ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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04-2795439
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ] (Do not check if a smaller reporting company)
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Smaller reporting company
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[X]
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Page
Number
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February 28,
2014 |
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November 30,
2013 |
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ASSETS
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(Unaudited)
|
|
|
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Current assets:
|
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|
|
|
||||
Cash & cash equivalents
|
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$
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2,731,126
|
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$
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3,199,020
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Short term investments & marketable securities
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369,900
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1,112,440
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Accounts receivable, net of allowances of $828,067 and $1,081,278, respectively
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5,265,058
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5,473,452
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Inventories, net of reserve for inventory obsolescence of $2,833,739 and $3,030,306, respectively
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8,384,046
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8,607,567
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Prepaid expenses and sundry receivables
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437,163
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424,626
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Prepaid and refundable income taxes
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677,389
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678,889
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Deferred income taxes
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3,529,778
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2,668,747
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Total Current Assets
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21,394,460
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22,164,741
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Property and equipment, net of accumulated depreciation and amortization
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1,411,919
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1,489,799
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Intangible assets, net of accumulated amortization
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757,083
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762,193
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Deferred income taxes
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1,835,564
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1,921,016
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Other
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3,500
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8,000
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Total Assets
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$
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25,402,526
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$
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26,345,749
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LIABILITIES AND CAPITAL
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Current Liabilities:
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Accounts payable & accrued liabilities
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$
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9,631,454
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$
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9,246,072
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Capitalized lease obligations - current portion
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7,244
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7,116
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Total current liabilities
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9,638,698
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9,253,188
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Capitalized lease obligations
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28,236
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30,195
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Total Liabilities
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9,666,934
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9,283,383
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Shareholders' Equity:
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Preferred stock, $1.00 par, authorized 20,000,000 none issued
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—
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—
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Common stock, $.01 par, authorized 15,000,000 shares, issued and outstanding 6,038,982 and 6,038,982 shares, respectively
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60,390
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60,390
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Class A common stock, $.01 par, authorized 5,000,000 shares, issued and outstanding 967,702 and 967,702 shares, respectively
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9,677
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9,677
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Additional paid-in capital
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2,331,749
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2,329,049
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Retained earnings
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13,241,307
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14,480,872
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Unrealized gains on marketable securities
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92,469
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182,378
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Total Shareholders' Equity
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15,735,592
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17,062,366
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Total Liabilities and Shareholders' Equity
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$
