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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
March 31, 2005
Commission File No. 001-13458
SCOTT'S LIQUID GOLD-INC.
4880 Havana Street
Denver, CO 80239
Phone: 303-373-4860
Colorado 84-0920811
State of Incorporation I.R.S. Employer
Identification No.
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 [ ]
Indicate by checkmark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
As of April 30, 2005, the Registrant had 10,471,000 of
its $0.10 par value common stock outstanding.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended
March 31,
2005 2004
----------- -----------
Net sales $ 5,522,500 $ 5,209,000
----------- -----------
Operating costs and expenses:
Cost Of Sales 3,107,500 2,750,600
Advertising 276,500 463,700
Selling 1,475,300 1,323,900
General and administrative 1,022,800 986,500
----------- -----------
5,882,100 5,524,700
----------- -----------
Loss from operations (359,600) (315,700)
Interest income 12,700 10,700
Interest expense (48,000) (45,800)
----------- -----------
(394,900) (350,800)
Income tax expense (benefit) - -
----------- -----------
Net loss $ (394,900) $ (350,800)
=========== ===========
Net loss per common share (Note 2):
Basic $ (0.04) $ (0.03)
=========== ===========
Diluted $ (0.04) $ (0.03)
=========== ===========
Weighted average shares outstanding:
Basic 10,471,000 10,356,000
=========== ===========
Diluted 10,471,000 10,356,000
=========== ===========
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Balance Sheets
March 31, December 31,
2005 2004
------------ -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,006,000 $ 3,354,600
Investment securities 301,800 54,200
Trade receivables, net of allowance
for doubtful accounts of $109,200
and $83,000, respectively 1,040,500 1,419,700
Other receivables 49,900 56,900
Inventories 4,710,800 2,940,300
Prepaid expenses 498,500 489,600
Deferred tax assets 306,500 339,400
----------- -----------
Total current assets 8,914,000 8,654,700
Property, plant and equipment, net 14,174,900 14,349,600
Other assets 19,900 22,600
----------- -----------
TOTAL ASSETS $23,108,800 $23,026,900
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of Credit $ 660,000 $ 790,000
Accounts payable 2,647,200 1,795,700
Accrued payroll and benefits 1,036,100 1,050,500
Other accrued expenses 443,200 413,700
Current maturities of
long-term debt 929,000 917,000
---------- -----------
Total current liabilities 5,715,500 4,966,900
Long-term debt, net of current maturities 1,655,600 1,893,000
Deferred tax liabilities 306,500 339,400
----------- -----------
Total liabilities 7,677,600 7,199,300
----------- -----------
Commitments and contingencies
Shareholders' equity:
Common stock; $.10 par value, authorized
50,000,000 shares; issued and
outstanding 10,471,000 shares 1,047,100 1,047,100
Capital in excess of par 4,979,200 4,979,200
Accumulated comprehensive income 2,700 4,200
Retained earnings 9,402,200 9,797,100
----------- -----------
Shareholders' equity 15,431,200 15,827,600
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $23,108,800 $23,026,900
=========== ===========
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
---------------------------
2005 2004
----------- -----------
Cash flows from operating activities:
Net loss $ (394,900) $ (350,800)
----------- -----------
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation and amortization 185,800 184,500
Changes in assets and liabilities:
Trade and other receivables, net 386,200 (538,100)
Inventories (1,770,500) (603,800)
Prepaid expenses and other assets (13,000) (115,500)
Accounts payable and accrued expenses 866,600 949,700
----------- -----------
Total adjustments to net loss (344,900) (123,200)
----------- -----------
Net Cash Used by
Operating Activities (739,800) (474,000)
----------- -----------
Cash flows from investing activities:
Purchase of investment securities (248,400) -
Purchase of property, plant & equipment (5,000) (23,100)
----------- -----------
Net Cash Used by Investing Activities (253,400) (23,100)
----------- -----------
Cash flows from financing activities:
Payments on short-term borrowings (130,000) -
Principal payments on
long-term borrowings (225,400) (215,200)
----------- -----------
Net Cash Used by
Financing Activities (355,400) (215,200)
----------- -----------
Net Decrease in Cash and Cash Equivalents (1,348,600) (712,300)
Cash and Cash Equivalents,
beginning of period 3,354,600 3,498,600
----------- -----------
Cash and Cash Equivalents,
end of period $ 2,006,000 $ 2,786,300
=========== ===========
Supplemental disclosures:
Cash Paid during period for:
Interest $ 46,000 $ 46,000
=========== ===========
Income taxes $ 1,100 $ 1,700
=========== ===========
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies
(a) Company Background
Scott's Liquid Gold-Inc. (a Colorado corporation) was
incorporated on February 15, 1954. Scott's Liquid Gold-Inc. and
its wholly owned subsidiaries (collectively, "we") manufacture
and market quality household and skin care products. In the first
quarter of 2001, we began acting as a distributor in the United
States of beauty care products contained in individual sachets
and manufactured by Montagne Jeunesse. Our business is comprised
of two segments, household products and skin care products.
(b) Principles of Consolidation
Our consolidated financial statements include our accounts
and our subsidiaries. All intercompany accounts and transactions
have been eliminated.
(c) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant estimates
include, but are not limited to, realizability of deferred tax
assets, reserves for slow moving and obsolete inventory, customer
returns and allowances, and bad debts. Actual results could
differ from those estimates.
(d) Cash Equivalents
We consider all highly liquid investments with an original
maturity of three months or less at the date of acquisition to be
cash equivalents.
(e) Investments in Marketable Securities
We account for investments in marketable securities in
accordance with Statement of Financial Accounting Standards ("SFAS")
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities", which requires that we classify investments in
marketable securities according to management's intended use of
such investments. We invest our excess cash and have established
guidelines relative to diversification and maturities in an effort
to maintain safety and liquidity. These guidelines are
periodically reviewed and modified to take advantage of trends in
yields and interest rates. We consider all investments as available
for use in our current operations and, therefore, classify them
as short-term, available-for-sale investments. Available-for-sale
investments are stated at fair value, with unrealized gains and
losses, if any, reported net of tax, as a separate component of
shareholders' equity and comprehensive income (loss). The cost
of the securities sold is based on the specific identification
method. Investments in corporate and government securities as of
March 31, 2005, are scheduled to mature within one year.
(f) Inventories
Inventories consist of raw materials and finished goods and
are stated at the lower of cost (first-in, first out method) or
market We record a reserve for slow moving and obsolete products
and raw materials.
Inventories were comprised of the following at:
March 31, 2005 December 31, 2004
- ----------------------------------------------------------------------
Finished goods $ 3,466,000 $ 2,256,100
Raw materials 1,553,800 993,200
Inventory valuation
in reserve (309,000) (309,000)
- ----------------------------------------------------------------------
$ 4,710,800 $ 2,940,300
======================================================================
(g) Property, Plant and Equipment
Property, plant and equipment are recorded at historical
cost. Depreciation is provided using the straight-line method
over estimated useful lives of the assets ranging from three to
forty-five years. Building structures and building improvements
are estimated to have useful lives of 35 to 45 years and 3 to 20
years, respectively. Production equipment and production support
equipment are estimated to have useful lives of 15 to 20 years and
3 to 10 years, respectively. Office furniture and office machines
are estimated to have useful lives 10 to 20 and 3 to 5 years,
respectively. Carpeting, drapes and company vehicles are estimated
to have useful lives of 5 to 10 years. Maintenance and repairs
are expensed as incurred. Improvements that extend the useful
lives of the assets or provide improved efficiency are capitalized.
(h) Financial Instruments
Financial instruments which potentially subject us to
concentrations of credit risk include cash and cash equivalents,
investments in marketable securities, and trade receivables. We
maintain our cash balances in the form of bank demand deposits
with financial institutions that management believes are
creditworthy. We establish an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific
customers, historical trends and other information. We have no
significant financial instruments with off-balance sheet risk of
accounting loss, such as foreign exchange contracts, option
contracts or other foreign currency hedging arrangements.
The recorded amounts for cash and cash equivalents,
receivables, other current assets, and accounts payable and
accrued expenses approximate fair value due to the short-term
nature of these financial instruments. The fair value of
investments in marketable securities is based upon quoted market
value. Our long-term debt bears interest at a variable rate,
the lender's base rate, which approximates the prime rate. The
carrying value of long-term debt approximates fair value as of
March 31, 2005 and December 31, 2004.
(i) Long-Lived Assets
We account for long-lived assets in accordance with the
provisions of SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
(j) Income Taxes
We account for income taxes in accordance with the
provisions of SFAS No. 109, "Accounting for Income Taxes",
which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences attributable
to differences between the financial statement carrying amounts
of assets and liabilities and their respective income tax bases.
A valuation allowance is provided when it is more likely than
not that some portion or all of a deferred tax asset will not
be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during
the period in which related temporary differences become
deductible. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to
be recovered or settled.
