NO. ______________
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER ____, 2001
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
INTERNATIONAL COMMERCIAL TELEVISION INC.
(Exact name of small business issuer in its charter)
NEVADA 5961 76-0621102
(State or other jurisdiction of (primary standard (I.R.S. Employer
incorporation or organization) industrial code) Identification Number)
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(561) 417-0882
(Address and telephone number of principal executive offices)
AGENT FOR SERVICE: WITH A COPY TO:
KELVIN CLANEY, CHIEF EXECUTIVE OFFICER JAMES L. VANDEBERG
INTERNATIONAL COMMERCIAL TELEVISION INC. OGDEN MURPHY WALLACE, PLLC
SUITE 203B KIMMEN CENTER 1601 FIFTH AVENUE - SUITE 2100
2300 N. DIXIE HIGHWAY SEATTLE, WASHINGTON 98101
BOCA RATON, FL 33431-7657 (206) 447-7000
(561) 417-0882
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject To Completion - [DATE]
PROSPECTUS
[_______________], 2001
[COMPANY LOGO: GLOBE WITH THE WORDS
"ICTV" RUNNING ACROSS IT AND THE NAME
"INTERNATIONAL COMMERCIAL TELEVISION" AT THE BOTTOM]
INTERNATIONAL COMMERCIAL TELEVISION INC.
SUITE 203B KIMMEN CENTER
2300 N. DIXIE HIGHWAY
BOCA RATON, FL 33431-7657
(561) 417-0882
2,000,000 SHARES OF COMMON STOCK
We are offering to sell up to 2,000,000 shares of common stock to the public on a self-underwritten, best efforts, no minimum basis. Of the 2,000,000 shares of common stock offered hereby, 1,333,000 shares are being sold by International Commercial Television Inc. and 667,000 are being sold by the selling shareholders (the "Selling Shareholders"). We will not receive any proceeds from the sale of the shares by the Selling Shareholders. The offering will close no later than 60 days after the effective date of the registration statement that includes this prospectus.
PRICE TO PUBLIC PROCEEDS TO COMPANY* PROCEEDS TO SELLING SHAREHOLDERS
---------------- --------------------- --------------------------------
PER SHARE $ 4.00 $ 4.00 $ 4.00
TOTAL $ 8,000,000 $ 5,332,000 $ 2,668,000
* Before deducting offering expenses payable by the Company estimated at $217,000.
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Our common stock is not listed on a national securities exchange or the Nasdaq Stock Market, and there is no existing market for our securities. We intend to apply to have our common stock included for quotation on the OTC Bulletin Board.
There are no pre-existing contractual agreements for any person to purchase the shares. We intend to have our officers and directors offer and sell the securities on behalf of International Commercial Television Inc. We have made no selling arrangements for the sale of the securities offered in this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
You should rely only on the information contained in this document. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities.
TABLE OF CONTENTS
PAGE NO.
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Forward Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Determination of Offering Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Directors, Executive Officers and Control Persons. . . . . . . . . . . . . . . . . . . . . . 9
Security Ownership of Certain Beneficial Owners, Management and Selling Shareholders . . . .12
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Interest of Named Experts and Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Indemnification of Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . .15
Description of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Management's Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . .30
Market for Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Changes In and Disagreements with Accountants. . . . . . . . . . . . . . . . . . . . . . . .34
Financial Statements Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before buying shares in the offering. You should read the entire prospectus carefully.
INVESTMENT RISKS
An investment in this offering involves risk. There is no market for our stock at present, and our stock is likely to be thinly traded if one develops. We have a limited operating history, and we are undercapitalized. Although we have generated some revenue to date, we have a history of operating losses. We may continue to incur net losses in the future.
INTERNATIONAL COMMERCIAL TELEVISION INC.
We produce long-form and short-form infomercials and sell our proprietary brands of advertised products directly to our viewing audience both domestically and internationally. The goal of our business plan is to create brand awareness through our infomercials so that these brands and their families of products may be sold in dedicated shelf-space areas by product category in traditional retail stores. Our principal products that we currently market through infomercials include Derma Wand, a skin care appliance that is designed to reduce fine lines and wrinkles and improve overall skin appearance; Smart Stacks, a rotating storage system composed of layers of clear plastic trays that stack on top of each other; and Better Blocks, a plastic children's building block system that bends, curves and moves. In addition, we have the license from the owners of several third party products to act as their international distributor. In this capacity, we take previously existing infomercials for the third party products, locate international infomercial operators to air the infomercials, and we receive either a royalty from the sale of the third party product or the difference between the price at which we sell the product to the international infomercial operator and the price at which we acquire the product.
Our principal executive offices are located at Suite 203B Kimmen Center, 2300 N. Dixie Highway, Boca Raton, Florida 33431-7657, and our telephone number is (561) 417-0882.
THE OFFERING
Common stock offered by International Commercial 1,333,000 shares on a
Television Inc. self-underwritten, best
efforts, no minimum basis
Common stock offered by the Selling Shareholders 667,000 shares on a pro
rata basis with the
1,333,000 company shares
Common stock to be outstanding after this offering: 11,582,500 shares
(assuming the sale of all
1,333,000 shares of
common stock being offered
by the company in this
offering)
Use of proceeds: We plan to use the
proceeds from this
offering for infomercial
production costs, research
and development, sales and
marketing and working
capital.
Proposed OTC Bulletin Board symbol: ICTV
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This summary of our offering is based on shares outstanding at June 30, 2001.
SUMMARY FINANCIAL DATA
The following tables summarize the statement of loss and deficit and balance sheet data for our business.
SIX MONTHS ENDED PERIOD JUNE 25,
JUNE 30, 2001 1998 (INCEPTION) TO
STATEMENT OF OPERATIONS DATA: (UNAUDITED) DECEMBER 31, 2000
------------------------------------------- --------------------- ---------------------
Revenues $ 625,919 $ 727,078
Operating Expenses $ 830,303 $ 1,111,255
Net Loss $ (204,384) $ (384,177)
Net Loss per share $ (.02) $ (.04)
Weighted average common shares outstanding 10,249,500 10,166,251
AS AT JUNE 30, 2001 AS AT DECEMBER 31,
BALANCE SHEET DATA: (UNAUDITED) 2000
------------------------------------------- --------------------- ---------------------
Cash and cash equivalents $ 60,141 $ 43,128
Total Assets $ 777,532 $ 806,403
Total Liabilities $ 1,004,993 $ 829,480
Shareholders' Equity (Deficit) $ (227,461) $ (23,077)
------------------------------------------- --------------------- ---------------------
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RISK FACTORS
There are significant risks associated with an investment in our common stock. Before making a decision concerning the purchase of our securities, you should carefully consider the following factors and other information in this prospectus when you evaluate our business.
The potential success of our business model must be considered in light of our limited operating history.
Our revenue projections assume that a certain percentage of viewers who see our infomercials will purchase our products. If a lower percentage of these viewers purchase our products than we project, we will not achieve the customer base necessary to become or remain profitable, and the value of your investment may decrease.
Our business involves a number of risks inherent in operating a direct response television business. The production of infomercials and purchase of media time for television involves significant advance expenditures. A short-form infomercial generally costs around $15,000-$18,000 to produce, while production costs for a long-form infomercial are generally around $120,000-$150,000. We are dependent on the success of the infomercials we produce and the public's continued acceptance of infomercials in general. If our infomercials do not generate consumer support and create brand awareness and we cannot recover the initial money we spend on media time, we will not be able to recoup the advance expenditures and may go out of business if new products and additional capital are not available.
We are dependent on the talent and resources of our key managers and employees. In particular, the success of our business depends to a great extent on Kelvin Claney, our Chief Executive Officer and a member of our Board of Directors. Mr. Claney has extensive experience in the infomercial industry, and his services are critical to our success. The market for persons with experience in the direct response television industry is very competitive, and there can be no guarantee that we will be able to retain the services of Mr. Claney. We do not have an employment agreement with Mr. Claney, and as a result, there is no assurance that he will continue to stay with our company in the future. We have not obtained key man insurance with respect to Mr. Claney or any of our executive officers. In addition, our international operations are dependent on the experience and relationships of Greg La Roza, our director of international export and product sourcing. Mr. La Roza's contacts and relationships with international direct marketers have enabled us to engage in international sales, since most of the transactions in the international direct marketing industry are relationship-based. We do not have an employment contract with Mr. La Roza, and the loss of him may mean the loss of very important contacts and relationships we have in the international direct marketing arena. The loss of Mr. Claney or Mr. La Roza could prevent us from implementing our business plan, thereby limiting our profitability and decreasing the value of your stock.
We seek to protect our proprietary rights to our products through a combination of patents, trademarks, copyrights and design registrations. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we consider proprietary. Litigation may be necessary to enforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others. Any litigation could result in substantial costs and diversion of management and other resources with no assurance of success and could seriously harm our business and operating results. Investors could lose their entire investment.
Not all of our products are covered by liability insurance against claims for damages. In particular, we do not have liability insurance for Smart Stacks and Better Blocks, and we do not have direct insurance for Derma Wand, although we do appear an additional insured party on the policy of the owner, Omega 5 Technology. We have not directly procured liability insurance policies for the third party products we market. Without insurance to cover damages resulting from liability claims stemming from our products, or if the manufacturer's insurance for third party products is inadequate to cover damages, we may be held responsible for product liability damages. If the damage award is substantial, our business operations would be significantly affected, and you could lose your entire investment.
The Food and Drug Administration (the "FDA") under the Federal Food, Drug and Cosmetic Act, as amended (the "FDC Act"), requires certain approvals and clearances before a medical device can be marketed in the United States. Derma Wand, a device that is designed to reduce fine lines and wrinkles and improve overall skin appearance, may be considered a medical device under the FDC Act. We are currently working with Omega 5 Technologies Inc. to obtain pre-market approval through a 510(k) application to market Derma Wand in the United States. Under the 510(k) application process it must be established that the medical device is "substantially equivalent" to an existing, legally marketed predicate device or a predicate device marketed before May 28, 1976. FDA marketing approval and clearance regulations depend heavily on administrative interpretations, which may change retroactively and may create additional barriers that prevent or delay the introduction of a product. A 510(k) pre-market notification may also need to contain clinical data. 510(k) approval may be delayed, and, in some instances, it is never obtained. Even if we obtain FDA approval to market Derma Wand in the United States, a new approval may be needed to modify the device, its intended use or its manufacturing. Medical instruments are subject to pervasive and continuing regulation by the FDA. Once a product is in commercial distribution, discovery of product problems or failure to comply with regulatory standards may result in restrictions on the product's future use or withdrawal of the product from the market despite prior governmental approval. Our revenue projections for the short term depend to some extent on revenue received from domestic sales of Derma Wand. If we do not get 510(k) clearance to market Derma Wand in the United States, or if we get approval and it is later withdrawn, our business, results or operations and financial condition may be negatively affected, and your stock may decrease in value.
Our ability to compete in the direct marketing industry and to expand into the traditional retail environment depends to a great extent on our ability to develop or acquire new innovative products under particular brands and to complement these products with related families of products under those brands. If we do not source new products as our existing products mature through their product life cycles, or if we do not develop related families of products under our brands, we will not be able to implement our business plan, and the value of your investment may decrease.
Our securities, when available for trading, will be subject to the Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers that sell such securities to other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets exceeding $5,000,000 or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of purchasers of our securities to buy or sell in any market that may develop.
In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks." (A "penny stock" is any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions). Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934, as amended. The rules may further affect the ability of owners of our shares to sell their securities in any market that may develop for them. Shareholders should be aware that, according to the Securities and Exchange Commission Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
- control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
- manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
- "boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
- excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
- the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
Any additional issuances of common stock by us from our authorized but unissued shares may have the effect of diluting the percentage interest of existing shareholders. Out of our 100,000,000 authorized common shares, 89,750,500 shares, or approximately 90%, remain unissued. The board of directors has the power to issue such shares without shareholder approval. None of our 20,000,000 authorized preferred shares are issued. We fully intend to issue additional common shares or preferred shares in order to raise capital to fund our business operations and growth objectives.
Preferred shares may be issued in series from time to time with such designation, rights, preferences and limitations as our board of directors determines by resolution and without shareholder approval. This is an anti-takeover measure. The board of directors has exclusive discretion to issue preferred stock with rights that may trump those of common stock. The board of directors could use an issuance of preferred stock with dilutive or voting preferences to delay, defer or prevent common stockholders from initiating a change in control of the company or reduce the rights of common stockholders to the net assets upon dissolution. Preferred stock issuances may also discourage takeover attempts that may offer premiums to holders of our common stock.
Our executive officers and directors own or exercise full or partial control over more than 98% of our outstanding common stock. Assuming the sale to non-affiliates of all 2,000,000 shares covered by this offering, our executive officers and directors will still own or exercise full or partial control over 92% of our outstanding common stock. As a result, other investors in our common stock may not have much influence on corporate decision making. In addition, the concentration of control over our common stock in the executive officers and directors could prevent a change in control of International Commercial Television Inc.
Our articles of incorporation and bylaws provide that our board of directors be divided into three classes, with one class being elected each year by the stockholders. This generally makes it more difficult for stockholders to replace a majority of directors and obtain control of the board.
Our articles of incorporation permit only our board of directors to call a special meeting of the stockholders, thereby limiting the ability of stockholders to effect a change in control of the company.
We have not paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. The board of directors has sole authority to declare dividends payable to our stockholders. The fact that we have not and do not plan to pay dividends indicates that we must use all of our funds generated by operations for reinvestment in our operating activities. Investors also must evaluate an investment in our company solely on the basis of anticipated capital gains.
Our articles of incorporation and bylaws contain provisions that limit the liability of directors for monetary damages and provide for indemnification of officers and directors. These provisions may discourage stockholders from bringing a lawsuit against officers and directors for breaches of fiduciary duty and may also reduce the likelihood of derivative litigation against officers and directors even though such action, if successful, might otherwise have benefited the stockholders. In addition, a stockholder's investment in our company may be adversely affected to the extent that costs of settlement and damage awards against officers or directors are paid by us pursuant to the indemnification provisions of the articles of incorporation and bylaws. The impact on a stockholder's investment in terms of the cost of defending a lawsuit may deter the stockholder from bringing suit against one of our officers or directors. We have been advised that the SEC takes the position that this provision does not affect the liability of any director under applicable federal and state securities laws.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. We intend to identify forward-looking statements in this prospectus using words such as "anticipates," "believes," "plans," "expects," "future," "intends" or similar expressions. These statements are based on our beliefs as well as assumptions we made using information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. Some, but not all, of the factors that may cause these differences include those discussed in the Risk Factors section. You should not place undue reliance on these forward-looking statements, which apply only until we close this offering.
USE OF PROCEEDS
The maximum net proceeds of the offering, after deducting estimated offering expenses, are approximately $5,115,000 if the offering is completely sold. We may use registered broker-dealers to act as selling agents and in connection with such sales will pay fees or commissions not in excess of the usual and customary fees and commission. If we use selling agents the net proceeds of the offering after deduction of commissions to selling agents will be approximately $4,848,400, assuming the full offering is sold through the selling agent. There is no assurance that we will sell any or all of the offering. The following table indicates how we intend to use the net proceeds at various levels of funding, assuming $217,000 in estimated offering expenses and a 5% commission paid to selling agents:
IF 10% SOLD IF 25% SOLD IF 50% SOLD IF 75% SOLD IF 100% SOLD
------------ ------------ ------------ ------------ -------------
APPLICATION OF PROCEEDS
Production costs $ 140,000 $ 350,000 $ 700,000 $ 1,050,000 $ 1,400,000
Research and development 30,000 75,000 150,000 225,000 300,000
Sales and marketing 45,000 200,000 400,000 600,000 800,000
Capital expenditures -- -- 50,000 50,000 50,000
Working capital 74,540 424,350 1,015,700 1,657,050 2,298,400
TOTAL PROCEEDS $ 289,540 $ 1,049,350 $ 2,315,700 $ 3,582,050 $ 4,848,400
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The following is a description of each of the items in the table above:
- Production costs include the creation of commercial themes and pitches; sourcing on-air talent, talent salaries and expenses; scripting; production set-up; studio and location shoots; and editing infomercials for airing.
- Research and development includes identification and sourcing of products and testing product suitability for a infomercial campaign with live demonstrations at consumer and home shows and in the retail environment.
- Sales and marketing includes developing media placement campaigns, media tests of infomercials and initial media purchases for rollout of television spots.
- Capital expenditures include the addition of a branch office in Los Angeles.
- Working capital includes general and administrative expenses and unallocated working capital.
DETERMINATION OF OFFERING PRICE
We have arbitrarily determined the $4.00 per share price of the common stock in this offering. The offering price is not an indication of and is not based upon the actual value of International Commercial Television Inc. It bears no relationship to our book value, assets or earnings or any other recognized criteria of value. The offering price should not be regarded as an indicator of the future market price of the securities.
DILUTION
Sales of the 667,000 shares of common stock by the Selling Shareholders in this offering will not result in any substantial change to the net tangible book value per share before and after the distribution of shares by the Selling Shareholders. There will be no change in the net tangible book value per share attributable to cash payments made by purchasers of the shares being offered by the Selling Shareholders. Prospective investors in the shares held by the Selling Shareholders should be aware, however, that the price of shares being offered by the Selling Shareholders may not bear any rational relationship to the net tangible book value per share of International Commercial Television Inc.
Purchasers of the 1,333,000 shares of common stock being offered by International Commercial Television Inc. in this offering will experience immediate and substantial dilution in the net tangible book value per share of the common stock from this offering. "Net tangible book value per share" represents the amount of our total tangible assets less total liabilities, divided by the total number of shares of common stock outstanding. Calculations of net tangible book value per share includes an additional 842,500 outstanding shares to address the dilutive effect of stock options based on the treasury stock method. At June 30, 2001, our net tangible book value was a deficit of approximately $886,000, or negative $.08 per share, based on 11,092,000 shares of common stock outstanding.
After giving effect to the sale of up 1,333,000 shares of common stock offered by International Commercial Television Inc. in this prospectus at a maximum offering price of $4.00 per share and estimated net proceeds of $5,115,000, the net tangible book value at June 30, 2001, would have been approximately
$4,229,000, representing an immediate increase in the adjusted net tangible book value of $0.42 per share to current shareholders and an immediate dilution of approximately $3.66 per share to new investors purchasing common stock in this offering. The following table illustrates this per share dilution:
Public offering price $4.00
Net tangible value per share at June 30, 2001 $(.08)
Increase per share attributable to new investors .42
------
Pro forma net tangible book value per share after offering $ .34 .34
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DILUTION TO NEW INVESTORS $3.66
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The following table summarizes the differences between existing stockholders and new investors in this offering with respect to the number of shares held or purchased from International Commercial Television Inc., the total consideration paid and the average consideration paid per share. The table does not deduct broker-dealer commissions and our estimated offering expenses. We have attributed $2,100 to the 2,100,000 shares issued more than two years ago in exchange for assets used for business models we are no longer pursuing. In addition, despite the fact that an independent appraisal by Houlihan Lokey Howard & Zukin Financial Advisors, Inc. valued at $15,000,000 the assets acquired from The Better Blocks Trust to conduct our infomercial business, we have attributed only $60,000, based on the historic cost of the assets acquired, to the 8,000,000 shares issued to The Better Blocks Trust. We also received $299,000 from a private placement of our common stock.
SHARES PURCHASED TOTAL CONSIDERATION
---------------- ------------------- AVERAGE PRICE
NUMBER % AMOUNT % PER SHARE
--------------------- ---------- ---- ---------- ------- -------------
Existing shareholders 10,249,500 85% $ 361,100 6% $ 0.04
New investors 1,333,000 15% 5,332,000 94% $ 4.00
TOTAL 11,582,500 100% $5,693,100 100% $ 0.49
========== ==== ========== ======= =============
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The information presented in the table above with respect to existing stockholders assumes no exercise of outstanding options to purchase 1,475,000 shares of common stock granted as of September 28, 2001, under our stock option plan, which may be outstanding as of the completion of this offering. The following table includes the effects of the outstanding options assuming they were fully exercised.
SHARES PURCHASED TOTAL CONSIDERATION
---------------- ------------------- AVERAGE PRICE
NUMBER % AMOUNT % PER SHARE
------------------------- ---------- ---- --------- -------- -------------
Existing shareholders 10,249,500 78% 361,100 4% $ 0.04
Exercise of stock options 1,475,000 12% 2,530,000 31% $ 1.72
New investors 1,333,000 10% 5,332,000 65% $ 4.00
TOTAL 13,057,500 100% 8,223,100 100% $ 0.63
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PLAN OF DISTRIBUTION
We are offering 2,000,000 shares of common stock to the public for cash on a self-underwritten, best efforts no minimum basis. Of the 2,000,000 shares of common stock offered hereby, we are selling 1,333,000 shares, and the Selling Shareholders are selling 667,000 shares. We will sell the shares on a pro rata basis, and as a result a portion of your investment will go to Selling Shareholders. For example, if you purchase 2,000 shares, 1,333 of those shares will be issued to you by International Commercial Television Inc. and 667 will be transferred to you by a Selling Shareholder.
We have not engaged underwriters in connection with the offering. In effecting sales, we may arrange for brokers or dealers to participate. Brokers or dealers may receive commissions or discounts from us in amounts to be negotiated prior to the sale. We and any brokers, dealers or agents that participate in the distribution of the shares may be deemed to be underwriters, and any profit on the sale of the common stock by them and any discounts, concessions or commissions received by any underwriters, brokers, dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act.
Under the securities laws of certain states, the shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in certain states the shares may not be sold unless they have been registered or qualified for sale in that state or an exemption from registration or qualification is available and is met.
The sale of our common stock offered under this prospectus will commence promptly upon the date of effectiveness of the registration statement that includes this prospectus and will continue until 60 days after the effective date of the registration statement. There are no pre-existing contractual agreements for any person to purchase the shares. We may solicit indications of interest in our common stock using a preliminary prospectus prior to the effective date of the registration statement that includes this prospectus.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding or litigation and none of our property is the subject of a pending legal proceeding. Further, our officers and directors know of no legal proceedings against us or our property contemplated by any governmental authority.
DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS
The following table sets forth the name, age, and position of each director and executive officer of International Commercial Television Inc.:
NAME AGE POSITION ----------------- --- ----------------------------------------------- Kelvin Claney 51 Chief Executive Officer, Treasurer and Director Thomas K. Woolsey 46 President, Secretary and Director Keith Smith 50 Chief Financial Officer Stephen J. Jarvis 48 Director William R. Flohr 40 Director Louis J. Basenese 52 Director Richard Pitera 59 Director Thomas Crosby 46 Director |
Thomas Woolsey, Stephen Jarvis and William Flohr were appointed to the Board of Directors on June 3, 2000. Kelvin Claney was appointed to the Board of Directors on January 22, 2001. Louis Basenese and Richard Pitera were appointed to the Board of Directors on August 15, 2001. Thomas Crosby was appointed to the Board of Directors on September 18, 2001.
Each director will serve staggered terms of one, two, or three years and until their successors are elected and qualified. Officers will hold their positions at the pleasure of the board of directors, without prejudice to the terms of any employment agreement.
There are no arrangements or understandings between the directors and officers of International Commercial Television and any other person pursuant to which any director or officer was or is to be selected as a director or officer. In addition, there are no agreements or understandings for the officers or directors to resign at the request of another person and the above-named officers and directors are not acting on behalf of nor acting at the direction of any other person.
KELVIN CLANEY - CHIEF EXECUTIVE OFFICER, TREASURER, DIRECTOR
Mr. Claney began working in the United States direct response business in 1989 as an independent contractor to National Media Corp., where he produced, sourced, and executive-produced various infomercial projects, including Euro Painter, HP9000, Auri polymer sealant and Color Cote 2000 (TM), Dustmaster 2000, LeSnack, Iron Quick and Fatfree Express. Since 1992, Mr. Claney has served as President of R.J.M. Ventures, Inc., a television direct response marketing company, where he was responsible for such things as identifying projects the company wants to become involved in, selecting production companies to produce infomercials and selecting media times to promote the infomercials. The creation of the Smart Stacks infomercial, which is now owned by International Commercial Television Inc., was one of the projects Mr. Claney was responsible for as President of R.J.M. Ventures, Inc. He also created the infomercial for the children's toy product known as Better Blocks, which was then owned by The Better Blocks Trust. Mr. Claney devotes 100% of his working energy to International Commercial Television Inc.
THOMAS K. WOOLSEY- PRESIDENT, SECRETARY AND DIRECTOR
Mr. Woolsey has been in the banking and investment banking business for over 20 years. He has held numerous positions in these areas, including First Vice President of Cantor Fitzgerald and Co. Inc. from 1988 to 1992, opening and managing the West Coast office in Los Angeles, California. In that position, he created proprietary investment products for the investment community at large. From 1992 to 1996, Mr. Woolsey was a limited partner in the money management firm "AVM Inc. and III Partners, Inc.," a broker dealer and a global fixed income hedge fund, respectively. While at AVM, Mr. Woolsey was responsible for the conception, creation and distribution of various financial products to the financial community. In addition to these responsibilities, Mr. Woolsey set up leveraged financing lines for the "III" company. These lines of more than $2 billion national value were utilized in the financing of various portfolio positions, from sovereign debt, foreign currency, government securities, corporate obligations, foreign currencies, etc. In addition to his duties as President of International Commercial Television, Mr. Woolsey, President of the Woolsey Group Productions, Inc., currently advises companies on the merits of mergers and acquisitions, joint ventures, bridge capital investing, as well as the distribution of various consumer products to some of the largest retailers in the country, including Wal-Mart, Sam's Club, McLane Distributing, K-Mart, Target and others. Mr. Woolsey devotes approximately 50% of his working hours per week to his duties at International Commercial Television Inc. This time allocation will increase as needed to promote International Commercial Television Inc. and to fulfill the duties and responsibilities as its President.
STEPHEN J. JARVIS - DIRECTOR
Mr. Jarvis is a major shareholder, co-founder and President of Positive Response Vision, Inc., an infomercial-based direct response company based in Manila with product distribution throughout South East Asia. Mr. Jarvis has served as President of Positive Response Vision since its inception in 1996. Under Mr. Jarvis's leadership, Positive Response Vision, Inc. has grown from employing a full-time staff of three persons to approximately 400 persons. As President of Positive Response Vision, Mr. Jarvis is responsible for product sourcing and acquisition, inventory, finance control and design issues. He also oversees the company's ongoing sales follow-up program. In his private capacity, Mr. Jarvis produces infomercials and licenses these infomercials to Positive Response Vision, Inc. and to other international infomercial operators.
