10-Q 1 l96721ae10vq.txt AMERICAN ARCHITECTURAL 10-Q 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 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM _________________TO ___________________. Commission file number: 0-25634 AMERICAN ARCHITECTURAL PRODUCTS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 87-0365268 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 860 Boardman - Canfield Road, Boca Building, Suite 107 Boardman Ohio 44512 (Address of principal executive offices) (330) 965-9910 (Registrant's telephone number, including area code) Not applicable (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 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 ( ) THE INTERIM FINANCIAL STATEMENTS INCLUDED IN THIS QUARTERLY REPORT WERE PREPARED BY THE COMPANY AND HAVE NOT BEEN REVIEWED BY AN INDEPENDENT PUBLIC ACCOUNTANT AS REQUIRED BY RULE 10-01 (D) OF REGULATION S-X. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common stock, $.001 par value, 13,821,616 shares outstanding at October 31, 2002 AMERICAN ARCHITECTURAL PRODUCTS CORPORATION FORM 10-Q INDEX Part I -- FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets - September 30, 2002 and December 31, 2001 Consolidated Statements of Operations - Three and nine months ended September 30, 2002 and 2001 Consolidated Statements of Cash Flows - Nine months ended September 30, 2002 and 2001 Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II -- OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES CERTIFICATIONS OF CEO AND CFO

AMERICAN ARCHITECTURAL PRODUCTS CORPORATION (DEBTOR-IN-POSSESSION) CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

(Unaudited) ~~June~~September 30, December 31, 2002 2001 --------- --------- ~~LIABILITIES~~ASSETS ~~AND STOCKHOLDERS' DEFICIT~~ CURRENT ~~LIABILITIES~~ASSETS ~~Accounts~~Cash ~~payable~~and -cash ~~trade~~equivalents $ 143,~~663~~308 $ ~~763~~2,762 ~~Accrued~~Accounts ~~Expenses Compensation and related benefits 69 289 Other 1~~receivable,~~306~~ ~~1,284~~less ~~Liabilities~~allowance ~~held~~ for ~~sale~~doubtful ~~11,393~~accounts ~~22,337~~of ~~Debtor-in-possession~~$0 ~~revolving credit~~ and ~~term~~$619 ~~loan~~317 ~~-- 18~~5,~~583~~972 ~~---------~~Prepaid ~~---------~~expenses ~~TOTAL~~and ~~CURRENT~~other ~~LIABILITIES~~current ~~14,431~~assets ~~43,256~~483 ~~Other~~964 ~~236~~Assets ~~147~~held ~~Liabilities~~for ~~subject~~sale ~~to compromise 159~~31,~~306~~498 ~~159~~76,~~360~~622 --------- --------- TOTAL ~~LIABILITIES~~CURRENT ~~173~~ASSETS 75,~~973~~606 ~~202~~86,~~763~~320 --------- --------- ~~STOCKHOLDERS'~~PROPERTY ~~DEFICIT~~AND ~~Preferred~~EQUIPMENT ~~stock,~~Land ~~Series~~and Aimprovements ~~convertible,~~115 ~~$.001~~115 ~~par,~~Buildings ~~20,000,000~~and ~~shares~~improvements ~~authorized;~~910 no1,144 ~~shares~~Machinery, ~~outstanding~~tools --and equipment -- ~~Preferred~~36 ~~stock,~~Computers ~~Series~~and Boffice ~~convertible,~~equipment ~~$.01~~251 ~~par,~~248 ~~30,000 shares authorized; no shares outstanding~~ -- ------ ~~Common stock, $.001 par, 100,000,000 shares authorized; 14,321,616 issued; 13,821,616 shares outstanding 14 14 Additional paid~~-in------- ~~capital 9~~1,~~142~~276 91,~~142~~543 ~~Treasury~~Less ~~stock,~~accumulated atdepreciation ~~cost~~ (~~100~~397) (~~100~~496) ~~Retained deficit (92,450) (123,781)~~ --------- --------- ~~TOTAL~~NET ~~STOCKHOLDERS'~~PROPERTY ~~DEFICIT~~AND ~~(83~~EQUIPMENT 879 1,~~394)~~047 ~~(114~~OTHER 2,~~725)~~213 671 --------- --------- $ 9078,~~579~~698 $ 88,038 ========= =========

AMERICAN ARCHITECTURAL PRODUCTS CORPORATION (DEBTOR-IN-POSSESSION) CONSOLIDATED BALANCE SHEETS (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

(Unaudited) ~~(Unaudited)~~September ~~Three months ended Six months ended June~~ 30, ~~June~~December 3031, ~~----------------------- -----------------------~~ 2002 2001 ~~2002 2001~~ -------- -~~-------~~ -------- -~~-------~~ ~~RESULTS~~LIABILITIES OFAND ~~DISCONTINUED~~STOCKHOLDERS' ~~OPERATIONS~~DEFICIT ~~Net~~CURRENT ~~Sales~~LIABILITIES $Accounts ~~29,350~~payable $- ~~25,883~~trade $ ~~51,011~~841 $ ~~45,826~~763 ~~Cost~~Accrued ofExpenses ~~Sales~~Compensation ~~23,792~~and ~~21,434~~related ~~42,157~~benefits ~~39,232~~63 ~~--------~~289 ~~--------~~Other ~~-------- -------- GROSS PROFIT 5~~1,~~558~~874 41,~~449~~284 ~~8,854~~Liabilities ~~6,594~~held ~~Selling~~for ~~Expense~~sale 29,~~676~~184 222,~~533~~337 ~~4,970 4,642 Impairment Charge 8,670~~ Debtor-in-possession ~~8,670~~revolving --credit ~~General~~ and ~~Administrative~~term ~~Expenses~~loan ~~1,114~~-- 118,~~365~~583 ~~2,407 2,914 Other (Income) Expense (14) 83 23 4~~ -------- -~~-------~~ -------- -~~-------~~ ~~INCOME~~TOTAL ~~(LOSS)~~CURRENT ~~BEFORE~~LIABILITIES ~~RESULTS OF DISPOSED OPERATIONS (6~~11,~~888)~~962 ~~468 (7~~43,~~216)~~256 ~~(966)~~Other ~~INCOME~~382 ~~FROM~~147 ~~DISPOSED~~Liabilities ~~OPERATIONS~~subject ~~45,774~~to ~~1,698~~compromise 42159,~~229~~292 1159,~~944~~360 --------- --------- TOTAL LIABILITIES 171,636 202,763 --------- --------- ~~INCOME~~STOCKHOLDERS' ~~FROM~~DEFICIT ~~DISCONTINUED~~Preferred ~~OPERATIONS 38~~stock,~~886~~ ~~2,166~~Series ~~35,013~~A ~~978 RESULTS OF CONTINUING OPERATIONS Corporate General and Administrative and Other Expenses 985 1~~convertible,~~010~~ ~~1,731~~$.001 1par,~~917~~ ~~Interest expense~~20, ~~net 109 542 371 1~~000,~~037~~000 ~~Reorganization~~shares ~~Costs~~authorized; ~~726~~no ~~2,445~~shares ~~1,580~~outstanding ~~3,090~~ --~~------~~ --~~------~~ ~~--------~~Preferred ~~--------~~stock, ~~LOSS~~Series ~~FROM~~B ~~CONTINUING~~convertible, ~~OPERATIONS~~$.01 (1par,~~820)~~ (330,~~997)~~000 ~~(3,682)~~shares ~~(6,044)~~authorized; ~~--------~~no ~~--------~~shares outstanding --~~------~~ --~~------~~ ~~NET~~Common ~~INCOME (LOSS) $ 37~~stock,~~066~~ $.001 (1par,~~831)~~ ~~$ 31~~100,~~331 $ (5~~000,~~066)~~000 ~~========~~shares ~~========~~authorized; ~~======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED 13~~14,~~822 13~~321,~~822~~616 ~~13,822~~issued; 13,~~822~~821,616 ~~========~~shares ~~========~~outstanding ~~========~~14 ~~========~~14 ~~BASIC~~Additional ~~AND~~paid-in ~~DILUTED~~capital ~~INCOME~~9,142 ~~(LOSS)~~9,142 ~~PER~~Treasury ~~COMMON~~stock, ~~SHARE~~at ~~Discontinued~~cost ~~operations $ 2.81 $ 0.16 $ 2.53 $ 0.07 Continuing operations~~ (~~0.13~~100) (~~0.29~~100) Retained deficit (~~0.26~~101,994) (~~0.44~~123,781) --------- --------- TOTAL STOCKHOLDERS' DEFICIT (92,938) (114,725) --------- --------- ~~BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE~~ $ ~~2.68~~78,698 $ ~~(0.13)~~88,038 ~~$ 2.27 $ (0.37)~~ ======== =~~=======~~ ======== =~~=======~~

