10-Q 1 cli02q2.txt FORM 10Q QUARTERLY PERIOD ENDED JUNE 30, 2002 UNITED STATES 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 June 30, 2002 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ To _______________ Commission file number 0-11997 CARRINGTON LABORATORIES, INC. (Exact name of registrant as specified in its charter) Texas 75-1435663 ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 2001 Walnut Hill Lane, Irving, Texas 75038 ----------------------------------------------------- (Address of principal executive offices and Zip Code) 972-518-1300 ----------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. 9,871,695 shares of Common Stock, $.01 par value, were outstanding at August 9, 2002. INDEX Page ---- Part I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at June 30, 2002 (unaudited) and December 31, 2001 3 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2002 (unaudited) and 2001 4-5 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 (unaudited) and 2001 6 Notes to Condensed Consolidated Financial Statements (unaudited) 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of 13-14 Security Holders Item 6. Exhibits & Reports on Form 8-K. 14 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Condensed Consolidated Balance Sheets (Dollar amounts in 000's) December 31, June 30, 2001 2002 ------ ------ (unaudited) Assets Cash and cash equivalents $ 3,454 $ 2,008 Accounts receivable, net 1,622 2,047 Inventories 5,338 4,548 Prepaid expenses 189 492 ------ ------ Total current assets 10,603 9,095 Property, plant and equipment, net 10,404 10,162 Other assets 210 170 ------ ------ Total assets $21,217 $19,427 ====== ====== Liabilities and Shareholders' Investment Notes payable $ 763 $ 763 Accounts payable 1,099 661 Accrued liabilities 884 962 Deferred revenue 417 417 ------ ------ Total current liabilities 3,163 2,803 Capital lease obligation - 146 Deferred revenue, long-term 1,125 1,375 Shareholders' investment: Common stock 98 99 Capital in excess of par 52,429 52,501 Deficit (35,598) (37,497) ------ ------ Total shareholders' investment 16,929 15,103 ------ ------ Total liabilities and shareholders' investment $21,217 $19,427 ====== ====== The accompanying notes are an integral part of these statements. Condensed Consolidated Statements of Operations (unaudited) (Dollar amounts and shares in 000's, except per share amounts) Three Months Ended June 30, 2001 2002 ----- ----- Revenues: Net product sales $3,702 $ 3,729 Royalty income 628 617 ----- ----- Total revenues 4,330 4,346 Costs and expenses: Cost of sales 2,464 2,874 Selling, general and administrative 1,204 1,454 Research and development - basic 614 462 Research and development - DelSite - 383 Other Income (7) 21 Interest, net (5) 10 ----- ----- Income (loss) from operations before income taxes 60 (858) Income taxes - - ----- ----- Net income (loss) $ 60 $ (858) ===== ===== Net income (loss) per share- basic and diluted $ 0.01 $(0.09) ===== ===== The accompanying notes are an integral part of these statements. Condensed Consolidated Statements of Operations (unaudited) (Dollar amounts and shares in 000's, except per share amounts) Six Months Ended June 30, 2001 2002 ------- ------- Revenues: Net product sales $ 7,728 $ 6,847 Royalty income 1,259 1,235 ------- ------- Total revenue 8,987 8,082 Costs and expenses: Cost of sales 5,121 5,465 Selling, general and administrative 2,434 2,952 Research and development - basic 1,188 849 Research and development - DelSite - 679 Other income (26) 21 Interest, net (16) 17 ------- ------- Income (loss) from operations before income taxes 286 (1,901) Income taxes - - ------- ------- Net income (loss) $ 286 $ (1,901) ======= ======= Net income (loss) per share basic and diluted $ 0.03 $ (0.19) ======= ======= The accompanying notes are an integral part of these statements. Condensed Consolidated Statements of Cash Flows (unaudited) (Dollar amounts in 000's) Six Months Ended June 30, 2001 2002 ------- ------- Cash flows from operating activities Net income (loss) $ 286 $ (1,901) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 506 564 Provision for inventory obsolescence 75 - Changes in assets and liabilities: Receivables, net 1,026 (425) Inventories (935) 789 Prepaid expenses (498) (303) Other assets 10 40 Accounts payable and accrued liabilities (643) (395) Deferred revenue 500 250 ------- ------- Net cash provided by (used) in operating activities 327 (1,381) Cash flows from investing activities: Purchases of property, plant and equipment (374) (139) ------- ------- Net cash used by investing activities (374) (139) Cash flows from financing activities: Issuances of common stock 47 74 Debt payments - - ------- ------- Net cash provided