Leasing News

SINGAPORE (Reuters) - U.S. speculators dumped dollars for yen and Asian stock markets slipped on Wednesday after the Federal Reserve left interest rates unchanged at 40-year lows and warned of weak conditions in the world's biggest economy.

The dollar softened against major currencies after the Fed said America's economic risks had shifted toward weakness, fanning speculation of a return to recession.

"People are worried about a double-dip recession and now they think the Fed is a little worried as well," said currency strategist Meg Browne at HSBC .

Traders said the Fed's statement did leave the door open for further cuts, and some investors said the sell off would be brief.

Dealers said U.S. speculators were selling the dollar during lunch hour, when trade tends to be thin. At 0440 GMT, it was quoted at 117.00 yen more than a full yen down from 118.72 yen in late U.S. trade on Tuesday.

The euro was also gaining ground against dollar, climbing to 98.81 cents, compared with 98.30 cents in late U.S. trade on Tuesday.

The U.S. central bank's Federal Open Market Committee voted unanimously to leave its trend-setting federal funds rate at 1.75 percent, but said weak stock markets and corporate scandals were taking a toll.

"The decision was as expected but the reaction in the stock market was bigger than we had thought," said Junya Tanase, global markets officer at JP Morgan Chase..

Poll suggests consumer confidence at lowest level since 1996

By Associated Press

Consumer confidence has slipped to its lowest level since 1996 in the ABC News- Money Magazine consumer index, a 15-year-old tracking poll.

The index, based on Americans' ratings of the economy, their personal finances and the buying climate, was released Tuesday the same day that President Bush convened his economic forum in Waco, Texas, to discuss the current health of the economy.

Consumer confidence in this survey was highest in January 2000 and lowest in February 1992.

Other findings:

A third, or 32 percent, rated the economy this month as excellent or good.

Fewer than four in 10, 38 percent, said now is a good time to buy things.

Those most likely to have a gloomy view of the economy were women, Democrats, blacks and those with low incomes.

The consumer tracking poll is based on interviews with about 1,000 adults each month and has an error margin of plus or minus 3 percentage points.

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HPSC Reports Strong Second Quarter 2002 Results Net Income Increases 292%

BOSTON--HPSC, Inc. (AMEX: HDR) reports a 292% increase in net income for the second quarter ended June 30, 2002, with net income of $1.05 million, compared to $268,000 in the same quarter last year. In line with preliminary results announced last week, earnings per share on a diluted basis were $0.24 in the second quarter of 2002 versus $0.06 in the prior year period. Basic earnings per share were $0.26 in the second quarter of 2002 compared to $0.07 in the same quarter last year. Net revenues for the second quarter of 2002 were $13.8 million, a 2% decrease from $14.1 million reported in the second quarter of 2001, primarily reflecting lower levels of asset sales activity and lower weighted-average implicit interest rates on financing contracts. Net operating expenses for the second quarter of 2002 were $12.1 million, an 11% improvement from the $13.6 million recorded in the same period last year.

Said John W. Everets, Chairman and Chief Executive Officer, "We are very pleased that the past quarter's results were so solid, building on those of the first quarter this year, with exceptionally strong net earnings as well as a strong volume of financings. Our financing margins continue to be attractive, despite the decline in interest rates. We continue to focus on our strategy of gaining market share and providing high quality service to our customers."

On June 17, 2002, the company reported that it had discovered than an employee of its asset-based lending subsidiary, American Commercial Finance Corporation (ACFC), had perpetrated a defalcation by which approximately $5 million had been diverted from the company over the last five years. The company has completed its formal investigation into this matter. As a result, the company has restated its financial statements for the periods affected beginning in 1996 through the first quarter of 2002. A copy of the restated annual report on Form 10-K/A for 2001 is available on the company's website under investor relations (www.hpsc.com), or can be obtained via the SEC's EDGAR system, or by calling the company at 617-720-7202.

Shortly after the close of the second quarter, the company closed on new revolving credit facilities with Foothill Capital Corporation, a subsidiary of Wells Fargo Bank, as the managing agent for a bank group. The variable-rate lines of credit provide the company and its subsidiary, ACFC, with committed facilities of up to $70 million to warehouse the company's new lease and loan financing contracts and to provide financing support for portions of the company's asset-based lending services provided through ACFC. The company has also entered into a new financing arrangement with ING Capital LLC pursuant to which ING will provide the company up to $20 million of financing collateralized by the company's interest in its existing Bravo facility.

In the second quarter of 2002, the volume of the company's new financing contract originations, excluding ACFC, rose to $74.2 million, a 17% increase over volume of $63.6 million produced in the second quarter of 2001. For the first six months of 2002, the volume of the company's new originations, excluding ACFC, increased 10% to $135.0 million from $123.1 million for the comparable period in 2001. For the six months ended June 30, 2002, ACFC originated $2.7 million in new lines of credit compared to $9.9 million for the same period last year. The company's total gross portfolio of owned and managed lease contracts and notes receivable grew to $858 million at the end of the second quarter of 2002, a 6% increase from a gross portfolio of $806 million at the end of 2001. Unearned income increased 8% to $113 million at the end of the second quarter of 2002, from $105 million at the end of last year.

For the first six months of 2002, net income was $1.9 million, a 117% increase over the $863,000 reported for the first half of 2001. Earnings per share on a diluted basis for the first half of 2002 were $0.44, compared to $0.20 for the same period last year. Basic earnings per share were $0.47 for the first half of 2002, compared to $0.22 for the first half of 2001. Net revenues for the first half of 2002 were $26.3 million, a 3% decline from net revenues of $27.2 million reported in the same period last year, reflecting lower interest rates received on the company's portfolio and decreased asset sales. Net operating expenses for the first six months of 2002 were $23.2 million, a 10% reduction from the $25.8 million reported for the same period last year.

HPSC will host a conference call and webcast to discuss these results on Wednesday, August 14, 2002, at 4 pm EDT. The call can be accessed by calling 1-800-310-6649, confirmation code 652791, or on the Internet at www.hpsc.com, and following instructions to the link there. A replay of the call will be available until Wednesday, August 21, 2002 at midnight and can be accessed either via the company's website or by calling 1-888-203-1112, confirmation code 652791.

About HPSC

HPSC Inc. (AMEX: HDR) is a leading non-bank financial services company providing leasing and financing opportunities to the medical and dental professions in all 50 states. Through its asset-backed lending subsidiary, American Commercial Finance Corporation (ACFC), the Company provides asset-based lines of credit to manufacturing and distribution companies throughout the eastern United States. For more information, please visit the company's website at www.hpsc.com.

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act. Such statement are subject to a number of risks and uncertainties, including but not limited to the following: the Company's dependence on funding sources and restrictive covenants in funding documents; payment restrictions and default risks in asset securitization transactions to which the Company is a party; customer credit risks; competition for customers and for capital funding at favorable rates relative to the capital costs of the Company's competitors; changes in healthcare payment policies; interest rate risk; the risk that the Company may not be able to realize the residual value of financed equipment at the end of its lease term; risks associated with the sale of certain receivable pools by the Company; dependence on sales representatives and the current management team; and fluctuations in quarterly operating results. The Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2001, contain additional information concerning such risk factors. Actual results in the future could differ materially from those described in the forward looking statements as a result of certain risk factors, including those set forth above, and the risk factors described in the Annual Report. HPSC cautions the reader, however, that such list of risk factors may not be exhaustive. HPSC undertakes no obligation to release publicly the result of any revisions to these forward looking statements that may be made to reflect any future events or circumstances.