See accompanying notes to consolidated financial statements. AMERICAN ARCHITECTURAL PRODUCTS CORPORATION (DEBTOR-IN-POSSESSION) CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)

(Unaudited) ~~Six~~(Unaudited) Three months ended ~~June~~Nine months ended September 30, September 30, 2002 2001 2002 2001 -------- -------- ~~CASH~~-------- ~~FLOWS~~-------- ~~FROM~~RESULTS ~~OPERATING~~OF ~~ACTIVITIES~~DISCONTINUED ~~Loss~~OPERATIONS ~~from~~Net ~~continuing~~Sales ~~operations~~ $ (329,~~682)~~432 $ (624,~~044)~~464 ~~Adjustments~~$ to80,443 ~~reconcile~~$ ~~loss~~70,289 ~~from~~Cost ~~continuing~~of ~~operations~~Sales to24,766 ~~net~~20,110 ~~cash~~66,923 ~~used~~59,341 in-------- ~~operating~~-------- ~~activities:~~-------- ~~Depreciation 37 112 Amortization~~ -------- ~~476~~GROSS ~~Provision~~PROFIT ~~for~~4,666 ~~reorganization~~4,354 ~~costs~~13,520 ~~-- 1~~10,~~140~~948 ~~Changes~~Selling inExpense ~~assets~~2,775 ~~and~~2,376 ~~liabilities~~7,745 ~~net~~7,018 ofImpairment ~~effects~~Charge of8,400 ~~business~~-- ~~acquisitions~~17,070 ~~and~~-- ~~divestitures~~General and ~~discontinued~~Administrative ~~operations:~~Expenses ~~Accounts~~1,086 ~~receivable~~1,296 ~~(9)~~3,493 ~~(398)~~4,210 ~~Prepaid~~Other ~~and other current assets~~ (~~475~~Income) ~~133~~Expense ~~Other~~69 ~~assets~~105 ~~(442)~~91 108 -------- ~~Accounts~~-------- ~~payable 393 (87) Accrued expenses and other liabilities 39 338 Liabilities subject to compromise (54) (2,394)~~ -------- -------- ~~NET~~INCOME ~~CASH~~(LOSS) ~~USED~~BEFORE ~~FOR~~RESULTS ~~OPERATIONS~~OF ~~BEFORE~~DISPOSED ~~DISCONTINUED~~ OPERATIONS (47,~~193~~664) 577 (614,~~724~~879) ~~NET~~(388) ~~CASH~~INCOME ~~PROVIDED~~(LOSS) BYFROM ~~DISCONTINUED~~DISPOSED OPERATIONS 1(589) (8,~~334~~510) 341,~~388~~641 (6,566) -------- -------- ~~NET~~-------- ~~CASH~~-------- ~~USED~~INCOME IN(LOSS) ~~OPERATING~~FROM ~~ACTIVITIES~~DISCONTINUED OPERATIONS (28,~~859~~253) (37,~~336~~933) ~~NET~~26,762 ~~CASH~~(6,954) ~~PROVIDED~~RESULTS BYOF ~~(USED~~CONTINUING ~~IN)~~OPERATIONS ~~INVESTING~~Corporate ~~ACTIVITIES~~General OFand ~~DISCONTINUED~~Administrative ~~OPERATIONS~~and 63Other Expenses 768 3,~~411~~376 (2,~~343)~~619 ~~CASH~~5,293 ~~FLOWS~~Interest ~~FROM~~(Income) ~~FINANCING~~Expense, ~~ACTIVITIES~~net ~~Net~~ (~~repayments~~182) ~~borrowings~~477 on71 ~~revolving~~1,514 ~~line~~Reorganization ofCosts ~~credit~~705 ~~(18~~691 2,~~583)~~285 73,~~541~~781 -------- -------- ~~NET~~-------- ~~CASH~~-------- ~~(USED~~LOSS ~~IN) PROVIDED BY FINANCING ACTIVITIES~~ FROM CONTINUING OPERATIONS ~~(18~~1,~~583)~~291 74,~~541~~544 ~~NET~~4,975 ~~CASH~~10,588 ~~PROVIDED BY (USED IN) FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS 30 (171)~~ -------- -------- ~~NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (18,553) 7,370~~ -------- -------- NET ~~INCREASE~~INCOME IN(LOSS) ~~CASH~~$ ~~AND~~(9,544) ~~CASH~~$(12,477) ~~EQUIVALENTS~~$ 4121,~~999~~787 1$(17,~~691~~542) ~~CASH~~======== ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC AND ~~CASH~~DILUTED ~~EQUIVALENTS~~13,822 ~~BEGINNING~~13,822 OF13,822 ~~PERIOD 2~~13,~~762~~822 ~~158~~======== ======== ======== ======== BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE Discontinued operations $ (0.60) $ (0.57) $ 1.94 $ (0.50) Continuing operations (0.09) (0.33) (0.36) (0.77) -------- -------- ~~CASH~~-------- -------- BASIC AND ~~CASH~~DILUTED ~~EQUIVALENTS,~~NET ~~END~~INCOME OF(LOSS) ~~PERIOD~~PER COMMON SHARE $ ~~44,761~~(0.69) $ (0.90) $ 1~~,849~~.58 $ (1.27) ======== ======== ======== ========

See accompanying notes to consolidated financial statements. AMERICAN ARCHITECTURAL PRODUCTS CORPORATION (DEBTOR-IN-POSSESSION) CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

~~Three~~(Unaudited) ~~months~~Nine ~~ended Six~~ months ended ~~June~~September 30, ~~June~~2002 ~~30,~~2001 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Loss from continuing operations $ (4,975) $(10,588) Adjustments to reconcile loss from continuing operations to net cash used in operating activities: Depreciation 52 250 Amortization -- 715 Provision for credit losses -- 1,797 Provision for reorganization costs -- 1,625 Changes in assets and liabilities, net of effects of business acquisitions and divestitures and discontinued operations: Accounts receivable 6 176 Prepaid and other current assets (269) 296 Other assets (344) 762 Accounts payable (242) (229) Accrued expenses and other liabilities 205 180 Liabilities subject to compromise (69) 192 -------- -------- NET CASH USED FOR OPERATIONS BEFORE DISCONTINUED OPERATIONS (5,636) (4,824) NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS 243 (623) -------- ~~2002~~-------- ~~2001~~NET ~~2002~~CASH ~~2001~~USED IN OPERATING ACTIVITIES (5,393) (5,447) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment -- (7) -------- -------- NET CASH (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS -- (7) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS 64,471 (1,206) -------- -------- ~~Professional~~NET ~~fees~~CASH $USED ~~697~~IN $INVESTING ~~634~~ACTIVITIES $164,~~537~~471 $(1,~~279~~213) ~~Other~~CASH 29FLOWS 52FROM 43FINANCING 52ACTIVITIES ~~Plant~~Net ~~closing~~(repayments) borrowings on debtor-in-possession 1revolving credit and term loan (18,~~759~~583) 7,473 -------- 1-------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS (18,~~759~~583) 7,473 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS 51 (455) -------- -------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (18,532) 7,018 -------- -------- ~~Total~~NET ~~Reorganization~~INCREASE ~~Costs~~IN $CASH ~~726~~AND $CASH EQUIVALENTS 40,546 358 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,~~445~~762 $1158 -------- -------- CASH AND CASH EQUIVALENTS,~~580~~ END OF PERIOD $3 43,~~090~~308 $ 516 ====== ==~~====~~ ====== ==~~====~~