by financing activities 47 74 ------- ------- Net decrease in cash and cash equivalents - (1,446) Cash and cash equivalents, beginning of period 3,200 3,454 ------- ------- Cash and cash equivalents, end of period $ 3,200 $ 2,008 ------- ------- Supplemental disclosure of cash flow information Property purchased through capital lease $ - $ 182 Cash paid during the period for interest 33 31 Cash paid during the period for federal, state and local income taxes 18 39 The accompanying notes are an integral part of these statements. Notes to Condensed Consolidated Financial Statements (unaudited) (1) Condensed Consolidated Financial Statements: The condensed consolidated balance sheet as of June 30, 2002, and the condensed consolidated statements of operations and cash flows for the six month periods ended June 30, 2001 and 2002, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include all normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows at June 30, 2002 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report to shareholders on Form 10-K for the year ended December 31, 2001. In June 2001, the Financial Accounting Standards Board issued FAS 142, Goodwill and Intangible Assets ("FAS 142"). Under FAS 142, goodwill and intangible assets are no longer amortized, but are reviewed at least annually for impairment. The Company adopted the provisions of FAS 142 effective January 1, 2002. There were no effects on the financial statements at June 30, 2002 or for the six months then ended. (2) Net Income (Loss) Per Share: Basic net income (loss) available to common shareholders per share was computed by dividing net income (loss) by the weighted average number of common shares outstanding of 9,734,087 and 9,848,992 at June 30, 2001 and 2002, respectively. In calculating the diluted net income (loss) available to common shareholders per share for 2001 and 2002, no effect was given to options or warrants because the effect of including these securities would have been antidilutive. (3) Reportable Segments: The Company operates in two reportable segments: its Medical Services Division, which sells human and veterinary products, and Caraloe, Inc., a consumer products subsidiary, which sells bulk raw materials, consumer beverages, and nutritional and skin care products, and also provides services for the development and manufacture of nutritional, cosmetic and medical products on a contract basis through its contract manufacturing group. The Company evaluates performance and allocates resources based on profit or loss from operations before income taxes. Corporate Income (Loss) Before Income Taxes set forth in the following table includes research and development expenses which were related to the development of pharmaceutical products not associated with the reporting segments. Assets which are used in more than one segment are reported in the segment where the predominant use occurs. The Company's production facility in Costa Rica, which provides bulk ingredients for all segments, and total cash for the Company are included in the Corporate Assets figure. Reportable Segments (in thousands): Medical Caraloe, Services Inc. Corporate Total ---------------------------------------------------------------------------- Quarter Ended June 30, 2001 ---------------------------------------------------------------------------- Revenues from unaffiliated customers $ 2,655 $ 1,675 $ - $ 4,330 Income (loss) before income taxes 357 72 (369) 60 Identifiable assets 11,490 1,566 7,836 20,892 Capital expenditures - - 252 252 Depreciation and amortization 144 - 112 256 ---------------------------------------------------------------------------- Quarter Ended June 30, 2002 ---------------------------------------------------------------------------- Revenues from unaffiliated customers $ 2,193 $ 2,153 $ - $ 4,346 Income (loss) before income taxes (22) (382) (454) (858) Identifiable assets 10,175 2,915 6,337 19,427 Capital expenditures - - 34 34 Depreciation and amortization 158 - 122 280 ---------------------------------------------------------------------------- Six Months Ended June 30, 2001 ---------------------------------------------------------------------------- Revenues from unaffiliated customers $ 5,085 $ 3,902 $ - $ 8,987 Income (loss) before income taxes 491 805 (1,010) 286 Capital expenditures - - 374 374 Depreciation and amortization 285 - 221 506 ---------------------------------------------------------------------------- Six Months Ended June 30, 2002 ---------------------------------------------------------------------------- Revenues from unaffiliated customers $ 4,528 $ 3,554 $ - $ 8,082 Income (loss) before income taxes (229) (593) (1,079) (1,901) Capital expenditures - - 139 139 Depreciation and amortization 318 - 246 564 ---------------------------------------------------------------------------- (4) Income Taxes: The tax effects of temporary differences have given rise to deferred tax assets. At December 31, 2001 and June 30, 2002, the Company provided a valuation allowance against the entire deferred tax asset due to the uncertainty as to the realization of the asset. At December 31, 2001, the Company had net operating loss carryforwards of approximately $38,700,000 for federal income tax purposes, which began expiring in 2002, and research and development tax credit carryforwards of approximately $478,000, which began expiring in 2002, all of which are available to offset federal income taxes due in future periods. The provision for the second quarter of 2002 was entirely offset by the utilization of NOL carryforwards. (5) Contingencies: From time to time in the normal course of business, the Company is party to various matters involving claims or possible litigation. Management believes the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position or results of operations. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Background The Company is a research-based biopharmaceutical, medical device, raw materials and nutraceutical company engaged in the development, manufacturing and marketing of naturally-derived complex carbohydrates and other natural product therapeutics for the treatment of major illnesses, the dressing and management of wounds and nutritional supplements. The Company is comprised of two business segments. See Note (3) to the unaudited condensed consolidated financial statements for financial information about these business segments. The Company sells, using a network of distributors, prescription and nonprescription human and veterinary products through its Medical Services Division, and consumer and bulk raw material products and product development and manufacturing services through its subsidiary, Caraloe, Inc. The Company's research and product portfolio are based primarily on complex carbohydrates isolated from the Aloe vera L. plant. The Company is advancing its research and development program for its proprietary Gelsite[TM] technology through its subsidiary DelSite Biotechnologies, Inc. Liquidity and Capital Resources At December 31, 2001 and June 30, 2002, the Company held cash and cash equivalents of $3,454,000 and $2,008,000, respectively. The decrease in cash of $1,446,000 is primarily due to operating losses, reductions in accounts payable, and increases in accounts receivable which were partially offset by lower inventory balances. The Company has invested in inventory to support sales of bulk products to a single customer. Receivables from this customer totaled $517,500 as of June 30, 2002. As of July 25, 2002, all of this balance had been collected. Pursuant to the Distributor and License Agreement with Medline Industries, Inc., ("Medline") the Company is to receive $12,500,000 in base royalties over a five-year period ending November 30, 2005. The Company is recognizing royalty income under this agreement on a straight-line basis. At June 30, 2002, the Company had received $1,792,000 more in royalties than it had recognized in income. As of June 30, 2002, the Company had no material capital commitments. In November 1997, the Company entered into an agreement with Comerica Bank- Texas for a $3,000,000 line of credit, secured by accounts receivable and inventory. As of June 30, 2002, there was $763,000 outstanding under this credit facility. This credit facility is also used to secure an $800,000 letter of credit to guarantee rental payments on a lease signed in January 2001, and a $100,000 letter of credit to secure payment under a lease for machinery. As a result of the current level of sales of raw materials produced at the Company's processing facility in Costa Rica, the Company's demand for Aloe vera L. leaves has exceeded and continues to exceed both the current and the normal production capacity of its farm. It has therefore been necessary for the Company to purchase Aloe vera L. leaves from other sources within Costa Rica. Since March 1998, the Company has been a minority investor in Aloe and Herbs International, Inc., a Panamanian corporation ("Aloe & Herbs"), the owner of Rancho Aloe (C.R.), S.A., a Costa Rican corporation, which produces Aloe vera L. leaves and sells them to the Company at competitive, local market rates. On October 22, 2001, the Company incorporated in Delaware, a new wholly- owned subsidiary named DelSite Biotechnologies, Inc. ("DelSite"). DelSite operates independently from the Company's research and development program and is responsible for the