Operating Performance:

(in thousands, except per share and share amounts)

Three Months Ended Six Months Ended

June 30, June 30, June 30, June 30,

2002 2001 2002 2001

(Unaudited)(Unaudited)(Unaudited)(Unaudited)

Revenues

Earned income $ 12,789 $ 12,416 $ 25,002 $ 24,447

Gains on sales of leases

and notes 3,839 4,218 5,907 6,862

Provision for losses (2,806) (2,553) (4,586) (4,060)

Net revenues 13,822 14,081 26,323 27,249

Selling, general and

administrative 5,566 6,246 10,524 11,432

Loss from employee

defalcation 157 345 448 753

Interest, net 6,347 7,036 12,215 13,591

Income before income taxes 1,752 454 3,136 1,473

Provision for income taxes 702 186 1,262 610

Net income $ 1,050 $ 268 $ 1,874 $ 863

BASIC NET INCOME PER SHARE $ 0.26 $ 0.07 $ 0.47 $ 0.22

Shares used to compute

basic net income per

share 4,064,324 3,962,100 4,030,106 3,957,199

DILUTED NET INCOME PER

SHARE $ 0.24 $ 0.06 $ 0.44 $ 0.20

Shares used to compute

diluted net income per

share 4,356,733 4,354,278 4,274,475 4,288,031

Selected Financial Data

June 30, Dec. 31,

2002 2001

(Unaudited)(Unaudited)

Cash and cash equivalents $ 1,510 $ 1,211

Restricted cash- Securitization servicing 27,353 28,786

Unearned income 112,841 104,741

Net investment in leases and notes 443,142 396,996

Senior notes and notes payable to banks 381,145 336,806

Senior subordinated notes 19,985 19,985

Stockholders' equity 38,031 36,781

--30--ma/bos*

CONTACT: HPSC Inc.

John Everets, 617/720-3600

________________________________________________________________________________________

GROWTH 1 FUNDING CORP.

1616 East Fourth Street

Suite 110

Santa Ana, CA. 92701

Email: info@growth1.com

Phone: (714) 835-6961

Fax: (714) 835-7532

www.growth1.com

http://www.growth1.com/Large_Projects/large_projects.html

Leasing News is seeking any experience a reader may have had regarding

this company. If you have any information or had dealings with this company, please let us know. Also, if you have any background information on Roxanna Munoz and/or Dane Moore? We are seeking information and have no opinion on these individuals or this company.

Growth 1 Funding Corp. was written about in Landline Magazine regarding allegedly not funding trailer-truck leases, and at one time were working with Kendra Bernal of the Funding Tree. It appears they are now offering to finance large projects $40 million and larger.

Kit,

Here are the two stories I wrote that include information about Growth 1.

The first one is what got me started on these finance companies, and the

second is my follow-up story. I’ll be out of the office for the next couple

days, so I’ll talk to you Friday.

Later,

Rene

Easy money?

by Rene Tankersley, feature editor

(Owner- Operator Independent Drivers Association)

They are a new breed of loan sharks and they are helping themselves to

thousands of dollars from owner-operators seeking easy money through

alternative financing or special lease programs. In reality, these

advance-fee finance companies are the ones getting the easy money.

*OOIDA Business Services department recently received complaints f

rom owner-operators who reportedly lost money to Growth 1 Funding Corporation in Santa Ana, CA, for promised equipment leasing and financing services. On the surface, Growth 1 looks legitimate with its professional-looking web site, but the Better Business Bureau (BBB) of the Southland in Colton, CA, rates Growth 1 as having an “unsatisfactory business performance record.”

*The BBB report on the company further states: “Complaints contain a pattern of allegations that the company made promises of obtaining financing with specific terms. When the company failed to obtain the financing at rates originally quoted or provide promised terms, customers requested refunds of the deposit amounts. The company responded by generally denying requests, referring to the terms and conditions of the commitment fee, or that a portion of the deposit amount was kept due to expenses incurred by the company attempting to obtain the financing.”

*OOIDA members Johnnie Banner, Lawrence McCafferty and Steven Long all reported similar experiences with Growth 1.

*An unsuspecting equipment dealer in Tampa, FL, referred Banner, of Auburndale, FL, to Growth 1 in July 2001 to obtain financing for a 2000 Kenworth W-900L (total cost $85,547.99) to be purchased from the dealer. Per written instructions by Growth 1, Banner signed a preliminary lease agreement for the promised financing and paid documentation fees and two lease payments totaling $5,510.77. After wire transferring the money from Banner’s checking account, Growth 1 did not provide the promised financing. Banner, his attorney and the equipment dealer have all contacted Growth 1 several times by phone and letters trying to get a refund for Banner. All they received was empty promises of “we will look into it.”

*On Nov. 5, Roxanna Munoz, senior underwriter for Growth 1, told Land Line the company owes Banner a refund.

*”I did find out that definitely this customer is owed a refund, there is no argument on that,” Munoz said. “Unfortunately, right now we’re just not allowed to cut out any checks at this moment due to a freeze that has been put in our company with our account due to an internal bank auditing that’s going on. We’re just looking at about another couple of days from now, it could be any day now that I have word that we have clearance and we can go ahead and start the accounting department back up to go ahead and do what they’ve got to do. I have your information here as to give you a concrete date of when Mr. Johnnie Banner should be getting his check.”

*McCafferty of Fernley, NV, says he’s heard this and several other promises from Munoz regarding the $1,653.73 he gave the company in June for an equipment lease that never materialized. His introduction to Growth 1 also came through a nearby unsuspecting truck dealer.

Long, of Palm Bay, FL, had a similar experience in July when he tried to purchase a drop trailer from a Kansas City, MO, equipment dealer, who referred him to Growth 1. Like the others, he signed a preliminary lease agreement and paid $200 in documentation fees and two lease payments of $610 each, totaling $1,420. As with Banner and McCafferty, the lease went nowhere.

Growth 1 has refunded $1,000 to Long, who still believes the company owes him $420 plus the other related expenses. Growth 1 isn’t the only finance company causing problems for OOIDA members. Two other California companies - Funder Direct and Commercial Money Center Inc. - have been the subjects of complaints by OOIDA members Lonnie Byers of Ozark, AR, and Darren Purrier of Las Vegas. Byers gave Funder Direct out of San Diego, $1,353.32 in May to lease a trailer that never was delivered.

Darren Purrier purchased a new truck through a dealer on Commercial Money Center’s lease program. Because he knew he had credit problems, Purrier says he expected the high payments and a higher interest rate, but not 48.672 percent interest. Because the interest rate was never stated in the lease agreement, Purrier did not realize how much interest he was paying until his accountant reviewed his records at tax time. He’s talked to a couple of people about refinancing the truck at a lower interest rate, but the lease agreement requires any early pay-off to include all the interest for the entire lease.

Funder Direct and Commercial Money Center have something in common. Although Funder Direct is using an address in San Diego, the California Secretary of State’s corporation filings list the company address as 221 West Crest in Escondido, CA, the same address used by Commercial Money Center.

WEB SPECIAL: Easy money? The sequel

Since the first report on Commercial Money Center Inc., Growth 1 Funding Corp. and other advance fee loan companies (Dec/Jan, Land Line), three OOIDA members - Johnnie L. Banner, Steven D. Long Sr. and Lonnie Byers - received refunds from Growth 1 and Funder Direct. However, more small-business truckers have reported losing thousands to this new breed of loan sharks who promised equipment financing, took their money and gave them nothing but excuses.

OOIDA member Lawrence E. McCafferty of Fernley, NV, is still waiting for his $2,573 refund from Growth 1 for a failed truck financing deal. OOIDA member Maxie McIntosh of Perris, CA, also paid $2,573 to Growth 1 on April 3, 2001, but the finance company never came through with the funding. Roxanna Munoz, senior underwriter for Growth 1, has agreed to look into refunds for McIntosh and McCafferty. Based in San Diego, CA, Growth 1 is owned by Dane Moore, but most owner-operators report dealing with Munoz.

At least five owner-operators reported problems with Commercial Money Center, headquartered in Las Vegas with an office in Escondido, CA. Burrell L. Lee Jr., OOIDA member from Radcliff, KY, gave CMC $5,194.53 in advanced payments plus $220 for processing fees and $175 for a Quicktrak inspection on May 8, 2001, to finance a truck. For his money, he received no financing, no equipment and no refund.

The same rings true for owner-operator Dane Stieben, of Colby, KS, who paid $5,840 to CMC; Phil and Victoria Stone, of Nortonville, KY, paid $4,520.56 to finance a trailer with CMC; and Galloway Transport, of Grandville, GA, who reported to the Federal Trade Commission it paid $2,000 to CMC for financing.