See accompanying notes to consolidated financial statements. AMERICAN ARCHITECTURAL PRODUCTS CORPORATION (DEBTOR-IN-POSSESSION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION American Architectural Products Corporation (AAPC or the Company) is principally engaged in the business of manufacturing residential and architectural windows and doors through its wholly-owned subsidiaries, Binnings Building Products, Inc. (Binnings), Danvid Window Company (Danvid), and American Weather-Seal Company (Weather-Seal). The Company sold Thermetic Glass, Inc. (TGI) and Modern Window Corporation (Modern) in August 2002. In May 2002, the Company sold Eagle Window and Door, Inc., the only remaining operating division of Eagle & Taylor Company (ETC - formerly known as American Architectural Products, Inc., AAP) and Eagle Service Company (collectively "Eagle"). American Glassmith Corporation (American Glassmith) was also a subsidiary at December 31, 2001 and was sold in March 2002. Denver Window Corporation (Denver) was a subsidiary at June 30, 2001 and was sold in September 2001. On December 18, 2000, the Company filed for voluntary protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Northern District of Ohio (the Bankruptcy Court). The Company is presently operating its business as a debtor-in-possession under Chapter 11 and is subject to the jurisdiction and supervision of the Bankruptcy Court. The accompanying consolidated financial statements have been prepared in accordance with AICPA Statement of Position 90-7 (SOP 90-7), "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" as more fully described in Note 2. The Company elected to adopt the provision of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment of or Disposal of Long-Lived Assets" issued in August 2001. As of the end of the third quarter of 2002, all of the Company's remaining operations are being marketed for sale. The assets and post-petition liabilities of these businesses are classified as being held for sale in the accompanying balance sheet. The statements of operations reflect the sales, cost of sales, selling, general and administrative costs and other expenses of these remaining operations and, together with the results of operations of businesses sold prior to September 30, 2002 (classified as disposed operations), are classified as discontinued operations. The results of continuing operations include the Company's corporate activities including overhead expenses and costs associated with the administration of the bankruptcy process. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of financial position and results of operations have been made. Operating results for interim periods are not necessarily indicative of results that may be expected for the year ended December 31, 2002. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto of the Company for the year ended December 31, 2001 included in the annual report on Form 10-K. The interim financial statements included in the Quarterly Report were prepared by the Company and have not been reviewed by an independent public accountant as required by Rule 10-01 (d) of Regulation S-X. No independent accountant has reviewed these unaudited financial statements to determine whether any material modifications should be made in order for them to be in conformity with the generally accepted accounting principles for interim financial information. The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain prior period amounts have been reclassified to conform with current period presentation. 2. BANKRUPTCY PROCEEDINGS AND GOING CONCERN CONSIDERATIONS: On December 18, 2000, the Company and its subsidiaries filed for voluntary bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Northern District of Ohio (the Bankruptcy Court). The Company is presently operating its businesses as a debtor-in-possession under Chapter 11 and is subject to the jurisdiction and supervision of the Bankruptcy Court. In Chapter 11 cases, substantially all liabilities as of the date of the filing of the petition for reorganization are subject to the treatment set forth under a plan of reorganization to be voted upon by the Company's impaired creditors and stockholders and confirmed by the Bankruptcy Court. The ultimate amount and treatment terms for such liabilities are subject to a plan of reorganization and, accordingly, are not presently determinable. In addition, on December 18, 2000, the Bankruptcy Court issued an order authorizing the Company to pay certain pre-petition claims of essential vendors and suppliers. Accordingly, these amounts have been paid or are included in "liabilities subject to compromise" on the consolidated balance sheets. An unsecured creditors' committee has been appointed by the Bankruptcy Court. The official committee and legal representatives are the primary entities with which the Company is negotiating the terms of a plan of reorganization. The Company has requested the Bankruptcy Court approve an extension to January 16, 2003, during which time the Company has the exclusive right to file a reorganization plan. The consolidated financial statements of the Company and its subsidiaries were prepared on the going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, during the years ended December 31, 2001, 2000 and 1999, the Company incurred losses of $24.7 million, $42.4 million, and $47.1 million, respectively. Further, the Company's ongoing debt service obligations included semi-annual interest payments of approximately $7.3 million, due each June 1 and December 1 through December 1, 2007. The indenture governing the Notes provides that an "Event of Default" includes the default in any payment of interest on the Notes when due, continued for 30 days. The Company did not have sufficient liquidity to make the June 1, 2000 through December 1, 2000 interest payments. Accordingly, the Company was in default of the indenture. Furthermore, the Company was in violation of certain of its covenants under the line of credit facility at December 31, 1999 but obtained waivers for those violations. These events, among other things, led to the Chapter 11 filings; therefore, the realization of assets and liquidation of liabilities is subject to significant uncertainty. In the Chapter 11 proceedings (subject, in certain circumstances, to Bankruptcy Court approval), the debtors may sell or otherwise dispose of assets, and liquidate or settle liabilities, for amounts other than those reflected in the consolidated financial statements. The amounts reported in the consolidated financial statements do not give effect to any adjustments to the carrying value of assets (except for the write-down of goodwill) or amounts of liabilities that might result as a consequence of actions taken pursuant to a plan of reorganization, which adjustments could be material. The continuation of the Company as a going concern is contingent upon, among other factors, the ability of the debtors to (1) formulate and file a plan which will gain the approval of the creditors and other parties in interest and confirmation by the Bankruptcy Court; (2) maintain debtor-in-possession financing; (3) achieve profitable operations; (4) obtain adequate shipments of merchandise from suppliers at acceptable credit terms; and (5) obtain post reorganization financing. There can be no assurances that the above conditions can be met. Liabilities Subject to Compromise As reflected in the consolidated financial statements, "liabilities subject to compromise" refer to liabilities incurred prior to the commencement of the Chapter 11 case. The amounts of the various liabilities that are subject to compromise are set forth below. These amounts represent the Company's estimate of known or potential pre-petition claims to be resolved in connection with the Chapter 11 case. Such claims remain subject to future adjustments. Adjustments may result from (1) negotiations; (2) actions of the Bankruptcy Court; (3) rejection of executory contracts and unexpired leases; (4) the determination as to the value of any collateral securing claims; (5) proofs of claim; or (6) other events. Payment terms for these amounts will be established in connection with the Chapter 11 case. Liabilities subject to compromise in the consolidated balance sheet consist of the following items (in thousands):

~~Three~~September ~~months ended Six months ended June~~ 30, ~~June~~December 30, ~~------------------------- -------------------------~~ 2002 2001 ~~2002 2001~~ -------- -------- ~~--------~~Accounts ~~--------~~payable ~~Net Sales AWS~~ $ 78,~~618~~306 $ 8,~~127~~316 $Accrued ~~13,258~~interest $payable 1517,~~345~~299 ~~BBP 5~~17,~~205~~299 ~~4,748~~Accrued ~~9,273~~liabilities ~~9,098 Danvid 16,776 14,665 29,538 24,552 Eliminations (249) (~~1,~~657)~~188 (1,~~058)~~188 ~~(3,169)~~Debt ~~-------- -------- -------- -------- Total $ 29~~132,~~350~~500 ~~$ 25~~132,~~883~~557 ~~$ 51,011 $ 45,826 ======== ======== ======== ======== Income (Loss) before Disposed Operations AWS $ 295 $ (601) $ (20) $ (1,700) BBP (1,436) 209 (1,880) 301 Danvid (5,747) 860 (5,316) 433~~ -------- -------- ~~-------- --------~~ Total $liabilities ~~(6,888)~~subject $to ~~468~~compromise $ (7159,~~216)~~293 $159,360 ~~(966)~~ ======== ======== ~~======== ========~~

Interest on certain pre-petition debt is not accrued after the bankruptcy filing. Such contractual interest expense not recorded totaled $3.8 million for each of the three month periods ending September 30, 2002 and 2001 and $11.4 million and $11.5 million for of the nine month periods ending September 30, 2002 and 2001, respectively. Debtor-In-Possession Financing In connection with the bankruptcy filing, the Company obtained an aggregate $35 million debtor-in-possession credit facility, subject to an available collateral base, from a group of lenders (the DIP Facility) which was repaid in May 2002 with a portion of the proceeds from the Eagle sale as discussed in Note 3. At December 31, 2001, $12.2 million and $6.4 million were outstanding under the DIP Facility's line of credit and term note, respectively. Reorganization Costs The amounts reflected as reorganization costs in the consolidated statements of operations consisted of the following (in thousands):

