with financial institutions and notes receivable. The Company maintains cash deposits with major banks and financial institutions which may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and believes the risk of any loss is minimal. At August 31, 2002, cash in excess of FDIC limits amounted to approximately $1.1 million. -7- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Of the Company's notes receivable balance of $1.12 million, $987,000 is owed by one customer in the aviation business. Thus, the Company is directly affected by the financial condition of this company and the airline industry in general. The credit risk associated with this customer is somewhat mitigated by the note being collateralized; however, a substantial portion of such collateral is outside the United States, thereby creating potential difficulties of recovery of collateral in case of default. The value of the collateral is estimated to be below the carrying value of the note. 6. Reclassifications ----------------- Certain prior period balances in the financial statements have been reclassified to conform to the current period financial statement presentation. 7. Stock Option Plan ----------------- In 1995, the Board of Directors adopted and the stockholders approved the Continental Information Systems Corporation 1995 Stock Compensation Plan (the "1995 Plan"). The 1995 Plan provides for the issuance of options covering up to 1,000,000 shares of common stock and stock grants of up to 500,000 shares of common stock to non-employee directors of the Company and, at the discretion of the Board of Directors, employees of and independent contractors and consultants to the Company. In 2000, the Board of Directors of T1Xpert adopted the T1Xpert Corp. Stock Compensation Plan (the "T1X 2000 Plan"). The T1X 2000 Plan provides for the issuance of stock options covering up to 2,000,000 shares of common stock to employees and advisory board members of T1Xpert. Options granted typically do not become exercisable until at least one year from the date of commencement of employment and vest ratably over periods of time as provided at the discretion of the Board of T1Xpert. Option grants expire ten years from date of grant, or upon termination of the employee's employment with T1Xpert. As of May 31, 2002 stock option grants representing 1,642,500 shares had been issued to employees at an option price of $.0675 per share under the T1X 2000 Plan. The T1X 2000 Plan is immaterial to the earnings of the Company. During the year ended May 31, 2002, 1,142,500 options were forfeited/expired with a weighted average exercise price of $.0675 per share. During the period ended August 31, 2002, the remaining outstanding 500,000 options were forfeited/ expired with a weighted average exercise price of $.0675. A summary of the status of the 1995 Plan as of August 31, 2002:

-8- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Discontinued Operations ----------------------- On July 14, 2000, the Company announced that it was offering for sale its commercial aircraft engine portfolio by competitive bid, that upon completion of the sale it would be exiting the aviation business, and that it would account for and report the Air Group Business as a discontinued operation. As of August 31, 2001, the majority of the assets and liabilities relating to the Air Group Business have been sold or settled. -9- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- Item 2. Management's Discussion and Analysis of Financial Condition and ---------------------------------------------------------------- Results of Operations --------------------- Introduction ------------ The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and the notes thereto for the fiscal year ended May 31, 2002, appearing in the Company's annual report on Form 10-K. All statements contained herein that are not historical facts, including but not limited to statements regarding anticipated future capital requirements and the Company's future business plans, are based on current expectations. These statements are forward looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are those set forth below and the other risk factors described from time to time in the Company's reports filed with the SEC. The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. Results of Operations --------------------- Comparison of the Three Months Ended August 31, 2002 and 2001 ------------------------------------------------------------- Revenues -------- For the three months ended August 31, 2002, total revenues decreased to $61,000 from $85,000 for the comparable fiscal quarter in 2001. Interest, fees and other income decreased to $61,000 for the three months ended August 31, 2002 from $75,000 for the comparable fiscal quarter in 2001. The decrease is the result of lower notes receivable and lower average cash balances during the period. There were no equipment rentals, nor income from direct financing leases, for the three months ended August 31, 2002 compared to $10,000 for the comparable fiscal quarter