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25,402,526
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$
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26,345,749
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Three Months Ended February 28,
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|||||||
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2014
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2013
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Revenues:
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Sales of health and beauty aid products - net
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$
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7,513,330
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$
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11,796,951
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Other income
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236,922
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2,698
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Total Revenues
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7,750,252
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11,799,649
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Costs and Expenses:
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Cost of sales
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4,306,641
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5,530,303
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Selling, general and administrative expenses
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3,718,854
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5,779,409
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Advertising, cooperative and promotional expenses
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1,038,900
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2,025,103
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Research and development
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126,696
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167,155
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Bad debt expense (recovery)
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(27,143
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)
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(29,225
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)
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Interest expense
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615
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24
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Total Costs and Expenses
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9,164,563
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13,472,769
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Restructuring Costs
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547,047
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—
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Total Costs and Expenses
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9,711,610
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13,472,769
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(Loss) Income before (Benefit from) Provision for Income Taxes
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(1,961,358
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)
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(1,673,120
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)
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(Benefit from) provision for income taxes
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(721,793
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)
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(657,730
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)
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Net (Loss) Income
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$
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(1,239,565
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)
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$
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(1,015,390
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)
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(Loss) Earnings per Share:
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Basic
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$
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(0.18
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)
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$
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(0.14
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)
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Diluted
|
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$
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(0.18
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)
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$
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(0.14
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)
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Weighted Average Common Shares Outstanding
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Basic
|
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7,006,684
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7,054,442
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Diluted
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7,006,684
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7,054,442
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Three Months Ended February 28,
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||||||
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2014
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2013
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Net (Loss) Income
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$
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(1,239,565
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)
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$
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(1,015,390
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)
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Other Comprehensive (Loss) Income
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Unrealized Gain (Loss) on Securities:
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Unrealized holding gain (loss) arising during the period, net of tax
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2,233
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49,404
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Less: reclassification adjustment for loss (gain) included in net (loss) income, net of tax
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(92,142
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)