~~THREE~~Three ~~MONTHS~~months ~~ENDED~~ended ~~JUNE~~Nine ~~30,~~months ~~2002~~ended ~~---------------------------------------------------------------------------------------------------------~~September ~~EXTRUSION~~30, ~~BPA~~September ~~SEGMENT~~30, ~~BPA~~2002 ~~FORTE~~2001 &2002 ~~AEG~~2001 ~~EXTRUSION SUB~~-~~TOTAL RESIDENTIAL TM AGI EAGLE TGI EWDC TOTAL~~ ----- ------~~------------------~~ ------~~---------------------------------------------------------------------~~ ~~Net Sales $~~ -- $ -- $ -- $Professional --fees $ --691 $ 22664 $ 62,~~911~~228 $ 1,~~722~~943 $Other --14 $27 ~~8,655~~57 ~~=============================~~79 ~~===========================================================================~~Plant ~~Income~~closing ~~(loss) from operations $~~ -- $ -- $ -- ~~$ -- $ -- $ 18 $ (328) $ 26 $ -- $ 284 Gain (loss) on disposal (162) -- (162) (~~1,~~002)~~759 ~~(538) (59) 47,800~~ -- ~~19 46,258~~ ---- ------ ------~~-------------~~ ------~~---------------------------------------------------------------------~~ ~~Income~~Total ~~(loss)~~Reorganization ~~from~~Costs $~~(162)~~ $705 -- $~~(162)~~ ~~$(1,002)~~691 $~~(538) $ (41) $ 47~~2,~~472~~285 $ ~~26 $ 19 $ 45~~3,~~774~~781 ~~disposed operations~~ ====== ====== ======~~===========~~ ======~~=====================================================================~~

In February 2001, the Company announced the shutdown of its wood window manufacturing operation in Ottawa, Ohio effective April 2001. In April 2001 the Bankruptcy Court approved the shutdown plan which was substantially completed by the end of April 2001. The plant closing charges reflected above are associated with this restructuring effort and include severance costs of $619 thousand and a loss on the liquidation of assets of $1.14 million. $555 thousand and $64 thousand of the accrued severance costs were paid during the second and third quarters of 2001, respectively. Professional fees incurred consisted primarily of consulting and legal fees for bankruptcy activity and restructuring efforts. 3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE During the second quarter of 2002, the Company committed to a plan to sell its remaining operations: Weather-Seal's window manufacturing operations (AWS), Binnings Building Products' Lexington, North Carolina operations (BBP), and Danvid Window Company (Danvid). In October 2002, the Company signed an agreement to sell substantially all of the assets of AWS for approximately $6.63 million and the assumption of certain post-petition liabilities. The Company recognized an impairment charge of $5.9 million at September 30, 2002 to adjust the recorded value of AWS' long-lived assets to their estimated fair value based on the expected proceeds from the sale. Also in October 2002, the Company agreed to sell substantially all of the assets of BBP for approximately $5.95 million and the assumption of certain post-petition liabilities. The Company recognized an impairment charge of $2.5 million at September 30, 2002 to adjust the recorded value of BBP's long-lived assets to their estimated fair value based on the expected sale proceeds. The sale prices under both agreements are subject to working capital adjustments to be determined as of the transaction closing date. Both agreements have been submitted to the Bankruptcy Court for approval. The following summarizes the results of operations for the three month and nine month periods ending September 30, 2002 and 2001 for each of these entities (in thousands):

~~THREE~~Three ~~MONTHS~~months ~~ENDED~~ended ~~JUNE~~Nine ~~30,~~months ~~2001~~ended ~~---------------------------------------------------------------------------------------------------------~~September ~~EXTRUSION~~30, ~~BPA~~September ~~SEGMENT~~30, ~~BPA~~2002 ~~FORTE~~2001 &2002 ~~AEG~~2001 ~~EXTRUSION SUB~~-~~TOTAL RESIDENTIAL TM AGI EAGLE TGI EWDC TOTAL~~ ------- -------- --------~~-------~~ --------~~-------------------------------------------------------------------~~ Net Sales AWS $ 38,~~249~~244 $ ~~475~~7,718 $ 321,~~724~~501 $ 923,~~007~~063 $BBP 35,~~044~~229 $4,754 114,~~731~~503 ~~$20~~13,~~702~~852 $Danvid 116,~~807~~088 $13,377 9445,626 ~~$40~~37,~~109~~929 ~~==============================~~Eliminations ~~=========================================================================== Income~~ (~~loss~~129) ~~from operations $~~ (~~349~~1,385) $ (~~172~~1,187) $ (~~521) $ (302) $ (185) $ (54) $ 2~~4,~~698 $ 80 $ (18~~555) ~~$ 1,698 Gain (loss) on disposal~~ -- -- -- -- -- -- -- -- -- -- ----~~--------------------------~~ --------~~-------------------------------------------------------------------~~ ~~Income~~Total ~~(loss) from disposed operations~~ $ ~~(349)~~29,432 $ ~~(172) $ (521) $ (302) $ (185) $ (54) $ 2~~24,~~698~~464 $ 80,443 $ ~~(18) $ 1~~70,~~698~~289 ======== ======== ========~~======~~ ========~~===================================================================~~

~~SIX~~Three ~~MONTHS~~months ~~ENDED~~ended ~~JUNE~~Nine ~~30,~~months ~~2002~~ended ~~---------------------------------------------------------------------------------------------------------~~September ~~EXTRUSION~~30, ~~BPA~~September ~~SEGMENT~~30, ~~BPA~~2002 ~~FORTE~~2001 &2002 ~~AEG~~2001 ~~EXTRUSION SUB~~-~~TOTAL RESIDENTIAL TM AGI EAGLE TGI EWDC TOTAL~~ ------- -------- --------~~------~~ --------~~-------------------------------------------------------------------~~ ~~Net Sales $ 874 $ 419 $ 1,293 $ 2,829 $ 1,158 $ 1,159 $ 23,203 $ 2,920 $ 5 $ 32,567 ============================= ===========================================================================~~ Income (~~loss~~Loss) ~~from~~before ~~operations~~Disposed $Operations ~~(409)~~AWS $ (~~267~~5,347) $ (~~676~~36) $ (15,~~582~~365) $ (~~393~~1,736) $BBP (~~393) $ 967 $ (137) $ (57) $ (~~2,~~271~~150) ~~Gain~~208 (~~loss~~4,031) on510 ~~disposal~~Danvid (~~306~~167) --405 (~~306) (1~~5,~~224~~483) ~~(784)~~838 ~~299 47,800 (840) (445) 44,500~~ -------- -------- -------- --------~~-------------------------------------------------------------------------~~ ~~Income~~Total ~~(loss) from disposed operations~~ $ (~~715) $ (267) $ (982) $ (2~~7,~~806~~664) $ ~~(1,177)~~577 $ (~~94) $ 48~~14,~~767 $ (977~~879) $ (~~502~~388) ~~$ 42,229~~ ======== ======== ========~~=====~~ ========~~===================================================================~~