Senitteau Norton of Boulderick Farms and Norton Refrigeration financed three trucks through CMC, and then some refrigerated trailers in October 2000. To finance the trailers, Norton paid $4,787.26 in advanced payments plus a $220 processing fee and $175 for a Quiktrak inspection.

Soon after she picked up the trailers and had them licensed, the dealership repossessed them because CMC never paid for the equipment. Since the financing fell through on the trailers, she asked CMC to apply the trailer down payment toward her truck payments, but CMC refused. With no trailers to go with their trucks, Norton’s company could not earn enough money to pay for the trucks and eventually lost them, too.

These owner-operators may have lost up to $5,000 each to CMC, but OOIDA members Darren Purrier of Las Vegas, Henry Brown of Phoenix, AZ, and Patricia Breeden of Stafford, VA, are paying CMC’s 48-50 percent interest rates. Purrier says when he confronted CMC about the high interest rates, he was told the rates were completely legal because it was a lease, not a loan.

Purrier says recent major repair work has made it difficult to keep up with the lease payments. When the Purriers tried to get a deferment, a CMC representative told them they must miss the payment before CMC would send them deferment paperwork. However, the rep didn’t tell the Purriers about the more than $300 in fees they were charged for the deferment.

Brown says the truck he received is not the one described on his paperwork and he still can’t get a legal title for the truck.

Munoz says CMC is out of business. Attempts to confirm this information were met with a full voice mailbox at CMC’s California office and a know-nothing receptionist at the Las Vegas headquarters, where company execs were unavailable for comment. The receptionist deferred all questions to a Mr. Gwarder (correct spelling not given), who was in a deposition April 4. However, a representative at U.S. Bancorp, who now services CMC’s lease contracts, did say the California office is closed, but the Las Vegas office currently is open.

Although CMC and Growth 1 received the most complaints from owner-operators, a few other companies each received one complaint. Of those, Commercial Leasing of Louisiana, an agent of Florida-based company International Corporate Finance Ltd., took the most money from one individual. Marti Wright of South Star Transport in El Paso, TX, paid Commercial Leasing more than $20,000 to finance three new trucks, which were repossessed about a month after delivery because the finance company never paid the dealer. Telephone numbers for Commercial Leasing are disconnected.

All complaints were forwarded to the Federal Trade Commission; the appropriate state’s attorney general and a private attorney for review. Some owner-operators have sought help from district attorneys in the counties where these companies operate.

If you have experienced similar problems, make an official report to the FTC at 1-877-382-4357 and the attorney general in your state and the state where the company is located. Your attorney general’s office should be listed in the government pages of your local telephone directory.

When a consumer calls these agencies, they usually will send the consumer a complaint form. It is very important to follow through with the complaint by filling out the necessary forms and returning them to the appropriate agencies along with copies (not originals) of all relevant documents. As with any business transaction, keep copies of all contracts, invoices, receipts and correspondence, including any complaint forms filed with various agencies.

--Rene Tankersley, feature editor

(As for Commercial Money Center, the company is going through the bankruptcy

proceedings. The bond insurance companies have their sets of attorneys. Their fees range from $350 to $450 an hour, not including legal assistants and aides, so whatever cash is generated will go to employees with claims, government taxes and fees, then the attorneys. All the officers are back in the leasing business under

different names and entities. They claim they are innocent of any wrong doing

or knowledge to any improprieties.

Leasing News hopes to have an up-date regarding the Funding Tree. Kendra

Bernal has resigned as president and awaits her trial for allegedly violating

parole. )

http://www.utdallas.edu/police/wavs/DragnetSetting.WAV

http://www.utdallas.edu/police/wavs/DragnetTheme.WAV

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Equipment Leasing Association Accountants Conference Sept 9-11

For over 20 years, ELA’s Lease Accountants Conference has provided companies like yours with the most up-to-date information on lease accounting standards. In the past year, the accounting profession has been thrown into the limelight due to reports of non-compliance with these standards.

If there was ever a year to attend the ELA Lease Accountants Conference, THIS IS THE YEAR! It is imperative that a representative from your company attend this significant event, scheduled September 9-11, 2002 at the Renaissance Mayflower Hotel, Washington, D.C.

For complete details and to register, or to download a PDF file of the conference brochure, go to: http://www.elaonline.com/events/2002/leaseaccts/

Program highlights include:

o Keynote addresses by SEC Deputy Chief Accountant Jackson Day and FASB member, Michael Crooch: What accountants must do now to accurately report the financial condition of their companies.

o The latest thinking and ELA’s analysis and position on the Consolidation of SPE’s Exposure Draft: What will happen to Off Balance Sheet Financing?

o A discussion of the latest FASB deliberations on Guarantor’s Accounting and Disclosure Requirements: What will this mean for Residual Value Guarantees?

For complete details and to register, or to download a PDF file of the conference brochure, go to: http://www.elaonline.com/events/2002/leaseaccts/, or email Janet Fianko at jfianko@elamail.com for the brochure to be mailed to you.

Look forward to seeing you at this important conference!

Michael Fleming, President

Equipment Leasing Association

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Hawaii Calling---This is Bette Kerhoulas Speaking

http://www.utdallas.edu/police/wavs/DragnetJob.WAV

Bette Kerhoulas, incoming president of the United Association of Equipment

Leasing Association, called from the main island in Hawaii. She is on vacation

from Pacifica-Capital, and promised her husband not to bring a lap top, but

she calls in every day.

It seems even though Leasing News said she was on vacation, she and her

staff received many telephone calls. No, she says, they don’t need to

borrow any money. They have cash to pay any fines or penalties, plus

they do not believe the Franchise Tax Board is correct.

It does appear that document fees for mortgage loans are taxed by the Franchise

Tax Board. At least, she says that is what they claim. The mortgage companies

do not charge the borrower for the sales tax, but they pay it.

It appears if the charge is with the other cost, it is part of the sale. If it is separate, meaning a separate letter, then it may be considered “labor” and not taxable.

Certain states already charge sales tax on passing title, it appears, such as Texas.

The key is the wording on the master document, but it now appears the California

Franchise Tax Board will be auditing all leasing companies in California during

the next two years to see if they are compiling, and if not, they owe the sales

tax plus ten percent interest per year for the last three years.

From Hawaii, she says she does not know if the UAEL Sales Tax meeting will

discuss this, or whether the representatives will have all the definitive answers,

but at Leasing New’s request, she is going to have a Mai Tai.

http://haleokala.com/bobblez.mid

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”We need to fight together,” Paul Menzel, CLP

Santa Barbara Bank and Trust’s discounting agreement does not pass title. Another consideration and argument that should be made to the Franchise Tax Board is that title can only be passed if the underlying transaction is a true lease. Otherwise the lessor never has title. Regardless of what the document says, lessors should examine the substance of the transaction as well.

All the lessors that are arguing with the Franchise Tax Board should ban together and hire a good attorney who has experience in this area. I would suggest Carey Boyden in Sacramento. This is an industry challenge that we need to fight together.

It is another example of the impact of our State’s poor management and the need for revenue at all costs that are threatening the small business person.

Paul J. Menzel, CLP

Senior Vice President / General Manager

Leasing Division

SANTA BARBARA BANK & TRUST

P.O. Box 60607

Santa Barbara, CA 93160-0607

1 South Los Carneros Road

Goleta, CA 93117

Dir Ph# (805)560-1650

Email PaulM@sbbt.com

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Federal and State Income Tax Issues, Too

The question of just selling rents or providing title has federal income tax issues as well. If a leasing company sells the payment stream on a non recourse basis and retains title then you have to look to see if the transaction is a tax lease.

The lessor retainsMACRS depreciation but must report as income the full discounted rent from the funding source because the non-recourse means there is no liability to return it so it becomes earned at once. Some believe that by not taking depreciation they have no quarrel with the IRS when in fact the question is “how much income to report”.