(k) Revenue Recognition
Revenue is generally recognized upon delivery of products
to customers, which is when title passes. Reserves for estimated
market development support, pricing allowances and returns are
provided in the period of sale as a reduction of revenue. Reserves
for returns and allowances are recorded as a reduction of revenue,
and are maintained at a level that management believes is
appropriate to account for amounts applicable to existing sales.
Reserves for coupons and certain other promotional activities
are recorded as a reduction of revenue at the later of the date
at which the related revenue is recognized or the date at which
the sales incentive is offered. At March 31, 2005 and
December 31, 2004 approximately $692,300 and $862,600,
respectively, had been reserved as a reduction of accounts
receivable, and approximately $110,000 and $90,000, respectively,
had been reserved as current liabilities. Co-op advertising,
marketing funds, slotting fees and coupons are deducted from
gross sales and total $364,000 and $515,100 at March 31, 2005
and 2004, respectively.
(l) Advertising Costs
We expense advertising costs as incurred.
(m) Stock-based Compensation
We have elected to follow Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for
our employee stock options. Under APB No. 25, employee stock
options are accounted for based upon the intrinsic value, which
is the difference between the exercise price and fair value of
the underlying common stock. Generally, if the exercise price
of employee stock options equals the market price of the
underlying stock on the date of the grant, no compensation
expense is recorded. We have adopted the disclosure only
provisions of SFAS No. 123, "Accounting for Stock-based
Compensation".
We granted 10,000 options for shares of our common stock
during the three months ended March 31, 2005 with an exercise
price equal to $0.53. Had compensation cost been recorded based
on the fair value of options granted by us, our pro-forma net
loss and net loss per share for the quarters ended March 31,
2005 and 2004 would have been as follows:
2005 2004
-------------------------- --------------------------
As Reported Pro Forma As Reported Pro-Forma
----------- ----------- ----------- -----------
Net loss $ (394,900) $ (396,900) $ (350,800) $ (367,100)
Basic loss
per share $ (0.04) $ (0.04) $ (0.03) $ (0.04)
Diluted loss
per share $ (0.04) $ (0.04) $ (0.03) $ (0.04)
The fair value of options granted has been estimated as of
the date of grant using the following assumptions as of March 31:
2005 2004
-------- --------
Dividend rate $ - $ -
Expected volatility 67% 169%
Risk-free interest rate 3.80% 3.04%
Expected life 4.5 years 4.5 years
(n) Comprehensive Income
We follow SFAS No. 130, "Reporting Comprehensive Income"
which establishes standards for reporting and displaying
comprehensive income and its components. Comprehensive income
includes all changes in equity during a period from non-owner sources.
The following table is a reconciliation of our net loss
to our total comprehensive loss for the quarters ended March 31,
2005 and 2004:
2005 2004
--------- ---------
Net loss $(394,900) $(350,800)
Unrealized gain (loss) on
investment securities (1,500) 500
--------- ---------
Comprehensive loss $(396,400) $(350,300)
========= =========
(o) Operating Costs and Expenses Classification
Cost of sales includes costs associated with manufacturing
and distribution including labor, materials, freight-in, purchasing
and receiving, quality control, internal transfer costs, repairs,
maintenance and other indirect costs, as well as warehousing and
distribution costs. We classify shipping and handling costs
comprised primarily of freight-out and nominal outside warehousing
costs as a component of selling expense on the accompanying
Consolidated Statement of Operations. Shipping and handling
costs totaled $398,600 and $323,300 for the quarters ended
March 31, 2005 and 2004 respectively.
Selling expenses consist primarily of shipping and handling
costs, wages and benefits for sales and sales support personnel,
travel brokerage commissions, promotional costs, as well as other
indirect costs.
General and administrative expenses consist primarily of
wages and benefits associated with management and administrative
support departments, business insurance costs, professional fees,
office facility related expenses and other general support costs.
(p) Recently Issued Accounting Pronouncements
In December 2004, the FASB issued Statement of Financial
Accounting Standards No. 123, (revised 2004) "Share-Based Payment"
("SFAS 123(R)"). This statement is a revision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" as amended ("SFAS 123"), and requires entities to
measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of
the award. The cost will be recognized over the period during
which an employee is required to provide services in exchange
for the award (usually the vesting period). SFAS 123(R) covers
various share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. SFAS 123(R)
eliminates the ability to use the intrinsic value method of
accounting for share options, as provided in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). SFAS 123(R) is effective beginning January 1, 2006,
with early adoption encouraged. We are currently evaluating the
statement's transition methods and does not expect this statement
to have an effect materially different than that of the pro forma
SFAS 123 disclosures provided in Note 1 to the our Consolidated
Financial Statements included in "Item 8. Financial Statements and
Supplementary Data" in our 2004 Annual Report on Form 10-K and in
Note 1 above.
In December 2004, the FASB issued Statement of Financial
Accounting Standards No. 153, "Exchanges of Nonmonetary Assets, an
amendment of APB Opinion No. 29" ("SFAS 153"). This Statement
amends APB Opinion No. 29 to permit the exchange of nonmonetary
assets to be recorded on a carry over basis when the nonmonetary
assets do not have commercial substance. This is an exception to
the basic measurement principal of measuring a nonmonetary asset
exchange at fair value. A nonmonetary asset exchange has commercial
substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 is
effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. If we enter into
significant nonmonetary asset exchanges in the future, SFAS 153
could have a material effect on our consolidated financial
position, results of operations or cash flows.
In December 2003, the FASB issued Interpretation No. 46 (
revised December 2003), "Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51" ("FIN 46R"). FIN 46R
requires a company to consolidate a variable interest entity, as
defined, when the company will absorb a majority of the variable
interest entity's expected losses, receive a majority of the
variable interest entity's expected residual returns, or both.
FIN 46R also requires certain disclosures relating to
consolidated variable interest entities and unconsolidated
variable interest entities in which a company has a significant
variable interest. The provisions of FIN 46R are required for
companies that have interests in variable interest entities or
potential variable interest entities commonly referred to as
special-purpose entities for periods ending after December 15,
2003. The provisions of FIN 46R are required to be applied for
periods ending after March 15, 2004 for all other types of
entities. We were required to perform this assessment at
March 31, 2005, and consolidate any variable interest entities
for which we would absorb a majority of the entities' expected
losses or receive a majority of the expected residual gains.
We do not have any variable interest entities as of March 31,
2005; therefore this assessment had no impact on our
consolidated financial statements.
(q) Reclassifications
Certain reclassifications have been made to the
December 31, 2004 balance sheet to conform to the current
Period presentation.
Note 2. Basis of Preparation of Financial Statements
We have prepared these unaudited interim consolidated
financial statements in accordance with the rules and regulations
of the Securities and Exchange Commission. Such rules and
regulations allow the omission of certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles as long as the statements are not misleading.
In the opinion of management, all adjustments necessary for
a fair presentation of these interim statements have been
included and are of a normal recurring nature. These interim
financial statements should be read in conjunction with our
financial statements included in our 2004 Annual Report
on Form 10-K.
Note 3. Earnings per Share
Per share data was determined by using the weighted average
number of common shares outstanding. Potentially dilutive
securities, including stock options, are considered only for
diluted earnings per share, unless considered anti-dilutive.
The potentially dilutive securities, which are comprised of
outstanding stock options of 1,115,500 and 1,134,000 at March 31,
2005 and 2004, were excluded from the computation of weighted
average shares outstanding due to the anti-dilutive effect.
A reconciliation of the weighted average number of common shares
outstanding for the three months ended March 31 follows:
2005 2004
---------- ----------
Common shares outstanding,
beginning of the year 10,471,000 10,356,000
Stock options exercised - -
---------- ----------
Weighted average number of
common shares outstanding 10,471,000 10,356,000
Dilutive effect of common
share equivalents - -
---------- ----------
Diluted weighted average number
of common shares outstanding 10,471,000 10,356,000
========== ==========
At March 31, 2005, there were authorized 50,000,000 shares
of our $.10 par value common stock and 20,000,000 shares of
preferred stock issuable in one or more series. None of the
preferred stock was issued or outstanding at March 31, 2005.
Note 4. Segment Information
We operate in two different segments: household products
and skin care products. Our products are sold in the United
States and internationally (primarily Canada), directly and
through independent brokers, to mass merchandisers, drug stores,
supermarkets, wholesale distributors and other retail outlets.
Our Management has chosen to organize our business around these
segments based on differences in the products sold. The household
products segment includes "Scott's Liquid Gold" for wood, a wood
cleaner which preserves as it cleans, and "Touch of Scent", a
room air freshener. The skin care segment includes:
"Alpha Hydrox", alpha hydroxy acid cleansers and lotions; a
retinol product; "Diabetic Skin Care", a healing cream and
moisturizer developed to address skin conditions of diabetics;
and skin care and other sachets of Montagne Jeunesse distributed
by us.
