##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to
 Commission file number 0-16345
 SED International Holdings, Inc.
 (Exact name of Company as specified in its charter)
 GEORGIA
    
    22-2715444(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)4916 North Royal Atlanta Drive, Tucker, Georgia
    
    30084(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code:
770-491-8962
Securities registered pursuant to Section 12(b) of the Act:
None
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    6Item 1B.
    
    Unresolved Staff Comments
    
    
    9Item 2.
    
    Properties
    
    
    9Item 3.
    
    Legal Proceedings
    
    
    10Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    10PART IIItem 5.
    
    Market Price of the Companys Common Stock, Related
Shareholder
Matters and Issuer Purchases of Stock
    
    
    11Item 6.
    
    Selected Financial Data Five Year Financial Summary
    
    
    13Item 7.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13Item 7A.
    
    Quantitative and Qualitative Disclosures About Market
Risk
    
    
    22Item 8.
    
    Financial Statements and Supplementary Data
    
    
    24Report of Independent Registered Public Accounting Firm
    
    
    24Consolidated Balance Sheets
    
    
    25Consolidated Statements of Operations
    
    
    26Consolidated Statements of Shareholders Equity
    
    
    27Consolidated Statements of Cash Flows
    
    
    28Notes to Consolidated Financial Statements
    
    
    29Item 9.
    
    Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    41Item 9A.
    
    Controls and Procedures
    
    
    41Item 9B.
    
    Other Information
    
    
    42PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    43Item 11.
    
    Executive Compensation
    
    
    43Item 12.
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    43Item 13.
    
    Certain Relationships and Related Transactions, and
Director Independence
    
    
    43Item 14.
    
    Principal Accounting Fees and Services
    
    
    43PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    44Signatures
    
    
    49EX-31.1 SECTION 302, CERTIFICATION OF THE PEOEX-31.2 SECTION 302, CERTIFICATION OF THE PFOEX-32.1 SECTION 906, CERTIFICATION OF THE PEOEX-32.2 SECTION 906, CERTIFICATION OF THE PFO
   Certain statements made in this Annual Report on Form 10-K are forward-looking statements
regarding the plans and objectives of management for future operations. Such statements involve
known and unknown risks, uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. The forward-looking
statements included herein are based on current expectations that involve numerous risks and
uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments
with respect to, among other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict accurately and many of
which are beyond our control. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward-looking statements included in this report
will prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein particularly in view of the current state of our
operations, the inclusion of such information should not be regarded as a statement by us or any
other person that our objectives and plans will be achieved. Factors that could cause actual
results to differ materially from those expressed or implied by such forward-looking statements
include, but are not limited to, the factors set forth herein under the headings Business, Risk
Factors and Managements Discussion and Analysis of Financial Condition and Results of
Operations. We undertake no obligation to revise or update publicly any forward-looking statements
for any reason.




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PART I
 
 Item 1. Business
 (a) General Development of Business
      (b) Financial Information about Industry Segments
  (c) Narrative Description of Business
 2




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Products and Vendors
      Sales and Marketing
  3




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www.sedonline.com
    Customers
  4




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Competition
   Seasonality
  Employees
  (d) Financial Information about Foreign and Domestic Operations and Export Sales
  (e) Available Information
    5




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Item 1A. Risk Factors
  Risks and Uncertainties
  §
    
    Continuation of distribution agreements SED operates under formal but cancelable
distribution agreements with certain of its suppliers. If these agreements were
cancelled, SED would be forced to obtain its products through wholesalers. This would
reduce SEDs profit margin on the affected products.§
    
    Availability of certain products From time to time, due to production limitations
or heavy demand, SED may only be able to purchase a limited amount of popular products
from its suppliers.§
    
    Product margins SED operates in a very competitive business environment.
Accordingly, product margins are continually under pricing pressure. From time to
time, SED receives price protection and other considerations from its vendors. While
SED has no reason to believe such vendor consideration will not continue, no assurance
can be given that such price protection and other considerations will continue to be
received in the future.§
    
    Vendor credit SED significantly relies on its suppliers for trade credit. Changes
by the suppliers in their credit terms could force SED to obtain less favorable
financing for its purchases.§
    
    Product obsolescence SED offers a broad line of products that are subject to fast
technological obsolescence, which increases the risk of inventory markdown. Through its
vendor agreements, SED has certain stock return privileges, which vary from supplier to
supplier. SED believes stock return programs will continue in the future, but can give
no assurance about whether these programs will continue.§
    
    Consumer electronicsSED has re-entered into the distribution of consumer
electronics, which is highly competitive. Some of SEDs competitors have substantially
greater financial, marketing and distribution resources than SED and SED may be unable
to successfully compete with these companies. Failure to successfully penetrate this
market could have an adverse impact on SEDs cash flows, financial position and
operating results.§
    
    Credit decisions and losses SED maintains an experienced customer credit
staff and relies on customer payment history and third party data to make customer
credit decisions. Nevertheless, SED may experience customer credit losses in excess of
its expectations. SED maintains credit insurance
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policies for certain customers located in the United States and select Latin American
countries (subject to certain terms and conditions). However, the terms of the credit
insurance agreement require SED to maintain certain minimum standards and policies with
respect to extending credit to customers. If SED does not adhere to such policies, the
insurance companies may not pay claims submitted by SED.§
    
    Proportionate control of general and administrative costs SED attempts to control
its overhead costs to keep such costs in line with its sales volume. As sales volumes
fluctuate, SED must continually monitor its overhead costs and make adjustments timely
and appropriately. Failure to control overhead costs could have an adverse impact on
SEDs cash flows, financial position and operating results.§
    
    Uncertain and possibly volatile economic and political environment in Latin America
 The general economic and political environment in both of the countries in which SED
operates in Latin America is uncertain and, at times, volatile. As a result of these
conditions, SED could experience unexpected costs from its operations in these
countries.§
    
    Availability of credit facilities SED has operated under a formal credit facility
with a bank for many years that was subject to certain collateral limitations and
contained certain covenants. During September 2005 a new credit facility was obtained.
No assurance can be given that SED will be able to maintain compliance with financial
covenants, or obtain waivers in the event of non-compliance, in the future. Failure to
maintain compliance with the financial covenants could adversely affect SEDs ability
to obtain vendor credit and the overall business operations. The principal credit
facility, which expires in September 2011, is further described in Note 4 to SEDs
Consolidated Financial Statements.§
    
    Cash flows While not presently expected, SEDs continued operations in Latin
America may require additional capital infusion (in the form of advance notes from the
parent company or other debt borrowings by a subsidiary). The credit facility restricts
the future funding by the parent company of Latin American operations. Operating needs
and regulatory matters may restrict SEDs ability to repatriate cash flows from the
foreign subsidiaries to the United States.§
    
    Competition SED operates in a highly competitive environment. The computer
wholesale distribution industry is characterized by intense competition, based
primarily on product availability, credit availability, price, speed of delivery,
quality and depth of product lines and training, service and support. Weakness in
demand in the market intensifies the competitive environment in which the SED operates.
SED competes with a variety of regional, national and international wholesale
distributors, some of which have greater financial resources than SED. SED also faces
competition from companies entering or expanding into the logistics and product
fulfillment and e-commerce supply chain services market.§
    
    Loss of Significant Customers Customers do not have an obligation to make
purchases from SED. In some cases, SED has made adjustments to its systems, vendor
offerings, and processes, and made staffing decisions, in order to accommodate the
needs of a significant customer. In the event a significant customer decides to make
its purchases from another distributor, experiences a significant change in demand from
its own customer base, becomes financially unstable, or is acquired by another company,
SEDs receipt of revenues may be significantly affected, resulting in an adverse effect
on SEDs business.§
    
    Dependence on Information Systems SED is highly dependent upon its internal
computer and telecommunication systems to operate its business. There can be no
assurance that SEDs information systems will not fail or experience disruptions, that
SED will be able to attract and retain qualified personnel necessary for the operation
of such systems, that SED will be able to expand and improve its information systems,
that SED will be able to convert to new systems efficiently, or that SED will be able
to integrate new programs effectively with its existing programs. Any of such problems
could have an adverse effect on SEDs business.§
    
