U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended: APRIL 30, 2004
Commission File Number: 0-29671
SGD HOLDINGS, LTD.
------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3986493
-------- ----------
(State of Incorporation) (IRS Employer ID No)
4385 SUNBELT DRIVE, ADDISON, TEXAS 75001
----------------------------------------
(Address of principal executive office)
(972) 248-0266
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ].
The number of shares outstanding of registrant's common stock, par value $.0001
per share, as of April 30, 2004 was 45,526,824.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X].
SGD HOLDINGS, LTD. AND SUBSIDIARIES
Form 10-QSB Index
Page No.
--------
Part I. Unaudited Financial Information
Item 1. Condensed Consolidated Balance Sheet -
April 30, 2004 3
Condensed Consolidated Statements of Operations -
Three Months Ended April 30, 2004 and 2003 4
Condensed Consolidated Statements of Operations -
Nine Months Ended April 30, 2004 and 2003 5
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended April 30, 2004 and 2003 6
Notes to Condensed Consolidated Financial Statements - 7-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-21
Item 3. Controls and Procedures 22
Part II. Other Information 23-27
2
SGD HOLDINGS, LTD. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
April 30, 2004
(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 1,306,664
Trade accounts receivable, net of allowance of $61,752 1,268,513
Inventory 2,332,204
Due from related parties 42,053
Deferred income taxes 235,600
Prepaid expenses and other assets 209,593
-------------
Total current assets 5,394,627
Property and equipment, net 261,621
Goodwill, net 3,718,439
Marketable equity securities 7,100
Other assets 32,392
-------------
Total assets $ 9,414,179
=============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Notes payable $ 1,105,530
Notes payable - related parties 1,350,488
Accounts payable 675,806
Accrued expenses 66,464
Due to related parties 243,893
-------------
Total current liabilities 3,442,181
Deferred income taxes payable 10,600
-------------
Total liabilities 3,452,781
-------------
Minority interest -
Commitments and contingencies
Stockholders' equity:
Common stock, $.0001 par value; 200,000,000 shares authorized;
45,526,824 shares issued and outstanding 4,553
Additional paid-in capital 9,918,549
Accumulated deficit (3,682,954)
Accumulated other comprehensive loss (278,750)
-------------
Total stockholders' equity 5,961,398
-------------
Total liabilities and stockholders' equity $ 9,414,179
=============
See accompanying notes to condensed consolidated financial statements.
3
SGD HOLDINGS, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended April 30, 2004 and 2003
(Unaudited)
2004 2003
Sales and revenues $ 2,576,881 $ 2,264,293
Cost of sales 1,905,723 1,752,289
------------ ------------
Gross profit 671,158 512,004
Selling, general and administrative expense 815,507 690,436
------------ ------------
Loss from operations (144,349) (178,432)
Other income (expense):
Unrealized gain (loss) on marketable securities 45,857 (1,943)
Loss on sale of marketable securities (47,750) --
Interest expense (14,055) (31,054)
Interest expense - related parties (27,257) (66,600)
Gold consignment fee (31,629) (52,930)
Interest and other income (expense) (558) 5,199
------------ ------------
Total other income (expense) (75,392) (147,328)
------------ ------------
Loss from continuing operations before income taxes (219,741) (325,760)
Income tax benefit (71,100) (54,800)
------------ ------------
Loss from continuing operations (148,641) (270,960)
------------ ------------
Discontinued operations:
Loss from operation of discontinued operations -- (671,559)
Income tax benefit -- --
------------ ------------
Loss on discontinued operations -- (671,559)
------------ ------------
Net loss before minority interest (148,641) (942,519)
Minority interest 200 --
------------ ------------
Net loss $ (148,441) $ (942,519)
============ ============
Basic and diluted loss per share:
Continuing operations $ (0.00) $ (0.01)
Discontinued operations -- (0.02)
------------ ------------
Net loss per share $ (0.00) $ (0.03)
============ ============
Weighted average shares outstanding (thousands) 43,337.9 32,912.1
============ ============
See accompanying notes to condensed consolidated financial statements.
4
SGD HOLDINGS, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Nine Months Ended April 30, 2004 and 2003
(Unaudited)
2004 2003
Sales and revenues $ 10,331,588 $ 10,907,808
Cost of sales 7,741,380 8,211,108
------------- -------------
Gross profit 2,590,208 2,696,700
Selling, general and administrative expense 2,468,888 2,165,735
------------- -------------
Earnings from operations 121,320 530,965
Other income (expense):
Unrealized gain (loss) on marketable securities 85,067 (7,407)
Loss on sale of marketable securities (69,783) --
Interest expense (39,536) (82,113)
Interest expense - related parties (119,457) (118,600)
Gold consignment fee (102,431) (143,825)
Interest and other income 5,373 6,437
------------- -------------
Total other income (expense) (240,767) (345,508)
------------- -------------
Earnings (loss) from continuing operations before income taxes (119,447) 185,457
Income tax expense (benefit) (34,400) 120,500
------------- -------------
Earnings (loss) from continuing operations (85,047) 64,957
------------- -------------
Discontinued operations:
Loss from operation of discontinued operations -- (1,228,166)
Income tax benefit -- (187,600)
------------- -------------
Loss on discontinued operations -- (1,040,566)
------------- -------------
Net loss before minority interest (85,047) (975,609)
Minority interest 200 --
------------- -------------
Net loss $ (84,847) $ (975,609)
============= =============
Basic and diluted loss per share:
Continuing operations $ (0.00) $ 0.00
Discontinued operations -- (0.03)
------------- -------------
Net loss per share $ (0.00) $ (0.03)
============= =============
Weighted average shares outstanding (thousands) 38,663.0 29,732.4
============= =============
See accompanying notes to condensed consolidated financial statements.