WILLIAM R. FLOHR - DIRECTOR
Mr. Flohr presently owns Info Marketing Group Inc., a vertically-integrated infomercial company, where he has served as President since 1991. In 1989, he co-created an infomercial series called "Amazing Discoveries." From 1989-1991, Mr. Flohr was a co-owner of Positive Response Television, Inc. In the two years he was with Positive Response Television, Inc., he produced over thirty infomercials. From 1982 to 1988, Mr. Flohr was a Senior TV Producer for the American Broadcasting Company Television Network (ABC), where he produced "Live with Regis and Kathie Lee" and "Giraldo" television talk shows. Since 2000, Mr. Flohr has served as a Director of Amden Corp., a developer and marketer of oral care products, including Cybersonic, an electronic sonic toothbrush that is presently sold via infomercials domestically and internationally.
LOUIS J. BASENESE - DIRECTOR
Mr. Basenese is currently Chief Executive Officer of Dimensional Marketing Concepts, Inc., a consumer product automotive chemical company. From October 1996 to May 2001, Mr. Basenese served as President and Chief Executive Officer of Motor Up America, Inc., an automotive consumer product company, where he developed a comprehensive business plan, assembled its corporate structure and built domestic distribution channels. Before focusing on the retail environment, Motor Up America enjoyed profitable sales under Mr. Basenese's control via the infomercial medium. For a short time prior to joining Motor Up America, Inc. in 1996, Mr. Basenese had his own management consultant firm. From 1994 to 1996, Mr. Basenese was President and Chief Executive Officer of Meguiar's, Inc., a $34 million family-held business. Mr. Basenese was also General Manager and Director of BASF Corporation for nine years, where he was responsible for the company's $200 million automotive and energy products division. Prior to that, Mr. Basenese worked for nine years for Ford Motor Company in various sales and marketing managerial positions.
RICHARD PITERA - DIRECTOR
Mr. Pitera is President of Dimensional Marketing Concepts, Inc. From 1997 to May 2001, he was Vice President of Sales for Motor Up America, Inc, where he helped develop new automotive consumer products, managed the company's North American manufacturer representative network, and increased sales from $70,000 per month to $1 million per month. Prior to joining Motor Up America, Mr. Pitera owned a mortgage company. He has also served as President of Hydrotech Chemical Corporation, a $55 million publicly held business, and was General Manager and Director of BASF Corporation. With BASF, he was responsible for complete operations of the company's $200 million automotive and energy products division that consisted of retail, OEM and traditional business segments in the consumer products and commodity products businesses. Mr. Pitera is a United States Air Force veteran retired with the rank of captain and a recipient of the Bronze Star.
THOMAS CROSBY - DIRECTOR
Mr. Crosby is a sole proprietor who operates under the name Crosby Management as a business and marketing consultant. Since 1991, Mr. Crosby has been involved in the product development of and funding for various infomercials, including the Sterling Spring Water Filter infomercial that aired successfully for over a year and eventually sold at the retail level. Mr. Crosby served as a Director of Sterling Air and Water Inc., which owned the Sterling Spring Water Filter infomercial, from 1992 to 1994. From 1989 - 1996, Mr. Crosby was co -owner and President of Vector Instruments Inc., a company that manufactured and marketed worldwide commercial swimming pool water controls and commercial water treatment systems.
KEITH SMITH- CHIEF FINANCIAL OFFICER
Mr. Smith obtained his M.B.A. from UCLA and has over 18 years of experience in the direct-to-consumer industry, with areas of expertise in product development, distribution, administrative operations and finance. In addition to serving as Chief Financial Officer of International Commercial Television Inc., Mr. Smith has served since January 1999 as Senior Vice President of Finance & Operations for e-HQ and e-Realbiz.com, where he is responsible for the day-to-day operations of the companies. Prior to joining e-HQ and e-Realbiz.com, Mr. Smith held a management consulting position at K-Tel Direct, Inc., where he oversaw multiple marketing campaigns and overall operations. From 1985 to 1996, Mr. Smith was co-owner, Vice President of Operations and Chief Operation Officer at
National Network Marketing, Inc., Maui Productions, an international direct response company with annual sales in excess of 60 million dollars. Mr. Smith is a United States Army veteran retired with the rank of Warrant Officer II and a recipient of the Bronze Star. Mr. Smith was hired as International Commercial Television's Chief Financial Officer in September 2001, and he expects to devote his full attention to the company in the near future.
KEY EMPLOYEES
GREG LA ROZA, DIRECTOR OF INTERNATIONAL EXPORT AND PRODUCT SOURCING
Since May 2000, Mr. La Roza has served as our Director of International Export and Product Sourcing, where among other things, he assists the company in locating international infomercial operators to air infomercials for products owned by the company in addition to products owned by third parties. From January 1998 to May 2000, he was the Vice President of Export for K-Tel Consumer Products Inc., where he developed and marketed consumer goods via direct response advertising to international distributors on all six continents. From October 1994 to December 1997, he was Manager of US Operations for Regal Shop International, where he negotiated exclusive licensing agreements with major US infomercial/product suppliers for an international direct response advertising community. While working with Regal Shop International, Mr. La Roza managed the procurement division and was responsible for new product development, international procurement and shipping. He also established a distributor network in Latin America, Europe and the Middle East, generating a 50% increase in sales volume.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND SELLING
SHAREHOLDERS
The following table sets forth, as of July 31, 2001, our outstanding common stock owned of record or beneficially by (1) each person who owned of record, or was known by us to own beneficially, more than 5% of our common stock, (2) each executive officer, (3) each director, (4) the Selling Shareholders, and (5) the shareholdings of all executive officers and directors as a group. As of July 31, 2001, we had 10,249,500 shares of common stock issued and outstanding.
PERCENTAGE
SHARES OF SHARES
BENEFIC- BENEFIC- SHARES PERCENTAGE
IALLY IALLY BENEFIC- OF SHARES
OWNED OWNED SHARES IALLY BENEFICIALLY
PRIOR TO PRIOR TO TO BE OWNED OWNED AFTER
THE THE SOLD IN AFTER THE THE OFFERING
NAME OFFERING OFFERING THE OFFERING OFFERING (1) (1)
------------------- ---------- ----------- ------------ ------------ -------------
Kelvin Claney , 8,532,500 79.4% -- 8,532,500 79.4%
Chief Executive
Officer, Treasurer
and Member of the
Board of Directors
(2)
------------------- ---------- ----------- ------------ ------------ -------------
The Better Blocks 8,500,000 79.1% 333,500 8,166,500 76%
Trust, declared 1
January 1994 (3)
------------------- ---------- ----------- ------------ ------------ -------------
Stephen Jarvis, 1,865,000 18.2% 333,500 1,531,500 14.9%
Member of the
Board of Directors
(4)
------------------- ---------- ----------- ------------ ------------ -------------
Thomas Woolsey, 80,000 * -- 80,000 *
President,
Secretary and
Member of the
Board of Directors
(5)
------------------- ---------- ----------- ------------ ------------ -------------
William Flohr, 80,000 * -- 80,000 *
Member of the
Board of Directors
(6)
------------------- ---------- ----------- ------------ ------------ -------------
Louis J. Basenese, -- -- -- -- --
Member of the
Board of Directors
(7)
------------------- ---------- ----------- ------------ ------------ -------------
Richard Pitera, -- -- -- -- --
Member of the
Board of Directors
(8)
------------------- ---------- ----------- ------------ ------------ -------------
Thomas Crosby, -- -- -- -- --
Member of the
Board of Directors
(9)
------------------- ---------- ----------- ------------ ------------ -------------
Keith Smith, Chief -- -- -- -- --
Financial Operator
(10)
------------------- ---------- ----------- ------------ ------------ -------------
All Executive 10,557,000 98.2% 667,000 9,890,000 92%
Officers and
Directors as a
Group - 5
individuals (11)
------------------- ---------- ----------- ------------ ------------ -------------
Except as noted below, all shares are held of record and each record shareholder
has sole voting and investment power.
13
|
*Less than one percent. (1) Assumes the sale of all shares offered by the Selling Shareholders in this offering. (2) Includes 12,500 shares owned by The Colleen Claney Family Trust, declared October 12, 1996, of which Mr. Claney is a joint trustee. Also includes 8,000,000 shares owned by The Better Blocks Trust, of which Mr. Claney is a joint trustee, and 500,000 options that are currently exercisable by The Better Blocks Trust. Mr. Claney disclaims beneficial ownership of the shares and options owned or controlled by The Better Blocks Trust and the Colleen Claney Family Trust beyond the extent of his pecuniary interest. Mr. Claney's beneficial ownership after the offering will be reduced, depending on the amount of 333,500 shares that are sold on behalf of the Better Blocks Trust as a Selling Shareholder in this offering. Mr. Claney's business address is the same as our executive offices in Boca Raton, Florida. (3) Includes 500,000 options that are currently exercisable by The Better Blocks Trust. The trustees of the Trust are Kelvin Claney, Robin Jan Claney and William Ainslee Reece. The Better Blocks Trust is a Selling Shareholder. The address for The Better Blocks Trust is Level 4, 9 High Street, Auckland New Zealand, c/o William Ainslee Reece, Trustee, Reece & Co. (4) Mr. Jarvis is a Selling Shareholder. Mr. Jarvis's business address is 1191 Vito Cruz Extension, Makati City, Metro Manila 1200 Philippines. (5) Mr. Woolsey's business address is 4220 Wimbledon Drive, Lawrence, Kansas 66047. (6) Mr. Flohr's business address is 741 A 10th Street, Santa Monica, California 90402. (7) Mr. Basenese's business address is 5095 SE Williams Way, Stuart, Florida 34997. (8) Mr. Pitera's business address is 5496 SE Reef Way, Stuart, Florida 34997. (9) Mr. Crosby's business address is the same as our executive offices in Boca Raton, Florida. (10) Mr. Smith's business address is 1881 Seabreeze Street, Thousand Oaks, California 91320. (11) Includes 500,000 options that are currently exercisable by The Better Blocks Trust and 333,500 options being sold by The Better Blocks Trust as a Selling Shareholder. |
International Commercial Television's executive offices are located at Suite 203B Kimmen Center, 2300 N. Dixie Highway, Boca Raton, Florida 33431-7657.
There are no arrangements known to International Commercial Television, the operation of which may result in a change of control of the company.
DESCRIPTION OF SECURITIES
The following is a description of the material terms of our capital stock. This description does not purport to be complete and is subject to and qualified in its entirety by our articles of incorporation and bylaws, which are included as exhibits to the registration statement that includes this prospectus, and by the applicable provisions of Nevada law.
Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of preferred stock, par value $0.001 per share.
COMMON STOCK
Each record holder of common stock is entitled to one vote for each share held on all matters properly submitted to the shareholders for their vote. The articles of incorporation do not permit cumulative voting for the election of directors, and shareholders do not have any preemptive rights to purchase shares in any future issuance of our common stock.
Because the holders of shares of our common stock do not have cumulative voting rights, the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose. In such event, the holders of the remaining shares will not be able to elect any of the directors.
The holders of shares of common stock are entitled to dividends, out of funds legally available therefor, when and as declared by the board of directors. The board of directors has never declared a dividend and does not anticipate declaring a dividend in the future. In the event of liquidation, dissolution or winding up of our affairs, holders are entitled to receive, ratably, the net assets of the company available to shareholders after payment of all creditors.
Under our articles of incorporation, only the board of directors has the power to call a special meeting of the shareholders, thereby limiting the ability of shareholders to effect a change in control of the company by changing the composition of its board.
All of the issued and outstanding shares of common stock are duly authorized, validly issued, fully paid, and non-assessable. To the extent that additional shares of our common stock are issued, the relative interests of existing shareholders may be diluted.
PREFERRED STOCK
The board of directors may determine, in whole or in part, the preferences, limitations and relative rights, within the limits set forth by the laws of the state of Nevada of any class of its preferred stock before the issuance of any shares of that class.
Preferred stock can be used as an anti-takeover measure. The board of directors has exclusive discretion to issue preferred shares with rights that may trump those of its common stock. The board of directors could use an issuance of preferred stock with dilutive or voting preferences to delay, defer or prevent common stock shareholders from initiating a change in control of the company or reduce the rights of common stockholders to the net assets upon dissolution. Preferred stock issuances may also discourage takeover attempts that may offer premiums to holders of the company's common stock.
INTEREST OF NAMED EXPERTS AND COUNSEL
Neither Moore Stephens Frazer and Torbet, LLP, Houlihan Lokey Howard & Zukin Financial Advisors, Inc. nor Ogden Murphy Wallace, P.L.L.C. was employed on a contingent basis in connection with the registration or offering of our common stock.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Nevada law, our articles of incorporation, filed as Exhibit 3.1 to the registration statement that includes this prospectus, provide that the company may indemnify a person who is a party or threatened to be made a party to an action, suit or proceeding by reason of the fact that he or she is an officer, director, employee or agent of the company, against such person's costs and expenses incurred in connection with such action so long as he or she has acted in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the company, and, in the case of criminal actions, had no reasonable cause to believe his or her conduct was unlawful. Nevada law requires a corporation to indemnify any such person who is successful on the merits or defense of such action against costs and expenses actually and reasonably incurred in connection with the action.
Our bylaws, filed as Exhibit 3.2 to the registration statement that includes this prospectus, provide that the company will indemnify its officers and directors for costs and expenses incurred in connection with the defense of actions, suits, or proceedings against them on account of their being or having been directors or officers of the company, absent a finding of negligence or misconduct in office. Our bylaws also permit the company to maintain insurance on behalf of its officers, directors, employees and agents against any liability asserted against and incurred by that person whether or not the company has the power to indemnify such person against liability for any of those acts.
DESCRIPTION OF BUSINESS
OVERVIEW
We produce long-form and short-form infomercials and sell our proprietary brands of advertised products directly to our viewing audience. The goal of our business plan is to create brand awareness through our infomercials so that these brands and their families of products may be sold in dedicated shelf-space areas by product category in traditional retail stores. We acquire the rights to the products that we market via licensing agreements, acquisition and in-house development. We currently sell these products domestically and internationally via infomercials. Our success is dependent, in part, on our ability to:
- source suitable direct response television products;
- produce profitable infomercials that attract and retain viewer interest;
- create brand awareness through our infomercials; and
- capitalize on the brand awareness we create in our infomercials to sell the products featured in our infomercials, along with related families of products, in traditional retail stores under our established brands.
We currently produce short-form and long-form infomercials. A short-form infomercial is a 30-second, 60-second, or 120-second direct response commercial, while a long-form infomercial is a 28-minute-and-30-second direct response commercial. Short-form infomercials generally feature products that can be explained or demonstrated in two minutes or less, with a selling price of $29 or less. Long-form infomercials generally feature products with a selling price of $30 - $300 and are generally unique, with more benefits and features, and thus a need for lengthier demonstrations and explanations.
While our domestic division was our primary revenue source for the fiscal year ended December 31, 2000, our international division is currently our primary revenue source. Approximately 33% of our sales for the fiscal year ended December 31, 2000, and 99% of our sales for the six months ended June 30, 2001, were generated from products sold on international infomercials. Our focus for the year 2001 shifted to the international market for several reasons. First, we perceived a high demand for infomercial products in the international market. Second, our management has many strong relationships with international infomercial operators, and we thought we could use those relationships to our advantage, especially when marketing third party products. Third, we decided to postpone marketing Derma Wand, one of our primary products, in the United States until we obtain FDA clearance, but we do have clearance to market Derma Wand internationally. Finally, many of our infomercials for our primary products are in need of updating, and we felt we should wait until we have the funding to modernize the infomercials before we air them in the United States. Although we plan to continue to devote attention to and to expand our international operations, we expect the vast majority of our revenue in the future to come from domestic sales.
In addition to products that we own or have the exclusive license to market (which we refer to as "our products" or "our own products"), we act as the international distributor for products owned by third parties (which we refer to as "third party products"). For third party products, we locate international infomercial operators to sell the product, and we receive either a royalty or the difference between the price at which we sell the product to the international infomercial operator and the price at which we acquire the product. In most instances, there are previously existing infomercials for the third party products. We generated approximately 5% of our total revenue for
the year ended December 31, 2000, and approximately 74% of our total revenue for the six months ended June 30, 2001, from the sale of third party products.
We are a Nevada corporation, and our headquarters are located at Suite 203B Kimmen Center, 2300 N. Dixie Highway, Boca Raton, Florida 33431-7657.
CORPORATE HISTORY
Our predecessor, The Gun Store, Inc., was incorporated in Montana on February 11, 1993. On June 25, 1998, The Gun Store, Inc. reincorporated in Nevada pursuant to a voluntary share exchange with Moran Dome Exploration, Inc., a Nevada corporation. Moran Dome was incorporated on June 25, 1998. Under the exchange, The Gun Store's 100 issued and outstanding shares of common stock were exchanged pro rata for 1,000,000 shares of Moran Dome Exploration, Inc. common stock. At the same time, Moran Dome entered into an agreement with Canadex Ventures Inc. for the rights to market, manufacture and use oxygen-enriched water for mining and mineral extraction in Alaska. The agreement with Canadex terminated on or about December 1998. Moran Dome entered into a similar agreement with David R. Mortenson & Associates in April 1999, for the license to manufacture and use a product known as Biocatalyst for mining, mineral extraction and ore processing. Moran Dome did not adequately exploit the rights granted by David R. Mortenson & Associates, and those rights lapsed.
In April 2000, Moran Dome entered into and closed a share and option purchase agreement with Kelvin Claney, Robin Jan Claney and William Ainslie Reece, in their capacity as trustees of The Better Blocks Trust, which owned or controlled all of the equity interest in Windowshoppc.com Limited, R.J.M. Ventures Limited and Better Blocks International Limited. Under the agreement, Moran Dome purchased all of the equity interest in Windowshoppc.com Limited and R.J.M. Ventures Limited and an option to purchase all of the equity in Better Blocks International Limited, as well as a license to all of the assets owned by Better Blocks International Limited. The purchase price under the agreement was 8,000,000 shares of Moran Dome's common stock and a $590,723 promissory note. The option exercise price is the issuance of another 500,000 shares of our common stock.
Following the transaction with The Better Blocks Trust, our objective has been to acquire products by either licensing arrangement or acquisition that are suitable for profitable direct response television advertising.
In March 2001, we amended and restated our articles of incorporation and changed our name from Moran Dome Exploration, Inc. to International Commercial Television Inc.
INDUSTRY OVERVIEW
In 1984 the Federal Communications Commission (FCC) repealed its limitations on advertising minutes per hour, which permitted the sale of 30 minute blocks of television advertising and the birth of the infomercial industry. Prior to 1984, it was virtually impossible to produce a television infomercial, because the maximum allowable minutes of commercial messages per hour was only 16 minutes under FCC standards. By the 1980s, the cable television industry was no longer regulated, which resulted in a rapid abundance of cable channels. The increase in cable channels meant there was more available media time. The producers of infomercials capitalized on this by purchasing media time from cable channels to air their infomercials. The infomercials combined the concepts of retail marketing and direct response marketing into a talk-show-type format. In the 1980s, increased attention from the FTC, as well as from federal and state consumer protection agencies, led to more stringent regulation of the industry and the development of the National Infomercial Marketing Association (now the Electronic Retailing Association) as a self-regulatory organization. Infomercials and home shopping channels soon became a widely accepted manner by which to obtain information regarding products and services and to purchase products and services from home. As time has progressed, the infomercial industry has grown steadily to include a greater variety and quantity of products marketed through infomercials.
MARKET OPPORTUNITY
DIRECT RESPONSE TELEVISION INDUSTRY
The direct response television industry continues to grow. According to a study by the Direct Marketing Association, which was coordinated by the WEFA Group, consumer sales in the United States from direct response television grew from $42.1 billion in 1995 to $69.8 billion in 2000, a 10.6% year-over-year growth rate. Sales for 2005 are projected to reach $101.8 billion.
TRADITIONAL US RETAIL MARKET
According to the U.S. Census Bureau, the total value of U.S. retail sales for the year 2000 was $3.08 trillion. Census data provides that retail sales of automotive parts and accessories alone amounted to $73.6 billion; sales of household appliances amounted to $12.3 billion; sales of hardware appliances amounted to $14.7 billion; and sales of health and personal care products amounted to $158.5 billion. These figures represent the value of goods purchased in retail stores under each category and do not include electronic shopping or mail order shopping.
THE INTERNATIONAL COMMERCIAL TELEVISION SOLUTION
We have noticed that many of our competitors who produce successful infomercials fail to capitalize on that success by associating the products featured in their infomercials with a particular brand. We think that there is a unique opportunity to do so. Our goal is to create several brands of products and to introduce our brands of products to the market by airing infomercials featuring one or a few anchor products for each particular brand. As our brands achieve recognition through the infomercial of the anchor product(s), we plan to sell the anchor product(s) and related families of products under those brands in traditional retail stores. Our objective is to have our brands of proprietary products sold in retail stores in dedicated shelf space areas by product category. We are currently developing the infrastructure we will need to develop our brands and to take families of products under those brands to the traditional retail environment.
OUR PROPOSED BRANDS AND CURRENT PRODUCTS
We continually seek to develop, acquire or obtain the license to consumer products that we feel can be distributed and marketed profitably, especially in the retail environment. Our success depends, in part, on our ability to market products that appeal to viewers and that can be easily associated with a particular brand. In order to succeed, we must also be cognizant of the need to identify new products to supplement and possibly replace our existing product lines as they mature through product life cycles.
We feel that our product development and marketing department is the backbone of our company. We put forth extensive effort to research and develop new products that are unique and that will be suitable both for direct response marketing in infomercials and for sale in traditional retail stores. Our development of new product ideas stems from a wide array of sources, including inventors, trade shows, strategic alliances with manufacturing and consumer product companies, industry conferences, and the continuous review of new developments within targeted brand and product categories. In addition, we also receive unsolicited new product proposals from independent parties.
When we evaluate a product for its suitability for an infomercial, we consider how appropriate it is for television demonstration and explanation and how consumers will perceive the value of the product. Part of our selection criteria for new products is as follows:
- The product must be capable of being profitable in a direct response television advertising environment, i.e., the product is capable of standing a four-to-five mark-up ratio (determined by dividing retail price by cost of goods), while still representing good perceived value to the consumer;
- The product must have the possibility of being sold in traditional retail stores under a particular brand;
- The product must be well-suited for display on television;
- The product must have a unique "hook" to it so that it catches the attention of the viewer;
- The product must have unique features and what the consumer considers to be "amazing" benefits;
- The product must be demonstrable. In our experience, the more we can visually demonstrate how the product will change the consumer's life and has compelling, real person testimonials to support it, the greater the opportunity that it will be profitable;
- The product must have mass audience appeal;
- The product must be relatively easy to ship; and
- The product, in its present form, should be currently otherwise unavailable in the marketplace.
We currently have trademark applications pending with the U.S. Patent and Trademark Office for the following product family brands: Beauty Fx, Home Fx, Fun Fx and Kitchen Fx. We expect to know if our trademarks are accepted by April 2002. In addition, we received via an assignment the trademark and its registration application for "Auto Fx See, Feel and Hear the Fx."
BEAUTY FX AND DERMA WAND
If our trademark for Beauty Fx is granted, we intend to market a line of health, beauty, skin care, nail care and cosmetic products under the Beauty Fx brand. We plan to anchor the Beauty Fx brand with a product called Derma Wand. Derma Wand is a compact, completely hand-held, high-frequency skin care appliance that is designed to reduce fine lines and wrinkles and improve overall skin appearance by producing enriched oxygen (ozone) to sterilize the skin.
We have a worldwide, non-exclusive license from Omega 5 Technologies to manufacture, market and distribute Derma Wand. We began to market Derma Wand in April 2000. Approximately 63% of our revenue for the year ended December 31, 2000, came from domestic sales of Derma Wand during our test-market phase. Upon completion of our test-market of Derma Wand, we decided to postpone selling it in the United States, because we were concerned that it might be classified by the FDA as a medical device under the FDC Act, which requires pre-market approval clearance. We are currently working with Omega 5 Technologies to obtain this clearance from the FDA, as is more fully described under the section entitled "Government Regulation." We hope to have this clearance within the next fiscal year.
After our United States test market of the Derma Wand infomercial, we began to focus on the international market. For the six months ended June 30, 2001, we generated approximately $50,000 in revenue from international sales of Derma Wand. The price consumers pay for Derma Wand varies from country to country, however, it generally ranges from approximately $100-$120.
We anticipate that Derma Wand, and related lines of health, beauty, skin care, nail care and cosmetic products under the Beauty Fx brand, will be our primary source of revenue for the short term. If we are granted our trademark for Beauty Fx, we will adapt our infomercial and packaging for Derma Wand to say that Derma Wand was brought to the consumer by Beauty Fx. If we are not granted the Beauty Fx trademark, we will seek a different brand name for Derma Wand and its related products.
HOME FX AND SMART STACKS
If our trademark is granted for Home Fx, we intend to market various housewares and home products under the Home Fx brand. We plan to anchor the Home Fx brand with Smart Stacks. Smart Stacks is a unique rotating storage system composed of layers of clear plastic trays that stack on top of each other with an opaque base lid and top tray lid. The trays may be stacked as high or low as needed,
enabling the system to be tailored to fit into different sizes of cupboards or spaces. At the back of each tray is a round spindle that enables each tray to independently rotate out, such that any one tray in the stack may be opened without dissembling the whole stack. Smart Stacks has the ability to be used as a freestanding or transportable snack and appetizer server. Each clear tray has a removable divider running across it so that the tray may be divided in half in order for two different foods to be stored in the same tray. The system is designed so that individual food odors from each tray will not be transferred to the food in another tray. Smart Stacks may be used for wet food storage in the refrigerator, but also may be used to store a variety of other household items such as dry food, hardware, toys, fishing tackle, cosmetics, stationary and sewing aids.
Prior to April 2000, Smart Stacks was sold by our subsidiary, R.J.M. Ventures Limited. The first infomercial for Smart Stacks aired in 1998. To date, we estimate that over one million individual sets of Smart Stacks have been sold throughout South Africa, New Zealand, Japan, Philippines, Spain, Eastern Europe, Germany and the United States. The sales price that consumers pay for Smart Stacks ranges from approximately $29.95 to $39.95.
Our marketing efforts to date with regard to Smart Stacks have focused on the international market. Smart Stacks generated approximately 11% of our total revenue over the fiscal year ended December 31, 2000, and 18% of our total revenue for the first six months of 2001. We plan to market Smart Stacks domestically in the third quarter of 2002, after we have re-edited the infomercial for re-airing. We will also continue to market Smart Stacks internationally. If we are granted the trademark for Home Fx, we will adapt the infomercial and packaging of Smart Stacks to say that Smart Stacks was brought to the consumer by Home Fx. If we are not granted the Home Fx trademark, we will seek different brand name for Smart Stacks and its related products.