On December 16, 1999, the Board of Directors of the Company approved a plan to abandon its commercial business segment, conducted through its wholly-owned subsidiary, Forte. The Company discontinued manufacturing operations at Forte in May 2000 The Company is actively marketing the remaining property for sale and recorded a loss on disposal of $437,000 in the first quarter of 2002 to write down the recorded value of this property to the estimated fair value based on the expected selling price. In January 2001, the Company announced the discontinuance of its Eagle Window and Door Center, Inc. (EWDC) operations in Boardman, Ohio. The Company substantially completed its plan to exit this business in December 2001. On January 31, 2002 the Company completed the sale of Weather-Seal's aluminum extrusion operations (the Aluminum Extrusion Group or AEG) for $1.5 million cash and the assumption of certain post-petition liabilities. During the second quarter of 2002, the Company began to actively market certain real property of AEG which was not included in the January 2002 sale. The net book value of this property has been reclassified as held for sale at December 31, 2001 and June 30, 2002. On February 15, 2002, the Company completed the sale of certain assets of the Binnings Pan American (Pan Am) and TM Window and Door (TM) divisions of Binnings for $500,000 cash, a $1.7 million note receivable and the assumption of certain liabilities. During the second quarter of 2002, the company recorded additional losses of $1,002,000 and $538,000 on the disposal of BPA and TM, respectively resulting from the write-down of the value of accounts receivable retained by the Company after the sale. AEG and a portion of Pan Am comprised the Company's extrusion segment. Extrusion products consist of aluminum extrusions used primarily in the fenestration products industry. These businesses supplied a portion of the raw materials used in the manufacture of windows by the Company. The consummation of these transactions completes the Company's exit from the extrusion segment. As a result, the Company now operates in one business segment, residential fenestration products. On March 22, 2002, the Company completed the sale of certain assets of American Glassmith (AGI) for $350,000 cash plus the assumption of certain post-petition liabilities. On May 6, 2002, the Company completed the sale of Eagle for $63.5 million plus the assumption of certain liabilities. The Company recognized a gain of $47.8 million on the sale, net of $0.6 million in income tax expense, for the nine months ended September 30, 2002. In August 2002, the Company completed the sale of substantially all of the assets of TGI for $1.3 million plus the assumption of certain post-petition liabilities. The Company recorded an impairment charge of $840 thousand during the first quarter of 2002 based on the expected proceeds from the sale. This charge is included in the loss on disposal. The results of operations for AEG, Pan Am, TM, AGI, Eagle, TGI, EWDC and Forte have been presented as results of disposed operations in the accompanying financial statements for all periods. The Company did not recognize income tax benefits on the losses from these operations. Net sales and net losses from disposed operations before inter-company eliminations by segment for each period consist of the following (in thousands):

~~SIX~~THREE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, ~~2001~~2002 -----------------------------------------------------------------------------------------------------~~----~~ EXTRUSION BPA SEGMENT BPA FORTE & AEG EXTRUSION SUB-TOTAL RESIDENTIAL TM AGI EAGLE TGI EWDC TOTAL ----------------------------- -----------------------------------------------------------------------~~----~~ Net Sales $ ~~6,442~~-- $-- ~~778~~ $ ~~7,220~~-- $ ~~18,247~~-- $-- ~~5,580~~ $ ~~3,400~~-- $-- ~~39,451~~ $ ~~5,580~~-- $ ~~329~~-- $-- ~~79,807~~ ============================= =======================================================================~~====~~ Income (loss) from operations $ ~~(952)~~-- $-- ~~120~~ $ ~~(832)~~-- $ ~~(621)~~-- $-- ~~(120)~~ $ ~~(200)~~-- $-- ~~3,896~~ $ (73194) $ -- $(~~106~~194) ~~$ 1,944~~ Gain (loss) on disposal --(351) -- --(351) --(145) --(4) --138 --(37) --5 --(1) --(395) ----------------------------- -----------------------------------------------------------------------~~----~~ Income (loss) from disposed operations $ (~~952~~351) $-- ~~120~~ $ (~~832~~351) $ (~~621~~145) $ (~~120~~4) $138 $(~~200~~37) $(189) ~~3,896~~ $ (731) $ (~~106~~589) ~~$ 1,944~~ ============================= =======================================================================~~====~~

~~JUNE~~THREE MONTHS ENDED SEPTEMBER 30, ~~2002~~2001 ---------------------------------------------------------------------------------------- ~~FORTE & TAYLOR AEG EAGLE EWDC TGI AWS BBP DANVID TOTAL~~ -----------------~~-----------------------------------------------------------------------~~ ~~Accounts~~EXTRUSION ~~receivable~~BPA -SEGMENT ~~net~~BPA $FORTE --& $AEG --EXTRUSION $ SUB--TOTAL $RESIDENTIAL --TM $AGI ~~732~~EAGLE $TGI ~~2,663~~EWDC $TOTAL ~~1,956 $ 6,273 $11,624 Inventories~~ -- -- -- -- ~~784 2,694 2,287 1,768 7,533 Property and equipment 1,325 1,278 725 360 448 9,846 5,019 1,689 20,690 Other~~ -- -- -- -- ~~18 139 16 1,224 1,397~~ --------------- ------------------------------------------------------------------------- ~~ASSETS~~Net ~~HELD~~Sales ~~FOR~~$ ~~SALE~~2,855 $ 1,~~325~~147 $ 14,~~278~~002 $ ~~725~~7,472 $ ~~360~~2,484 $ 1,~~982~~597 $1520,~~342~~445 $ 91,~~278~~741 $~~10,954~~ 17 $41 37,~~244~~758 =============================== ======================================================================= ~~Accounts~~Income ~~payable~~(loss) -from ~~trade~~operations $ --(595) $(1,041) -- $(1,636) -- $(6,782) -- $(1,871) ~~296~~ $ (1,~~343~~101) $ ~~985~~3,092 $ ~~1,407~~47 $(259) 4$ (8,~~031~~510) ~~Accrued~~Gain ~~expenses~~(loss) on disposal -- -- -- -- ~~204~~-- ~~1,961~~-- ~~1,172~~-- ~~4,025~~-- ~~7,362~~-- -- ------------------------------- ----------------------------------------------------------------------- ~~LIABILITIES~~Income ~~HELD~~(loss) ~~FOR~~from ~~SALE~~disposed operations $ --(595) $(1,041) --$(1,636) $(6,782) -- $(1,871) -- $(1,101) ~~500~~ $ 3,~~304~~092 $ ~~2,157~~47 $(259) ~~5,432~~ $11 (8,~~393~~510) =============================== =======================================================================

~~DECEMBER~~NINE 31MONTHS ENDED SEPTEMBER 30, ~~2001~~2002 --------------------------------------------------------------------------------------------------------- EXTRUSION BPA SEGMENT BPA FORTE & ~~TAYLOR~~ AEG ~~BPA~~EXTRUSION SUB-TOTAL RESIDENTIAL TM AGI EAGLE ~~EWDC~~ TGI ~~AWS~~EWDC ~~BBP DANVID~~ TOTAL ------------------------------- -----------------------------------------------------------------------~~---~~ ~~Accounts~~Net ~~receivable~~Sales ~~- net~~ $ --874 $ ~~718~~419 $ ~~200 $ 300 $ -- $ 8,057 $ -- $ 502 $~~ 1,~~633~~293 $ 12,~~602~~829 $ ~~3,195 $16,207 Inventories --~~ 1,~~141~~158 3,391 39 128 6,730 -- 765 1,998 2,617 1,533 18,342 Property and equipment 1,357 1,215 211 813 456 5,614 823 1,251 10,318 5,178 1,838 29,074 Cost in excess of net assets acquired -- -- -- -- -- 2,036 -- -- -- 1,747 6,923 10,706 Other -- -- 55 -- 29 648 -- -- 160 29 1,372 2,293 --------------------------------------------------------------------------------------------------------- ASSETS HELD FOR SALE $~~1,357~~ ~~$3,074 $3,857 $~~1,~~152~~159 $~~613 $~~23,~~085~~203 $~~823~~ $23,~~518~~829 $~~14,106~~ ~~$11,173~~5 $~~14,861~~ ~~$76~~32,~~622~~183 =============================== =======================================================================~~===~~ ~~Accounts~~Income ~~payable~~(loss) -from ~~trade~~operations $ --(409) $(267) ~~203~~$ (676) $(1,~~625~~582) $ ~~430~~(393) $~~191~~ $(393) ~~2,017~~ $ --967 $ ~~142~~(331) $ ~~902~~(57) ~~636~~ $ 1(2,~~003~~465) $Gain ~~7,149~~(loss) ~~Accrued~~on ~~expenses~~disposal --(657) ~~182 969 687 119 6,562~~ -- ~~224~~(657) (1,~~783~~369) ~~725~~(788) ~~3,654~~437 1447,~~905~~764 ~~Capital~~(835) ~~lease~~(446) ~~obligations~~44,106 -- -- -- -- -- ~~283~~ -- -- -- -- -- ~~283~~ ----------- -----------------------------------------------------------------------~~-----------------------~~ ~~LIABILITIES~~Income ~~HELD~~(loss) ~~FOR~~from ~~SALE~~disposed $operations -- $(1,066) ~~385~~ $~~2,594~~(267) $(1,~~117~~333) $~~310~~(2,951) $ 8(1,~~862~~181) $ --44 $ ~~366 $ 2~~48,~~685~~731 $ (1,~~361~~166) $(503) ~~4,657~~ $22 41,~~337~~641 =============================== =======================================================================~~===~~