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—
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Comprehensive (Loss) Income (Note 3, Note 11)
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$
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(1,329,474
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)
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$
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(965,986
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)
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Three Months Ended February 28,
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|||||||
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2014
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2013
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Cash Flows from Operating Activities:
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Net Loss
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$
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(1,239,565
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)
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$
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(1,015,390
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)
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Adjustments to reconcile net loss to cash used in operating activities:
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Depreciation and amortization
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86,498
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71,943
|
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|
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Change in allowance for bad debts
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(27,143
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)
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(29,225
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)
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|
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Deferred compensation
|
2,700
|
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—
|
|
|
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(Gain) on sale of securities
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(146,025
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)
|
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—
|
|
|
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Deferred income taxes
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(722,993
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)
|
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(658,282
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)
|
|
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Change in Operating Assets & Liabilities:
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Decrease (increase) in accounts receivable
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235,537
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(1,222,109
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)
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Decrease (increase) in inventory
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223,521
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(570,250
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)
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Decrease in insurance claim receivable
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—
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800,000
|
|
|
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(Increase) in prepaid expenses and other receivables
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(12,537
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)
|
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(36,903
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)
|
|
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Decrease (increase) in prepaid income and refundable income tax
|
1,500
|
|
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(28,260
|
)
|
|
||
Decrease in other assets
|
4,500
|
|
|
4,472
|
|
|
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Decrease (increase) in accounts payable and accrued liabilities
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385,381
|
|
|
(197,591
|
)
|
|
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(Decrease) in income taxes payable
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—
|
|
|
(9,440
|
)
|
|
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Net Cash Used in Operating Activities
|
(1,208,626
|
)
|
|
(2,891,035
|
)
|
|
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Cash Flows from Investing Activities:
|
|
|
|
|
||||
Acquisition of property, plant and equipment
|
(3,509
|
)
|
|
(395,551
|
)
|
|
||
Proceeds from sale of property, plant and equipment
|
—
|
|
|
—
|
|
|
||
Purchase of intangible assets
|
—
|
|
|
—
|
|
|
||
Purchase of marketable securities
|
—
|
|
|
(153,000
|
)
|
|
||
Proceeds from sale and maturity of investments
|
746,071
|
|
|
400,000
|
|
|
||
Net Cash Provided by (used in) Investing Activities
|
742,562
|
|
|
(148,551
|
)
|
|
||
Cash Flows from Financing Activities:
|
|
|
|
|
||||
Increase in capital lease obligation
|
—
|
|
|
—
|
|
|
||
Payments for capital lease obligations
|
(1,830
|
)
|
|
(1,176
|
)
|
|
||
Purchase of Company stock and retirement
|
—
|
|
|
—
|
|
|
||
Dividends paid
|
—
|
|
|
(493,811
|
)
|
|
||
Net Cash (Used in) Financing Activities
|
(1,830
|
)
|
|
(494,987
|
)
|
|
||
Net (Decrease) in Cash
|
(467,894
|
)
|
|
(3,534,573
|
)
|
|
||
Cash and Cash Equivalents at Beginning of Period
|
3,199,020
|
|
|
9,828,681
|
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
2,731,126
|
|
|
$
|
6,294,108
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
|
||||
Interest
|
$
|
615
|
|
|
$
|
24
|
|
|
Income taxes
|
$
|
500
|
|
|
$
|
39,700
|
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
5-7 Years
|
Furniture and fixtures
|
3-10 Years
|
Tools, dies and masters
|
3 Years
|
Transportation equipment
|
5 Years
|
Leasehold improvements
|
Shorter of the remaining economic life or the remaining life of the lease
(8.50 years)
|
|
|
February 28, 2014
|
|
November 30, 2013
|
||||||||||||
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COST
|
|
MARKET
|
|
COST
|
|
MARKET
|
||||||||
Current:
|
|
|
|
|
|
|
|
|
||||||||
Limited partnership
|
|
223,348
|
|
|
369,900
|
|
|
223,348
|
|
|
354,050
|
|
||||
Common stock
|
|
—
|
|
|
—
|
|
|
600,046
|
|
|
758,390
|
|
||||
Total Current
|
|
$
|
223,348
|
|
|
$
|
369,900
|
|
|
$
|
823,394
|
|
|
$
|
1,112,440
|
|
|
|
February 28,
|
|
Quoted Market
Price in Active Markets |
|
Significant
Other Observable Inputs |
||||||
Description
|
|
2014
|
|
(Level 1)
|
|
(Level 2)
|
||||||
Limited partnership
|
|
369,900
|
|
|
369,900
|
|
|
—
|
|
|||
Total
|
|
$
|
369,900
|
|
|
$
|
369,900
|
|
|
$
|
—
|
|
|
|
November 30,
|
|
Quoted Market
Price in Active Markets |
|
Significant
Other Observable Inputs |