FUN FX AND BETTER BLOCKS
If our trademark application is granted for Fun Fx, we intend to market toys, games and other types of home entertainment under the Fun Fx brand. We plan to anchor the Fun Fx line of products with Better Blocks. Better Blocks is a plastic children's building block system, which, unlike conventional building systems, will bend shape, curve and move. The standard set of Better Blocks is designed for children three years of age and older, while Bigger Better Blocks, which are eight times bigger than the standard Better Blocks, are available for children zero to three years of age. The range of Better Blocks has expanded over the years due to developments in the plastics industry. Better Blocks was first offered in only primary colors, but now is available in glow-in-the-dark, sparkle, and magic color-changing colors.
We acquired the exclusive, royalty-free worldwide license to manufacture, market and distribute Better Blocks under the Share and Option Purchase Agreement with The Better Blocks Trust in April 2000. The Better Blocks infomercial was conceived and developed in 1992 by Kelvin Claney, our chief executive officer and director, and the first infomercial for Better Blocks aired on the Nickelodeon national cable system that year. Various versions of Better Blocks infomercials aired during the 1990s, both domestically and internationally. In once instance on a special 24-hour promotion on QVC-USA, a live home shopping channel, Better Blocks products generated approximately $1.3 million in gross revenue. In addition to the United States, Better Blocks infomercials have aired in Canada, the Middle East, Russia, China, France, Finland, Poland, Hungary, South America, Britain, Australia and New Zealand. The sales price of Better Blocks depends on the type of Better Blocks purchased, but generally ranges from $29.95 to $59.95. For the year ended December 31, 2000, Better Blocks generated approximately 21% of our total revenue. We are currently modernizing our Better Blocks short-form infomercials for re-airing in the fourth quarter of 2001 by our agent TeleAmerica Media Inc. If we are granted the Fun Fx trademark, we will adapt our infomercial and packaging to say that Better Blocks was brought to the consumer by Fun Fx. If we are not granted the Fun Fx trademark, we will seek a different brand name for Better Blocks and its related products.
KITCHEN FX
If our trademark application is granted for Kitchen Fx, we intend to market a line of kitchen appliances and utensils under the Kitchen Fx brand. We are in the initial stages of development of a cooking device based on a patent that we were assigned. We plan to have a working model of the cooking device ready in the last quarter of 2002 and to produce an infomercial for it in the first quarter of 2003. Presently, we are evaluating different products, including the cooking device, in the kitchen product category to determine a suitable anchor product to launch under the Kitchen Fx brand. If we are not granted the Kitchen Fx trademark, we will seek a different brand name for our intended kitchen product line.
AUTO FX SEE, FEEL AND HEAR THE FX
We have an application for registration pending with the U.S. Patent and Trademark Office for the trademark Auto Fx See, Feel & Hear the Fx, which we received via an assignment from Dimensional Marketing Concepts, Inc. in August 2001. We intend to market a range of automotive products under the Auto Fx brand, beginning with a protective paint sealant that is currently under development and is in the prototype stage. We expect to have the product ready for production in the last quarter of 2001 and intend to begin production of an infomercial in the first quarter of 2002 for the protective paint sealant. We plan to expand the product line under the Auto Fx See, Feel and Hear the Fx brand by developing a full range of paint sealants and other automotive beauty products, in addition to individual specialized additive products for treating engines, powertrains, gasoline and fuel systems. We expect our products that we market under this brand to generate a significant amount of our total revenue beginning in 2002.
THIRD PARTY PRODUCTS
In the six months ended June 30, 2001, and in the year 2000, we rolled out the following third party products in the international market: Cybersonic, Fight The Fat, Aussie Nads, Auto Hammer and Mojave Sunglasses. Our rights to these third party products are in the form of informal licenses from the owners of the products to act as the international distributor. As the international distributor, we locate international infomercial operators to air the infomercials, and we receive either royalties from the sales of the products or the difference between the price at which we sell the product to the international infomercial operator and the price at which we acquire the product. The majority of our total revenue for the six months ended June 30, 2001, came from the sales of third party products, which consisted primarily of Cybersonic.
MARKETING, SALES, PRODUCTION AND DISTRIBUTION
We use infomercials as an initial means to advertise and promote our products, because we feel that infomercials communicate information to a mass market of television viewers in a cost-effective way that creates brand awareness and produces future sales in traditional retail stores. We generally air infomercials in non-peak time slots because media costs are less than peak-time slots. We believe infomercials:
- educate the consumer;
- develop brand recognition; and
- allow us to easily measure the results of our marketing efforts so that we can continually market our products on a commercially viable basis.
Infomercials allow us to demonstrate our products so that the consumer has an opportunity to gain an understanding of the functionality and usefulness of the product. With new products, there is a strong need for consumer education, and we feel that infomercials are an effective educational tool.
More importantly, we feel that infomercials create brand recognition. Viewers of a long-form infomercial are exposed to the name and features of a particular brand and product for nearly thirty minutes. We think that this brand recognition will make it easier to market the featured product in the retail environment, because consumers who have seen our infomercials will already have been exposed to the brand. We expect other products within the featured product's family to benefit from brand association in the retail environment. We believe this introduction of product family brands through infomercials will save much time, money and effort that we would otherwise have to spend on marketing if we were to introduce our products to traditional retail without airing the infomercials first.
We also think infomercials are an easy means by which to measure the success of our marketing efforts. We can measure how successful an infomercial is or will be by doing a media test. If the product performs well during test marketing, we can increase the media time for the infomercial. We can also target certain markets by buying media time in particular locations or cities. The products we sell via our infomercials may do well in some markets, but not in others. When
orders are placed, we gather demographic information about the purchaser and use this information to determine our future target markets. If a particular infomercial is not generating positive results, we will either stop airing it, or we will decrease our media spending in order to minimize losses.
We contract with several independent companies to manufacture our products. In general, we place an order with the manufacturer and we pay the manufacturer cash upon shipment of the goods. In some instances, we provide the manufacturer with an advance payment to cover a portion of the manufacturers' costs, and we pay the balance after the goods are shipped. Alfred Holt and Co. Ltd. in New Zealand is our Better Blocks manufacturer. Creative Plus Ltd. in China is currently our manufacturer of Smart Stacks and Derma Wand. Protec Co. Ltd. in Taiwan manufactures Cybersonic.
We contract with West Telemarketing to answer phones and capture orders for products sold through our infomercials. Our storage of inventory and fulfillment of orders is performed by Innovative Chemical Corporation, a contract fulfillment company in New York. We contract out these functions to keep our fixed overhead costs to a minimum and to maximize our time for implementing our business plan.
We generally fulfill our orders within 30-50 days of the date customers order our products. If for some reason we are unable to fulfill an order within 50 days of the date of a customer's order, then we provide the customer with a letter explaining the reason for the delay. The letter will also provide the customer with a revised shipping date not to exceed 30 days, and will offer the customer an option to either consent to the delay in shipping or to cancel their order and receive a prompt refund.
INFOMERCIAL PRODUCTION
We contract with independent production companies to produce our infomercials. We have extensive independent producer associations, and we contract out such functions as a way to keep our overhead to a minimum. The production companies generally work for cost plus a royalty of between one to two percent of sales, not including shipping and handling. Such royalties are usually paid out over the sales life of the product. In the case of our own products, we are responsible for paying the royalties to our production companies, whereas in the case of third party products, the owner of the third party product is responsible for paying royalties to the company that produced its infomercial. We, along with the owner or inventor of the product, as the case may be, will generally have input in the production process. We utilize a company specialist to oversee all scripting, filming and editing of the infomercial, and we take great care to ensure that the infomercial is produced in such a way that it can easily be adapted to international markets.
MEDIA TESTING
Once the infomercial is produced, we build up or acquire a small amount of inventory and purchase $10,000-$20,000 worth of media time through one of our preferred direct response television specialist media agencies to test the infomercial in select target markets. The agencies generally have comprehensive records of the markets and time slots in which certain product categories have historically sold well. The agencies also have comprehensive tracking and analyzing programs to test and track the sales response in the markets where we air our infomercials. The agencies will provide us with a report showing the amount of revenue generated from the infomercial as a ratio to media dollars spent. For example, a 1:2.5 ratio means that for every $1.00 spent on media, $2.50 was generated in sales. We take this information, along with other things such as cost of goods, fulfillment charges, telemarketing costs, insurance, returns, credit card commissions and shipping costs and generate our own reports to assess the success of the infomercial in our target markets.
PRODUCT ROLL-OUT
If a positive result is achieved during media testing, we will begin to build up inventory of the product and "roll out" the infomercial on a wider scale by increasing media spending on a weekly basis until a point just before returns diminish. When we roll out infomercials, we generally spend around $75,000-$100,000 per week for media time for a long-form infomercial and a minimum of $50,000 per week for a short-form infomercial. We monitor results, payoffs and profitability of our infomercials on a daily basis and aim to be very cautious as to when and how we go about rolling out our infomercials.
In our experience, a "good average" infomercial, which we define as having a media ratio of 1:2.5, will have a life span of 8 to 12 months and will, at its peak, sustain $150,000-$200,000 in media spending per week. A "hit" infomercial, which we define as having a media ratio of 1:4 or greater, will have a life span of 12 to 24 months, and at its peak, will sustain $600,000-$700,000 in media spending per week.
INTERNATIONAL SALES
The goal of our international division is to establish solid distribution relationships in each country where we air infomercials. By doing so, we can tailor our products and production for each individual region, and forge relationships with local experts and established companies that are intimate with the marketplace. When a product that was domestically sold in an infomercial is prepared for international distribution, the international infomercial operator will dub the infomercial, develop product literature in the appropriate foreign language and review the infomercial's compliance with local laws. The international infomercial operator will then test the infomercial and roll it out on a larger scale if the test marketing is successful. We believe that almost every well-produced infomercial will produce profitable margins somewhere internationally, even if it has failed in the United States.
For the six months ended June 30, 2001, international sales were our largest revenue source. Although we do not expect international sales to be our primary source of revenue in the future, we do expect to continue to devote attention to the international market and to have our infomercials aired internationally on a daily basis to millions of people through our strategic alliances that we have and will continue to develop throughout the world. We are working to leverage our line of products that we market internationally and test which shows sell best in each country and region. We have recruited Greg La Roza, a specialist with eight years of experience in international distribution, to be our director of international export and product sourcing. Mr. La Roza's contacts and relationships in the international infomercial industry have been a tremendous benefit for our business.
TRADITIONAL RETAIL SALES
We aim to capitalize on the brand and product awareness we create through our infomercials by selling our proprietary brands of products and related families of products under those brands in dedicated shelf-space areas by product category in traditional retail stores. We believe that traditional retail sales are a logical step to take after we create brand and product awareness through our infomercials, because we will not have to incur any significant marketing costs and expenses that consumer product companies would otherwise have to incur when introducing their products to the traditional retail environment.
We are currently working toward creating the infrastructure that we will need in order to take our brands and products to the traditional retail environment. In August 2001, we entered into an agreement with Dimensional Marketing Concepts, Inc. to act as an independent sales representative to manage the promotion, marketing and sale of certain of our products into retail channels of trade in the United States and Puerto Rico. We plan to enter the retail environment within the next twelve months.
OTHER DIRECT RESPONSE SALES METHODS
Once we have rolled out a product in an infomercial, we prepare to distribute the product via other direct response methods, such as mail order catalogs, direct mail, credit card statement inserts and live appearances on television home shopping channels, such as QVC. We believe that this is an additional means by which to use the brand awareness we create in our infomercials, and to reach consumers who might not watch television. These other direct response methods also extend the time period during which each of our products can generate revenue.
CUSTOMER SERVICE
We aim to provide our customers with quality customer service. We generally offer an unconditional 30-day money back return policy to purchasers of our products.
COMPETITION
We compete directly with several established companies that generate sales from infomercials and direct response television, as well as small independent direct response television producers. Our competitors also include companies that make imitations of products at substantially lower prices. Products similar to ours may be sold in department stores, pharmacies, general merchandise stores, magazines, newspapers, direct mail advertising, catalogs and over the Internet. Many of our major competitors, which include Reliant Interactive Media Corp., Infotopia Inc. and Guthy-Renker Corp., have substantially greater financial, marketing and other resources than us.
We expect that we will face additional competition from new market entrants and current competitors as they expand their direct marketing business models. The barriers to entry in the infomercial industry are fairly low, but there are many difficult hurdles for young entrants to overcome if they are to be successful in the long-term. To be competitive, we believe we must respond promptly and effectively to the challenges of technological change, evolving standards and our competitors' innovations. We must also source successful products, create brand awareness and utilize good sales pitches for our products. We believe that although we have a limited operating history, we are strategically positioned to compete because of our management's experience and strong relationships in the industry. In addition, we feel that associating our products with particular brands and focusing on the traditional retail environment, as we intend to do, will give us a competitive advantage over traditional infomercial companies who fail to capitalize on the consumer awareness they create via their infomercials.
INTELLECTUAL PROPERTY
Our success is dependent, in part, upon our proprietary rights to our primary products. The following consists of a description of our intellectual property rights.
- TRADEMARKS
We have several registered trademarks for Better Blocks in countries throughout the world. The United States Patent and Trademark Office has accepted our statement of use for Smart Stacks, and we expect the trademark for Smart Stacks to be registered in due course. In addition, on August 21, 2001, we filed trademark applications with the United States Patent and Trademark Office for Beauty Fx, Fun Fx, Kitchen Fx and Home Fx. We expect to know if our trademark applications for these brands have been accepted by April 2002. In addition, we received via an assignment from Dimensional Marketing Concepts, Inc. the trademark known as Auto Fx See, Feel & Hear the Fx from Dimensional Marketing Concepts, Inc., an application for which is presently pending with the U.S. Patent and Trademark Office.
- PATENTS
We have patents for the toy building elements of Better Blocks in several countries throughout the world. We also have the nonexclusive right to the use of the United States patent for Derma Wand, belonging to Omega 5 Technologies, Inc., as is necessary to manufacture, market and distribute Derma Wand. In addition, we have the patent for a cooking apparatus that we are currently developing a prototype for and intend to market under the Kitchen Fx brand, if the Kitchen Fx trademark is granted.
- COPYRIGHTS
We have copyright registrations for all versions of our infomercials for Better Blocks and Smart Stacks.
- REGISTERED DESIGNS
We have registered designs for Better Blocks in several countries throughout the world.
There can be no assurance that our current or future intellectual property rights, if any, will not be challenged, invalidated or circumvented, or that any rights granted thereunder will provide competitive advantages to us. In addition, there can be no assurance that claims allowed on any future patents will be sufficiently broad to protect our products. The laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States. We intend to enforce our proprietary rights through the use of licensing agreements and, when necessary, litigation. Although we believe the protection afforded by our patents, trademarks, copyrights and registered designs has value, rapidly changing technology and industry standards make our future success depend primarily on the innovative skills, expertise, and management abilities of our team rather than on patent and trademark protection.
ROYALTY AGREEMENTS
In April 2000, we assumed from R.J.M. Ventures Limited and Better Blocks International Limited, by virtue of the Share and Option Purchase Agreement we signed with The Better Blocks Trust, the obligation to pay royalties on the sales of Smart Stacks and Derma Wand under the following agreements:
SMART STACKS
- Under a manufacturing, marketing and distribution agreement with Audrey Watson, the inventor of Smart Stacks, we are obligated to pay Ms. Watson royalties of between 2-5% of the net sales of Smart Stacks. The agreement terminates in May 2003.
- Under a production agreement with the Broadcast Arts Group ("BAG"), we are obligated to pay BAG royalties at a rate of between 2% to 2.5% of adjusted gross revenues from the sale of Smart Stacks. We may terminate the contract with written notice if we elect not to air the infomercial and market the product.
DERMA WAND
- Under a marketing and royalty agreement with Omega 5 Technologies ("Omega 5"), the developer of Derma Wand, we are obligated to pay Omega 5 a royalty at a rate of $5.00 per unit for sales in the United States and $2.50 per unit for sales outside the United States. The agreement is silent as to its duration.
- Under a production agreement with BAG, we are obligated to pay royalties to BAG at a rate of: (i) 2% of our adjusted gross revenue from the sales of Derma Wand to consumers in the United States in direct response to airings of the infomercial; (ii) $1.00 for each unit sold in the United States to consumers via all other means; (iii) 5% of the wholesale selling price to home shopping retailers to which BAG renders wholesale coordination services; (iv) 2% of the selling price to televised home shopping retailers as to which BAG does not render coordination services; and (v) $0.75 per unit sold outside of the United States. This agreement terminates on August 31, 2002.
- Under an endorsement agreement with Susan Luigs Crenshaw, we are obligated to pay Ms. Crenshaw a royalty of $0.50 per unit sold, with a maximum royalty payment of $6,500 for any one calendar quarter if we only air the Derma Wand internationally. If the Derma Wand infomercial is rolled out in the United States, then the fee reverts back to a flat $6,500 per quarter.
On August 10, 2001, we entered into an agreement with Tel America Media Incorporated ("TAM"), under which we granted TAM the right to exclusively sell Better Blocks products by way of direct response television advertising using an infomercial owned by us for the period of September 30, 2001, to December 29, 2001. Under the agreement, TAM is obligated to pay us a royalty of $1.50 per each sale of a 1000 piece Better Blocks kit.
On a limited basis, we receive royalties from international sales of third party products that we market, which are usually based on oral agreements.
GOVERNMENTAL REGULATION
We are subject to regulations by a variety of federal, state and local agencies, including the Federal Trade Commission, the Federal Communications Commission, the Consumer Product Safety Commission and the FDA under the FDC Act. The government regulations to which we are subject vary depending on the types of products we manufacture and market. As we begin to market a broader variety of products and services, we may become subject to regulation by additional agencies.
Some of our products, such as Derma Wand, are or may be classified in the United States as a medical device under the FDC Act, which requires a pre-market approval application or clearance before the medical device can be marketed. We are currently working with Omega 5 Technologies to obtain FDA clearance for Derma Wand through a 510(k) notification, pursuant to which the FDA determines that a medical device is "substantially equivalent" to an existing, legally marketed predicate device or a predicate device marketed before May 28, 1976. Clinical testing of certain devices may be required as part of the 510(k) process. There can be no assurance that the FDA will find a device substantially equivalent and allow marketing of the device. Even if the device is found substantially equivalent, the clearance process may be delayed. In addition, any medical device we manufacture or distribute pursuant to FDA clearances or approvals is subject to pervasive and continuing regulation by the FDA.
As an electrical product, while not required by law in the United States, prudence dictates that Derma Wand comply with a recognized electrical safety standard. Derma Wands that are manufactured in Canada receive a Certificate of Compliance from CSA International, which meets the requirements for North America, of CSA standard C22.2 No. 125-M1984 and UL standard No. 1431. Derma Wands that are manufactured in China are manufactured to the above CSA and UL standards but have not been granted a CSA Certificate of Compliance because a final review of the factory has not been performed by CSA inspectors. We anticipate that this review will be completed if the 510(k) certification is granted and the product is needed to be imported from China into the North American market.
International regulatory requirements for sales of devices such as Derma Wand vary from country to country. Currently we obtain certifications that are necessary to market Derma Wand internationally from Omega 5 Technologies, so that all products manufactured in China may have the "CE mark" affixed. This "CE mark" enables the Derma Wand to be sold freely in Europe and most other countries outside of the United States.
There can be no assurance that new laws, rules, regulations or policies that may have an adverse effect on our operations will not be enacted or promulgated at a future date.
EMPLOYEES
We currently employ a total of three employees, all of whom are full-time. We consider our labor relations to be good. None of our employees are covered by a collective bargaining agreement. If our business grows as we project, we anticipate hiring up to ten new employees in the next fiscal year.
RESEARCH AND DEVELOPMENT
Our research and development expenses were approximately $169,000 for the year-ended December 31, 2000, and approximately $2,500 for the six months ended June 30, 2001. Our research and development costs have consisted of efforts to discover and develop new products and the testing and development of direct-response advertising related to these products.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto included elsewhere in this Prospectus. The following information contains forward-looking statements.
OVERVIEW
International Commercial Television Inc. was incorporated as Moran Dome Exploration, Inc. on June 25, 1998. We had limited operations and assets until April 2000, when we entered into and closed a Share and Option Purchase Agreement with Kelvin Claney, Robin Jan Claney and William Ainslie Reece, in their capacity as trustees of The Better Blocks Trust. When the share and option purchase agreement with The Better Blocks Trust closed, we began our operations as a infomercial company selling products directly to consumers via long-form and short-form infomercials, both domestically and internationally. We market products that we own or have the exclusive license to market (which we refer to as "our products" or "our own products"), and we also act as the international marketing distributor for products owned by third parties (which we refer to as "third party products"). As the international marketing distributor for the third party products, we take previously existing infomercials for third party products, locate international infomercial operators to sell the products featured in the infomercials, and we receive either a royalty or the difference between the price at which we sell the product to the international infomercial operator and the price at which we acquire the product.
Although we currently sell products through infomercials, the goal of our business plan is to use the brand awareness we create in our infomercials so that we can sell the products featured in our infomercials, along with related families of products, under distinct brand names in traditional retail stores. Our goal is to have these families of products sold in the traditional retail environment in shelf-space dedicated to the product category. We are developing the infrastructure to create these brands of products so that we can implement our business plan.
Fluctuations in our revenue are driven by changes in our product mix. Revenues may vary substantially from period to period depending on our product line-up. A product that generates revenue in one quarter may not necessarily generate revenues in each quarter of a fiscal year for a variety of reasons, including the product's stage in its life-cycle, the public's general acceptance of the infomercial and other outside factors, such as the general state of the economy.
Just as fluctuations in our revenues are driven by changes in our product mix, our gross margins from period to period depend on our product mix. Our gross margins vary according to whether the products we are selling are primarily our own products or third party products. As a general rule, the gross margins for our own products are considerably higher based on proportionately smaller cost of sales. For third party products, our general experience is that our gross margins are lower, because we record as cost of sales the proportionately higher cost of acquiring the product from the manufacturer. Within each category, (i.e., our own products versus third party products), gross margins still tend to vary based on factors such as market price sensitivity and cost of production.
Many of our expenses for our own products are incurred up-front. Some of our up-front expenditures include infomercial production costs and media spends. If our infomercials are successful, these up-front expenditures produce revenue on the back-end, as consumers purchase the products aired on the infomercials. We do not incur infomercial production costs and media spends for our third party products, because we merely act as the distributor for pre-produced infomercials. It is the responsibility of the international infomercial operators to whom we sell the third party products to take the pre-produced infomercial, adapt it to their local standards, and pay for media spends.
BASIS FOR PRESENTATION OF FINANCIAL INFORMATION
As a result of the Share and Option Purchase Agreement with the trustees of The Better Blocks Trust in April 2000, the former owners of Windowshoppc.com Limited and R.J.M. Ventures Limited effectively control our company, and the combination is accounted for in our consolidated financial statements as a reverse merger, with Windowshoppc.com and R.J.M. Ventured Limited as acquirer. This required nominal adjustments to the carrying value of the assets of the acquired entity, International Commercial Television (then known as Moran Dome Exploration, Inc.). Proforma operating results as if the acquisition had taken place at the beginning of the accounting period are not presented, because the operations of
International Commercial Television Inc. were negligible. Our consolidated financial statements include the financial position and results of operations of our subsidiaries, Windowshoppc.com Limited and R.J.M. Ventures Limited.
RESULTS OF OPERATIONS
Operations for the year ended December 31, 2000, essentially consisted of nine months because we had limited activity and nominal assets prior to commencing infomercial operations in April 2000. Although not directly comparable in terms of time covered, we have discussed the six months ended June 30, 2001 as being more or less comparable with the December 31, 2000 results.
Revenues
Our revenues of approximately $727,000 for the year ended December 31, 2000, decreased to approximately $626,000 for the six months ended June 30, 2001. For the year ended December 31, 2000, approximately $485,000 (67%) of our revenue came from domestic sales, which consisted primarily of sales of our own products, including Derma Wand and Better Blocks, and approximately $242,000 (33%) was from international sales, which consisted primarily of sales of Derma Wand and Smart Stacks. Derma Wand sales alone generated approximately $456,000 (63%) of our total revenue for the year ended December 31, 2000, which resulted primarily from domestic test-marketing of the product. We ceased selling Derma Wand in the United States in 2001, because we believed the FDA may classify it as a medical device for which pre-market approval is necessary. We are in the process of submitting Derma Wand to the FDA's 510(k) approval process. We hope to have the 510(k) approval within the next fiscal year and to resume marketing Derma Wand in the United States at that time.
After we ceased marketing Derma Wand domestically, we focused on the international market. For the six months ended June 30, 2001, over 99% of our revenues came from international sales, which consisted primarily of the sale of the third party product Cybersonic. Cybersonic sales accounted for approximately $302,000 (48%) of the total revenue we generated in this period. We increased our sales of third party products in general from approximately $38,000 (5% of total revenue) for the year ended December 31, 2000, to approximately $460,000 (74% of total revenue) for the six months ended June 30, 2001.
We plan to roll out several new infomercials in the next fiscal year and anticipate that these new infomercials will cause our revenue to increase.
Gross Margin
Gross margin percentage decreased from approximately 51% for the year ended December 31, 2000, to approximately 15% for the six months ended June 30, 2001, primarily due to the fact that we received less of our total revenues for the six months ended June 30, 2001, from the sales of our own products (Smart Stacks, Derma Wand and Better Blocks), and more from the sales of third party products like Cybersonic, where we generally have a higher cost of sales than we do for our own products. For the year ended December 31, 2000, we received gross margins of approximately $239,000 for Derma Wand, $97,000 for Better Blocks and $33,000 for Smart Stacks. For the six months ended June 30, 2001, we received gross margins of approximately $34,000 for Smart Stacks, $26,000 for Derma Wand and $21,000 for Cybersonic.
Operating Expenses
Total operating expenses for the year ended December 31, 2000, were approximately $705,000, and decreased for the six months ended June 30, 2001, to approximately $264,000. Our selling and marketing expenses, which amounted to approximately $285,000 for the year ended December 31, 2000, decreased to approximately $56,000 for the six months ended June 30, 2001, largely due to the fact that we have been focusing our efforts on the preparation of this offering so that we can obtain additional financing.
Our research and development expenses amounted to approximately $169,000 for the year ended December 31, 2000, and decreased to approximately $2,500 for the six months ended June 30, 2001. Our research and development expenses consist primarily of efforts to discover and develop new products and the testing and
development of direct-response advertising related to these products. The decrease in research and development was also due to the fact that we have been focusing on this offering in order to obtain additional financing.