    Dependence on Independent Shipping Companies SED relies on arrangements with
independent shipping companies, such as Federal Express and United Parcel Service, for
the delivery of its products from vendors and to customers. The failure or inability of
these shipping companies to deliver products, or the unavailability of their shipping
services, even temporarily, could have a material adverse effect on
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SEDs business. SED may also be adversely affected by an increase in freight surcharges
due to rising fuel costs and added security. There can be no assurance that SED will be
able to pass along the full effect of an increase in these surcharges to its customers.§
    
    Foreign Currency Exchange Risks; Exposure to Foreign Markets SED conducts business
in countries outside of the United States, which exposes SED to fluctuations in foreign
currency exchange rates. SED may enter into short-term forward exchange or option
contracts to hedge this risk; nevertheless, fluctuations in foreign currency exchange
rates could have an adverse effect on SEDs business. In particular, the value of SEDs
equity investment in foreign countries may fluctuate based upon changes in foreign
currency exchange rates. These fluctuations, which are recorded in a cumulative
translation adjustment account, may result in losses in the event a foreign subsidiary
is sold or closed at a time when the foreign currency is weaker than when SED initially
invested in the country.SEDs international operations are subject to other risks such as the imposition of
governmental controls, export license requirements, restrictions on the export of certain
technology, political instability, trade restrictions, tariff changes, difficulties in
staffing and managing international operations, changes in the interpretation and
enforcement of laws (in particular related to items such as duty and taxation),
difficulties in collecting accounts receivable, longer collection periods and the impact
of local economic conditions and practices. There can be no assurance that these and
other factors will not have an adverse effect on SEDs business.§
    
    Changes in Income Tax and Other Regulatory Legislation SED operates in compliance
with applicable laws and regulations. When new legislation is enacted with minimal
advance notice, or when new interpretations or applications of existing laws are made,
SED may need to implement changes in its policies or structure. SED makes plans for its
structure and operations based upon existing laws and anticipated future changes in the
law.SED is susceptible to unanticipated changes in legislation, especially relating to income
and other taxes, import/export laws, hazardous materials and electronic waste recovery
legislation, and other laws related to trade, accounting, and business activities. Such
changes in legislation, both domestic and international, may have a significant adverse
effect on SEDs business.§
    
    Changes in Accounting Rules SED prepares its financial statements in conformity
with accounting principles generally accepted in the United States. These accounting
principles are subject to interpretation by the Financial Accounting Standards Board,
the Securities and Exchange Commission, the American Institute of Certified Public
Accountants and various other bodies formed to interpret and create appropriate
accounting policies. A change in these policies or a new interpretation of an existing
policy could have a significant effect on our reported results and may affect our
reporting of transactions before a change is announced.§
    
    Exposure to Natural Disasters, War, and Terrorism SEDs headquarters facilities
and some of its logistics centers as well as certain vendors and customers are located
in areas prone to natural disasters such as floods, hurricanes, tornadoes, or
earthquakes. In addition, demand for SEDs services is concentrated in major
metropolitan areas. Adverse weather conditions, major electrical failures or other
natural disasters in these major metropolitan areas may disrupt SEDs business should
its ability to distribute products be impacted by such an event.SED operates in multiple geographic markets, several of which may be susceptible to acts
of war and terrorism. SEDs business could be adversely affected should its ability to
distribute products be impacted by such events.SED and many of its suppliers receive parts and products from Asia and operate in many
parts of the world that may be susceptible to disease or epidemic that may disrupt SEDs
ability to receive or deliver products or other disruptions in operations.§
    
    Volatility of Common Stock Price Because of the foregoing factors, as well as
other variables affecting SEDs operating results, past financial performance should
not be considered a reliable indicator of future performance, and investors should not
use historical trends to anticipate results or
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trends in future periods. In addition, SEDs participation in a highly dynamic industry
often results in significant volatility of the common stock price. Some of the factors
that may affect the market price of the common stock, in addition to those discussed
above, are changes in investment recommendations by securities analysts, changes in
market valuations of competitors and key vendors, and fluctuations in the overall stock
market, but particularly in the technology sector.§
    
    Our Common Stock Has Been Thinly Traded, Liquidity Is Limited Our common stock is
now traded on the Pink Sheets® LLC over the counter market, which provides
significantly less liquidity than a securities exchange (such as the American or New
York Stock Exchange) or an automated quotation system (such as the Nasdaq National
Market or SmallCap Market). Often there is currently a limited volume of trading in
our common stock, and on many days there has been no trading activity at all.
Purchasers of shares of our common stock may find it difficult to resell their shares
at prices quoted in the market or at all.
 
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
         9




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Item 3. Legal Proceedings
 Mark Diamond v. SED International Holdings, Inc. et
al.,
   
 Item 4. Submission of Matters to A Vote of Security Holders
  10




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PART II
 
 Item 5.
    
    Market for the Companys Common Stock, Related Shareholder Matters and Issuer Purchases of
Equity Securities
  Bid PriceHigh
    
    LowFiscal year 2007First
    
    $
    1.00
    
    
    $
    .55Second
    
    
    1.40
    
    
    
    .63Third
    
    
    1.40
    
    
    
    .85Fourth
    
    
    1.60
    
    
    
    .92Fiscal year 2006First
    
    
    .55
    
    
    
    .35Second
    
    
    .53
    
    
    
    .35Third
    
    
    .80
    
    
    
    .39Fourth
    
    
    1.03
    
    
    
    .55
    11




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FIVE YEAR PERFORMANCE GRAPH
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 
 *
    
    $ 100 invested on 6/30/02 in stock or index-including
reinvestment of dividends.
Fiscal year ending June 30. BasePeriod
    
    Return
    
    Return
    
    Return
    
    Return
    
    Return6/02
    
    6/03
    
    6/04
    
    6/05
    
    6/06
    
    6/07SED INTERNATIONAL HOLDINGS, INC.
    
    
    100.00
    
    
    
    73.72
    
    
    
    156.11
    
    
    
    36.43
    
    
    
    85.00
    
    
    
    138.77RUSSELL MICROCAP
    
    
    100.00
    
    
    
    104.78
    
    
    
    145.62
    
    
    
    151.71
    
    
    
    173.37
    
    
    
    198.00PEER GROUP
    
    
    100.00
    
    
    
    69.92
    
    
    
    110.01
    
    
    
    110.85
    
    
    
    118.91
    
    
    
    160.68
 12




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Item 6. Selected Financial Data Five Year Financial Summary
 Year ended June 30,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Statement of operations
data:Net sales
    
    $
    408,435,000
    
    
    $
    412,371,000
    
    
    $
    380,864,000
    
    
    $
    371,741,000
    
    
    $
    413,148,000Cost of sales
    
    
    386,515,000
    
    
    
    390,968,000
    
    
    
    364,091,000
    
    
    
    355,168,000
    
    
    
    393,724,000Gross profit
    
    
    21,920,000
    
    
    
    21,403,000
    
    
    
    16,773,000
    
    
    
    16,573,000
    
    
    
    19,424,000Selling, general and administrative expenses
    
    
    20,254,000
    
    
    
    17,958,000
    
    
    
    17,195,000
    
    
    
    18,536,000
    
    
    
    24,961,000Depreciation and amortization expense
    
    
    413,000
    
    
    
    422,000
    
    
    
    868,000
    
    
    
    1,233,000
    
    
    
    1,614,000Foreign currency transaction (gain) loss
    
    
    (876,000
    )
    
    
    512,000
    
    
    
    (244,000
    )
    
    
    14,000
    
    
    
    581,000Loss (gain) on disposal of assets
    
    
    
    
    
    
    
    
    
    
    31,000
    
    
    
    (30,000
    )
    
    
    (3,000
    )Impairment charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,000Operating income (loss)
    
    
    2,129,000
    
    
    
    2,511,000
    
    
    
    (1,077,000
    )
    
    
    (3,180,000
    )
    
    
    (7,768,000
    )Interest expense  net
    
    
    1,574,000
    
    
    
    1,389,000
    
    
    
    691,000
    
    
    
    246,000
    
    
    
    470,000Other income  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,513,000Income (loss) before income taxes from
continuing operations
    
    
    555,000
    
    
    
    1,122,000
    
    
    
    (1,768,000
    )
    
    
    (3,426,000
    )
    
    
    2,275,000Income tax expense
    
    
    1,368,000
    
    
    
    931,000
    
    
    
    680,000
    
    
    
    801,000
    
    
    
    613,000(Loss) income from continuing operations
    
    
    (813,000
    )
    
    
    191,000
    
    
    