5
SGD HOLDINGS, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine Months Ended April 30, 2004 and 2003
(Unaudited)
2004 2003
Cash flows provided (used) by operating activities:
Net loss $ (84,847) $ (975,609)
Loss from discontinued operations -- (1,040,566)
------------ ------------
Earnings (loss) from continuing operations (84,847) 64,957
Adjustments to reconcile net earnings (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 57,520 51,658
Deferred income taxes (34,400) 120,500
Unrealized (gain) loss on marketable securities (85,067) 7,407
Proceeds from sale of marketable securities 23,797 --
Loss on sale of marketable securities 69,783 --
Common stock issued for services -- 50,000
Minority interest (200) --
Changes in assets and liabilities:
Accounts receivable (77,139) (226,347)
Inventory 114,964 (522,424)
Other assets 178,815 112,379
Accounts payable and accrued expenses 340,200 (267,077)
------------ ------------
Net cash provided (used) by continuing operations 503,426 (608,947)
Net cash used by discontinued operations -- (382,855)
------------ ------------
Net cash provided (used) by operations 503,426 (991,802)
------------ ------------
Cash flows used by investing activities:
Capital expenditures (82,014) (75,326)
Cash received in excess of cash paid for Gem Pak 6,214 --
------------ ------------
Net cash used by continuing operations (75,800) (75,326)
Net cash used by discontinued operations -- (7,205)
------------ ------------
Net cash used by investing activities (75,800) (82,531)
------------ ------------
Cash flows provided (used) by financing activities:
Amounts due related parties 100,736 31,333
Proceeds from sale of common stock 36,000 200,000
Loans made to Gem Pak before acquisition (148,477) --
Funds transferred to discontinued operations -- (14,590)
Repayment of long-term debt and notes payable (8,049) (12,876)
------------ ------------
Net cash provided (used) by continuing operations (19,790) 203,867
Net cash provided by discontinued operations -- 390,059
------------ ------------
Net cash provided (used) by financing activities (19,790) 593,926
------------ ------------
Net increase (decrease) in cash and cash equivalents 407,836 (480,407)
Cash and cash equivalents, beginning of period 898,828 1,156,355
------------ ------------
Cash and cash equivalents, end of period $ 1,306,664 $ 675,948
============ ============
See accompanying notes to condensed consolidated financial statements.
6
SGD HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The condensed consolidated financial statements include the accounts of
SGD Holdings, Ltd. ("SGD") and its wholly owned subsidiaries: HMS
Jewelry Company, Inc. ("HMS"); Jewelry Solutions & Commerce, Inc.
("Jewelry"); Tandori, Inc. ("Tandori"); Con-Tex Silver Imports, Inc.
("Silver"); Gem Pak, Inc. (Gem Pak), the 80% subsidiary of HMS; and
Rings N' Things, LLC ("Rings"), the 80% owned subsidiary of Jewelry,
(collectively referred to as the "Company"). Tandori and Silver are
inactive. All material intercompany accounts and transactions have been
eliminated.
(B) ORGANIZATION
SGD was incorporated on May 22, 1996 in Delaware as Transun
International Airways, Inc. and until June 1999 was a development stage
company with plans to establish itself as an air transport company
providing non-scheduled air service (charter flights) for tour
operators, charter brokers, cruise line casinos, theme parks and theme
attractions. Transun International Airways, Inc. changed its name to
Goldonline International, Inc. on June 10, 1999. Goldonline
International, Inc. changed its name to SGD Holdings, Ltd. on January
24, 2001.
On April 20, 2000, pursuant to an agreement and plan of reorganization
dated April 11, 2000, SGD acquired 100% of the issued and outstanding
common stock of Benton Ventures, Inc. ("Benton"), a Delaware
corporation, in exchange for 1,200,000 newly issued common shares of
SGD. On April 25, 2000, the Board of Directors of SGD elected to merge
Benton into SGD pursuant to Section 253 of Delaware's General Corporate
Laws. As a result of the merger, SGD became the surviving company and
assumed the reporting responsibilities under successor issuer status as
more fully detailed in Section 12(g)(3) of The Securities Exchange Act
of 1934. Benton was a dormant company and its assets and liabilities
were insignificant.
HMS was incorporated on October 12, 2000 in Texas. Jewelry was
incorporated on February 3, 1999 in Delaware. Rings was incorporated on
September 2, 2003 in Nevada. Gem Pak was incorporated on May 24, 2002
in Texas.
7
On June 10, 1999, SGD acquired all of the issued and outstanding common
stock of Silver and Jewelry. For accounting purposes, the acquisitions
were treated as the acquisition of Silver and Jewelry by SGD with
Silver as the acquiror (reverse acquisition). The historical financial
amounts prior to June 10, 1999 is that of Silver.
Effective October 1, 2000, SGD completed the acquisition of HMS Jewelry
Co., Ltd., a Texas limited partnership, and HMS Operating Company, a
Texas corporation, and transferred the assets acquired and liabilities
assumed into HMS Jewelry Company, Inc. For accounting purposes, the
acquisition was treated as a purchase.
Effective September 1, 2001, SGD completed the acquisition of Tandori
in a transaction treated as a purchase for accounting purposes.
Effective April 1, 2004, HMS completed the acquisition of 80% of Gem
Pak in a transaction treated as a purchase for accounting purposes. SGD
issued 100,000 shares of its common stock for 80% of Gem Pak's common
stock.
(C) DISCONTINUED OPERATIONS
The operations of Silver and Tandori were discontinued at the end of
July 2003, see Note 2.
(D) NATURE OF BUSINESS
SGD is a holding company principally engaged in acquiring and
developing jewelry businesses. HMS is primarily involved in the
wholesale gold jewelry business. Jewelry and Rings are operating three
small retail locations. Gem Pak sells packaging and display materials,
primarily to jewelry stores.