in 2001. The decrease is primarily attributable to the sale of the balance of the lease portfolio during the fiscal year 2002. Costs and Expenses ------------------ Costs and expenses decreased to $535,000 for the three months ended August 31, 2002 from $1,346,000 for the comparable fiscal quarter in 2001. The decrease is primarily due to the cessation of operations at T1Xpert resulting in no material research and development expenses being incurred by T1Xpert in the three-month period ended August 31, 2002. Depreciation of rental equipment decreased to $-0- for the three months ended August 31, 2002 from $5,000 for the comparable fiscal quarter in 2001. This decrease is due to the sale of the balance of the lease portfolio in 2002. Selling, general and administrative expenses increased to $532,000 for the three months ended August 31, 2002 from $430,000 for the comparable fiscal quarter in 2001. This increase during the three months ended August 31, 2002 was principally due to costs associated with restructuring the Company's operations and provisions for state franchise tax liabilities in the amount of $100,000. Management expects that general and administrative costs (including legal and accounting) will not be reduced in future periods because costs relating to the Company's prior operations and its continuance as a publicly traded and reporting company will continue to be incurred by the Company. Income Taxes ------------ For the three-month period ended August 31, 2002, provision for deferred income tax benefit on income from continuing operations was not recorded, because, in management's opinion, the realizability of the deferred tax asset was uncertain in light of the Company's actual operating results since reorganization. -10- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- Liquidity And Capital Resources ------------------------------- Net cash used in operations for the three months ended August 31, 2002 was $119,000 compared to cash provided by operations of $1,724,000 for the comparable period in 2001; net cash used in continuing operations for the three months ended August 31, 2002 was $119,000 compared to net cash used in continuing operations in the amount of $1,060,000 for the comparable period in 2001. Less cash was used for operations in the current period due to the discontinuance of the funding of T1Xpert operations in fiscal 2002. There was no net cash provided by discontinued operations for the three months ended August 31, 2002, compared to $2,784,000 net cash provided by discontinued operations for the three months ended August 31, 2001. The cash provided by discontinued operations was primarily due to the sale of assets from the discontinued operations. As of August 31, 2002, the Company had $1.2 million in cash and cash equivalents, as compared to $1.4 million at May 31, 2002. The decrease is principally due to the use of cash for operations. As of August 31, 2002, approximately 2,122,000 shares of stock had been repurchased by the Company at an aggregate cost of approximately $2,080,000. On August 26, 2002, the Board of Directors authorized the expenditure of funds to repurchase up to 20% or 1,033,230 shares of the outstanding shares of its common stock. The Company believes it has sufficient cash on hand to meet current anticipated administrative needs until various claims against the Company can be resolved. There can be no assurance that the Company's estimate as to the validity and valuation of the claims against the Company is accurate, in which case the Company may be unable to meet claims against it. This may result in the Company needing to sell off assets at distressed prices or liens filed against the Company also resulting in distressed asset sales or the Company seeking bankruptcy protection. Any such distressed asset sales may further diminish the Company's ability to meet its obligations. The Company does not have sufficient funds on hand to develop its T1Xpert products without the aid of a strategic alternative that will bring necessary funding to complete product development and marketing such strategic alternative may severely dilute the Company's interest in T1Xpert. The Company does not anticipate entering into financing arrangements with financial institutions which would involve collateralizing and/or leveraging the Company's assets. Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- There have been no significant changes in our exposure to market risk from the information provided in Item 7A - Quantitative and Qualitative Disclosures About Market Risk on our Form 10-K filed with the Securities and Exchange Commission (the "SEC") on August 28, 2002. Item 4. Controls and Procedures ----------------------- (a) Evaluation of disclosure controls and procedures. Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to the Securities Exchange Act of 1934. -11- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- Rule 13a-14. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. (b) Changes in internal control. Not applicable. -12- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- The Company incorporates by reference prior legal matters reported in the Company's Form 10-K for the fiscal year ended May 31, 2002. The claim referenced in the Company's May 31, 2002 Form 10-K asserted by the Skytrek bankruptcy trustee against the Company has been tentatively settled by the parties with CIS Air Corporation agreeing to return $17,500 of the deposit received from Skytrek to the trustee. This claim is subject to final documentation and bankruptcy court approval. On July 30, 2002, the Company filed suit in the United States District Court for the Southern District of New York against four stockholders of the Company and another party alleging that these parties formed an undisclosed group and wrongfully used material, non-public information concerning the Company in violation of applicable federal securities laws and state statutes. The Company settled with one of these stockholders who has, as part of the settlement, sold his shares in the Company back to the Company at a discount from the market price. This stockholder also agreed to, among other things, not acquire any additional shares in the Company. The Company intends to vigorously prosecute this action against the two remaining shareholder defendants. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The Company held its Annual Meeting (the "Meeting") on October 14, 2002. The purpose of the Meeting was to vote on the following proposals: 1. The election of one director to the Board of Directors; and 2. The ratification of the appointment of Lazar Levine & Felix LLP as the Company's independent accountants for the fiscal year ending May 31, 2003. With respect to Proposal 1, the director was elected at the Meeting. In addition, Proposal 2 was approved at the Meeting. The voting results for the proposals were as follows: Proposal 1: Jonah M. Meer For: 3,344,495 Withheld: 172,763 Proposal 2: For: 3,353,464 Against: 86,989 Abstain: 76,805 Item 6. Exhibits and Reports on Form 8-K -------------------------------- Exhibit No. 3.1* Restated Certificate of Incorporation, as amended (filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended November 30, 1997 and incorporated herein by reference). 3.2** Restated Bylaws as amended through August 26, 2002 (filed as Exhibit 3.2 to the Company's Form 10-K for the fiscal year ended May 31, 2002 and incorporated herein by reference). 10.1** 1995 Stock Compensation Plan (filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended August 31, 1995 and incorporated herein by reference). -13- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- 10.2** Advisory Agreement for Real Estate Related Investments between Continental Information Systems Corporation and Emmes Investment Management Co. LLC dated June 30, 1997 (filed as Exhibit 10.13 to the Company's Form 10-K for the fiscal year ended May 31, 1997 and incorporated herein by reference). 10.3** Employment Agreement between the Company and Jonah M. Meer dated June 30, 2002 (filed as Exhibit 10.3 to the Company's Form 10-K for the fiscal year ended May 31, 2002 and incorporated herein by reference). 10.4** Separation and Consulting Agreement between the Company and Michael L. Rosen dated June 30, 2002 (filed as Exhibit 10.4 to the Company's Form 10-K for the fiscal year ended May 31, 2002 and incorporated herein by reference). 21 Subsidiaries of the Registrant CIS Corporation, a Delaware corporation. CIS Air Corporation, a Delaware corporation. T1Xpert Corp., a Delaware corporation. * Filed as an exhibit to the Company's amended Form 10 Registration Statement (Commission File No. 0-25104), originally filed November 10, 1994 and incorporated herein by reference. ** Incorporated by reference. 99. Reports on Form 8-K - The Company did not file any Forms 8-K during the ------------------- quarter ended August 31, 2002. 99.1 Certification of Chief Executive and Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -14- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- 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. CONTINENTAL INFORMATION SYSTEMS CORPORATION Date: October 15, 2002 By: /s/ Jonah M. Meer ------------------------------------- Name: Jonah M. Meer Titles: Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Director -15- CONTINENTAL INFORMATION SYSTEMS CORPORATION AND ITS SUBSIDIARIES -------------------------------------------------------------------------------- CERTIFICATIONS I, JONAH M. MEER, certify that: 1. I have reviewed this quarterly report on Form 10-Q of CONTINENTAL INFORMATION SYSTEMS CORPORATION. 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. 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 I 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. 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. 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 15, 2002 By: /s/ Jonah M. Meer ------------------------------------- Name: Jonah M. Meer Titles: Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Director -16-

CONTINENTAL INFORMATION SYSTEMS CORP 10-Q