    (2,448,000
    )
    
    
    (4,227,000
    )
    
    
    1,662,000(Loss) income from discontinued operations
    
    
    (70,000
    )
    
    
    193,000
    
    
    
    (154,000
    )
    
    
    (42,000
    )
    
    
    (4,742,000
    )Net (loss) income
    
    $
    (883,000
    )
    
    $
    384,000
    
    
    $
    (2,602,000
    )
    
    $
    (4,269,000
    )
    
    $
    (3,080,000
    )Basic and diluted (loss) income
per share:From continuing operations
    
    $
    (.21
    )
    
    $
    .05
    
    
    $
    (.63
    )
    
    $
    (1.10
    )
    
    $
    0.43From discontinued operations
    
    
    (.02
    )
    
    
    .05
    
    
    
    (.04
    )
    
    
    (.01
    )
    
    
    (1.24
    )Basic and diluted (loss) income per share
    
    $
    (.23
    )
    
    $
    .10
    
    
    $
    (.67
    )
    
    $
    (1.11
    )
    
    $
    (0.81
    )Weighted average number of shares outstanding:Basic
    
    
    3,877,000
    
    
    
    3,872,000
    
    
    
    3,871,000
    
    
    
    3,856,000
    
    
    
    3,816,000Diluted
    
    
    3,877,000
    
    
    
    3,884,000
    
    
    
    3,871,000
    
    
    
    3,856,000
    
    
    
    3,816,000
 At June 30,2007
    
    2006
    
    2005
    
    2004
    
    2003Balance sheet data:Working capital
    
    $
    21,055,000
    
    
    $
    20,528,000
    
    
    $
    20,632,000
    
    
    $
    22,001,000
    
    
    $
    25,514,000Total assets
    
    
    93,222,000
    
    
    
    75,315,000
    
    
    
    70,783,000
    
    
    
    69,219,000
    
    
    
    86,170,000Shareholders equity
    
    
    22,159,000
    
    
    
    21,469,000
    
    
    
    21,823,000
    
    
    
    23,606,000
    
    
    
    27,716,000
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
     13




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§
    
    Continuation of distribution agreements SED operates under formal but cancelable
distribution agreements with certain of its suppliers. If these agreements were
cancelled, SED would be forced to obtain its products through wholesalers. This would
reduce SEDs profit margin on the affected products.§
    
    Availability of certain products From time to time, due to production limitations
or heavy demand, SED may only be able to purchase a limited amount of popular products
from its suppliers.§
    
    Product margins SED operates in a very competitive business environment.
Accordingly, product margins are continually under pricing pressure. From time to time,
SED receives price protection and other considerations from its vendors. While SED has
no reason to believe such vendor consideration will not continue, no assurance can be
given that such price protection and other considerations will continue to be received in
the future.§
    
    Vendor credit SED significantly relies on its suppliers for trade credit. Changes
by the suppliers in their credit terms could force SED to obtain less favorable financing
for its purchases.§
    
    Product obsolescence SED offers a broad line of products that are subject to fast
technological obsolescence, which increases the risk of inventory markdown. Through its
vendor agreements, SED has certain stock return privileges, which vary from supplier to
supplier. SED believes stock return programs will continue in the future, but can give
no assurance about whether these programs will continue.§
    
    Consumer Electronics SED has entered into the distribution of consumer electronics
in fiscal 2004, which is highly competitive. Some of SEDs competitors have substantially
greater financial, marketing and distribution resources than SED and SED may be unable to
successfully compete with these companies. Failure to successfully penetrate this market
could have an adverse impact on SEDs cash flows, financial position and operating
results.§
    
    Credit decisions and losses SED maintains an experienced customer credit staff and
relies on customer payment history and third party data to make customer credit decisions.
Nevertheless, SED may experience customer credit losses in excess of its expectations.
From time to time, depending on credit risk assessment and coverage costs, SED maintains
credit insurance for customers located in the United States and maintains insurance in
many Latin American countries (subject to certain terms and conditions). However, the
terms of the credit insurance agreement require SED to maintain certain minimum standards
and policies with respect to extending credit to customers. If SED does not adhere to
such policies, the insurance companies may not pay claims submitted by SED.§
    
    Proportionate control of general and administrative costs SED attempts to control
its overhead costs to keep such costs in line with its sales volume. As sales volumes
fluctuate, SED must continually monitor its overhead costs and make adjustments timely and
appropriately.§
    
    Uncertain and possibly volatile economic and political environment in Latin America
The general economic and political environment in the countries in which SED operates in
Latin America is uncertain and, at times, volatile. As a result of these conditions, SED
could experience unexpected costs from its operations in these countries.§
    
    Availability of credit facilities SED operates under a formal credit facility with a bank
obtained in
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September 2005. The agreement was amended in March 2007 to extend the maturity to September
2011. This credit facility is subject to certain collateral limitations and certain
covenants. SED from time to time has violated the financial covenants associated with
previous credit agreements, but was successful in negotiating waivers of such violations. No
assurance can be given that SED will be able to maintain compliance with financial
covenants, or obtain waivers in the event of non-compliance, in the future. Failure to
maintain compliance with the financial covenants could adversely affect SEDs ability to
obtain vendor credit and the overall business operations. The principal credit facility,
which expires in September 2011, is further described in Note 4 to SEDs Consolidated
Financial Statements.§
    
    Cash flows While not presently anticipated, SEDs continued operation in Latin
America may require additional capital infusion in the form of loans from the parent
company or other debt borrowings by the subsidiary. The September 2005 credit facility
places certain restrictions on the future funding of Latin American operations (see Note 4
to SEDs Consolidated Financial Statements).
  Results of Continuing Operations
  Year Ended June 30,2007
    
    2006
    
    2005Net sales
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Cost of sales, including buying and occupancy expense
    
    
    94.63
    %
    
    
    94.81
    %
    
    
    95.60
    %Gross profit
    
    
    5.37
    %
    
    
    5.19
    %
    
    
    4.40
    %Selling, general and administrative expenses
    
    
    4.96
    %
    
    
    4.35
    %
    
    
    4.51
    %Depreciation and amortization expense
    
    
    .10
    %
    
    
    .10
    %
    
    
    .23
    %Foreign currency transactions (gain) loss
    
    
    (.21
    )%
    
    
    .13
    %
    
    
    (.06
    )%Operating income (loss)
    
    
    .52
    %
    
    
    .61
    %
    
    
    (.28
    )%Interest expense
    
    
    .38
    %
    
    
    .34
    %
    
    
    .18
    %Income (loss) before income taxes from continuing operations
    
    
    .14
    %
    
    
    .27
    %
    
    
    (.46
    )%Income tax expense
    
    
    .34
    %
    
    
    .22
    %
    
    
    .18
    %(Loss) income from continuing operations
    
    
    (.20
    )%
    
    
    .05
    %
    
    
    (.64
    )%
 Fiscal 2007 Compared to Fiscal 2006
  15




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##### Table of Contents



Year EndedJune 30,
    
    
    Change2007
    
    
    2006
    
    
    Amount
    
    
    Percent($ in Millions)United States:Domestic
    
    $
    247.1
    
    
    $
    271.8
    
    
    $
    (24.7
    )
    
    
    (9.1
    %)Export
    
    
    73.9
    
    
    
    64.1
    
    
    
    9.8
    
    
    
    15.3
    %Latin America
    
    
    90.0
    
    
    
    76.5
    
    
    
    13.5
    
    
    
    17.6
    %Elimination
    
    
    (2.6
    )
    
    
    
    
    
    
    (2.6
    )
    
    
    N/AConsolidated
    
    $
    408.4
    
    
    $
    412.4
    
    
    $
    (4.0
    )
    
    
    (1.0
    %)
         16




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##### Table of Contents



Fiscal 2006 Compared to Fiscal 2005
   Year EndedJune 30,
    
    
    Change2006
    
    
    2005
    
    
    Amount
    
    
    Percent($ in Millions)United States:Domestic
    
    $
    271.8
    
    
    $
    267.5
    
    
    $
    4.3
    
    
    
    1.6
    %Export
    
    
    64.1
    
    
    
    59.5
    
    
    
    4.6
    
    
    
    7.7
    %Latin America
    
    
    76.5
    
    
    
    53.9
    
    
    
    22.6
    
    
    
    41.9
    %Consolidated
    
    $
    412.4
    
    
    $
    380.9
    
    
    $
    31.5
    
    
    
