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IN THE UNITED STATES DISTRICT COURT
COMPLAINT FOR PERMANENT INJUNCTION Plaintiff, Securities and Exchange Commission (the "Commission"), for its Complaint alleges as follows: SUMMARY OF THE ACTION 1. This case involves fraudulent misrepresentations about the financial condition of Sport-Haley, Inc. Sport-Haley made material misrepresentations in the company's periodic financial statements by overstating work in process ("WIP") inventory, 1 understating losses from discontinued operations, and improperly capitalizing period costs. 2 Because of these and other accounting errors, Sport-Haley filed with the Commission materially incorrect financial statements during its 1998, 1999 and 2000 fiscal years. The improper accounting caused Sport-Haley to overstate its 1998 fiscal year income by $1.5 million or 41 percent and its 1999 fiscal year income by $311,000 or 22 percent. 2. Defendants Robert G. Tomlinson and Steve S. Auger were each officers of Sport-Haley during the relevant time period. Tomlinson, as Sport-Haley's chairman and chief executive officer, and Auger, as Sport-Haley's controller, reviewed and signed Sport-Haley's filings with the Commission knowing they contained materially overstated WIP inventory and materially understated losses related to discontinued operations. 3. Defendant Sport-Haley has engaged in, and unless restrained and enjoined by the Court will engage in, transactions, acts, practices, and courses of business that violate Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. 77q(a)], Sections 10(b), 13(b)(2), and Section 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b), 78m(b)(2), 78o(d)] and Rules 10b-5, 12b-20, 15d-1, and 15d-13 [17 C.F.R. §§ 240.10b-5, 240.12b-20, 240.15d-1, and 240.15d-13]) thereunder. 4. Defendants Tomlinson and Auger have engaged in, and unless restrained and enjoined by the Court will engage in, transactions, acts, practices, and courses of business that violate Section 17(a) of the Securities Act [15 U.S.C. 77q(a)], Sections 10(b) and Section 13(b)(5) and of the Exchange Act [15 U.S.C. §§ 78j(b) and 78m(b)(5)] and Rules 10b-5 and 13b2-1 [17 C.F.R. §§ 240.10b-5 and 240.13b2-1]) thereunder. Further, Defendants Tomlinson and Auger aided and abetted Sport-Haley's violations of Sections 13(b)(2) and 15(d) of the Exchange Act [15 U.S.C. §§ 78m(b)(2) and 78o(d)] and Rules 12b-20, 15d-1, and 15d-13 [17 C.F.R. §§ 240.12b-20, 240.15d-1, and 240.15d-13]) thereunder. 5. The Commission brings this action pursuant to the authority conferred upon it by Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)] and Sections 21(d) and (e) of the Exchange Act [15 U.S.C. Sections 78u(d) and (e)] for an order permanently restraining and enjoining each of the defendants and granting other relief. 6. The Commission seeks an order requiring each defendant to pay civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. Section 78u(d)(3)]. 7. The Commission seeks an order pursuant to the equitable authority of the court requiring Defendants Sport-Haley, Tomlinson, and Auger to disgorge all ill-gotten gains from their participation in the fraud including all proceeds of public offerings, benefits derived from employment by Sport-Haley such as salary, bonuses, stock, and other remuneration and prejudgment and post-judgment interest thereon. 8. The Commission seeks an order pursuant to Section 21(d)(2) of the Exchange Act, as amended by Section 305 of the Sarbanes-Oxley Act [15 U.S.C. 78u(d)(2)] or pursuant to the equitable authority of the court permanently barring Defendants Tomlinson and Auger from being officers or directors of any public company. JURISDICTION AND VENUE 9. This Court has jurisdiction over this action pursuant to Sections 20 and 22(a) of the Securities Act [15 U.S.C. Sections 77t and 77v(a)] and Sections 21(d) and (e) and 27 of the Exchange Act [15 U.S.C. Sections 78u(d) and (e) and 78aa]. Venue lies in this Court pursuant to Section 27 of the Exchange Act. 10. In connection with the transactions, acts, practices, and courses of business described in this Complaint, each of the defendants, directly and indirectly, has made use of the means or instrumentalities of interstate commerce, of the mails, and/or of the means and instruments of transportation or communication in interstate commerce. 