||||||
Description
|
|
2013
|
|
(Level 1)
|
|
(Level 2)
|
||||||
Limited partnership
|
|
354,050
|
|
|
354,050
|
|
|
—
|
|
|||
Common stock
|
|
758,390
|
|
|
758,390
|
|
|
—
|
|
|||
Total
|
|
$
|
1,112,440
|
|
|
$
|
1,112,440
|
|
|
$
|
—
|
|
|
|
February 28,
2014 |
|
November 30,
2013 |
||||
Raw materials
|
|
$
|
5,917,170
|
|
|
$
|
5,948,457
|
|
Finished goods
|
|
2,466,876
|
|
|
2,659,110
|
|
||
|
|
$
|
8,384,046
|
|
|
$
|
8,607,567
|
|
|
|
February 28,
2014 |
|
November 30,
2013 |
||||
Machinery and equipment
|
|
$
|
156,810
|
|
|
$
|
156,810
|
|
Furniture and equipment
|
|
771,988
|
|
|
771,988
|
|
||
Tools, dies and masters
|
|
497,675
|
|
|
494,166
|
|
||
Transportation equipment
|
|
44,076
|
|
|
44,076
|
|
||
Capitalized lease obligations
|
|
62,140
|
|
|
62,140
|
|
||
Web Site
|
|
20,000
|
|
|
20,000
|
|
||
Leasehold improvements
|
|
1,090,798
|
|
|
1,090,798
|
|
||
|
|
$
|
2,643,487
|
|
|
$
|
2,639,978
|
|
Less: Accumulated depreciation
|
|
1,231,568
|
|
|
1,150,179
|
|
||
Property and Equipment—Net
|
|
$
|
1,411,919
|
|
|
$
|
1,489,799
|
|
|
|
February 28,
2014 |
|
November 30,
2013 |
||||
Patents and trademarks
|
|
$
|
932,896
|
|
|
$
|
932,896
|
|
Less: Accumulated amortization
|
|
175,813
|
|
|
170,703
|
|
||
Intangible Assets - Net
|
|
$
|
757,083
|
|
|
$
|
762,193
|
|
|
February 28,
2014 |
|
November 30,
2013 |
||||
Co-operative advertising
|
$
|
3,419,879
|
|
|
$
|
3,218,259
|
|
Accrued returns
|
$
|
1,194,885
|
|
|
$
|
1,045,458
|
|
|
|
Three Months Ended February 28,
|
||||||
|
|
2014
|
|
2013
|
||||
Interest income
|
|
$
|
174
|
|
|
$
|
11,851
|
|
Dividend Income
|
|
7,938
|
|
|
—
|
|
||
Realized (loss) gain on sale of securities
|
|
146,528
|
|
|
(9,522
|
)
|
||
Royalty income
|
|
3,000
|
|
|
—
|
|
||
Miscellaneous
|
|
79,282
|
|
|
369
|
|
||
Total Other income
|
|
$
|
236,922
|
|
|
$
|
2,698
|
|
|
|
February 28, 2014
|
||||||||||||||
|
|
|
|
|
|
Classified As
|
||||||||||
Type
|
|
Amount
|
|
Deferred Tax
|
|
Short-Term
Asset |
|
Long-Term
Asset |
||||||||
Depreciation
|
|
$
|
(984,890
|
)
|
|
$
|
(363,460
|
)
|
|
$
|
—
|
|
|
$
|
(363,460
|
)
|
Unrealized (gain) on investments
|
|
(146,552
|
)
|
|
(54,083
|
)
|
|
(54,083
|
)
|
|
—
|
|
||||
Reserve for bad debts
|
|
28,880
|
|
|
10,658
|
|
|
10,658
|
|
|
—
|
|
||||
Reserve for returns
|
|
1,994,072
|
|
|
735,885
|
|
|
735,885
|
|
|
—
|
|
||||
Reserve for obsolete inventory
|
|
2,833,739
|
|
|
1,045,754
|
|
|
1,045,754
|
|
|
—
|
|
||||
Vacation accrual
|
|
173,513
|
|
|
64,033
|
|
|
64,033
|
|
|
—
|
|
||||
Charitable contributions
|
|
996,145
|
|
|
367,613
|
|
|
9,964
|
|
|
357,649
|
|
||||
Section 263A costs
|
|
207,268
|
|
|
76,490
|
|
|
76,490
|
|
|
—
|
|
||||
Loss carry forward
|
|
9,436,602
|
|
|
3,482,452
|
|
|
1,641,077
|
|
|
1,841,375
|
|
||||
Net deferred tax asset (liability)
|
|
|
|
$
|
5,365,342
|
|
|
$
|
3,529,778
|
|
|
$
|
1,835,564
|
|
||
|
|
|
||||||||||||||
|
|
November 30, 2013
|
||||||||||||||
|
|
|
|
|
|
Classified As
|
||||||||||
Type
|
|
Amount
|
|
Deferred Tax
|
|
Short-Term
Asset |
|
Long-Term
(Liability) |
||||||||
Depreciation
|
|
$
|
(980,638
|
)
|
|
$
|
(361,891
|
)
|
|
$
|
—
|
|
|
$
|
(361,891
|
)
|
Unrealized (gain) on investments
|
|
(289,021
|
)
|
|
(106,669
|
)
|
|
(106,669
|
)
|
|
—
|
|
||||
Reserve for bad debts
|
|
56,513
|
|
|
20,855
|
|
|
20,855
|
|
|
—
|
|
||||
Reserve for returns
|
|
2,070,223
|
|
|
763,988
|
|
|
763,988
|
|
|
—
|
|
||||
Reserve for obsolete inventory
|
|
3,030,306
|
|
|
1,118,294
|
|
|
1,118,294
|
|
|
—
|
|
||||
Vacation accrual
|
|
252,117
|
|
|
93,040
|
|
|
93,040
|
|
|
—
|
|
||||
Charitable contributions
|
|
988,611
|
|
|
364,833
|
|
|
9,964
|
|
|
354,869
|
|
||||
Section 263A costs
|
|
212,794
|
|
|
78,529
|
|
|
78,529
|
|
|
—
|
|
||||
Loss carry forward
|
|
7,096,270
|
|
|
2,618,784
|
|
|
690,746
|
|
|
$
|
1,928,038
|
|
|||
Net deferred tax asset (liability)
|
|
|
|
$
|
4,589,763
|
|
|
$
|
2,668,747
|
|
|
$
|
1,921,016
|
|
|
Three Months Ended
|
||||||
|
February 28, 2014
|
|
February 28, 2013
|
||||
Current tax - Federal
|
$
|
—
|
|
|
$
|
—
|
|
Current tax - State & Local
|
1,200
|
|
|
552
|
|
||
Deferred tax
|
(722,993
|
)
|
|
(658,282
|
)
|
||
Total tax
|
$
|
(721,793
|
)
|
|
$
|
(657,730
|
)
|
Prepaid and refundable income taxes
|
|
Federal
|
|
State &
Local |
|
Total
|
||||||
February 28, 2014
|
|
$
|
337,532
|
|
|
$
|
339,857
|
|
|
$
|
677,389
|
|
November 30, 2013
|
|
$
|
337,532
|
|
|
$
|
341,357
|
|
|
$
|
678,889
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||
|
|
February 28, 2014
|
|
February 28, 2013
|
||||||||||
|
|
Amount
|
|
Percent of Pretax Income
|
|
Amount
|
|
Percent of Pretax Income
|
||||||
(Benefit from) provision for income taxes at federal statutory rate
|
|
$
|
(666,862
|
)
|
|
34.00
|
%
|
|
$
|
(568,861
|
)
|
|
34.00
|
%
|
Changes in (benefit) provision for income taxes resulting from:
|
|
|
|
|
|
|
|
|
||||||
State income taxes, net of federal income tax benefit
|
|
(56,879
|
)
|
|
2.90
|
%
|
|
(48,520
|
)
|
|
2.90
|
%
|
||
Non-deductible expenses and other adjustments
|
|
1,948
|
|
|
(0.10
|
)%
|
|
(40,349
|
)
|
|
2.41
|
%
|
||
(Benefit from) provision for income taxes at effective rate
|
|
$
|
(721,793
|
)
|
|
36.80
|
%
|
|
$
|
(657,730
|
)
|
|
39.31
|
%
|
|
|
For Three Months Ended February 28,
|
|
||||||
|
|
2014
|
|
2013
|
|
||||
Net (loss) income available for common shareholders
|
|
$
|
(1,239,565
|
)
|
|
$
|
(1,015,390
|
)
|
|
Weighted average common shares outstanding-Basic
|
|
7,006,684
|
|
|
7,054,442
|
|
|
||
Net effect of dilutive stock options
|
|
—
|
|
|
—
|
|
|
||
Weighted average common shares and common shares equivalents—Diluted
|
|
7,006,684
|
|
|
7,054,442
|
|
|
||
Basic (loss) earnings per share
|
|
$
|
(0.18
|
)
|
|
$
|
(0.14
|
)
|
|
Diluted (loss) earnings per share
|
|
$
|
(0.18
|
)
|
|
$
|
(0.14
|
)
|
|
|
|
Three Months Ended February 28,
|
||||||||||||
|
|
2014
|
|
2013
|
||||||||||
Category
|
|
Net Sales
|
|
|
|
Net Sales
|
|
|
||||||
Skin Care
|
|
$
|
2,605,922
|
|
|
34.7
|
%
|
|
$
|
3,546,652
|
|
|
30.0
|
%
|
Oral Care
|
|
2,338,195
|
|
|
31.2
|
%
|
|
2,512,008
|
|
|
21.3
|
%
|
||
Dietary Supplement
|
|
1,174,633
|
|
|
15.6
|
%
|
|
1,717,269
|
|
|
14.6
|
%
|
||
Nail Care
|
|
938,506
|
|
|
12.5
|
%
|
|
3,696,481
|
|
|
31.3
|
%
|
||
Fragrance
|
|
276,760
|
|
|
3.7
|
%
|
|
66,246
|
|
|
0.6
|
%
|
||
Miscellaneous
|
|
113,645
|
|
|
1.5
|
%
|
|
179,199
|
|
|
1.5
|
%
|
||
Analgesic
|
|
54,249
|
|
|
0.7
|
%
|
|
65,936
|
|
|
0.6
|
%
|
||
Hair
|
|
11,420
|
|
|
0.1
|
%
|
|
13,160
|
|
|
0.1
|
%
|
||
|
|
$
|
7,513,330
|
|
|
100.0
|
%
|
|
$
|
11,796,951
|
|
|
100.0
|
%
|
•
|
Gross sales of skin care products
decreased
$1,128,268
or
26.2%
for
three months ended February 28, 2014
, as compared to the same period in
2013
, primarily due to discontinued items and inventory out of stocks problems that has now been corrected. Returns of skin care products
decreased
$74,862
or
18.4%
for
three months ended February 28, 2014
as compared to the same period in
2013
, commensurate with lower sales and returns of discontinued products.