    8.3
    %
       17




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##### Table of Contents



Discontinued Operations
    Quarterly Data
  Quarter EndedSept 30,
    
    
    Dec 31,
    
    
    Mar 31,
    
    
    June 30,
    
    
    Sept 30,
    
    
    Dec 31,
    
    
    Mar 31,
    
    
    June 30,2005
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2007
    
    
    2007(In thousands, except per share data)Net sales
    
    $
    102,298
    
    
    $
    102,986
    
    
    $
    109,557
    
    
    $
    97,530
    
    
    $
    96,621
    
    
    $
    93,009
    
    
    $
    107,692
    
    
    $
    111,113Gross profit
    
    
    4,484
    
    
    
    5,275
    
    
    
    5,666
    
    
    
    5,978
    
    
    
    5,124
    
    
    
    5,364
    
    
    
    6,030
    
    
    
    5,402Operating income (loss)
    
    
    1
    
    
    
    756
    
    
    
    1,069
    
    
    
    685
    
    
    
    760
    
    
    
    750
    
    
    
    825
    
    
    
    (206
    )(Loss) income from continuing
operations
    
    
    (459
    )
    
    
    158
    
    
    
    441
    
    
    
    51
    
    
    
    113
    
    
    
    27
    
    
    
    21
    
    
    
    (974
    )(Loss) income from discontinued
operations
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )Net (loss) income
    
    $
    (466
    )
    
    $
    158
    
    
    $
    441
    
    
    $
    251
    
    
    $
    113
    
    
    $
    27
    
    
    $
    21
    
    
    $
    (1,044
    )(Loss) income per share:From continuing operations
    
    $
    (.12
    )
    
    $
    .04
    
    
    $
    .11
    
    
    $
    .02
    
    
    $
    .03
    
    
    $
    .01
    
    
    $
    
    
    
    $
    (.25
    )From discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (.02
    )Total (loss) income per share
    
    $
    (.12
    )
    
    $
    .04
    
    
    $
    .11
    
    
    $
    .07
    
    
    $
    .03
    
    
    $
    .01
    
    
    $
    
    
    
    $
    (.27
    )
 18




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##### Table of Contents



Contractual Obligations
  Payments Due By PeriodContractual Obligations
    
    TOTAL
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012Operating Leases
    
    $
    3,589,000
    
    
    $
    1,119,000
    
    
    $
    1,113,000
    
    
    $
    755,000
    
    
    $
    392,000
    
    
    $
    210,000
 Off-Balance Sheet Arrangements
   Liquidity and Capital Resources
      19




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##### Table of Contents



20




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##### Table of Contents



Critical Accounting Policies and Estimates
 Allowance for Doubtful Accounts  Methodology
  Inventories  Slow Moving , Obsolescence, and Lower of Cost or Market
  Financial Instruments
   21




---



##### Table of Contents



Inflation and Price Levels
   
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
  Liquidity and Capital Resources
 Foreign Currency Exchange
    22




---



##### Table of Contents



23




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 
 Report of Independent Registered Public Accounting Firm
 The Board of Directors and Shareholders
SED International Holdings, Inc. and Subsidiaries
     
 24




---



##### Table of Contents



SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 June 30,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,356,000
    
    
    $
    4,426,000Trade accounts receivable, less allowance for doubtful accounts of
$348,000 (2007) and $437,000 (2006)
    
    
    42,059,000
    
    
    
    33,584,000Inventories, net
    
    
    41,751,000
    
    
    
    32,720,000Deferred income taxes, net
    
    
    23,000
    
    
    
    58,000Other current assets
    
    
    4,929,000
    
    
    
    3,586,000Total current assets
    
    
    92,118,000
    
    
    
    74,374,000Property and equipment, net
    
    
    1,104,000
    
    
    
    941,000Total assets
    
    $
    93,222,000
    
    
    $
    75,315,000LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    40,342,000
    
    
    $
    31,480,000Accrued and other current liabilities
    
    
    6,177,000
    
    
    
    4,834,000Revolving credit facility
    
    
    24,544,000
    
    
    
    17,532,000Total liabilities
    
    
    71,063,000
    
    
    
    53,846,000Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value; 129,500 shares
authorized, none issued
    
    
    
    
    
    
    Common stock, $.01 par value; 100,000,000 shares authorized, 5,573,347
(2007) and 5,583,347 (2006) shares issued, 3,878,856 (2007) and
3,888,856
(2006) shares outstanding
    
    
    56,000
    
    
    
    56,000Additional paid-in capital
    
    
    68,531,000
    
    
    
    68,584,000Accumulated deficit
    
    
    (30,479,000
    )
    
    
    (29,596,000
    )Accumulated other comprehensive loss
    
    
    (2,862,000
    )
    
    
    (4,488,000
    )Treasury stock, 1,694,491 shares, at cost
    
    
    (13,087,000
    )
    
    
    (13,087,000
    )Total shareholders equity
    
    
    22,159,000
    
    
    
    21,469,000Total liabilities and shareholders equity
    
    $
    93,222,000
    
    
    $
    75,315,000
  25




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##### Table of Contents



SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Year Ended June 30,2007
    
    
    2006
    
    
    2005Net sales
    
    $
    408,435,000
    
    
    $
    412,371,000
    
    
    $
    380,864,000Cost of sales
    
    
    386,515,000
    
    
    
    390,968,000
    
    
    
    364,091,000Gross profit
    
    
    21,920,000
    
    
    
    21,403,000
    
    
    
    16,773,000Selling, general and administrative expenses,
excluding depreciation and amortization
expense
    
    
    20,254,000
    
    
    
    17,958,000
    
    
    
    17,195,000Depreciation and amortization expense
    
    
    413,000
    
    
    
    422,000
    
    
    
    868,000Foreign currency transactions (gain) loss
    
    
    (876,000
    )
    
    
    512,000
    
    
    
    (244,000
    )Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    31,000Operating income (loss)
    
    
    2,129,000
    
    
    
    2,511,000
    
    
    
    (1,077,000
    )Interest expense
    
    
    1,574,000
    
    
    
    1,389,000
    
    
    
    691,000Income (loss) before income taxes from
continuing operations
    
    
    555,000
    
    
    
    1,122,000
    
    
    
    (1,768,000
    )Income tax expense
    
    
    1,368,000
    
    
    
    931,000
    
    
    
    680,000(Loss) income from continuing operations
    
    
    (813,000
    )
    
    
    191,000
    
    
    
    (2,448,000
    )(Loss) income from discontinued operations
    
    
    (70,000
    )
    
    
    193,000
    
    
    
    (154,000
    )Net (loss) income
    
    $
    (883,000
    )
    
    $
    384,000
    
    
    $
    (2,602,000
    )Basic and diluted (loss) income per share:From continuing operations
    
    $
    (.21
    )
    
    $
    .05
    
    
    $
    (.63
    )From discontinued operations
    
    
    (.02
    )
    
    
    .05
    
    
    
    (.04
    )Basic and diluted (loss) income per share
    
    $
    (.23
    )
    
    $
    .10
    
    
    $
    (.67
    )Weighted average number of shares outstanding:Basic
    
    
    3,877,000
    
    
    
    3,872,000
    
    
    
    3,871,000Diluted
    
    
    3,877,000
    
    
    
    3,884,000
    
    
    
    3,871,000
  26




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##### Table of Contents



SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Treasury Stock
    
    
    Compensation
    
    
    ShareholdersShares
    
    
    Par Value
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    Shares
    
    
    Cost
    
    
    Stock Awards
    
    
    EquityBALANCE JUNE 30, 2004
    
    
    5,569,872
    
    
    $
    56,000
    
    
    $
    68,574,000
    
    
    $
    (27,378,000
    )
    
    $
    (4,510,000
    )
    
    
    1,690,701
    
    
    $
    (13,083,000
    )
    
    $
    (53,000
    )
    
    $
    23,606,000Amortization of stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    20,000Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000Exercise of stock options
    
    
    6,666
    
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,602,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,602,000
    )Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    778,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    778,000Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,824,000
    )BALANCE JUNE 30, 2005
    
    
    5,576,538
    
    
    
    56,000
    
    
    
    68,595,000
    
    
    
    (29,980,000
    )
    
    
    (3,732,000
    )
    
    
    1,690,701
    
    
    
    (13,083,000
    )
    