(E) GENERAL
The condensed consolidated financial statements included in this report
have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission for interim reporting and
include all adjustments (consisting only of normal recurring
adjustments) that are, in the opinion of management, necessary for a
fair presentation. These condensed consolidated financial statements
have not been audited.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed
or omitted pursuant to such rules and regulations for interim
reporting. The Company believes that the disclosures contained herein
are adequate to make the information presented not misleading. However,
these condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report for the year ended July
31, 2003, which is included in the Company's Form 10-KSB dated July 31,
2003 and filed November 13, 2003. The financial data for the interim
periods presented may not necessarily reflect the results to be
anticipated for the complete year. Certain reclassifications of the
amounts presented for the comparative period have been made to conform
to the current presentation.
8
(F) STOCK OPTIONS AND WARRANTS
The Company accounts for stock-based awards to employees using the
intrinsic value method described in Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees" and its
related interpretations. Accordingly, no compensation expense has been
recognized in the accompanying condensed consolidated financial
statements for stock-based awards to employees when the exercise price
of the award is equal to or greater than the quoted market price of the
stock on the date of the grant.
As of April 30, 2004, the Company had options outstanding to its three
current directors and one former director, which vested on May 31,
2001, for 100,000 shares each. These options all expire on May 31,
2004. No options have been granted since that date. Accordingly, there
is no pro forma disclosure for the current period.
SFAS No. 123, "Accounting for Stock-Based Compensation" and SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of FASB Statement No. 123" require
disclosures as if the Company had applied the fair value method to
employee awards rather than the intrinsic value method. The fair value
of stock-based awards to employees is calculated through the use of
option pricing models, which were developed for use in estimating the
fair value of traded options, which have no vesting restrictions and
are fully transferable. These models also require subjective
assumptions, including future stock price volatility and expected time
to exercise, which greatly affect the calculated values.
2. DISCONTINUED OPERATIONS
(a) On April 23, 2003, Silver filed a Voluntary Petition for
Reorganization under Chapter 11 of Title 11 of the United States Code
in the United States Bankruptcy Court for the Northern District of
Texas, Fort Worth Division, Case No. 03-43783-DML-11.
During the week ended July 25, 2003, management of the Company
determined to cease operations of Silver. Accordingly, in SGD's next
scheduled Board of Director's meeting, on August 7, 2003, the Board
voted to convert the Chapter 11 case to Chapter 7 and all operations of
Silver were immediately discontinued. The Voluntary Petition for
Reorganization under Chapter 11 was converted to Chapter 7 on September
23, 2003. The operations of Silver have been included in discontinued
operations for the periods presented.
9
Silver was involved in both the wholesale and retail jewelry business,
principally silver, with retail locations in Texas. The wholesale
operation of Silver consisted of sales directly from its headquarters
in Conroe, Texas, sales from a Dallas location and sales from jewelry
shows at locations throughout the south central United States. Silver
had sales of $275,165 and $1,394,376 during the three-month and
nine-month periods ended April 30, 2003, respectively.
(b) On July 17, 2003, the Company received an offer to acquire the
assets and business of Tandori, effective July 31, 2003, in exchange
for assumption of liabilities, excluding payroll taxes. In addition,
the buyer agreed to pay SGD up to 50% of any profits the buyer might
make from the sale of Tandori's assets, up to $1,000,000, if the buyer
should sell the assets to a third party within three years of the
acquisition. The Company subsequently approved the offer and the
operations have been included in discontinued operations for the
periods presented. The purchaser was G. David Gordon and the former
President of Tandori.
Tandori operated under the LifeStyle Technologies(TM) name as a full
service home technology integration company providing complete
installation and equipment for structured wiring, home audio, home
theater, home security, PC networking, central vacuum, accent lighting
and other current technology applications. Tandori had sales of
$802,872 and $2,689,494 during the three-month and nine-month periods
ended April 30, 2003, respectively.
3. RELATED PARTY TRANSACTIONS
HMS leases its facility from HMS Leasing Company, LLC, at the rate of
$8,075 per month pursuant to a lease agreement that expires on October
31, 2010. This obligation amounted to $72,675 during the nine-month
periods ended April 30, 2004 and 2003. HMS Leasing Company, LLC is
owned by the president of HMS. HMS is a guarantor of the loan
obligation of HMS Leasing Company, LLC on the facility, which has a
balance of $509,700 at April 30, 2004.
At April 30, 2004, the Company owed G. David Gordon, CEO of HMS, a
shareholder and the brother of a Director, compensation in the amount
of $150,000 at April 30, 2004, which is payable one-half in SGD common
stock and one-half in cash. David Gordon was also owed $1,507 in
accrued interest at April 30, 2004.
At April 30, 2004, the Company had made net advances of $9,254 to the
president of HMS, including companies owned by him.
See Note 7 for details of the $1,350,488 in note obligations to related
parties.
10
The Company has made net sales to Premier Concepts, Inc. ("Premier") of
$64,221 during the nine-month period ended April 30, 2003 and sales of
$15,734 during the current nine-month period. The Company has net
receivables from Premier at April 30, 2004 of $32,799. The Company owns
7.9% of the stock of Premier at April 30, 2004 and the Chief Executive
Officer of Premier is the Acting CEO and a Director of the Company. On
October 10, 2003, Premier filed a Voluntary Petition for Reorganization
under Chapter 11 of Title 11 of the United States Code in the United
States Bankruptcy Court for the Central District of California, Los
Angeles Division; Case No. LA 03-36445 BR.
Amounts due to related parties include $21,000 in accrued compensation
due to Terry Washburn, Acting CEO of the Company, and $6,132 in
reimbursements due to a company owned by Mr. Washburn. On January 28,
2004, the Company issued Mr. Washburn 1,500,000 common shares in
exchange for $15,000 due him.
On January 28, 2004, the Company issued 3,500,000 common shares to BJB
Services, Inc., whose principal serves as controller for the Company,
in exchange for $35,000 due for prior services. At April 30, 2004, the
Company owes BJB $43,975 for services rendered and owes another
company, which is 50% owned by the principal of BJB, $2,153 for
services rendered.
