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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004 or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to ____________________
Commission File Number: 000-29182
THE MAJOR AUTOMOTIVE COMPANIES, INC.
--------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Nevada 11-3292094
--------------------------------- ------------------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
43-40 Northern Boulevard
Long Island City, New York 11101
--------------------------------
(Address of Principal Executive Offices)
(718) 937-3700
--------------
(Registrant's Telephone Number)
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 as
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 August 23, 2004, there were 9,720,047 shares of the registrant's common
stock outstanding.
INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements ........................................ 3
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Consolidated Condensed Balance Sheets ............................... 3
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Consolidated Condensed Statements of Operations ..................... 5
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Consolidated Condensed Statements of Cash Flows ..................... 6
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Notes to Consolidated Condensed Financial Statements ................ 8
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................. 13
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Item 3. Quantitative and Qualitative Disclosures About Market Risk .. 20
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Item 4. Controls and Procedures ..................................... 20
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings ........................................... 21
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Item 2. Changes in Securities and Use of Proceeds ................... 21
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Item 3. Defaults Upon Senior Securities ............................. 21
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Item 4. Submission of Matters to a Vote of Security Holders ......... 21
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Item 5. Other Information ........................................... 21
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Item 6. Exhibits and Reports on Form 8-K ............................ 21
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Signatures .......................................................... 22
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2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 2004 DECEMBER 31, 2003
------------- -----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,895,365 $ 1,003,137
Short-term investments 431,740 430,325
Net investment in direct financing leases, current 159,774 213,311
Accounts receivable, net 13,576,539 11,204,480
Inventories 49,808,971 50,257,955
Due from related parties 1,636,331 2,515,749
Other current assets 252,514 277,942
----------- -----------
TOTAL CURRENT ASSETS 69,761,234 65,902,899
Net investment in direct financing leases,
net of current portion 29,919 62,773
Property and equipment, net 4,823,358 4,899,059
Deferred income taxes 1,576,000 1,576,000
Excess of costs over net assets acquired 13,376,000 13,589,000
Due from officer 1,395,358 1,395,358
Notes receivable and other assets 234,097 187,850
----------- -----------
TOTAL ASSETS $91,195,966 $87,612,939
=========== ===========
3
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - floor plan $ 49,679,231 $ 49,599,366
Accounts payable 9,182,149 7,761,992
Accrued expenses 6,202,043 4,955,215
Current maturities of long-term debt 1,964,464 701,741
Customer deposits and other current liabilities 600,521 567,846
------------ ------------
TOTAL CURRENT LIABILITIES 67,628,408 63,586,160
Long-term debt, less current maturities 5,627,446 7,156,125
------------ ------------
TOTAL LIABILITIES 73,255,854 70,742,285
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value- 2,000,000 shares
authorized; 0 shares issued and outstanding
in 2004 and 2003 - -
Common stock, $.01 par value- 50,000,000 shares
authorized; 9,720,047 and 9,702,047 shares issued
and 9,492,856 and 9,474,856 shares outstanding in
2004 and 2003, respectively 97,200 97,020
Additional paid in capital 40,189,749 40,175,709
Deficit (20,383,073) (21,438,311)
Treasury stock, at cost; 227,191 shares in 2004 and 2003 (1,963,764) (1,963,764)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 17,940,112 16,870,654
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 91,195,966 $ 87,612,939
============ ============
4
THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE FOR THE
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
------------------------- ---------------------------
2004 2003 2004 2003
---- ---- ---- ----
Sales $188,794,842 $190,018,727 $103,923,036 $98,872,736
Cost of sales 157,691,278 159,413,776 86,933,351 82,797,667
------------ ------------ ------------ -----------
Gross profit 31,103,564 30,604,951 16,989,685 16,075,069
Operating expenses 29,614,439 30,059,435 15,400,324 15,231,911
Interest expense, net of interest income 373,672 395,400 185,499 235,814
------------ ------------ ------------ -----------
Income before income taxes 1,115,453 150,116 1,403,862 607,344
Income tax expense 60,215 27,000 160,627 7,000
------------ ------------ ------------ -----------
Net income $ 1,055,238 $ 123,116 $ 1,243,235 $ 600,344
============ ============ ============ ===========
Net income per common share:
Basic $ 0.11 $ 0.01 $ 0.13 $ 0.06
Diluted $ 0.11 $ 0.01 $ 0.13 $ 0.06
============ ============ ============ ===========
Average number of shares used in computation:
Basic 9,480,889 9,398,454 9,486,922 9,455,220
Diluted 9,488,410 9,401,284 9,489,505 9,458,704
============ ============ ============ ===========
5
THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
(UNAUDITED)
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,055,238 $ 123,116
Adjustments to reconcile net income
to net cash provided by (used in) operating activities
Depreciation and amortization 185,533 179,793
Increase (reduction) of allowance for doubtful accounts 246,650 (38,138)
Loss on sale of leased property, net (2,400) -
Stock issued for compensation and services 14,220 53,321
Excess of costs over net assets acquired 213,500 -
(Increase) decrease in assets:
Net investment in direct financing leases 86,391 77,215
Accounts receivable, net (2,618,709) 4,052,682
Inventories 450,364 2,759,427
Due from related parties 879,418 (964,492)
Other assets (20,819) (493,990)
Increase or (decrease) in liabilities
Accounts payable 1,420,157 1,742,005
Accrued expenses 1,123,478 (315,118)
Customer deposits and other current liabilities 32,675 -
Notes payable - floor plan 79,865 (4,027,014)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,268,411 3,148,807
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from certificate of deposit 431,740 425,930
Purchase of certificate of deposit (430,325) (428,364)
Purchase of property and equipment (132,953) (31,641)
Proceeds from sale of leased equipment 24,151 -
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (110,217) (34,075)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (265,956) (441,125)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (265,956) (441,125)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,892,228 2,673,607
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,003,137 796,074
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,895,365 $ 3,469,681
=========== ===========
6
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 1,007,993 $ 1,601,000
Income taxes 28,000 20,000
Non-cash financing and investing
Common stock issued as stock compensation 14,220 -
7
THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited
June 30, 2004
1. Basis of Presentation and Significant Accounting Policies
In the opinion of The Major Automotive Companies, Inc. (the "Company"), the
accompanying unaudited consolidated condensed financial statements contain all
adjustments (consisting primarily of normal recurring adjustments) necessary to
fairly present, in all material respects, the Company's financial position and
its results of operations and cash flows as of the dates and for the periods
indicated.