|
•
|
Gross sales of oral care products
decreased
$230,564
or
7.9%
for the
three months ended February 28, 2014
as compared to the same period in fiscal
2013
mainly due to inventory out of stock problems that have now been corrected. Returns of oral care products
increased
20.9%
for
three months ended February 28, 2014
as compared to the same period in
2013
due to returns of discontinued products.
|
•
|
Gross sales of the Company’s diet products
decreased
$286,915
, or
13.4%
for
three months ended February 28, 2014
as compared to the same period in
2013
. In addition, returns
increased
56.0%
as a result of discontinued products. The Company is launching three new Mega-T products in fiscal 2014.
|
•
|
Gross sales of the Company's nail care products
decreased
$3,383,714
or
59.9%
for
three months ended February 28, 2014
, as compared to the same period in
2013
. The decrease was mainly due to Gel Perfect gross sales which declined
$3,267,145
for the
three months ended February 28, 2014
as compared to the same period in
2013
. Gross sales were lower due to decreased distribution of Gel Perfect as a result of an overall decline in the gel nail polish category. The Company expects that gross sales will decline further during fiscal 2014. Returns of nail care products, primarily Gel Perfect,
decreased
$625,220
for
three months ended February 28, 2014
as compared to
2013
. Returns were primarily of Gel Perfect products discontinued at retail.
|
•
|
Royalty costs decreased $52,651 in the first quarter of fiscal
2014
as compared to the same period in fiscal
2013
reflecting the decline in sales.
|
•
|
Shipping costs decreased $307,874 in the first quarter of fiscal
2014
as compared to the same period in fiscal
2013
. The decrease was due to decreased sales as well the outsourcing of logistics to OHL. The cost of shipping to the Company's customers prior to The Emerson Group outsourcing transaction, averaged approximately 4.8% of gross sales while the OHL shipping costs are estimated to average 1.6% of gross sales.
|
•
|
Personnel costs decreased $1,251,222 in the first quarter of fiscal
2014
as compared to the same period in fiscal
2013
due to the reduction in work force implemented as a result of the outsourcing plan, as well as a reduction in work force that took place in the fourth quarter of fiscal 2013.
|
•
|
Legal and accounting related costs decreased $32,361 in the first quarter of fiscal
2014
as compared to the first quarter of fiscal
2013
.
|
•
|
Travel, meals and entertainment expenses decreased $62,406 in the first quarter of fiscal
2014
as compared to the same period in fiscal
2013
as a result of the decrease in personnel.
|
•
|
Consulting and related costs decreased $96,321 in the first quarter of fiscal
2014
as compared to the first quarter of fiscal
2013
. The decrease was due to the termination of most consulting contracts in the second quarter of fiscal 2013.
|
•
|
The balance of the increase or decrease in expenses comprised a number of smaller expense categories.
|
•
|
A decrease in media, trade advertising and related expenses of $925,094.
|
•
|
A decrease in co-operative advertising that is recorded as a sales expense of $61,109.
|
•
|
Cash flow generated or used by operating activities;
|
•
|
Dividend payments;
|
•
|
Capital expenditures.
|
Item 6.
|
EXHIBITS
|
•
|
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
•
|
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
•
|
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
|
•
|
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
*
|
Filed herewith.
|
+
|
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.
|
|
|
|
CCA INDUSTRIES, INC.
|
||
|
|
|
By:
|
/s/ STEPHEN A. HEIT
|
|
|
Stephen A. Heit
Executive Vice President and Chief Financial Officer, and duly authorized signatory on behalf of Registrant
|
•
|
Outbound freight costs – average out to be approximately
[ ** ]
cents per lb.
|
•
|
Warehouse labor
[ ** ]
cents per case.
|
•
|
There is no charge for unloading and putting away inbound product as long as product arrives on standardized configured pallets. The labor charge only occurs when the product is shipped outbound to customers/retailers.
|
•
|
Storage cost of
[ ** ]
cents per month per case – First
[ ** ]
days for each case no charge – If case sits longer than
[ *
∗
]
days the monthly charge applies going forward.
|
•
|
For International Sales the above warehouse labor and storage costs apply. There will be no Service Fee paid for international sales, but Company understands that Contractor will not be performing any services. It is assumed buyer will be paying for freight for International Sales.
|
1.01
|
Certain Defined Terms.
For the purpose of this Agreement, the following capitalized terms shall have the meanings set forth below:
|
(a)
|
“Agreement” shall mean this Agreement, including all Exhibits attached hereto, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof.
|
(b)
|
“Claim” shall have the meaning set forth in Section 6.01.
|
(c)
|
“Commission” shall have the meaning set forth in Section 4.02.
|
(d)
|
“Company” shall have the meaning set forth in the Preamble to this Agreement.
|
(e)
|
“Confidential Information” shall have the meaning set forth in Section 5.05.
|
(f)
|
“Customers” mean current or prospective customers of the Company with respect to the Products.
|
(g)
|
“Disclosing Party” shall have the meaning set forth in Section 5.05.
|
(h)
|
“Effective Date” shall have the meaning set forth in Section 2.02.