At April 30, 2004, Carolyn Greco, President of Gem Pak, is owed $19,126
for advances made to Gem Pak.
4. MARKETABLE EQUITY SECURITIES
The following summarizes the Company's investments in securities at
April 30, 2004:
Trading securities - None.
Available-for-sale securities (Premier Concepts, Inc., a related
party):
Cost $ 429,550
Unrealized gain (loss) (422,450)
--------------
Fair value $ 7,100
==============
The Company recognized an unrealized gain from trading securities in
the amount of $45,857 and $85,067 during the three-month and nine-month
periods ended April 30, 2004, respectively. The Company recognized an
unrealized loss from trading securities in the amount of $1,943 and
$7,407 during the three-month and nine-month periods ended April 30,
2003, respectively.
Unrealized losses from available-for-sale securities, which are
restricted under Rule 144 and which is included as a component of
equity, as of April 30, 2004, were as follows:
Unrealized losses $ (422,450)
Deferred income taxes 143,700
--------------
Accumulated other comprehensive income (loss) $ (278,750)
==============
11
5. INVENTORIES AND GOLD CONSIGNMENT AGREEMENT
Inventories at April 30, 2004 consist of:
Inventory, principally gold jewelry $ 5,390,903
Less consigned gold (3,058,699)
----------------
Net inventories $ 2,332,204
================
HMS has a gold consignment agreement with a gold lender. Under the
terms of the agreement, HMS is entitled to lease the lesser of an
aggregate amount of 13,200 ounces, or an aggregate consigned gold
value not to exceed $4,950,000 less any balance outstanding on its
$1,500,000 line of credit. Title to such consigned gold remains with
the gold lender until HMS purchases the gold. However, during the
period of consignment, the entire risk of loss, damage or destruction
of the gold is borne by HMS. The purchase price per ounce is based on
the daily Second London Gold Fix. HMS pays the gold consignor a
consignment fee based upon the dollar value of gold ounces
outstanding, as defined in the agreement. At April 30, 2004, HMS had
7,873.1 ounces of gold on consignment with a market value of
$3,058,699 ($388.50 per ounce).
Consigned gold is not included in inventory, and there is no related
liability recorded. As a result of these consignment arrangements, HMS
is able to shift a substantial portion of the risk of market
fluctuations in the price of gold to the gold lender, since HMS does
not purchase gold from the gold lender until receipt of a purchase
order from, or shipment of jewelry to, its customers.
The gold lender has also provided a line of credit to HMS in the
amount of $1,500,000 that is due on demand, including interest at the
lender's prime rate plus 3/4%. HMS does not have any advances on this
line of credit at April 30, 2004.
Payment for the consigned gold and the line of credit is secured by
substantially all property of HMS including its cash, accounts
receivable, inventory and equipment, the personal guaranty of the
President of HMS, the personal guaranty of G. David Gordon and the
corporate guaranty of SGD.
The consignment agreement may be terminated by the gold lender upon 60
days notice. If the gold lender were to terminate its existing gold
consignment agreement, HMS does not believe it would experience an
interruption of its gold supply that would materially adversely affect
its business. HMS believes that other consignors would be willing to
enter into similar arrangements should its gold lender terminate its
relationship with the company.
The consignment agreement contains certain restrictive covenants
relating to maximum usage, net worth, working capital, and other
financial ratios, and the agreement requires HMS to own a specific
amount of gold at all times.
12
HMS is currently negotiating with its gold lender to increase the size
of the consignment facility and to modify certain terms and conditions
of the current agreement.
6. NOTES PAYABLE
Notes payable consists of the following at April 30, 2004:
Note payable to a company, extended to
July 31, 2004; interest payable monthly
at 5.8% (a) $ 835,000
Note payable to a bank, with monthly payments
of $4,658.36 including interest at 5.25%; with
the balance of $250,252.77 due December 10, 2004;
guaranteed by the President of Gem Pak;
collateralized by bonds owned by an individual
who is also a personal guarantor 270,530
-----------
Total notes payable $ 1,105,530
===========
(a) Convertible into common stock at the lesser of $.015 per share or
the market price, limited to 9.9% of the total outstanding shares of
the Company at the time of conversion. All of the issued and
outstanding common stock of HMS is collateral on the note, in second
position behind the collateral position of the note due the president
of HMS and the note is guaranteed by G. David Gordon. In the event of
default on any of the loans secured by the HMS common stock, the
lender has the option to purchase HMS for $5,000,000. On January 28,
2004, the Company issued 250,000 shares of its common stock as a loan
extension fee and issued 1,210,746 shares of its common stock for
$12,107 in accrued interest.
7. NOTES PAYABLE DUE RELATED PARTIES
Notes payable due related parties consists of the following at April
30, 2004:
Note payable to the president of HMS, due on
July 31, 2004; interest payable monthly at 8%;
collateralized by the common stock of HMS;
guaranteed by G. David Gordon; convertible into
common stock of the Company at $.01 per share,
limited to 9.9% of the total outstanding shares of
the Company at the time; with anti-dilution rights $ 1,250,000
13
Note payable to G. David Gordon, CEO of HMS, a
shareholder and the brother of a Director of the
Company; due on July 31, 2004 with interest at 6%
payable monthly; collateralized by the common stock
of HMS in third position behind the other notes
above; all principal and accrued interest convertible
into common stock of the Company at $.01 per share;
and all shares have anti-dilution rights 100,488
-----------
Total notes payable due related parties $ 1,350,488
===========
The Company issued the president of HMS 300,000 shares of its common
stock as a loan extension fee on January 28, 2004.
8. SEGMENT INFORMATION
The Company reports segments based upon the management approach, which
designates the internal reporting that is used by management for making
operating decisions and assessing performance. With the disposition of
Silver and Tandori, continuing operations currently includes one
segment, the wholesale gold operations of HMS.