11. The headquarters of Sport-Haley are located in this judicial district, and Defendant Auger resides in this judicial district. All of the transactions, acts, practices and courses of business constituting the violations of law alleged herein occurred within this judicial district. DEFENDANTS 12. Sport-Haley, Inc., a Colorado company located in Denver, Colorado, designs, markets, and contracts for the manufacture of golf apparel and outerwear under the Haley-Registered Trademark label. Sport-Haley's common stock is quoted on the NASDAQ National Market System. Sport-Haley filed reports on Forms 10-K and 10-Q with the Commission pursuant to Section 15(d) of the Exchange Act. 13. Robert G. Tomlinson, age 62, is a resident of Scottsdale, Arizona, and served as Sport-Haley's chief executive officer from 1992 until March 18, 2002. Tomlinson has served as chairman of the board since 1992. Tomlinson also served on Sport-Haley's audit committee from 1992 until February 2000. 14. Steve S. Auger, age 58, is a resident of Morrison, Colorado, and served as Sport-Haley's controller from July 1993 until October 1999. He served as the company's secretary and treasurer from January 1996 until October 1999, when he resigned from Sport-Haley. THE FACTS Sport-Haley's False and Misleading Financial Statements 15. Sport-Haley filed annual and quarterly financial statements with the Commission during its 1998, 1999, and 2000 fiscal years containing materially overstated income as a result of improper accounting in three areas including, but not limited to, WIP inventory, capitalization of period costs, and discontinued headwear operations. 16. As a result of the improper accounting, Sport-Haley's 1998 and 1999 Forms 10-Q and Forms 10-K, and Forms 10-Q for the first three quarters of the company's 2000 fiscal year were false or misleading. 17. The WIP inventory problem caused the company's 1998 pretax income reported in its 1998 Form 10-K to be overstated by $1.4 million or 36.9 percent. 18. The WIP inventory problem also caused the company to materially misstate inventory reported in its 1998 and 1999 Forms 10-K and in all Forms 10-Q for fiscal years 1999 and 2000. 19. The improperly capitalized period costs caused Sport-Haley's 1998 pretax income reported in its 1998 Form 10-K to be overstated by $164,000 or 4.3 percent and resulted in the company's 1998 income statement showing an $84,000 increase in net income from operations rather than a decline of $80,000. 20. As a result of the improperly capitalized period costs, Sport-Haley's financial statements in its 1999 Form 10-K overstated pretax income by $159,000 or 11.5 percent and overstated prepaid assets by $1.3 million or 526 percent. 21. The improperly capitalized period costs also caused the company to materially overstate prepaid 3 and fixed assets 4 in its quarterly financial statements reported in its Forms 10-K for the company's 1998 and 1999 fiscal years and its Forms 10-Q for all quarters during the company's 1999 and 2000 fiscal years. 22. The understated losses on disposal of headwear equipment from discontinued operations resulted in Sport-Haley understating its pretax loss on disposal of assets by $206,000 or 69.1 percent in its 1999 Form 10-K for the year ended June 30, 1999. 23. The company materially misstated losses from discontinued headwear operations in its Forms 10-Q for the first three quarters of Sport-Haley's 2000 fiscal year. 24. As a result of Sport-Haley's improper accounting of WIP inventory and period costs, among other accounting improprieties, the company overstated its 1998 fiscal year pretax net income by $1.5 million or 41 percent in its 1998 Form 10-K for the fiscal year ended June 30, 1998. 25. As a result of Sport-Haley's improper accounting of WIP inventory, period costs, among other errors, the company overstated its 1999 fiscal year pretax net income by $311,000 or 22 percent in its 1999 Form 10-K for the fiscal year ended June 30, 1999. Sport-Haley knew or was reckless in not knowing that its financial statements were false or misleading. 26. Tomlinson reviewed and signed all Sport-Haley's Forms 10-K, Forms 10-Q, and registration statements during the Company's 1998, 1999, and 2000 fiscal years. Tomlinson knew or was reckless in not knowing that Sport-Haley's financial statements were false or misleading. 27. Auger prepared and signed Sport-Haley's Forms 10-K and Forms 10-Q during the Company's 1998 and 1999 fiscal years and assisted in preparing the company's quarterly financial statements for the first and second quarters of its 2000 fiscal year. Auger knew or was reckless in not knowing that Sport-Haley's financial statements were false or misleading. 28. In April 1994, Sport-Haley issued warrants in connection with its initial public offering. 29. Since the warrants were exercisable for four years between April 1995 and April 1999, the company was engaged in a continuous offering of the underlying common stock to the warrantholders from April 1995 through April 1999. 