The following provides information on our segments for
the three months ended March 31:
2005 2004
----------------------- ------------------------
Household Skin Care Household Skin Care
Products Products Products Products
----------- ----------- ----------- -----------
Net sales to
external customers $ 2,092,200 $ 3,430,300 $ 2,303,200 $ 2,905,800
========== =========== =========== ===========
Loss before profit
sharing, bonuses and
income taxes $ (421,300) $ 26,400 $ (390,800) $ 40,000
=========== =========== =========== ===========
Identifiable assets $ 4,041,300 $ 7,427,100 $ 3,915,200 $ 7,306,600
=========== =========== =========== ===========
The following is a reconciliation of segment information to
consolidated information for the three months ended March 31:
2005 2004
------------ -----------
Net sales to external customers $ 5,522,500 $ 5,209,900
=========== ===========
Loss before profit sharing,
bonuses and income taxes $ (394,900) $ (350,800)
=========== ===========
Identifiable assets $11,468,400 $11,221,800
Corporate assets 12,457,900 13,599,000
----------- -----------
Consolidated total assets $23,926,300 $24,820,800
=========== ===========
Corporate assets noted above are comprised primarily of our
cash and investments, deferred income tax assets and property and
equipment not directly associated with the manufacturing,
warehousing, shipping and receiving activities.
Note 5. Subsequent Event
On May 4, 2005, our wholly-owned subsidiary, Neoteric
Cosmetics, Inc. ("Neoteric"), entered into a new distribution
agreement with Montagne Jeunesse International Ltd ("Montagne
Jeunesse") covering our distribution of Montagne Jeunesse
products. It replaces a distribution agreement in effect
since 2000. In the new agreement, Montagne Jeunesse appoints
Neoteric as its exclusive distributor to market and distribute
Montagne Jeunesse products in the United States of America. The
appointment is for a period of 18 months, commencing May 3, 2005,
and continues in force until terminated by either party by giving
to the other party no less than three months' notice in writing of
a termination at the end of the initial term of 18 months or any
time after the initial term.
The principal and controlling owner of Montagne Jeunesse,
Gregory Butcher, owned beneficially, to our knowledge, at
March 15, 2005 approximately 10.0% of our outstanding
common stock. Our sales of Montagne Jeunesse products
accounted in 2004 and to date in 2005 for a significant
portion of our total net revenues.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
During the first quarter of 2005, we experienced an increase in
sales of our Montagne Jeunesse line of skin care products while
experiencing a decrease in sales of our other skin care products
and our line of household chemical products. Our net loss for the
first quarter of 2005 was $394,900 versus a loss of $350,800 in
the first quarter of 2004. The loss for 2005 was primarily due to
a lower profit margin on the increased sales of our Montagne
Jeunesse products and to the household chemical products
sales decrease. Please see the discussion below regarding our new
distribution agreement for Montagne Jeunesse products.
Summary of Results as a Percentage of Net Sales
Year Ended Three Months Ended
December 31, March 31,
2004 2005 2004
----------- -------- -------
Net sales
Scott's Liquid Gold
household products 41.3% 37.9% 44.2%
Neoteric Cosmetics 58.7% 62.1% 55.8%
------ ------ ------
Total Net Sales 100.0% 100.0% 100.0%
Cost of Sales 57.0% 56.3% 52.8%
------ ------ ------
Gross profit 43.0% 43.7% 47.2%
Other revenue 0.2% 0.2% 0.2%
------ ------ ------
43.2% 43.9% 47.4%
------ ------ ------
Operating expenses 46.4% 50.2% 53.2%
Interest expense 0.8% 0.9% 0.9%
------ ------ ------
47.2% 51.1% 54.1%
------ ------ ------
Loss before income taxes (4.0%) (7.2%) (6.7%)
====== ====== ======
Our gross margins may not be comparable to those of other entities,
since some entities include all of the costs related to their
distribution network in cost of sales and others, like us, exclude
a portion of them (freight out to customers and nominal outside
warehouse costs) from gross margin, including them instead in
the selling expense line item. See Note 1(o), Operating
Costs and Expenses Classification, to the Consolidated Financial
Statements in this Report
Comparative Net Sales
Percentage
Increase
2005 2004 (Decrease)
----------- ----------- ----------
Scott's Liquid Gold $ 1,555,700 $ 1,660,100 (6.3%)
Touch of Scent 536,500 643,100 (16.6%)
----------- ----------- ------
Total household
chemical products 2,092,200 2,303,200 (9.2%)
----------- ----------- ------
Alpha Hydrox and other
skin care 681,200 1,241,600 (45.1%)
Montagne Jeunesse skin care 2,749,100 1,664,200 65.2%
----------- ----------- ------
Total skin care products 3,430,300 2,905,800 18.1%
----------- ----------- ------
Total Net Sales $ 5,522,500 $ 5,209,000 6.0%
=========== =========== ======
Three Months Ended March 31, 2005
Compared to Three Months Ended March 31, 2004
Consolidated net sales for the first quarter of the current
year were $5,522,500 versus $5,209,000 for the first three months
of 2004, an increase of $313,500. Average selling prices for the
first three months of the year 2005 were relatively unchanged over
the comparable period of 2004. Co-op advertising, marketing funds,
slotting fees, and coupons paid to retailers are deducted from
gross sales, and totaled $364,000 in the first quarter of 2005
versus $515,100 in the same quarter in 2004, a decrease of
$151,100 or 29.3%.
During the first quarter of 2005, net sales of skin care
products accounted for 62.1% of consolidated net sales compared to
55.8% for the same quarter of 2004. Net sales of these products
for that period were $3,430,300 in 2005 compared to $2,905,800 in
2004, an increase of $524,500 or 18.1%. We have continued to
experience a drop in unit sales of our earlier-established alpha
hydroxy acid products due at least in part to maturing in the
market for alpha hydroxy acid-based skin care products and intense
competition from producers of similar or alternative products,
many of which are considerably larger than Neoteric Cosmetics,
Inc. Sales of our Alpha Hydrox products (with and without alpha
hydroxy acid) have also decreased during 2004 and the first
quarter of 2005, due to reduced distribution of those products at
retail stores, including our largest and other customers having
reduced in prior quarters the number of types of those products
carried on their shelves and discontinuation in 2003 of these
products at certain retail chains. This change has resulted, and
is likely to result in the future, in lower sales of those
products. For the first quarter of 2005, the sales of our Alpha
Hydrox products accounted for 9.6% of net sales of skin care
products and 6.0% of total net sales, compared to 29.3% of net
sales of skin care products and 16.4% of total net sales in the
first quarter of 2004. We are in the early stages of introducing
four new items in our Alpha Hydrox line of cosmetic products and
will start shipping them in the second quarter of 2005.
For 2005, sales of Montagne Jeunesse products comprised a
majority of net sales of our skin care products. Net sales of
Montagne Jeunesse were approximately $2,749,100 in 2005 compared
to $1,664,200 in 2004. We believe that this increase in sales of
Montagne Jeunesse is attributable primarily to an increase in the
number and type of Montagne Jeunesse sachets on retailers' shelves
in the first quarter of 2005 versus 2004. We also believe there
were fewer units of products left over from holiday sales at the
end of 2004 versus 2003 thus creating a need to replenish retailer
inventory early in 2005.
In 2001, the Company commenced purchases of the skin care
sachets from Montagne Jeunesse under a distribution agreement
covering the United States. Montagne Jeunesse is the sole supplier
of that product. On May 4, 2005, we entered into a new
distribution agreement with Montagne Jeunesse International Ltd.,
which replaces the distribution agreement previously in effect.
Sales of these products represent a significant source of the
Company's revenues. If the Montagne Jeunesse distribution
agreement were to be terminated, it would significantly reduce
the Company's revenues, would have a material adverse effect on
the Company's operating results and cash flow and, absent other
developments, would result in the need for substantial reductions
in the Company's expenses. The principal and controlling owner
of Montagne Jeunesse is, to the knowledge of the Company, the
beneficial owner at March 15, 2005 of approximately 10% of
the Company's outstanding common stock.
Sales of household products for the first quarter of this
year accounted for 37.9% of consolidated net sales compared to
44.2% for the same period of 2004. These products are comprised
of Scott's Liquid Gold for wood, a wood cleaner which preserves
as it cleans, and Touch of Scent, a room air freshener. During
the quarter ended March 31, 2005, sales of household products
were $2,092,200 as compared to sales of $2,303,200 for the same
quarter of 2004. Sales of Scott's Liquid Gold for wood, were
down by $104,400, a decrease of 6.3%, which we believe is the
result primarily of a decrease in advertising in the first
quarter of 2005 versus 2004. Sales of Touch of Scent were down
by $106,600 or 16.6%, primarily due to a decrease in orders for,
and distribution of, our Touch of Scent dispenser package. We
are introducing a new wood care product under the Scott's Liquid
Gold product line and will start shipping in the second quarter
of 2005.
As sales of a consumer product decline, there is the risk
that retail stores will stop carrying the product. The loss of
any significant customer for any skin care products, "Scott's
Liquid Gold" for wood or "Touch of Scent", could have a
significant adverse impact on our revenues and operating results.
We believe that our future success is highly dependent on
favorable acceptance in the marketplace of Montagne Jeunesse
products and the sales of our Alpha Hydrox products and
"Scott's Liquid Gold" for wood.