The assets and liabilities of AEG, BPA, TM, AGI, Eagle, TGI, EWDC, Forte, AWS, BBP, and Danvid which were sold or are being sold are classified as assets held for sale and liabilities held for sale, respectively, in the accompanying consolidated balance sheets. As part of the agreement on the sale of Taylor Building Products, Inc. in December 1999, the Company retained the real property. This property is also classified as held for sale at September 30, 2002 and December 31, 2001. The buyer was required to purchase the property within a period not to exceed nineteen months from the closing date, provided certain conditions were met. The obligation of the buyer to purchase the real property is currently being contested. A summary of the assets and liabilities held for sale is as follows (in thousands):

4. COST IN EXCESS OF NET ASSETS ACQUIRED (GOODWILL) On January 1, 2002 the Company adopted the provisions of SFAS 142, "Goodwill and Other Intangible Assets", which requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. The Company ceased amortization of goodwill on January 1, 2002 and reviews goodwill for impairment at least annually. In conjunction with the adoption of SFAS 142, the Company reviewed goodwill (classified within "Assets Held for Sale" at December 31, 2001) for impairment at June 30, 2002. This review indicated that the implied fair value of the Company's goodwill, based on projected undiscounted cash flows, is $0; therefore, the Company recorded an impairment charge of $8.7 million at June 30, 2002. The Company recorded amortization expense related to goodwill of $101 thousand and $304 thousand during the three month and nine month periods ended September 30, 2001, respectively. No amortization expense was recorded during 2002. 5. CONTINGENCIES As discussed in Note 3, the Company sold the Aluminum Extrusion Group (AEG) during the first quarter of 2002. However, the Company did not sell the land and buildings used by AEG. One of those properties, the Norton facility, is now actively being marketed and is classified as held-for-sale in the accompanying balance sheets. The tenants of the other property, the Boardman facility (Boardman), vacated the premises in September 2002. Since that time, the Company has undergone efforts to prepare the property for sale, including performing an environmental review. In conjunction with those efforts, soil testing is being conducted to determine the extent of environmental remediation required. The Company estimates that the cost to clean up Boardman ranges from approximately $135 thousand to $520 thousand depending on the outcome of the soil testing. The Company has accrued the minimum estimate at September 30, 2002. 6. COMPREHENSIVE INCOME Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. For the three months and nine months ended September 30, 2002 and 2001, comprehensive income for the Company did not differ from net income. 7. INCOME TAXES The Company established a full valuation allowance on its income tax benefit for the three and nine months ended September 30, 2002 and 2001. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 On December 18, 2000, American Architectural Products Corporation (the Company) and its subsidiaries filed for voluntary bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Northern District of Ohio (the Bankruptcy Court). The Company is presently operating its businesses as a debtor-in-possession under Chapter 11 and is subject to the jurisdiction and supervision of the Bankruptcy Court. In Chapter 11 cases, substantially all liabilities as of the date of the filing of the petition for reorganization are subject to settlement under a plan of reorganization to be voted upon by the Company's impaired creditors and stockholders and confirmed by the Bankruptcy Court. The ultimate amount and settlement terms for such liabilities are subject to a plan of reorganization and, accordingly, are not presently determinable. In addition, on December 18, 2000, the Bankruptcy Court issued an order authorizing the Company to pay certain pre-petition claims of essential vendors and suppliers. Accordingly, these amounts have been paid or are included in the appropriate liability captions on the consolidated balance sheets. An unsecured creditors' committee has been appointed by the Bankruptcy Court. The official committee and legal representatives are the primary entities with which the Company is negotiating the terms of a plan of reorganization. The Company has requested the Bankruptcy Court approve an extension to January 16, 2003, during which time the Company has the exclusive right to file a reorganization plan. The consolidated financial statements of the Company and its subsidiaries were prepared on the going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, during the years ended December 31, 2000, 1999 and 1998, the Company incurred losses of $41.9 million, $47.1 million and $8.8 million, respectively. Further, the Company's ongoing debt service obligations included semi-annual interest payments of approximately $7.3 million, due each June 1 and December 1 through December 31, 2007. The indenture governing the Notes provides that an "Event of Default" includes the default in any payment of interest on the Notes when due, continued for 30 days. The Company did not have sufficient liquidity to make the June 1 or December 1, 2000 interest payments. Accordingly, the Company was in default of the indenture. Furthermore, the Company was in violation of certain of its covenants under the line of credit facility at December 31, 1999 but obtained waivers for those violations. These events, among other things, led to the Chapter 11 filings; therefore, the realization of assets and liquidation of liabilities is subject to significant uncertainty. In the Chapter 11 proceedings (subject, in certain circumstances, to Bankruptcy Court approval), the debtors may sell or otherwise dispose of assets, and liquidate or settle liabilities, for amounts other than those reflected in the consolidated financial statements. The amounts reported in the consolidated financial statements do not give effect to any adjustments to the carrying value of assets (except for the write-down of goodwill) or amounts of liabilities that might result as a consequence of actions taken pursuant to a plan of reorganization, which adjustments could be material. The continuation of the Company as a going concern is contingent upon, among other factors, the ability of the debtors to (1) formulate and file a plan which will gain the approval of the creditors, shareholders and other parties in interest and confirmation of the Bankruptcy Court; (2) maintain debtor-in-possession financing; (3) achieve profitable operations; (4) obtain adequate shipments of merchandise from suppliers at acceptable credit terms; and (5) obtain post reorganization financing. There can be no assurances that the above conditions can be met. CRITICAL ACCOUNTING POLICIES The consolidated financial statements have been prepared in accordance with generally accepted accounting principles which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. The Company's significant accounting policies are described in Note 1 of the Consolidated Financial Statements included in the 2001 Annual Report. The Company believes the following are the critical accounting policies which could have the most significant effect on the Company's reported results and require the most difficult, subjective or complex judgements by management. Unless otherwise noted, the Company has not made any changes in estimates or assumptions since December 31, 2001 that had a significant effect on the reported amounts. Discontinued Operations The Company elected to adopt the provisions of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment of or Disposal of Long-Lived Assets" issued in August 2001. As of June 30, 2002, all of the Company's remaining operations are being marketed for sale. The assets and post-petition liabilities of these businesses are classified as being held for sale in the accompanying balance sheet. The Statements of Operations reflect the sales, cost of sales, selling, general and administrative costs and other expenses of these remaining operations and, together with the results of operations of businesses either sold or under agreement to sell prior to September 30, 2002 (classified as disposed operations), are classified as discontinued operations. Accounting for Contingencies The Company accrues for contingencies in accordance with SFAS No. 5, "Accounting for Contingencies," or when it is probable that a liability or loss has been incurred and the amount can be reasonably estimated. Contingencies by their nature relate to uncertainties that require our exercise of judgment both in assessing whether or not a liability or loss has been incurred and estimating any amount of potential loss. The most important contingencies affecting the Company's financial statements include the establishment and assessment of the allowance for doubtful accounts, excess and obsolete inventory reserves, product warranty reserves and litigation and environmental accruals. Impairment of Long-Lived Assets The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company evaluates the recoverability of goodwill annually or more frequently if events or circumstances indicate that an asset might be impaired. The Company uses judgment when applying the impairment rules to determine when an impairment test is necessary. Factors the Company considers which could trigger an impairment review include significant underperformance relative to historical operating results or forecasted operating results, a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used, and significant negative industry or economic trends. Restructuring Activities The Company accrues the cost of restructuring activities in accordance with Emerging Issues Task Force Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)," depending upon the facts and circumstances surrounding the situation. Management exercises judgment in estimating the total costs of each of these activities. As the Company implements restructuring activities, the actual costs may differ from the estimated costs due to changes in the facts and circumstances that were not foreseen at the time of the initial assessment. Accounting Change On January 1, 2002 the Company adopted the provisions of SFAS 142, "Goodwill and Other Intangible Assets", which requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. The Company ceased amortization of goodwill on January 1, 2002 and reviewed goodwill for impairment in June 2002 at which time it was all written off. New Accounting Standards In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections," was issued. The Statement updates, clarifies and simplifies existing accounting pronouncements. While the technical corrections to existing pronouncements are not substantive in nature, in some instances, they may change accounting practice. The provisions of this standard must be applied for financial statements issued on or after May 15, 2002, with early application encouraged. Application of the standard has no material effect on the Company's financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement addresses the requirements for recognition of a liability for a cost associated with an exit or disposal activity. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002. DISCONTINUED OPERATIONS On December 16, 1999, the Board of Directors of the Company approved a plan to abandon its commercial business segment, conducted through its wholly-owned subsidiary, Forte. The Company discontinued manufacturing operations at Forte in May 2000. The Company is actively marketing the remaining property for sale. In January 2001, the Company announced the discontinuance of its EWDC operations. The Company substantially completed its plan to exit this business in December 2001. In December 2001, the Company agreed to sell certain assets of Weather-Seal's aluminum extrusion operations (the Aluminum Extrusion Group or AEG) for $1.5 million cash. The Company completed this sale on January 31, 2002. Also, in December 2001, the Company entered into an agreement to sell certain assets of the Binnings Pan American (BPA) and TM Window and Door (TM) divisions of Binnings for $500,000 cash, a $1.7 million note receivable and the assumption of certain liabilities. This transaction closed February 15, 2002. AEG and a portion of Pan Am comprised the Company's extrusion segment. Extrusion products consist of aluminum extrusions used primarily in the fenestration products industry. These businesses supplied a portion of the raw materials used in the manufacture of windows by the Company. The consummation of these transactions completes the Company's exit from the extrusion segment. In February 2002, the Company signed an agreement to sell substantially all of the assets of American Glassmith (AGI) for $350,000 cash and the assumption of certain post-petition liabilities. This sale was completed on March 22, 2002. On May 6, 2002, the Company sold ETC's Eagle Window and Door, Inc. division and its subsidiary, Eagle Service Company (collectively, "Eagle"), for approximately $63.5 million and recognized a $47.8 million gain on disposal at that time. In August 2002, the Company completed the sale of substantially all of the assets of TGI for $1.3 million, and the assumption of certain post-petition liabilities. The Company recorded an impairment charge of $840 thousand during the first quarter of 2002 based on the expected proceeds from the sale. This charge is recognized as a loss on disposal. In October 2002, the Company signed an agreement to sell substantially all of the assets of AWS for approximately $6.63 million and the assumption of certain post-petition liabilities. The Company recognized an impairment charge of $5.9 million at September 30, 2002 to adjust the recorded value of AWS' long-lived assets to their estimated fair value based on the expected proceeds from the sale. Also in October 2002, the Company agreed to sell substantially all of the assets of BBP for approximately $5.95 million and the assumption of certain post-petition liabilities. The Company recognized an impairment charge of $2.5 million at September 30, 2002 to adjust the recorded value of BBP's long-lived assets to their estimated fair value based on the expected sale proceeds. As of September 30, 2002, all of the Company's remaining operations are being marketed for sale. The assets and post-petition liabilities of these businesses are classified as being held for sale in the accompanying balance sheet. The Statement of Operations reflects the sales, cost of sales, selling, general and administrative costs and other expenses of these remaining operations and, together with the results of operations of businesses sold prior to September 30, 2002 (classified as disposed operations), are classified as discontinued operations. The following discussion and analysis refer only to the operations of the Company not classified as disposed operations. RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED September 30, 2002 AND 2001 DISCONTINUED OPERATIONS Net Sales Net Sales increased $4.9 million from $24.5 million for the three months ended September 30, 2001 to $29.4 for the same period in 2002. The increase in sales is due to increased volumes at all three of the Company's remaining operations with almost half of the increase generated by the Company's southern aluminum and vinyl window manufacturer, Danvid. Gross Profit Gross profit increased $0.3 million to $4.7 million during the three months ended September 30, 2002 from gross profit of $4.4 million during the three months ended September 30, 2001. The Company's Weather-Seal operations reflected improved gross profit of $0.5 million for the three month period ending September 30, 2002 compared to the comparable period in 2001. This additional gross profit was offset slightly by a decrease in gross profit at Danvid despite the increased sales volumes there, due to a change in product mix and higher scrap costs resulting from using a different glass product. Danvid's decreased gross profit was the primary contributor to an overall decrease in gross margin of 1.9%. Gross margin for the three month period ending September 30, 2001 was 17.8% as compared to 15.9% for the three month period ending September 30, 2002. Selling, General and Administrative Expenses. Selling, General and Administrative Expenses before impairment charges were $3.9 million for the three months ended September 30, 2002 compared to $3.7 million for the comparable period in 2001 reflecting an increase of $0.2 million. This increase is due to increased selling expenses of $0.4 million in support of increased sales volumes which were offset slightly by a $0.2 million decrease in general and administrative expenses realized by all three of the Company's operations. Impairment Charge. At September 30, 2002 the Company recorded impairment charges of $5.9 million and $2.5 million at it's Weather-Seal and Binnings operations, respectively. These charges reflect the difference in the carrying values of those operation's long-lived assets as compared to their fair value as evidenced by the expected proceeds from the sale of those assets. No impairment charges were recorded by those businesses during the three months ended September 30, 2001. Loss before Disposed Operations. The impairment charges recorded by AWS and Binnings totaling $8.4 million were the primary factors contributing to the loss before disposed operations for the three month period ending September 30, 2002 of $7.6 million. This compares to income before disposed operations of $0.6 million for the three months ended September 30, 2001. CONTINUING OPERATIONS Corporate General and Administrative and Other Expenses. Corporate general and administrative and other expenses decreased $2.6 million from $3.4 million for the three months ended September 30, 2001 to $0.8 million for the three months ended September 30, 2002. During the third quarter in 2001, the Company recorded a reserve of approximately $2.1 million relating to a note receivable from a prior business divestiture. Additionally, the Company fully amortized deferred charges related to the DIP Facility in December 2001; therefore, amortization expense decreased approximately $0.3 million during the three months ended September 30, 2002 compared to the three months ended September 30, 2001. The divestiture of various businesses during 2002 has contributed to further decreases in Corporate overhead costs. Interest Expense. The Company recognized no interest expense during the three month period ended September 30, 2002 as the DIP Facility was repaid in May 2002 with a portion of the proceeds from the sale of Eagle. During the same period, the Company recognized $0.2 million in interest income on its investment of the remaining proceeds from the Eagle sale. The Company incurred approximately $0.5 million of net interest expense during the three month period ended September 30, 2001. Reorganization Costs. Reorganization costs were approximately $0.7 million for both three month periods ended September 30, 2001 and 2002. These costs consist primarily of professional fees. Income Taxes. The Company established a full valuation allowance on its income tax benefit recorded for the three months ended September 30, 2002 and 2001. COMPARISON OF NINE MONTHS ENDED September 30, 2002 AND 2001 DISCONTINUED OPERATIONS Net Sales. During the nine months ended September 30, 2002, net sales were $80.4 million representing an increase of $10.1 million over year-to-date September 30, 2001 net sales of $70.3 million. The increase is primarily due to increased sales volumes at the Company's Danvid operation. Gross Profit. Gross profit increased by $2.6 million from $10.9 million during the nine months ended September 30, 2001 to $13.5 million for the comparable period in 2002 resulting from increased sales volumes. Gross margin for the same period increased 1.2% to 16.8% for the nine months ended September 30, 2002 from 15.6% for the nine months ended September 30, 2001. The shutdown of Weather-Seal's Ottawa operations in the second quarter of 2001 was a significant contributor the improved gross margins realized during this period. Selling, General and Administrative Expenses. Selling, General and Administrative expenses before impairment charges for the nine months ended September 30, 2002 as compared to the comparable period in 2001 remained consistent at $11.2 million in each year. Impairment Charge. During the year-to-date period ended September 30, 2002, the Company recorded $17.1 million in impairment charges. $8.7 of these charges related to the write-off of goodwill recorded during the second quarter as a result of the Company's impairment review. The remaining $8.4 million impairment charge results from the write-downs of the Company's long-lived assets at Weather-Seal and Binnings of $5.9 million and $2.5 million, respectively, to their estimated fair value based on the expected proceeds from the sale of those assets. Loss before Disposed Operation. The Company recognized a loss before disposed operations of $14.9 million for the nine months ended September 30, 2002 as compared to a loss of $0.4 million for the comparable period in 2001. The current year-to-date loss is due to the $17.1 million impairment charge. The remaining $2.2 million income before disposed operations results from the improved gross profit and consistent selling, general and administrative expenses during