As the owner you report rent income not the fee you earned. If you hold title on a true lease and sell the stream, on a non recourse basis, your income is the discounted rent amount received and it is only off set with the first years MACRS depreciation. That is why many lessors sell the title and obtain a remarketing agreement to obtain residual or purchase option rights..

This California sales tax question now puts an additional problem to sell or not to sell the title ..

Terry Winders CLP

Leaseconsulting@msn.com

-----------

This is not the first time the State Board of Equalization is visiting this

issue. I worked for a leasing company in the 70’s and early 80’s who got

“trapped by their logic.

Because I was a partner in a general partnership, they levied a number of partners personal bank accounts to get their money. It took 4 years to get that money back because a suit was brought.( not by us) ( Enterprise Leasing I think) and it was determined that just having the word sale in the documents between you and your lender did not constitute a sale. It was the “intent of the document and not the form” that was binding and relevant.

The only upside of the whole nightmare was that while the state board had our money, they were charging and paying about 5% more than banks. When it was finally resolved, our “enforced savings accounts” had all grown nicely.

I’m getting really sick of governmental agencies waking up every morning with the thought “ Who can I get money from now?”

Doris Tamboryn

J.G. Capital Corp.

Overtam@aol.com

---

I’m not sure why everyone is surprised about the State of Ca’s position

on collecting tax on discounted leases. This has always been the rule

(as far back as I can remember).

There were several UAEL sessions on the topic. When they need more taxes, they enforce stronger. Wasn’t there a 90 day rule (discounting took place within 90 days) that saved a lot of lessors in the past? Someone may be able to look into the specifics to help out Bette.

Hope this helps.

Jim Swander

Jim Swander <jimswander@sprintmail.com>

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Heat records fall in western Oregon

The Associated Press

PORTLAND, Ore. (AP) -- Records were accumulating faster than beads of sweat Tuesday as at least 10 Oregon cities had afternoon temperatures of more than 100 degrees.

More than a dozen cities in the western part of the state set records, including Portland, which declared an "orange" air pollution warning because of high ozone levels.

The air quality warnings mean that state officials expect high temperatures and low-level winds, which mix with auto exhaust and other pollutants to create high levels of smog.

In Medford, smoke from forest fires mixed with the state's worst heat -- 108 degrees -- to create breathing woes.

"To add insult to injury, we're probably looking at some high ozone numbers here as well," said John Becker, an Oregon Department of Environmental Quality air quality expert in Medford. "Right now, the best advice is, if you've got smoke around you, try to take it easy."

Particle pollution, such as that from fires or diesel engines, is even more dangerous to health than ozone pollution, said Michael Heumann, an environmental epidemiologist for the Oregon Public Health Service. That's because particles carry chemicals on their surface and lodge in the lungs, he said, instead of being breathed out like other pollutants.

While wildfire smoke continued to cause problems in a few cities, such as Brookings, wind helped keep Klamath Falls, Eugene and other cities relatively free of smoke or ozone pollution.

Roseburg reached 107 degrees, the second hottest spot in the state, while Corvallis and Troutdale both hit 106, beating records that have stood since the drought-plagued summer of 1977.

Coastal cities were also hit hard by the heat wave. Astoria logged a 95- degree day, 9 degrees higher than the previous record. Tillamook also hit 95, beating its high by 11 degrees. Newport sweltered in 99-degree heat, blasting past its old record of 83 degrees, set Aug. 13, 1942.

But Florence was the hottest coastal spot, hitting 104 degrees. To the east, Eugene recorded the same temperature, and Salem also hit 104, edging out a 103-degree record for Aug. 13 that the capital set in 1920. Gorge winds didn't save The Dalles, which hit 102.

In Portland, the official high temperature as measured at Portland International Airport was 102 degrees, topping a 96-degree record set in 1992.

( How hot was it? Jim Merrilees did not hit the golf balls after work. )

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CIT Small Business Lending Surpasses $2 Billion In SBA Loans

Celebrates 10 Years Of Serving The Small Business Community

LIVINGSTON, NJ - CIT Small Business Lending Corporation (SBL), the nation's number one Small Business Administration lender and a unit of CIT Group, Inc. (NYSE: CIT), today announced it has surpassed the $2 billion mark in total owned and managed SBA Loans made to small businesses nationwide since 1992.

"Growing the business unit from a start-up lender to the nation's number one SBA loan provider for two years in a row is a special accomplishment that we feel very proud of," said John Canning, president of SBL. "Reaching $2 billion in managed assets in our 10th year of operation, especially in such a challenging economic environment, is a testament to the great entrepreneurial spirit that drives the U.S. economy. SBL's focus is on serving the needs of all small business owners," added Canning.

CIT Small Business Lending has a network of approximately 70 field sales offices throughout the U.S., and since its inception has provided loans to over 7,500 entrepreneurs, helping them realize their dreams of starting, acquiring or growing their businesses. Loans range from $50,000 to $3 million, with the average loan size approximately $500,000.

"We are also proud to have overseen more than $1 billion in total project costs through our Construction Lending Department since its inception in 1997," said Canning. "This demonstrates our commitment to helping small businesses meet a variety of financing needs, including building their business from the ground-up."

About CIT Small Business Lending Corporation

CIT Small Business Lending Corporation offers Small Business Administration (SBA) loans to finance business acquisitions, owner-occupied real estate purchases and franchise start-ups though a network of field representatives. The nation's #1 SBA lender, CIT Small Business Lending has been designated a "Preferred Lender" by the SBA and can provide quick credit decisions and loan closings. The company's website and online SBA loan application are located at www.smallbizlending.com.

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HP Formally Announces HP Financial Services

HP announced today ) HP Financial Services, the company's new leasing and financial services subsidiary. HP Financial Services is designed to enhance HP's worldwide sales efforts by delivering a broad range of financial services and asset management capabilities that can positively impact HP's customer and partner relationships and shareowner value.

HP Financial Services operates as a wholly owned subsidiary of HP, and HP intends to include its performance as one of five segments in HP's quarterly financial segment reporting. HP Financial Services represents approximately 4 percent of HP's total revenue. Ten percent of total HP sales are leased transactions.

The merger of HP and Compaq has brought together more than 1,500 IT financing professionals -- managing nearly $10 billion in assets in more than 50 countries -- to form one globally consistent team focused on making the process of acquiring, managing and retiring IT solutions simpler. HP Financial Services is the second largest captive IT leasing company in the world and operates in more countries than any other leasing company in its segment.

"HP Financial Services brings to the new HP a centralized business model for the financial services we offer our customers as part of a total HP solution. We are confident our subsidiary will help fuel company growth and increase shareowner value," said Peter Blackmore, executive vice president, HP Enterprise Systems Group. "The new HP is ready to execute for current and future customers, and HP Financial Services is ready to meet their financial asset management needs throughout the technology life cycle."

HP Financial Services is headed by former Compaq Financial Services president and chief executive officer Irv Rothman and has headquarters in Murray Hill, N.J. Regional headquarters are in Dublin, Ireland, and Sydney, Australia. Rothman brings 29 years of financial and leasing experience to the company.

"The combination of HP Technology Finance and Compaq Financial Services has brought together two great organizations to create a global leader in IT financing -- better equipped than ever before to provide customers with globally consistent offerings and ready to take our place among the best-performing financial services companies in the world," said Rothman. "Customers are looking for solutions that fully integrate products and services -- including financial services. Our new organization helps sharpen HP's competitive edge by delivering the broadest range of global IT financial services available."

Rothman will be supported by a team of 11 senior executives including: Tom Adams, Finance; Ed Andrews, Global Structured Finance; Gerri Gold, Corporate Development; Ann Henry, Corporate Resources; Keith Kendall, North America; Cynthia Klustner, Integration Management; Dan McCarthy, Legal; Matt Minetola, Information Technology; Constantin Salameh, Europe, Middle East and Africa; Cintia Silverstre, Latin America; and John Sutherland, Asia Pacific. Current customers from HP and Compaq will continue to receive the same level of service and quality they have come to expect from their account teams.

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Wine consumption grows in U.S. in 2001

Despite a slow economy and slow travel and hospitality industry, U.S. wine consumption is growing, a new handbook showed.