Our general and administrative expenses were also a material expense, amounting to approximately $172,000 for the year ended December 31, 2000, and approximately $141,000 for the six months ended June 30, 2001. Our general and administrative expenses consist of professional fees, expenses to execute our business plan, and expenses incurred in day-to-day operations. The majority of the general and administrative expenses we incurred were fees in connection with retaining auditors and professional advisors to help position us for this offering.
Unless our offering is only successful at a 10% level, we expect our expenses to increase materially over those from the year ended December 31, 2000, and the six months ended June 30, 2001. Our production costs, sales and marketing expenses, research and development expenses and general and administrative expenses will continue to increase as we implement our business plan and as we produce and air new infomercials. We expect the increase in these up-front expenses ultimately to generate increased revenues.
Net Losses
To date, we have not achieved profitability. Our net loss for the year ended December 31, 2000, was approximately $382,000, and decreased to approximately $204,000 for the six months ended June 30, 2001, primarily due to the decrease in our operating expenses. We anticipate incurring a loss for the year 2001, primarily as a result of expenses associated with this offering. We anticipate that until the registration process is complete, we will continue to operate at a loss, and we may continue to operate at a loss thereafter, depending on the market acceptance of the products we launch.
PLAN OF OPERATION; LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, we had cash of approximately $60,000. We used approximately $64,000 for our operating activities during the six months ended June 30, 2001. This use of cash was funded by advances from a shareholder of approximately $82,000. During 2000, we used approximately $401,000 for our operating activities. This use of cash was funded by advances from a shareholder of approximately $158,000 and a private placement of our common stock of $299,000.
We have a note payable to The Better Blocks Trust in the amount of approximately $591,000, with interest, which is due on November 1, 2002. The note bears interest at the prime rate plus 1%. At June 30, 2001, the total principal and accrued interest on the note amounted to approximately $664,000.
On September 28, 2001, we granted 1,475,000 stock options to our directors and officers, 280,000 with a $0.50 exercise price and 1,195,000 with a $2.00 exercise price. If the optionees exercise these options over the next five years as they vest, we will receive $2,530,000 in capital. We estimate that these option grants will result in non-cash compensation expense of approximately $364,000 that we will recognize over the next five years as services are rendered by the optionees. We also estimate that we will disclose in the notes to our financial statements pro forma compensation expense of approximately $1,160,000 over the next five years in accordance with the fair value based method prescribed in SFAS 123.
We decided to undertake this offering to obtain capital to enhance our ability to produce future infomercials and to buy the media time needed to roll out our product lines. Assuming the success of our offering and the same levels of success that our previous infomercials have demonstrated, we believe that we will have sufficient capital resources to accomplish our business plan for the foreseeable future. If we encounter either unexpected failure or unprecedented success with some of our products, we may need to seek additional capital to carry out our business plan.
If our offering has only limited success, and we raise only approximately $500,000, we will not have capital sufficient to permit us to produce all of the infomercials that we would otherwise produce. If we raise only $500,000, we will produce only two long-form infomercials and two short-form infomercials for new products. We also believe that an offering that raises only $500,000 may satisfy our capital needs for only the next 6 to 12 months if none of the products we plan to launch succeed in the marketplace and if we are not able to
obtain an extension on repayment of the promissory note to The Better Blocks Trust. We then will need to raise money through additional debt or equity financing. We have no binding commitments or arrangements for additional financing, and there is no assurance that our management will be able to obtain any additional financing on terms acceptable to us, if at all.
We did not have any significant capital expenditures for the year ended December 31, 2000, and the six months ended June 30, 2001. If our offering is successful at the 50% level (approximately $2,500,000) or above, we intend to set up a small branch office in the Los Angeles area within the next fiscal year. We anticipate that our capital expenditures for setting up such an office will be approximately $50,000.
DESCRIPTION OF PROPERTY
Our current executive offices are located at 203B Kimmen Center, 2300 N. Dixie Highway, Boca Raton, Florida 33431-7657, and our telephone number is (561) 417-0882. We currently have a month-to-month oral lease for our executive offices, under which we pay approximately $400 per month.
We believe that our present facilities will be suitable for the operation of our business for the foreseeable future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In November 1999, the original Moran Dome Exploration, Inc. shareholders, who held a total of 1,000,000 shares and the members of David R. Mortenson & Associates, who held a total of 1,000,000 shares, sold their shares to William Flohr, a member of our board of directors; Stephen Jarvis, a member of our board of directors; and Thomas Woolsey, our president, secretary and member of our board of directors.
Mr. Crosby, a member of our board of directors, has assisted in positioning us for this offering. Depending on the level of success of our offering, Mr. Crosby may join us permanently as an executive officer. If Mr. Crosby joins us as an executive officer, his compensation package would include a significant grant of stock options for his future service. Under the rules of the SEC, Mr. Crosby could be considered a founder or promoter of our company.
Except as noted below, no director, executive officer or nominee therefor of International Commercial Television, and no owner of five percent or more of the company's outstanding shares or any member of their immediate family has entered into or proposed any transaction with the company in which the amount involved exceeds $60,000.
On April 1, 2000, we entered into a share and option purchase agreement with The Better Blocks Trust, of which Kelvin Claney, who is now our chief executive officer, director and treasurer, is co-trustee. Under the agreement, we purchased all of the equity interest in Windowshoppc.com Limited and R.J.M. Ventures Limited and an option to purchase all of the equity in Better Blocks International Limited, as well as a license to all of the assets owned by Better Blocks International Limited. The purchase price under the agreement was 8,000,000 shares of Moran Dome's common stock and a $590,723 promissory note. The option exercise price is the issuance of another 500,000 shares of our common stock. Mr. Claney is a founder and the driving force behind our business to date, and under the rules of the SEC, he may be considered a founder or promoter of our company.
We have received short-term advances from Kelvin Claney. The outstanding balance of the advances received from Mr. Claney was approximately $158,000 as of December 31, 2000, and approximately $239,000 as of June 30, 2001.
We have an ongoing third party arrangement with Positive Response Vision, Inc., of which our director Stephen Jarvis is president. Under the agreement, Positive Response Vision, Inc. acts as a third party distributor of certain of our products, including Smart Stacks and Derma Wand. In some instances, the third party agreement we have with Positive Response Vision, Inc. has been based on royalties of $2.00 per unit, but in most cases Positive Response Vision, Inc. purchases units from us at an agreed price. During the fiscal year ended December 31, 2000, we received approximately $108,000 of our total revenues from sales to Positive Response Vision, Inc. and approximately $53,000 of our total revenues through June 30, 2001.
Our director William Flohr is a director and greater than 10% beneficial owner of Amden Corp., which owns Cybersonic. We periodically purchase units of Cybersonic from Amden Corp. and act as the international distributor for them. In acting as the international distributor, we generally receive the difference between the price at which we sell the product to the international infomercial operator and the price at which we acquire the product from Amden Corp. During the fiscal year ended December 31, 2000, we recognized approximately $2,500 of revenue from sales of Cybersonic to international infomercial operators, and we paid Amden Corp. approximately $2,375. During the six months ended June 30, 2001, we recognized approximately $302,000 in revenue from sales of Cybersonic, and we paid Amden Corp. approximately $281,000.
In August 2001, we entered into an Independent Sales Representative Agreement with Dimensional Marketing Concepts, Inc. to act as our exclusive independent sales representative to manage the promotion, marketing and sale of certain of our products into retail channels of trade in the United States and Puerto Rico. Our directors Louis Basenese and Richard Pitera are the chief executive officer and president, respectively, of Dimensional Marketing Concepts, Inc. Under the agreement, we are generally obligated to pay Dimensional Marketing Concepts a commission of 15% of the aggregate proceeds received by us from sales to Dimensional Marketing Concepts Inc. accounts, less taxes and such things as markdowns, discounts, returns and refunds, etc. In consideration of the services to be performed under the agreement by Dimensional Marketing Concepts, Inc. and for their service as directors, we granted Mr. Basenese and Mr. Pitera options to purchase a total of 170,000 shares each of our common stock.
CERTAIN BUSINESS RELATIONSHIPS
Except with regard to the transaction described above with Kelvin Claney in his capacity as co-trustee of The Better Blocks Trust, the transaction described above with William Flohr in his capacity as director and greater than 10% beneficial owner of Amden Corp., no director or nominee for director is or has been during the fiscal year ended December 31, 2000, or the six months ended June 30, 2001, an executive officer or beneficial owner of more than 10% of any other entity that has engaged in a transaction with International Commercial Television in excess of 5% of either the company's revenues or assets.
INDEBTEDNESS OF MANAGEMENT
There are no persons who are directors, executive officers of International Commercial Television, nominees for election as a director, immediate family members of the foregoing, corporations or organizations (wherein the foregoing are executive officers or partners, or 10% of the shares of which are directly or beneficially owned by the foregoing), trusts or estates (wherein the foregoing have a substantial beneficial interest or as to which the foregoing serve as a trustee or in a similar capacity) that are indebted to International Commercial Television in an amount in excess of $60,000.
MARKET FOR COMMON STOCK
MARKET PRICE
There is no trading market for our common stock at present and there has been no trading market to date. There is no assurance that a trading market will ever develop or, if such a market does develop, that it will continue. Owing to the low price of the securities, many brokerage firms may not be willing to effect transactions in the securities. Even if a purchaser finds a broker willing to effect a transaction in our common stock, the combination of brokerage commissions, state transfer taxes, if any, and other selling costs may exceed the selling price.
We intend to apply to have our common stock included for trading on the NASD OTC Bulletin Board. To qualify for listing on the NASD OTC Bulletin Board, an equity security must have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company for listing on the Bulletin Board. We may be unable to find a market maker willing to sponsor the company. If we do qualify for the OTC Bulletin Board, shareholders may still find it difficult to dispose of, or to obtain accurate quotations as to the market value of, the company's securities trading in the OTC market. Quotations on the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Our securities will also be subject to Securities and Exchange Commission's "penny stock" rules. The penny stock rules may further affect the ability of owners of our shares to sell their securities in any market that may develop for them. There may be a limited market for penny stocks, due to the regulatory burdens on broker-dealers. The market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark ups or commissions charged by the broker-dealers might be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all.
STOCK OPTIONS
On September 28, 2001, we granted 1,475,000 options to purchase our common stock to the persons listed on the table below pursuant to our 2001 Stock Option Plan. Each option is exercisable for one share of our common stock. Some of the options were granted with an exercise price of $0.50 per share, and some were granted with an exercise price of $2.00 per share. For each optionee 10% of the options granted will vest on June 30, 2002, and 10% will vest every six months thereafter.
OPTION
NAME OF OPTIONEE NO. OF OPTIONS EXERCISE PRICE EXERCISE TERM DATE OF GRANT
---------------- -------------- --------------- ------------- -------------
Keith Smith 70,000 $ 0.50 5 years 9/28/01
175,000 $ 2.00 10 years 9/28/01
Louis Basenese 20,000 $ 0.50 5 years 9/28/01
150,000 $ 2.00 10 years 9/28/01
Richard Pitera 20,000 $ 0.50 5 years 9/28/01
150,000 $ 2.00 10 years 9/28/01
Thomas Crosby 60,000 $ 0.50 5 years 9/28/01
100,000 $ 2.00 10 years 9/28/01
William Flohr 20,000 $ 2.00 10 years 9/28/01
Mark Solley 40,000 $ 0.50 5 years 9/28/01
150,000 $ 2.00 10 years 9/28/01
Greg LaRoza 50,000 $ 0.50 5 years 9/28/01
300,000 $ 2.00 10 years 9/28/01
Thomas Woolsey 20,000 $ 0.50 5 years 9/28/01
150,000 $ 2.00 10 years 9/28/01
TOTAL 1,475,000
|
In connection with the Share and Option Purchase Agreement with the Trustee of The Better Blocks Trust, we purchased all of the equity interest in Windowshoppc.com Limited and R.J.M. Ventures, an option to purchase all of the equity in Better Blocks International Limited, and a license to all of the assets owned by Better Blocks International Limited. The purchase price under the agreement was 8,000,000 shares of our common stock and a $590,723 promissory note. The option exercise price under the agreement is the issuance of another 500,000 of our common stock. The option has an initial term of ten years. During the first five years of the term, the option may be exercised by the mutual agreement of the Trustee of The Better Blocks Trust and us. At the end of the first five years and each year thereafter, the Trustee of The Better Blocks Trust may extend the term of the option by one year, and the option may be exercised by the mutual agreement of the Trustee of The Better Blocks Trust and us. Once less than five years remain in the term of the option, we may exercise the option in our sole discretion. We may terminate the option term at any time in our sole discretion.
Except as discussed above, there we no other options, warrants or other securities convertible into our common stock outstanding as of September 28, 2001.
SHARES ELIGIBLE FOR FUTURE SALE
As of July 31, 2001, we had 10,249,500 shares issued and outstanding. The following table shows the tradability status of the 10,249,500 shares:
- Free trading shares that may be sold without 100,000 shares regard to the requirements of Rule 144:
- Shares currently eligible to be resold 149,500 shares* pursuant to Rule 144 subject to public information, volume limitation, manner of sale and notice conditions 90 days after the effectiveness of this registration statement:
- Shares held by affiliates and may be sold 10,000,000 under Rule 144 only in compliance with the public information, volume limitation, manner of sale and notice conditions of the rule:
* Of the 149,500 shares, 92,000 will be become available for sale without condition under Rule 144 at various times during the period from July 2002 to November 2002. The remaining 57,500 shares are owned by affiliates, and must be sold pursuant to Rule 144's conditions.
In general, a sale under Rule 144 after holding shares for more than one year but less than two years requires compliance with the following material conditions:
- public information-we must be current in our requirement to file our
quarterly and annual reports with the SEC, as well as any reports required
to be filed on Form 8-K for material events;
- volume limitation-during any three-month period a shareholder may not sell
more than one percent of our total outstanding shares, as shown on our most
recent quarterly or annual report;
- manner of sale-the shares must be sold in a market transaction through a
broker or market maker, generally without solicitation of a buyer; and
- notice-except for certain de minimis sales, the seller must file a Form 144
with the SEC.
Sales of unregistered securities by an affiliate must always comply with these four conditions. After holding their shares for more than two years, shareholders that are not affiliates may sell their shares without having to comply with these conditions. Rule 144 has a number of exceptions and complications, and any sale under Rule 144 requires an opinion of counsel reasonably satisfactory to us.
There are no contractual restrictions prohibiting the sale of any of our outstanding shares.
HOLDERS
As of July 31, 2001, there were 10,249,500 shares of common stock outstanding, held by 326 shareholders of record.
DIVIDENDS
To date we have not paid any dividends on our common stock, and we do not expect to declare or pay any dividends on our common stock in the foreseeable future. Payment of any dividends will be dependent upon our future earnings, if any, our financial condition, and other factors as deemed relevant by the board of directors.
EXECUTIVE COMPENSATION
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following table sets forth all compensation paid or earned for services rendered to International Commercial Television in all capacities during the years ended December 31, 2000, 1999 and 1998, by our current and past President (the "Named Officers"). No executive officer received total annual salary, bonus and other compensation in excess of $100,000 in those periods. No executive officer that would have otherwise been included in this table on the basis of salary and bonus earned for these fiscal years has been excluded by reason of his or her termination of employment or change in executive status during the fiscal year.
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------------------------- ------------------------ --------
Other
Name Annual Restricted Securities
And Compen- Stock Underlying LTIP All Other
Principal Sation Award(s) Options/ Payouts Compen-
Position Year Salary ($) Bonus ($) ($)(1) ($) SARs (#) ($) sation ($)
------------ ---- ---------- --------- -------- ----------- ----------- -------- ----------
Thomas 2000 4,000.00 -- -- -- -- -- --
Woolsey
(Current
President)*
John 2000 -- -- -- -- -- -- --
Bauska 1999 -- -- -- -- -- -- --
(Past 1998 -- -- -- -- -- -- --
President)
*Mr. Woolsey was appointed President of International Commercial Television Inc. on June 3, 2000.
|
COMPENSATION OF DIRECTORS
Directors receive no compensation for their service as directors, although they do receive reimbursement for expenses.
EMPLOYMENT CONTRACTS
We have no employment agreements with our executive officers.
We may in the future create retirement, pension, profit sharing, insurance and medical reimbursement plans covering our Executive Officers and Directors, and staff. At the present time, no such plans exist. No advances have been made or are contemplated by International Commercial Television to any of its executive officers or directors.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
-----
Report of Independent Certified Public Accountants F-1
Consolidated balance sheets as of December 31, 2000
and June 30, 2001 (unaudited) F-2
Consolidated statements of operations for the years ended
December 31, 1999 and 2000 and for the six months
ended June 30, 2000 and 2001 (unaudited) F-3
Consolidated statements of shareholders' equity for the
years ended December 31, 1999 and 2000 and for
the six months ended June 30, 2001 (unaudited) F-4
Consolidated statements of cash flows for the years
ended December 31, 1999 and 2000 and for the six
months ended June 30, 2000 and 2001 (unaudited) F-5
Notes to the consolidated financial statements F-6 to F-16
|
International Commercial Television Inc. and Subsidiaries
(Formerly known as Moran Dome Explorations, Inc.)
Boca Raton, Florida
We have audited the accompanying consolidated balance sheet of International Commercial Television Inc. and Subsidiaries (formerly known as Moran Dome Explorations, Inc.) as of December 31, 2000 and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended December 31, 2000 and 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Commercial Television, Inc. and Subsidiaries (formerly known as Moran Dome Explorations, Inc.) as of December 31, 2000, and the results of its consolidated operations and cash flows for the years ended December 31, 2000 and 1999 in conformity with accounting principles generally accepted in the United States of America.
/s/ Moore Stephens Frazer and Torbet, LLP City of Industry, California July 23, 2001 |
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
December June 30, 2001 31, 2000 (unaudited) ------------- --------------- |
CURRENT ASSETS:
Cash $ 43,128 $ 60,141
Accounts receivable 82,419 1,175
Inventory, net 10,000 7,300
Prepaid expenses 36,809 40,025
Deferred charges 53,290
------------- ---------------
Total current assets 172,356 161,931
------------- ---------------
PROPERTY AND EQUIPMENT:
Computers and software 12,096 13,312
Less accumulated depreciation 1,772 3,434
------------- ---------------
Property and equipment, net 10,324 9,878
------------- ---------------
OTHER ASSETS:
Purchase option 500,000 500,000
Intangible assets, net 123,723 105,723
------------- ---------------
Total other assets 623,723 605,723
------------- ---------------
Total assets $ 806,403 $ 777,532
============= ===============
|
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 39,041 $ 101,835
Advances from shareholder 157,600 239,384
------------- ---------------
Total current liabilities 196,641 341,219
------------- ---------------
NOTE PAYABLE AND ACCRUED INTEREST TO
SHAREHOLDER 632,839 663,774
------------- ---------------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 100,000,000
shares authorized, 10,249,500 issued
and outstanding 2,250 2,250
Additional paid-in capital 358,850 358,850
Accumulated deficit (384,177) (588,561)
------------- ---------------
Total shareholders' equity (23,077) (227,461)
------------- ---------------
Total liabilities and shareholders' equity $ 806,403 $ 777,532
============= ===============
|
The accompanying notes are an integral part of this statement.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Six months ended
Year ended December 31, June 30, (unaudited)
---------------------- ----------------------
1999 2000 2000 2001
--------- ---------- ---------- ----------
NET SALES $ - $ 727,078 $ 282,477 $ 625,919
COST OF SALES - 355,284 114,612 530,486
--------- ---------- ---------- ----------
GROSS PROFIT - 371,794 167,865 95,433
--------- ---------- ---------- ----------
OPERATING EXPENSES:
Depreciation and amortization 28,772 9,591 19,662
Research and development 168,712 99,721 2,546
Acquisition costs 28,770 7,754 30,008
General and administrative 2,100 172,290 40,880 140,974
Selling and marketing 285,100 217,428 56,309
Royalties 17,902 5,000 8,940
Rent 3,914 1,169 5,369
--------- ---------- ---------- ----------
Total operating expenses 2,100 705,460 381,543 263,808
--------- ---------- ---------- ----------
OPERATING LOSS (2,100) (333,666) (213,678) (168,375)
--------- ---------- ---------- ----------
OTHER EXPENSES:
Interest expense, shareholder 42,116 9,886 30,935
Interest expenses 6,295 2,289 5,074
--------- ---------- ---------- ----------
Total other expenses - 48,411 12,175 36,009
--------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES (2,100) (382,077) (225,853) (204,384)
INCOME TAXES - - - -
--------- ---------- ---------- ----------
NET LOSS $ (2,100) $(382,077) $(225,853) $(204,384)
========= ========== ========== ==========
BASIC LOSS PER SHARE $ - $ (0.04) $ (0.02) $ (0.02)
========= ========== ========== ==========
FULLY DILUTED LOSS PER SHARE $ - $ (0.04) $ (0.02) $ (0.02)
========= ========== ========== ==========
|
The accompanying notes are an integral part of this statement.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
Common stock,
$.001 par value Additional
----------------------- Paid-In Accumulated
Shares Amount Capital Deficit Totals
----------- ---------- -------- ---------- ----------
Balances, January 1, 1999, restated
for effect of reverse merger
(see Notes 1 and 2) 10,100,000 $ 2,100 $ 60,000 $ $ 62,100
Net loss (2,100) (2,100)
----------- ---------- -------- ---------- ----------
Balances, December 31, 1999 10,100,000 2,100 60,000 (2,100) 60,000
Issuance of common stock 149,500 150 298,850 299,000
Net loss (382,077) (382,077)
----------- ---------- -------- ---------- ----------
Balances, December 31, 2000 10,249,500 2,250 358,850 (384,177) (23,077)
Net loss (unaudited) (204,384) (204,384)
----------- ---------- -------- ---------- ----------
Balances, June 30, 2001 (unaudited) 10,249,500 $ 2,250 $358,850 $(588,561) $(227,461)
=========== ========== ======== ========== ==========
|
The accompanying notes are an integral part of this statement.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Six months ended
Year ended December 31, June 30,(unaudited)
-------------------------- --------------------------
1999 2000 2000 2001
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,100) $ (382,077) $ (225,853) $ (204,384)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 28,772 9,591 19,662
(Increase) decrease in accounts receivable (82,419) (10,589) 81,244
(Increase) decrease in inventory (10,000) (11,508) 2,700
Increase in prepaid expenses (36,809) (40,767) (3,216)
Increase in deferred charges (53,290)
Increase in accounts payable and accrued liabilities 39,041 74,923 62,794
Increase in accrued interest on note payable 42,116 9,886 30,935
------------ ------------ ------------ ------------
Net cash used in operating activities (2,100) (401,376) (194,317) (63,555)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (12,096) (10,241) (1,216)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft 10,658
Increase in advances from shareholder 157,600 193,900 81,784
Proceeds from issuance of common stock 2,100 299,000
------------ ------------ ------------ ------------
Net cash provided by financing activities 2,100 456,600 204,558 81,784
------------ ------------ ------------ ------------
NET INCREASE IN CASH - 43,128 - 17,013
CASH, beginning of the period - - - 43,128
------------ ------------ ------------ ------------
CASH, end of period $ - $ 43,128 $ - $ 60,141
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest expense paid $ - $ 6,295 $ 2,289 $ 5,074
============ ============ ============ ============
Income taxes paid $ - $ - $ - $ -
============ ============ ============ ============
SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Note payable used to finance acquisitions $ - $ 590,723 $ 590,723 $ -
============ ============ ============ ============
|
The accompanying notes are an integral part of this statement.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
International Commercial Television Inc., (formerly known as Moran Dome Explorations, Inc.), (the Company) was organized under the laws of the state of Nevada on June 25, 1998. From June 25, 1998 through March 31, 2000, the Company had limited operations and assets. During this period, the Company did not commence planned principal operations or derive any revenue therefrom and consequently was considered a development stage company as defined by SFAS No. 7.
On April 1, 2000, the Company entered into a Share and Option Purchase Agreement with the trustees of The Better Block Trust (BBT), which owned or controlled all of the equity interest in Windowshoppc.com Limited (WSL), R.J.M. Ventures Limited (RJML) and Better Blocks International Limited (BBIL). Under the agreement, the Company purchased all of the equity interest in WSL and RJML, an option to purchase all of the equity in BBIL and obtained a license to all of the assets owned by BBIL. The purchase price under the agreement was 8,000,000 shares of the Company's common stock and a $590,723 promissory note. The option exercise price is the issuance of an additional 500,000 shares of the Company's common stock. Inasmuch as the former owners of WSL and RJML controlled the Company after the acquisition, the combination was accounted for under APB 16, "Business Combinations," as a reverse merger with WSL and RJML as acquirer and requiring nominal adjustment to the carrying value of the assets or liabilities of the acquired entity, International Commercial Television, Inc. Proforma operating results as if the acquisition had taken place at the beginning of the period have not been presented as the operations of the acquiree were negligible. The financial position and results of operations of the subsidiaries are included in the consolidated financial statements of the Company.
Windowshoppc.com Limited was organized under the laws of New Zealand on June 25, 1999 and has a fiscal year end of March 31.
R.J.M. Ventures Limited was organized under the laws of New Zealand on April 23, 1998 and has a fiscal year end of March 31.
The Company sells various consumer products. The products are primarily marketed and sold through infomercials. The products are sold throughout the United States and internationally via the infomercials. Although the companies are incorporated in Nevada and New Zealand, operations are currently run from Boca Raton, Florida.
The accompanying consolidated financial statements include 100% of the accounts of the Company and its wholly-owned subsidiaries, Windowshoppc.com Limited and R.J.M. Ventures Limited. All significant inter-company transactions and accounts have been eliminated.
The Company's consolidated financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 year end.
The Company has adopted the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards for derivative financial instruments and hedging activities. The adoption of this statement did not have a material impact to the Company's consolidated financial statements.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has adopted SAB No. 101, "Revenue Recognition in Financial Statements" (SAB 101). SAB 101 establishes accounting and reporting standards for the recognition of revenue. It states that revenue generally is realized or realizable and earned when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered: (3) the seller's price to the buyer is fixed or determinable; (4) collectibility is reasonably assured. The adoption of this statement did not have a material impact to the Company's consolidated financial statements.
The Company adopted the provisions of FIN No. 44, "Accounting for Certain Transactions Involving Stock Compensation (an interpretation of APB Opinion No. 25.)" FIN 44 clarifies the application of Opinion No. 25 for only certain issues. It does not address any issues related to the application of the fair value method in Statement No. 123. Among other issues, FIN 44 clarifies the definition of employee for purposes of applying Opinion 25, the criteria for determining whether a plan qualifies as a noncompensatory plan, the accounting consequence of various modifications to the terms of the previously fixed stock option or award, and accounting for an exchange of stock compensation awards in a business combination. The adoption of this principle had no material effect on the Company's consolidated financial statements.