    
    (33,000
    )
    
    
    21,823,000Reclassification of unvested
stock awards  adoption of
SFAS 123 (R)
    
    
    
    
    
    
    
    
    
    
    (33,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,000Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000Treasury shares purchased
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,790
    
    
    
    (4,000
    )
    
    
    
    
    
    
    (4,000
    )Exercise of stock options
    
    
    6,668
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384,000Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (756,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (756,000
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (372,000
    )BALANCE JUNE 30, 2006
    
    
    5,583,347
    
    
    
    56,000
    
    
    
    68,584,000
    
    
    
    (29,596,000
    )
    
    
    (4,488,000
    )
    
    
    1,694,491
    
    
    
    (13,087,000
    )
    
    
    
    
    
    
    21,469,000Stock awards cancelled
    
    
    (10,000
    )
    
    
    
    
    
    
    (75,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75,000
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    22,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (883,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (883,000
    )Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,626,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,626,000Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    743,000BALANCE JUNE 30, 2007
    
    
    5,573,347
    
    
    $
    56,000
    
    
    $
    68,531,000
    
    
    $
    (30,479,000
    )
    
    $
    (2,862,000
    )
    
    
    1,694,491
    
    
    $
    (13,087,000
    )
    
    $
    
    
    
    $
    22,159,000
  27




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##### Table of Contents



SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Year Ended June 30,2007
    
    
    2006
    
    
    2005Operating activities:Net (loss) income
    
    $
    (883,000
    )
    
    $
    384,000
    
    
    $
    (2,602,000
    )Adjustments to reconcile net (loss) income to net cash
used in operating activities:Depreciation and amortization
    
    
    413,000
    
    
    
    422,000
    
    
    
    868,000Deferred tax assets
    
    
    35,000
    
    
    
    4,000
    
    
    
    (2,000
    )Stock-based compensation
    
    
    (53,000
    )
    
    
    20,000
    
    
    
    38,000Provision for losses on accounts receivable
    
    
    658,000
    
    
    
    475,000
    
    
    
    560,000Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    31,000Changes in operating assets and liabilities:Trade accounts receivable
    
    
    (7,528,000
    )
    
    
    (3,944,000
    )
    
    
    (13,000
    )Other receivable
    
    
    
    
    
    
    
    
    
    
    500,000Inventories, net
    
    
    (7,494,000
    )
    
    
    452,000
    
    
    
    (3,053,000
    )Other current assets
    
    
    (836,000
    )
    
    
    (2,086,000
    )
    
    
    238,000Trade accounts payable
    
    
    6,401,000
    
    
    
    1,912,000
    
    
    
    (215,000
    )Accrued and other current liabilities
    
    
    922,000
    
    
    
    337,000
    
    
    
    (48,000
    )Net cash used in operating
activities
    
    
    (8,365,000
    )
    
    
    (2,024,000
    )
    
    
    (3,698,000
    )Investing activities:Purchase of equipment
    
    
    (538,000
    )
    
    
    (182,000
    )
    
    
    (463,000
    )Net cash used in investing activities
    
    
    (538,000
    )
    
    
    (182,000
    )
    
    
    (463,000
    )Financing activities:Net proceeds from issuance of stock
    
    
    
    
    
    
    2,000
    
    
    
    3,000Net borrowings under revolving credit facility
    
    
    7,012,000
    
    
    
    3,942,000
    
    
    
    2,742,000Purchase of treasury stock
    
    
    
    
    
    
    (4,000
    )
    
    
    Net cash provided by financing
activities
    
    
    7,012,000
    
    
    
    3,940,000
    
    
    
    2,745,000Effect of exchange rate changes on cash and cash equivalents
    
    
    821,000
    
    
    
    (390,000
    )
    
    
    418,000(Decrease) increase in cash and cash equivalents
    
    
    (1,070,000
    )
    
    
    1,344,000
    
    
    
    (998,000
    )Cash and cash equivalents:Beginning of year
    
    
    4,426,000
    
    
    
    3,082,000
    
    
    
    4,080,000End of year
    
    $
    3,356,000
    
    
    $
    4,426,000
    
    
    $
    3,082,000Supplemental Disclosures of Cash Flow Information 
cash paid during the year for:Interest paid
    
    $
    1,544,000
    
    
    $
    1,438,000
    
    
    $
    693,000Income tax payments
    
    $
    909,000
    
    
    $
    976,000
    
    
    $
    679,000
  28




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##### Table of Contents



SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Years ended June 30, 2007, 2006 and 2005
 1. Description of Business
    2. Summary of Significant Accounting Policies
 Principles of Consolidation
 Risks and Uncertainties
  §
    
    Continuation of distribution agreements The Company operates under formal but
cancelable distribution agreements with certain of its suppliers. If these agreements
were cancelled, the Company would be forced to obtain its products through
wholesalers. This would reduce the Companys profit margin on the affected products.§
    
    Availability of certain products From time to time, due to production limitations
or heavy demand, the Company may only be able to purchase a limited amount of popular
products from its suppliers.§
    
    Product margins The Company operates in a very competitive business environment.
Accordingly, product margins are continually under pricing pressure. From time to
time, the Company receives price protection and other considerations from its vendors.
While the Company has no reason to believe such vendor consideration will not
continue, no assurance
 29




---



##### Table of Contents



can be given that such price protection and other considerations will continue to be
received in the future.§
    
    Vendor credit The Company significantly relies on its suppliers for trade credit.
Changes by the suppliers in their credit terms could force the Company to obtain less
favorable financing for its purchases.§
    
    Product obsolescence The Company offers a broad line of products that are subject
to fast technological obsolescence, which increases the risk of inventory markdown.
Through its vendor agreements, the Company has certain stock return privileges, which
vary from supplier to supplier. The Company believes stock return programs will
continue in the future, but can give no assurance about whether these programs will
continue.§
    
    Consumer electronicsThe Company re-entered into the distribution of consumer
electronics in fiscal 2004, which is highly competitive. Some of the Companys
competitors have substantially greater financial, marketing and distribution resources
than the Company and the Company may be unable to successfully compete with these
companies. Failure to successfully penetrate this market could have an adverse impact
on the Companys cash flows, financial position and operating results.§
    
    Credit decisions and losses The Company maintains an experienced customer
credit staff and relies on customer payment history and third party data to make
customer credit decisions. Nevertheless, the Company may experience customer credit
losses in excess of its expectations. The Company maintains credit insurance policies
for certain customers located in the United States and select Latin American countries
(subject to certain terms and conditions). However, the terms of the credit insurance
agreement require the Company to maintain certain minimum standards and policies with
respect to extending credit to customers. If the Company does not adhere to such
policies, the insurance companies may not pay claims submitted by the Company.§
    
    Proportionate control of general and administrative costs The Company attempts to
control its overhead costs to keep such costs in line with its sales volume. As sales
volumes fluctuate, the Company must continually monitor its overhead costs and make
adjustments timely and appropriately. Failure to control overhead costs could have an
adverse impact on the Companys cash flows, financial position and operating results.§
    
    Uncertain and possibly volatile economic and political environment in Latin America
 The general economic and political environment in both of the countries in which the
Company operates in Latin America is uncertain and, at times, volatile. As a result of
these conditions, the Company could experience unexpected costs from its operations in
these countries.§
    
    Availability of credit facilities The Company has operated under a formal credit
facility with a bank for many years that was subject to certain collateral limitations
and contained certain covenants. During September 2005 a new credit facility was
obtained. No assurance can be given that the Company will be able to maintain
compliance with financial covenants, or obtain waivers in the event of non-compliance,
in the future. Failure to maintain compliance with the financial covenants could
adversely affect the Companys ability to obtain vendor credit and the overall
business operations. The principal credit facility, which expires in September 2011,
is further described in Note 4.§
    
    Cash flows While not presently expected, the Companys continued operations in
Latin America may require additional capital infusion (in the form of advance notes
from the parent company or other debt borrowings by a subsidiary). The credit facility
restricts the future funding by the parent company of Latin American operations.
Operating needs and regulatory matters may restrict the Companys ability to
repatriate cash flows from the foreign subsidiaries to the United States.
 30




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##### Table of Contents



Revenue Recognition
 Concentrations of Credit Risk
 Use of Estimates
 Cash Equivalents
 Accounts Receivable
 Allowance for Doubtful Accounts
 Inventories
 31