9. LEGAL MATTERS
On December 13, 2002, SGD filed a petition against James G. "Greg"
Gordon ("Gordon") in the 342nd District Court, Tarrant County, Texas
alleging breach of fiduciary duty, conversion of corporate funds and
misappropriation of corporate funds. SGD alleged that Gordon, who was
President of SGD from June 10, 1999 until November 25, 2002, wrongfully
and without authority or approval, transferred approximately $2.7
million from two separate SGD bank accounts into an account or accounts
held by Silver. Thereafter, Gordon utilized a portion of SGD's funds
for his and his family's personal use and enjoyment, his personal
financial gain and for unauthorized transactions on Silver's behalf.
SGD was seeking to recover its damages, which were in excess of $2.7
million, costs of court and pre-judgment interest, as allowed by law.
SGD dismissed its claim against Gordon as it determined the cost would
exceed any benefit and the funds it saved could be used to pay
creditors of the Company; however the Company still maintains the right
to re-file the lawsuit against Gordon.
On January 3, 2003, James G. Gordon and Lisa K. Gordon ("Plaintiffs")
filed a petition in the District Court of Montgomery County, Texas,
Cause No. 03-01-00006-CV against SGD Holdings, Ltd., G. David Gordon
and David Covey. G. David Gordon is the brother of James G. Gordon and
David Covey is the former president of Tandori, Inc., a wholly owned
subsidiary of SGD. Plaintiffs, in their claim asserted against SGD, are
seeking to declare the one for six stock split, which occurred in
September 1999, void. If declared void, they claim they would presently
own 75,000,000 shares of SGD common stock instead of 11,250,000 shares
of SGD common stock as currently reported by the Company. Presently,
the case is in discovery and Company counsel has not obtained all
information necessary to assess the merits of Plaintiffs' claim and is
therefore unable to determine a possible outcome or the extent of the
Company's liability, if any.
14
In March 2003, Con-Tex Silver Imports, Inc. filed a petition in the
District Court of Galveston County, Texas, Cause No. 03CV0316 against
Debbie King, the sister-in-law of James G. Gordon. Effective October
28, 2002, James G. Gordon, the former President of Silver entered into
a transaction with his sister-in-law whereby he sold the assets of one
of the retail locations of Silver for cash proceeds of $30,645. The
Company recorded a loss on the transaction of $51,015. In its claim,
Silver alleged conspiracy, unjust enrichment and that the sale of the
retail location is void because of unconscionability. Additionally,
Silver requested a return of profits received by Defendant. This action
is currently stayed due to Silver filing a Voluntary Petition for
Reorganization under Chapter 11 of Title 11 of the United States Code
on April 23, 2003. The Voluntary Petition for Reorganization under
Chapter 11 was converted to Chapter 7 on September 23, 2003.
On April 23, 2003, SGD's wholly owned subsidiary, Con-Tex Silver
Imports, Inc. filed a Voluntary Petition for Reorganization under
Chapter 11 of Title 11 of the United States Code in the United States
Bankruptcy Court for the Northern District of Texas, Fort Worth
Division, Case No. 03-43783-DML-11 and on September 23, 2003 the
Voluntary Petition was converted to Chapter 7.
On May 2, 2003, Lakewood Development Corporation ("Lakewood"), a
stockholder, filed a petition in the District Court of Tarrant County,
Texas, Cause No. 96 198685 03 against SGD Holdings, Ltd. and James G.
Gordon, former President of SGD. Lakewood, in its claim asserted
against SGD and Gordon, alleged fraud in stock transactions under
Section 27.01 of the Texas Business and Commerce Code, violations of
the anti-fraud provisions of the Texas Securities Act and common law
fraud. In addition, Lakewood is alleging breach of fiduciary duty
against Gordon. Lakewood is seeking restitution of the $7,817,500 which
it invested in common stock based upon representations made by Gordon,
together with damages, expenses and interest. Presently, the case is in
discovery and Company counsel has not obtained all information
necessary to assess the merits of Lakewood's claims and therefore is
unable to determine a possible outcome or the extent of the Company's
liability, if any.
On December 31, 2003, Richard Singer and Robert Bertsch, on behalf of
the Company, filed suit against James G. Gordon, a director of the
Company, for his breach of fiduciary duty as a result of his unilateral
actions to prevent the Company from exercising its option to acquire
the building which HMS currently leases. The parties have yet to begin
any substantial discovery and, therefore, the Company and its attorneys
are not in a position to assess the merits of this action.
10. COMMITMENTS
In addition to the HMS lease discussed in Note 3, the Company has two
non-cancelable operating leases. Future minimum lease payments amount
to $34,529 for the balance of fiscal 2004, $81,116 for fiscal 2005 and
$46,116 for fiscal 2006.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
From time to time, the Company may publish forward-looking statements
relative to such matters as anticipated financial performance, business
prospects, technological developments and similar matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. All statements other than statements of
historical fact included in this section or elsewhere in this report are,
or may be deemed to be, forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Exchange
Act of 1934. Important factors that could cause actual results to differ
materially from those discussed in such forward-looking statements include:
1. General economic factors including, but not limited to, changes in
interest rates, trends in disposable income; 2. Information and
technological advances; 3. Cost of products sold; 4. Competition; 5. Legal
issues; and 6. Success of marketing, advertising and promotional campaigns.
The continuing operations of the Company consist primarily of the wholesale
sales of HMS.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased from $2,198,988 at July 31, 2003 to
$1,952,446 at April 30, 2004. The decrease in working capital of $246,542
consists of an increase in current assets of $540,698 less an increase in
current liabilities of $787,240. The major items of the increase in current
assets consisted of an increase in accounts receivable of $104,824, an
increase in inventory of $131,385 and an increase in cash of $407,836. The
major increase in current liabilities was from an increase in accounts
payable of $314,463 and an increase in notes payable of $270,530.