The Financial Accounting Standards Board has issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." These statements will change the accounting for business combinations and goodwill in two significant ways. First, SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method will be prohibited. Second, SFAS 142 changes the accounting for goodwill from an amortization method to an impairment only approach. Thus, amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of that statement, which for companies with calendar year ends, will be January 1, 2002. The Company expects that the adoption of the new statements will not have a material affect on its consolidated financial statements.
Product sales revenue is recognized upon shipment of the product to the customer. The Company has a return policy whereby the customer can return any product received within 30 days of receipt for a full refund excluding shipping and handling. The Company provides an allowance for returns based upon past experience.
Financial instruments, which potentially subject the Company to concentration of credit risk, include cash and trade receivables. The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. For the year ended December 31, 2000, substantially all of the Company's trade receivables were due from one customer.
The Company considers all unrestricted highly liquid investments with an original maturity of three months or less to be cash equivalents.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
No allowance for uncollectible accounts has been provided. The Company's management has evaluated the accounts and believes they are all collectible.
Inventory consists primarily of products held for resale, and are stated at the lower of cost (first-in, first-out method) or market.
Property and equipment are carried at cost and depreciation is computed over the estimated useful lives of the individual assets ranging from 3 to 5 years. Depreciation is computed using the straight-line method.
The related cost and accumulated depreciation of assets retired or otherwise disposed of are removed from the accounts and the resultant gain or loss is reflected in earnings. Maintenance and repairs are expensed currently while major renewals and betterments are capitalized.
Long-term assets of the Company are reviewed annually as to whether their carrying value has become impaired. Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. Management also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. As of December 31, 2000, management expects these assets to be fully recoverable.
Depreciation expense amounted to $1,772 for the year ended December 31, 2000, and $1,662 and $591 for the six months ended June 30, 2001 and 2000, respectively.
Intangible assets are being amortized using the straight-line method with estimated lives ranging from 3 to 5 years.
The recoverability of intangible assets is evaluated periodically, but not less than annually, by an analysis of operating results for each acquired business, significant events or changes in business-environment. As of June 30, 2001, management expects these assets to be fully recoverable.
Research and development costs are expensed as incurred. Research and development costs primarily consist of efforts to discover and develop new products and the testing and development of direct-response advertising related to these products. Research and development expense amounted to $168,712 for the year ended December 31, 2000, and $2,546 and $99,721 for the six months ended June 30, 2001 and 2000, respectively.
Advertising costs are expensed as incurred and are included in research and development expense and selling and marketing expense in the accompanying consolidated financial statements. Advertising expense amounted to $179,889 for the year ended December 31, 2000 and $144,485 for the six months ended June 30, 2000. The Company did not incur advertising costs for the six months ended June 30, 2001.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company uses the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of assets and liabilities.
Income tax benefits have not been recorded during the current period on United States and New Zealand losses. These benefits will be recorded when realized or at such time it is determined that these benefits are likely to be realized.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for all stock option plans. Under APB 25, compensation cost is recognized for stock options granted to employees when the option is less than the market price of the underlying common stock on the date of grant.
SFAS Statement No. 123, "Accounting for Stock-Based Compensation," requires the Company to provide proforma information regarding net income and net income per share as if compensation costs for the Company's stock option plans and other stock awards had been determined in accordance with the fair value based method prescribed in SFAS 123. The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model. As of December 31, 2000, June 30 2001 and 2000, there were no stock options granted.
The preparation of financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates.
NOTE 2 - BUSINESS ACQUISITION
On April 1, 2000, the Company entered into a Share and Option Purchase Agreement with the trustees of BBT, which owned or controlled all of the equity interest in WSL, RJML and BBIL. Under the agreement, the Company purchased all of the equity interest in WSL and RJML, an option to purchase all of the equity in BBIL and obtained a license to all of the assets owned by BBIL. The purchase price under the agreement was 8,000,000 shares of the Company's common stock and a $590,723 promissory note. The option exercise price is the issuance of an additional 500,000 shares of the Company's common stock.
These acquisitions were accounted for under APB 16, "Business Combinations," as a reverse merger with WSL and RJML as the acquiror. As of April 1, 2000 (date of acquisition), WSL, RJML and license rights were valued at approximately $15,000,000 in an independent appraisal performed by Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 3 - LICENSE AND RECONVEYANCE AGREEMENTS
Effective April 1, 2000, the Company entered into a License and Reconveyance Agreement with WSL and RJML. These agreements are royalty-free. WSL and RJML owns or has rights in certain intellectual properties that it does not presently wish to exploit, but which it may wish to exploit in the future. Accordingly, WSL and RJML granted all production rights, proprietary rights, inventory, development rights, hard assets, licenses and any assets or rights to the Company. The Company has the right to further develop and enhance the intellectual properties as the Company sees fit. At the option of WSL or RJML, they can demand to reconvey all grants previously given to the Company.
NOTE 4 - FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS 107), "Disclosures About Fair Value of Financial Instruments" requires disclosure of the fair value of financial instruments held by the Company. SFAS 107 defines the fair value of financial instruments as the amount at which the instrument could be exchanged in a current transaction between willing parties. The following methods and assumptions were used to estimate fair value:
The carrying amount of accounts receivable and payable approximate fair value due to their short-term nature. The carrying amount of note payable debt approximates fair value based on the borrowing rate of prime rate plus 1.0%.
NOTE 5 - INTANGIBLE ASSETS
Intangible assets, which resulted from acquisitions, consisted of the following:
June 30, (unaudited)
Estimated December --------------------------------
Useful Life 31, 2000 2001 2000
------------------------------- --------------- --------------- --------------- ---------------
INTANGIBLE ASSETS:
Trademarks, patents, license
agreements and technology 5 $ 94,805 $ 94,805 $ 94,805
Infomercials 5 13,526 13,526 13,526
Assembled workforce and other 3 42,392 42,392 42,392
--------------- --------------- ---------------
Totals 150,723 150,723 150,723
Accumulated amortization 27,000 45,000 9,000
--------------- --------------- ---------------
Intangible assets, net $ 123,723 $ 105,723 $ 141,723
=============== =============== ===============
|
Amortization expense amounted to $27,000 for the year ended December 31, 2000, and $18,000 and $9,000 for the six months ended June 30, 2001 and 2000, respectively.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
On May 18, 1998, RJML entered into a manufacturing, marketing and distribution agreement with the inventor of Smart Stacks. Smart Stacks is a set of rotating and stacking storage trays. Pursuant to the agreement, the inventor grants to RJML the exclusive right to manufacture, advertise, promote, market, sell and distribute Smart Stacks worldwide through all means. In consideration of the grants received, RJML shall pay a royalty at a rate between 2.0% and 5.0% of RJML's net sales depending on various scenarios as defined in the agreement.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
On July 1, 1998, RJML entered into a production agreement with The Broadcast Arts Group, Inc. (BAG) for the creation of infomercials of Smart Stack. RJML pays all necessary expenses for the creation of the infomercials and after completion, will retain all rights, title and interest arising under the U.S. Copyright Act, the U.S. Trademark Act and all other applicable laws, rules and regulations in and to the entire editorial, visual, audio and graphic content of the infomercials. In consideration of services rendered by BAG, RJML shall pay a royalty at a rate between 2.0% and 2.5% of RJML's adjusted gross sales depending on various scenarios as defined in the agreement.
On August 17, 1999, WSL entered into a production agreement with BAG for the creation of infomercials of Derma Wand. WSL pays all necessary expenses for the creation of the infomercials and after completion, will retain all rights, title and interest arising under the U.S. Copyright Act, the U.S. Trademark Act and all other applicable laws, rules and regulations in and to the entire editorial, visual, audio and graphic content of the infomercials. In consideration of services rendered by BAG, WSL shall pay a royalty at a rate of: (i) 2.0% of WSL's adjusted gross revenue made in the United States to consumers in direct response to airings of the infomercial, (ii) $1.00 for each unit sold in the United States to consumers via all other means, (iii) 5.0% of the wholesale selling price to televised home shopping retailers as to which BAG renders coordination services, (iv) 2.0% of the wholesale selling price to televised home shopping retailers as to which BAG does not render coordination services, and (v) $.75 for each unit sold outside of the United States.
On October 15, 1999, WSL entered into an endorsement agreement with an individual for her appearance in a Derma Wand infomercial. Under the agreement, WSL paid a fixed amount for the individual's appearance in the infomercial and an airing fee of $6,500 for each calendar quarter during which WSL continues to air said infomercial. On July 11, 2001, the agreement was amended to include a royalty payment of $.50 for each unit sold internationally, with a maximum royalty payment of $6,500 for any one calendar quarter. Further, if the infomercial is aired in the United States, then the airing fee will revert back to a flat $6,500 per calendar quarter.
On February 11, 2000, WSL entered into an asset purchase agreement with Omega 5
Technologies (Omega 5) for the purchase of all tangible and intangible assets
relating to the Derma Wand product. Derma Wand is a high frequency skin care
device. The aggregate purchase price is $1,100,000 payable in incremental
payments maturing on December 31, 2002. Until the purchase price is paid in
full, WSL shall pay Omega 5 royalties on all net sales of Derma Wand at a rate
of $2.00 for each unit sold. Royalties paid will be credited towards the
purchase price. On November 11, 2000, WSL's management decided not to complete
the purchase resulting in forfeitures of all rights, title and interest relating
to the Derma Wand product. However, pursuant to the agreement, WSL retained a
nonexclusive license to manufacture, market and distribute Derma Wand. On
January 5, 2001, WSL entered into a marketing and royalty agreement with Omega
5. WSL shall have worldwide nonexclusive rights to manufacture, market and
distribute Derma Wand. In consideration of these rights, WSL shall pay a
royalty at a rate between $2.50 and $5.00 for each unit sold of Derma Wand
depending on various scenarios as defined in the agreement.
The Company assumed any and all responsibilities associated with the agreements noted above on April 1, 2000, pursuant to the license and reconveyance agreement disclosed in Note 3.
For the period from April 1, 2000 through June 30, 2001, the Company did not maintain product liability insurance for all products sold. For certain products, the Company is listed as an additional insured party under the product manufacturers' insurance policy.
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has received short-term advances from a shareholder. These advances amounted to $157,601 as of December 31, 2000, and $239,385 and $248,900 for the six months ended June 30, 2001 and 2000, respectively.
The Company has a note payable to a shareholder in the amount of $590,723. The note is unsecured and bears interest at an annual rate of prime rate plus 1.0%. The prime rate was 9.50%, 6.75%, and 9.50% as of December 31, 2000, June 30, 2001 and June 30, 2000, respectively. Interest is compounded monthly, principal and interest are due November 1, 2002. Total principal and accrued interest amounted to $632,839 as of December 31, 2000, and $663,774 and $600,609 for the six months ended June 30, 2001 and 2000, respectively.
The Company has made sales to an entity controlled by a director and shareholder of the Company. Sales to this entity amounted to approximately $108,000 for the year ended December 31, 2000 and approximately $53,000 for the six months ended June 30, 2001. There were no such sales for the period ended June 30, 2000.
The Company has made purchases from an entity with a common director and shareholder. Purchases from this entity amounted to approximately $2,400 for the year ended December 31, 2000, and approximately $281,000 for the six months ended June 30, 2001. There were no such purchases for the six months ended June 30, 2000.
NOTE 8 - CAPITAL STOCK
As of December 31, 2000, the authorized capital stock of the Company consisted of 10,000,000 shares of common stock, $.001 par value. As of December 31, 2000, the Company had 10,249,500 shares of common stock issued and outstanding, 249,500 shares in excess of the number authorized as of that date. On January 22, 2001, the Company's Board of Directors recommended a resolution to amend and restate the Company's Articles of Incorporation. The amended and restated Articles, among other things, increased the authorized shares of common stock to 100,000,000 and established 20,000,000 shares of preferred stock having a par value of $.001 per share. This resolution was approved by the consent of shareholders on February 26, 2001 and filed with the Nevada Secretary of State on March 6, 2001.
NOTE 9 - CAPITAL TRANSACTIONS
The Company issued 8,000,000 shares of its common stock in the acquisition of WSL and RJML on April 1, 2000.
Between the period June 1, 2000 to October 15, 2000, the Company engaged in a private placement offering of its common stock. On the completion of the offering, the Company accepted subscriptions for a total of 149,500 shares of common stock for a total of $299,000 or $2.00 per share.
NOTE 10 - BASIC AND FULLY DILUTED LOSS PER SHARE
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share" requires presentation of basic earnings per share and dilutive earnings per share.
The computation of basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted earnings per share gives the effect to all dilutive potential common shares outstanding during the period. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on losses. The computation is as follows:
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 10 - BASIC AND FULLY DILUTED LOSS PER SHARE (CONTINUED)
For the year ended December 31, 2000: Loss Shares Per-share
--------------------------------------------------- (Numerator) (Denominator) Amount
----------------- ------------- ---------------
Basic and fully diluted loss per share
--------------------------------------
Loss available to common shareholders $ (382,077) 10,166,251 $ (0.04)
================= ============= ===============
For the six months ended June 30, 2001 (unaudited): Loss Shares Per-share
--------------------------------------------------- (Numerator) (Denominator) Amount
----------------- ------------- ---------------
Basic and fully diluted loss per share
---------------------------------------------------
Loss available to common shareholders $ (204,384) 10,249,500 $ (0.02)
================= ============= ===============
For the six months ended June 30, 2000 (unaudited): Loss Shares Per-share
--------------------------------------------------- (Numerator) (Denominator) Amount
----------------- ------------- ---------------
Basic and fully diluted loss per share
--------------------------------------
Loss available to common shareholders $ (225,853) 10,100,000 $ (0.02)
================= ============= ===============
|
NOTE 11 - STOCK OPTION PLAN
The Company adopted a stock option plan. The purpose of this Plan is to provide additional incentives to key employees, officers, directors and consultants of the Company and its subsidiaries, thereby helping to attract and retain the best available personnel for positions of responsibility and otherwise promoting the success of the business activities. It is intended that options issued under this Plan constitute nonqualified stock options.
NOTE 12 - INCOME TAXES
The Company did not provide any current or deferred US federal, state or foreign tax provision or benefit for any of the periods presented because it has experienced operating losses since inception. The Company has provided a full valuation allowance on the net deferred tax asset because of uncertainty regarding its realizability. This asset primarily consists of net operating losses and amortization.
The Company had net operating losses of approximately $760,000 related to US federal, foreign and state jurisdictions through June 30, 2001. Utilization of net operating losses, which begin to expire at various times starting in 2021, may be subject to certain limitations.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are approximately as follows:
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 12 - INCOME TAXES (CONTINUED)
June 30, (unaudited)
December --------------------------------------
31, 2000 2001 2000
------------------ ------------------ ------------------
Net operating loss $ 85,000 $ 155,000 $ 50,000
Basis of investments 2,322,000 2,327,000 2,318,000
Basis of intangibles 398,000 398,000 398,000
Accumulated amortization (17,000) (28,000) (5,000)
State taxes (114,000) (117,000) (111,000)
------------------ ------------------ ------------------
Total deferred tax assets 2,674,000 2,735,000 2,650,000
Valuation allowance (2,674,000) (2,735,000) (2,650,000)
Net deferred tax assets $ - $ - $ -
================== ================== ==================
|
NOTE 13 - SEGMENT REPORTING
The Company operates in one industry segment and is engaged in the selling of various consumer products primarily through direct marketing infomercials. The Company evaluates performance and allocates resources based on several factors, of which the primary financial measure is operating income (loss) by geographic area. Accounting policies of the business segments are the same as those described in the summary of significant accounting policies in Note 1. Operating expenses are primarily prorated based on the relationship between domestic and international sales.
Information with respect to the Company's operating income (loss) by geographic area is as follows:
For the year ended December 31, 2000:
-------------------------------------------
Domestic International Totals
------------------ ------------------ ------------------
Net sales $ 485,444 $ 241,634 $ 727,078
Cost of sales 206,696 148,588 355,284
------------------ ------------------ ------------------
Gross profit 278,748 93,046 371,794
------------------ ------------------ ------------------
Operating expenses:
Depreciation and amortization 19,211 9,561 28,772
Research and development 112,649 56,063 168,712
Acquisition costs 19,210 9,560 28,770
General and administrative 115,038 57,252 172,290
Selling and marketing 190,361 94,739 285,100
Royalties 11,953 5,949 17,902
Rent 3,914 3,914
------------------ ------------------ ------------------
Total operating expenses 472,336 233,124 705,460
------------------ ------------------ ------------------
Operating loss $ (193,588) $ (140,078) $ (333,666)
================== ================== ==================
|
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 13 - SEGMENT REPORTING (CONTINUED)
For the six months ended June 30, 2001 (unaudited):
-----------------------------------------------------------
Domestic International Totals
------------------- ------------------ ------------------
Net sales $ 4,507 $ 621,412 $ 625,919
Cost of sales 1,000 529,486 530,486
------------------- ------------------ ------------------
Gross profit 3,507 91,926 95,433
------------------- ------------------ ------------------
Operating expenses:
Depreciation and amortization 142 19,520 19,662
Research and development 18 2,528 2,546
Acquisition costs 216 29,792 30,008
General and administrative 1,015 139,959 140,974
Selling and marketing 405 55,904 56,309
Royalties 64 8,876 8,940
Rent 5,369 5,369
------------------- ------------------ ------------------
Total operating expenses 7,229 256,579 263,808
------------------- ------------------ ------------------
Operating loss $ (3,722) $ (164,653) $ (168,375)
=================== ================== ==================
For the six months ended June 30, 2000 (unaudited):
-----------------------------------------------------------
Domestic International Totals
------------------ ------------------ ------------------
Net sales $ 239,053 $ 43,424 $ 282,477
Cost of sales 91,597 23,015 114,612
------------------ ------------------ ------------------
Gross profit 147,456 20,409 167,865
------------------ ------------------ ------------------
Operating expenses:
Depreciation and amortization 8,117 1,474 9,591
Research and development 84,394 15,327 99,721
Acquisition costs 6,562 1,192 7,754
General and administrative 34,597 6,283 40,880
Selling and marketing 184,008 33,420 217,428
Royalties 4,231 769 5,000
Rent 1,169 1,169
------------------ ------------------ ------------------
Total operating expenses 323,078 58,465 381,543
------------------ ------------------ ------------------
Operating loss $ (175,622) $ (38,056) $ (213,678)
================== ================== ==================
|
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS MORAN DOME EXPLORATIONS, INC.)
(Information related to the six months ended June 30, 2001 and subsequent to December 31, 2000 are unaudited)
NOTE 14 - SUBSEQUENT EVENTS
On August 10, 2001, the Company entered into an agreement with Tel America Media Incorporated (TAM), granting TAM the right to exclusively sell Better Blocks products by way of direct response television advertising using infomercials owned by the Company for the period of September 30, 2001 to December 29, 2001. Under the agreement, the Company will earn a royalty of $1.50 for each 1000 piece of Better Blocks Kits sold.
On August 13, 2001, the Company entered into an agreement with Dimensional Marketing Concepts, Inc. (DMC), granting DMC the right to act as the exclusive independent sales representative to manage the promotion, marketing and sale of certain products, as defined in the agreement, into retail channels of trade in the United States and Puerto Rico. The chief executive officer and president of DMC serve as directors of the Company. Under the agreement, the Company will pay DMC a commission at the rate of 15% of net sales for products sold as defined in the agreement.
On September 29, 2001, the Company granted stock options pursuant to the Company's 2001 Stock Option Plan. The stock options granted amounted to 1,475,000 shares of the Company's common stock. The option exercise price stated to these options ranges from $.50 to $2.00 with an exercise option term ranging from 5 to 10 years. These options will vest 10% every six months beginning June 30, 2002.
The computation of diluted earnings per share does not assume the exercise of the stock options granted because they would have an anti-dilutive effect.
Subject to Completion - [__________, 2001]
PROSPECTUS
INTERNATIONAL COMMERCIAL TELEVISION INC.
2,000,000 SHARES
COMMON STOCK
We have not authorized any dealer, salesperson or other person to give you written information other than this prospectus or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or a solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this prospectus nor any sales made hereunder after the date of this prospectus shall create an implication that the information contained herein or the affairs of International Commercial Television have not changed since the date hereof.
Until [Date] (90 days after the date of this prospectus), all dealers that effect transactions in these shares of common stock may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.
THE DATE OF THIS PROSPECTUS IS [DATE]
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Nevada law, our articles of incorporation, filed as Exhibit 3.1, provide that the company may indemnify a person who is a party or threatened to be made a party to an action, suit or proceeding by reason of the fact that he or she is an officer, director, employee or agent of the company, against such person's costs and expenses incurred in connection with such action so long as he or she has acted in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the company, and, in the case of criminal actions, had no reasonable cause to believe his or her conduct was unlawful. Nevada law requires a corporation to indemnify any such person who is successful on the merits or defense of such action against costs and expenses actually and reasonably incurred in connection with the action.
Our bylaws, filed as Exhibit 3.2, provide that the company will indemnify its officers and directors for costs and expenses incurred in connection with the defense of actions, suits, or proceedings against them on account of their being or having been directors or officers of the company, absent a finding of negligence or misconduct in office. Our bylaws also permit the company to maintain insurance on behalf of our officers, directors, employees and agents against any liability asserted against and incurred by that person whether or not the company has the power to indemnify such person against liability for any of those acts.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses for the issuance and distribution of the shares registered by this prospectus are set forth in the following table, exclusive of selling agent commissions and expenses:
ITEM AMOUNT ($)
--------------------- -----------
SEC Registration Fee 2,000
EDGAR Filing Expenses 5,000
Transfer Agent Fees 5,000
Legal Fees 60,000
Accounting Fees 60,000
Evaluation Fee 65,000
Printing Costs 10,000
Miscellaneous 10,000
TOTAL $ 217,000
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ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the issuance and sales of our securities without registration during the past three years. No such sales involved the use of an underwriter and no commissions were paid in connection with the sale of any securities.
On April 28, 1999, Moran Dome issued a total of 1,000,000 shares of its common
stock to ten members of David R. Mortenson & Associates in exchange for a
license to use a product called "Biocatalyst" for mining in Alaska. Each member
of David R. Mortenson & Associates was an accredited investor. The issuance of
the shares was exempt from registration under Rule 504 and Rule 506 of
Regulation D under Sections 3(b) and 4(2), respectively, of the Act. The
following members of David R. Mortenson & Associates purchased the securities:
David R. Mortenson; Terry Fowler; Joshua J. Mortenson; Laurent R. Barbudaux;
Marie M. Charles; C.E. Kaiser; Ron Donovan Hinton Jr.; James R. Collins, D.V.M.;
Jock R. Collins, D.V.M.; Joshua D. Smetzer.
On April 1, 2000, Moran Dome issued 8,000,000 shares of its common stock to the trustees of The Better Block Trust. The Shares were issued pursuant to a share and option purchase agreement with Kelvin Claney, Robin Jan Claney and William Ainslie Reece, in their capacity as trustees of The Better Blocks Trust, which owned or controlled all of the equity interest in Windowshoppc.com Limited, R.J.M. Ventures Limited and Better Blocks International Limited. Under the
II-1
Agreement, the Company purchased all of the equity interest in Windowshoppc.com Limited, an option to purchase all of the equity in Better Blocks International Limited and obtained a license to purchase all of the assets owned by Better Blocks International Limited. The option exercise price is the issuance of another 500,000 shares of the Company's stock. The sale of shares was exempt from registration under Regulation S of the Act, Rule 506 of Regulation D under the Act and Section 4(2) under the Act.
On October 15, 2000, we concluded a private placement offering of our common stock. On completion of the offering, a total of 149,500 shares were issued to accredited investors at $2.00 per share for total proceeds of $299,000. The offer and sale of stock was exempt from registration under Rule 504 and Rule 506 of Regulation D under Sections 3(b) and 4(2), respectively, of the Act. 116,500 shares, or $233,000 of these sales, were also exempt under Regulation S under the Act, due to the foreign nationality of the relevant purchasers. The following investors purchased securities: Ian A. Aldred, 7,500 shares; Ellen D. Briggs, 2,500 shares; Lesley Gail Carew, 2,500 shares; Kelvin Claney, 20,000 shares; The Colleen Claney Family Trust, 12,500 shares; Dagger Nominees Limited, 15,000 shares; Arturo and Ma. Emilia Dazu Dimayuga, 2,000 shares; Paul Farmer, 1,000 shares; Irvin Jerold Gross, 1,000 shares; Stephen James Jarvis, 25,000 shares; David Chow Yum Kwan, 20,000 shares; D.N. Lawson, 2,500 shares; Region South Ventures Limited, 30,000 shares; SAS Group, Inc., 5,000 shares; Kathleen Sellers, 1,000 shares; Warren Scott Wilson, 1,000 shares; Susan R. Yeager, 1,000 shares.
On September 28, 2001, we granted options to purchase up to 1,475,000 shares of our common stock to various directors, executives and employees pursuant to our 2001 Stock Option Plan. We granted 280,000 of those options at an option exercise price of $0.50 per share and 1,195,000 at an option exercise price of $2.00 per share. The offer and sale of the options was exempt from registration under Rule 701 under the Act. If Rule 701 under the Act is not available as an exemption, we believe the offer and sale of the options was exempt under Rule 506 of Regulation D under the Act and Section 4(2) under the Act. In addition, the offer and sale of 60,000 options granted with an exercise price of $0.50 per share and 100,000 options granted at $2.00 per share were also exempt under Regulation S under the Act, due to the foreign nationality of the relevant purchaser. We granted the options to the following persons: Keith Smith, 70,000 options at $0.50 and 175,000 options at $2.00; Louis Basense, 20,000 options at $0.50 and 150,000 options at $2.00; Richard Pitera, 20,000 options at $0.50 and 150,000 options at $2.00; Thomas Crosby, 60,000 options at $0.50 and 100,000 options at $2.00; William Flohr, 20,000 options at $2.00; Mark Solley, 40,000 options at $0.50 and 150,000 options at $2.00; Greg LaRoza, 50,000 options at $0.50 and 300,000 options at $2.00; Thomas Woolsey, 20,000 options at $0.50 and 150,000 options at $2.00.