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##### Table of Contents



Property and Equipment
 Foreign Currency Translation 
 Income Taxes 
 Earnings Per Common Share (EPS)
 Stock-Based Compensation  Accounting
for Stock Based Compensation issued to Employees
  32




---



##### Table of Contents



Year EndedJune 30,2005Net loss, as reported
    
    $
    (2,602,000
    )Stock-based compensation included in reported net loss
    
    
    18,000Stock-based compensation under fair value reporting
    
    
    (64,000
    )Pro forma net loss
    
    $
    (2,648,000
    )Basic and diluted loss per share:As reported
    
    $
    (.67
    )Pro forma
    
    $
    (.68
    )
  2005Dividend yield
    
    
    0.0
    %Expected volatility
    
    
    80.2
    %Risk-free interest rate
    
    
    3.6
    %Expected life, in years
    
    
    5.0
 Recent Accounting Pronouncements- Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes-An
Interpretation of Financial Accounting Standards Board Statement No. 109.
   33




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##### Table of Contents



3. Property and Equipment
  June 30,2007
    
    
    2006Furniture and equipment
    
    $
    10,896,000
    
    
    $
    10,407,000Leasehold improvements
    
    
    2,253,000
    
    
    
    2,109,000Other
    
    
    215,000
    
    
    
    119,00013,364,000
    
    
    
    12,635,000Less accumulated depreciation and amortization
    
    
    (12,260,000
    )
    
    
    (11,694,000
    )$
    1,104,000
    
    
    $
    941,000
  4. Credit Facilities
     34




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##### Table of Contents



5. Income Taxes
  June 30,2007
    
    
    2006Net deferred tax assets and (liabilities):U.S. federal and state operating loss carry-forwards
    
    $
    23,545,000
    
    
    $
    22,810,000Unremitted foreign earnings
    
    
    (3,052,000
    )
    
    
    (2,794,000
    )Translation loss on unremitted foreign earnings
    
    
    1,087,000
    
    
    
    1,704,000Depreciation and amortization
    
    
    186,000
    
    
    
    210,000Allowance for accounts receivable
    
    
    106,000
    
    
    
    145,000Inventories
    
    
    470,000
    
    
    
    486,000Allowance for sales returns
    
    
    19,000
    
    
    
    25,000Employee benefits and compensation
    
    
    16,000
    
    
    
    20,000Reserves and accruals
    
    
    218,000
    
    
    
    212,000Sales tax
    
    
    1,000
    
    
    
    11,000Stock options
    
    
    51,000
    
    
    
    78,000Available tax credits
    
    
    328,000
    
    
    
    328,000Other
    
    
    6,000
    
    
    
    102,00022,981,000
    
    
    
    23,337,000Valuation allowance
    
    
    (22,958,000
    )
    
    
    (23,279,000
    )Net deferred tax assets
    
    $
    23,000
    
    
    $
    58,000
  35




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##### Table of Contents



Year Ended June 30,2007
    
    
    2006
    
    
    2005United States
    
    $
    (2,676,000
    )
    
    $
    (1,011,000
    )
    
    $
    (3,682,000
    )Foreign
    
    
    3,231,000
    
    
    
    2,133,000
    
    
    
    1,914,000Total
    
    $
    555,000
    
    
    $
    1,122,000
    
    
    $
    (1,768,000
    )
  Year Ended June 30,2007
    
    
    2006
    
    
    2005Current:State
    
    $
    9,000
    
    
    $
    6,000
    
    
    $
    (3,000
    )Foreign
    
    
    1,324,000
    
    
    
    921,000
    
    
    
    685,0001,333,000
    
    
    
    927,000
    
    
    
    682,000Deferred:Foreign
    
    
    35,000
    
    
    
    4,000
    
    
    
    (2,000
    )35,000
    
    
    
    4,000
    
    
    
    (2,000
    )$
    1,368,000
    
    
    $
    931,000
    
    
    $
    680,000
   Year Ended June 30,2007
    
    2006
    
    2005Statutory federal rates (benefit)
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    (34.0
    %)State income taxes net of
federal income tax rate
(benefit)
    
    
    (0.3
    )
    
    
    7.2
    
    
    
    (7.7
    )Non-deductible Items
    
    
    2.9
    
    
    
    1.6
    
    
    
    0.9Permanent difference true-up
    
    
    
    
    
    
    1.8
    
    
    
    U.S. tax on foreign earnings
    
    
    114.6
    
    
    
    36.8
    
    
    
    138.7Valuation allowance
    
    
    48.3
    
    
    
    (24.0
    )
    
    
    (60.3
    )Foreign taxes in excess
(deficiency) of federal
statutory
rate
    
    
    46.9
    
    
    
    17.7
    
    
    
    (1.2
    )Other
    
    
    0.1
    
    
    
    7.9
    
    
    
    2.1Total
    
    
    246.5
    %
    
    
    83.0
    %
    
    
    38.5
    %
  6. Lease Obligations
  36




---



##### Table of Contents



Year Ending June 30,2008
    
    $
    1,119,0002009
    
    
    1,113,0002010
    
    
    755,0002011
    
    
    392,0002012
    
    
    210,000$
    3,589,000
 7. Shareholders Equity
   WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Term
    
    ValueOutstanding at June 30, 2006
    
    
    517,909
    
    
    $
    2.60Forfeited or expired
    
    
    (11,750
    )
    
    $
    5.92Outstanding at June 30, 2007
    
    
    506,159
    
    
    $
    2.52
    
    
    
    4.4
    
    
    $
    89,000Vested and expected to vest at June 30, 2007
    
    
    506,159
    
    
    $
    2.52
    
    
    
    4.4
    
    
    $
    89,000Exercisable at June 30, 2007
    
    
    497,934
    
    
    $
    2.52
    
    
    
    4.4
    
    
    $
    84,000Available for grant at June 30, 2007
    
    
    801,591
  37




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##### Table of Contents



Outstanding Options
    
    Exercisable OptionsWeighted
    
    
    
    
    
    Average
    
    WeightedAverage
    
    
    
    
    
    Remaining
    
    AverageRange of
    
    Number
    
    Exercise
    
    Number
    
    Contractual
    
    ExerciseExercise Prices
    
    Outstanding
    
    Price
    
    Exercisable
    
    Life (Years)
    
    Price$0.0000 - $1.0130
    
    
    92,500
    
    
    $
    .6395
    
    
    
    86,000
    
    
    
    5.7
    
    
    $
    0.6198$1.0131 - $2.0260
    
    
    255,000
    
    
    $
    1.9494
    
    
    
    255,000
    
    
    
    4.3
    
    
    $
    1.9494$2.0261 - $3.0390
    
    
    78,000
    
    
    $
    2.4428
    
    
    
    78,000
    
    
    
    5.5
    
    
    $
    2.4428$5.0651 - $6.0780
    
    
    55,334
    
    
    $
    5.8800
    
    
    
    55,334
    
    
    
    2.1
    
    
    $
    5.8800$6.0781 - $7.0910
    
    
    5,250
    
    
    $
    6.8200
    
    
    
    5,250
    
    
    
    2.7
    
    
    $
    6.8200$7.0911 - $8.1040
    
    
    16,300
    
    
    $
    7.8728
    
    
    
    14,575
    
    
    
    3.0
    
    
    $
    7.8648$9.1171 - $10.1300
    
    
    3,775
    
    
    $
    10.1068
    
    
    
    3,775
    
    
    
    .4
    
    
    $
    10.1068506,159
    
    
    
    
    
    
    
    497,934
 Restricted Stock
 Year Ended June 30,2007
    
    2006
    
    2005Shares of restricted stock-beginning of year
    
    
    12,750
    
    
    
    17,000
    
    
    
    21,250Vested
    
    
    (5,250
    )
    
    
    (4,250
    )
    
    
    (4,250
    )Canceled
    
    
    (7,500
    )
    
    
    
    
    
    
    Shares of restricted stock-end of year
    
    
    
    
    
    
    12,750
    
    
    
    17,000
  8. Employee Benefit Plan
  9. Segment Information
  38




---



##### Table of Contents



Fiscal 2007
    
    United States
    
    Latin America
    
    Eliminations
    
    ConsolidatedNet sales to unaffiliated customers
    
    $
    321,012,000
    
    
    $
    90,065,000
    
    
    $
    (2,642,000
    )
    
    $
    408,435,000Gross profit
    
    $
    15,006,000
    
    
    $
    6,914,000
    
    
    