On a consolidated basis, cost of goods sold was $3,107,500
during the first three months of 2005 compared to $2,750,600 for
the same period of 2004, an increase of $356,900 or 13.0%, on a
sales increase of 6%. As a percentage of consolidated net sales,
cost of sales was 56.3% in 2005 versus 52.8% in 2004, an increase
of about 6.6%, which was essentially due to greater sales of
Montagne Jeunesse products at a higher cost per unit, along with
the increased cost of steel cans and the increase in the cost of
petroleum based raw materials used in many of our products.
Operating Expenses, Interest Expense and Other Income
Percentage
Increase
2005 2004 (Decrease)
----------- ----------- ----------
Operating Expenses
Advertising $ 276,500 $ 463,700 (40.4%)
Selling 1,475,300 1,323,900 11.4%
General & Administrative 1,022,800 986,500 3.7%
----------- ----------- ------
Total operating
expenses $ 2,774,600 $ 2,774,100 0.0%
=========== =========== ======
Interest Income $ 12,700 $ 10,700 18.7%
Interest Expense $ 48,000 $ 45,800 4.8%
Operating expenses, comprised of advertising, selling and
general and administrative expenses, increased by $500 in the
first quarter of 2005 when compared to first quarter of 2004.
The various components of operating expenses are discussed below.
Advertising expenses for the first three months of 2005
were $276,500 compared to $463,700 for the comparable quarter of
2004, a decrease of $187,200 or 40.4%. A majority of that
decrease, $178,000, was due to a decrease in advertising expenses
applicable to household chemical products.
Selling expenses for the first quarter of 2005 were
$1,475,300 compared to $1,323,900 for the comparable three months
of 2004, an increase of $151,400 or 11.4%. That increase was
comprised of an increase in freight expenses of $69,300, an
increase in salaries and fringe benefits and related travel expense
of $101,200 primarily because of an increase in personnel in 2005
versus 2004, offset by a net decrease in other selling expenses,
none of which by itself is significant, of $19,100.
General and administrative expenses for the first three months
of 2005 were $1,022,800 compared to $986,500 for the comparable
period of 2004, an increase of $36,300 or 3.7%. That increase was
primarily attributable to an increase in bad debt expense ($27,000).
Interest expense for the first quarter of 2005 was $48,000
versus $45,800 for the comparable quarter of 2004. Interest
income for the three months ended March 31, 2005 was $12,700
compared to $10,700 for the same period of 2004, which consists
of interest earned on our cash reserves in 2005 and 2004.
During the first quarter of 2005 and of 2004, expenditures for
research and development were not material (under 2% of revenues).
Liquidity and Capital Resources
On August 10, 2004 we obtained a $1,500,000 line of credit
from a bank to finance additional inventory and accounts receivable.
The line of credit bears interest at a rate of .5% over the bank's
base rate (5.75% at March 31, 2005) and matures on August 10, 2005.
The line of credit is secured by inventory and accounts receivable.
The covenants are the same as the bank loan described below. At
March 31, 2005, the amount borrowed under this line of credit was
$660,000.
We have a bank loan for approximately $2.6 million at the
bank's base rate, adjustable annually each November (5.00% at
November 2004), secured by our land and buildings, with principal
and interest payable monthly through November 2007. The loan
agreement contains a number of covenants, including the requirement
for maintaining a current ratio of at least 1:1 and a ratio of
consolidated long-term debt to consolidated net worth of not more
than 1:1. We may not declare any dividends that would result in
a violation of either of these covenants. The foregoing
requirements were met at the end of the first quarter of 2005.
During the first quarter of 2005 our working capital
decreased by $489,300, and concomitantly, our current ratio
(current assets divided by current liabilities) decreased from
1.7:1 at December 31, 2004 to 1.6:1 at March 31, 2005. This
decrease in working capital is attributable to a net loss in
the first three months of 2005 of $394,900, and a reduction in
long-term debt of $237,400, a decrease in deferred tax
liabilities of $32,900, a decrease in accumulated comprehensive
income of $1,500, offset by depreciation in excess of capital
additions of $174,700, and a decrease in other assets of $2,700.
At March 31, 2005, trade accounts receivable were $1,040,500
versus $1,419,700 at year-end, largely because sales in the quarter
ended March 31, 2005 were less than those of the quarter ended
December 31, 2004. Accounts payable increased from the end of 2004
through March of 2005 by $851,500 corresponding primarily with the
increase in inventory over that period, as well as, an increase in
advertising activity during the first quarter of 2005 when compared
to the fourth quarter of 2004. At March 31, 2005 inventories were
$1,770,500 more than at December 31, 2004, due to the increase in
Montagne Jeunesse inventory and household chemical products
inventory to support sales of these products in the upcoming
quarters. Accrued expenses decreased by $15,100 from
December 31, 2004 to March 31, 2005 primarily from a decrease
in accrued salaries and related items of $14,400.
We have no significant capital expenditures planned for
2005 and have no current plans for any external financing, other
than our existing bank loans. We expect that our available cash
and cash flows from operating activities will fund the next
twelve months' cash requirements.
Our dependence on operating cash flow means that risks
involved in our business can significantly affect our liquidity.
Any loss of a significant customer, any further decreases in
distribution of our skin care or household chemical products,
any new competitive products affecting sales levels of our
products, or any significant expense not included in our internal
budget could result in the need to raise cash, such as through a
bank financing. Except for the short-term line of credit
described above, we have no arrangements for an external financing
of debt or equity, and we are not certain whether any such
financing would be available on acceptable terms. Please also see
other risks summarized in "Forward Looking Statements" below. We
expect our operating cash flows to improve if we achieve
profitability in 2005.
Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss due to adverse
changes in financial and commodity market prices and rates. We
are not materially exposed to market risks regarding interest
rates because the interest on our outstanding debt is at the
lender's base rate, which approximates the prime rate, adjustable
yearly. Our investments in debt and equity securities are
short-term and not subject to significant fluctuations in fair
value. If interest rates were to rise 10% from year-end levels,
the fair value of our debt and equity securities would have
decreased by approximately $11,800. Further, we do not use
foreign currencies in our business. Currently, we receive
payments for sales to parties in foreign countries in U.S. dollars.
Additionally, we do not use derivative instruments or engage in
hedging activities. As a result, we do not believe that
near-term changes in market risks will have a material effect on
results of operations, financial position or our cash flows.
Forward-Looking Statements
This report may contain "forward-looking statements" within
the meaning of U.S. federal securities laws. These statements are
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements and our performance inherently involve risks and
uncertainties that could cause actual results to differ
materially from the forward-looking statements. Factors that
would cause or contribute to such differences include, but are
not limited to, continued acceptance of the our products in the
marketplace; the degree of success of any new product or product
line introduction by us; competitive factors; any decrease in
distribution of (i.e., retail stores carrying) our significant
products; continuation of our distributorship agreement with
Montagne Jeunesse; the need for effective advertising of our
products; limited resources available for such advertising; new
competitive products and/or technological changes; dependence
upon third party vendors and upon sales to major customers;
changes in the regulation of our products, including applicable
environmental regulations; adverse developments in pending
litigation; the loss of any executive officer; and other matters
discussed in our periodic filings with the Securities and Exchange
Commission. We undertake no obligation to revise any
forward-looking statements in order to reflect events or
circumstances that may arise after the date of this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Please see "Market Risks" in Item 2 of Part I of this Report which
information is incorporated herein by this reference.
Item 4. Controls and Procedures
As of March 31, 2005, we conducted an evaluation, under the
supervision and with the participation of the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and
procedures. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in
Securities and Exchange Commission rules and forms as of
March 31, 2005. There was no change in our internal control over
financial reporting during the quarter ended March 31, 2005 that
has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Not Applicable
Item 2. Not Applicable
Item 3. Not Applicable
Item 4. Not Applicable
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
None.
(b) Exhibits
10.1 Third Amendment to the Scott's Liquid Gold-Inc. Employee Stock
Ownership Plan, effective March 28, 2005
10.2 Agreement dated as of May 3, 2005 between Montagne Jeunesse
International Ltd. and Neoteric Cosmetics, Inc.
31.1 Rule 13a-14(a) Certification of the Chief Executive
Officer
31.2 Rule 13a-14(a) Certification of the Chief Financial
Officer
32.1 Section 1350 Certification
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.
SCOTT'S LIQUID GOLD-INC.
May 11, 2005 BY: /s/ Mark E. Goldstein
Date --------------------------------------
Mark E. Goldstein
President and Chief Executive Officer
May 11, 2005 BY: /s/ Jeffry B. Johnson
Date --------------------------------------
Jeffry B. Johnson
Treasurer and Chief Financial Officer
EXHIBIT INDEX
Exhibit
No. Document
10.1 Third Amendment to the Scott's Liquid Gold-Inc.
Employee Stock Ownership Plan, effective
March 28, 2005
10.2 Agreement dated as of May 3, 2005 between Montagne
Jeunesse International Ltd. and Neoteric
Cosmetics, Inc.