The 2002 edition of the Adams Wine Handbook showed that U.S. wine consumption rose to 233.7 million 9-liter cases in 2001, up about 0.8 percent frm last year. In the last seven years, annual compound growth was 3.6 percent

Table wine, the largest category with a nearly 90 percent market share, was the cause behind the increase, the handbook showed, and was the only category to grow last year. Imported wine grew 6.4 percent last year, while total domestic wine dropped 0.6 percent.

"Consumer demand for quality varietal wines from around the globe, coupled with reports linking moderate wine consumption to good health, has helped fuel the wine boom of the past eight years," said Robert Keane, co-publisher of the Adams Beverage Group, publisher of the handbook.

Other factors attributed to the increase in wine consumption is attractive prices of imports, better educated consumers and more variety.

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French on road to mapping wine DNA

The test allows scientists to detect which grapes have been used in wines

CNN

PARIS, France—French wine experts believe they have found a way to use DNA to tell the difference between a vintage and plonk.

The National Institute of Agronomic Research (INRA) says it has mapped the DNA sequences of unpurified wine which may allow them to distinguish diluted wines from authentic champagne, or grand cru.

French anti-fraud investigators hope genetic tracing will become an alternative to current, decidedly unscientific, ways of detecting fraud.

Today, authorities rely on rigorous inspection of wine inventories and the close monitoring of accounting books, rather than science.

INRA scientist Philippe This said the technological advance consists of taking unpurified wine made from a single type of grape and tracing its DNA sequence to differentiate it from mixtures.

He said: “It’s not quantitative—we can’t tell if a wine is, say, 85 percent of one type of grape and 15 percent of another, but we can determine which ones are present.”

The INRA team has so far identified the genetic makeup of wines from some 600 types of grapevine, less than one-fifth of the estimated world total.

However, the purification process strips out much of the DNA from wine by the time it’s bottled.

That means it may not be possible, at least in the near future, for researchers to take a bottle off the store shelf, run a few tests and determine whether it’s the real thing or a rip-off with a false label.

“It’s not even sure we’ll ever be able to do that,” This said. “We should have the first confirmations within the next six months or so about whether it’s possible.”

Alain Chatelet, head of the wine inspection division of France’s Competition, Consumption and Anti-Fraud Agency said: “We are very interested in this research—it could give us an important additional weapon in the fight against fraud.”

Last year, the agency carried out about 26,700 checks across France to crack down on wine fraud.

In May, wine merchant Jacques Hemmer received an 18-month prison sentence and was fined almost $1 million for trying to pass off a mixture of cheap table wine as authentic Bordeaux.

“It’s extremely easy to falsify the origin of wine,” said Chatelet.

“Right now, there are virtually no types of analysis that would allow us to distinguish one wine from another.”

( They also claim Zinfandel is not a California grape, but originally comes

from Croatia???)

----------------------------------------------------------------------------------

Scientists map genetic code of wine—AP

(different viewpoint )

By LAURENCE JOAN-GRANGE, Associated Press Writer

PARIS (AP) - It may be less enjoyable than relying on taste buds, but French researchers say they have found a way to use DNA to tell the difference between a high-end wine and a cheaper blend.

Scientists at the National Institute of Agronomic Research recently succeeded in mapping the DNA sequences of unpurified wine, with the hope that one day they can distinguish diluted wines from authentic champagnes, or grand crus.

So far, the technological advance consists of taking unpurified wine made from a single type of grape - not the purified wine people drink - and tracing its DNA sequence to differentiate it from mixtures, says Philippe This of INRA’s wine genetics lab in the southern city of Montpellier.

“It’s not quantitative - we can’t tell if a wine is, say, 85 percent of one type of grape and 15 percent of another, but we can determine which ones are present,” he said.

However, the purification process strips out much of the DNA from wine by the time it’s bottled. That means it may not be possible, at least in the near future, for researchers to take a bottle off the store shelf, run a few tests and determine whether it’s the real thing or a rip-off with a false label.

“It’s not even sure we’ll ever be able to do that,” This said. “We should have the first confirmations within the next six months or so about whether it’s possible.”

The INRA team has identified the genetic makeup of wines from some 600 types of grapevine, less than one-fifth of the estimated world total. Only about 200 types of grape are used in the wines consumed today, This said.

French anti-fraud investigators hope genetic tracing will become an alternative to current, decidedly unscientific, ways of detecting fraud. Today, authorities rely on rigorous inspection of wine inventories and close monitoring of accounting books, not science.

“We are very interested in this research - it could give us an important additional weapon in the fight against fraud,” said Alain Chatelet, who heads the wine inspection division of the government’s Competition, Consumption and Anti-Fraud Agency. Last year, his division carried out about 26,700 checks across France to crack down on wine fraud.

“It’s extremely easy to falsify the origin of wine,” said Chatelet. “Right now, there are virtually no types of analysis that would allow us to distinguish one wine from another.”

Other studies on the amino acids, isotopes and mineral content in wine are under way, he said.

In May, a court sentenced wine merchant Jacques Hemmer to 18 months behind bars, eight of them suspended, and fined him the equivalent of about $1 million for trying to pass off a mixture of cheap table wine as authentic Bordeaux.

Wine is a vital industry in France, traditionally one of the world’s top consumers and producers. In 1999, the last year such figures were available, the value of wine production in France was about $9.2 billion, Chatelet said. About 800,000 people, such as growers, distributors and vendors, are employed in the industry here

Gimme That Wine

http://www.epinions.com/musc_mu-68711/display_~full_specs

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Wineries Cheer Appellation's Failure

By Michelle Locke

Associated Press Writer

PHILO, Calif. –– Morning and evening, winemaker Deborah Cahn can see the Pacific Ocean fog lapping her vine-covered hills in the Anderson Valley, its chill dankness fostering the "noble rot" that gives a sweet and spicy kick to her vineyard's Gewurtztraminer varieties.

Which is why she vigorously opposes the idea of lumping her vineyard, 10 miles east of the craggy Northern California coast, into a new "California Coast" wine region stretching 600 miles south to the sun-baked Mexican border.

"I grow grapes in what I think is a really superior part of the world and I think having Anderson Valley on the label makes a difference," says Cahn, who with her husband, Ted Bennett, started Navarro Vineyards some 30 years ago. "I would not make as good a Gewurtztraminer if I did not grow it in the Anderson Valley."

The point of her winery "is to produce wines that reflect a specific place at a specific point in time," she added. "When the area gets too big, vineyard location and vintage variation becomes meaningless."

So far, regulators at the Bureau of Alcohol, Tobacco and Firearms have agreed, rejecting the request twice, most recently in July.

Still, the issue isn't finished in wine country, with both sides claiming they're trying to find the best way to define wine.

"There are labels on the market today that contain the words 'California coast,' or 'California coastal,' but because that is not defined, it's what is called a fanciful term," says Pete Downs, vice president for government affairs for Kendall-Jackson Wine Estates, a heavyweight that supported the new district. "We were looking for a way to define that so that the consumer understood that that had some real meaning."

The issue demonstrates how seriously wine buyers examine labels and how many vineyards are working to produce wines they believe reflect the qualities of narrowly defined geographic areas, the concept known by the French as "terroir."

As recently as the late '70s, wines were labeled under loose standards that allowed the use of many geographic areas. But in 1978, the ATF began recognizing American Viticultural Areas, known as AVAs. Once an AVA is established, wines may use the name, known as an appellation, on the label, but 85 percent of the wine must originate from the named region.

California has more than 80 AVAs, and most went through with little fuss.

But not the California Coastal AVA, which was proposed in 1998 by a consortium of large winemakers, including Kendall-Jackson and Robert Mondavi, to stretch from Mexico to Mendocino County.

The request was rejected, but the petitioners came back in 2000 with a revised proposal for a "California Coast" designation.

The proposed AVA would have included 68 smaller AVAs and covered 22,000 square miles, going inland anywhere from 5 to 68 miles. It would have joined the established South Coast, Central Coast, San Francisco Bay, and North Coast AVAs and filled in gaps in between.

More than 470 people sent in comments to regulators, nearly all of them negative.