the year-to-date period ended September 30, 2002 as compared to the year-to-date period ended September 30, 2001. CONTINUING OPERATIONS Corporate General and Administrative and Other Expenses. Corporate general and administrative and other expenses decreased $2.7 million from $5.3 million during the nine months ended September 30, 2001 to $2.6 million for the comparable period in 2002. During the third quarter in 2001, the Company recorded a provision to reserve a note receivable from a prior business divestiture of approximately $2.1 million. Also, during the nine months ended September 30, 2001, the company had amortized approximately $0.7 million of deferred charges related to the DIP Facility in 2001. The charges were fully amortized in 2001. Interest Expense, net. Net Interest expense decreased $1.4 million from $1.5 million for the nine months ended September 30, 2002 to $0.1 million for the nine months ended September 30, 2002. This decrease is due to the repayment of the Company's DIP credit Facility in May 2002. The Company has also recognized interest income of $0.3 million from the investment of the net proceeds from the sale of Eagle after repayment of the DIP Facility. Income Taxes. The Company established a full valuation allowance on its income tax benefit recorded for the nine months ended September 30, 2002 and 2001. LIQUIDITY AND CAPITAL RESOURCES The Company's principal liquidity requirements are for debt service requirements under the 1997 $125 million, 11-3/4% Senior Notes (Notes), the note issued in connection with the Weather-Seal acquisition, working capital needs and capital expenditures. The Company's annual principal and interest debt service requirements, including capital lease obligations, remain uncertain until a plan of reorganization is filed and approved by the Bankruptcy Court. Cash used in operating activities before discontinued operations was $5.6 million and $4.8 million for the nine months ended September 30, 2002 and 2001, respectively. The Company received approximately $1.2 million in the third quarter of 2001 in satisfaction of an amount receivable in conjunction with a previous business divestiture which offset a portion of the cash used in operations primarily for interest payments on the DIP credit Facility and reorganization costs. Net activity on the Company's line of credit resulted in a use of cash of $18.6 million during the nine months ended September 30, 2002 and a source of cash of $7.5 million for the same period of 2001. The Company used a portion of the proceeds from the sale of Eagle to repay the DIP Facility in May 2002. The remaining proceeds are invested in a money market mutual fund which is used to fund the Company's operating requirements. The proceeds from the sale of Eagle are included in net cash provided by investing activities of discontinued operations in the accompanying financial statements. SEASONALITY The Company's business is seasonal since its primary revenues are driven by residential construction. Inclement weather during the winter months, particularly in the northeast and midwest regions of the United States, usually reduces the level of building and remodeling activity in both the home improvement and new construction markets and, accordingly, has an adverse impact on the demand for fenestration products. Traditionally, the Company's lowest sales levels usually occur during the first and fourth quarters. The Company believes that its operations in the southwestern and southeastern United States minimize the risk to the Company for potentially unusual inclement weather conditions in the midwest and the northeast. Because a high percentage of the Company's manufacturing overhead and operating expenses are relatively fixed throughout the year, operating income has historically been lower in quarters with lower sales. Working capital requirements are usually at their highest level during the second and third quarters. CYCLICALITY Demand in the fenestration industry is influenced by new home construction activity and the demand for replacement products. Trends in the housing sector directly impact the financial performance of the Company. Accordingly, the strength of the U.S. economy, the age of existing home stock, job growth, consumer confidence, consumer credit, interest rates and migration of the inter/intra U.S. population have a direct impact on the Company. Any declines in new housing starts and/or demand for replacement products may adversely impact the Company and there can be no assurance that any such adverse effects would not be material. INFLATION AND RAW MATERIAL COSTS During the past several years, the rate of inflation has been relatively low and has not had a significant impact on the Company's operations. However, the Company purchases raw materials, such as aluminum, wood, vinyl and glass, that are subject to fluctuations in price that may not reflect the general rate of inflation, and are more closely tied to the supply of and demand for the particular commodity. Specifically, there have been periods of significant and rapid changes in aluminum prices, with a concurrent short-term impact on the Company's operating margins. In some cases, generally where the increases have been modest, the Company has been able to mitigate the effect of these price increases over the long-term by passing them on to customers. FORWARD-LOOKING STATEMENTS Certain statements in this Section and elsewhere in this report are forward-looking in nature and relate to trends and events that may affect the Company's future financial position and operating results. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms "expect," "anticipate," "intend," and "believe" and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this report. The statements are based on current expectations, are inherently uncertain, are subject to risks, and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including changes in economic conditions in the markets served by the Company, increasing competition, fluctuations in raw materials and energy prices, and other unanticipated conditions. It is not possible to foresee or identify all such factors. The Company makes no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to fluctuating interest rates that may impact, adversely or otherwise, the results of operations and cash flows for its cash and cash equivalents, primarily in money market mutual fund investments. The estimated fair value of cash and cash equivalents approximates the principal amounts reflected in the Company's balance sheets. Item 4. CONTROLS AND PROCEDURES Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, there were no significant changes in the Company's internal controls or in other factors that could significantly affect the disclosure controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II -- OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On December 18, 2000, the Company and its subsidiaries filed for voluntary protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Northern District of Ohio (the "Bankruptcy Court"). The Company is presently operating its business as a debtor-in-possession under Chapter 11 and is subject to the jurisdiction and supervision of the Bankruptcy Court. The Company and its subsidiaries are engaged in various litigation and have a number of unresolved claims. While the amounts claimed are substantial and the ultimate liability with respect to such litigation and claims cannot be determined at this time, management believes that such liability, to the extent not provided for through insurance or otherwise, is not likely to have a material impact on the financial condition or the results of operations of the Company. However, all such claims arising prior to December 18, 2000 must be resolved through confirmation of the Company's plan of reorganization as such plan may be approved by the Bankruptcy Court. Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not Applicable Item 3. DEFAULTS UPON SENIOR SECURITIES See Note 2 to the Consolidated Financial Statements. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable Item 5. OTHER INFORMATION As previously disclosed, the Company entered into an agreement in December 2001 to sell certain assets of the Binnings Pan American (BPA) and TM Window and Door (TM) divisions of its subsidiary Binnings Building Products, Inc. for consideration consisting of $500,000 cash, a $1.7 million note receivable and the assumption of certain liabilities. This transaction closed on February 15, 2002. On August 30, 2002, the Company announced that an investigation is being conducted into certain matters relating to conduct of the purchaser and its principals with respect to this transaction. The Company is unable to predict the duration or potential results of the investigation at this time. The Company has been engaging in negotiations with third party buyers regarding the potential sale of substantially all of the operating assets of each of Weather-Seal, Binnings, and Danvid. George Hofmeister, Chairman of the Board of Directors of the Company, has advised the Company that he potentially may have a pecuniary interest in such a transaction and, as such, will abstain from any action taken by the Board of Directors with respect thereto. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 99.1 - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K During the third quarter of 2002, the company filed the following current reports on Form 8-K: September 10, 2002 under Item 5: Other Events. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN ARCHITECTURAL PRODUCTS CORPORATION Date: November 14, 2002 /s/ Joseph Dominijanni -------------------------------------- Joseph Dominijanni Chief Executive Officer /s/ Douglas J. Thomas -------------------------------------- Douglas J. Thomas Chief Financial Officer CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Joseph Dominijanni, certify that: 1. I have reviewed this quarterly report on Form 10-Q of American Architectural Products 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. 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; 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: November 14, 2002 /s/ Joseph Dominijanni -------------------------------------- Joseph Dominijanni Chief Executive Officer CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Douglas J. Thomas, certify that: 1. I have reviewed this quarterly report on Form 10-Q of American Architectural Products 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. 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; 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: November 14, 2002 /s/ Douglas J. Thomas -------------------------------------- Douglas J. Thomas Chief Financial Officer

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