The Company has a number of unresolved legal issues with one of its
Directors, James G. Gordon and will continue to have high legal costs,
which amounted to approximately $76,000 during the nine months ended April
30, 2004, until these issues can be resolved. The Company anticipates that
it will be able to raise additional funds, as necessary, to fund these
lawsuits.
The Company sold 2,400,001 shares of its common stock during the quarter
ended April 30, 2004 for $36,000 in cash.
The Company acquired property and equipment in the amount of $82,014 during
the nine-month period ended April 30, 2004 and is currently budgeting an
additional $20,000 for capital expenditures for the remainder of fiscal
2004. The Company plans to use cash and existing credit sources for the
acquisitions.
16
HMS relies on a gold consignment program, short-term borrowings and
internally generated funds to finance its inventories and accounts
receivable. HMS fills most of its gold supply needs through a gold
consignment arrangement with a gold lender. Under the terms of that
arrangement, HMS is entitled to lease the lesser of an aggregate of 13,200
ounces of fine gold or an aggregate consigned gold value not to exceed
$4,950,000, reduced by any outstanding balance on its $1,500,000 line of
credit. The consigned gold is secured by substantially all property of HMS,
including its cash, accounts receivable, inventory and machinery and
equipment, the corporate guaranty of SGD and the individual guaranty's of
Harry Schmidt, President of HMS, and G. David Gordon. HMS pays the gold
lender a consignment fee based on the dollar value of ounces of gold
outstanding under their agreement, which value is based on the daily Second
London Gold Fix. HMS believes that its financing rate under the consignment
arrangement is substantially similar to the financing rates charged to gold
consignees similarly situated to HMS. As of April 30, 2004, HMS held
7,873.1 ounces of gold on consignment with a market value of $3,058,699.
The consignment agreement contains restrictive covenants relating to
maximum usage, net worth, working capital and other financial ratios and
the agreement requires HMS to own a specific amount of gold at all times.
The consignment agreement may be terminated by the gold lender upon 60 days
notice. If the gold lender were to terminate its existing gold consignment
arrangement, HMS does not believe it would experience an interruption of
its gold supply that would materially adversely affect its business. HMS
believes that other consignors would be willing to enter into similar
arrangements should its gold lender terminate its relationship with the
company.
Consigned gold is not included in inventory, and there is no related
liability recorded. As a result of these consignment arrangements, HMS is
able to shift a substantial portion of the risk of market fluctuations in
the price of gold to the gold lender, since HMS does not purchase gold from
the gold lender until receipt of a purchase order from, or shipment of
jewelry to, its customers.
While we believe our supply of gold is relatively secure, significant
increases or rapid fluctuations in the cost of gold may impact the demand
for our products. Fluctuations in the precious metals markets and credit
may result in an interruption of our gold supply or the credit arrangements
necessary to allow us to support our accounts receivable and continue the
use of consigned gold.
The gold lender has also provided a line of credit to HMS in the amount of
$1,500,000 that is due on demand, including interest at the lender's prime
rate plus 3/4%. HMS does not have any advances on this line of credit at
April 30, 2004.
17
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 2004 AND 2003
SALES AND COST OF SALES - The Company's sales and cost of sales may be
summarized as follows for the three-month periods ended April 30, 2004 and
2003:
2004 2003
Sales and revenues $ 2,576,881 $ 2,264,293
Cost of sales 1,905,723 1,752,289
----------- -----------
Gross profit $ 671,158 $ 512,004
=========== ===========
Total sales increased $312,588 (13.8%) during the three-month period ended
April 30, 2004, as compared to the same prior year period. The increase
consists of $178,942 in retail sales by the jewelry stores and Gem Pak and
an increase of $133,646 in wholesale gold sales. Gem Pak distributed its
new catalog during April 2004 and HMS distributed its catalog during May
and June 2004. The Company expects improved sales from new products.
The Second London Gold Fix was $388.50 per ounce on April 30, 2004 and
$399.75 per ounce on January 31, 2004, the beginning of the current year
quarter. The Second London Gold Fix was $336.75 per ounce on April 30, 2003
and $367.50 per ounce on January 31, 2003. Sales volumes were down during
the current quarter, countering one-half of the approximate 12% average
increase in gold price. The decline in volume sold is attributed to lower
consumer spending due to the general state of the economy. In addition, the
Company is currently in the second year of its catalog and sales have
generally been better during the initial year of a catalog.
Gross profit has increased to 26.0% during the current year period from
22.6% during the same prior year period. The 3.4% improvement includes 0.5%
for HMS and 2.9% from the higher gross profit realized from new operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE - The following summarizes the
Company's selling, general and administrative expenses ("SGA") for the
three-month periods ended April 30, 2004 and 2003:
2004 2003
HMS $ 617,835 $ 597,998
Jewelry and Rings 122,745 1,122
Gem Pak 33,615 --
Corporate and other 41,312 91,316
----------- -----------
Total $ 815,507 $ 690,436
=========== ===========
HMS's SGA for the quarter ended April 30, 2004 increased 3.3% from the year
earlier period. Jewelry and Rings SGA commenced operations during the
current quarter and represents the SGA associated with their retail
operations. Gem Pak was acquired during the current quarter and the SGA
represents one month of operations. Corporate SGA decreased $50,004 during
the quarter ended April 30, 2004 as compared to the year earlier period.
The prior year corporate SGA includes a $50,000 charge for a settlement
with G. David Gordon.
18
INTEREST EXPENSE AND GOLD CONSIGNMENT FEE - Related party interest expense
decreased $39,343 to $27,257 during the quarter ended April 30, 2004, as
compared to the year earlier period. Interest expense decreased $16,999
during the quarter ended April 30, 2004, as compared to the year earlier
period. The decrease in related party interest expense is primarily due to
the prior year amount including amortization of loan and guaranty fees in
the amount of $40,000. The decrease in other interest expense is primarily
due to the prior year amount including $13,300 in amortization of loan
fees.