REPORTS TO STOCKHOLDERS
We plan to furnish our stockholders with an annual report for each fiscal year containing financial statements audited by its independent auditors. Additionally, we may, in our sole discretion, issue unaudited quarterly or other interim reports to its stockholders when we deem appropriate. We will be a reporting company under Section 12(g) of the Securities and Exchange Act of 1934, and will be required to file quarterly and annual reports and proxy statements. Any document we file may be read and copied at the Commission's Public Reference Room located at 450 Fifth Street NW, Washington DC 20549. Please call the Commission at 1-800-SEC-0330 for further information about the public reference rooms. Our filings with the Commission are also available to the public from the Commission's website at http://www.sec.gov.
ITEM 27. EXHIBITS
The following Exhibits are attached to this registration statement:
1.1 Share and Co-Sale Agreement*
2.1 Share and Option Purchase Agreement
3.1 Amended and Restated Articles of Incorporation
3.2 Amended and Restated Bylaws
3.3 First Amendment to Amended and Restated Bylaws
4.1 Specimen Share Certificate
5.1 Opinion of Ogden Murphy Wallace, P.L.L.C.
10.1 Manufacturing, Marketing and Royalty Agreement with Omega 5
Technologies
10.2 Stock Option Plan
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II-2
10.3 Promissory Note made by Moran Dome Exploration Inc. payable to
the Trustees of The Better Blocks Trust, in the amount of
$590,723.27
10.4 Extension of Promissory Note dated August 23, 2001, by and between
the Trustees of The Better Blocks Trust and International
Commercial Television Inc.
10.5 Independent Sales Representative Agreement between International
Commercial Television Inc. and Dimensional Marketing Concepts, Inc.
10.6 Assignment of Trademark by Dimensional Marketing Concepts, Inc.
21.1 Subsidiaries of International Commercial Television Inc.
23.1 Consent of Moore Stephens Frazer and Torbet, LLP
23.2 Consent of Ogden Murphy Wallace, P.L.L.C. (see Exhibit 5.1)
23.3 Consent of Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
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* To be filed by subsequent amendment.
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) To the extent we have brokers or agents assist with the distribution of this offering, to provide to such brokers or agents at the closing or closings specified in our agreements with them certificates in such denominations and registered in such names as required by the brokers or agents to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the provisions described above in Item 24, or otherwise, the small business issuer has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction of the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act, to treat
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer pursuant to Rule 424(b)(1), or
(4), or 497(h) under the Securities Act as part of this registration statement
as of the time the SEC declared it effective.
(4) For purposes of determining any liability under the Securities Act, to treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Lawrence, State of Kansas, on the 1 day of October, 2001.
INTERNATIONAL COMMERCIAL TELEVISION INC.
By: /s/ Thomas K. Woolsey ------------------------------------- Thomas K. Woolsey, President |
In accordance with the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates stated.
/s/ Thomas K. Woolsey Date: 10-1-01
----------------------------------------------- -------------------------
Thomas K. Woolsey, President, Secretary and
Director
/s/ Kelvin Claney Date: October 1, 2001
----------------------------------------------- -------------------------
Kelvin Claney, Chief Executive Officer,
Treasurer and Director
/s/ Keith E. Smith Date: October 3, 2001
----------------------------------------------- -------------------------
Keith E. Smith, Chief Financial Officer
/s/ Stephen J. Jarvis Date: 10-1-2001
----------------------------------------------- -------------------------
Stephen J. Jarvis, Director
/s/ William R. Flohr Date: 11/1/01 [sic]
----------------------------------------------- -------------------------
William R. Flohr, Director
/s/ Louis J. Basenese Date: 10/1/01
----------------------------------------------- -------------------------
Louis J. Basenese, Director
/s/ Richard Pitera Date: 9/30/01
----------------------------------------------- -------------------------
Richard Pitera, Director
/s/ Thomas Crosby Date: Oct. 1, 2001
----------------------------------------------- -------------------------
Thomas Crosby, Director
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
1.1 Share and Co-Sale Agreement*
2.1 Share and Option Purchase Agreement
3.1 Amended and Restated Articles of Incorporation
3.2 Amended and Restated Bylaws
3.3 First Amendment to Amended and Restated Bylaws
4.1 Specimen Share Certificate
5.1 Opinion of Ogden Murphy Wallace, P.L.L.C.
10.1 Manufacturing, Marketing and Royalty Agreement with Omega 5
Technologies
10.2 Stock Option Plan
10.3 Promissory Note made by Moran Dome Exploration Inc. payable to
the Trustees of The Better Blocks Trust, in the amount of
$590,723.27
10.4 Extension of Promissory Note dated August 23, 2001, by and between
the Trustees of The Better Blocks Trust and International
Commercial Television Inc.
10.5 Independent Sales Representative Agreement between International
Commercial Television Inc. and Dimensional Marketing Concepts, Inc.
10.6 Assignment of Trademark by Dimensional Marketing Concepts, Inc.
21.1 Subsidiaries of International Commercial Television Inc.
23.1 Consent of Moore Stephens Frazer and Torbet, LLP
23.2 Consent of Ogden Murphy Wallace, P.L.L.C. (see Exhibit 5.1)
23.3 Consent of Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
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* To be filed by subsequent amendment.
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SHARE AND OPTION PURCHASE AGREEMENT
THIS SHARE AND OPTION PURCHASE AGREEMENT (this "Agreement") is made and entered into effective as of the 1st day of April 2000 (the "Effective Date") by and between Kelvin John Claney, Robin Jan Marney and William Ainslie Reece (collectively "Trustee"), in their capacity as trustees of The Better Block Trust created by Deed dated 1 January 1994, Moran Dome Explorations, Inc., a Nevada corporation ("Buyer"), and, solely as to Section 1.9 hereof, Better Blocks International Limited.
RECITALS
A. Trustee desires to sell certain stock, which affords ownership of companies that own certain assets, including an infomercial production and know-how related thereto, in accordance with the terms and conditions of this Agreement.
B. Trustee desires to sell an option to purchase certain other stock, which affords ownership of a company that own certain assets, including the tooling and intellectual property relating to the product known as "Better Blocks" and know-how related thereto, in accordance with the terms and conditions of this Agreement.
C. Buyer desires to purchase such stock and option in accordance with the terms and conditions hereof.
NOW THEREFORE, in consideration of the mutual promises contained in this Agreement, the parties agree as follows:
1. PURCHASE AND SALE OF SHARES AND OPTION
1.1.1 The "Shares" consist of equity interests in Windowshop PC.Com Limited ("WSL"), R.J.M. Ventures Limited ("RJML") and Better Blocks International Limited ("BBI") (WSL, RJML and BBI known collectively as the "Companies"), all of which are limited liability companies formed under the Laws of New Zealand. The Shares of WSL and RJML shall be known as the "Purchased Shares" and the Shares of BBI shall be known as the "Optioned Shares"; and as the case may warrant, Shares of specific Companies may be referred to as "WSL Shares", "RJML Shares" or "BBI Shares".
1.1.2 Trustee represents and warrants to Buyer that:
a. The Shares constitute all of the issued and authorized capital of the Companies;
b. They are duly authorized to sell the Shares pursuant to the terms and conditions of this Agreement, and that all consents, resolutions and approvals necessary for the transactions contemplated by this Agreement to be consummated are in place;
c. They have good and marketable title to the Shares, and upon consummation of the transactions contemplated by this Agreement, Buyer will hold title to the Shares free and clear of any liens or encumbrances; and
d. Upon consummation of the transactions contemplated by this Agreement, by virtue of owning the Shares, Buyer will control the IP Assets, all of which are owned by the Companies.
1.2.1 All video productions and methods of production and the contracts and rights to sell and market related thereto (the "Production Rights") described in Schedule 1.2.1.
1.2.2 All patents, patent application, copyrights, trade secrets, trademarks, trade names and other proprietary rights based, in whole or in part, or included in or covering the Production Rights, or any portion thereof (the "Proprietary Rights"), and more specifically defined and described in Schedule 1.2.2.
1.2.3 All inventory of the Production Rights or any portions thereof (the "Inventory"), more specifically defined and described in Schedule 1.2.3.
1.2.4 All development rights to the Production Rights, including but not limited to, all OEM and VAR rights (the "Development Rights").
1.2.5 All hard assets relating to and necessary to run the Production Rights or any portions thereof (the "Hard Assets") more specifically defined and described in Schedule 1.2.5.
1.2.6 All licenses, contracts, permits and approvals relating to or affecting the Production Rights (the "Licenses") more specifically defined and described in Schedule 1.2.6.
The IP Assets owned by virtue of or acquired in connection with the purchase of the Purchased Shares shall be known as the "Acquired IP Assets", and the IP Assets owned by BBI or provided by Trustee or BBI in connection with their obligations under this Agreement shall be known as the "Licensed IP Assets".
the Licensed IP Assets shall, except as disclosed in Schedule 1.3, at the time of the closing of the Option (as defined below) be free and clear of all obligations, security interests, liens, infringements and encumbrances whatsoever.
1.7.1 The Companies shall not sell, license, contract, commit or otherwise encumber IP Assets;
1.7.2 The Companies shall carry and continue in force and effect through Closing, fire and extended coverage insurance on the IP Assets as is in existence as of the Effective Date;
1.7.3 The Companies shall not amend or modify any agreement to which it is a party that relates in any way to IP Assets, without Buyer's prior written consent;
1.7.4 The Companies and their officers, employees or contractors shall use their best efforts to preserve the IP Assets in good and working order. The Companies shall preserve for Buyer the good will and business relationships they have with customers relating to IP Assets or any portion thereof.
1.8.1 The Option shall have an initial term of ten (10) years.
During the first five (5) years of the Option term, the Option may be exercised by mutual agreement between Buyer and Trustee. At the end of the first five years, and at the end of each year thereafter during which Trustee extends the term of the Option pursuant to this sentence, Trustee may extend the term of the Option by one year. During any such year during which Trustee extended the term of the Option pursuant to the preceding sentence, the Option may be exercised by mutual agreement between Buyer and Trustee. Once less than five (5) years remain in the term of the Option, Buyer may exercise the Option in its sole discretion. Buyer may terminate the Option term at any time in its sole discretion.
1.8.2 The exercise price for the sale of the Optioned Shares to Buyer is Five Hundred Thousand (500,000) shares of Buyer's stock and shall by satisfied by Buyer's issuance of Five Hundred Thousand (500,000) shares of its stock to Trustee.
1.8.3 To commence the closing of the exercise of the Option, Buyer shall deliver to Trustee a notice specifying the time and place at which Trustee shall close the Option (the "Option Closing"). At the Option Closing, Trustee shall deliver to Buyer with respect to the Optioned Shares and Licensed IP Assets those items called for, mutatis mutandi, by Section 4.1, and Buyer shall deliver to Trustee with respect to the Optioned Shares and Licensed IP Assets those items called for, mutatis mutandi, by Section 4.3.
1.8.4 At the Option Closing, except with respect to matters permitted by Buyer during the pendency of the BBI License, Trustee shall be deemed to restate, as of the date of the Option Closing and with respect to the Optioned Shares, the Licensed IP Assets and the Option Closing, the representations and warranties contained in Sections 1.1.2 and 2.1 through 2.11.
1.8.5 At the Option Closing, Buyer shall be deemed to restate, as of the date of the Option Closing and with respect to the Optioned Shares, the Licensed IP Assets and the Option Closing, the representations and warranties contained in Sections 3.1 and 3.2.
1.8.6 If Buyer terminates the Option term, or if the Option term expires before Buyer has exercised the Option, the consideration paid to Trustee under Section 1.4 in connection with the acquisition of the Option shall remain the property of Trustee.
1.9.1 Buyer shall have an exclusive worldwide license to all of the Licensed IP Assets, including without limitation rights to manufacture, market, distribute and provide services with respect thereto. No fee, royalty or payment other than those made under Sections 1.4 and 1.8 shall be due in connection with the BBI License. In this regard, BBI hereby acknowledges that it has received benefit in connection with its determination to enter into the BBI License.
1.9.2 Buyer shall have the right to further develop and enhance the Proprietary Rights contained in the Licensed IP Assets, provided that any such developments and enhancements shall become Licensed IP Assets and remain
the property of BBI. Buyer shall pay all fees and costs necessary to protect and preserve the Proprietary Rights contained in the Licensed IP Assets as and when they fall due.
1.9.3 Buyer may use or license the Licensed IP Assets in furtherance of its business in any manner Buyer sees fit, including without limitation granting sublicenses, distribution or marketing rights or any other subdivision of the rights granted to Buyer hereunder.
2. TRUSTEE'S REPRESENTATIONS AND WARRANTIES. Trustee represents and warrants to Buyer as follows:
order against Trustee that affects IP Assets in any way.
3. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer warrants and represent to Trustee as follows:
4. CLOSING OBLIGATIONS.
4.1.1 Documents of conveyance and transfer to Buyer of all of the
Shares.
4.1.2 Appropriate original instruments of consent or waiver
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executed by third parties with respect to all contract rights of the Companies being purchased by Buyer hereunder in order more fully to effect Buyer's use of and control over the IP Assets, including, without limitation, consents by all appropriate governmental agencies, if any.
4.1.3 Possession of the originals of all IP Assets and all copies
thereof; it being understood and agreed that no IP Assets or any portion thereof shall remain in the possession or control of Trustee after Closing.
4.1.4 True and correct copies of resolutions duly accepted by Trustee's governing body confirming this Agreement, authorizing and carrying out all transactions contemplated herein and the execution and delivery by Trustee of all instruments then or thereafter required to do so; said resolutions to be duly certified.
4.1.5 Such other instruments and documents as may be elsewhere herein required or reasonably requested by Buyer or its counsel.
4.1.6 A certificate signed by the authorized representative of Trustee, dated the date of Closing, certifying that all of Trustee's representations and warranties set forth in this Agreement continue to be true on the Closing Date as if originally made on such date, except to the extent otherwise expressly provided or permitted in this Agreement.
4.2.1 Execute and deliver to Buyer such instruments as may reasonably be required to carry out the intent and purpose of this Agreement.
4.2.2 Deliver to Buyer such other data, papers and information as may be requested by Buyer to assist Buyer in the use of IP Assets.
4.2.3 Transfer or cause the transfer to the Companies of any asset or right necessary to prevent Trustee from being in breach of its representation and warranty set forth in Section 2.11.
4.3.1 The Buyer Stock and the Purchase Note provided for herein.
4.3.2 True and complete copies of resolutions duly adopted by Buyer's Board duly certified by the Secretary of Buyer, which provide all necessary corporate authorization for the execution and carrying out of this Agreement and the provisions hereof.
4.3.3 A certificate signed by the President and the Secretary of Buyer, dated the date of Closing, certifying that all representations and warranties set forth in this Agreement continue to be true on the Closing Date as if originally made on such date and the fulfillment of the covenants and agreements as of the Closing.
5. MISCELLANEOUS.
any action to enforce the terms of this Agreement shall be in a federal or state court in King County, Washington.
5.2.1 If to Trustee: Reece & Co
Level 2
9 High Street
Auckland
New Zealand
Attention: W A Reece - Trustee
5.2.2 If to Buyer: Moran Dome Explorations, Inc
110 SE 4th Avenue
Suite 104
Delray Beach
Florida 33483
Attention: Tom Woolsey - President
5.2.3 With a copy to: Ogden Murphy Wallace, P.L.L.C.
1601 Fifth Avenue, Suite 2100
Seattle, WA 98101
Attn: Jim Vandeberg
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personal in nature and shall not be assignable by Trustee, and shall be assignable by Buyer only to any corporation resulting from the reorganization, merger or consolidation of Buyer with any other corporation or any corporation to which Buyer may sell all or substantially all of its assets, and it must be so assigned by Buyer to, and accepted as binding upon it by such other corporation, in connection with any such reorganization, merger, consolidation or sale.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their authorized representatives as of the date first written above.
BUYER: TRUSTEE:
MORAN DOME EXPLORATIONS, INC. Each UNDERSIGNED in their capacity as a
trustee of THE BETTER BLOCKS TRUST created
by Deed 1 January 1994
/s/ Thomas Woolsey
-----------------------------------
Thomas Woolsey /s/ Kelvin Claney
----------------------------------- -----------------------------------
[Print Name] Kelvin John Claney
Its: President /s/ Robin Jan Marney
-----------------------------------
Robin Jan Marney
/s/ William Ainslie Reece
-----------------------------------
William Ainslie Reece
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SOLELY AS TO SECTION 1.9:
BETTER BLOCKS INTERNATIONAL
LIMITED
By /s/ Colleen Claney --------------------------------- Its Director |
FORM OF
PROMISSORY NOTE
Seattle, Washington
____________ __, 2000 $500,000
FOR VALUE RECEIVED, the undersigned, two (2) years from the date hereof, promises to pay to the order of Kelvin John Claney, Robin Jan Marney and William Ainslie Reece, in their capacity as trustees of The Better Block Trust created by Deed dated 1 January 1994, the sum of Five Hundred Thousand Seven Hundred and Twenty Three Dollars and Twenty Seven Cents ($590,723.27), in legal tender of the United States with interest thereon at the rate specified below, compounded monthly from the date hereof.
Upon default, the holder may also increase the interest rate to a rate equal to four (4) percentage points greater than the rate otherwise provided in this note, and such interest rate shall apply until the note is fully paid. In addition, the holder may include any unpaid interest and late charges at the time of acceleration as part of the amount due under this note and subject to interest at the higher rate determined according to this paragraph.
The holder may employ attorneys or other agents to collect amounts due under this note if the undersigned is in default or to otherwise enforce the terms of this note and any agreement securing this note, and the undersigned agrees to pay all fees, costs and expenses incurred by the holder as a consequence of its default. Such fees, costs and expenses include attorneys' fees whether or not litigation is commenced and including any appeal, fees or
expenses incurred in any bankruptcy, receivership, or other insolvency proceedings, any anticipated post-judgment collection charges, and all other costs of collection, including court costs.
ORAL PROMISES TO FORGIVE PAYMENT OR TO FOREBEAR ENFORCEMENT OF PAYMENT ARE NOT ENFORCEABLE.
By: ______________________________
Its: _____________________________
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
The corporation does by these present restate its articles of incorporation as follows:
ARTICLE I
The name of the corporation is "International Commercial Television Inc."
ARTICLE II
2.1. Authorized Capital
The total number of shares that this corporation is authorized to issue is 120,000,000, consisting of 100,000,000 shares of Common Stock having a par value of $0.001 per share and 20,000,000 shares of Preferred Stock having a par value of $0.001 per share. The Common Stock is subject to the rights and preferences of the Preferred Stock as set forth below.
2.2. Issuance of Preferred Stock by Class and in Series
The Preferred Stock may be issued from time to time in one or more classes and one or more series within such classes in any manner permitted by law and the provisions of these Articles of Incorporation, as determined from time to time by the Board of Directors and stated in the resolution or resolutions providing for its issuance, prior to the issuance of any shares. The Board of Directors shall have the authority to fix and determine and to amend the voting powers, designations, preferences, limitations, restrictions and relative rights of the shares (including, without limitation, such matters as dividends, redemption, liquidation, conversion and voting) of any class or series that is wholly unissued or to be established. Unless otherwise specifically provided in the resolution establishing any class or series, the Board of Directors shall further have the authority, after the issuance of shares of a class or series
whose number it has designated, to amend the resolution establishing such class or series to decrease the number of shares of that class or series, but not below the number of shares of such class or series then outstanding.
ARTICLE III
The purpose of this corporation is to engage in any business, trade or activity that may lawfully be conducted by a corporation organized under the law of the state of Nevada (hereinafter, "applicable corporate law") and to engage in any and all such activities as are incidental or conducive to the attainment of the foregoing purpose or purposes.
ARTICLE IV
Except as may be authorized pursuant to Section 2.2 of Article II, no preemptive rights shall exist with respect to shares of stock or securities convertible into shares of stock of this corporation.
ARTICLE V
The right to cumulate votes in the election of Directors shall not exist with respect to shares of stock of this corporation.
ARTICLE VI
6.1. Number of Directors
The Board of Directors shall be composed of not less than one nor more than six Directors. The specific number of Directors shall be set by resolution of the Board of Directors or, if the Directors in office constitute fewer than a quorum of the Board of Directors, by the affirmative vote of a majority of all the Directors in office. The number of Directors of this corporation may be increased or decreased from time to time in the manner provided herein, but no decrease in the number of Directors shall have the effect of shortening the term of any incumbent Director.
6.2. Classification of Directors
The Directors shall be divided into three classes, with each class to be as nearly equal in number as possible, as specified by resolution of the Board of Directors or, if the Directors in office constitute fewer than a quorum of the Board of Directors, by the affirmative vote of a majority of all the Directors in office. The term of office of Directors of the first class shall expire at the first annual meeting of shareholders after their election. The term of office of Directors of the second class shall expire at the second annual meeting after their election. The term of office of Directors of the third class shall expire at the third annual meeting after their election. At each annual meeting after such classification, a number of Directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the third succeeding annual meeting. Absent his or her death, resignation or removal, a Director shall continue to serve despite the expiration of the Director's term until his or her successor shall have been elected and qualified or until there is a decrease in the number of Directors.
6.3. Removal of Directors
The shareholders may remove one or more Directors with or without cause, but only at a special meeting called for the purpose of removing the Director or Directors, and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the Director or Directors.
6.4. Vacancies on Board of Directors
If a vacancy occurs on the Board of Directors, including a vacancy resulting from an increase in the number of Directors, the Board of Directors may fill the vacancy, or, if the Directors in office constitute fewer than a quorum of the Board of Directors, they may fill the vacancy by the affirmative
vote of a majority of all the Directors in office. The shareholders may fill a vacancy only if there are no Directors in office.
ARTICLE VII
This corporation reserves the right to amend or repeal any of the provisions contained in these Articles of Incorporation in any manner now or hereafter permitted by the applicable corporate law, and the rights of the shareholders of this corporation are granted subject to this reservation.
ARTICLE VIII
The Board of Directors shall have the power to adopt, amend or repeal the Bylaws of this corporation, subject to the power of the shareholders to amend or repeal such Bylaws. The shareholders shall also have the power to amend or repeal the Bylaws of this corporation and to adopt new Bylaws.
ARTICLE IX
9.1. Shareholder Actions
Subject to any limitations imposed by applicable securities laws, any action required or permitted to be taken at a shareholders meeting may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
9.2. Number of Votes Necessary to Approve Actions
Whenever applicable corporate law permits a corporation's articles of incorporation to specify that a lesser number of shares than would otherwise be required shall suffice to approve an action by shareholders, these Articles of
Incorporation hereby specify that the number of shares required to approve such an action shall be such lesser number.
9.3. Special Meetings of Shareholders
So long as this corporation is a public company, except as may be authorized pursuant to Section 2.2 of Article II, special meetings of the shareholders of the corporation for any purpose may be called at any time by the Board of Directors or, if the Directors in office constitute fewer than a quorum of the Board of Directors, by the affirmative vote of a majority of all the Directors in office, but such special meetings may not be called by any other person or persons.
9.4. Quorum for Meetings of Shareholders.
Except with respect to any greater requirement contained in these Articles of Incorporation or the applicable corporate law, one-third of the votes entitled to be cast on a matter by the holders of shares that, pursuant to the Articles of Incorporation or the applicable corporate law, are entitled to vote and be counted collectively upon such matter, represented in person or by proxy, shall constitute a quorum of such shares at a meeting of shareholders.
ARTICLE X
To the full extent that applicable corporate law, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the personal liability of Directors, a Director of this corporation shall not be liable to this corporation or its shareholders for monetary damages for conduct as a Director. Any amendments to or repeal of this Article X shall not adversely affect any right or protection of a Director of this corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment or repeal.
ARTICLE XI
11.1. Indemnification.
The corporation shall indemnify its directors to the full extent permitted by applicable corporate law now or hereafter in force. However, such indemnity shall not apply if the director did not (a) act in good faith and in a manner the director reasonably believed to be in or not opposed to the best interests of the corporation, and (b) with respect to any criminal action or proceeding, have reasonable cause to believe the director's conduct was unlawful. The corporation shall advance expenses for such persons pursuant to the terms set forth in the Bylaws, or in a separate Board resolution or contract.
11.2. Authorization.
The Board of Directors may take such action as is necessary to carry out these indemnification and expense advancement provisions. It is expressly empowered to adopt, approve, and amend from time to time such Bylaws, resolutions, contracts, or further indemnification and expense advancement arrangements as may be permitted by law, implementing these provisions. Such Bylaws, resolutions, contracts or further arrangements shall include but not be limited to implementing the manner in which determinations as to any indemnity or advancement of expenses shall be made. The Board of Directors shall have further power to authorize the corporation to indemnify its officers, employees or agents (whether serving the corporation directly or serving at its request) to the full extent permitted by applicable corporate law now or hereafter in force.
11.3. Insurance.
The corporation shall have the power, exercised by authority of the Board of Directors, to purchase and maintain insurance on behalf of any person to whom
indemnity is provided under or through this Article XI to the full extent permitted by applicable corporate law now or hereafter in force.
11.4. Effect of Amendment.
No amendment or repeal of this Article shall apply to or have any effect on any right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.
IN WITNESS WHEREOF, the undersigned, President of the corporation, for the purpose of amending and restating the corporation's Articles of Incorporation, hereby makes, files and records these Amended and Restated Articles of Incorporation of INTERNATIONAL COMMERCIAL TELEVISION INC., formerly known as MORAN DOME EXPLORATIONS, INC., and certifies that it is the act and deed of the corporation and that the facts stated herein are true.