Certain information and footnote disclosure normally contained in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These condensed consolidated financial statements should be
read in conjunction with the audited December 31, 2003 consolidated financial
statements and related notes included in the Company's Annual Report on Form
10-K for the year ended December 31, 2003. The results of operations for the
six-month and three-month periods ended June 30, 2004 and 2003 are not
necessarily indicative of the operating results for the full year.
In order to maintain consistency and comparability of financial information
between periods presented, certain reclassifications have been made to the
Company's prior year financial statements. For the six months and three months
ended June 30, 2003, warranty expense of $1,595,000 and $830,000, respectively,
was reclassified from operating expense to cost of sales to conform with the
2004 presentation.
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 disclosures of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of income and expenses
during the reporting periods. Operating results in the future could vary from
the amounts derived from management's estimates and assumptions.
The Company has presented basic and diluted earnings (loss) per share, where
applicable. Basic earnings (loss) per share excludes potential dilution and is
calculated by dividing income (loss) available to common stockholders by the
weighted average number of outstanding common shares. Diluted earnings per share
incorporates the potential dilutions from all potential dilutive securities that
would have reduced earnings per share.
2. Floor Plan Interest, Floor Plan Assistance and Advertising Assistance
Floor plan and advertising assistance received from manufacturers are recorded
as offsets to the cost of the vehicle and recognized into income upon the sale
of the vehicle or when earned under a specific manufacturer's program, whichever
is later. Floor plan assistance payments have been included as offsets to
inventory and cost of sales, as appropriate. Floor plan interest expense is
presented as a component of operating expense in the accompanying consolidated
condensed statement of operations to provide more meaningful information
regarding the Company's margin performance.
For the six months ended June 30, 2004 and 2003, aggregate floor plan interest
included in operating expenses was $885,460 and $1,119,753, respectively. For
the three months ended June 30, 2004 and 2003, aggregate floor plan interest
included in operating expenses was $377,764 and $544,755, respectively.
8
THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited
June 30, 2003
Continued
For the six-month and three-month periods ended June 30, 2004 and 2003,
aggregate floor plan assistance received was, as follows:
Six Months Ended June 30, Three Months Ended June 30,
------------------------- ---------------------------
2004 2003 2004 2003
---- ---- ---- ----
Total floor plan assistance received $ 626,795 $ 725,549 $ 275,141 $ 341,084
=============== ================== =============== =================
Amount included in cost of sales $ 925,452 $ 635,549 $ 546,566 $ 365,084
=============== ================== =============== =================
For the six-month and three-month periods ended June 30, 2003 and 2003,
aggregate advertising assistance received was, as follows:
Six Months Ended June 30, Three Months Ended June 30,
------------------------- ---------------------------
2004 2003 2004 2003
---- ---- ---- ----
Total advertising assistance received $ 412,228 $ 612,494 $ 241,243 $ 154,315
=============== ================== =============== =================
Amount included in cost of sales $ 505,248 $ 536,494 $ 175,750 $ 214,315
=============== ================== =============== =================
3. Inventories
Inventories are comprised of the following:
June 30, 2004 December 31, 2003
------------- -----------------
New automobiles $15,090,100 $16,339,679
New trucks and vans 17,366,699 15,785,288
Used automobiles and trucks 15,897,376 16,618,207
Parts and accessories 1,331,005 1,473,761
Other 123,791 41,020
----------- -----------
$49,808,971 $50,257,955
=========== ===========
9
THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited
June 30, 2004
Continued
4. Related Party Transactions
Amounts due from related parties result from sales and purchases of vehicles to
and from dealerships owned by Bruce Bendell, the Company's President, Chief
Executive Officer, Acting Chief Financial Officer and Chairman, and his brother,
Harold Bendell (the "Bendell Dealerships"), as well as previous advances made in
the ordinary course of business. All of the sales and purchases to and from the
Bendell Dealerships are made at wholesale cost plus related fees and have,
therefore, resulted in no significant profit or loss to the Company. For the
six-month and three-month periods ended June 30, 2004 and 2003, the related
party sales and purchases were as follows:
Six Months Ended June 30, Three Months Ended June 30,
------------------------- ---------------------------
2004 2003 2004 2003
---- ---- ---- ----
Related party sales $ 2,963,624 $ 2,236,658 $1,349,777 $ 1,135,383
============== ================== ============== ================
Related party purchases $ 3,610,871 $ 9,655,185 $1,765,248 $ 3,883,903
============== ================== ============== ================
Pursuant to an agreement in principal, effective January 1, 2004, with HB
Automotive, Inc., a company controlled by Harold Bendell, and a management
agreement with Harold Bendell, the Company has accrued management fees for
services performed for the Company by HB Automotive, Inc. and Harold Bendell.