31.1 Rule 13a-14(a) Certification of the Chief Executive
Officer
31.2 Rule 13a-14(a) Certification of the Chief Financial
Officer
32.1 Section 1350 Certification
EXHIBIT 10.1
THIRD AMENDMENT TO THE SCOTT'S LIQUID GOLD-INC. EMPLOYEE
STOCK OWNERSHIP PLAN
1. Recitals Pursuant to corporate resolution, Scott's Liquid
Gold-Inc. wishes to eliminate the cash-out provision of the
Scott's Liquid Gold-Inc. Employee Stock Ownership Plan and
Trust Agreement (the "Plan").
2. Amendment of Plan The following amendments to the Plan
are adopted, effective as provided in Paragraph 3 below:
A. Section 1.4(c) of the Plan shall be deleted and
replaced in its entirety with the following:
(c) Beginning with distributions on or after March 28,
2005, the Cash-Out Limit shall be $0.00.
B. Section 6.3(a)(1) of the Plan shall be deleted and
replaced in its entirety with the following:
(1) For distributions prior to March 28, 2005, if the
amount does not exceed the Cash-Out Limit, the Committee shall
direct the Trustee to distribute the vested value to such
Participant without the consent of the Participant as soon as
administratively feasible after the Participant's separation
from service with the Employer. As of March 28, 2005, all
distributions shall require Participant consent and shall be
subject to subsection (2) below.
3. Effective Date This Third Amendment shall be effective
for distributions made on or after March 28, 2005.
4. Terms and Conditions of Plan Except for the amendments in
paragraph 2, all terms and conditions of the Plan are unamended
and shall remain in full force and effect.
5. Execution Scott's Liquid Gold-Inc. has executed this
Third Amendment as of this 1st day of March, 2005
COMPANY:
SCOTT'S LIQUID GOLD-INC.
/s/ Dennis P. Passantino
Dennis P. Passantino
Vice President - Operations, Corporate Secretary
PARTICIPATING EMPLOYERS:
ADVERTISING PROMOTIONS INCORPORATED
COLORADO PRODUCT CONCEPTS, INC.
NEOTERIC COSMETICS, INC.
SLG CHEMICALS, INC.
SLG PLASTICS, INC.
SLG TOUCH-A-LITE, INC.
/s/ Dennis P. Passantino
Dennis P. Passantino
Vice President - Operations, Corporate Secretary
EXHIBIT 10.2
MONTAGNE JEUNESSE
NEOTERIC COSMETICS, INC.
DATED: May 4, 2005
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made on May 3rd, 2005.
BETWEEN:
MONTAGNE JEUNESSE INTERNATIONAL LTD a company incorporated in
England and Wales (registered no. 4209056) whose registered
office is at Eco Factory, off Valley way, Swansea Enterprise
Park, Llansamlet, Swansea, SA6 8QP (the "Supplier"); and
NEOTERIC COSMETICS, INC., whose registered company address is
at 4880 Havana Street, Denver, Colorado, USA 80239 (the
"Distributor partner")
IT IS AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement:
"Commencement Date" means the 3rd day of May 2005;
"Control" means the ability to direct the affairs of another
whether by virtue of the ownership of shares, contract or otherwise;
"Products" means the products specified in Part A of Schedule 1
or such other products as stipulated by the Supplier from time
to time;
"Supplier Core Products" means the products specified in Part B
of Schedule 1 or such other products as stipulated by the Supplier
from time to time;
"Territory" means the areas specified in Schedule 2;
"Trade Mark[s]" means the trade mark[s] listed in Schedule 3
together with any further trade marks of which the Supplier may
become the proprietor in the Territory in respect of the Products
and which the Supplier may permit the Distributor partner by
express notice in writing to use in respect of the Products;
"Year" means each successive period of 12 months commencing in the
Commencement Date.
1.2 In this Agreement a reference to:
1.2.1 a "subsidiary" or "holding company" shall be
construed in accordance with section 736 of the Companies Act 1985;
1.2.1 persons includes a reference to any body corporate,
unincorporated association or partnership;
1.2.3 a person includes a reference to that person's legal
personal representatives, successors and permitted assigns;
1.2.4 a Clause or Schedule, unless the context otherwise
requires, is a reference to a clause of or schedule to this Agreement;
1.2.5 an agreement or other document is a reference to that
agreement or document as from time to time supplemented or amended.
1.3 The headings in this Agreement shall not affect the
interpretation of this Agreement.
2. APPOINTMENT
2.1 The Supplier appoints the Distributor partner as its exclusive
distributor partner to market and distribute the Products in the
Territory on the terms of this Agreement.
2.2 The Supplier reserves unto itself the right notwithstanding
anything to the contrary herein to take such steps as it deems
necessary or considers expedient to itself to promote the sale of
the Products in the Territory subject to it giving prior
notification to the Distributor partner of its intentions to do so.
2.3 Notwithstanding the appointment hereunder the Supplier shall
reserve the right to trade direct outside the Territory with any
person firm body corporate or unincorporate which insists on
purchasing direct from the Supplier for shipment into the Territory
subject to the Supplier providing details of such person firm body
corporate or unincorporate to the Distributor partner. The
distributor is rewarded 5% of any such sales net.
3. PERIOD
This appointment will commence from the date hereof for a fixed
period of eighteen months and thereafter subject to automatic
rolling two-year renewals. Should either party decide to terminate
this Agreement it must give six months notice in writing of their
desire to terminate, if notice has been served both parties are
obliged to continue to fulfill their obligations as per this
Agreement to the fullest extent, to the expiration of the six
month period.
4. DISTRIBUTOR PARTNER'S UNDERTAKINGS
The Distributor partner undertakes and agrees with the Supplier
or suppliers sub-contractor at all times during the term of
this Agreement:
4.1 to purchase the Products only from the Supplier;
4.2 not to distribute during the duration of this Agreement
and for 36 months thereafter any goods of the same description as
and which compete with the Products;
4.3 to refrain outside the Territory from seeking customers for
the Products;
4.4 to refrain outside the Territory from establishing any
branch or maintaining any distribution depot for the sale of the
Products;
4.5 to use its best endeavours to develop, promote and sell the
Products in the Territory and to expand the sale of the Products to
all potential purchasers by all reasonable and proper means and not
to do anything which may hinder or interfere with such sales;
4.6 to purchase the Supplier Core Products, such purchase being
mandatory;
4.7 to pay or ensure payment to the Supplier of all sums due to the
Supplier for sales of the Products;
4.8 to submit quarterly written reports to the Supplier showing
details of stock at the end of the last report and of the current
report, outstanding customer orders and orders placed by the
Distributor partner with the Supplier still outstanding and such
other information relating to the to the sale and service of the
Products as the Supplier may require from time to time;
4.9 to maintain on its own account an inventory of the Products
at levels which are based upon 3 months agreed forecasted sales
for the Products throughout the Territory;
4.11 to keep all such stocks of the Products as it may hold in
conditions appropriate for the storage of such goods and to provide
appropriate security for such stocks all at its own cost;
4.12 to insure at its own cost with a reputable insurance company
all stocks of the products as are held by it against all risks to
at least the full replacement value of such stocks and to produce
to the Supplier on demand full particulars of such insurance and
the receipt for the then current premium.
4.13 The Distributor Partner is to submit to the Supplier a
business marketing plan (in the format of the outline draft attached
at Addendum 1) on an annual basis. The business marketing plan is to
be submitted before commencement of trade for the year by April 30th
for the period May to April. The business marketing plan should
include the information listed below:
- - market structure and share by sector
- - market objectives for the coming year
- - profile of the key retailers in the Distributor Partners
market, including sales analysis, product listings, depth of
distribution, EDI and EPOS data when available, in store photos
- - competitor information
- - an annual advertising and promotion programme
- - copies of advertising and editorial material used by the
Distributor Partner
- - Key Retailer Promotional Plan
4.14 to display advertising materials and other signs provided by
the Supplier;
4.15 to observe all directions and instructions given to it by
the Supplier in relation to the promotion and advertisement of the
Products; in particular to adhere to all display materials and
pantone references which the Supplier provides for advertising
materials save that where the Distributor partner wishes to make
any changes to the same it must obtain the Supplier's prior
written approval before doing so.