/s/ Tom Woolsey Date: 3/2/01
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Tom Woolsey, President
/s/ Tom Woolsey Date: 3/2/01
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Tom Woolsey, Secretary
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AMENDED AND RESTATED
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
TABLE OF CONTENTS
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SECTION 1 - OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2 - SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Special Meetings. . . . . . . . . . . . . . . . . . . . . . 4
2.3 Meetings by Communications Equipment. . . . . . . . . . . 4
2.4 Date, Time and Place of Meetings. . . . . . . . . . . . 4
2.5 Notice of Meeting. . . . . . . . . . . . . . . . . . . . . 4
2.6 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . 5
2.7 Fixing of Record Date for Determining Shareholders . . 5
2.8 Voting Record . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 Manner of Acting . . . . . . . . . . . . . . . . . . . . . 6
2.11 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.12 Voting Shares . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 Voting for Directors . . . . . . . . . . . . . . . . . . . 7
2.14 Action by Shareholders Without a Meeting. . . . . . . . 7
SECTION 3 - BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . 8
3.1 General Powers. . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Number, Classification and Tenure . . . . . . . . . . . . 8
3.3 Annual and Regular Meetings . . . . . . . . . . . . . . . 8
3.4 Special Meetings. . . . . . . . . . . . . . . . . . . . . . 9
3.5 Meetings by Communications Equipment. . . . . . . . . . . 9
3.6 Notice of Special Meetings. . . . . . . . . . . . . . . . 9
3.6.1 Personal Delivery . . . . . . . . . . . . . . . . 9
3.6.2 Delivery by Mail . . . . . . . . . . . . . . . . 9
3.6.3 Delivery by Private Carrier . . . . . . . . . . 9
3.6.4 Facsimile Notice. . . . . . . . . . . . . . . . . 10
3.6.5 Delivery by Telegraph. . . . . . . . . . . . . . 10
3.6.6 Oral Notice . . . . . . . . . . . . . . . . . . . 10
3.7 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . 10
3.7.1 In Writing. . . . . . . . . . . . . . . . . . . . 10
3.7.2 By Attendance . . . . . . . . . . . . . . . . . . 10
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3.8 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.9 Manner of Acting . . . . . . . . . . . . . . . . . . . . . 11
3.10 Presumption of Assent. . . . . . . . . . . . . . . . . . . 11
3.11 Action by Board or Committees Without a Meeting . . . 11
3.12 Resignation. . . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Executive and Other Committees. . . . . . . . . . . . . . 12
3.15.1 Creation of Committees. . . . . . . . . . . . . 12
3.15.2 Authority of Committees . . . . . . . . . . . . 12
3.15.3 Minutes of Meetings . . . . . . . . . . . . . . 13
3.15.4 Removal . . . . . . . . . . . . . . . . . . . . . 13
3.16 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4 - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Appointment and Term . . . . . . . . . . . . . . . . . . . 13
4.2 Resignation. . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4 Contract Rights of Officers . . . . . . . . . . . . . . . 14
4.5 Chairman of the Board . . . . . . . . . . . . . . . . . . 14
4.6 Chief Executive Officer. . . . . . . . . . . . . . . . . . 14
4.7 President. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.8 Vice President. . . . . . . . . . . . . . . . . . . . . . . 14
4.9 Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.10 Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.11 Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5 - CONTRACTS, LOANS, CHECKS AND DEPOSITS. . . . . . . . . 15
5.1 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Loans to the Corporation. . . . . . . . . . . . . . . . . 15
5.3 Checks, Drafts, Etc. . . . . . . . . . . . . . . . . . . . 16
5.4 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6 - CERTIFICATES FOR SHARES AND THEIR TRANSFER. . . . . . 16
6.1 Issuance of Shares . . . . . . . . . . . . . . . . . . . . 16
6.2 Certificates for Shares. . . . . . . . . . . . . . . . . . 16
6.3 Stock Records . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Restriction on Transfer. . . . . . . . . . . . . . . . . . 16
6.5 Transfer of Shares . . . . . . . . . . . . . . . . . . . . 17
6.6 Lost or Destroyed Certificates. . . . . . . . . . . . . . 17
SECTION 7 - BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . 17
SECTION 8 - ACCOUNTING YEAR . . . . . . . . . . . . . . . . . . . . . 18
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SECTION 9 - SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 10 - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 18
10.1 Right to Indemnification . . . . . . . . . . . . . . . . . 18
10.2 Restrictions on Indemnification. . . . . . . . . . . . . . 19
10.3 Advancement of Expenses. . . . . . . . . . . . . . . . . . 19
10.4 Right of Indemnitee to Bring Suit . . . . . . . . . . . 20
10.5 Nonexclusivity of Rights . . . . . . . . . . . . . . . . . 20
10.6 Insurance, Contracts and Funding. . . . . . . . . . . . . 20
10.7 Identification of Employees and Agents of the Corporation . 20
10.8 Persons Serving Other Entities. . . . . . . . . . . . . . 21
SECTION 11 - LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . 21
SECTION 12 - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . 21
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BYLAWS
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SECTION 1. OFFICES
The principal office of the corporation shall be located at the principal place of business or such other place as the Board of Directors ("Board") may designate. The corporation may have such other offices as the Board may designate or as the business of the corporation may require.
SECTION 2. SHAREHOLDERS
2.1 ANNUAL MEETING
The annual meeting of the stockholders to elect Directors and transact such other business as may properly come before the meeting shall be held on a date not more than 180 days after the end of the corporation's fiscal year, such date and time to be determined by the Board.
2.2 SPECIAL MEETINGS
Special meetings of the stockholders of the corporation for any purpose may be called at any time by the Board of Directors or, if the Directors in office constitute fewer than a quorum of the Board of Directors, by the affirmative vote of a majority of all the Directors in office, but such special meetings may not be called by any other person or persons.
2.3 MEETINGS BY COMMUNICATIONS EQUIPMENT
Stockholders may participate in any meeting of the stockholders by any means of communication by which all persons participating in the meeting can hear each other during the meeting. Participation by such means shall constitute presence in person at a meeting.
2.4 DATE, TIME AND PLACE OF MEETING
Except as otherwise provided in these Bylaws, all meetings of stockholders, including those held pursuant to demand by stockholders, shall be held on such date and at such time and place designated by or at the direction of the Board.
2.5 NOTICE OF MEETING
Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be given by or at the direction of the Board, the Chairman of the Board, the President or the Secretary to each stockholder entitled to notice of or to vote at the meeting not less than 10 nor more than 60 days before the meeting, except that notice of a meeting to act on a plan of merger or share exchange, the sale, lease, exchange or other disposition of all or substantially all of the corporation's assets other than in the regular course of business or the dissolution of the corporation shall be given not less than 20 or more than 60 days before such meeting. If an annual or special stockholders' meeting is
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adjourned to a different date, time or place, no notice of the new date, time or place is required if they are announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed, notice of the adjourned meeting must be given to stockholders entitled to notice of or to vote as of the new record date.
Such notice may be transmitted by mail, private carrier, personal delivery, telegraph, teletype or communications equipment that transmits a facsimile of the notice. If those forms of written notice are impractical in the view of the Board, the Chairman of the Board, the President or the Secretary, written notice may be transmitted by an advertisement in a newspaper of general circulation in the area of the corporation's principal office. If such notice is mailed, it shall be deemed effective when deposited in the official government mail, first-class postage prepaid, properly addressed to the stockholder at such stockholder's address as it appears in the corporation's current record of stockholders. Notice given in any other manner shall be deemed effective when dispatched to the stockholder's address, telephone number or other number appearing on the records of the corporation. Any notice given by publication as herein provided shall be deemed effective five days after first publication.
2.6 WAIVER OF NOTICE
Whenever any notice is required to be given by an stockholder under the provisions of these Bylaws, the Articles of Incorporation or the Nevada Private Corporations Law, a waiver of notice in writing, signed by the person or persons entitled to such notice and delivered to the corporation, whether before or after the date and time of the meeting or before or after the action to be taken by consent is effective, shall be deemed equivalent to the giving of such notice. Further, notice of the time, place and purpose of any meeting will be deemed to be waived by any stockholder by attendance in person or by proxy, unless such stockholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting.
2.7 FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS
For the purpose of determining stockholders entitled (a) to notice of or to vote at any meeting of stockholders or any adjournment thereof, (b) to receive payment of any dividend, or (c) in order to make a determination of stockholders for any other purpose, the Board may fix a future date as the record date for any such determination. Such record date shall be not more than 60 days, and, in case of a meeting of stockholders, not less than 10 days, prior to the date on which the particular action requiring such determination is to be taken. If no record date is fixed for the determination of stockholders entitled to notice of or to vote a meeting, the record date shall be the day immediately preceding the date on which notice of the meeting is first given to stockholders. Such a determination shall apply to any adjournment of the meeting unless the Board fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. If no record date is set for the determination of stockholders entitled to receive payment of any stock, dividend or distribution (other than one involving a purchase, redemption or other acquisition of the corporation's shares), the record date shall be the date the Board authorizes the stock dividend or distribution.
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2.8 VOTING RECORD
At least 10 days before each meeting of stockholders, an alphabetical list of the stockholders entitled to notice of such meeting shall be made, arranged by voting group and by each class or series of shares, with the address of and number of shares held by each stockholder. This record shall be kept at the principal office of the corporation for 10 days prior to such meeting, and shall be kept open at such meeting, for the inspection of any stockholder or any stockholder's agent or attorney.
2.9 QUORUM
Except with respect to any greater requirement contained in the Articles of Incorporation or the Nevada Private Corporations Law, one-third of the votes entitled to be cast on a matter by the holders of shares that, pursuant to the Articles of Incorporation or the Nevada Private Corporations Law, are entitled to vote and be counted collectively upon such matter, represented in person or by proxy, shall constitute a quorum of such shares at a meeting of stockholders. If less than the required number of such votes are represented at a meeting, a majority of the votes so represented may adjourn the meeting from time to time. Any business may be transacted at a reconvened meeting that might have been transacted at the meeting as originally called, provided a quorum is present or represented at such meeting. Once a share is represented for any purpose at a meeting other than solely to object to holding the meeting or transacting business, it is deemed present for quorum purposes for the remainder of the meeting and any adjournment (unless a new record date is or must be set for the adjourned meeting), notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
2.10 MANNER OF ACTING
If a quorum is present, action on a matter other than the election of Directors shall be approved if the votes cast in favor of the action by the shares entitled to vote and be counted collectively upon such matter exceed the votes cast against such action by the shares entitled to vote and be counted collectively thereon, unless the Articles of Incorporation or the Nevada Private Corporations Law requires a greater number of affirmative votes. Whenever the Nevada Private Corporations Law permits a corporation's bylaws to specify that a lesser number of shares than would otherwise be required shall suffice to approve an action by stockholders, these Bylaws hereby specify that the number of shares required to approve such an action shall be such lesser number.
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2.11 PROXIES
As stockholder may vote by proxy executed in writing by the stockholder or by his or her attorney-in-fact or agent. Such proxy shall be effective when received by the Secretary or other officer or agent authorized to tabulate votes. A proxy shall become invalid 11 months after the date of its execution, unless otherwise provided in the proxy. A proxy with respect to a specified meeting shall entitle its holder to vote at any reconvened meeting following adjournment of such meeting but shall not be valid after the final adjournment.
2.12 VOTING SHARES
Except as provided in the Articles of Incorporation, each outstanding share entitled to vote with respect to a matter submitted to a meeting of stockholders shall be entitled to one vote upon such matter.
2.13 VOTING FOR DIRECTORS
Each stockholder entitled to vote in an election of Directors may vote, in person or by proxy, the number of shares owned by such stockholder for as many persons as there are Directors to be elected and for whose election such stockholder has a right to vote. Stockholders shall not have the right to cumulate their votes. Unless otherwise provided in the Articles of Incorporation, the candidates elected shall be those receiving the largest number of votes cast, up to the number of Directors to be elected.
2.14 ACTION BY STOCKHOLDERS WITHOUT A MEETING
Any action that may be or is required to be taken at a meeting of the stockholders may be taken without a meeting if one or more written consents describing the action taken shall be signed by stockholders holding of record or otherwise entitled to vote in the aggregate not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on the action were present and voted. The Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board. If not otherwise fixed by the Board, the record date for determining stockholders entitled to take action without a meeting is the date the first stockholder consent is delivered to the corporation. A stockholder may withdraw a consent only by delivering a written notice of withdrawal to the corporation prior to the time that consents sufficient to authorize taking the action have been delivered to the corporation. Every written consent shall bear the date of signature of each stockholder who signs the consent. A written consent is not effective to take the action referred to in the consent unless, within 60 days of the earliest dated consent delivered to the corporation, written consents signed by a sufficient number of stockholders to take action are delivered to the corporation. Unless the consent specifies a later effective date, actions taken by written consent of the stockholders are effective when (a) consents
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sufficient to authorize taking the action are in possession of the corporation and (b) the period of advance notice required by the Articles of Incorporation to be given to any nonconsenting or nonvoting stockholders has been satisfied. Any such consent shall be inserted in the minute book as if it were the minutes of a meeting of the stockholders.
SECTION 3. BOARD OF DIRECTORS
3.1 GENERAL POWERS
All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the Board, except as may be otherwise provided in these Bylaws, the Articles of Incorporation or the Nevada Private Corporations Law.
3.2 NUMBER, CLASSIFICATION AND TENURE
The Board of Directors shall be composed of not less than one nor more than six Directors. The specific number of Directors shall be set by resolution of the Board of Directors or, if the Directors in office constitute fewer than a quorum of the Board of Directors, by the affirmative vote of a majority of all the Directors in office. The number of Directors of this corporation may be increased or decreased from time to time in the manner provided by the Articles of Incorporation, but no decrease in the number of Directors shall have the effect of shortening the term of any incumbent Director. The Directors shall be divided into three classes, with each class to be as nearly equal in number as possible, as specified by resolution of the Board or, if the Directors in office constitute fewer than a quorum of the Board, by the affirmative vote of a majority of all the Directors in office. The term of office of Directors of the first class shall expire at the first annual meeting of stockholders after their election. The term of office of Directors of the second class shall expire at the second annual meeting after their election. The term of office of Directors of the third class shall expire at the third annual meeting after their election. At each annual meeting after such classification, a number of Directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the third succeeding annual meeting. Absent his or her death, resignation or removal, a Director shall continue to serve despite the expiration of the Director's term until his or her successor shall have been elected and qualified or until there is a decrease in the number of Directors. Directors need not be stockholders of the corporation or residents of the state of Nevada, and need not meet any other qualifications.
3.3 ANNUAL AND REGULAR MEETINGS
An annual Board meeting shall be held without notice immediately after and at the same place as the annual meeting of stockholders. By resolution the Board, or any committee designated by the Board, may specify the time and place for holding regular meetings without notice other than such resolution.
3.4 SPECIAL MEETINGS
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Special meetings of the Board or any committee designated by the Board may be called by or at the request of the Chairman of the Board, the President, the Secretary or, in the case of special Board meetings, any one-third or more of the Directors in office and, in the case of any special meeting of any committee designated by the Board, by its Chairman. The person or persons authorized to call special meetings may fix any place for holding any special Board or committee meeting called by them.
3.5 MEETINGS BY COMMUNICATIONS EQUIPMENT
Members of the Board or any committee designated by the Board may participate in a meeting of such Board or committee by, or conduct the meeting through the use of, any means of communication by which all Directors participating in the meeting can hear each other during the meeting. Participation by such means shall constitute presence in person at a meeting.
3.6 NOTICE OF SPECIAL MEETINGS
Notice of a special Board or committee meeting stating the place, day and hour of the meeting shall be given to a Director in writing or orally. Neither the business to be transacted at nor the purpose of any special meeting need be specified in the notice of such meeting.
3.6.1 PERSONAL DELIVERY
If notice is given by personal delivery, the notice shall be delivered to a Director at least two days before the meeting.
3.6.2 DELIVERY BY MAIL
If notice is delivered by mail, the notice shall be deposited in the official government mail at least five days before the meeting, properly addressed to a Director at his or her address shown on the records of the corporation, with postage thereon prepaid.
3.6.3 DELIVERY BY PRIVATE CARRIER
If notice is given by private carrier, the notice shall be dispatched to a Director at his or her address shown on the records of the corporation at least three days before the meeting.
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3.6.4 FACSIMILE NOTICE
If a notice is delivered by wire or wireless equipment that transmits a facsimile of the notice, the notice shall be dispatched at least two days before the meeting to a Director at his or her telephone number or other number appearing on the records of the corporation.
3.6.5 DELIVERY BY TELEGRAPH
If notice is delivered by telegraph, the notice shall be delivered to the telegraph company for delivery to a Director at his or her address shown on the records of the corporation at least three days before the meeting.
3.6.6 ORAL NOTICE
If notice is delivered by orally, by telephone or in person, the notice shall be personally given to the Director at least two days before the meeting.
3.7 WAIVER OF NOTICE
3.7.1 IN WRITING
Whenever any notice is required to be given to any Director under the provisions of these Bylaws, the Articles of Incorporation or the Nevada Private Corporations Law, a waiver thereof in writing, signed by the person or persons entitled to such notice and delivered to the corporation, whether before or after the date and time of the meeting, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any regular or special meeting of the Board or any committee designated by the Board need be specified in the waiver of notice of such meeting.
3.7.2 BY ATTENDANCE
A Director's attendance at or participation in a Board or committee meeting shall constitute a waiver of notice of such meeting, unless the Director at the beginning of the meeting, or promptly upon his or her arrival, objects to holding the meeting or transacting business at such meeting and does not thereafter vote for or assent to action taken at the meeting.
3.8 QUORUM
A majority of the number of Directors fixed by or in the manner provided in these Bylaws shall constitute a quorum for the transaction of business at any Board meeting but, if less than a majority are present at a meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice. A majority of the number of Directors composing any committee of the Board, as established and fixed by resolution of the Board, shall constitute a quorum for the transaction of business at any meeting of such committee but, if less than a majority are present at a meeting, a majority of
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such Directors present may adjourn the committee meeting from time to time without further notice.
3.9 MANNER OF ACTING
If a quorum is present when the vote is taken, the act of the majority of the Directors present at a Board or committee meeting shall be the act of the Board or such committee, unless the vote of a greater number is required by these Bylaws, the Articles of Incorporation or the Nevada Private Corporations Law.
3.10 PRESUMPTION OF ASSENT
A Director of the corporation who is present at a Board or committee meeting at which any action is taken shall be deemed to have assented to the action taken unless (a) the Director objects at the beginning of the meeting, or promptly upon the Director's arrival, to holding the meeting or transacting any business at such meeting, (b) the Director's dissent or abstention from the action taken is entered in the minutes of the meeting, or (c) the Director delivers written notice of the Director's dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation within a reasonable time after adjournment of the meeting. The right of dissent or abstention is not available to a Director who votes in favor of the action taken.
3.11 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING
Any action that could be taken at a meeting of the Board or of any committee created by the Board may be taken without a meeting if one or more written consents setting forth the action so taken are signed by each of the Directors or by each committee member either before or after the action is taken and delivered to the corporation. Action taken by written consent of Directors without a meeting is effective when the last Director signs the consent, unless the consent specifies a later effective date. Any such written consent shall be inserted in the minute book as if it were the minutes of a Board or a committee meeting.
3.12 RESIGNATION
Any Director may resign from the Board or any committee of the Board at any time by delivering either oral tender of resignation at any meeting of the Board or any committee, or written notice to the Chairman of the Board, the President, the Secretary or the Board. Any such resignation is effective upon delivery thereof unless the notice of resignation specifies a later effective date and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
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3.13 REMOVAL
At a meeting of stockholders called expressly for that purpose, one or more members of the Board, including the entire Board, may be removed with or without cause (unless the Articles of Incorporation permits removal for cause only) by the holders of the shares entitled to elect the Director or Directors whose removal is sought if the number of votes cast to remove the Director exceeds the number of votes cast not to remove the Director.
3.14 VACANCIES
If a vacancy occurs on the Board, including a vacancy resulting from an increase in the number of Directors, the Board may fill the vacancy, or, if the Directors in office constitute fewer than a quorum of the Board, they may fill the vacancy by the affirmative vote of a majority of all the Directors in office. The stockholders may fill a vacancy only if there are no Directors in office. A Director elected to fill a vacancy shall serve only until the next election of Directors by the stockholders.
3.15 EXECUTIVE AND OTHER COMMITTEES
3.15.1 CREATION OF COMMITTEES
The Board, by resolution adopted by the greater of a majority of the Directors then in office and the number of Directors required to take action in accordance with these Bylaws, may create standing or temporary committees, including an Executive Committee, and appoint members from its own number and invest such committees with such powers as it may see fit, subject to such conditions as may be prescribed by the Board, the Articles of Incorporation, these Bylaws and applicable law. Each committee must have one or more members, and the Board may designate one or more Directors as alternate members who may replace any absent or disqualified member at any committee meeting, with all such members and alternate members to serve at the pleasure of the Board.
3.15.2 AUTHORITY OF COMMITTEES
Each Committee shall have and may exercise all the authority of the Board to the extent provided in the resolution of the Board creating the committee and any subsequent resolutions adopted in like manner, except that no such committee shall have the authority to: (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the Articles of Incorporation or the Nevada Private Corporations Law to be submitted to stockholders for approval or (ii) adopt, amend or repeal any bylaw of the corporation.
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
3.15.3 MINUTES OF MEETINGS
All committees shall keep regular minutes of their meetings and shall cause them to be recorded n books kept for that purpose.
3.15.4 REMOVAL
The Board may remove any member of any committee elected or appointed by it but only by the affirmative vote of the greater of a majority of Directors then in office and the number of Directors required to take action in accordance with these Bylaws.
3.16 COMPENSATION
By Board resolution, Directors and committee members may be paid either expenses, if any, of attendance at each Board or committee meeting, or a fixed sum for attendance at each Board or committee meeting, or a stated salary as Director or a committee member, or a combination of the foregoing. No such payment shall preclude any Director or committee member from serving the corporation in any other capacity and receiving compensation therefore.
SECTION 4. OFFICERS
4.1 APPOINTMENT AND TERM
The officers of the corporation shall be those officers appointed from time to time by the Board or by any other officer empowered to do so. The Board shall have sole power and authority to appoint executive officers. As used herein, the term "executive officer" shall mean the President, the chief financial officer and any other officer designated by the Board as an executive officer. The Board or the President may appoint such other officers to hold office for such period, have such authority and perform such duties as may be prescribed. The Board may delegate to any other officer the power to appoint any subordinate officers and to prescribe their respective terms of office, authority and duties. Any two or more offices may be held by the same person. Unless an officer dies, resigns or is removed from office, he or she shall hold office until his or her successor is appointed.
4.2 RESIGNATION
Any officer may resign at any time by delivering written notice to the corporation. Any such resignation is effective upon delivery, unless the notice of resignation specifies a later effective date, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective.
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
4.3 REMOVAL
Any officer may be removed by the Board at any time, with or without cause. An officer or assistant officer, if appointed by another officer, may be removed at any time, with or without cause, by any officer authorized to appoint such officer or assistant officer.
4.4 CONTRACT RIGHTS OF OFFICERS
The appointment of an officer does not itself create contract rights.
4.5 CHAIRMAN OF THE BOARD
If appointed, the Chairman of the Board shall perform such duties as shall be assigned to him or her by the Board from time to time, and shall preside over meetings of the Board and stockholders unless another officer is appointed or designated by the Board or Chairman of such meetings.
4.6 CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall preside over meetings of the Board and stockholders in the absence of a Chairman of the Board, and, subject to the Board's control, shall supervise and control all the assets, business and affairs of the corporation. In general, the Chief Executive Officer shall perform all duties incident to the office of Chief Executive Officer and such other duties as are prescribed by the Board from time to time.
4.7 PRESIDENT
The President shall act under the direction of the Chief Executive Officer and shall perform such other duties incident to the office of President as from time to time may be assigned to the President by the Chief Executive Officer or by or at the direction of the Board. If no Secretary has been appointed, the President shall have responsibility for the preparation of minutes of meetings of the Board and stockholders and for authentication of the records of the corporation.
4.8 VICE PRESIDENT
In the event of the death of the President or his or her inability to act, the Vice President (or if there is more than one Vice President, the Vice President who was designated by the Board as the successor to the President, or if no Vice President is so designated, the Vice President first elected to such office) shall perform the duties of the President, except as may be limited by resolution of the Board, with all the powers of and subject to all the restrictions upon the President. Vice Presidents shall perform such other duties as from time to time may be assigned to them by the President or by or at the direction of the Board.
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
4.9 SECRETARY
If appointed, the Secretary shall be responsible for preparation of minutes of the meetings of the Board and stockholders, maintenance of the corporation records and stock registers, and authentication of the corporation's records, and shall in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the President or by or at the direction of the Board. In the absence of the Secretary, an Assistant Secretary may perform the duties of the Secretary.
4.10 TREASURER
If appointed, the Treasurer shall have charge and custody of and be responsible for all funds and securities of the corporation, receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in banks, trust companies or other depositories selected in accordance with the provisions of these Bylaws, and in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the President or by or at the direction of the Board. In the absence of the Treasurer, an Assistant Treasurer may perform the duties of the Treasurer.
4.11 SALARIES
The salaries of the officers shall be fixed from time to time by the Board or by any person or persons to whom the Board has delegated such authority. No officer shall be prevented from receiving such salary by reason of the fact that he or she is also a Director of the corporation.
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 CONTRACTS
The Board may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances.
5.2 LOANS TO THE CORPORATION
No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board. Such authority may be general or confined to specific instances.
5.3 CHECKS, DRAFTS, ETC.
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, or agent or agents, of the corporation and in such manner as is from time to time determined by resolution of the Board.
5.4 DEPOSITS
All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board may authorize.
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 ISSUANCE OF SHARES
No shares of the corporation shall be issued unless authorized by the Board, or by a committee designated by the Board to the extent such committee is empowered to do so.
6.2 CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be signed, either manually or in facsimile, by the President or any Vice President and by the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary and shall include on their face written notice of any restrictions that may be imposed on the transferability of such shares. All certificates shall be consecutively numbered or otherwise identified.
6.3 STOCK RECORDS
The stock transfer books shall be kept at the principal office at the corporation or at the office of the corporation's transfer agent or registrar. The name and address of each person to whom certificates for shares are issued, together with the class and number of shares represented by each such certificate and the date of issue thereof, shall be entered on the stock transfer books of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
6.4 RESTRICTION ON TRANSFER
Except to the extent that the corporation has obtained an opinion of counsel acceptable to the corporation that transfer restrictions are not required under applicable securities laws, or has otherwise satisfied itself that such transfer restrictions are not required, all certificates representing shares of the corporation shall bear a legend on the face of the certificate, or on the reverse of the certificate if a reference to the legend is contained on the face, which reads substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND NO INTEREST MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UDNER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, (B) THIS CORPORAZTION RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO THIS CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (C) THIS CORPORATION OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
6.5 TRANSFER OF SHARES
The transfer of shares of the corporation shall be made only on the stock transfer books of the corporation pursuant to authorization or document of transfer made by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney-in-fact authorized by power of attorney duly executed and filed with the Secretary of the corporation. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificates for a like number of shares shall have been surrendered and canceled.
6.6 LOST OR DESTROYED CERTIFICATES
In the case of a lost, destroyed or damaged certificate, a new certificate may be issued in its place upon such terms and indemnity to the corporation as the Board may prescribe.
SECTION 7. BOOKS AND RECORDS
The corporation shall:
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
(a) Keep as permanent records minutes of all meetings of its stockholders and the Board, a record of all actions taken by the stockholders or the Board without a meeting, and a record of all actions taken by a committee of the Board exercising the authority of the Board on behalf of the corporation.
(b) Maintain appropriate accounting records.
(c) Maintain a record of its stockholders, in a form that permits preparation of a list of the names and addresses of all stockholders, in alphabetical order by class of shares showing the number and class of shares held by each; provided, however, such record may be maintained by an agent of the corporation.