For the six months ended June 30, 2004 and 2003, such fees amounted to
$1,012,400 and $216,744, respectively. For the three months ended June 30, 2004
and 2003, such fees amounted to $538,400 and $173,617, respectively. At June 30,
2004, the Company is indebted to HB Automotive, Inc. in the aggregate amount of
$1,346,121, in connection with such fees, which is included in accrued expenses.
As of June 30, 2004, Bruce Bendell was indebted to the Company in the net amount
of $125,256. This indebtedness arose from a series of cash advances, for which
no interest has been charged, aggregating $1,395,358, the latest of which was
made prior to June 30, 2002. At June 30, 2004, the Company has accrued, but
unpaid, an aggregate of $1,270,102, due to Bruce Bendell for bonuses and credit
enhancement, included in accrued expenses. Included in the amount, is a credit
enhancement of $225,000 that was accrued in the quarter ended June 30, 2004.
While this amount is consistent with the amount approved previously by the
Company's Board of Directors, the current period's accrual is subject to the
future approval of the Company's Board of Directors.
On June 10, 2004, Bruce Bendell sent a proposal letter to the Company offering
to buy all of the Company's outstanding common stock, not already owned by him,
for cash consideration of approximately $0.70 per share. Mr. Bendell has granted
the Company, until September 7, 2004 to consider the terms of his proposal. For
a detailed discussion of such proposal see the Company's Current Reports on
Forms 8-K filed on June 10, 2004, June 18, 2004, July 7, 2004, July 26, 2004 and
August 17, 2004.
10
THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited
June 30, 2004
Continued
5. Franchise Terminations
In February 2004, the Company sold its Subaru franchise and certain Subaru parts
to an unrelated third party for a cash purchase price of $450,000. Additionally,
the purchaser received the Company's inventory of new 2004 Subaru vehicles and
assumed the related floor liability. All proceeds from this transaction have
been put in escrow pending receipt of certain approvals from third parties. In
the second quarter of 2004, the Company closed the sale and recorded a gain of
$237,000 and a reduction of excess of costs over net assets acquired of $213,000
as a result of this transaction.
In March 2004, the Company received notice from American Suzuki Motor
Corporation, the franchisor of the Company's Suzuki dealership in Hempstead, New
York, of a proposed termination of their franchise agreement with the Company.
At the time, the Company had a potential buyer of the franchise and requested
that Suzuki delay the termination pending completion of the sale. When the
potential sale negotiations were terminated the Company requested that Suzuki
reinstate the termination and purchase the Company's inventory of new Suzuki
vehicles. The Suzuki dealership was not material to the Company's operations and
management does not expect the termination of such dealership to have a
significant effect on results of operations or cash flow.
6. Nasdaq Compliance
On April 29, 2004, the Company received a Notification of Deficiency from Nasdaq
indicating that the Company is not in compliance with Nasdaq Marketplace Rule
4310(c)(4), relating to minimum bid price per share ($1.00) for continued
listing on The Nasdaq SmallCap Market.
The Company has until October 26, 2004 to demonstrate compliance with this rule
(and maintain compliance with all other listing requirements) or face possible
delisting from The Nasdaq SmallCap Market. If, by October 26, 2004, the Company
does not demonstrate compliance with the minimum $1.00 bid price, but otherwise
satisfies the Nasdaq SmallCap Market initial listing criteria, the Company will
be granted an additional 180 day compliance period. Thereafter, if the Company
has not regained compliance within the second 180 day compliance period, but
satisfies the initial inclusion criteria, it may be afforded an additional
compliance period, up to its next shareholder meeting, provided the Company
commits to: (1) seek shareholder approval for a reverse stock split at its next
shareholder meeting; and (2) promptly thereafter effect the reverse stock split.
On May 17, 2004, the Company received a letter from Nasdaq indicating that the
Company was not in compliance with Nasdaq Marketplace Rules 4350A(c) and
4350A(d)(2) (the "Rules"), relating to independent director and audit committee
requirements, respectively, for continued listing on The Nasdaq SmallCap Market.
Subsequently, on July 15, 2004, after a new, independent director was appointed
to the Company's Board of Directors and as Chairman of its Audit Committee,
Nasdaq notified the Company that it had regained compliance with the Rules.
11
THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited
June 30, 2004
Continued
7. Contingencies
The Company is involved, and will continue to be involved, in a number of legal
proceedings arising out of the conduct of its business, including litigation
with customers, current and former business associates and employment-related
lawsuits. The Company intends to vigorously defend itself and assert available
defenses with respect to each of these matters. Where necessary, management has
accrued its estimate of the probable costs for the resolution of these
proceedings based on consultation with outside counsel, assuming various
strategies. Further, the Company has certain insurance coverage and rights of
indemnification with respect to certain aspects of these matters. During the
quarter, there were no significant developments in the Company's legal
proceedings, which are discussed in detail in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003, except for the settlement
for $115,000 of a case entitled Tillroe Realty Co. vs. Compass Lincoln Mercury,
Inc. and Fidelity Holdings, Inc. A settlement or an adverse resolution of one or
more of the other matters may result in the payment of significant costs and
damages, which could have a material adverse effect on the Company's business,
financial condition, results of operations, cash flows and prospects.