    
    
    
    $
    21,920,000(Loss) income from continuing
operations
    
    $
    (1,102,000
    )
    
    $
    3,231,000
    
    
    
    
    
    
    $
    2,129,000Total assets at year-end
    
    $
    79,694,000
    
    
    $
    26,430,000
    
    
    $
    (12,902,000
    )
    
    $
    93,222,000Fiscal 2006Net sales to unaffiliated customers
    
    $
    335,824,000
    
    
    $
    76,547,000
    
    
    
    
    
    
    $
    412,371,000Gross profit
    
    $
    15,112,000
    
    
    $
    6,291,000
    
    
    
    
    
    
    $
    21,403,000Income from continuing
operations
    
    $
    371,000
    
    
    $
    2,140,000
    
    
    
    
    
    
    $
    2,511,000Total assets at year-end
    
    $
    68,555,000
    
    
    $
    19,002,000
    
    
    $
    (12,242,000
    )
    
    $
    75,315,000Fiscal 2005Net sales to unaffiliated customers
    
    $
    327,006,000
    
    
    $
    53,858,000
    
    
    
    
    
    
    $
    380,864,000Gross profit
    
    $
    12,025,000
    
    
    $
    4,748,000
    
    
    
    
    
    
    $
    16,773,000(Loss) income from continuing
operations
    
    $
    (3,142,000
    )
    
    $
    2,065,000
    
    
    
    
    
    
    $
    (1,077,000
    )Total assets at year-end
    
    $
    87,400,000
    
    
    $
    14,387,000
    
    
    $
    (31,004,000
    )
    
    $
    70,783,000
   Consumer
    
    WirelessMicrocomputer
    
    Electronics
    
    Telephone
    
    HandlingYear Ended June 30,
    
    Products
    
    Products
    
    Products
    
    Revenue
    
    Total2007
    
    $
    353,616,000
    
    
    $
    46,175,000
    
    
    $
    7,640,000
    
    
    $
    1,004,000
    
    
    $
    408,435,0002006
    
    $
    349,126,000
    
    
    $
    32,466,000
    
    
    $
    29,508,000
    
    
    $
    1,271,000
    
    
    $
    412,371,0002005
    
    $
    310,747,000
    
    
    $
    23,374,000
    
    
    $
    45,541,000
    
    
    $
    1,202,000
    
    
    $
    380,864,000
  10. Significant Vendors
  11. Supplemental Disclosures
  Balance at
    
    Charged toBeginning
    
    Costs and
    
    
    
    
    
    Balance atYear Ended June 30,
    
    of Year
    
    Expenses
    
    Deductions (1)
    
    End of Year2007
    
    $
    437,000
    
    
    $
    658,000
    
    
    $
    (747,000
    )
    
    $
    348,0002006
    
    $
    535,000
    
    
    $
    475,000
    
    
    $
    (573,000
    )
    
    $
    437,0002005
    
    $
    616,000
    
    
    $
    560,000
    
    
    $
    (641,000
    )
    
    $
    535,000
 
 (1)
    
    Deductions represent actual write-offs of specific accounts receivable charged
against the allowance account, net of amounts recovered. 39




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##### Table of Contents



Balance at
    
    Charged toBeginning
    
    Costs and
    
    
    
    
    
    Balance atYear Ended June 30,
    
    of Year
    
    Expenses
    
    Deductions (1)
    
    End of Year2007
    
    $
    1,037,000
    
    
    $
    (92,000
    )
    
    $
    
    
    
    $
    945,0002006
    
    $
    1,060,000
    
    
    $
    (23,000
    )
    
    $
    
    
    
    $
    1,037,0002005
    
    $
    916,000
    
    
    $
    144,000
    
    
    $
    
    
    
    $
    1,060,000
 
 (1)
    
    Deductions represent actual write-offs or mark-downs of inventories. 12. Discontinued Operations
     13. Legal Proceedings
 Mark Diamond v. SED International Holdings, Inc. et
al.,
 40




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
  41




---



##### Table of Contents



Item 9B. Other Information
  42




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  Code of Ethics
 www.sedonline.com
 
 Item 11. Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services.
  43




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
  Financial Statements.
 
    
    Report of Independent Registered Public Accounting Firm (J.H Cohn, LLP-2007, 2006
and 2005)
    
    Consolidated Balance Sheets at June 30, 2007 and 2006
    
    Consolidated Statements of Operations for the years ended June 30, 2007, 2006 and 2005
    
    Consolidated Statements of Shareholders Equity for the years ended June 30,
2007, 2006 and 2005
    
    Consolidated Statements of Cash Flows for the years ended June 2007, 2006 and 2005
    
    Notes to Consolidated Financial Statements
 Financial Statement Schedules.
 
    
    Schedule II:Valuation and Qualifying Accounts is filed herewith under
Supplemental Disclosures in Note 11 to the Consolidated Financial Statements.
  Exhibits Incorporated by Reference or Filed with this Report.
 ExhibitNumber
    
    Description3.1
    
    Articles of Incorporation of the Company (1).3.2
    
    Amendment to Articles of Incorporation (2).3.3
    
    Bylaws of the Company (3).3.4
    
    Article 1, Section 1.2 of the Bylaws of SED International Holdings, Inc., as amended on September 18, 2007 (40).4.1
    
    Form of Rights Agreement, dated as of October 31, 1996 between the Company and National City Bank (4).**10.7
    
    Southern Electronics Corporation 1988 Restricted Stock Plan, together with related form of Restricted Stock Agreement (5).**10.8
    
    First Amendment dated November 7, 1989 to Southern Electronics Corporation 1988 Restricted Stock Plan (6).**10.9
    
    Second Amendment dated July 17, 1992 to Southern Electronics Corporation 1988
Restricted Stock Plan (7).**10.10
    
    Form of Southern Electronics Corporation 1991 Stock Option Plan, together with
related forms of Incentive Stock Option Agreement and Non-Qualified Stock Option
Agreement (8).**10.11
    
    First Amendment dated July 17, 1992 to Southern Electronics Corporation 1991
Stock Option Plan (9).**10.12
    
    Second Amendment dated August 30, 1996 to Southern Electronics Corporation 1991
Stock Option Plan (10).
 44




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##### Table of Contents



ExhibitNumber
    
    Description**10.14
    
    Employment Agreement dated November 7, 1989, between the Company, SED
International and Jean Diamond (11), as amended by form of Amendment No. 1 dated
September 24, 1991 (12).**10.23
    
    Form of Non-Qualified Stock Option Agreement for Directors (13).**10.24
    
    1995 Formula Stock Option Plan, together with related form of Non-Qualified
Stock Option Agreement (14).**10.26
    
    Third Amendment dated September 12, 1996 to the Southern Electronics Corporation
Stock Option Plan (15).**10.31
    
    Second Amendment to Employment Agreement effective July 1, 1998 between SED
International and Jean Diamond (16).**10.32
    
    1999 Stock Option Plan dated July 20, 1999, together with related forms of Stock
Option Agreement and Restriction Agreement (17).**10.33
    
    Third Amendment to Employment Agreement effective December 16, 1998 between SED
International and Jean Diamond (18).**10.35
    
    Fourth Amendment to Employment Agreement effective July 1, 1999 between SED
International and Jean Diamond (19).**10.38
    
    Form of Indemnification Agreement entered into with each of the directors of the
Company and the Company (20).**10.39
    
    Form of Indemnification Agreement entered into with each of the officers of the
Company and the Company (21).10.40
    
    Form of Lease Agreement dated as of April 1, 1999 between Diamond Chip Group,
L.L.C. and SED International (22).10.41
    
    Fourth Amendment to Second Amended and Restated Credit Agreement dated October
12, 2001 between SED International Holdings, Inc. and Wachovia Bank, N.A. (23).**10.42
    
    Employment Agreement effective November 11, 1999 between SED International, Inc.
and Barry Diamond (24).**10.43
    
    First Amendment to Employment Agreement effective June 1, 2001 between SED
International Inc. and Barry Diamond (25).**10.48
    
    Amendment to Employment Agreement between Jean Diamond and SED International,
Inc., dated September 1, 1999. This amendment is effective as of November 1,
2001(26).**10.50
    
    Amendment to Employment Agreement between Barry Diamond and SED International,
Inc., dated September 11, 1999. This amendment is effective as of November 1,
2001(27).**10.53
    