|
(i)
|
“Extended Termination Fee” shall mean an amount equal to the average Commission per day over the six (6) month period immediately preceding Representative’s receipt of Notice of Termination, multiplied by the number of days between (a) the termination date and (b) the date that is six (6) months after Representatives receives Notice of Termination.
|
(j)
|
“Force Majeure Event” shall have the meaning set forth in Section 7.03.
|
(k)
|
“Governmental Authority” means any supranational, national, federal, provincial, state or local judicial, legislative, executive or regulatory authority, body or instrumentality.
|
(l)
|
‘”Gross Invoiced Sales” means the gross selling price (before application of any discounts, rebates, credits, allowances or similar deductions or adjustments) of all Products that are invoiced to Customers.
|
(m)
|
“Initial Termination Fee” shall mean an amount equal to the average Commission per day based upon the six (6) month period (or actual completed months, if less than six) immediately preceding the date written Notice of Termination, multiplied by the number of days between (a) the termination date and (b) the date that is six (6) months after Representative receives Notice of Termination.
|
(n)
|
“Intellectual Property” means all intellectual property rights, including all rights in patents, patent applications, formulae, trademarks, trademark applications, trade names, confidential information, trade secrets, inventions, copyright, industrial designs and know-how.
|
(o)
|
“Net Invoiced Sales” with respect to any period means Gross Invoiced Sales for such period less each of the following: (i) quantity and cash discounts, if any, allowed and taken during such period, (ii) returns during such period, (iii) mark-downs granted on account of retailer discontinued products and/or unsalables.
|
(p)
|
“Notice of Termination” means a written notice provided by Company or Representative stating the date on which that party intends to terminate this Agreement.
|
(q)
|
“Person” means any individual, a limited liability company, a joint venture, a corporation, a partnership, an association, a trust, a division, or an operating group of any of the foregoing or any other entity or organization.
|
(r)
|
“Products” shall have the meaning set forth in the Recitals to this Agreement.
|
(s)
|
“Receiving Party” shall have the meaning set forth in Section 5.05.
|
(t)
|
“Representative” shall have the meaning set forth in the Preamble to this Agreement.
|
(u)
|
“Services” means any of the services to be provided by or on behalf of Representative to the Company under this Agreement and set forth in Exhibit B.
|
(v)
|
“Term” shall have the meaning set forth in Section 2.02.
|
(w)
|
“Territory” means the United States, excluding its territories and possessions.
|
1.02
|
Interpretation.
The words “hereof,” “herein,” “hereto,” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provisions of this Agreement. The terms defined in the singular shall have a comparable meaning when used in the plural and vice versa. The term “including” shall mean “including, without limitation.” When a reference is made in this Agreement to an Article, a Section, or an Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated.
|
2.01
|
Appointment.
Subject to the terms and conditions hereof, the Company hereby appoints Representative as its sales representative with respect to the sale of the Products in the Territory, and Representative hereby accepts such appointment.
|
2.02
|
Term.
This agreement shall commence on January 20, 2014 (the “Effective Date”) and shall continue in effect for six (6) months (the “Initial Term”). This agreement shall automatically renew for successive six (6) month periods unless written notice is provided of either party’s intent not to renew at least six (6) months before the end of the then-current term (the “Term”).
|
2.03
|
Effective Date.
This Agreement shall have no force or effect unless and until the Effective Date. If the Effective Date does not occur, then this Agreement shall be void
ab initio
and shall have no force or effect.
|
3.01
|
Representative Services.
In addition to such other duties and obligations of Representative as are set forth in this Agreement, during the Term Representative shall perform the Services set forth on Exhibit B in respect of the Products in the Territory.
|
3.02
|
Information;
Reports.
During the Term, Representative shall provide to the Company information and reports as the Company may reasonably request, including (i) detailed reports regarding sales of the Products, Customer feedback, and discussion of any issues and opportunities relating to the Products and the development of the Company’s business in respect thereof; and, (ii) such additional market data in respect of the Products and/or Customers, in each case, at such times and in such formats as may be mutually agreed by Representative and the Company.
|
3.03
|
Meetings.
Representative shall meet with the Company on at least a quarterly basis to discuss the sales, advertising, marketing, management and development of the Company’s business relating to the Products, including a review of the monthly sales, returns by SKU, Customer and market
|
4.01
|
Commission.
Not later than five (5) days following the end of each fiscal month during the Term, the Company shall pay to Representative a commission on all Net Invoiced Sales of the Products in the Territory for such months as determined in accordance with the rates set forth on Exhibit C attached hereto (a “Commission”). It is understood that when calculating a Commission, retailer funds, co-ops, new distribution allowances, and freight costs do not reduce the Net Invoiced Sales. All commissions shall be subtracted by Fesnak & Associates, LLP and paid directly to Representative.
|
4.02
|
Expenses.
Other than as specifically provided herein, each party shall be responsible for its own day-to-day, regular expenses incurred in connection with the performance of its obligations under this Agreement. Also, Company shall be allocated its pro-rata share of Data Expenses (approximately $
[ ** ]
annually, its pro-rata share of NACDS (approximately $
[ ** ]
annually) and its pro-rata share of ECRM (approximately $
[ *
∗
]
annually).
|
5.01
|
Intellectual Property.