Opponents saw the plan as a marketing strategy looking to capitalize on the popularity of California coastal wines. They say the plan would confuse consumers.

"Our emphasis really should be on strengthening the appellations and we saw the broad profile of this particular proposal in essence weakening us," says Tom Shelton, president of Joseph Phelps Vineyards.

Regulators agreed, saying the mountain ridges, interior basins and coastal plains of the proposed district were too dissimilar to present as one region with definable characteristics.

At Navarro Vineyards, Cahn and Bennett have had success with a number of wines, including the Gewurtztraminer, although it took a while for them to appreciate their foggy advantage. For some years they threw away grapes with botrytis until a European visitor showed them that, properly handled, the grapes can be turned into smooth, sweet wines.

They're concentrating on producing wines unique to their location, resisting "a tendency in America to make everything taste like Coca-Cola," says Cahn. "We think it's more important to have a product that tastes better some years ... but really represents the time and place."

–––

On the Net:

http://www.navarrowine.com/main.php

Pitt warns lawyers on fraud

By Associated Press

WASHINGTON - The nation's top securities regulator warned business lawyers yesterday they must represent the interests of shareholders, not just chief executives, lest they face the same oversight and penalties now visited on accountants and corporate chieftains.

Securities and Exchange Commission chairman Harvey Pitt noted that lawyers already face more federal scrutiny because of a new law to crack down on corporate fraud and stiffen penalties for wrongdoers, including the power to go after ill- gotten legal fees. There may be more to come, Pitt said.

The law ''should alert this group that, in addition to auditors and corporate leaders, Congress believes that lawyers representing public companies also have responsibilities requiring governmental definition,'' Pitt told business lawyers gathered for the annual meeting of the American Bar Association.

''Lawyers for public companies represent the company as a whole and its shareholder-owners, not the managers who hire and fire them,'' Pitt said.

Pitt, a securities lawyer before he joined the Bush administration, noted that most lawyers balk at the idea of Congress or federal agencies dictating lawyer conduct. The legal profession is supposed to operate largely under it own ethics code, with state bar associations policing misconduct.

Pitt said he is disappointed by a lax response to cases of possible securities fraud or other lapses that his agency has referred to state bars.

The new law gives the SEC new power to police lawyers, as well. Lawyers must now report some kinds of misconduct to company higher-ups or to the board or directors, with the SEC the arbiter of whether lawyers did enough.

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################ #####################################################

ePLUS REPORTS FIRST QUARTER FINANCIAL RESULTS:

REVENUES INCREASE DUE TO ACQUISTIONS AND CUSTOMER GROWTH

Revenues Increase 35% to $72 Million; Net Earnings Decline 7.6% to $2

Million

HERNDON, VA - - ePlus inc. (Nasdaq NM: PLUS <http://finance.yahoo.com/q?s=plus&d=t> - news

<http://biz.yahoo.com/n/p/plus.html>), a leading provider of Enterprise Cost Management (ECM) today announced financial results for its first quarter ending June 30, 2002. For the quarter, as compared to the same period the prior fiscal year, total revenues increased 35% to $72.2 million from $53.3 million, net earnings declined 7.6% to $2.0 million from $2.1 million, and fully diluted earnings per share declined 9.5% to $0.19 from $0.21.

The increase in total revenues for the quarter was driven by a 39% increase in sales of equipment to new customers from two acquisitions, and increased equipment orders from ePlus’ existing customers. Phillip G. Norton, chairman, president and CEO of ePlus stated “Our acquisition strategy is to expand our geographic footprint and acquire new customers. With the acquisition of SourceOne in October ‘01 and Elcom in March ‘02, we strengthened our competitiveness and visibility in New England, New York, New Jersey, and California, and acquired several hundred new customers. We have integrated and retained the acquired customer base, and have successfully introduced other ePlus Enterprise Cost Management products to these customers.”

“ePlus began a number of pilots for Procure+ and Content+ for Fortune 1000 companies” continued Mr. Norton. “If they are successful, they should transition to multi-year license and subscription deals in the next few months. This area looks promising, and our pipeline of new opportunities is strong. In many cases, we competed against the best vendors in the industry or displaced incumbents to win the pilot.”

During the quarter, ePlus incurred higher general and administrative expenses, including a 60% increase in salaries and benefits, from $7.0 million to $11.2 million. Total headcount increased from 460 to 590 from June 30, 2001 to June 30, 2002. ePlus incurred expenses related to the transition of the acquired customers and systems, including the changeover of approximately 40 customers from Elcom’s internet procurement system to ePlus’ Procure+, and integration of the SalesTrak order automation and tracking system acquired from Elcom into ePlus’ systems. The transition was substantively completed by July 31^st.

Mr. Norton said. “We are incurring higher costs as compared to prior years, to hire and support a greater sales staff, expand locations, improve our products, and increase marketing activities. All of these investments are highly focused on increasing our customer base and revenues. We believe it is important to make this investment today, while our competitors are shrinking, to be better positioned to capture growth in the future. Our success this quarter is clear evidence that our strategy is right on target.”

During the quarter, ePlus generated cash flow of $4.1 million, and its cash position grew from $28.2 million to $32.3 million. Total shareholder’s equity grew to $108.2 million or $10.30 per share (fully diluted).

Highlights

* ePlus announced ePlus Enterprise Cost Management (eECM), a holistic approach to generating cost savings throughout an enterprise. eECM combines ePlus’ leading software, business process services, sales, and financing services. ePlus hosted its first webinar and sponsored its first white paper, “Enterprise Cost Management: A Holistic Approach to Capturing and Sustaining Cost Savings” by Aberdeen Group, Inc.

* ePlus Content Services signed four Content+ licenses or services agreements. Each transaction is structured as a pilot; upon successful completion, transactions will continue as licenses or subscription agreements. Although there is a charge for each pilot, nominal revenues were recorded during the quarter ending June 30, 2002.

* ePlus Systems signed four Procure+ licenses, pilots, or software upgrades, two of which replaced competitor’s systems.

Of the eight Content+ and Procure+ customers, one is in the Fortune

100, two are in the Fortune 500, and one is in the Fortune 1000.

* ePlus rolled out Manage+ v3.0, which includes an updated Application Security Layer, enhanced reporting, new global update feature, and comprehensive search feature, and announced its first customer on the new version, Towers Perrin.

* ePlus continued to provide financing for a broad range of commercial, educational, and governmental customers, including the U.S. Coast Guard, Westinghouse Savannah River, Pennzoil Quaker State, Alcoa, Remington Arms, Texas Health Resources, Boston University, The Trane Company, Whirlpool Corporation, Williams College, RBC Dain Rauscher, Carolina Power and Light, City of Raleigh, Duke University, General Dynamics, Ingersoll Rand, and Meadwestvaco.

* Amended a State of New Jersey purchase contract acquired from Elcom, to ePlus Technology, and increased the term to one year, facilitating the sale of equipment and services to the state, municipalities, and schools.

* ePlus continued to sell equipment and services to a broad range of commercial, educational and governmental customers, including multiple educational institutions under the PEPPM contract, AOL, the Commonwealth of Pennsylvania, Silicon Valley Bank, VISA International, City of Raleigh, Food Lion, Martin Marietta Materials, Salomon Smith Barney, U.S. Marine Corps, and Pennzoil.

* Formed a Canadian subsidiary for servicing U.S. customers with operations in Canada.

The financial results presented herein are unaudited. Investors are

encouraged to review the company’s Form 10-Q which will be filed on or

around August 15, 2002, and to review other SEC filings including the

company’s audited financial statements contained in Form 10-K.

Conference Call Scheduled for Wednesday, August 14^th at 11:00 A.M.

The Company will host a conference call at 11 a.m. on Wednesday, August 14, 2002. To listen, please call (973) 633-1010 or toll-free 800-683-1535. Ask to be connected to the ePlus conference call. Live and archived webcasts can be accessed from <http://www.eplus.com/news/073002.htm>. A telephone replay of the conference call will be available by calling (877) 519-4471 or (973) 341-3080, and entering the passcode 3409975 beginning at about 2:00 P.M. on August 14^th through August 24^th.