The Company's policies related to long-lived assets, such as goodwill and
property and equipment, which constitute a significant component of its
consolidated condensed balance sheets, require that an evaluation of such assets
for impairment when events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. If any impairment is
found to exist, the related assets will be written down to fair value.
Additionally, these policies affect the amount and timing of future
amortization. In accordance with Statements of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS 141"), and Statements of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"), goodwill and intangible assets deemed to have indefinite lives are no
longer amortized but, instead are subject to impairment tests at least annually.
These rules on accounting for goodwill have been applied beginning in the first
quarter of 2002. During 2002, the required impairment tests of goodwill were
performed as of January 1, 2002 and December 31, 2002. Additionally, such tests
have been performed as of December 31, 2003. Management has concluded, based, in
part, on the analysis performed and conclusions reached by an independent
valuation appraiser retained by the Company, that there is no impairment of
goodwill as of any of the dates for which such tests were performed. The Company
remains, however, subject to financial statement risk to the extent that
intangible assets become impaired due to decreases in the fair market value of
the related underlying business.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our and our subsidiaries' ("we" or the "Company")
operations, financial condition, liquidity and capital resources should be read
in conjunction with our unaudited Consolidated Condensed Financial Statements
and related notes thereto included elsewhere herein.
This discussion contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. Our actual results could differ
significantly from the results discussed in the forward-looking statements.
The Company
On May 14, 1998, The Major Automotive Companies, Inc. (f/k/a Fidelity Holdings,
Inc.,) then a holding company involved in the acquisition and development of
synergistic technological and telecommunications businesses and the regional
consolidation of the retail automotive industry, acquired, from a related party,
the Major Automotive Group of dealerships ("Major Auto") and related real
property and leases. Until November 3, 2000, when our Board of Directors
determined to sell our non-automotive operations, including our Technology
division, we operated in two divisions: Automotive and Technology. Since that
time, our continuing operations are represented by our automotive dealerships'
activities, including our Major Auto subsidiary and other dealerships, as well
as our automotive leasing subsidiary, Major Fleet and Leasing, Inc.
In the first half of 2004, our operations result in a pre-tax profit of
$1,115,000 and a net profit of $1,055,000. In the comparable period of 2003, we
had a pre-tax profit of $150,000 and a net profit for that period of $123,000.
There are two primary factors that, we believe, contributed to our results. In
the 2004 period, our gross profit increased by approximately $500,000 and our
operating expenses decreased by approximately $500,000, of which approximately
$200,000 was a reduction in floor plan interest. Additionally, although we
incurred approximately $1.3 million in additional compensation expenses
attributable to HB Automotive, Inc. and Bruce Bendell, we were able to reduce
total operating expenses. We believe that these results are reflective of our
implementation of effective operational strategies, including the closing of
under-performing dealerships. These changes, however, are also due to the
disproportionately weaker results during the first half of 2003. The 2003
period's results were adversely affected by a number of factors outside our
control including the general decline in automotive sales throughout the
country, attributable to both the general economy and consumer reluctance based
on the war with Iraq, and the severe and prolonged winter weather conditions
that prevailed in the New York metropolitan area during the first quarter of
2003 that resulted in reduced sales and increased operating costs.
CRITICAL ACCOUNTING POLICIES
We prepare our consolidated condensed financial statements in conformity with
accounting principles generally accepted in the United States. Such principles
require that we make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Operating results in the future could vary
from the amounts derived from those estimates and assumptions. We have
identified the policies below that are critical to our business operations and
the understanding of our results of operations and involve significant
estimates. For detailed discussion of other significant accounting policies see
Note 1, Basis of Presentation and Significant Accounting Policies, of the Notes
to Consolidated Condensed Financial Statements included elsewhere, herein, and
in our Form 10-K for the year ended December 31, 2003, filed with the Securities
and Exchange Commission (the "Commission").
13
Revenue Recognition. The majority of our revenue is from the sales of new and
used vehicles, including any commissions from related vehicle financings. We
recognize revenue upon delivery of the vehicle to the customer. At time of
delivery, all financing arrangements between and among the parties have been
concluded. Currently, there are a number of states that have passed legislation
that limits the amounts car dealers can earn from vehicle financing and several
other states' attorneys general have either proposed similar legislation or have
evidenced interest in this area. If this trend continues and becomes an issue in
New York, it may be a limiting factor on our ability to generate revenues and
profits. Commission revenue on warranty and insurance products sold in
connection with vehicle sales is recognized upon sale. Additionally, we record
income from direct financing leases based on a constant periodic rate of return
on the net investment in the lease. Income earned from operating lease
agreements is recorded evenly over the term of the lease.
Inventory. Our inventory policy determines the valuation of inventory, which is
a significant component of our consolidated balance sheets. Our inventory
consists primarily of retail vehicles held for sale valued at the lower of cost
or market with new vehicles valued on the first-in, first-out basis and used
vehicles and vehicles held for lease with cost determined using the specific
identification method, net of reserves. Cost includes the actual price paid for
each vehicle plus reconditioning and transportation expenses. We establish
reserves based on vehicle inventory aging and management's estimate of market
values. While we believe that our estimates of market value are appropriate, we
are subject to the risk that our inventory may be overvalued from time to time
primarily with respect to used vehicles, which could require additional reserves
to be recorded.