The gold consignment fee decreased $21,301 during the three month period
ended April 30, 2004, as compared to the prior year period. The decrease is
due to having lower balances on the gold consignment facility as a result
of a reduction in the number of ounces of gold on consignment. At April 30,
2004, HMS had 7,873.1 ounces of gold on consignment with a related
consignment obligation of $3,058,699 ($388.50 per ounce). At April 30,
2003, HMS had 12,925 ounces of gold on consignment with a related
consignment obligation of $4,352,494 ($336.75 per ounce). Accordingly, the
decrease is a result of the 39% decrease in the quantity of gold on
consignment offset by the 12% average increase in the price of gold, since
the rate was approximately the same.
UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES - The Company recognized an
unrealized gain in the amount of $45,857 during the three month period
ended April 30, 2004, from its investment in marketable equity securities
that have been classified as trading securities. During the three month
period ended April 30, 2003, the Company recognized an unrealized loss of
$1,943.
LOSS ON SALE OF MARKETABLE SECURITIES - The Company sold its remaining
trading marketable securities during the current year quarter and realized
a loss of $47,750.
INCOME TAXES - The Company recorded an income tax benefit of $71,100 during
the three month period ended April 30, 2004, and a benefit for income taxes
in the amount of $54,800 during the three month period ended April 30,
2003.
DISCONTINUED OPERATIONS - The Company recognized a loss of $671,559, with
no income tax benefit, during the three months ended April 30, 2003, from
its discontinued operations.
19
NINE MONTHS ENDED APRIL 30, 2004 AND 2003
SALES AND COST OF SALES - The Company's sales and cost of sales may be
summarized as follows for the nine-month periods ended April 30, 2004 and
2003:
2004 2003
Sales and revenues $ 10,331,588 $ 10,907,808
Cost of sales 7,741,380 8,211,108
------------ ------------
Gross profit $ 2,590,208 $ 2,696,700
============ ============
Total sales, principally gold sales, have decreased $576,220 (5.3%) during
the nine-month period ended April 30, 2004, as compared to the same prior
year period.
The Second London Gold Fix was $388.50 per ounce on April 30, 2004 as
compared to $354.75 per ounce on July 31, 2003, the beginning of the
current year period. The Second London Gold Fix was $336.75 per ounce on
April 30, 2003 as compared to $304.65 per ounce on July 31, 2002. Sales
volumes were down substantially during the current year period, more than
countering the approximate 16% average increase in gold price. The decline
in volume sold is attributed to lower consumer spending due to the general
state of the economy. In addition, the Company is currently in the second
year of its catalog and sales have generally been better during the initial
year of a catalog. The decline in sales began to reverse in the quarter
ended April 30, 2004, and the Company released its new catalog during May
and June 2004, which is expected to result in improved sales.
Total gross profit has increased to 25.1% during the current year period
from 24.7% during the same prior year period. HMS gross profit declined to
23.7% during the current year period as compared to 24.7% during the same
prior year period. HMS has a fixed dollar amount of profit for each ounce
of gold sold. Accordingly, with the gold value increasing, the gross profit
percentage is a smaller percentage of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE - The following summarizes the
Company's selling, general and administrative expenses ("SGA") for the
nine-month periods ended April 30, 2004 and 2003:
2004 2003
HMS $ 1,912,299 $ 1,914,691
Jewelry and Rings 286,154 3,401
Gem Pak 33,615 --
Corporate 236,820 247,643
------------ ------------
Total $ 2,468,888 $ 2,165,735
============ ============
HMS's SGA for the nine-month period ended April 30, 2004 decreased 0.1%
from the year earlier period. Jewelry and Rings SGA commenced operations
during the current year period and this cost represents the SGA associated
with their retail operations. Gem Pak was acquired April 1, 2004 and this
cost represents the SGA associated with one month of operations. Corporate
SGA decreased $10,823 (4.4%) during the nine-month period ended April 30,
2004 as compared to the year earlier period.
20
INTEREST EXPENSE AND GOLD CONSIGNMENT FEE - Related party interest expense
increased $857 to $119,457 during the nine-month period ended April 30,
2004, as compared to the year earlier period. Interest expense decreased
$42,577 during the nine-month period ended April 30, 2004, as compared to
the year earlier period. The decrease in other interest expense is
primarily due to the prior year amount including $39,900 in amortization of
loan and guaranty fees.
The gold consignment fee decreased $41,394 during the nine-month period
ended April 30, 2004, as compared to the prior year period. The decrease is
due to having lower balances on the gold consignment facility as a result
of a reduction in the number of ounces of gold on consignment. At April 30,
2004, HMS had 7,873.1 ounces of gold on consignment with a related
consignment obligation of $3,058,699 ($388.50 per ounce). At April 30,
2003, HMS had 12,925 ounces of gold on consignment with a related
consignment obligation of $4,352,494 ($336.75 per ounce). Accordingly, the
decrease is a result of the 39% decrease in the quantity of gold on
consignment offset by the 12% increase in the price of gold, since the rate
was approximately the same.
UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES - The Company recognized an
unrealized gain in the amount of $85,067 during the nine-month period ended
April 30, 2004, from its investment in marketable equity securities that
have been classified as trading securities. During the nine-month period
ended April 30, 2003, the Company recognized an unrealized loss of $7,407.
LOSS ON SALE OF MARKETABLE SECURITIES - The Company sold its remaining
trading marketable securities during the current year period and realized a
loss of $69,783.
INCOME TAXES - The Company recorded an income tax benefit of $34,400 during
the nine-month period ended April 30, 2004, and a provision for income
taxes in the amount of $120,500 during the nine-month period ended April
30, 2003.
DISCONTINUED OPERATIONS - The Company recognized a loss of $1,040,566,
including an income tax benefit of $187,600, during the nine-month period
ended April 30, 2003, from its discontinued operations.