4.16 not to represent itself as an agent of the Supplier for any
purpose nor pledge the Supplier's credit or give any condition or
warranty or make any representation on the Supplier's behalf or
commit the Supplier to any contracts nor without the Supplier's
prior written consent make any promises or guarantees with
reference to the Products beyond those contained in the promotional
material supplied by the Supplier or otherwise incur any liability
on behalf of the Supplier;
4.17 to inform the Supplier immediately of any changes in the
Distributor partner's organisation or method of doing business
which might affect the performance of the Distributor partner's
duties under this Agreement;
4.18 to keep full and proper books of account and records showing
clearly all enquiries, quotations, transactions and proceedings
relating to the Products and to allow the authorised representatives
of the Supplier or their duly appointed agents to have access at all
reasonable times to the aforesaid books and records for the purposes
of inspecting them and verifying the Distributor partner's dealings
with the Products;
4.19 to send at its own expense to the premises of the Supplier or
make available at the Distributor partner's premises at a time or
times convenient to the Supplier, competent employees for
instruction by the Supplier in the use, sale and application of
the Products. If such employees shall leave the employment of the
Distributor partner or it shall appear that any of them will be
unavailable to the Distributor partner for assisting it in
performing its duties hereunder for more than one month then the
Distributor partner shall send or make available one or more
competent employees at its own expense to the Supplier for
instruction;
4.20 to sell the Products under the Trade Mark[s] or as packed
and presented by the Supplier and to refrain from making any
alteration or modification to the Products or packaging or
promotional material supplied by the Supplier without the
Supplier's prior written consent;
4.21 to refrain from registering or applying to register in its
own name any of the Trade Mark[s] or designs of the Seller and to
cease using the Trade mark[s] or any of them after the termination
of this Agreement or after the time allowed to the Distributor
partner for the disposal of stocks of the Products under Clause 17
in the event of the Distributor partner using such time;
4.22 not to use the Trade Mark[s] or any of them otherwise than
in accordance with this Agreement;
4.23 to indemnify the Supplier against all losses, liabilities
and costs which the Supplier may incur arising out of the breach
of the Distributor partner's obligations under this Agreement;
4.24 to submit to the supplier on a regular quarterly basis
projections of product requirements on a rolling 6 month basis
and any requirements for ancillary materials in sufficiently full
and accurate details as to enable the Supplier with the least
possible delay to respond effectively.
5. FORECASTS AND ORDERS
5.1 Not later than 1st May in each Year the Distributor partner
shall inform the Supplier in writing of its forecast of the number
of each type of the Products which it expects to purchase from the
Supplier for delivery during the 6 month period commencing on the
first day of the month following such date such forecast being in
the form of the draft attached at Schedule 4;
5.2 The Supplier undertakes to use all reasonable endeavours to
meet all orders for the products forwarded to the Supplier by the
Distributor partner in accordance with the Supplier's terms of
delivery to the extent that such orders do not exceed the forecast
for each type of the Products [provided under sub-clause 5.1 above];
Both parties agree to work to attain the suggested
targets below.
TARGETS:
2005/6 $10m
2006/7 $12m
2007/8 $15m
2008/9 $18m
2009/10 $20m
5.4 The Distributor partner guarantees to purchase a minimum
quantity of any new Product introduced by the Supplier, within six
months of the Product being available. If the Distributor partner
feels any Product within the range will not sell in its Territory
for reasons of culture, religion and climate, it will advise the
Supplier in writing of their reasoning for not introducing the
Product. The Distributor partner acknowledges that: the Supplier
reserves the right to offer any such Product declined for sale to
a third party within the Territory.
5.5 Should historical sales not justify a language variant or the
Supplier is introducing a Private Label, then the Distributor
partner concerned is advised that unless the Distributor partner
purchases a minimum launch quantity of 20,000 of an item along
with a committed forecast by month for the next twelve months the
Distributor partner will not receive stock. The Distributor
partner is advised that resulting from the removal of an
English/French/German pack that the only other way the Distributor
partner could receive stock will be through labeling. However,
this would not normally be sanctioned unless the circumstances are unique.
6. SUPPLIER'S UNDERTAKINGS
The Supplier undertakes:
6.1 (Subject to clauses 2.2 2.3 and 5.4) to supply the Products
only to the Distributor partner for resale in the Territory and
not to supply the Products to users in the Territory;
6.2 to provide the Distributor partner with information on the
advertising and promotion used by the Supplier and supply such
quantities of promotional and advertising material as the
Distributor partner shall reasonably request at the cost of the
Distributor partner from time to time;
6.3 to inform the Distributor partner within one month of
receipt of the Distributor partner's advertising and promotional
programme whether it accepts the programme and the extent if any
to which it will contribute to the costs of such programme;
6.4 to provide full training for the employees sent by the
Distributor partner in accordance with Clause 4.19;
6.5 to provide such information and support as may reasonably
be requested by the Distributor partner to enable it properly
and efficiently to discharge its duties under this Agreement;
6.6 where mutually agreed to attend with the Distributor partner
in fairs and exhibitions in the Territory;
6.7 to make available to the Distributor partner such field
selling support as the Supplier may deem necessary.
7. PRICES AND PAYMENTS
7.1 The prices to be paid by the Distributor partner to the
Supplier for the Products shall be the Supplier's published list
prices as established by the Supplier from time to time.
7.2 Any and all expenses, costs and charges incurred by the
Distributor partner in the performance of its obligations under
this Agreement shall be paid by the Distributor partner unless
the Supplier has expressly agreed beforehand in writing to pay
such expenses, costs and changes.
7.3 The Supplier shall give the Distributor partner 3 months
written notice of any change in the Supplier's published list
prices of the Products.
7.4 The Distributor partner shall pay the full amount invoiced
to it by the Supplier without any deductions no later than 35 days
from receipt of goods.
7.5 The Distributor partner shall be responsible for the
collection, remittance and payments of any or all taxes, charges,
levies, assessments and other fees of any kind imposed by
governmental or other authority in respect of the purchase, sale,
importation, lease or other distribution of the Products.
8. STAND DISPLAY MATERIALS
(a) Shelf talkers, stand header cards, showcards when supplied
by the Supplier shall be invoiced at cost to the Distributor
partner. The cost of stands supplied by the Supplier shall be met
by the Distributor partner. The cost of the stand displays are
detailed on the price list attached at Schedule 1 amended as the
Supplier deems necessary from time to time. Any extra promotional
material produced from time to time by the Distributor partner
solely for the Distributor partner's use including leaflets on
the products in the language of the Territory, shall be solely
for the Distributor partner's account. It is acknowledged by the
Distributor partner that the use of such material must be approved
beforehand by the Supplier.
(b) Outlets to which the Distributor partner shall sell the
products shall be Grocery, Drug, Perfumeries, Pharmacies,
Textile Fashion, Mass Merchandisers, Beauty Salons, Airport
Retail Shops, Home Shopping Network, department stores and
health food stores. The Distributor partner shall consult with
the Supplier concerning the distribution policy. The Distributor
partner shall only vary the distribution policy in a significant
way with the agreement of the Supplier.
9. LICENCES AND PERMITS
The Distributor partner shall be responsible for obtaining any
necessary import licences or permits necessary for the entry of
the Products into the Territory or their delivery to the
Distributor partner and the Distributor partner shall be
responsible for any and all customs duties, clearance charges,
taxes, brokers' fees or other amounts payable in connection
with such importation and delivery. Where documents are requested
by the Distributor partner to be sent by courier these shall be
so despatched at the Distributor partner's cost
10. WITHDRAWAL OF PRODUCTS AND SPECIFICATION CHANGES
The Supplier shall be entitled upon giving three month's written
notice to the Distributor partner to vary Schedule 1 so as to
exclude from this Agreement such one or more of the Products as
it thinks fit if for any reason the production of such Products
shall have been permanently discontinued. The Supplier shall be
entitled to make changes to the specifications of the Products
which do not adversely affect that Product's performance and
shall give notice of such changes to the Distributor partner
as soon as may be practical.
11. CONDITIONS OF SALE
The Supplier's conditions of sale in force from time to
time shall apply to all sales by the Supplier to the Distributor
partner hereunder. If there is any inconsistency between the
conditions of sale and the terms of this Agreement the latter
shall prevail.
12. TRADE MARKS
12.1 The Distributor partner shall not without the prior written
consent of the Supplier:
12.1.1 alter the labelling or packaging of any of the
Products displaying the Trade Marks;
12.1.2 make any addition to the Products;
12.1.3 alter, deface or remove in any manner any reference to
the Trade Marks, any reference to the Supplier or any other name
attached or affixed to the Products or their packaging or labelling.
12.2 The Distributor partner shall not do or omit to do anything
in its use of the Trade Marks which may or would adversely affect
their validity.
12.3 The Distributor partner shall not at any time during or
within one year after termination of this Agreement adopt, use or
register without the prior written consent of the Supplier any
word or symbol or combination thereof similar to the Trade Marks.
12.4 The Supplier makes no representation or warranty as to the
validity or enforceability of the Trade Marks nor as to whether the
Trade Marks infringe upon any intellectual property right of third
parties in the Territory.
12.5 The parties to this Agreement shall forthwith execute a form
of registered user agreement or several registered user agreements
as the case may require in the form specified by the Supplier or
in such form as circumstances may permit in respect of such of
the Trade Marks as are at the date hereof registered in the
Territory. In the event of any of the Trade Marks becoming so
registered by the Supplier during the continuance of this
agreement the Supplier shall so inform the Distributor partner
and the parties hereto shall then execute such a registered user
agreement or agreements in respect of such Trade Marks. In the
event of any conflict between any such registered user agreement
and the terms of this Agreement the latter shall prevail.