Long-lived Assets. Our policies related to long-lived assets, such as goodwill
and property and equipment, which constitute a significant component of our
consolidated condensed balance sheets, require that we evaluate such assets for
impairment when events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. If any impairment is found to
exist, the related assets will be written down to fair value. Additionally,
these policies affect the amount and timing of future amortization. In
accordance with Statements of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS 141"), and Statements of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets" ("SFAS 142"), goodwill and
intangible assets deemed to have indefinite lives are no longer amortized but,
instead are subject to impairment tests at least annually. We have applied the
new rules on accounting for goodwill beginning in the first quarter of 2002.
During 2002, we performed the required impairment tests of goodwill as of
January 1, 2002 and December 31, 2002. Additionally, we have performed such
tests as of December 31, 2003. We have concluded, based, in part, on the
analysis performed and conclusions reached by an independent valuation appraiser
we retained, that there is no impairment of goodwill as of any of the dates for
which such tests were performed. We remain, however, subject to financial
statement risk to the extent that intangible assets become impaired due to
decreases in the fair market value of the related underlying business.
Floor Plan and Advertising Assistance. Floor plan and advertising assistance
received from manufacturers are recorded as reductions of inventory or offsets
to the cost of the vehicle, as appropriate, and recognized as income upon the
sale of the vehicle or when earned under a specific manufacturer's program,
whichever is later. Floor plan assistance payments have been included as offsets
to cost of sales and inventory, as appropriate. Floor plan interest expense is
presented as a component of operating expense in the accompanying consolidated
condensed statement of operations to provide more meaningful information
regarding the Company's margin performance.
For the six months ended June 30, 2004 and 2003, aggregate floor plan interest
included in operating expense was $885,460 and $1,120,000, respectively. For the
three months ended June 30, 2004 and 2003, aggregate floor plan interest
included in operating expense was $377,765 and $545,000, respectively. The
decrease in 2004 of floor plan interest expense is reflective of the
comparatively lower average levels of inventory we financed under our floor plan
lines in the 2004 first half, compared with the first half of 2003.
14
For the six months ended June 30, 2004 and 2003, aggregate floor plan assistance
included as a reduction of cost of sales was $925,000 and $636,000,
respectively. For the three months ended June 30, 2004 and 2003, aggregate floor
plan assistance included as a reduction of cost of sales was $547,000 and
$365,000, respectively.
Advertising assistance received from manufacturers for the six months ended June
30, 2004 and 2003, included as a reduction of cost of sales was $505,000 and
$536,000, respectively. Advertising assistance received from manufacturers for
the three months ended June 30, 2004 and 2003, included as a reduction of cost
of sales was $176,000 and $214,000, respectively.
Contingencies. We are involved, and will continue to be involved, in a number of
legal proceedings arising out of the conduct of our business, including
litigation with customers, current and former business associates and
employment-related lawsuits. We intend to vigorously defend ourselves and assert
available defenses with respect to each of these matters. Where necessary, we
have accrued our estimate of the probable costs for the resolution of these
proceedings based on consultation with outside counsel, assuming various
strategies. Further, we have certain insurance coverage and rights of
indemnification with respect to certain aspects of these matters. However, a
settlement or an adverse resolution of one or more of these matters may result
in the payment of significant costs and damages, which could have a material
adverse effect on our business, financial condition, results of operations, cash
flows and prospects.
Income Taxes. Our income tax policy requires that we compute the provision for
income taxes on the pretax income (loss) based on the current law. We provide
for deferred income taxes to show the effect of tax consequences in future years
of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates. We use valuation allowances to reduce the value of deferred
tax assets when we believe that their recovery is in doubt.
15
SELECTED OPERATING DATA (UNAUDITED)
($ in millions, except SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
per vehicle data) ------------------------- ---------------------------
Variance - Variance -
Favorable % Favorable %
2004 2003 (Unfavorable) Variance 2004 2003 (Unfavorable) Variance
---- ---- ------------- -------- ---- ---- ------------- --------
Revenues
New vehicles $ 75.4 $ 65.2 $ 10.2 15.6 $ 44.3 $ 31.9 $ 12.4 38.9
Used vehicles 104.2 116.1 (11.9) (10.2) 54.7 62.5 (7.8) (12.5)
Service and parts 8.3 8.0 0.3 3.8 4.4 3.9 0.5 12.8
Other 0.9 0.7 0.2 28.6 0.5 0.6 (0.1) (16.7)
-------- -------- -------- ------ ------- --------- -------- ------
Total revenues $ 188.8 $ 190.0 $ (1.2) (0.6) $ 103.9 $ 98.9 $ 5.0 5.1