About ePlus inc.

A leading provider of Enterprise Cost Management, ePlus provides a comprehensive solution to reduce the costs of purchasing, owning, and financing goods and services. ePlus Enterprise Cost Management (eECM) packages business process outsourcing, eProcurement, asset management, supplier enablement, strategic sourcing, and financial services into a single integrated solution, all based on ePlus’ leading business application software. Profitable since inception in 1990, the company is headquartered in Herndon, VA and has more than 30 locations in the U.S. For more information, visit our website at www.eplus.com <http://www.eplus.com>, call 800-827-5711 or email to info@eplus.com <mailto:info@eplus.com>.

ePlus™, ePlusSuite™, Procure+™ , Manage+™ , Service+™, and MarketBuilder™ are trademarks of ePlus inc. ePlus Enterprise Cost Management, eECM, Pay+ and ePlus Leasing are trademarks applied for of ePlus inc. Finance+SM is a registered service mark of ePlus inc. ePlus Content FrameworkSM is an applied for service mark applied ePlus inc. Other marks referenced herein are property of their respective owners.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release, which are not historical facts, may be deemed to be “forward-looking statements”. Actual and anticipated future results may vary due to certain risks and uncertainties, including, without limitation, general economic conditions; the possibility of defects in our products or catalog content data; our ability to hire and retain sufficient personnel; our ability to protect our intellectual property; the creditworthiness of our customers; our ability to raise capital and obtain non-recourse financing for our transactions; our ability to realize our investment in leased equipment; our ability to reserve adequately for credit losses; fluctuations in our operating results; our reliance on our management team; and other risks or uncertainties detailed in our Securities and Exchange Commission filings.

ePlus inc. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

Three Months Ended

June 30,

2001 2002

REVENUES

Sales of equipment $36,453,739 $50,631,880

Sales of leased equipment 452,108 4,611,303

36,905,847 55,243,183

Lease revenues 10,792,055 10,575,403

Fee and other income 5,595,434 6,356,694

16,387,489 16,932,097

TOTAL REVENUES 53,293,336 72,175,280

COSTS AND EXPENSES

Cost of sales, equipment 31,351,389 45,389,224

Cost of sales, leased equipment 427,370 4,535,001

31,778,759 49,924,225

Direct lease costs 3,288,399 910,776

Professional and other fees 720,524 773,073

Salaries and benefits 6,966,460 11,178,983

General and administrative expenses 3,623,994 3,628,301

Interest and financing costs 3,350,257 2,410,584

17,949,634 18,901,717

TOTAL COSTS AND EXPENSES 49,728,393 68,825,942

EARNINGS BEFORE PROVISION FOR INCOME TAXES 3,564,943

3,349,338

PROVISION FOR INCOME TAXES 1,425,977 1,373,203

NET EARNINGS $2,138,966 $1,976,135

NET EARNINGS PER COMMON SHARE - BASIC $0.22 $0.19

NET EARNINGS PER COMMON SHARE - DILUTED $0.21 $0.19

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 9,946,355

10,402,604

WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 10,138,328

10,504,198

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Merrill Lynch Takes Steps to Help Build Public Confidence in American Business

NEW YORK----Merrill LynchCEO and CFO Certify Financial Statements; Firm Already in Compliance

with New Regulatory Proposals; Stock Options to be Expensed

Merrill Lynch (NYSE:MER) today announced further steps to strengthen its corporate governance and financial reporting.

The company has submitted certifications attesting to the accuracy of its financial statements as newly required by both the S.E.C. and the Sarbanes-Oxley Act recently passed by the Congress. Chairman and Chief Executive Officer David Komansky and Chief Financial Officer Tom Patrick signed and submitted the certifications last Friday, August 9.

Messrs. Komansky and Stan O'Neal, president and chief operating officer, noted that Merrill Lynch is in compliance with virtually all of the policies and procedures embodied in new proposals by the New York Stock Exchange as well as those mandated by the regulators and the Congress.

"We have a long tradition of strong corporate governance," they said. "For example, we already have in place nearly all of the NYSE proposals."

Among specifics:

The Merrill Lynch board consists of nine independent directors

with only the CEO and COO as employee members.

The board's audit, compensation and nominating committees are composed entirely of independent directors.

Each of the directors on the audit committee has "financial expertise," as required by the new proposals.

The company's outside auditor, Deloitte & Touche, has long reported directly to the board's audit committee.

The independent directors periodically meet in private sessions without management.

Messrs. Komansky and O'Neal noted that Merrill Lynch has long required shareholder approval of equity-based compensation plans for executives. "A new rule calls for shareholder approval of such plans for all employees - and we will comply," they said.

As part of an industry-wide initiative, Merrill Lynch also said it will expense stock options on its income statement in the future, under a methodology to be developed, making it one of a group of leading financial services firms to publicly announce the action.

"This decision is one of a series of steps we have taken and will continue to implement to help build public confidence in American business," said Messrs. Komansky and O'Neal. "We are joining other leading financial firms in committing to the development and application of a uniform and consistent method of expensing options - with an appropriate transition period." The company expects the change to be effective for stock options granted for the performance year 2003.

The company also noted that in the last two weeks Merrill Lynch's Global Securities Research & Economics Group has initiated important new measures to help investors better evaluate the financial performance of companies covered by the firm.

"We are requiring all U.S. equity research reports to include earnings based on generally accepted accounting principles (GAAP) in addition to any pro forma earnings that companies may report," said Messrs. Komansky and O'Neal. "We also have identified six key income statement and balance sheet measures that will be incorporated as appropriate into our research reports to help investors better evaluate the quality of a company's reported numbers."

These new measures "are above and beyond" a number of far-reaching research standards adopted by Merrill Lynch earlier this year to strengthen the clarity, independence and objectivity of its research.

"Financial institutions are the window through which investors see the capital markets. It's incumbent on firms like ours to lead by example in the way we operate internally and in the way we conduct business," they said. "We are committed to doing everything we can to help build investor confidence - in Merrill Lynch and in the financial markets."

Merrill Lynch is one of the world's leading financial management and advisory companies with offices in 37 countries and total client assets of approximately $1.4 trillion. As an investment bank, it is a leading global underwriter of debt and equity securities and a leading strategic advisor to corporations, governments, institutions and individuals worldwide. Through Merrill Lynch Investment Managers, the company is one of the world's largest managers of financial assets, with approximately $500 billion in assets under management. For more information, please visit www.ml.com.

--30--ac/ny*

CONTACT: Merrill Lynch

Media Relations:

Tim Cobb, 212/449-9205

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Former Detroit mayor to become first black leader of lawyers' group

By Gina Holland

WASHINGTON (AP) The American Bar Association picked a black former big-city politician Tuesday to break a 125-year string of white presidents.

Dennis Archer, a past Michigan Supreme Court justice and two-term mayor of Detroit, was elevated to president-elect of the 408,000-member association. He pledged to emphasize diversity in the group, which is still mainly white 60 years after a ban on black members was lifted.

''Today is the beginning of a new chapter,'' Archer said as his wife of 35 years, Trudy, wiped away tears. The Archers were joined by Cecilia Marshall, the widow of Thurgood Marshall, the first black Supreme Court Justice, and Sen. Hillary Rodham Clinton, D-N.Y.

Archer, a native of 1,500-resident Cassopolis, Mich., grew up in a home with no indoor plumbing and took weekly baths in a metal tub. His father had a third-grade education and couldn't find good work after he lost an arm in a car accident. Archer started working at age 8 with odd jobs like setting up bowling pins and caddying at a golf course.

He said a professor encouraged him to crack into the ''white'' bar 30 years ago and he decided ''it is better to work from within than on the outside, throwing bricks and stones.''

Black lawyers who had been kept out of the ABA founded the competing National Bar Association in 1925. Archer headed that group in 1983, while also working his way into leadership jobs for the ABA.

The ABA elected Alfred P. Carlton of Raleigh, N.C., president on Monday. Archer was selected to succeed Carlton in August 2003 and will serve for one year.