30. On December 21, 1999, Sport-Haley filed a Form S-8 registration statement to register 100,000 shares of common stock under the company's employee stock option plan. The 1999 Form S-8 was signed by Tomlinson and incorporates by reference the company's 1999 Form 10-K. 31. During 1998 and 1999, the company earned proceeds from the exercise of the warrants and employee stock options. 32. On October 16, 2000, Sport-Haley disclosed it would restate its annual and quarterly financial statements for fiscal years ended June 30, 1998 and 1999 and delay filing its 2000 Form 10-K as a result of possible accounting errors resulting in material changes in net income reported in prior financial statements. 33. The accounting improprieties disclosed by Sport-Haley included: (a) incorrect recording and valuation of WIP inventory; (b) improper deferral of period costs as prepaid and fixed and fixed assets; and (c) incorrect recording of losses related to disposal of headwear equipment. 34. On November 6, 2000 Sport-Haley filed its 2000 Form 10-K restating the company's 1998 and 1999 year-end financial statements. 35. Sport-Haley's stock price dropped over 23 percent on the first day of trading after the company announced its planned restatement. Sport-Haley's Improper Accounting for Work-In-Process Inventory 36. Beginning no later than early 1998, Sport-Haley's computerized inventory system began improperly accumulating WIP inventory. 5 37. As a result of the improper accrual, Sport-Haley's WIP inventory balance ballooned to $1.7 million during its 1998 fiscal year. The 1998 WIP inventory accounted for 9.5 percent of Sport-Haley's total inventory and had increased by more than 900 percent from the prior year. 38. Even though Auger knew the company historically maintained a WIP inventory balance of between $200,000 and $500,000, Auger conducted no physical counts of WIP inventory or other valid procedures to assure the accuracy of the $1.7 million WIP inventory balance. As a result, Auger recklessly allowed Sport-Haley to include materially overstated WIP inventory in its 1998 financial statements. 39. Sport-Haley never physically counted WIP inventory during its 1998 or 1999 fiscal years. 40. Tomlinson and Auger each knew that the company never physically counted the company's WIP inventory during its 1998 and 1999 fiscal years. 41. Tomlinson and Auger each knew that the company failed to take any reasonable steps to verify the amount of WIP inventory during the company's 1998 and 1999 fiscal years. 42. During the audit of Sport-Haley's financial statements for the fiscal year ended June 30, 1999, Auger was aware that Sport-Haley's 1999 year-end WIP inventory account was significantly inflated. 43. In August 1999, Auger met with Tomlinson and informed him that WIP inventory had reached approximately $2.1 million. 44. Tomlinson knew the WIP inventory amount was inflated. 45. Tomlinson and Auger met during Sport-Haley's 1999 audit to determine how to adjust the WIP inventory account for the company's 1999 year-end financial statements. 46. Tomlinson was concerned that correcting the improper accounting for WIP inventory would reduce the company's profit margins. 47. Tomlinson and Auger agreed to a solution that minimized the impact on the company's gross margin, kept the 1998 financial statements intact, and ratably eliminated the overstatement during the course of the 2000 fiscal year. 48. Auger estimated the proper amount of WIP inventory as of June 30, 1999 to be approximately $370,000, purportedly leaving an overstated balance of approximately $1.7 million. 49. The company then wrote off approximately $500,000 of the $1.7 million to cost of goods sold. 50. Sport-Haley moved the remaining $1.2 million of the overstated inventory balances to a new inventory account that was to be amortized over the course of the 2000 fiscal year, at approximately $100,000 monthly. 51. These entries, as outlined above, had no accounting basis and were made to hide the company's massive WIP inventory misstatement. 52. Neither Tomlinson nor Auger verified how much WIP inventory could be properly recorded in the company's 1999 year-end financial statements. 53. Tomlinson reviewed and signed Sport-Haley's 1999 Form 10-K, its December 21, 1999 Form S-8 registration statement, and its quarterly reports for the first, second, and third quarters of Sport-Haley's 2000 fiscal year. 54. Auger prepared and signed the company's 1998 Form 10-K, and Forms 10-Q for the company's first and second quarters of its 1999 fiscal year. 55. Auger prepared and signed the 1999 Form 10-K, and assisted in preparing the first and second quarter financial statements for quarters ended September 30, 1999, and December 31, 1999. 