======== ======== ======== ====== ======= ========= ======== ======
GROSS PROFIT
New vehicles $ 7.3 $ 6.4 $ 0.9 14.1 $ 5.2 $ 3.3 $ 1.9 57.6
Used vehicles 20.3 20.9 (0.6) (2.9) 9.9 10.8 (0.9) (8.3)
Service and parts 2.6 2.6 - - 1.3 1.4 (0.1) (7.1)
Other 0.9 0.7 0.2 28.6 0.6 0.6 - -
-------- -------- -------- ------ ------- --------- -------- ------
Total gross profit $ 31.1 $ 30.6 $ 0.5 1.6 $ 17.0 $ 16.1 $ 0.9 5.6
======== ======== ======== ====== ======= ========= ======== ======
NEW VEHICLES
Unit sales 2,595 2,503 92 3.7 1,487 1,242 245 19.7
Average revenue per vehicle $29,052 $26,065 $ 2,987 11.5 $29,789 $ 25,673 $ 4,116 16.0
Average cost per vehicle $26,248 $23,347 $ 2,901 12.4 $26,266 $ 23,004 $ 3,262 14.2
Gross profit per vehicle $ 2,804 $ 2,718 $ 86 3.2 $ 3,523 $ 2,669 $ 854 32.0
Gross profit percentage 9.7% 10.4% -0.7% (6.7) 11.8% 10.4% 1.4% 13.5
USED VEHICLES
Unit sales 7,126 7,824 (698) (8.9) 3,359 4,097 (738) (18.0)
Average revenue per vehicle $14,628 $14,839 $ (211) (1.4) $16,291 $ 15,259 $ 1,032 6.8
Average cost per vehicle $11,780 $12,012 $ (232) (1.9) $13,332 $ 2,616 $ 716 5.7
Gross profit per vehicle $ 2,848 $ 2,827 $ 21 0.7 $ 2,959 $ 2,643 $ 316 12.0
Gross profit percentage 19.5% 19.1% 0.4% 2.1 18.2% 17.3% 0.9% 5.2
PERCENTAGE OF TOTAL REVENUES
New vehicles 39.9% 34.3% 5.6% 16.3 42.6% 32.3% 10.3% 31.9
Used vehicles 55.2% 61.1% -5.9% (9.7) 52.6% 63.2% -10.6% (16.8)
Service and parts 4.4% 4.2% 0.2% 4.8 4.2% 3.9% 0.3% 7.7
Other 0.5% 0.4% 0.1% 25.0 0.6% 0.6% 0.0% -
-------- -------- -------- ------ ------- --------- -------- ------
100.0% 100.0% 0.0% 0.0% 100.0% 100.0% 0.0% 0.0%
======== ======== ======== ====== ======= ========= ======== ======
OTHER OPERATING DATA
Total operating expenses $ 29.6 $ 30.1 $ (0.5) (1.7) $ 15.4 $ 15.3 $ (0.1) (0.7)
Floor plan interest,
included in operating
expenses 0.9 1.1 (0.2) (18.2) 0.4 0.6 (0.2) (37.2)
16
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2004 AND SIX MONTHS ENDED
JUNE 30, 2003
Revenues. Revenues for the six-month period ended June 30, 2004 decreased to
approximately $188.8 million, which is $1.2 million, or 0.6%, less than the
prior comparable period's revenues of $190.0 million. The primary reason for the
decline in revenues was a decrease in used vehicle unit sales that was only
partially offset by an increase in new vehicle units sold. New vehicle sales
increased by 92 units in the first half of 2004 to 2,595 units from 2,503 units
in the first half of 2003, primarily, because of increased consumer incentives
from new vehicle manufacturers, while used vehicle unit sales substantially
declined, with sales of only 7,126 units, retail and wholesale, in the current
year's six month period as compared with 7,824units in the comparable 2003
period. We believe this decrease of 698 units, or 8.9%, is primarily
attributable to a shift from used vehicle sales to new vehicles because of
increased incentives buyers receive from manufacturers. Also, the average sales
price of used vehicles declined by $211 per vehicle, which is reflective of the
trend to new vehicles by purchasers who can afford a higher priced vehicle. An
average of approximately 1,188 used vehicles, company-wide, retail and
wholesale, were sold during each of the months in the 2004 period, compared with
an average of 1,304 units per month in the 2003 comparable period. We believe
that the consumer trend toward new vehicle purchases will continue as long as
manufacturers remain committed to giving new vehicle purchasers substantial
incentives to do so.
Cost of sales. The cost of sales decrease of approximately $1.7 million, or
1.1%, to $157.7 million in the first half of 2004 from $159.4 million for the
six months ended June 30, 2003, is significantly attributable to the 698 unit
decline in used vehicle sales.
Gross profit. Our total gross profit of $31.1 million for the six months ended
June 30, 2004 is approximately $500,000, or 1.6%, more than gross profits of
$30.6 million in the prior year's comparable period. The increase in gross
profit was primarily attributable to the increase in gross profit on the
increased volume of new vehicle sales of approximately $900,000, as partially
offset by the decrease in gross profit of $600,000 on decreased used vehicle
sales volume in the 2004 period compared with the first six months of 2003.
Operating expenses. In the six months ended June 30, 2004, operating expenses
decreased approximately $500,000, or 1.7%, to approximately $29.6 million, from
approximately $30.1 million in the prior year's comparable period. This decrease
is primarily attributable to our overhead reductions that more than offset
increases of approximately $1.3 million in additional compensation expenses
attributable to HB Automotive, Inc. and Bruce Bendell and included a $200,000
decrease in interest related to our floor plan financing, which was $900,000 in
the 2004 six-month period compared with $1.1 million in the comparable 2003
period and general reductions in our overhead expenses. The decrease in floor
plan interest is associated with the lower average used vehicle inventory levels
that we maintained and financed through our floor plan lines in the 2004
six-month period as compared with the first six months of 2003.
Interest expense, net. Net interest expense had a net decrease of approximately
$22,000 in the first half of 2004 compared with the same 2003 period. The
decrease in interest is attributable to repayments of long-term debt.