(d) Maintain its records in written form or in another form capable of conversion into written form within a reasonable time.
(e) Keep a copy of the following records at its principal office:
1. the Articles of Incorporation and all amendments thereto as
currently in effect;
2. these Bylaws and all amendments thereto as currently in effect;
3. the minutes of all meetings of stockholders and records of all
action taken by stockholders without a meeting, for the past three
years;
4. the corporation's financial statements for the past three years;
5. all written communications to stockholders generally within the
past three years;
6. a list of the names and business addresses of the current Directors
and officers; and
7. the most recent annual report delivered to the Nevada Secretary of
State.
SECTION 8. ACCOUNTING YEAR
The accounting year of the corporation shall be the calendar year, provided that if a different accounting year is at any time selected by the Board for purposes of federal income taxes, or any other purpose, the accounting year shall be the year so selected.
SECTION 9. SEAL
The Board may provide for a corporate seal that shall consist of the name of the corporation, the state of its incorporation, and the year of its incorporation.
SECTION 10. INDEMNIFICATION
10.1 RIGHT TO INDEMNIFICATION
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
Each person who was, is or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any threatened, pending or completed action, suit, claim or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereinafter "proceedings"), by reason of the fact that he or she is or was a Director or officer of the corporation or, that being or having been such a Director or officer of the corporation, he or she is or was serving at the request of the corporation as a Director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (hereafter an "indemnitee"), whether the basis of a proceeding is alleged action in an official capacity or in any other capacity while serving as such a Director, officer, partner, trustee, employee or agent, shall be indemnified and held harmless by the corporation against all losses, claims, damages (compensatory, exemplary, punitive or otherwise), liabilities and expenses (including attorneys' fees, costs, judgments, fines, ERISA excise taxes or penalties, amounts to be paid in settlement and any other expenses) actually and reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a Director or officer of the Company or a Director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise and shall insure to the benefit of the indemnitee's heirs, executors and administrators. Except as provided in subsection 10.4 of this Section with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if a proceeding (or part thereof) was authorized or ratified by the Board. The right to indemnification conferred in this Section shall be a contract right.
10.2 RESTRICTIONS ON INDEMNIFICATION
No indemnification shall be provided to any such indemnitee for acts or omissions of the indemnitee (a) if the indemnitee did not (i) act in good faith and in a manner the indemnitee reasonably believed to be in or not opposed to the best interests of the corporation, and (ii) with respect to any criminal action or proceeding, have reasonable cause to believe the indemnitee's conduct was unlawful or (b) if the corporation is otherwise prohibited by applicable law from paying such indemnification. Notwithstanding the foregoing, if Section 78.7502 or any successor provision of the Nevada Private Corporations Law is hereafter amended, the restrictions on indemnification set forth in this subsection 10.2 shall be as set forth in such amended statutory provision.
10.3 ADVANCEMENT OF EXPENSES
The right to indemnification conferred in this Section shall include the right to be paid by the corporation the expenses reasonably incurred in defending any proceeding in advance of its final disposition (hereinafter an "advancement of expenses"). An advancement of expenses shall be made upon delivery to the corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified.
10.4 RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under subsection 10.1 or 10.3 of this Section is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. If successful in whole or in part, in any such suit or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of the undertaking, the indemnitee shall be entitled to be paid also the expense of litigating such suit. The indemnitee shall be presumed to be entitled to indemnification under this Section upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, when the required undertaking has been tendered to the corporation) and thereafter the corporation shall have the burden of proof to overcome the presumption that the indemnitee is so entitled.
10.5 NONEXCLUSIVITY OF RIGHTS
The right to indemnification and the advancement of expenses conferred in this Section shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation or Bylaws of the corporation, general or specific action of the Board or stockholders, contract or otherwise.
10.6 INSURANCE, CONTRACTS AND FUNDING
The corporation may maintain insurance, at its expense, to protect itself and any Director, officer, partner, trustee, employee or agent of the corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any expense, liability or loss, whether or not the corporation would have the authority or right to indemnify such person against such expense, liability or loss under the Nevada Private Corporations Law or other law. The corporation may enter into contracts with any Director, officer, partner, trustee, employee or agent of the corporation in furtherance of the provisions of this section and may create a trust fund, grant a security interest, or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Section.
10.7 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
In addition to the rights of indemnification set forth in subsection 10.1, the corporation may, by action of the Board, grant rights to indemnification and advancement of expenses to employees and agents or any class or group of
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
employees and agents of the corporation (a) with the same scope and effect as the provisions of this Section with respect to indemnification and the advancement of expenses of Directors and officers of the corporation; (b) pursuant to rights granted or provided by the Nevada Private Corporations Law; or (c) as are otherwise consistent with law.
10.8 PERSONS SERVING OTHER ENTITIES
Any person who, while a Director or officer of the corporation, is or was serving (a) as a Director, officer, employee or agent of another corporation of which a majority of the shares entitled to vote in the election of its directors is held by the corporation or (b) as a partner, trustee or otherwise in an executive or management capacity in a partnership, joint venture, trust, employee benefit plan or other enterprise of which the corporation or a majority owned subsidiary of the corporation is a general partner or has a majority ownership shall conclusively be deemed to be so serving at the request of the corporation and entitled to indemnification and the advancement of expenses under subsections 10.1 and 10.3 of this Section.
SECTION 11. LIMITATION OF LIABILITY
To the full extent that the Nevada Private Corporations Law, as they exist on the date hereof or may hereafter be amended, permit the limitation or elimination of the liability of any person who would be considered an indemnitee under subsection 10.1 of Section 10, an indemnitee of the Company shall not be liable to the Company or its stockholders for monetary damages for conduct in the capacity based upon which such person is considered an indemnitee. Any amendments to or repeal of this Section 11 shall not adversely affect any right or protection of any indemnitee of the Company for or with respect to any acts or omissions of such indemnitee occurring prior to such amendment or repeal.
SECTION 12. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board, except that the Board may not repeal or amend any Bylaw that the stockholders have expressly provided, in amending or repealing such Bylaw, may not be amended or repealed by the Board. The stockholders may also alter, amend and repeal these Bylaws or adopt new Bylaws. All Bylaws made by the Board may be amended, repealed, altered or modified by the stockholders.
/s/ Tom Woolsey --------------------------------- Tom Woolsey, Secretary |
BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
FIRST AMENDMENT TO
AMENDED AND RESTATED BYLAWS
OF
INTERNATIONAL COMMERCIAL TELEVISION INC.
THIS FIRST AMENDMENT (the "Amendment") to the Amended and Restated Bylaws (the "Bylaws") of International Commercial Television Inc., a Nevada corporation (the "Corporation"), hereby amends the Corporation's Bylaws, and is in addition to, and does not replace, the Bylaws of the Corporation, except as otherwise provided herein.
a. The first sentence of Section 3.2 is amended to read as follows:
"The Board of Directors shall be composed of not less than one nor more than seven Directors."
Adopted by resolution of the Corporation's Board of Directors on the 18th day of September, 2001.
/s/ Thomas Woolsey --------------------------------- Thomas Woolsey, Secretary |
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF
NEVADA
NUMBER INTERNATIONAL COMMERCIAL TELEVISION INC. SHARES
Cusip No. 459273 10 4
AUTHORIZED COMMON STOCK: 100,000,000 SHARES PAR VALUE: $.001
This Certifies that
Is The Record Holder Of
Shares of INTERNATIONAL COMMERCIAL TELEVISION, INC. Common Stock Transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate Properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
[SEAL]
For Value Received, ___________________________ hereby sell, assign and transfer unto
_________________________________________________________________________ Shares of the Capital Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
_______________________________________________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated ______________
SIGNATURE GUARANTEED:
Signature(s) must be guaranteed by a firm which is a member of a registered national stock exchange, or by a bank (other than a savings bank) or a trust company. The guaranteeing firm must be a member of the Medallion Guarantee Program.
TRANSFER FEE WILL APPLY
OGDEN
MURPHY
WALLACE
P.L.L.C.
ATTORNEYS AT LAW
James L. Vandeberg
jvandeberg@omwlaw.com
October 1, 2001
Thomas Woolsey
International Commercial Television Inc.
Suite 203B Kimmen Center
2300 N. Dixie Highway
Boca Raton, Florida 33431-7657
Re: International Commercial Television Inc. - Registration Statement on Form SB-2
Dear Mr. Woolsey:
We have acted as counsel for International Commercial Television Inc., a Nevada corporation (the "Company"), in connection with the preparation of the registration statement on Form SB-2 (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Act of 1933, as amended (the "Act"), relating to the public offering (the "Offering") of up to 2,000,000 shares (the "Shares") of the Company's common stock, $0.001 par value (the "Common Stock"), 1,333,000 of which are to be sold by the Company and 667,000 of which are to be sold by selling shareholders. This opinion is being furnished pursuant to Item 601(b)(5) of Regulation S-B under the Act.
In rendering the opinion set forth below, we have reviewed (a) the Registration Statement and the exhibits thereto; (b) the Company's Amended and Restated Articles of Incorporation; (c) the Company's Amended and Restated Bylaws; (d) certain records of the Company's corporate proceedings as reflected in its minute books; and (e) such statutes, records and other documents as we have deemed relevant. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and conformity with the originals of all documents submitted to us as copies thereof. In addition, we have made such other examinations of law and fact as we have deemed relevant in order to form a basis for the opinion hereinafter expressed. Based upon the foregoing, we are of the opinion that the Shares, when sold pursuant to the terms contemplated by the Registration Statement, will be validly issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an Exhibit to the Registration Statement and to all references to this Firm under the caption "Interests of Named Experts and Counsel" in the Registration Statement.
Very truly yours,
OGDEN MURPHY WALLACE, P.L.L.C.
James L. Vandeberg
JLV/cam
Established 1902
1601 Fifth Avenue, Suite 2100 Seattle, WA 98101-1686
206.447.7000 Fax: 206.447.0215 Web: www.omwlaw.com
WINDOWSHOP PC.COM, LTD.
P.O. Box 7945
Boca Raton, FL 33431
January 5, 2001
Omega 5 Technologies, Inc.
501 Rennie Street
Hamilton, Ontario L8H 3P6
Canada
Re: Derma Wand Marketing and Royalty Arrangements
|
Ladies and Gentlemen:
This letter is intended to set forth the terms to which Omega 5 Technologies, Inc. ("Omega 5") and Windowshop PC.com, Ltd. ("Windowshop") have agreed regarding sales of the Derma Wand product.
Sales in the United States US $5.00/unit
Sales outside the United States US $2.50/unit
If Windowshop determines at any time that it cannot profitably market the product in the United States at the rate set forth above due to then-existing market conditions, it may request an interim reduction in such rate. Omega 5 may consider any such request and negotiate an appropriate rate reduction in good faith with Windowshop.
all defects in material and workmanship and shall conform to the manufacturer's specifications under normal use and service. The foregoing warranty shall not extend to the glass bulb incorporated within the product or to products which have been misused or neglected. The foregoing warranty shall be for the benefit of Windowshop and all direct and indirect purchasers of the product. As between the parties, Windowshop shall be responsible for shipping charges to and from Omega 5's facility in Hamilton, Ontario associated with returns of the product for repair or replacement under the foregoing warranty.
If the foregoing accurately describes the agreements we have reached, please so indicate by signing where indicated below.
Sincerely,
/s/ Kelvin Claney
--------------------------------
Kelvin Claney
General Manager
|
THE FOREGOING TERMS ARE ACCEPTED
AND AGREED IN THEIR ENTIRETY:
OMEGA 5 TECHNOLOGIES, INC.
By: /s/ Christopher Hatton Date: January 6, 2001
---------------------------------- ---------------------------
Christopher Hatton, President
|
Moran Dome Explorations, Inc. hereby acknowledges the provisions of this letter agreement, including, without limitation, Section 12 hereof, regarding its assumption of the rights and obligations of Windowshop PC.com, Ltd., hereunder in the event of the latter's dissolution.
MORAN DOME EXPLORATIONS, INC.
By: /s/ Thomas Woolsey 1/7/01
----------------------------------
Thomas Woolsey, President
|
INTERNATIONAL COMMERCIAL TELEVISION INC.
2001 STOCK OPTION PLAN
(a) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" means the Board of Directors of the Employer.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the Employer's common stock.
(e) "Committee" means the Board or the Committee appointed by the Board in accordance with Section 4(a).
(f) "Continuous Status as an Employee" means the absence of any interruption or termination of service as an Employee; Continuous Status as an Employee will not be considered interrupted in the case of sick leave, military leave, or any other approved leave of absence.
(g) "Consultant" means any person who is not an employee or officer of Employer who serves as a consultant of the Employer or any Subsidiary of the Employer that is hereafter organized or acquired by the Employer
(h) "Employee" means any person employed by or serving as an employee, officer or director of the Employer or any Subsidiary of the Employer that is hereafter organized or acquired by the Employer.
(i) "Employer" means International Commercial Television Inc., a Nevada corporation.
(j) "Nonemployee Director" has the meaning set forth in Rule 16b-3 under the 1934 Act.
(k) "Option" means a stock option granted under the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means any person who receives an Option.
(n) "Plan" means this 2001 Stock Option Plan.
(o) "Subsidiary" means any bank or other corporation of which not less than fifty percent (50%) of the voting shares are held by the Employer or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Employer or a Subsidiary.
(1) Determine the persons to whom Options are to be granted, the times of grant, and the number of shares to be represented by each Option;
(2) Interpret the Plan;
(3) Authorize any person or persons to execute and deliver Option agreements or to take any other actions deemed by the Committee to be necessary or appropriate to effectuate the grant of Options by the Committee; and
(4) Make all other determinations and take all other actions which the Committee deems necessary or appropriate to administer the Plan in accordance with its terms and conditions.
provided in Sections 6(f) and 6(g), at any time after the grant of an Option, then the Option terminates on the date of termination of status as an Employee.
Any adjustments as a result of a change in the Employer's capitalization will be made by the Committee, whose determination in that respect is final, binding and conclusive. Except as otherwise expressly provided in this Section 6(j), no Optionee shall have any rights by reason of any stock split or the payment of any stock dividend or any other increase or decrease in the number of shares of Common Stock. Except as otherwise expressly provided in this Section 6(j), any issue by the Employer of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect the number of shares or price of Common Stock subject to any Options, and no adjustments in Options shall be made by reason thereof. The grant of an Option under the Plan does not in any way affect the right or power of the Employer to make adjustments, reclassifications, reorganizations or changes of its capital or business structure.
As a condition to the exercise of an Option, the Employer may require the person exercising such Option to represent and warrant at the time of exercise that the shares of Common Stock are being purchased only for investment and without any present intention to sell or distribute such Common Stock if, in the opinion of counsel for the Employer, such a representation is required by any relevant provisions of law.
immediately following the transaction, those persons who were shareholders of the Employer immediately before the transaction control less than 50% of the voting power of the surviving organization (a "change of control event") or in the event of a proposed sale of substantially all of the assets of the Employer, or in the event of a proposed dissolution or liquidation of the Employer (collectively, "sale transaction") all outstanding Options that are not then fully exercisable become exercisable immediately before the date of closing of any change of control event or sale transaction or such earlier date as the Committee may fix.
* * * *
CERTIFICATE OF ADOPTION
I certify that the foregoing plan was adopted by the Board on February 26, 2001.
/s/ Tom Woolsey
--------------------------------
Tom Woolsey
Secretary
International Commercial Television Inc.
|
FORM OF
PROMISSORY NOTE
Seattle, Washington
____________ __, 2000 $590723.27
FOR VALUE RECEIVED, the undersigned, two (2) years from the date hereof, promises to pay to the order of Kelvin John Claney, Robin Jan Marney and William Ainslie Reece, in their capacity as trustees of The Better Block Trust created by Deed dated 1 January 1994, the sum of Five Hundred Thousand Seven Hundred and Twenty Three Dollars and Twenty Seven Cents ($590,723.27), in legal tender of the United States with interest thereon at the rate specified below, compounded monthly from the date hereof.
Upon default, the holder may also increase the interest rate to a rate equal to four (4) percentage points greater than the rate otherwise provided in this note, and such interest rate shall apply until the note is fully paid. In addition, the holder may include any unpaid interest and late charges at the time of acceleration as part of the amount due under this note and subject to interest at the higher rate determined according to this paragraph.
The holder may employ attorneys or other agents to collect amounts due under this note if the undersigned is in default or to otherwise enforce the terms of this note and any agreement securing this note, and the undersigned agrees to pay all fees, costs and expenses incurred by the holder as a consequence of its default. Such fees, costs and expenses include attorneys' fees whether or not litigation is commenced and including any appeal, fees or
expenses incurred in any bankruptcy, receivership, or other insolvency proceedings, any anticipated post-judgment collection charges, and all other costs of collection, including court costs.
ORAL PROMISES TO FORGIVE PAYMENT OR TO FOREBEAR ENFORCEMENT OF PAYMENT ARE NOT ENFORCEABLE.
By: /s/ Thomas Woolsey
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Thomas Woolsey
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[Print Name]
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EXTENSION OF PROMISSORY NOTE
DATED ON OR ABOUT APRIL 1, 2000
This Extension of Promissory Note Dated On or About April 1, 2000, is made as of the 23 day of August, 2001, by and between Kelvin John Claney, Robin Jan Marney and William Ainslie Reece, in their capacity as trustees of The Better Blocks Trust created by Deed dated 1 January 1994 ("Lender"), and International Commercial Television Inc. (formerly known as Moran Dome Exploration Inc.) ("Borrower").
WHEREAS, Borrower executed a Promissory Note on or about April 1, 2000, in the principal amount of $590,723.27 ("Promissory Note"). The Promissory Note is due two years from the date of execution; and
WHEREAS, Borrower has requested an extension of the term of the Promissory Note, and Lender has agreed to that extension on the terms and conditions set forth in this Extension of Promissory Note Dated On or About April 1, 2000.
NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereby agree that the term of the Promissory Note shall be extended to November 1, 2002.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, ALL OTHER TERMS AND CONDITIONS OF THE
PROMISSORY NOTE DATED ON OR ABOUT APRIL 1, 2000, SHALL REMAIN IN FULL FORCE AND
EFFECT.
LENDER: BORROWER:
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Each undersigned in their capacity as INTERNATIONAL COMMERCIAL
a trustee of THE BETTER BLOCKS TRUST TELEVISION INC.
created by Deed 1 January 1994
/s/ Kelvin Claney /s/ Thomas Woolsey
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Kelvin Claney, Trustee Thomas Woolsey, President
/s/ Roving Jan Marney
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Robin Jan Marney, Trustee
/s/ William Ainslie Reece
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William Ainslie Reece
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THIS INDEPENDENT SALES REPRESENTATIVE AGREEMENT (the "Agreement") is dated as of August 8, 2001 and is between INTERNATIONAL COMMERCIAL TELEVISION, INC., a Nevada corporation ("ICTV"), and DIMENSIONAL MARKETING CONCEPTS, INC., a Florida corporation ("DMC").
ICTV is engaged in the marketing and distribution of various consumer products, and DMC has expertise in managing the promotion, marketing and sale (collectively, "Promotion" and grammatical variants thereof) of consumer products into retail channels of trade. The parties wish to set forth herein the terms and conditions under which ICTV will engage DMC to perform certain services in connection with the Promotion of consumer products into retail channels of trade in the territory specified herein.
Accordingly, in consideration of the mutual promises and undertakings set forth herein, and intending to be legally bound hereby, the parties agree as follows:
all other activities for which it is responsible under this Agreement. Each party and its duly authorized representatives shall have the right, once per calendar year during the term of this Agreement and once during the subsequent year, to audit such records as are maintained by the other party to verify the commissions and other costs payable hereunder and otherwise assure compliance herewith. Each such audit shall require at least ten business days prior written notice and shall take place during the hours of 9:00 a.m. to 5:00 p.m., Monday through Friday, at the offices of the party whose records are being audited.
(and those of its designees and licensors) in the Marks. ICTV shall retain full control over all such actions, including, without limitation, the settlement thereof. In consideration of DMC's performance of the Services, ICTV shall pay DMC 15% of any and all funds actually recovered in connection therewith during the term of this Agreement.
term of, and for a period of 60 days following the date of termination of, this Agreement. The parties shall have no further rights or obligations hereunder upon termination of this Agreement except pursuant to those provisions hereof which expressly survive the termination of this Agreement.
The indemnitee shall cooperate with the indemnitor in the negotiation, compromise and defense of any such matter. The indemnitor shall be in charge of and control such negotiations, compromise and defense and shall have the right to select counsel with respect thereto, provided that the indemnitor shall promptly notify the indemnitee of all developments in the matter. Except as otherwise expressly provided below, neither the indemnitee nor the indemnitor may compromise or settle any such matter without the prior consent of the other, and neither shall be bound by any such compromise or settlement absent its prior consent (which shall not be unreasonably withheld or delayed). The preceding sentence shall not apply in any case in which the indemnitor fails or refuses to assume the defense of any matter as to which its indemnity obligations applies (whether or not litigation has formally been instituted). In any such case, the indemnitor shall be responsible for any compromise or settlement thereof reached by the indemnitee and all Liabilities attendant thereto. Without the prior written consent of the affected party, no such compromise settlement shall implicate rights, obligations or property beyond the subject matter of this Agreement.
shall timely inform ICTV of all such legal or governmental proceedings so that ICTV may attempt by appropriate legal means to limit such disclosure, and DMC shall further use its best efforts to limit the disclosure and maintain confidentiality to the maximum extent possible).
supplemental benefits of regular employees of ICTV or any of its affiliated companies. DMC shall bear all responsibility and liability for the payment of all federal, state and local income taxes due on money received from ICTV hereunder and filing all appropriate tax returns and other forms with respect thereto. Moreover, DMC shall be solely responsible for (i) payment of all compensation to its officers, employees and agents, (ii) all health and/or disability insurance, retirement benefits, and other welfare or pension benefits to which such personnel may be entitled and (iii) all employment taxes and withholding with respect to such personnel.
16. Miscellaneous.
If to ICTV: If to DMC: ------------ ----------- International Commercial Television, Dimensional Marketing Concepts, Inc. Inc. 110 S.W. 4th Avenue, Suite 104 5818 S.E. Federal Highway #57 Delray Beach, FL 33483-4569 Stuart, FL 34994 Attn: Kelvin Claney Attn: Louis Basenese FAX: (561) 482-0883 FAX: _________________________ |
Each party may by written notice given to the other(s) in accordance with this Agreement change the address to which notices to such party are to be delivered. Notices shall be deemed received (i) on the same day if delivered in person or by same-day courier, facsimile or electronic mail, (ii) on the next business day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the seventh business day if delivered by postal service, postage prepaid.
without reliance upon any promise, representation or warranty other than those expressly set forth herein.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Agreement as of the date first above written
INTERNATIONAL COMMERCIAL DIMENSIONAL MARKETING
TELEVISION, INC. CONCEPTS, INC.
By: /s/ Kelvin Claney By: /s/ Louis J. Basenese
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Name: Kelvin Claney Name Louis J. Basenese
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Title: Chief Executive Officer Title: CEO
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THIS TRADEMARK ASSIGNMENT ("Assignment") is made as of August 23, 2001, by DIMENSIONAL MARKETING CONCEPTS, INC., a Florida corporation ("Assignor"), in favor of INTERNATIONAL COMMERCIAL TELEVISION, INC., a Nevada corporation ("Assignee").
A. Assignor is the owner of the trademark known as "AUTO FX SEE, FEEL & HEAR THE FX" (the "Trademark"), an application for registration of which on the Principal Register of the U.S. Patent and Trademark Office is presently pending at SN 78075830 (the "Registration Application").
B. Assignor wishes to assign the Trademark and the Registration Application to Assignee.
ACCORDINGLY, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, Assignor hereby agrees as follows:
(a) Assignor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to the Trademark, free and clear of any liens, charges and encumbrances.
(b) Assignor is not aware of the existence any other trademark which is either identical to the Trademark or is so similar thereto as to be likely to cause confusion or to cause mistake or to deceive;
(c) To the best of Assignor's knowledge, there are no infringement actions pending or threatened alleging that the Trademark or the use thereof infringes any trademarks or other rights held by third parties.
(d) No prior application to register the Trademark has been filed with any registration authority in the United States or, to the best of Assignee's knowledge, any other country, and there has been no final decision adverse to Assignor's claim of ownership of the Trademark;
(e) Neither the Trademark nor any right to the use thereof is subject to any subsisting licenses; and
(f) Assignor has the unqualified right to enter into and fully perform this Assignment.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly executed on the date first written above.
Attest: DIMENSIONAL MARKETING
CONCEPTS, INC.
By: /s/ Louis Basenese By: /s/ Richard Pitera
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Title: CEO Title: President
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CORPORATE SEAL
ACKNOWLEDGEMENT
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STATE OF FLORIDA :
: SS.
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COUNTY OF MARTIN :
My Commission Expires:
International Commercial Television Inc. owns 100% of the following subsidiaries:
- R.J.M. Ventures, Limited, a private limited company constituted under the New Zealand Companies Act 1993; and
- Windowshoppc.com Limited, a private limited company constituted under the New Zealand Companies Act 1993.
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
International Commercial Television Inc. and Subsidiaries
(formerly known as Moran Dome Explorations, Inc.)
We consent to the reference to our firm under the caption "Interests of Named Experts and Counsel" and to the use of our report dated July 23, 2001, in the Registration Statement (Form SB-2) and related Prospectus of International Commercial Television Inc. for the registration of shares of its common stock to be sold by International Commercial Television Inc. and the Selling Shareholders.
September 28, 2001
/s/ Moore Stephens Frazer and Torbet, LLP ------------------------------------------------ Moore Stephens Frazer and Torbet, LLP Independent Accountants |
CONSENT OF INDEPENDENT FINANCIAL ADVISORS
The Board of Directors
International Commercial Television Inc. and Subsidiaries
(formerly known as Moran Dome Explorations, Inc.)
In connection with our engagement to express our opinion on the fair market value of the equity of Windowshoppc.com Limited, R.J.M. Ventures Limited and Better Blocks International Limited as of April 1, 2000, for financial reporting purposes, we consent to the reference to our firm under the "Dilution" section and notes to the financial statements in the Registration Statement (Form SB-2) and related Prospectus of International Commercial Television Inc. for the registration of an offering of shares of its common stock to be sold by International Commercial Television Inc. and the Selling Shareholders.
September 28, 2001
/s/ Houlihan Lokey Howard & Zuking Financial Advisors, Inc. -------------------------------------------------------------------- Houlihan Lokey Howard & Zukin Financial Advisors, Inc. |