research, development and marketing of the Company's proprietary GelSite[TM] technology for controlled release and delivery of bioactive pharmaceutical ingredients. The Company believes that its available cash resources and expected cash flows from operations will provide the funds necessary to finance its current operations. However, the Company does not expect that its current cash resources will be sufficient to finance clinical studies and costs of filing new drug applications necessary to develop its products to their full commercial potential. Additional funds, therefore, may have to be raised through equity offerings, borrowings, licensing arrangements or other means, and there is no assurance that the Company will be able to obtain such funds on satisfactory terms when they are needed. In March 2001, the Board of Directors authorized the Company to repurchase up to one million shares of its outstanding Common Stock. As of June 30, 2002, the Company has not repurchased any shares pursuant to this authorization. The Company believes it has the financial resources necessary to repurchase shares from time to time pursuant to the Board's repurchase authorization. Regulation The Company is subject to regulation by numerous governmental authorities in the United States and other countries. Certain of the Company's proposed products will require governmental approval prior to commercial use. The approval process applicable to prescription pharmaceutical products usually takes several years and typically requires substantial expenditures. The Company and any licensees may encounter significant delays or excessive costs in their respective efforts to secure necessary approvals. Future United States or foreign legislative or administrative acts could also prevent or delay regulatory approval of the Company's or any licensees' products. Failure to obtain requisite governmental approvals or failure to obtain approvals of the scope requested could delay or preclude the Company or any licensees from marketing their products, or could limit the commercial use of the products, and thereby have a material adverse effect on the Company's liquidity and financial condition. Impact of Inflation The Company does not believe that inflation has had a material impact on its results of operations. Second Quarter of 2002 Compared With Second Quarter of 2001 Total revenues were $4,346,000 in the second quarter of 2002, an increase of $16,000, or 0.4%, compared with $4,330,000 in the second quarter of 2001. Net sales for Caraloe, Inc., the Company's consumer products subsidiary, increased from $1,675,000 to $2,153,000 due to a 7.2% increase in raw material sales and a 154% increase in contract manufacturing business. Caraloe sales to a single customer, which were primarily Manapol[R] powder, decreased from $1,206,000 in the second quarter of 2001 to $1,130,000 in the second quarter of 2002. Revenues of the Company's wound and skin care products decreased 17.4%, due primarily to softness in order demand from the Company's exclusive distributor. Cost of sales increased from $2,464,000 to $2,874,000, or 16.6%. As a percentage of revenues, cost of sales increased from 56.9% in the second quarter of 2001 to 66.1% in the second quarter of 2002. This was due primarily to variances incurred at both the Costa Rica and American manufacturing plants because of lower production volumes and to the mix of products sold. Selling, general and administrative expenses increased from $1,204,000 in the second quarter of 2001 to $1,454,000 in 2002. This increase was caused primarily by the addition of new personnel, including the President of Caraloe in July 2001, and expanded distribution facilities in anticipation of obtaining new contract manufacturing business, as well as additional business development expenses. Basic research and development expenses in support of operations decreased to $462,000 from $614,000, or 24.8%, as efforts were focused on product development in support of contract manufacturing. DelSite research expenses were $383,000 as efforts were primarily focused on development of the manufacturing process of its product Gelsite[TM] and on development of the use of Gelsite[TM] for delivery of proteins and peptides. Net interest expense was $10,000 in the second quarter of 2002 as compared to net interest income of $5,000 in the second quarter of 2001. The resulting net loss for the second quarter of 2002 was $858,000, compared with net income of $60,000 during the second quarter of 2001. Assuming dilution, the net loss for the second quarter of 2002 was $(0.09) per share, compared to net income of $0.01 per share for the same quarter of 2001. First Six Months of 2002 Compared With First