Income tax expense. We provide for income taxes based on current forecasts of
income before taxes for the year and current forecasts of permanent differences
between tax and book income. Deferred taxes, including valuation allowances,
will be reviewed throughout fiscal 2004.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2004 AND THREE MONTHS ENDED
JUNE 30, 2003
Revenues. Revenues for the three-month period ended June 30, 2004 increased to
approximately $103.9 million, which is $5.0 million, or 5.1%, more than the
prior comparable period's revenues of $98.9 million. The primary reason for the
increase in revenues was the increase in new vehicles sold. New vehicle unit
sales increased by 245 units, or 19.7%, in the current quarter compared with the
2003 second quarter. Used vehicle sales declined quarter to quarter. In number
of used vehicles sold, there was a
17
decrease of 738 (18.0%) units sold, retail and wholesale, from 4,097 in 2003 to
3,359 in 2004. Total used vehicle sales revenue declined to $54.7 million in the
2004 second quarter from $62.5 million in the 2003 comparable period, a decrease
of $7.8 million, or 12.5%. Revenue per new vehicle sold increased substantially
by $4,116 per vehicle in the 2004 second quarter to $29,789 as compared with the
second quarter of 2003's revenue per new vehicle of $25,673. Revenue per used
vehicle sold increased by approximately $1,032 in the 2004 period from the
comparable quarter in the prior year. We believe that there is a consumer trend
toward new vehicle purchases that will continue as long as manufacturers remain
committed to giving new vehicle purchasers substantial incentives to do so.
Cost of sales. The cost of sales increase of approximately $4.1 million, or
5.0%, to $86.9 million in the second quarter of 2004 from $82.8 million for the
three months ended June 30, 2003 is significantly attributable to the 245 unit
increase and higher average cost, an average increase of $3,262 per vehicle, in
new vehicle sales. This more than offset the decline in used vehicle sales.
Gross profit. Our total gross profit of $17.0 million for the three months ended
June 30, 2004, is an increase of $0.9 million, or 5.6%, from gross profits of
$16.1 million in the prior year's comparable quarter. The increase in gross
profit was primarily attributable to the increase in volume of new vehicle sales
as well as higher dollar margins of new and used vehicles sold in the period.
Operating expenses. In the three months ended June 30, 2004, operating expenses
increased approximately $.2 million, or 1.3%, to approximately $15.4 million,
from $15.2 million in the prior year's comparable quarter. This increase is
primarily attributable to additional compensation expenses earned by HB
Automotive, Inc. and Bruce Bendell that we were able to substantially offset by
our overhead reductions and, to a lesser extent, to increases in selling
expenses associated with our higher volume new vehicle sales during the current
quarter.
Interest expense, net. Net interest expense had a net decrease of approximately
$50,000 to $186,000 in the second quarter of 2004 from $236,000 recorded in the
comparable prior period. This decrease is attributable to repayments of
long-term debt.
Income tax expense. We provide for income taxes based on current forecasts of
income before taxes for the year and current forecasts of permanent differences
between tax and book income. Deferred taxes, including valuation allowances,
will be reviewed throughout fiscal 2004.
LIQUIDITY AND CAPITAL RESOURCES - JUNE 30, 2004
At June 30, 2004, our total assets were $91.2 million, an increase of
approximately $3.6 million from total assets of $87.6 million at December 31,
2003. This aggregate increase is primarily related to the increase in our cash
of $2.9 million and net accounts receivable of $2.4 million, as partially offset
by decreases in our inventories of $449,000, due from related parties of
$879,000 and goodwill of $213,000.
For the six months ended June 30, 2004, we had a net increase in cash and cash
equivalents of $2,892,228. The primary reason for this increase was the net cash
provided by our operating activities of $3,268,411.
The net cash provided by our operating activities of $3,268,411 was comprised of
our net income of $1,055,238 plus net non-cash charges of $657,003 and a net
increase in liabilities of $2,779,525 (primarily attributable to a increases in
accounts payable and accrued expenses of $1,420,157 and $1,246,828,
respectively), as partially offset by a net increase in assets of $1,223,355
(attributable, primarily, to an increase in accounts receivable of $2,618,709
and decreases in inventories and due from related parties of $450,364 and
$879,418, respectively). This is reflective, primarily, of our increased level
of both fleet and retail sales during the second quarter which gave rise to
increased receivables and our consequently increased level of expenses,
including accrued incentive pay during that quarter.
Additionally, our net cash use of $110,227 in our investing activities, is
primarily attributable to purchases of property and equipment.
18
We used $265,956 in our financing activities for payments of long-term debt.
The foregoing activities, i.e., operating, investing and financing, resulted in
a net cash increase of $2,892,228 for the six months ended June 30, 2004.
Our working capital was approximately $2.1 million and $2.3 million at June 30,
2004 and December 31, 2003, respectively. We require cash to fund our working
capital needs and capital expenditures, as well as to meet existing commitments.
These cash requirements include payments on long-term debt of $350,000 for the
last six months of 2004, $2.0 million for 2005, $479,000 for 2006 and $4.6
million, thereafter, and lease payments of $729,000 for the last six months of
2004, $1.3 million for 2005, $1.2 million for 2006 and $2.2 million, thereafter.
In addition, pursuant to an employment agreement with our President, Chief
Executive Officer and Acting Chief Financial Officer, Bruce Bendell, that
expired on June 30, 2004, we were obligated to pay him a minimum of $500,000 per
year. We believe that such agreement will be extended or renegotiated. However,
there can be no assurance that we and Mr. Bendell will agree on terms or, if
agreed upon, that such terms will not include material increases in cash or
other compensation to Mr. Bendell. Additionally, subject to the approval of our
Board of Directors, it is expected that we will pay Mr. Bendell $450,000,
annually, for the continuation of his credit enhancement to us through the
provision of his personal guarantee on our floor plan financing. All of the
foregoing obligations are funded, principally, from cash flows from operations
and borrowings under floor plan financings.