All rights to either party’s Intellectual Property, including trademarks, trade names, trade secrets, brands, patents, and copyrights shall remain that party’s absolute property during and after the Term of this Agreement. The Products and any Intellectual Property owned by the Company in connection therewith shall be the absolute property of the Company during and after the Term of this Agreement. Neither party shall apply for registration of any trademarks, trade names, or brand names of the other party and each party hereby renounces all rights that it may acquire to such trademarks, trade names, or brand names according to the law or customs because of this Agreement or because of its use of such trademarks, trade names, or brand names under this Agreement.
|
5.02
|
Grant of Sublicense.
Solely to the extent necessary to enable Representative to provide the Services in accordance with the terms herein, the Company hereby grants Representative a royalty-free, non-
|
5.03
|
Competing Products.
During the Term, Representative and its Affiliates reserve the right to represent all brands, products, companies or supply services. Company acknowledges that Representative and its Affiliates may represent or provide sales or marketing services, directly or indirectly, in the Territory with respect to any directly- or indirectly-competing products.
|
5.04
|
Confidentiality.
In performing its obligations under this Agreement, each party may receive information (the “Receiving Party”) of a confidential and proprietary nature regarding the other party, including information about such party’s Intellectual Property and its operations, research, marketing plans, strategies and customer lists (collectively, “Confidential Information”). The Receiving Party shall hold the other party’s Confidential Information in strict confidence, shall not use such Confidential Information except as permitted hereunder, and shall not disclose such Confidential Information to any third party without the prior written consent of the disclosing party (the “Disclosing Party”). Each party shall use the same degree of care to protect the Disclosing Party’s Confidential Information as it uses to protect its own Confidential Information of like nature, but in no circumstances less than a commercially-reasonable level of care. The Receiving Party shall ensure that its employees and agents are bound to the same obligations of confidentiality as the Receiving Party. Confidential Information shall not be deemed to include: (a) information which is known to the Receiving Party prior to the date of receipt and not obtained or derived in any manner related to this Agreement; (b) information which is or becomes part of the public domain through no fault of the Receiving Party; or (c) information which is obtained from a third party that lawfully possesses such Confidential Information and is under no obligation to keep such Confidential Information confidential. The Receiving Party may disclose Confidential Information of the Disclosing Party in response to a valid court order, law, rule, regulation, or other governmental action, provided that the Disclosing Party is notified in writing prior to disclosure of such Confidential Information to permit the Disclosing Party to oppose such disclosure by appropriate legal action. Upon the termination or expiration of this Agreement or upon the earlier request of
|
5.05
|
Insurance.
Company shall maintain Products Liability Insurance in an amount satisfactory to Representative, under which Representative is named as an additional insured. Products Liability Insurance is to be placed with insurers which have a Best’s rating of no less than “A.” Such insurance requirements shall be maintained during the Term and shall continue for a minimum of three years following termination of this Agreement. Failure to comply with the insurance requirements shall place Company in material breach of this Agreement.
|
7.01
|
Termination.
This Agreement shall be terminable as follows:
|
(a)
|
In the event that a party hereto commits a material breach of any of the terms or conditions of this Agreement, the other party may terminate this Agreement (i) if such breach may be cured, upon written notice if the breaching party fails to cure such breach within thirty (30) days after its receipt of written notice thereof, or (ii) if such breach is incapable of cure, upon written notice to the other party thereof.
|
(b)
|
In accordance with the provisions of Section 7.03;
|
(c)
|
The Company may terminate this Agreement during the Initial Period for any reason, upon written Notice of Termination to Representative thereof. In such event, the Company shall pay Representative an amount equal to an Initial Termination Fee within thirty (30) days of the termination date; or,
|
(d)
|
Either party hereto may terminate this Agreement after the Initial Period for any reason, upon at least six (6) months’ prior written Notice of Termination to the other party thereof. The Company may terminate this Agreement in accordance with the immediately preceding sentence but with less than six (6) months’ prior written Notice of Termination to Representative;
provided
, that in such event, the Company shall pay Representative an amount equal to an Extended Termination Fee within thirty (30) days of the termination date.
|
7.02
|
Effect of Termination.
Within thirty (30) days of termination or expiration of this Agreement, other than with respect to any amounts then the subject of a good faith dispute, the Company shall pay to Representative and Representative shall pay to the Company all monies due in respect of the Services provided.
|
7.03
|
Force Majeure.
If either party is prevented from or delayed in performing any of its obligations hereunder due to any cause which is beyond the non-performing party’s reasonable control, including, without limitation, fire, explosion, flood, or other acts of God; acts, regulations, or laws of any Governmental Authority; war or civil commotion; acts of terrorism, strike, lock-out or labor disturbances; or failure of public utilities or common carriers (a “Force Majeure Event”), such non-performing party shall not be liable for breach of this Agreement with respect to such non-performance or delay to the extent any such non-performance or delay s due to a force Majeure Event; provided, that the non-performing party gives immediate written notice to the other party of the Force Majeure Event. If a Force Majeure Event asserted as the basis of a party’s non-performance continues to prevent performance for more than one (1) month, the other party may terminate this Agreement by giving written notice to the non-performing party before the non-performing party resumes performance. Notwithstanding anything contained in this Section 7.03, such non-performing party shall exercise commercially-reasonable efforts to eliminate the Force Majeure Event and to resume timely performance of its affected obligations as soon as practicable.