56. Neither Tomlinson nor Auger adequately disclosed the WIP inventory problems and corresponding financial misstatements to Sport-Haley's board of directors or the audit committee before Sport-Haley filed its 1999 Form 10-K. 57. As a result of the company's improper accounting for the WIP inventory error, Sport-Haley filed its Form 10-K for the fiscal year ended June 30, 1999, including financial statements that overstated WIP inventory by $1.3 million or 11 percent of total inventory. 58. Sport-Haley did not disclose the WIP inventory error or explain the company's elaborate measures to adjust the financial statements for the WIP inventory error in its 1999 Form 10-K or Forms 10-Q for the company's first three quarters of its 2000 fiscal year. Sport-Haley's Improper Deferral of Period Costs 59. Prior to July 1, 1997, Sport-Haley began materially understating expenses related to product design, tradeshows, logo disks, property taxes and advertising by improperly deferring these costs as prepaid and fixed and fixed assets. 60. As a result of the company's improper deferral of period costs, Sport-Haley overstated its income by $164,000 or 4 percent in its 1998 Form 10-K for the fiscal year ended June 30, 1998, and $159,000 or 11.5 percent in its 1999 Form 10-K for the fiscal year ended June 30, 1999. Sport-Haley's Improper Accounting for Discontinued Headwear Operations 61. In a May 28, 1999 press release, Sport-Haley announced it was discontinuing its headwear product line at the end of its 1999 fiscal year and that the sale of headwear equipment from the discontinued operations would result in an estimated $160,000 loss. 62. Auger drafted the May 1999 press release and provided the final version to Tomlinson. 63. After issuing the May 1999 press release, Auger revised Sport-Haley's estimated loss on disposal of headwear equipment to $298,000 and recognized the loss in Sport-Haley's books. 64. Prior to filing Sport-Haley's 1999 Form 10-K, Tomlinson knew of the company's anticipated losses on the sale of equipment from the discontinued operations. 65. Shortly before filing Sport-Haley's 1999 Form 10-K on September 28, 1999, Auger reversed the $206,000 loss. 66. Auger reversed this loss without any accounting basis. 67. Even though Tomlinson and Auger had sufficient information to know Sport-Haley anticipated significantly larger losses, they allowed Sport-Haley to record only $92,000 loss related to the discontinued operations in its 1999 Form 10-K filed with the Commission for the fiscal year ended June 30, 1999. 68. By failing to recognize the estimated loss on disposal of headwear equipment in conformity with generally accepted accounting principles, Sport-Haley understated its 1999 pretax loss on disposal of assets by $206,000 or 69.1 percent of pretax loss. FIRST CLAIM Violations by All Defendants of Section 17(a)(1) of the Securities Act 69. Plaintiff repeats and realleges paragraphs 1 through 68 above. 70. All of the defendants, directly and indirectly, with scienter, in the offer and sale of Sport-Haley securities, by use of the means or instruments of transportation or communication in interstate commerce or by use of the mails, have employed devices schemes or artifices to defraud. 71. By reason of the foregoing, all of the defendants violated and, unless restrained and enjoined, will violate Section 17(a)(1) of the Securities Act. SECOND CLAIM Violations by All Defendants of Section 17(a)(2) and 17(a)(3) of the Securities Act 72. Plaintiff repeats and realleges paragraphs 1 through 68 above. 73. All of the defendants, directly and indirectly, in the offer and sale of Sport-Haley securities, by use of the means or instruments of transportation or communication in interstate commerce or by use of the mails, have obtained money or property by means of untrue statements of material fact or omissions to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading; or have engaged in transactions, practices, or courses of business which have been, or are operating as a fraud or deceit upon the purchasers of such securities. 74. By reason of the foregoing, all of the defendants violated and, unless restrained and enjoined, will violate Sections 17(a)(2) and (3) of the Securities Act. THIRD CLAIM Violations by All Defendants of Section 10(b) of the Exchange Act 75. Plaintiff repeats and realleges paragraphs 1 through 68 above. 