12.6 The Distributor partner acknowledges that this Agreement
shall not operate to vest any right title or interest in the Trade
Marks in the Distributor partner other than pursuant to
Clause 12.5 above.
12.7 The Distributor partner will immediately bring to the notice
of the Supplier any improper or wrongful use in the Territory of
the Trade Marks and the Distributor partner will on being so
requested by the Supplier and at the cost of the Supplier assist
in taking all steps to defend the rights of the Supplier including
the institution at the Supplier's cost of any actions which it
may deem necessary to commence for the protection of any of
its rights.
13. PRODUCT LIABILITY INDEMNITY
13.1 The Supplier shall indemnify the Distributor partner against
all losses, liabilities and costs which the Distributor partner
may incur arising out of any alleged fault or defect (howsoever
arising) in the materials or workmanship of the Products
manufactured or supplied by the Supplier (including, without
limitation, all losses, liabilities and costs incurred as a
result of defending or settling any claim (a "Relevant Claim")
alleging any such liability.
13.2 The Distributor partner shall have no right to an indemnity
under Clause 13.1 for any Relevant Claim if it fails to act in
accordance with Clause 13.3.
13.3 If the Distributor partner becomes aware of any matter which
might give rise to a Relevant Claim, the following provisions
shall apply:
13.3.1 the Distributor partner shall immediately give
written notice to the Supplier of the matter (stating in reasonable
detail the nature of the matter and, so far as practicable, the
amount claimed) and shall consult with the Supplier with respect
to the matter. If the matter has become the subject of any
proceedings the Distributor partner shall deliver the notice
within sufficient time to enable the Supplier to contest the
proceedings before any final judgment;
13.3.2 the Distributor partner shall provide to the
Supplier and its professional advisers reasonable access to
premises and personnel and to any relevant assets, documents
and records within its possession or control for the purposes
of investigating the matter and enabling the Supplier to take such
action as is referred to in Clause 13.3.5; Provided it does not
interfere in the distributor partners capacity as a public company.
13.3.3 the Supplier at its expenses, shall be entitled to
take copies of any of the documents or records, and photograph
any premises or assets, referred to in Clause 13.3.2
13.3.4 The Distributor partner shall:
(a) take such action and institute such proceedings, and
give such information and assistance, as the Supplier may
reasonably request to:
(i) dispute, resist, appeal, compromise, defend,
remedy or mitigate the matter; or
(ii) enforce against any person (other than the
Supplier) the rights of the Distributor partner in relation to the
matter; and
(b) in connection with any proceedings related to the matter
(other than against the Supplier) use professional advisers
nominated by the Supplier and, if the Supplier so requests, allow
the Supplier the exclusive conduct of the proceedings,
in each case on the basis that the Supplier shall fully
indemnify the Distributor partner for all reasonable costs incurred
as a result of any request or nomination by the Suppliers;
1.3.5 The Distributor partner shall not admit liability in
respect of or settle the matter without the prior written consent
of the Supplier, such consent not to be unreasonably withheld or
delayed.
13.4 Nothing in this Clause 13 shall in any way restrict or limit
the general obligation at law of the Distributor partner to
mitigate any loss which it may incur as a result of any matter
giving rise to a claim pursuant to Clause 13.1.
14. PRODUCT LIABILITY INSURANCE
14.1 The Supplier shall effect with reputable insurers in a sum
of not less than GBP10 million for any one occurrence in respect of
any and all liability (howsoever and whensoever arising) in respect
of any claim that the Products are faulty or defective and the
Supplier shall produce to the Distributor partner on request the
current annual premium receipt for such insurance (or other
evidence thereof).
14.2 The Supplier shall renew such insurance for the term of this
Agreement and within fourteen days of each such renewal shall
produce to the Distributor partner the premium receipt for renewal
(or otherwise thereof satisfactory to the Distributor partner).
14.4 If the Supplier shall fail to effect any such renewal the
Distributor partner shall be entitled to effect such insurance
and the Supplier shall on demand reimburse to the Distributor
partner an amount equal to the premium for such insurance.
15. TERM
This Agreement shall commence on the Commencement Date and shall
(unless terminated at an earlier date pursuant to Clause 16)
continue in force for an initial term (the "Initial Term") of
eighteen months from the Commencement Date and shall continue in
force after the Initial Term until terminated by either party
giving to the other party no less than three months' notice in
writing expiring at the end of the Initial Term or any time
after the Initial Term.
16. TERMINATION
16.1 Either party (the "Initiating Party") may terminate this
Agreement with immediate effect by notice in writing to the
other party (the "Breaching Party") on or at any time after
the occurrence of any of the events specified in Clause 16.2
in relation to the Breaching Party.
16.2 The events are:
16.2.1 a material breach by the Breaching Party of any
of its material obligations under this Agreement which (if the
breach is capable of remedy) the Breaching Party has failed to
remedy the breach within 30 days after receipt of notice in writing
from the Initiating Party giving full particulars of the breach and
requiring the Breaching Party to do so and stating that a failure so
to remedy the breach may give rise to a termination under this
Clause; For the purposes of this Clause 16.2.1 a breach shall be
considered capable of remedy if time is not of the essence in
performance of the obligation and if the Breaching Party can comply
with the obligation within the 30 day period;
16.2.2 the passing by the Breaching Party of a resolution
for its winding-up or the making by a court of competent
jurisdiction of an order for the winding-up of the Breaching
Party or the dissolution of the Breaching Party;
16.2.3 the making of an administration order in relation
to the Breaching Party or the appointment of a receiver over, or
the taking possession or sale by an encumbrancer of, any of the
Breaching Party's assets;
16.2.4 the Breaching Party making an arrangement or
composition with its creditors generally or making an application
to a court of competent jurisdiction for protection from its
creditors generally.
16.3 The Supplier may terminate this Agreement with immediate
effect by notice in writing to the Distributor partner if:
16.3.1 the Distributor partner changes its organisation or
methods of business in such a way as in the opinion of the
Supplier to be able less effectively to carry out its duties
hereunder;
16.3.2 there is a change in control of the Distributor
partner.
16.4 Any act done or omitted to be done by any person, firm or
company who controls, is under common control with or is controlled
by the Distributor partner which would be a breach of this Agreement
if done by the Distributor partner shall be deemed to be a breach of
this Agreement by the Distributor partner.
17. CONSEQUENCES OF TERMINATION
17.1 All rights and obligations of the parties shall cease to
have effect immediately upon termination of this Agreement except
that termination shall not affect:
17.1.1 the accrued rights and obligations of the parties at
the date of termination; and
17.1.2 the continued existence and validity of the rights
and obligations of the parties under those clauses which are
expressed to survive termination and any provisions of this
Agreement necessary for the interpretation or enforcement of
this Agreement.
17.2 Upon termination of this Agreement:
17.2.1 the Distributor partner shall be permitted for a
period of three months following notification of termination to
sell and distribute such stocks of the Products as it may at the
time have in store or under its control provided that when doing
so the Distributor partner shall not dump the Products or enter
into any aggressive price discounting which could in any way
damage the brands or the goodwill and reputation of the Supplier.
At the end of such period, the Distributor partner shall promptly
return all remaining saleable current stocks of the Products,
meaning stock purchased within the last 18 months at the date of
close of contract at the Supplier's sales price to the Distributor
partner, to the Supplier at the expense of the Distributor partner
or otherwise dispose of such stocks as the Supplier may instruct.
17.2.2 on the expiration of such three month period the
Distributor partner shall promptly return to the Supplier or
otherwise dispose of as the Supplier may instruct all samples,
instruction books, technical pamphlets, catalogues, advertising
materials, specifications and other materials, documents or papers
whatsoever sent to the Distributor partner and relating to the
Supplier's business (other than correspondence which has passed
between the parties) which the Distributor partner may have in
its possession or under its control; Excluding all promotional
material developed by the distributor partner, but including
materials purchased from supplier that will be reimbursed at
cost purchased.
17.3 The Supplier shall be entitled to cancel all orders placed
by the Distributor partner prior to the date of termination which
have been accepted by the Supplier without any liability of
whatsoever nature to the Supplier.
17.4 Listing Fees:
The Supplier and any subsequent Distributor partners accept
no liability for listing fees or other forms of cooperative funding
or returns in dealings with third party retailers by the
Distributor partner.
18. CONFIDENTIALITY
18.1 During the term of this Agreement and after termination or
expiration of this Agreement for any reason whatsoever the
Receiving Party shall:
18.1.1 keep the Confidential Information confidential;
18.1.2 not disclose the Confidential Information to any
other person other than with the prior written consent of the
Disclosing Party or in accordance with Clauses 18.2 and 18.3; and
18.1.3 not use the Confidential Information for any purpose
other than the performance of its obligations under this Agreement.
18.2 During the term of this Agreement the Receiving Party may
disclose the Confidential Information to its employees (the
"Recipient") to the extent that it is reasonably necessary for the
purposes of this Agreement.