''I am saddened that it has taken this long,'' said Arkansas Appeals Court Judge Wendell L. Griffen of Little Rock, who is black. ''I am hopeful that we will be able to replicate that, that the doors will also be opened in law firms and law schools.''

While its ban on black members was in place, the ABA checked to make sure applicants were white. There was an effort to run out several black lawyers after they slipped through the application process in 1912.

The ABA ended the ban in 1943, but black membership stayed small.

In 1986, the group began a drive for black members, pressing for ''full and equal participation'' of minorities and females. There is evidence of the group's work. At the association' six-day meeting, which ended Tuesday, there were multiple discussions about recruiting black lawyers and keeping them in the profession.

Also at this year's meeting, the group chose another black lawyer Robert Grey Jr. of Richmond, Va. to follow Archer as president in 2004-5.

''The ABA has acknowledged our history. People wish it weren't so. Many of us are embarrassed by it. But those sentiments have opened up hearts and minds to more inclusiveness. This is a different ABA,'' said Martha Barnett of Tallahassee, Fla., the second female ABA president, who served from 2000-01.

The ABA does not ask members to list their race, but it's estimated that less than 3 percent of the group is black, a reflection of the mostly white legal profession. Archer said Tuesday he will reach out to encourage more young minorities to try law as a career.

During his year as president, Archer will work almost full-time for the group, meeting with leaders all over the world about issues like legal representation for people facing the death penalty.

''It is mind-boggling to find myself where I am today,'' Archer said in an interview. ''You start thinking of the sacrifices that have been made. So many lawyers couldn't go into the courtroom or use the law library because they were people of color, indignities they had to experience.''

On the Net:

American Bar Association: http://www.abanet.org

NAME: Dennis Wayne Archer.

AGE-BIRTHDATE: 60; born in Detroit, Jan. 1, 1942.

CAREER: Detroit mayor, 1994-2001; Michigan Supreme Court justice, 1986-90; lawyer, law professor, special education teacher.

EDUCATION: Graduate of Detroit College of Law, Western Michigan University.

FAMILY: Wife, Trudy DunCombe Archer, a judge in Michigan; two sons

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News Briefs---

IBM confirms plans to cut 15,000 employees

NEW YORK (AP) After months of layoff notices, technology giant IBM Corp. revealed that it's in the process of cutting more than 15,600 jobs, or 5 percent of its work force.

Airline cutbacks, low-cost carriers shaping Boeing's future

SEATTLE (AP) Even as Boeing's largest customer retrenches and U.S. airlines continue to struggle, the company's commercial jet division says its already-halved production plans have not changed and that overseas markets are offering glimmers of hope.

OfficeMax reports larger loss in second quarter

CLEVELAND (AP) Office products retailer OfficeMax Inc. on Tuesday reported stronger sales in the second quarter during what is typically its slowest season, but said its loss for the quarter increased from a year ago.

Bankruptcy court examiner: Planet Hollywood forgave celebs' loans

ORLANDO, Fla. (AP) Planet Hollywood International Inc. wrote off $5 million in loans to celebrities and created a ``tangled web'' of insider deals that benefited top executives and other insiders, an independent review of the bankrupt company shows.

---

Bankruptcy court examiner: Planet Hollywood forgave celebs' loans

At forum, Bush says times 'kind of tough' but better economy ahead

WACO, Texas (AP) President Bush said that ``times are kind of tough'' as workers, investors and business leaders poured out their anxieties Tuesday at an economic forum about lost jobs, falling stock prices and the spread of corporate corruption.

West Coast dock workers, shipping lines back at bargaining table

SAN FRANCISCO (AP) Contract negotiations between West Coast dock workers and shipping lines resumed Tuesday after a two-week hiatus filled with increasingly snappish rhetoric from both sides.

Female doctors spend more time with patients, study suggests

CHICAGO (AP) Female primary-care doctors spend more time with their patients than male doctors and engage in more patient-oriented, emotion-focused talk during office visits, a study found.

---

Citigroup donating big sums to Davis campaign

SACRAMENTO, Calif. (AP) Financial services giant Citigroup Inc. is fighting on several fronts in California to influence key legislators and Gov. Gray Davis.

Sad fact, but it's time Davis ran into sunset

By Mark Kiszla

Denver Post Sports Columnist

- GREELEY - It's over. After 7,607 yards rushing in the NFL, two Super Bowl victories and four surgeries to knees that have betrayed his greatness, this amazing run of Terrell Davis' simply cannot go on.

T.D. knows it.

Denver coach Mike Shanahan knows it.

So why cannot the Broncos say goodbye to T.D.?

Because saying goodbye is always the hardest part of any relationship built on guts and glory.

The Broncos have loved Davis to the point of extinction. They have ridden the best running back in franchise history into the ground.

The player and the team both swear no decision has been made. But do either the Broncos or T.D. really have any choice?

It is time for Davis to retire from football. In his heart and mind, T.D. does not want to leave the game. His aching body, however, is screaming for him to quit.

"Football is great, but it's not everything in life," Davis said. "I mean, it was fun while it lasted."

Early Monday evening, it felt uncomfortably late to Davis. Standing not far from the practice field where an unheralded sixth-round draft choice from Georgia set his remarkable NFL dreams in motion seven years ago, T.D. was buffeted by an uncommonly chilly summer breeze.

And what sent shivers down the spine was the very real possibility that No. 30 will not score a touchdown again for the Broncos.

Davis is a young man still shy of his 30th birthday. Doctors, however, have poked and probed his brittle, arthritic, degenerating knees, then told T.D. the last words any athlete wants to hear.

"In football terms, I'm pretty old," Davis said, "especially as a running back."

Shanahan possesses a harsh trait essential to a successful NFL coach. His heart can keep beating with ice in his veins. Without a trace a sentimentality, he has cut ties with star players from Steve Atwater to Michael Dean Perry. But telling T.D. he cannot play any longer would be far more difficult for Shanahan. Why?

For it was Davis who once dashed to the huddle at the Super Bowl, despite being blind from a throbbing migraine. If Shanahan had not pushed T.D. way past the red line, using him to excess by handing him the ball a nearly unfathomable 951 times during the 1997 and '98 seasons alone, the knees of this tailback might not be in tatters now, but the Broncos would definitely not have two championships in their trophy case.

When Shanahan was asked point-blank, however, if he can now trust Davis to be reliable enough to carry the load of being the Broncos' workhorse, the coach's honesty was almost too much to swallow.

"I don't think anybody knows the answers to the questions: How much will he play? How long can he play? Will the knee hold up?" replied Shanahan, later revealing the grim reality: "I cannot say the chances are great."

Davis has been a no-limit soldier of boundless courage. During the past three seasons, however, T.D. has slowly been reduced to a painful parody of the star he once was.

Every Broncos teammate prays Davis can stay a step ahead of the inevitable, for one more championship run, one more Pro Bowl season, or even one more game. Tight end Shannon Sharpe, however, sees the truth. In the eyes of T.D. is the obvious fatigue of a warrior who has been pushing too hard through too much pain for too long.

"At some point in time," Sharpe said, "you have to realize that, "You know what? I've had a great career, maybe it's time to focus my energies on something else.' "

It makes us all feel a little older to realize that T.D. has worn out his knees and his welcome in the NFL.

Thoughts of retirement are whirring inside, and Davis will not sleep soundly until a decision is reached. Just because the answer is right does not make it any easier. "The hamster is up there running on the wheel," he said. "I'm thinking about a lot of different things."

T.D. should walk away, while he still can, with his head held high and no regrets.

Go now, before Shanahan is left with no option except to give Davis the harshest cut of all, or worse, before teary-eyed teammates must drag Davis off the field with one of his lame legs dangling in pain.

Davis rushed for 2,008 yards in 1998, covering more ground in a year than O.J. Simpson ever did. He joins Joe Montana in a select NFL club of nine players who have been named the MVP of both a regular season and the Super Bowl. Nobody in league history except T.D. has ever run undefeated for 100 yards in seven straight playoff games.

Davis has achieved the impossible in football. Now, however, he must do something even harder.

Say goodbye.

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