76. All of the defendants, directly or indirectly, with scienter, in connection with the purchase or sale of securities, by use of the means or instrumentalities of interstate commerce or by use of the mails, have employed devices, schemes, or artifices to defraud; have made untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or have engaged in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchasers or sellers of such securities. 77. By reason of the foregoing, all of the defendants violated and, unless restrained and enjoined, will violate Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. FOURTH CLAIM Sport-Haley Violated Section 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 78. Plaintiff repeats and realleges paragraphs 1 through 68 above. 79. Throughout the relevant period, Sport-Haley, has been subject to the periodic reporting requirements imposed by the Exchange Act on companies having securities registered with the Commission. As described elsewhere in this complaint, the periodic filings made by Sport-Haley during the relevant period have been materially inaccurate. 80. Sport-Haley also failed to add such further material information as was necessary to make the required statements or reports, in the light of the circumstances under which they were made, not misleading. 81. By reason of the foregoing, Sport-Haley violated and, unless restrained and enjoined, will violate Section 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 thereunder. FIFTH CLAIM Tomlinson and Auger Aided and Abetted Sport-Haley's Violations of Section 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 82. Plaintiff repeats and realleges paragraphs 1 through 68 above. 83. Tomlinson knew or was reckless in not knowing Sport-Haley materially misstated WIP inventory during its 1999 and 2000 fiscal years and discontinued headwear operations in the company's 1999 Form 10-K. Auger made all the false entries in Sport-Haley's books and records and prepared the false financial statements even though he knew or was reckless in not knowing the company materially misstated its WIP inventory during its 1998, 1999, and 2000 fiscal years and discontinued headwear operations during its 1999 fiscal year and first three quarters of 2000. Tomlinson and Auger each reviewed and signed Sport-Haley's annual and quarterly reports even though knew or were reckless in not knowing they contained material false information and omissions. 84. Thus, Tomlinson and Auger aided and abetted Sport-Haley's violations of Section 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13 and substantially assisted Sport-Haley in committing these violations. 85. By reason of the foregoing, Tomlinson and Auger aided and abetted and unless restrained and enjoined will aid and abet violations of Section 15(d) of the Exchange Act and Rules 12b-20, 15d-1, and 15d-13. SIXTH CLAIM Sport-Haley Violated Section 13(b)(2)(A) of the Exchange Act 86. Plaintiff repeats and realleges paragraphs 1 through 68 above. 87. Throughout the relevant period, Sport-Haley failed to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflected the company's transactions relating to WIP inventory, period costs, and discontinued headwear operations in accordance with generally accepted accounting principles. 88. By reason of the foregoing, Sport-Haley violated, is violating, and unless restrained and enjoined will violate Section 13(b)(2)(A) of the Exchange Act. SEVENTH CLAIM Tomlinson and Auger Aided and Abetted Sport-Haley's Violations of Section 13(b)(2)(A) of the Exchange Act 89. Plaintiff repeats and realleges paragraphs 1 through 68 above. 90. Tomlinson knew or was reckless in not knowing the company's financial statements contained material misstatements regarding WIP inventory during its 1999 and 2000 fiscal years. Auger recorded false entries regarding the company's WIP inventory and discontinued headwear operations. Thus, Tomlinson and Auger knew or were reckless in not knowing of Sport-Haley's violations of Section 13(b)(2)(A) of the Exchange Act and substantially assisted Sport-Haley in committing these violations. 91. By reason of the foregoing, Tomlinson and Auger aided and abetted and unless restrained and enjoined will aid and abet violations of Section 13(b)(2)(A) of the Exchange Act. EIGHTH CLAIM Sport-Haley Violated Section 13(b)(2)(B) of the Exchange Act 92. Plaintiff repeats and realleges paragraphs 1 through 68 above. 93. Throughout the relevant period, Sport-Haley failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions were recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements. Specifically, Sport-Haley failed to take steps to verify WIP inventory, period costs and anticipated losses from discontinued headwear operations were recorded in conformity with generally accepted accounting principles. 94. By reason of the foregoing, Sport-Haley violated and, unless restrained and enjoined, will violate Section 13(b)(2)(B) of the Exchange Act. NINTH CLAIM Tomlinson and Auger Aided and Abetted Sport-Haley's Violations of