Six Months of 2001 Net sales were $8,082,000 in the first six months of 2002, compared with $8,987,000 in the first six months of 2001. This decrease of $905,000, or 10.1%, resulted from a decrease of $348,000 in sales of Caraloe, Inc., the Company's consumer products subsidiary, and a decrease in wound care sales of $557,000. Caraloe's sales to a single customer, which were primarily Manapol[R] powder, decreased from $3,055,000 in 2001 to $2,264,000 in 2002. The decrease was offset in part by growth of $502,000 in contract manufacturing sales. Revenues of the Company's wound care products decreased from $5,085,000 in 2001 to $4,528,000 in 2002 or 11% due to the impact of stocking orders by Medline in the first quarter of 2001 and softness in order demand from Medline in the second quarter of 2002. Cost of sales increased from $5,121,000 in 2001 to $5,465,000 in 2002, or 6.7%. As a percentage of sales, cost of sales increased from 56.9% in the first six months of 2001 to 67.6% in the first six months of 2002. This was due primarily to variances incurred at both the Costa Rica and American manufacturing plants because of lower production volumes and to the mix of products sold. Selling, general and administrative expenses increased to $2,952,000 in 2002 from $2,434,000 in 2001. The increase was primarily caused by the addition of new personnel, including the President of Caraloe in July 2001, expenses for expanded distribution facilities in anticipation of obtaining new contract manufacturing business, expenses for the creation of DelSite and additional business development expenses. Basic research and development expenses in support of operations decreased to $849,000 in 2002 from $1,188,000 in 2001, or 28.5% as efforts were focused on product development in support of contract manufacturing. DelSite research expenses were $679,000 as efforts were primarily focused on development of the manufacturing process of its Gelsite[TM] product and on development of the use of Gelsite[TM] for delivery of proteins and peptides. Net interest income of $16,000 was realized in the first six months of 2001, versus net interest expense of $17,000 in the first six months of 2002. The resulting net loss for the first six months of 2002 was $1,901,000, compared with a net income of $286,000 for the first six months of 2001. Assuming dilution, the net loss for the first six months of 2002 was $(0.19) per share, compared to a net income of $0.03 per share for the same period in 2001. Forward Looking Statements All statements other than statements of historical fact contained in this report, including but not limited to statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations (and similar statements contained in the Notes to Condensed Consolidated Financial Statements) concerning the Company's financial position, liquidity, capital resources and results of operations, its prospects for the future and other matters, and also including statements made in Part II of this report, are forward-looking statements. Forward-looking statements in this report generally include or are accompanied by words such as "anticipate", "believe", "estimate", "expect", "intend", "will", "would", "should" or words of similar import. Such forward-looking statements include, but are not limited to, statements regarding the ability of the Company and/or DelSite to obtain sufficient funds to finance DelSite's proposed activities; the ability of DelSite to successfully exploit the Company's new drug delivery technology; the adequacy of the Company's cash resources and cash flow from operations to finance its current operations; and the Company's intention, plan or ability to repurchase shares of its outstanding Common Stock. Although the Company believes that the expectations reflected in its forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the Company's results to differ materially from the results indicated by such forward-looking statements include but are not limited to the possibilities that the Company may be unable to obtain the quantity or quality of Aloe vera L. leaves it needs from Rancho Aloe, that the claims of parties with whom the Company is involved in litigation may not be without merit and the Company may be unable to resolve its disputes with third parties in a satisfactory manner, that the Company's cash resources and cash flow from operations may not be adequate to finance its current operations, that the Company and or DelSite may be unable to obtain the funds needed to carry out large scale clinical trials and other research and development projects, that the results of the Company's clinical trials may not be sufficiently positive to warrant continued development and marketing