21
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in the
reports that are filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in
the Securities and Exchange Commission's rules and forms. Disclosure
controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
the reports that are filed under the Exchange Act is accumulated and
communicated to management, including the principal executive officer, as
appropriate to allow timely decisions regarding required disclosure. Under
the supervision of and with the participation of management, including the
principal executive officer, the Company has evaluated the effectiveness of
the design and operation of its disclosure controls and procedures as of
April 30, 2004, and, based on its evaluation, our principal executive
officer has concluded that these controls and procedures are effective.
(b) Changes in Internal Controls
There have been no significant changes in internal controls or in other
factors that could significantly affect these controls subsequent to the
date of the evaluation described above, including any corrective actions
with regard to significant deficiencies and material weaknesses.
22
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 13, 2002, SGD filed a petition against James G. "Greg" Gordon
("Gordon") in the 342nd District Court, Tarrant County, Texas alleging
breach of fiduciary duty, conversion of corporate funds and
misappropriation of corporate funds. SGD alleged that Gordon, who was
President of SGD from June 10, 1999 until November 25, 2002, wrongfully and
without authority or approval, transferred approximately $2.7 million from
two separate SGD bank accounts into an account or accounts held by Silver.
Thereafter, Gordon utilized a portion of SGD's funds for his and his
family's personal use and enjoyment, his personal financial gain and for
unauthorized transactions on Silver's behalf. SGD was seeking to recover
its damages, which were in excess of $2.7 million, costs of court and
pre-judgment interest, as allowed by law. SGD dismissed its claim against
Gordon as it determined the cost would exceed any benefit and the funds it
saved could be used to pay creditors of the Company; however the Company
still maintains the right to re-file the lawsuit against Gordon.
On January 3, 2003, James G. Gordon and Lisa K. Gordon ("Plaintiffs") filed
a petition in the District Court of Montgomery County, Texas, Cause No.
03-01-00006-CV against SGD Holdings, Ltd., G. David Gordon and David Covey.
G. David Gordon is the brother of James G. Gordon and David Covey is the
former president of Tandori, Inc., a wholly owned subsidiary of SGD.
Plaintiffs, in their claim asserted against SGD, are seeking to declare the
one for six stock split, which occurred in September 1999, void. If
declared void, they claim they would presently own 75,000,000 shares of SGD
common stock instead of 11,250,000 shares of SGD common stock as currently
reported by the Company. Presently, the case is in discovery and Company
counsel has not obtained all information necessary to assess the merits of
Plaintiffs' claim and is therefore unable to determine a possible outcome
or the extent of the Company's liability, if any.
In March 2003, Con-Tex Silver Imports, Inc. filed a petition in the
District Court of Galveston County, Texas, Cause No. 03CV0316 against
Debbie King, the sister-in-law of James G. Gordon. Effective October 28,
2002, James G. Gordon, the former President of Silver entered into a
transaction with his sister-in-law whereby he sold the assets of one of the
retail locations of Silver for cash proceeds of $30,645. The Company
recorded a loss on the transaction of $51,015. In its claim, Silver alleged
conspiracy, unjust enrichment and that the sale of the retail location is
void because of unconscionability. Additionally, Silver requested a return
of profits received by Defendant. This action is currently stayed due to
Silver filing a Voluntary Petition for Reorganization under Chapter 11 of
Title 11 of the United States Code on April 23, 2003. The Voluntary
Petition for Reorganization under Chapter 11 was converted to Chapter 7 on
September 23, 2003.
On April 23, 2003, SGD's wholly owned subsidiary, Con-Tex Silver Imports,
Inc. filed a Voluntary Petition for Reorganization under Chapter 11 of
Title 11 of the United States Code in the United States Bankruptcy Court
for the Northern District of Texas, Fort Worth Division, Case No.
03-43783-DML-11 and on September 23, 2003, the Voluntary Petition was
converted to Chapter 7.
23
On May 2, 2003, Lakewood Development Corporation ("Lakewood"), a
stockholder, filed a petition in the District Court of Tarrant County,
Texas, Cause No. 96 198685 03 against SGD Holdings, Ltd. and James G.
Gordon, former President of SGD. Lakewood, in its claim asserted against
SGD and Gordon, alleged fraud in stock transactions under Section 27.01 of
the Texas Business and Commerce Code, violations of the anti-fraud
provisions of the Texas Securities Act and common law fraud. In addition,
Lakewood is alleging breach of fiduciary duty against Gordon. Lakewood is
seeking restitution of the $7,817,500 which it invested in common stock
based upon representations made by Gordon, together with damages, expenses
and interest. Presently, the case is in discovery and Company counsel has
not obtained all information necessary to assess the merits of Lakewood's
claims and therefore is unable to determine a possible outcome or the
extent of the Company's liability, if any.
On December 31, 2003, Richard Singer and Robert Bertsch, on behalf of the
Company, filed suit against James G. Gordon, a director of the Company, for
his breach of fiduciary duty as a result of his unilateral actions to
prevent the Company from exercising its option to acquire the building
which HMS currently leases. The parties have yet to begin any substantial
discovery and, therefore, the Company and its attorneys are not in a
position to assess the merits of this action.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended April 30, 2004, the Company issued 2,400,001
shares of its common stock in exchange for $36,000 in cash and issued
100,000 shares of its common stock to acquire 80% of Gem Pak. The small
business issuer claimed exemption from registration based upon Section 4(2)
of the Securities and Exchange Act of 1933.
ITEM 5. OTHER INFORMATION
Although the Company does not currently employ a Chief Financial Officer,
Terry Washburn, President and Acting CEO, is also the principal accounting
officer.
24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 31 Certification pursuant to 18 U.S.C. Section 1350
Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32 Certification pursuant to 18 U.S.C. Section 1350
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
None.
SIGNATURE
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.
SGD HOLDINGS, LTD.
Date: June 21, 2004 By: /s/ Terry Washburn
-------------------------------------
Terry Washburn, President, Acting CEO
and Principal Accounting Officer
25