95. Plaintiff repeats and realleges paragraphs 1 through 68 above. 96. Throughout the relevant period, Tomlinson and Auger knowingly failed to implement a system of internal controls to ensure the company's WIP inventory and losses from discontinued headwear operations were properly recorded. Thus, Tomlinson and Auger knew or were reckless in not knowing of Sport-Haley's violations of Section 13(b)(2)(B) of the Exchange Act and substantially assisted Sport-Haley in committing these violations. 97. By reason of the foregoing, Tomlinson and Auger aided and abetted and unless restrained and enjoined will aid and abet violations of Section 13(b)(2)(B) of the Exchange Act. TENTH CLAIM Violations by Tomlinson and Auger of Rule 13b2-1 Under the Exchange Act 98. Plaintiff repeats and realleges paragraphs 1 through 68 above. 99. Tomlinson directly and indirectly caused Sport-Haley to falsely record transactions relating to the company's WIP inventory during its 1999 and 2000 fiscal years. Auger directly or indirectly caused Sport-Haley's accounting records regarding WIP inventory, period costs, and discontinued headwear operations to be falsified. Thus, Tomlinson and Auger falsified or caused to be falsified books, records or accounts subject to Section 13(b)(2)(A) of the Exchange Act. 100. By reason of the foregoing, Tomlinson and Auger violated and, unless restrained and enjoined, will violate Rule 13b2-1 under the Exchange Act. ELEVENTH CLAIM Violations by Tomlinson and Auger of Section 13(b)(5) of the Exchange Act 101. Plaintiff repeats and realleges paragraphs 1 through 68 above. 102. Tomlinson knew Sport-Haley's financial statements contained material misstatements regarding WIP inventory during its 1999 and 2000 fiscal years. Auger knowingly or recklessly recorded false entries regarding the company's 1998 and 1999 WIP inventory and discontinued headwear operations. Thus, Tomlinson and Auger knowingly circumvented or knowingly failed to implement a system of internal accounting controls and knowingly falsified books, records, or accounts described in Section 13(b)(2) of the Exchange Act. 103. By reason of the foregoing, Tomlinson and Auger violated and, unless restrained and enjoined, will violate Section 13(b)(5) of the Exchange Act. RELIEF REQUESTED WHEREFORE, the Commission respectfully requests that the Court: I. Find that the defendants, and each of them, committed the violations alleged. II. Enter an injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining each defendant, his agents, servants, employees and attorneys, and those persons in active concert or participation with them who receive actual notice of a judgment by personal service or otherwise, and each of them, from violating, directly or indirectly, the provisions of law and rules alleged in this Complaint. III. Order Sport-Haley, Tomlinson and Auger to disgorge and pay over, as the Court may direct, all ill-gotten gains received or benefits in any form derived from the illegal conduct alleged in this Complaint, together with pre-judgment and post-judgment interest as provided by law. IV. Order Sport-Haley, Tomlinson, and Auger to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act. V. Enter an Order barring Tomlinson and Auger from serving as an officer or director of any publicly held company pursuant to Section 21(d)(2) of the Exchange Act. VI. Grant such other relief as this Court may deem just or appropriate.
Footnotes1 WIP inventory is inventory that is being constructed, but is not yet a finished product ready for sale. 2 Period costs are recurring monthly expenses such as officers' salaries and other administrative costs. 3 Prepaid assets are expenditures made before the benefits (usually services) are received. 4 Fixed assets are physical assets such as land, buildings, machinery, and furniture that are used in the regular operations of a business. 5 Inventories of goods must periodically be compiled, measured, and recorded in the books of accounts of a business. Inventory usually is classified as (a) finished goods, (b) work in process, or (c) raw materials (ARB-43, Ch. 4, Statement 1). 2001 Miller GAAP Guide : Chapter 27.
http://www.sec.gov/litigation/complaints/comp18371.htm
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