of the products tested, that new products may not receive required approvals by the appropriate government agencies or may not meet with adequate customer acceptance, that the Company and or DelSite may not be able to obtain financing when needed, that the Company and or DelSite may not be able to obtain appropriate licensing agreements for products that it wishes to market or products that it needs assistance in developing, that the Company may not be able to fund its operating costs from revenues and available cash resources, that one or more of the customers that the Company expects to purchase significant quantities of products from the Company or Caraloe may fail to do so, that competitive pressures may require the Company to lower the prices of or increase the discounts on its products, that other parties who owe the Company substantial amounts of money may be unable to pay what they owe the Company, that the Company's patents may not provide the Company with adequate protection, that the Company's manufacturing facilities may be inadequate to meet demand, that the Company's distributors may be unable to market the Company's products successfully, that the Company may be unable to reach satisfactory agreements with its important suppliers, that the Company may not be able to use its tax loss carryforwards before they expire, that the Company may not have sufficient financial resources necessary to repurchase shares of its outstanding Common Stock when it is desirable to do so, or that the Company may be unable to produce or obtain, or may have to pay excessive prices for, the raw materials or products it needs. All forward-looking statements in this report are expressly qualified in their entirety by the cautionary statements in the two immediately preceding paragraphs. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Company's exposure to market risk from changes in foreign currency exchange rates and the supply and prices of Aloe vera L. leaves has not changed materially from its exposure at December 31, 2001, as described in the Company's Annual Report on Form 10-K for the year then ended. Part II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. At the 2002 Annual Meeting of Shareholders held on May 16, 2002, R. Dale Bowerman was re-elected to serve as a director of the Company for a term expiring at the 2005 annual meeting, with the holders of 7,896,156 shares voting for his re-election and the holders of 147,506 shares abstaining. The other directors whose terms of office continued after the meeting are George DeMott and Carlton E. Turner, Ph.D.,D.Sc. whose terms expires at the 2003 annual meeting, and Thomas J. Marquez and Selvi Vescovi, whose terms expire at the 2004 annual meeting. The proposal to adopt a resolution to amend the first sentence of Section 1.03 of the Company's 1995 Stock Option Plan to read in its entirety as follows: "Options may be granted by the Company from time to time under the Plan to purchase an aggregate of [ 1,500,000 ] 2,250,000 shares of the authorized Common Stock", was approved by the holders of 3,096,972 shares, with the holders of 902,832 shares voting against approval and the holders of 61,114 shares abstaining. The proposal to ratify the appointment of Ernst & Young LLP as independent public accountants for the Company for the fiscal year ending December 31, 2002 was approved by the holders of 7,977,525 shares, with the holders of 64,215 shares voting against approval and the holders of 7,472 shares abstaining. No vote was taken on a shareholder proposal to request the Board of Directors to take action to declassify the Board of Directors and cause all directors to be elected annually, because the shareholder who had requested the inclusion of the proposal in the Company's proxy statement failed to appear at the annual meeting and submit the proposal for a vote. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit No. Description 99.1 CEO Certification of SEC Reports Under Section 906 99.2 CFO Certification of SEC Reports Under Section 906. (b) Reports on Form 8-K: The Registrant did not file any reports on Form 8-K during the quarter ended June 30, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARRINGTON LABORATORIES, INC. (Registrant) Date: August 14, 2002 By: /s/ Carlton E. Turner ---------------------------- Carlton E. Turner, President and C.E.O. (principal executive officer) Date: August 14, 2002 By: /s/ Robert W. Schnitzius ---------------------------- Robert W. Schnitzius, Chief Financial Officer (principal financial and accounting officer) INDEX TO EXHIBITS Item Description No. 99.1 CEO Certification of SEC Reports Under Section 906 99.2 CFO Certification of SEC Reports Under Section 906.