We believe that the cash generated from existing operations, together with cash
on hand, available credit from our current lenders, including banks and floor
plan lenders, will be sufficient to finance our debt and lease obligations,
other commitments, current operations and internal growth for at least the next
twenty-four months.
FORWARD-LOOKING STATEMENTS
When used in the Quarterly Report on Form 10-Q, the words "may",
"will", "should", "expect", "believe", "anticipate", "continue", "estimate",
"project", "intend" and similar expressions are intended to identify
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") regarding events,
conditions and financial trends that may affect our future plans of operations,
business strategy, results of operations and financial condition. We wish to
ensure that such statements are accompanied by meaningful cautionary statements
pursuant to the safe harbor established in the Private Securities Litigation
Reform Act of 1995. Prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors including
our ability to consummate, and the terms of, acquisitions, if any. Such
forward-looking statements should, therefore, be considered in light of various
important factors, including those set forth herein and others set forth from
time to time in our reports and registration statements filed with the
Securities and Exchange Commission (the "Commission"). We disclaim any intent or
obligation to update such forward-looking statements.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Foreign Currency Risk
Although we sell some vehicles in certain Eastern European countries,
principally, Ukraine, Belarus and Kazakhstan, substantially all our revenues
come from sales of vehicles in the Unites States. Consequently, foreign sales
constitute a minimal amount of our revenues. Even so, our financial results
could be affected by changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Because substantially all our revenues are
currently denominated in U.S. dollars, a strengthening of the dollar could make
our vehicles less competitive in foreign markets. Due to the nature of our
operations, we believe that there is not a material risk exposure.
Interest Rate Risk
Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since all of our investments are in short-term
instruments, including money market funds. Our interest rate expense is also
sensitive to changes in the general level of U.S. interest rates because the
interest rates charged vary with the prime rate or LIBOR. Due to the nature of
our investments and operations, we believe that there is not a material risk
exposure.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer, who is also our Acting Chief Financial Officer,
after evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-15 and 15d-15 as of the end
of the period covered by this report (the "Evaluation Date")), has concluded
that as of the Evaluation Date, our disclosure controls and procedures were
adequate and effective to ensure that material information relating to the
Company and its consolidated subsidiaries would be made known to him by others
within those entities, particularly during the period in which this quarterly
report on Form 10-Q was being prepared.
Changes in Internal Controls
There were no significant changes in our internal controls or in other factors
that have materially affected or are reasonably likely to materially affect our
disclosure controls and procedures subsequent to the Evaluation Date, nor any
significant deficiencies or material weaknesses in such disclosure controls and
procedures requiring corrective actions. As a result, no corrective actions were
taken.
Notwithstanding the foregoing, there can be no assurance that our disclosure
controls and procedures will detect or uncover all failures of our employees and
our consolidated subsidiaries to disclose material information otherwise
required to be set forth in our periodic reports.
20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the quarter, there were no significant developments in our legal
proceedings. For a detailed discussion of our legal proceedings, please refer to
Note 5 of the Notes to our Consolidated Condensed Financial Statements contained
herein, and our Annual Report on Form 10-K for the fiscal year ended December
31, 2003.
ITEM 2. CHANGES IN SECURITIES
The securities described below were sold by us during this quarter without being
registered under the Securities Act. All such sales made in reliance on Section
4(2) and/or Rule 506 promulgated thereunder of the Securities Act were, to the
best of our knowledge, made to investors that, either alone or together with a
representative that assisted such investor in connection with the applicable
investment, had such sufficient knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks connected with
the applicable investment:
1. On April 30, 2004, we issued 4,500 shares of our common stock to David
Edelstein, at a per share price of $0.79, as compensation for services as an
outside member of our Board of Directors.
2. On April 30, 2004, we issued 4,500 shares of our common stock to Jeffrey
Weiner, at a per share price of $0.79, as compensation for services as an
outside member of our Board of Directors.
3. On April 30, 2004, we issued 4,500 shares of our common stock to Steven Nawi,
a former director, at a per share price of $0.79, as compensation for services
as an outside member of our Board of Directors.
4. On April 30, 2004, we issued 4,500 shares of our common stock to Steven
Hornstock, at a per share price of $0.79, as compensation for services as an
outside member of the Company's Board of Directors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
31.1 Chief Executive Officer's and Acting Chief Financial Officer's
Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer's and Acting Chief Financial Officer's
Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
21
(b) Reports on Form 8-K.
On June 10, 2004, we filed a report on Form 8-K disclosing the issuance of a
press release announcing that we had received a proposal letter contemplating a
transaction pursuant to which an entity to be formed by Bruce Bendell would be
merged into us for cash consideration of approximately $0.70 per share.
On June 18, 2004, we filed a report on Form 8-K disclosing the granting of
additional time by Bruce Bendell to consider the terms of his previously
proposed transaction.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE MAJOR AUTOMOTIVE COMPANIES, INC.
Date: August 23, 2004 /s/ Bruce Bendell
------------------
Bruce Bendell
Chairman of the Board and Chief Executive Officer
and Acting Chief Financial Officer
22