    Amendment to Employment Agreement between Jean Diamond and SED International,
Inc., dated September 11, 2002. This amendment is effective as of January 1,
2002 (28).**10.55
    
    Employment Agreement effective July 1, 2005 between SED International, Inc. and
Jonathan Elster (29).**10.56
    
    Amendment to Employment Agreement between Barry Diamond and SED International,
Inc. dated November 22, 2004 (30).10.57
    
    Lease Agreement dated February 1, 2006 between Zenith LaborNet, Inc. and SED
International, Inc. (31).10.58
    
    First Amendment of Lease for 4916 N. Royal Atlanta Drive, Tucker, GA 30084,
dated September 19, 2005 (32).10.59
    
    Lease Agreement Extension for 4916 N. Royal Atlanta Drive, Tucker, GA 30084,
dated March 20, 2006 (33).10.60
    
    Loan and Security Agreement between SED International, Inc. and Wachovia Bank
National Association, dated September 21, 2005 (34).10.61
    
    Lease agreement dated October 1, 2006 between CRI Corporate Center, LLC and
SED International, Inc. (35).10.62
    
    Seventh Addendum to Lease Dated March 13, 2007 for 1729 NW 84th
Avenue, Doral, Florida 33126 (36).
 45




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##### Table of Contents



ExhibitNumber
    
    Description10.63
    
    Third Amendment to Wachovia Loan and Security Agreement dated March 1, 2007 (37).14
    
    Code of Ethics dated September 2, 2002 (38).21
    
    Subsidiaries of the Company (39).24
    
    Power of Attorney (see signature page to this Form 10-K).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer.32.1
    
    Section 1350 Certification by Principal Executive Officer.32.2
    
    Section 1350 Certification by Principal Financial Officer.
 
 **
    
    Denotes compensatory plan, compensation arrangement or management contract.1)
    
    Incorporated herein by reference to Exhibit 3.1 from the Companys 1999 Form
10-K.2)
    
    Incorporated herein by reference to Exhibit 3.2 from the Registrants Revised
Definitive Proxy Soliciting Materials filed March 26, 2002 (SEC File No. 000-16345).3)
    
    Incorporated herein by reference to Exhibit 3.3 from the Companys 1999 Form
10-K.4)
    
    Incorporated herein by reference to Exhibit 4.1 from the Companys Current
Report on Form 8-K dated October 30, 1996 (SEC File No. 0-16345).5)
    
    Incorporated herein by reference to Exhibit 10.7 from Companys Annual Report
on Form 10-K for the fiscal year ended June 30, 1988 (SEC File No. 0-16345).6)
    
    Incorporated herein by reference to Exhibit 10.8 from Companys 1990 Form
10-K (SEC File No. 0-16345).7)
    
    Incorporated herein by reference to Exhibit 10.9 from Companys 1992 Form
10-K (SEC File No. 0-16345).8)
    
    Incorporated herein by reference to Exhibit 10.10 from Companys Definitive
Supplemental Proxy Statement dated October 18, 1991 (SEC File No. 0-16345).9)
    
    Incorporated herein by reference to Exhibit 10.11 from Companys 1992 Form
10-K (SEC File No. 0-16345).10)
    
    Incorporated herein by reference to Exhibit 10.12 from Companys Proxy
Statement pertaining to Companys 1995 Annual Meeting of Stockholders dated October 1,
1995 (SEC File No. 0-16345).11)
    
    Incorporated herein by reference to Exhibit 10.14 from Companys Quarterly
Report on Form 10-Q for the quarterly period ended December 31, 1989 (SEC File No.
0-16345).12)
    
    Incorporated herein by reference to Exhibit 10.14 from Companys 1991 Form
10-K (SEC File No. 0-16345).13)
    
    Incorporated herein by reference to Exhibit 10.23 from Companys 1995 Form
10-K (SEC File No. 0-16345).14)
    
    Incorporated herein by reference to Exhibit 10.24 from Companys Proxy
Statement pertaining to Companys 1995 Annual Meeting of Stockholders dated October 1,
1995 (SEC File No. 0-16345). 46




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15)
    
    Incorporated herein by reference to Exhibit 10.26 from Companys Proxy
Statement pertaining to Companys 1996 Annual Meeting of Stockholders dated October 1,
1996 (SEC File No. 0-16345).16)
    
    Incorporated herein by reference to Exhibit 10.31 from Companys 1998 Form
10-K.17)
    
    Incorporated herein by reference to Exhibit 10.32 from Companys 1999 Form
10-K.18)
    
    Incorporated herein by reference to Exhibit 10.33 from the Companys
Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1998 (SEC
File No. 0-16345).19)
    
    Incorporated herein by reference to Exhibit 10.35 from Companys 1999 Form
10-K.20)
    
    Incorporated herein by reference to Exhibit 10.38 from Companys 1999 Form
10-K.21)
    
    Incorporated herein by reference to Exhibit 10.39 from Companys 1999 Form
10-K.22)
    
    Incorporated herein by reference to Exhibit 10.40 from Amendment No. 1 to the
Companys Annual Report on Form 10-K/A for the fiscal year ended June 30, 1999 (SEC
File No. 0-16345).23)
    
    Incorporated herein by reference to Exhibit 10.41 from the Registrants (SEC
File No. 000-16345) 2001 Form 10-K.24)
    
    Incorporated herein by reference to Exhibit 10.42 from the Registrants (SEC
File No. 000-16345) 2001 Form 10-K.25)
    
    Incorporated herein by reference to Exhibit 10.43 from the Registrants (SEC
File No. 000-16345) 2001 Form 10-K.26)
    
    Incorporated herein by reference to Exhibit 10.48 from the Registrants
Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2001 (SEC
File No. 000-16345).27)
    
    Incorporated herein by reference to Exhibit 10.50 from the Registrants
Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2001 (SEC
File No. 000-16345).28)
    
    Incorporated herein by reference to Exhibit 10.53 from Companys Annual
Report on Form 10-K for the fiscal year ended June 30, 2002.29)
    
    Incorporated herein by reference to Exhibit 10.55 from the Registrants (SEC
File No. 000-16345) 2006 Form 10-K.30)
    
    Incorporated herein by reference to Exhibit 10.56 from the Registrants (SEC
File No. 000-16345) 2006 Form 10-K.31)
    
    Incorporated herein by reference to Exhibit 10.57 from the Registrants (SEC
File No. 000-16345) 2006 Form 10-K.32)
    
    Incorporated herein by reference to Exhibit 10.58 from the Registrants (SEC
File No. 000-16345) 2006 Form 10-K.33)
    
    Incorporated herein by reference to Exhibit 10.59 from the Registrants (SEC
File No. 000-16345) 2006 Form 10-K. 47




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34)
    
    Incorporated herein by reference to Exhibit 10.60 from the Registrants (SEC
File No. 000-16345) 2006 Form 10-K.35)
    
    Incorporated by reference to Exhibit 10.61 from the Companys Quarterly
Report on Form 10-Q for the quarterly period ended December 31, 2006 (SED File No.
000-16345)36)
    
    Incorporated by reference to Exhibit 10.62 from the Companys Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2007 (SED File No.
000-16345)37)
    
    Incorporated by reference to Exhibit 10.63 from the Companys Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2007 (SED File No.
000-16345)38)
    
    Incorporated herein by reference to Exhibit 14 from the Registrants (SEC
File No. 000-16345) 2006 Form 10-K.39)
    
    Incorporated herein by reference to Exhibit 21 from the Registrants (SEC
File No. 000-16345) 2006 Form 10-K.40)
    
    Incorporated herein by reference to Exhibit 3.1 from the Companys Current
Report on Form 8-K filed on September 19, 2007. 48




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SIGNATURES
  SED International Holdings, Inc.By:
    /s/ LYLE DICKLERLyle Dickler, Vice President  Finance(principal financial and accounting officer)    /s/ JEAN DIAMOND

Jean Diamond
    
    Chairman of the Board
Chief Executive Officer and Director
(principal executive officer)/s/ LYLE DICKLER

Lyle Dickler
    
    Vice President  Finance
(principal financial and accounting officer)/s/ STEWART I. AARON
Stewart I. Aaron
    
    Director/s/ MELVYN I. COHEN

Melvyn I. Cohen
    
    Director/s/ JOSEPH SEGAL

Joseph Segal
    
    Director
 49