18.3 The Receiving Party shall procure that each Recipient is made
aware of and complies with all the Receiving Party's obligations of
confidentiality under this Agreement as if the Recipient was a
party to this Agreement.
18.4 The obligations contained in Clauses 18.1 and 18.3 shall not
apply to any Confidential Information which:
18.4.1 is at the date of this Agreement or at any time after
the date of this Agreement comes into the public domain other than
through breach of this Agreement by the Receiving Party or any
Recipient;
18.4.2 can be shown by the Receiving Party to the reasonable
satisfaction of the Disclosing Party to have been known by the
Receiving Party before disclosure by the Disclosing Party to the
Receiving Party; or
18.4.3 subsequently comes lawfully into the possession of
the Receiving Party from a third party.
18.5 For the purposes of this Clause, "Confidential Information"
means all information of a confidential nature disclosed (whether
in writing, verbally or by any other means and whether directly or
indirectly) by one party (the "Disclosing Party") to the other party
(the "Receiving Party") whether before or after the date of this
Agreement including, without limitation, any information relating to
the Disclosing Party's products, operations, processes, plans or
intentions, product information, know-how, design rights, trade
secrets, market opportunities and business affairs.
19. FORCE MAJEURE
19.1 If either party is prevented, hindered or delayed from or in
performing any of its obligations under this Agreement by a Force
Majeure Event then:
19.1.1 that party's obligations under this Agreement shall
be suspended for so long as the Force Majeure Event continues and to
the extent that that party is so prevented, hindered or delayed;
19.1.2 within two days after commencement of the Force
Majeure Event that party shall notify the other party in writing
of the occurrence of the Force Majeure Event, the date of
commencement of the Force Majeure Event and the effects of the
Force Majeure Event or its ability to perform its obligations
under this Agreement;
19.1.3 if that party fails to give the notice referred
to in Clause 19.1.2 it shall forfeit its rights under Clause 19.1.1;
19.1.4 that party shall use all reasonable efforts to
mitigate the effects of the Force Majeure Event upon the
performance of its obligations under this Agreement; and
19.1.5 within two days after the cessation of the Force
Majeure Event that party shall notify the other party in writing
of the cessation of the Force Majeure Event and shall resume
performance of its obligations under this Agreement.
19.2 If the Force Majeure Event continues fore more than one
month after the commencement of the Force Majeure either party
may terminate this Agreement by giving not less than 30 days
notice in writing to the other party.
19.3 For the purposes of this clause, "Force Majeure Event" means
any event beyond the reasonable control of a party including,
without limitation, strikes, lock-outs, labour disputes, acts of
God, war, riot, civil commotion, malicious damage, compliance with
any law or governmental order, rule regulation or direction,
accident, breakdown of plant or machinery, fire, flood or storm.
20. GENERAL
20.1 This Agreement together with any documents referred to in
this Agreement constitute the entire agreement between the parties
relating to the subject matter of this Agreement and supersedes
all previous such agreements.
20.2 This Agreement shall only be valid and binding on the
Supplier if it has been signed on behalf of the Supplier by its
Market Director and Sales & Marketing Director.
20.3 No variation of this Agreement shall be valid unless it is
in writing and signed by or on behalf of each of the parties/by a
director of each of the parties.
20.4 The failure to exercise or delay in exercising a right or
remedy under this Agreement shall not constitute a waiver of the
right or remedy or a waiver of any other rights or remedies and no
single or partial exercise of any right or remedy under this
Agreement shall prevent any further exercise of the right or remedy
or the exercise of any other right or remedy.
20.5 Nothing in this Agreement shall be construed as creating a
partnership between the parties or as constituting either party as
the agent of the other party (save as expressly set out in this
Agreement) for any purpose whatsoever and neither party shall have
the authority or power to bind the other party or to contract in
the name of or create a liability against the other party in any
way or for any purpose.
21. ASSIGNMENT AND SUBCONTRACTING
21.1 Neither party shall assign or transfer or purport to assign
or transfer any of its rights or obligations under this Agreement
except that a party may assign all or any of its rights under this
Agreement with the prior written consent of the other party (such
consent not to be unreasonably withheld or delayed).
21.2 Neither party shall subcontract the performance of any of
its obligations under this Agreement.
22. NOTICES
22.1 Any notice under or in connection with this Agreement shall
be in writing in the English language and shall be delivered
personally or sent by first class post pre-paid recorded delivery
(and air mail if overseas) or by facsimile, to the party due to
receive the notice or communication as its address set out in
this Agreement or such other address as either party may specify
by notice in writing to the other.
22.2 In the absence of evidence of earlier receipt, any notice
shall be deemed to have been duly given:
22.2.1 if delivered personally, when left at the address
referred to in Clause 22.1;
22.2.2 if sent by mail other than air mail, two days after
posting it;
22.2.3 if sent by air mail, six days after posting it;
22.2.4 if sent by facsimile, on completion of its transmission.
23. GOVERNING LAW AND JURISDICTION
23.1 This Agreement is governed by, and shall be construe in
accordance with, English law.
23.2 Each party irrevocably agrees for the benefit of the Supplier
that the courts of England shall have exclusive jurisdiction to hear
and determine any suit, action or proceedings, and to settle any
disputes, which may arise out of or in connection with this
Agreement (respectively, "Proceedings" and "Disputes") and, for
such purposes, irrevocably submits to the jurisdiction of the
courts of England.
23.3 Each party irrevocably waives any objection which it might
at any time have to the courts of England being nominated as the
forum to hear and determine any Proceedings and to settle any
Disputes and agrees not to claim that the courts of England are
not a convenient or appropriate forum.
23.4 Each party agrees that the process by which any Proceedings
are begun in England or elsewhere may be served on the Distributor
partner by being delivered in accordance with Clause 22. Nothing
contained in this Clause 23.4 shall affect the right to serve
process in any other manner permitted by law.
23.5 The submission to the jurisdiction of the courts of England
shall not (and shall not be construed so as to) limit the right
of the Supplier to take Proceedings against the Distributor
partner in any other court of competent jurisdictions, nor shall
the taking of Proceedings by the Supplier in any one or more
jurisdictions preclude the Supplier taking Proceedings in any
other jurisdiction (whether concurrently or not) if and to the
extent permitted by applicable law.
24. COUNTERPARTS
This Agreement may be executed in any number of counterparts each
of which when executed and delivered shall be an original, but all
the counterparts together shall constitute one and the same
instrument.
AS WITNESS the hands of the duly authorised representatives of
the parties the day and year first above written.
Supplier Partner Distributor Partner
Montagne Jeunesse Neoteric Cosmetics, Inc.
International Ltd.
/s/ Brian Stevendale /s/ Mark Goldstein
Director President, CEO
SCHEDULE 1
PART A
The Products
See attached Price List(s)
PART B
The Supplier Core Products
ALL Hair Miracles
ALL Face Masques
ALL Face Tonics
ALL Foot Products
ALL Body Products
SCHEDULE 2
(The Territory)
United States of America
SCHEDULE 3
The Trade Marks
Montagne Jeunesse
Cut From The Wild
Chantelle
Model Secrets
One Night Color
Davinci
Fab Face Food
Renew You
Skin Treats
Perfectly Pampered
One Night Stand
Unique shapes of products
SCHEDULE 4
ORDERS AND FORECASTS
EXHIBIT 31.1
CERTIFICATION
I, Mark E. Goldstein, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the
quarter ended March 31, 2005 of Scott's Liquid Gold-Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including our consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report
based on such evaluation; and
(c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal control over financial reporting.
DATED: May 11, 2005
/s/ Mark E. Goldstein
------------------------------------
Mark E. Goldstein
President, Chief Executive Officer,
and Chairman of the Board
Principal Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Jeffry B. Johnson, certify that:
1. I have reviewed this quarterly report on Form 10-Q for
the quarter ended March 31, 2005 of Scott's Liquid Gold-Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including our consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal control over financial reporting.
DATED: May 11, 2005
/s/ Jeffry B. Johnson
--------------------------------------
Jeffry B. Johnson
Treasurer and Chief Financial Officer
Principal Financial Officer
EXHIBIT 32.1
CERTIFICATION OF 10-Q REPORT
OF
SCOTT'S LIQUID GOLD-INC.
FOR THE QUARTER MARCH 31, 2005
1. The undersigned are the Chief Executive Officer and the Chief
Financial Officer of Scott's Liquid Gold-Inc. ("Scott's Liquid
Gold"). This Certification is made pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. This Certification accompanies the
10-Q Report of Scott's Liquid Gold for the quarter ended
March 31, 2005.
2. We certify that such 10-Q Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 and that the information contained in such 10-Q Report
fairly presents, in all material respects, the financial condition
and results of operations of Scott's Liquid Gold.
This Certification is executed as of May 11, 2005.
/s/ Mark E. Goldstein
- -----------------------------------
Mark E. Goldstein
President, Chief Executive Officer
and Chairman of the Board
Principal Executive Officer
/s/ Jeffry B. Johnson
- -----------------------------------
Jeffry B. Johnson
Treasurer and Chief Financial Officer
Principal Financial Officer