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8.01
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Notices.
All notices and other communications shall be in writing and shall be deemed to have been duly given when: (a) delivered personally, or (b) transmitted by facsimile (with receipt
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8.02
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Failure to Exercise.
The failure of either party to enforce at any time for any period any provisions hereof shall not be construed to be a waiver of such provision or of the right of such party thereafter to enforce each such provisions, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. Remedies provided herein are cumulative and not exclusive of any remedies provided at law.
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8.03
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Assignment.
This Agreement may not be assigned by either party without the prior written consent of the other party, except that, without such consent, (i) the Company may assign its rights and/or obligations hereunder to any of its Affiliates, (ii) either party may make an assignment of this Agreement as collateral security in favor of its lenders, and (iii) the Company may assign this Agreement to a purchaser of all or substantially all of the assets of the Company’s business related to the Products. Subject to the foregoing sentence, this Agreement shall bind and inure to the benefit
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8.04
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No Third Party Beneficiaries.
Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Company and Representative, or their successors or permitted assigns, any rights or remedies under or by reason of this Agreement.
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8.05
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Severability.
Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, to the extent the economic benefits conferred by such Agreement to both parties remain substantially unimpaired, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any o the terms or provisions of this Agreement in any other jurisdiction.
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8.06
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Governing Law.
This Agreement shall be deemed to have been entered into in the State of New Jersey, and shall be construed and interpreted in accordance with the laws of that State applicable to agreements made and to be performed in the State of New Jersey. Any and all disputes, controversies and claims arising out of or relating to this Agreement, or with respect to the interpretation of this Agreement, or the rights or obligations of the parties and their successors and permitted assigns, whether by operation of law or otherwise, shall be settled and determined by arbitration in New Jersey pursuant to the then existing rules of the American Arbitration Association for commercial arbitration. The arbitrators shall have the power to award specific performance, rescission or injunctive relief in addition to damages or other monetary awards, but shall not have the power to modify, alter, enlarge upon or otherwise change any of the provisions or terms and conditions of this Agreement. The arbitration shall be final and binding upon the parties and judgment there on may be entered in the courts of the State of New Jersey and the United States federal courts in said State, and the parties hereby consent to the jurisdiction of such courts for such purposes. Service of any notice, process, motion or other document in connection with any arbitration proceeding, any arbitration award or any other action or proceeding, maybe by personal service or by certified or registered mail return receipt requested, addressed to the party intended at its address for the receipt of notices as herein set forth.
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8.07
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Headings.
The headings used herein have been inserted for convenience only and shall not affect the interpretation of this Agreement.
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8.08
|
Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and together shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart.
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8.09
|
Entire Agreement.
This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, except for any written agreement of the parties that expressly provides that it is not superseded by this Agreement. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed (i) in the case of an amendment, by the Company and Representative, and (ii) in the case of a waiver, by the party against whom the waiver is to be effective.
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8.10
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Survival.
Section 5.02 and5.05, and Articles IV, VI, and IIX shall survive the expiration or termination of this Agreement in accordance with the respective terms thereof.
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(1)
|
Promote, solicit, and encourage the continued demand for the Products by Customers;
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(2)
|
Provide complete sales representation coverage of all classes of trade in respect of the Products, including food, drug, mass merchandising, dollar stores, club stores, drug wholesalers;
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(3)
|
Provide retail sales calls on a periodic basis or otherwise as may be requested by the Company or otherwise when advisable;
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(4)
|
Provide sales promotion planning and administration;
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(5)
|
Promptly transmit to the Company all orders and offers to purchase the Products takes or received by Representative;
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(6)
|
Assist the Company in the sales and marketing of the Products to Customers as the Company shall reasonably request; and,
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(7)
|
Allocate booth space to the Products at the National Association of Chain Drug Stores (NACDS) annual marketplace conference, NACDS annual meeting, ECRM events and other similar industry conferences, meetings, events, and conventions.
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Net Invoiced Sales during
each Fiscal Year
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Commission on Net Invoiced Sales
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All Net Invoiced Sales
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[ *
*
]
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|
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|
1.
|
I have reviewed this quarterly report on Form 10-Q of CCA Industries, Inc.;
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2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report.
|
4.
|
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
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5.
|
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of CCA Industries, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report.
|
4.
|
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
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5.
|
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
|
/s/ STEPHEN A. HEIT
|
Stephen A. Heit
|
Chief Financial Officer and Chief Accounting Officer
|
(1)
|
The Report, to which this certification is attached, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
(1)
|
The Report, to which this certification is attached, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
/s/ STEPHEN A. HEIT
|
Stephen A. Heit
|
Chief Financial Officer and Chief Accounting Officer
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